485BPOS

                                                      Registration No. 2-93177
                                                             File No. 811-4108

                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC 20549

                                  FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933                    [X]

      Pre-Effective Amendment No. __                                     [   ]


      Post-Effective Amendment No. 43                                      [X]
                                   --


                                    and/or

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


      Amendment No. 39                                                     [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.

Two World Financial Center, 225 Liberty Street, New York, New York 10281-1008

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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 April 29, 2004 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 April 29, 2004


                                         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   Investment   Objective  and   Principal   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 Principal Investment 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 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 Total

Returns for the periods  -----------------      5 Years            10 Years
ended December 31, 2003       1 Year       (or life of class  (or life of class

                                                if less)           if less)
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Oppenheimer Aggressive
Growth           Fund/VA

Non-Service Shares            25.59%             0.31%              6.50%
(inception date:

8/15/86)
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S&P 500 Index

                              28.67%             -0.57%            11.06%1

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Oppenheimer Aggressive
Growth Fund/VA Service

Shares (inception date:       25.44%            -22.10%              N/A

10/16/00)
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1.    From 12/31/93

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,
2003.


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                           0.68%                   0.68%

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Distribution     and     Service           N/A                    0.25%
(12b-1) Fees

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Other Expenses                            0.02%                   0.02%

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Total Annual Operating Expenses           0.70%                   0.95%

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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, 2003,  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:


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                              1 Year      3 Years     5 Years     10 Years
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Non-Service Shares             $72         $224        $390         $871

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Service Shares                 $97         $303        $525        $1,166

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About the Fund's Investments


The Fund's Principle Investment Policies and Risks.  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, healthcare, industrials, 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 but is not required to sell them due to declines in the Fund's
share price.  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 adverse or
unstable market, economic or political 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 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 Manager does not expect
turnover to be high.    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. Increased portfolio turnover creates higher brokerage and
transaction costs for the Fund (and may reduce performance).


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 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 $155
billion in assets as of March 31, 2003, including other Oppenheimer funds
with more than 7 million shareholder accounts. The Manager is located at Two
World Financial Center, 225 Liberty Street, 11th Floor, New York, New York
10281-1008.

|X|   Portfolio Managers. The portfolio manager of the Fund is John O'Hare.
He is the person primarily responsible for the day-to-day management of the
Fund's portfolio. Mr. O'Hare has been the Fund's portfolio manager since
October 29, 2003.

|X|   Mr. O'Hare has been a Vice President of the Manager since September
2003. He is also an officer and portfolio manager of other Oppenheimer funds.
Mr. O'Hare joined the Manager as a portfolio manager of other funds in
September 2003. Prior to joining the Manager, Mr. O'Hare was an Executive
Vice President and Portfolio Manager (June 2000 - August 2003) and Portfolio
Manager and Senior Vice President (August 1997 - June 2000) at Geneva Capital
Management, Ltd. (an investment advisor).

|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, 2003, 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| Excessive Short-Term Exchange Activity.  The Fund discourages
excessive short-term activity and has asked its participating insurance
companies for their cooperation in trying to prevent such activity in their
separate accounts by investors and their financial advisors. While the Fund
recognizes that some contract owners may engage in periodic asset allocation
and re-balancing of fund investments in their accounts, making an exchange
out of the Fund within 30 days of buying shares (either by purchase or
exchange), or making more than four "round trip" exchanges between funds in a
year, may be considered excessive short-term exchange activity. Separate
accounts under common ownership or control are combined for these limits.
There may be other types of transactions that demonstrate a pattern of
harmful short-term exchanges, and transactions involving larger amounts of
money raise special concerns because of the effect of exchanges on Fund
liquidity, investment programs and transaction costs. The Fund seeks the
cooperation of participating insurance companies in preventing excessive
short-term exchange activity by their respective separate account investors,
and the Fund's Transfer Agent attempts to selectively monitor flows into and
out of the Fund, but there can be no assurance that the Fund, the Transfer
Agent or the Fund's participating insurance companies will be successful in
curbing abusive short-term exchanges.

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

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 participating insurance company must receive that order before
the close of the Exchange (usually 4:00 p.m. EST). 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.

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.

OPPENHEIMER AGGRESSIVE GROWTH FUNDVA

FINANCIAL HIGHLIGHTS


NON-SERVICE SHARES    YEAR ENDED DECEMBER 31
2003          2002          2001          2000        1999
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA


Net asset value, beginning of period                            $29.23
$ 40.72       $ 70.77       $ 82.31      $44.83
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)
(.15)         (.10)          .23           .53        (.09)
Net realized and unrealized gain (loss)                           7.63
(11.16)       (21.38)        (8.59)      37.57

- --------------------------------------------------------------
Total from investment operations                                  7.48
(11.26)       (21.15)        (8.06)      37.48
- ------------------------------------------------------------------------------------------------------------------------------
Dividends andor distributions to shareholders:
Dividends from net investment income
- --          (.23)         (.54)           --          --
Distributions from net realized gain
- --            --         (8.36)        (3.48)         --

- --------------------------------------------------------------
Total dividends andor distributions to shareholders
- --          (.23)        (8.90)        (3.48)         --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                                  $36.71
$ 29.23       $ 40.72       $ 70.77      $82.31

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

- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1                               25.59%
(27.79)%      (31.27)%      (11.24)%     83.60%

- ------------------------------------------------------------------------------------------------------------------------------
RATIOSSUPPLEMENTAL DATA
Net assets, end of period (in thousands)                    $1,113,743    $
979,919    $1,621,550    $2,595,101  $2,104,128
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                           $1,041,584
$1,240,435    $1,898,088    $2,978,465  $1,314,349
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss)
(0.43)%       (0.29)%        0.47%         0.65%      (0.17)%
Total expenses                                                    0.70%
3       0.68% 3       0.68% 3       0.64% 3     0.67% 3
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
154%           54%          134%           39%         66%


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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


AGGRESSIVE GROWTH FUND/VA

FINANCIAL HIGHLIGHTS  Continued

SERVICE SHARES    YEAR ENDED DECEMBER 31                       2003
2002          2001      2000 1
- -----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA


Net asset value, beginning of period                         $29.13       $
40.70       $ 70.77   $ 97.75
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                            -- 2
..16           .19       .20
Net realized and unrealized gain (loss)                        7.41
(11.53)       (21.36)   (27.18)

- ----------------------------------------------
Total from investment operations                               7.41
(11.37)       (21.17)   (26.98)
- -----------------------------------------------------------------------------------------------------------
Dividends andor distributions to shareholders:
Dividends from net investment income                             --
(.20)         (.54)       --
Distributions from net realized gain
- --            --         (8.36)       --

- ----------------------------------------------
Total dividends andor distributions to shareholders             --
(.20)        (8.90)       --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period                               $36.54       $
29.13       $ 40.70   $ 70.77

==============================================
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3                            25.44%
(28.05)%      (31.31)%  (27.60)%

- -----------------------------------------------------------------------------------------------------------
RATIOSSUPPLEMENTAL DATA
Net assets, end of period (in thousands)                    $11,698
$144           $54        $1
- -----------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                           $ 3,858
$ 72           $31        $1
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income (loss)                                  (0.72)%
(0.56)%        0.09%     1.14%
Total expenses                                                 0.95%
1.55%         0.83%     0.64%
Expenses after expense reimbursement or fee waiver and
reduction to custodian expenses                                 NA 5
0.98%          NA 5     NA 5
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
154%           54%          134%       39%


1. For the period from October 16, 2000 (inception of offering) to December
31, 2000.
2. Less than $0.005 per share.
3. 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.

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

PR0620.001.0404
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
- --------------------


12/31/94                -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%
12/31/03                25.59%

Oppenheimer

Balanced Fund/VA
(named Oppenheimer Multiple Strategies
Fund/VA prior to April 29, 2004)         Oppenheimer Balanced Fund/VA is a
A series of Oppenheimer Variable         mutual fund that seeks a high total
Account Funds                            investment return, which includes

                                         current income and capital

Prospectus dated April 29, 2004          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 Fund.
                                               This Prospectus contains
                                         important information about the Fund's
                                         objective, its investment policies,
                                         strategies and risks.  Please read
As with all mutual funds, the            this Prospectus (and your insurance
Securities                               product prospectus) carefully before
and Exchange Commission has not          you 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.
                                                                          1234


Contents

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


            The  Fund's   Investment   Objective  and   Principal   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 Principal 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, agency debentures, mortgage backed securities,
corporate debt, and asset backed securities to achieve a balance between
total return and 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 12.53% (2nd Q `03) 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, 2003                         (or life of class   (or life of class
                                              if less)            if less)


- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Oppenheimer
Balanced Fund/VA
Non-Service Shares

(inception 2/9/87)         24.96%               6.37%               8.87%

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
S&P 500 Index

                           28.67%              -0.57%              11.06%1

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Lehman Bros.

Aggregate Bond Index        4.10%               6.62%              6.95%1

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Oppenheimer
Balanced Fund/VA
Service Shares

(inception date:           24.69%               7.56%               N/A2
5/1/02)

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

1.    From 12/31/93.

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,
2003.


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                           0.73%                   0.73%

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

Other Expenses                            0.03%                   0.03%

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

Total Annual Operating Expenses           0.76%                   1.01%

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

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, 2003,  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             $78         $243        $422         $942

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

Service Shares                 $103        $322        $558        $1,236

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


About the Fund's Investments

The Fund's Principal Investment Policies and Risks. 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.


|X|   Loans and Portfolio Securities. The Fund has entered into a Securities
Lending Agreement with JP Morgan Chase. Under that agreement portfolio
securities of the Fund may be loaned to brokers, dealers and other financial
institutions. The Securities Lending Agreement provides that loans must be
adequately collateralized and may be made only in conformity with Fund's
Securities Lending Guidelines, adopted by the Fund's Board of Trustees. The
value of the securities loaned may not exceed 25% of the value of the Fund's
net assets.


      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. Increased portfolio
turnover creates higher brokerage and transaction costs for the Fund (and may
reduce performance).


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 but is not required to sell them due to declines in the
Fund's share price. 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, 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 $155 billion in
assets as of March 31, 2004, including other Oppenheimer funds with more than
7 million shareholder accounts.  The Manager is located at Two World
Financial Center, 225 Liberty Street, 11th Floor, New York, New York
10281-1008.

      |X| Portfolio Managers.  Effective January 13, 2003 and May 2, 2003,
the equity portion of the Fund's portfolio is managed by Emmanuel Ferriera
and Christopher Leavy respectively, supported by other members of the
Manager's value portfolio team, and effective January 13, 2003, 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.
Ferriera, Mr. Leavy 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 and Mr. Leavy are each Vice Presidents 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 in September 2000, Mr. Leavy was a
portfolio manager at 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). 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, 2003, was 0.73% 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| Excessive Short-Term Exchange Activity.  The Fund discourages
excessive short-term activity and has asked its participating insurance
companies for their cooperation in trying to prevent such activity in their
separate accounts by investors and their financial advisors. While the Fund
recognizes that some contract owners may engage in periodic asset allocation
and re-balancing of fund investments in their accounts, making an exchange
out of the Fund within 30 days of buying shares (either by purchase or
exchange), or making more than four "round trip" exchanges between funds in a
year, may be considered excessive short-term exchange activity. Separate
accounts under common ownership or control are combined for these limits.
There may be other types of transactions that demonstrate a pattern of
harmful short-term exchanges, and transactions involving larger amounts of
money raise special concerns because of the effect of exchanges on Fund
liquidity, investment programs and transaction costs. The Fund seeks the
cooperation of participating insurance companies in preventing excessive
short-term exchange activity by their respective separate account investors,
and the Fund's Transfer Agent attempts to selectively monitor flows into and
out of the Fund, but there can be no assurance that the Fund, the Transfer
Agent or the Fund's participating insurance companies will be successful in
curbing abusive short-term exchanges.

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

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
participating insurance company must receive that order before the close of
the Exchange (usually 4:00pm EST). 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 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.

OPPENHEIMER MULTIPLE STRATEGIES FUND/VA

FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
NON-SERVICE SHARES    YEAR ENDED DECEMBER 31
2003          2002          2001          2000      1999
- ---------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of period                           $13.16
$15.40        $16.55        $17.46    $17.05
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
..27           .50           .53           .72       .82
Net realized and unrealized gain (loss)                          2.90
(2.02)         (.19)          .38      1.04

- ------------------------------------------------------------
Total from investment operations                                 3.17
(1.52)          .34          1.10      1.86
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
(.41)         (.51)         (.64)         (.82)     (.59)
Distributions from net realized gain
- --          (.21)         (.85)        (1.19)     (.86)

- ------------------------------------------------------------
Total dividends and/or distributions to shareholders
(.41)         (.72)        (1.49)        (2.01)    (1.45)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                                 $15.92
$13.16        $15.40        $16.55    $17.46

============================================================
- -----------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1                              24.96%
(10.40)%        2.22%         6.44%    11.80%

- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)                     $533,710
$458,848      $593,033      $589,298  $578,783
- ---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                            $475,389
$517,516      $599,324      $566,724  $593,151
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income
1.82%         3.31%         3.42%         4.36%     4.46%
Total expenses                                                   0.76% 3
  0.74% 3       0.76% 3       0.76% 3   0.73% 3
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
248%           42%           30%           42%       17%

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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

FINANCIAL HIGHLIGHTS  Continued
- -----------------------------------------------------------------------------

SERVICE SHARES    YEAR ENDED DECEMBER 31                          2003
2002 1
- --------------------------------------------------------------------------------------
PER SHARE OPERATING DATA

Net asset value, beginning of period                            $13.14
$14.51
- --------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
..39           .13
Net realized and unrealized gain (loss)
2.74         (1.50)

- ----------------------
Total from investment operations
3.13         (1.37)
- --------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
(.40)           --
Distributions from net realized gain
- --            --

- ----------------------
Total dividends and/or distributions to shareholders
(.40)           --
- --------------------------------------------------------------------------------------
Net asset value, end of period                                  $15.87
$13.14

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

- --------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2
24.69%        (9.44)%

- --------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)                       $25,302
$2,306
- --------------------------------------------------------------------------------------
Average net assets (in thousands)                               $9,908
$1,037
- --------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income
1.37%         3.30%
Total expenses                                                    1.01%
4       0.99% 4
- --------------------------------------------------------------------------------------
Portfolio turnover rate
248%           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, 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.

INFORMATION AND SERVICES

For More Information on Oppenheimer Balanced Fund/VA
(named Oppenheimer Multiple Strategies Fund/VA prior to April 29, 2004)


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

PR0670.001.0404
Printed on recycled paper.

                                                     1234


                          Appendix to Prospectus of

                         Oppenheimer Balanced Fund/VA
               (a series of Oppenheimer Variable Account Funds)

      Graphic material included in the Prospectus of Oppenheimer Balanced
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
- -----                                     --------------------


12/31/94                                        -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%
12/31/03                                        24.96%

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

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

                                      appreciation when consistent with its
                                      goal of high current income. The Fund

Prospectus dated April 29, 2004       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 Investment Objective and Principal 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 Principal 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
o     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.

     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.

     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.

|X|   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 (Non-Service Shares) (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 Q '95) and the lowest return (not
annualized) for a calendar quarter was -1.90% (1st Q '94).


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

Average Annual Total Returns      1 Year         5 Years          10 Years
for the periods ended December                 (or life of
31, 2003                                     class, if less)

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Oppenheimer Bond Fund/VA

Non-Service Shares (inception      6.78%          5.57%             6.28%

4/3/85)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Lehman Brothers Credit Index       7.69%          7.10%             7.42%

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Oppenheimer Bond Fund/VA

Service Shares (inception          6.56%          8.82%              N/A

5/1/02)
- --------------------------------------------------------------------------------


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 Credit Index, an unmanaged
index of non-convertible investment grade corporate debt of U.S. issuers that
is a measure of the domestic fixed-rate corporate 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,
2003.


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" 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, 2003, 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 and Risks. 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 are 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.

         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 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").

|_|   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.


     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.

     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.

     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.

     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.

     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.

     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.

|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.

     Loans of  Portfolio  Securities.  The Fund has  entered  into a  Securities
Lending  Agreement  with  JP  Morgan  Chase.  Under  that  agreement,  portfolio
securities  of the Fund may be loaned to brokers,  dealers  and other  financial
institutions.  The  Securities  Lending  Agreement  provides  that loans must be
adequately  collateralized  and  may be  only  in  conformity  with  the  Fund's
Securities  Lending  Guidelines,  adopted by the Fund's Board of  Trustees.  The
value of the securities loaned may not exceed 25% of the value of the Fund's net
assets.

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 $155 billion in assets as
of March 31, 2004, including other Oppenheimer funds, with more than 7
million shareholder accounts. The Manager is located at Two World Financial
Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008.


     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).

     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, 2003,  was 0.71% 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. 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.


     Excessive  Short-Term  Exchange  Activity.  The Fund discourages  excessive
short-term  activity and has asked its  participating  insurance  companies  for
their  cooperation in trying to prevent such activity in their separate accounts
by investors and their financial  advisors.  While the Fund recognizes that some
contract owners may engage in periodic asset allocation and re-balancing of fund
investments in their accounts, making an exchange out of the Fund within 30 days
of buying  shares  (either by  purchase or  exchange),  or making more than four
"round trip"  exchanges  between funds in a year,  may be  considered  excessive
short-term  exchange  activity.  Separate  accounts  under  common  ownership or
control are combined for these limits.  There may be other types of transactions
that  demonstrate a pattern of harmful  short-term  exchanges,  and transactions
involving  larger amounts of money raise special  concerns because of the effect
of exchanges on Fund liquidity,  investment  programs and transaction costs. The
Fund seeks the cooperation of  participating  insurance  companies in preventing
excessive  short-term  exchange  activity by their  respective  separate account
investors,  and the Fund's Transfer Agent attempts to selectively  monitor flows
into and out of the  Fund,  but  there can be no  assurance  that the Fund,  the
Transfer  Agent  or  the  Fund's  participating   insurance  companies  will  be
successful in curbing abusive short-term exchanges.

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

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.

     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.

OPPENHEIMER BOND FUND/VA

FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------

NON-SERVICE SHARES    YEAR ENDED DECEMBER 31
2003          2002         2001          2000        1999
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------------

Net asset value, beginning of period
$11.31        $11.21       $11.25        $11.52      $12.32
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
..51           .65          .81           .94         .88
Net realized and unrealized gain (loss)
..23           .27          .03          (.29)      (1.06)
Payment from affiliate
- --           .01           --            --          --

- -------------------------------------------------------------
Total from investment operations
..74           .93          .84           .65        (.18)
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
(.63)         (.83)        (.88)         (.92)       (.57)
Distributions from net realized gain
- --            --           --            --        (.05)

- -------------------------------------------------------------
Total dividends and/or distributions to shareholders
(.63)         (.83)        (.88)         (.92)       (.62)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period
$11.42        $11.31       $11.21        $11.25      $11.52

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

- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
- -----------------------------------------------------------------------------------------------------------------------------------
Total return at net asset value 1
6.78%         9.02%        7.79%         6.10%      (1.52)%
Total return before payment from affiliate 2
N/A          8.93%         N/A           N/A         N/A

- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)
$618,234      $724,787     $693,701      $562,345    $601,064
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)
$691,931      $686,932     $638,820      $557,873    $633,059
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income before payment from affiliate
4.03%         5.91% 2      7.93%         7.94%       7.22%
Net investment income after payment from affiliate
N/A          6.07%         N/A           N/A         N/A
Total expenses                                                          0.73%
4       0.73% 4      0.77% 4       0.76% 4     0.73% 4
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
101%          157%         186%          260%        256%


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. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
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. Reduction to custodian expenses less than 0.01%.


FINANCIAL HIGHLIGHTS  Continued
- -----------------------------------------------------------------------------

SERVICE SHARES    YEAR ENDED DECEMBER 31
2003         2002 1
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------

Net asset value, beginning of period                              $11.30
$10.46
- -----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income
..43         .11
Net realized and unrealized gain
..28         .72
Payment from affiliate
- --         .01

- -----------------------
Total from investment operations
..71         .84
- -----------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
(.62)         --
Distributions from net realized gain
- --          --

- -----------------------
Total dividends and/or distributions to shareholders
(.62)         --
- -----------------------------------------------------------------------------------------
Net asset value, end of period                                    $11.39
$11.30

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

- -----------------------------------------------------------------------------------------
TOTAL RETURN:
- -----------------------------------------------------------------------------------------
Total return at net asset value 2
6.56%       8.03%
Total return before payment from affiliate 3
N/A        7.94%

- -----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------
Net assets, end of period (in thousands)                          $3,835
$2,435
- -----------------------------------------------------------------------------------------
Average net assets (in thousands)                                 $3,903
$  834
- -----------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income before payment from affiliate
3.73%       4.37% 3
Net investment income after payment from affiliate
N/A        5.04%
Total expenses                                                      0.98%
5     0.98% 5,6
- -----------------------------------------------------------------------------------------
Portfolio turnover rate                                              101% 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, 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
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. Reduction to custodian expenses less than 0.01%.
6. Voluntary waiver of transfer agent fees 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 SEC File No. 811-4108                     The  Fund's   shares  are
distributed by:
PR0630.001.0404                     [logo] OppenheimerFunds Distributor, Inc.
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
- -----                               --------------------


12/31/94                                  -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%
12/31/03                                   6.78%

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


Prospectus dated April 29, 2004



                                         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   Investment   Objective  and   Principal   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 Principal 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 the periods                          5 Years           10 Years
ended                            1 Year     (or life of class     (or life of
- ----------------------------                     or less)       class or less)

December 31, 2003

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Oppenheimer Capital
Appreciation Fund/VA

Non-Service Shares               30.94%           3.42%             12.37%
(inception date: 4/3/85)

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
S&P 500 Index

                                 28.67%           -0.57%            11.06%1

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Oppenheimer Capital
Appreciation Fund/VA

Service Shares (inception        30.69%           4.29%               N/A
date: 9/18/01)

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

1.    From: 12/31/93.


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,
2003.


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           N/A                    0.25%
(12b-1) Fees

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

Other Expenses                            0.02%                   0.04%

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

Total Annual Operating Expenses           0.67%                   0.94%

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


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, 2003,  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                 $96         $300        $520        $1,155

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

About the Fund's Investments


The Fund's Principal Investment Policies and Risks.  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 and by attempting to limit valuation risk by being
price sensitive. 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 but is not required to sell them due to declines in the
Fund's share price.  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. In times of adverse or
unstable market, economic or political conditions, the Fund can invest up to
100% of its assets in temporary investments that are inconsistent with the
Fund's principal investment strategies. 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.
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. 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.  Increased
portfolio  turnover creates higher brokerage and transaction  costs for the Fund
(and may reduce performance).


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 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 $155
billion in assets as of March 31, 2004, including other Oppenheimer funds
with more than 7 million shareholder accounts. The Manager is located at Two
World Financial Center, 225 Liberty Street, 11th Floor, New York, New York
10281-1008.

      Portfolio Manager.  The portfolio manager of the Fund is Jane Putnam.
She is a Vice President of the Fund and the Manager (since June 1994).  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, 2003, 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.


      Excessive Short-Term Exchange Activity.  The Fund discourages excessive
short-term activity and has asked its participating insurance companies for
their cooperation in trying to prevent such activity in their separate
accounts by investors and their financial advisors. While the Fund recognizes
that some contract owners may engage in periodic asset allocation and
re-balancing of fund investments in their accounts, making an exchange out of
the Fund within 30 days of buying shares (either by purchase or exchange), or
making more than four "round trip" exchanges between funds in a year, may be
considered excessive short-term exchange activity. Separate accounts under
common ownership or control are combined for these limits. There may be other
types of transactions that demonstrate a pattern of harmful short-term
exchanges, and transactions involving larger amounts of money raise special
concerns because of the effect of exchanges on Fund liquidity, investment
programs and transaction costs. The Fund seeks the cooperation of
participating insurance companies in preventing excessive short-term exchange
activity by their respective separate account investors, and the Fund's
Transfer Agent attempts to selectively monitor flows into and out of the
Fund, but there can be no assurance that the Fund, the Transfer Agent or the
Fund's participating insurance companies will be successful in curbing
abusive short-term exchanges.

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

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 participating insurance company must receive that order before
the close of the Exchange (usually 4:00 p.m. EST). 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 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.

OPPENHEIMER CAPITAL APPRECIATION FUND/VA

FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------

NON-SERVICE SHARES    YEAR ENDED DECEMBER 31                   2003
2002          2001          2000          1999
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA

Net asset value, beginning of period                         $26.62
$36.58        $46.63        $49.84       $ 36.67
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                           .12
..11           .18           .27           .06
Net realized and unrealized gain (loss)                        8.07
(9.89)        (5.86)          .02         14.68

- ----------------------------------------------------------------
Total from investment operations                               8.19
(9.78)        (5.68)          .29         14.74
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                           (.11)
(.18)         (.27)         (.06)         (.13)
Distributions from net realized gain
- --            --         (4.10)        (3.44)        (1.44)

- ----------------------------------------------------------------
Total dividends and/or distributions to shareholders           (.11)
(.18)        (4.37)        (3.50)        (1.57)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                               $34.70
$26.62        $36.58        $46.63        $49.84

================================================================
- -----------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1                            30.94%
(26.86)%      (12.58)%       (0.23)%       41.66%

- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (in thousands)                 $1,715,240
$1,338,769    $1,975,345    $2,095,803    $1,425,197
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                        $1,468,297
$1,630,430    $2,000,314    $1,922,099    $1,002,835
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                                          0.39%
0.35%         0.51%         0.66%         0.21%
Total expenses                                                 0.67% 3
0.66% 3       0.68% 3       0.67% 3       0.70% 3
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
48%           32%           45%           38%           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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

FINANCIAL HIGHLIGHTS  Continued
- -----------------------------------------------------------------------------
SERVICE SHARES    YEAR ENDED DECEMBER 31
2003          2002        2001 1
- -----------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------

Net asset value, beginning of period
$26.53        $36.56        $31.66
- -----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
..08           .20            -- 2
Net realized and unrealized gain (loss)
8.02        (10.05)         4.90

- ------------------------------------
Total from investment operations
8.10         (9.85)         4.90
- -----------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
(.10)         (.18)           --
Distributions from net realized gain
- --            --            --

- ------------------------------------
Total dividends and/or distributions to shareholders
(.10)         (.18)           --
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period
$34.53        $26.53        $36.56

====================================
- -----------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3
30.69%       (27.09)%       15.51%

- -----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)                       $119,699
$18,260           $90
- -----------------------------------------------------------------------------------------------------
Average net assets (in thousands)                              $ 48,178
$ 6,263           $16
- -----------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income                                              0.14%
0.26%         0.11%
Total expenses                                                     0.94%
5       0.81% 5,6     0.81% 5
- -----------------------------------------------------------------------------------------------------
Portfolio turnover rate                                             48%
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, 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.
6. Voluntary waiver of transfer agent fees 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
PR0610.001.0404

Printed on recycled paper

890

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


12/31/94                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%
12/31/03                30.94%

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 April 29, 2004          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 only eligible to
                                         purchase Service shares, Class 3 or
                                         Class 4 shares of the Fund.

As with all mutual funds, the                This Prospectus contains important
Securities                               information about the Fund's
and Exchange Commission has not          objective, its investment policies,
approved or disapproved the Fund's       strategies and risks.  Please read
securities nor has it determined that    this Prospectus (and your insurance
this Prospectus is accurate or           product prospectus) carefully before
complete.                                you invest and keep them for future
It is a criminal offense to represent    reference about your account.
otherwise.
                                                                          1234

Contents

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


            The  Fund's   Investment   Objective  and   Principal   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 Principal 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 from inception
for service class shares, and by showing how the average annual total returns
for 1, 5 and 10 years or life of class of the Fund's non-service and service
class shares compare to those of a broad-based market index. Because Class 3
and Class 4 shares were recently made available, no performance information
is available for those share classes. 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% (4 Q `99) and the lowest return (not annualized)
for a calendar quarter was -18.34% (3 Q `02).


- ---------------------------------------------------------------------------
Average       Annual

Total   Returns  for      1 Year            5 Years          10 Years
the  periods   ended    (or life of       (or life of       (or life of
December 31, 2003     class if less)    class if less)    class if less)


- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Oppenheimer Global
Securities   Fund/VA
Non-Service Shares

(inception 11/12/90)      43.02%            10.28%             9.97%

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Morgan Stanley

World Index               33.76%            -0.39%             7.581

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Oppenheimer Global

Securities Fund/VA        42.86%            -2.87%              N/A
Service Shares

(inception 7/13/00)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Oppenheimer Global
Securities Fund/VA         43.53             N/A2              N/A2
Class 3
(inception 5/1/03)

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

Oppenheimer Global
Securities Fund/VA         N/A2              N/A2              N/A2
Class 4
(inception 5/3/04)

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

1.    From 12/31/93
2.    Because Class 3 and Class 4 are new classes of shares,  performance 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
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,
2003.


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                     Class 3         Class 4
                                 Shares          Service Shares  Shares          Shares

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

Redemption Fee*  None            None            1%*             1%*

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

Exchange Fee*    None            None            1%*             1%*

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


*     The  Fund  assesses  a 1% fee on the  proceeds  of  Class 3 and  Class 4
   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  Class 4 Shares
Shares

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

 Management Fees  0.63%            0.63%           0.63%           N/A1

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

Distribution and
Service (12b-1)  None            0.25%           None            N/A1
Fees

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

Other Expenses   0.04%           0.05%           0.05%           N/A1

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

Total Annual
Operating        0.67%           0.93%           0.68%           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,
2003 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, 2003,  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                 $95         $296        $515        $1,143

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

Class 3 Shares                 $69         $218        $379         $847

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

Class 4 Shares                 N/A1        N/A1        N/A1         N/A1

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

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


About the Fund's Investments


The Fund's Principal Investment Policies and Risks.  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.

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.


      |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.  The Financial Highlights table at the end of this Prospectus
shows the Fund's portfolio turnover rates during prior fiscal years.
Increased portfolio turnover creates higher brokerage and transaction costs
for the Fund (and may reduce performance).


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 but is not required to sell them due to declines in the
Fund's share price.  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.  In times of adverse
or unstable market, economic or political conditions, the Fund can invest up
to 100% of its assets in temporary investments that are inconsistent with the
Fund's principal investment strategies.  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.
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 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 $155
billion in assets as of March 31, 2004, including other Oppenheimer funds
with more than 7 million shareholder accounts.  The Manager is located at Two
World Financial Center, 225 Liberty Street, 11th Floor, New York, New York
10281-1008.


      |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, 2003, was 0.63% 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, Class 4 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 and Class 4 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|  Excessive  Short-Term  Exchange  Activity.   The  Fund  discourages
excessive  short-term  activity  and has  asked  its  participating  insurance
companies  for their  cooperation  in trying to prevent such activity in their
separate  accounts by investors and their financial  advisors.  While the Fund
recognizes that some contract  owners may engage in periodic asset  allocation
and  re-balancing of fund  investments in their  accounts,  making an exchange
out of the Fund  within  30 days of  buying  shares  (either  by  purchase  or
exchange),  or making more than four "round-trip" exchanges between funds in a
year,  may be considered  excessive  short-term  exchange  activity.  Separate
accounts  under common  ownership  or control are  combined for these  limits.
There  may be other  types of  transactions  that  demonstrate  a  pattern  of
harmful  short-term  exchanges,  and transactions  involving larger amounts of
money  raise  special  concerns  because  of the effect of  exchanges  on Fund
liquidity,  investment  programs  and  transaction  costs.  The Fund seeks the
cooperation  of  participating  insurance  companies in  preventing  excessive
short-term  exchange activity by their respective  separate account investors,
and the Fund's  Transfer Agent attempts to selectively  monitor flows into and
out of the Fund,  but there can be no  assurance  that the Fund,  the Transfer
Agent or the Fund's  participating  insurance  companies will be successful in
curbing abusive short-term exchanges.

- ------------------------------------------------------------------------------
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 four different classes of
shares. The class of shares designated as Service class shares and Class 4
shares are subject to a distribution and service plan.  The impact of the
expenses of that plan on Service class shares is described below.  The class
of shares that are not subject to a plan are designated as non-service shares
and Class 3 shares. 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 share class and Class 4
shares to pay the distributor, for distribution related services and personal
service and account maintenance for the Fund's Service class and Class 4
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 share class and Class 4
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 class and Class 4 shares.  The impact of
the service plan is to increase operating expenses of the Service class and
Class 4 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 participating insurance company must receive that order before
the close of the Exchange (usually 4:00 p.m. EST). 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 and Class 4
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 and Class 4 shares redeemed exceed Class 3 and Class 4
shares that have been held more than 60 days. For Class 3 and Class 4 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 and since  inception for
its Class 3 shares.  Because  Class 4 shares were recently  made  available,  no
performance  information is available for that share class.  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 4 shares  of the Fund will not be issued
prior to April 29, 2004, no financial information is shown for Class 4 shares in
the Financial  Highlights table or in the financial  statements  included in the
Statement of Additional Information.

OPPENHEIMER GLOBAL SECURITIES FUND/VA

FINANCIAL HIGHLIGHTS

NON-SERVICE SHARES  YEAR ENDED DECEMBER 31,                   2003
2002           2001           2000           1999
- ----------------------------------------------------------------------------------------------------------------------------------

 PER SHARE OPERATING DATA

 Net asset value, beginning of period                        $17.70
$22.84         $30.33         $33.41         $22.07
- ----------------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income
..19            .16            .17            .27            .14
 Net realized and unrealized gain (loss)                       7.34
(5.19)         (3.85)          1.82          12.21

- ---------------------------------------------------------------------
 Total from investment operations                              7.53
(5.03)         (3.68)          2.09          12.35
- ----------------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                          (.15)
(.11)          (.19)          (.09)          (.14)
 Dividends in excess of net investment income
- --             --             --             --           (.13)
 Distributions from net realized gain
- --             --          (3.62)         (5.08)          (.74)

- ---------------------------------------------------------------------
 Total dividends and/or distributions to shareholders          (.15)
(.11)         (3.81)         (5.17)         (1.01)
- ----------------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $25.08
$17.70         $22.84         $30.33         $33.41

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

- ----------------------------------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE 1                           43.02%
(22.13)%       (12.04)%         5.09%         58.48%

- ----------------------------------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA

 Net assets, end of period (in thousands)                $2,280,752
$1,549,993     $1,905,890     $2,136,420     $1,762,366
- ----------------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                       $1,751,226
$1,776,289     $1,918,335     $2,116,100     $1,251,190
- ----------------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 2
 Net investment income                                         0.99%
0.80%          0.70%          0.83%          0.57%
 Total expenses                                                0.67% 3
0.67% 3        0.70% 3        0.68% 3        0.69% 3
- ----------------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate
34%            34%            39%            50%            64%

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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

 SERVICE SHARES  YEAR ENDED DECEMBER 31,
2003           2002           2001           2000 1
- ----------------------------------------------------------------------------------------------------------------------------------


 PER SHARE OPERATING DATA

 Net asset value, beginning of period
$17.61         $22.78         $30.30         $32.65
- ----------------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment
income                                                         .12
..12            .21            .03
 Net realized and unrealized gain (loss)
7.36          (5.19)         (3.92)         (2.38)

- ------------------------------------------------------
 Total from investment operations
7.48          (5.07)         (3.71)         (2.35)
- ----------------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income
(.13)          (.10)          (.19)            --
 Distributions from net realized
gain                                           --             --
(3.62)            --

- ------------------------------------------------------
 Total dividends and/or distributions to shareholders
(.13)          (.10)         (3.81)            --
- ----------------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period
$24.96         $17.61         $22.78         $30.30

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

- ----------------------------------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE 2
42.86%        (22.37)%       (12.17)%        (7.20)%

- ----------------------------------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA

 Net assets, end of period (in thousands)
$168,739        $52,830        $20,467           $983
- ----------------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                                        $
91,800        $34,847        $ 8,502           $325
- ----------------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment income
0.68%          0.51%          0.44%          0.60%
 Total expenses
0.93% 4        0.90% 4        0.85% 4        0.83% 4
- ----------------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover
rate                                                        34%
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, 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

OPPENHEIMER GLOBAL SECURITIES FUND/VA



FINANCIAL HIGHLIGHTS  Continued

 CLASS 3 SHARES  PERIOD ENDED DECEMBER
31,
2003 1
- ----------------------------------------------------------------------------------------------------------------------------------

 PER SHARE OPERATING DATA

 Net asset value, beginning of
period
$ 17.55
- ----------------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment
income
..07
 Net realized and unrealized gain
                                                           7.57

- ----------
 Total from investment operations
                                                              7.64
- ----------------------------------------------------------------------------------------------------------------------------------
 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
$ 25.19


==========

- ----------------------------------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE
2
43.53%

- ----------------------------------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA

 Net assets, end of period (in
thousands)
$147,576
- ----------------------------------------------------------------------------------------------------------------------------------
 Average net assets (in
thousands)
$ 80,579
- ----------------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment
income
0.73%
 Total expenses
                                                             0.68% 4
- -----------------------------------------------------------------------------
 Portfolio turnover
rate
                34%

1. For the period from May 1, 2003 (inception of offering) to December 31,
2003.
2. 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.

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

PR0485.001.0404
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
- -----                               --------------------


12/31/94                                  -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%
12/31/03                                  43.02%

                        OPPENHEIMER HIGH INCOME FUND/VA
               (a series of Oppenheimer Variable Account Funds)
                    Supplement dated April 29, 2004 to the
                       Prospectus dated April 29, 2004

      The Prospectus is changed as follows:

1.    The   Prospectus  is  changed  by  replacing  the  paragraph   captioned
    "Portfolio  Managers"  under  the  section  captioned  "How  the  Fund  is
    Managed" on page 9:

      "Portfolio   Manager.   The  portfolio  manager  of  the  Fund  is
      Dimitrios  Kourkoulakos.  He is the person principally responsible
      for the day-to-day  management of the Fund's  portfolio since June
      2002; he shared that  responsibility as co-portfolio  manager from
      February 5, 2003 to April 19,  2004.  He is Vice  President of the
      Fund and of the Manager.  He also serves as officer and  portfolio
      manager for other  Oppenheimer  funds.  Mr.  Kourkoulakos has been
      employed by the Manager since 1995."



      April 29, 2004                                            PS0640.004

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


Prospectus dated April 29, 2004          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
                                         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 Investment Objective and Principal 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 Principal 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
o     "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.


|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. The Fund's investments in debt securities, particularly high-yield,
lower-grade debt securities, 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
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.

|X|   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.

|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. 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.

|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 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.

|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 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 (Non-Service Shares) (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 8.88% (2nd Q '03) and the lowest return (not
annualized) for a calendar quarter was -7.12% (3rd Q '98).


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

Average Annual Total Returns        1 Year         5 Years          10 Years
for the periods ended December                   (or life of
31, 2003                                       class, if less)

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Oppenheimer High Income Fund/VA

Non-Service Shares (inception       23.96%          4.37%            6.47%

4/30/86)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Merrill Lynch High Yield Master     27.23%          5.47%            7.23%
Index

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Oppenheimer High Income Fund/VA

Service Shares (inception           23.79%          9.28%             N/A

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,
2003.


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                           0.73%                   0.73%

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

Other Expenses                            0.03%                   0.06%

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

Total Annual Operating Expenses           0.76%                   1.04%

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


Expenses may vary in future years. "Other expenses" 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, 2003, 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             $78         $243        $422         $942

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

Service Shares                 $106        $331        $574        $1,271

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

About the Fund's Investments


The Fund's Principal Investment Policies and Risks. 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.

      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 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.


      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.


      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.

      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.

      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.

      "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.

|X|   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.

|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.

      Loans of Portfolio Securities. The Fund has entered into a Securities
Lending Agreement with JP Morgan Chase. Under that agreement, portfolio
securities of the Fund may be loaned to brokers, dealers and other financial
institutions. The Securities Lending Agreement provides that loans must be
adequately collateralized and may be only in conformity with the Fund's
Securities Lending Guidelines, adopted by the Fund's Board of Trustees. The
value of the securities loaned may not exceed 25% of the value of the Fund's
net assets.

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 $155 billion in assets as of March
31, 2004, including other Oppenheimer funds, with more than 7 million
shareholder accounts. The Manager is located at Two World Financial Center,
225 Liberty Street, 11th Floor, New York, New York 10281-1008.

|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, 2003, was 0.73% 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. 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.


      Excessive Short-Term Exchange Activity. The Fund discourages excessive
short-term activity and has asked its participating insurance companies for
their cooperation in trying to prevent such activity in their separate
accounts by investors and their financial advisors. While the Fund recognizes
that some contract owners may engage in periodic asset allocation and
re-balancing of fund investments in their accounts, making an exchange out of
the Fund within 30 days of buying shares (either by purchase or exchange), or
making more than four "round trip" exchanges between funds in a year, may be
considered excessive short-term exchange activity. Separate accounts under
common ownership or control are combined for these limits. There may be other
types of transactions that demonstrate a pattern of harmful short-term
exchanges, and transactions involving larger amounts of money raise special
concerns because of the effect of exchanges on Fund liquidity, investment
programs and transaction costs. The Fund seeks the cooperation of
participating insurance companies in preventing excessive short-term exchange
activity by their respective separate account investors, and the Fund's
Transfer Agent attempts to selectively monitor flows into and out of the
Fund, but there can be no assurance that the Fund, the Transfer Agent or the
Fund's participating insurance companies will be successful in curbing
abusive short-term exchanges.

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

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.

      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.

OPPENHEIMER HIGH INCOME FUND/VA

FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------

NON-SERVICE SHARES    YEAR ENDED DECEMBER 31                   2003
2002          2001          2000        1999
- ---------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA

Net asset value, beginning of period                          $7.51
$8.54         $9.27        $10.72      $11.02
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                           .60
..58           .84          1.00        1.01
Net realized and unrealized gain (loss)                        1.09
(.76)         (.62)        (1.36)       (.55)

- -------------------------------------------------------------
Total from investment operations                               1.69
(.18)          .22          (.36)        .46
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                           (.59)
(.85)         (.95)        (1.09)       (.76)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                                $8.61
$7.51         $8.54        $ 9.27      $10.72

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

- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1                            23.96%
(2.40)%        1.97%        (3.74)%      4.29%

- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)                   $480,112
$345,670      $344,788      $333,533    $340,829
- ---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                          $396,858
$335,894      $347,723      $329,260    $340,519
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                                          8.31%
8.29%         9.94%        10.47%       9.61%
Total expenses                                                 0.76% 3
0.77% 3       0.79% 3       0.79% 3     0.75% 3
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
48%           75%           46%           31%         33%


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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.


OPPENHEIMER HIGH INCOME FUND/VA


SERVICE SHARES    YEAR ENDED DECEMBER 31                   2003
2002          2001 1
- --------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA

Net asset value, beginning of period                      $7.49       $
8.54         $8.40
- --------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                       .61
..88           .20
Net realized and unrealized gain (loss)                    1.06
(1.08)         (.06)

- ----------------------------------
Total from investment operations                           1.67
(.20)          .14
- --------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                       (.58)
(.85)           --
- --------------------------------------------------------------------------------------------
Net asset value, end of period                            $8.58       $
7.49         $8.54

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

- --------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                        23.79%
(2.67)%        1.67%

- --------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)                $76,354
$17,705            $3
- --------------------------------------------------------------------------------------------
Average net assets (in thousands)                       $41,246      $
5,602            $2
- --------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                      7.84%
8.91%        12.51%
Total expenses                                             1.04% 4      1.02%
4,5     0.96% 4
- --------------------------------------------------------------------------------------------
Portfolio turnover rate                                      48%
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, 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees 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 SEC File No. 811-4108                     The  Fund's   shares  are
distributed by:
PR0640.001.0404                     [logo] OppenheimerFunds Distributor, Inc.
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
- -----                               --------------------


12/31/94                                  -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%
12/31/03                                  23.96%

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


Prospectus dated April 29, 2004

                                         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.


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Contents

            About the Fund
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            The  Fund's   Investment   Objective  and   Principal   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 Principal Investment Strategies


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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.
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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 3000 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 eight 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).

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Average Annual Total

Returns for the periods       1 Year             5 Years           10 Years
ended December 31, 2003                     (or life of class     (or life of

                                                if less)        class if less)
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Oppenheimer Main Street
Fund(R)/VA Non-Service

Shares                        26.72%              0.52%             10.66%
(inception 7/5/95)

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S&P 500 Index

                              28.67%             -0.57%             10.55%1

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Oppenheimer Main Street
Fund(R)/VA Service Shares

(inception 7/13/00)           26.44%             -5.82%               N/A

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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,
2003.


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                           0.68%                   0.68%
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Distribution     and     Service           None                   0.25%
(12b-1) Fees
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Other Expenses                            0.02%                   0.03%

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Total Annual Operating Expenses           0.70%                   0.96%

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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, 2003,  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:

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                              1 Year      3 Years     5 Years     10 Years
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Non-Service Shares             $72         $224        $390         $871

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Service Shares                 $98         $306        $531        $1,178

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About the Fund's Investments


The Fund's Principal Investment Policies and Risks. 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|   Loans of Portfolio Securities. The Fund has entered into a Securities
Lending Agreement with JP Morgan Chase. Under that agreement portfolio
securities of the Fund may be loaned to brokers, dealers and other financial
institutions. The Securities Lending Agreement provides that loans must be
adequately collateralized and may be made only in conformity with the Fund's
Securities Lending Guidelines, adopted by the Fund's Board of Trustees. The
value of the securities loaned may not exceed 25% of the value of the Fund's
net assets.


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. Increased portfolio turnover
creates higher brokerage and transaction costs for the Fund (and may reduce
performance).


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 but is not required to sell then due to declines in the
Fund's share price. 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 adverse or
unstable market, economic or political 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 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 $155
billion in assets as of March 31, 2004, including other Oppenheimer funds
with more than 7 million shareholder accounts.  The Manager is located at Two
World Financial Center, 225 Liberty Street, 11th Floor, New York, New York
10281-1008.

      |X|  Portfolio Managers. The portfolio managers of the Fund are
Nikolaos Monoyios and Marc Reinganum, who are also Vice Presidents of the
Fund and of the Manager.  They are the persons responsible for the day-to-day
management of the Fund's portfolio since May 1, 1999 and October 1, 2003,
respectively.  Prior to joining the Manager in April 1998, Mr. Monoyios was
portfolio manager at Guardian Investor Services (from 1979), the investment
management subsidiary of The Guardian Life Insurance Company. Prior to
joining the Manager in September 2002, Dr. Reinganum was the Mary Jo Vaughn
Raucher Chair in Financial Investments at Southern Methodist University since
1995. At Southern Methodist University he also served as the Director of the
Finance Institute, Chairman of the Finance Department, President of the
Faculty at the Cox School of Business and member of the Board of Trustee
Investment Committee.

      |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, 2003, 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| Excessive Short-Term Exchange Activity.  The Fund discourages
excessive short-term activity and has asked its participating insurance
companies for their cooperation in trying to prevent such activity in their
separate accounts by investors and their financial advisors. While the Fund
recognizes that some contract owners may engage in periodic asset allocation
and re-balancing of fund investments in their accounts, making an exchange
out of the Fund within 30 days of buying shares (either by purchase or
exchange), or making more than four "round trip" exchanges between funds in a
year, may be considered excessive short-term exchange activity. Separate
accounts under common ownership or control are combined for these limits.
There may be other types of transactions that demonstrate a pattern of
harmful short-term exchanges, and transactions involving larger amounts of
money raise special concerns because of the effect of exchanges on Fund
liquidity, investment programs and transaction costs. The Fund seeks the
cooperation of participating insurance companies in preventing excessive
short-term exchange activity by their respective separate account investors,
and the Fund's Transfer Agent attempts to selectively monitor flows into and
out of the Fund, but there can be no assurance that the Fund, the Transfer
Agent or the Fund's participating insurance companies will be successful in
curbing abusive short-term exchanges.

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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.
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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 participating insurance company must receive that order before the close
of the Exchange (usually 4:00 p.m. EST). 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 eight 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.

OPPENHEIMER MAIN STREET FUND/VA

FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------

 NON-SERVICE SHARES    DECEMBER 31                              2003
2002          2001         2000          1999
- ------------------------------------------------------------------------------------------------------------------------------
 PER SHARE OPERATING DATA

 Net asset value, beginning of period                         $15.32
$18.99        $21.26       $24.63        $20.48
- ------------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income
..18           .16           .13          .10           .11
 Net realized and unrealized gain (loss)                        3.86
(3.70)        (2.29)       (2.14)         4.29

- ----------------------------------------------------------------
 Total from investment operations                               4.04
(3.54)        (2.16)       (2.04)         4.40
- ------------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                           (.16)
(.13)         (.11)        (.09)         (.09)
 Distributions from net realized gain
- --            --            --        (1.24)         (.16)

- ----------------------------------------------------------------
 Total dividends and/or distributions to shareholders           (.16)
(.13)         (.11)       (1.33)         (.25)
- ------------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                               $19.20
$15.32        $18.99       $21.26        $24.63

================================================================
- ------------------------------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE 1                            26.72%
(18.80)%      (10.16)%      (8.78)%       21.71%

- ------------------------------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA
 Net assets, end of period (in thousands)                 $1,214,960
$890,740    $1,074,945   $1,009,823      $555,311
- ------------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                        $1,003,396
$999,275    $1,028,913   $  809,662      $391,063
- ------------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 2
 Net investment income                                          1.10%
0.94%         0.73%        0.69%         0.63%
 Total expenses                                                 0.70% 3
0.69% 3       0.73% 3      0.73%         0.78% 3
- ------------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate
85%           98%           69%          63%          118%


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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


SERVICE SHARES    DECEMBER 31                                   2003
2002          2001        2000 1
- -----------------------------------------------------------------------------------------------------------------
 PER SHARE OPERATING DATA

 Net asset value, beginning of period                          $15.26
$18.95        $21.24        $24.04
- -----------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income
..14           .13           .14           .02
 Net realized and unrealized gain (loss)                         3.85
(3.70)        (2.32)        (2.82)

- --------------------------------------------------
 Total investment operations                                     3.99
(3.57)        (2.18)        (2.80)
- -----------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income
(.15)         (.12)         (.11)           --
 Distributions from net realized gain
- --            --            --            --

- --------------------------------------------------
 Total dividends and/or distributions to shareholders
(.15)         (.12)         (.11)           --
- -----------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                                $19.10
$15.26        $18.95        $21.24

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

- -----------------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE 2                             26.44%
(18.99)%      (10.27)%      (11.61)%
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA
 Net assets, end of period (in thousands)                    $166,717
$51,929       $21,545        $1,698
- -----------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                           $ 98,210
$34,604       $10,306        $  543
- -----------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment income
0.83%         0.87%         0.66%         0.50%
 Total expenses                                                  0.96%
4       0.84% 4       0.88% 4       0.88%
- -----------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate
85%           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, 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
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

PR0650.001.0404
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%
12/31/03                                  26.72%

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


Prospectus dated April 29, 2004


                                         Oppenheimer Main Street Small Cap
                                         Fund(R)/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   Investment   Objective  and   Principal   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 Principal 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.

- --------------------------------------------------------------------------
     What is "Market Capitalization"?
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
     In general, the market capitalization is the value of a company
     determined by the total market value of its issued and outstanding
     common stock.
- --------------------------------------------------------------------------

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 five 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)

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

Average Annual
Total Returns for          1 Year              5 Years                  10 Years
the periods ended     (or  life of class  (or  life of class  (or life of class if less)
December 31, 2003    if less)            if less)

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

Oppenheimer Main
Street Small Cap
Fund(R)/VA                   44.36%               7.72%                6.02%
Non-Service Shares
(inception 5/1/98)

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

Russell 2000(R)Index           47.25%             7.13%1              3.91%1

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

Oppenheimer  Main Street
Small    Cap    Fund(R)/VA
Service Shares                44.24%              9.96%                N/A
(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,
2003.


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                           0.75%                   0.75%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distribution     and     Service           None                   0.25%
(12b-1) Fees
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Other Expenses                            0.26%                   0.23%

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

Total Annual Operating Expenses           1.01%                   1.23%

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

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, 2003,  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             $103        $322        $558        $1,236

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

Service Shares                 $125        $390        $676        $1,489

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

About the Fund's Investments


The Fund's Principal Investment Policies and Risks.  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. ("Lipper"), 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. Increased
portfolio turnover creates higher brokerage and transaction costs for the
Fund (and may reduce performance).



 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 but is not required to sell them due to declines in the
Fund's share price.  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 adverse
or unstable market, economic or political 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 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 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 $155 billion in
assets as of March 31, 2004, including other Oppenheimer funds with more than
7 million shareholder accounts.  The Manager is located at Two World
Financial Center, 225 Liberty Street, 11th Floor, New York, New York
10281-1008.

      |X| Portfolio Managers. The portfolio managers of the Fund are Mark
Zavanelli and Nikolaos D. Monoyios. They are the persons principally
responsible for the day-to-day management of the Fund's portfolio. Mr.
Zavanelli and Mr. Monoyios are both Vice Presidents of the Fund and of the
Manager and officers and portfolio managers of other Oppenheimer funds.
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).
Prior to joining the Manager in April 1998, Mr. Monoyios was a portfolio
manager at Guardian Investor Services (from 1979), 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, 2003, 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|  Excessive  Short-Term  Exchange  Activity.   The  Fund  discourages
excessive  short-term  activity  and has  asked  its  participating  insurance
companies  for their  cooperation  in trying to prevent such activity in their
separate  accounts by investors and their financial  advisors.  While the Fund
recognizes that some contract  owners may engage in periodic asset  allocation
and  re-balancing of fund  investments in their  accounts,  making an exchange
out of the Fund  within  30 days of  buying  shares  (either  by  purchase  or
exchange),  or making more than four "round trip" exchanges between funds in a
year,  may be considered  excessive  short-term  exchange  activity.  Separate
accounts  under common  ownership  or control are  combined for these  limits.
There  may be other  types of  transactions  that  demonstrate  a  pattern  of
harmful  short-term  exchanges,  and transactions  involving larger amounts of
money  raise  special  concerns  because  of the effect of  exchanges  on Fund
liquidity,  investment  programs  and  transaction  costs.  The Fund seeks the
cooperation  of  participating  insurance  companies in  preventing  excessive
short-term  exchange activity by their respective  separate account investors,
and the Fund's  Transfer Agent attempts to selectively  monitor flows into and
out of the Fund,  but there can be no  assurance  that the Fund,  the Transfer
Agent or the Fund's  participating  insurance  companies will be successful in
curbing abusive short-term exchanges.


- ------------------------------------------------------------------------------
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 offer 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
Colorado. The participating insurance company must receive that order before
the close of the Exchange (usually 4:00 p.m. EST). 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.

OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------

NON-SERVICE SHARES   YEAR ENDED DECEMBER 31,           2003
2002          2001          2000         1999
- ---------------------------------------------------------------------------------------------------------------------
 PER SHARE OPERATING DATA

 Net asset value, beginning of period                  $ 9.31
$11.05        $11.09        $14.07       $ 9.60
- ---------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                            (.03)
(.01)           -- 1        (.03)        (.02)
 Net realized and unrealized gain (loss)                 4.16
(1.73)         (.04)        (2.35)        4.49

- --------------------------------------------------------------
 Total from investment operations                        4.13
(1.74)         (.04)        (2.38)        4.47
- ---------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Distributions from net realized gain                      --
- --            --          (.60)          --
- ---------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                        $13.44        $
9.31        $11.05        $11.09       $14.07

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

- ---------------------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE 2                     44.36%
(15.75)%       (0.36)%      (18.34)%      46.56%

- ---------------------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA

 Net assets, end of period (in thousands)             $27,551
$19,577       $18,514       $14,599       $6,927
- ---------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                    $20,271
$20,505       $15,307       $12,576       $2,738
- ---------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment loss                                    (0.30)%
(0.09)%       (0.01)%       (0.29)%      (0.37)%
 Total expenses                                          1.01%
1.00%         1.05%         1.37%        1.83%
 Expenses after expense reimbursement or fee waiver
 and reduction to custodian expenses                      N/A 4         N/A
4         N/A 4        1.35%        1.34%
- ---------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                  130%
121%          213%          162%         176%

1. Less than $0.005 per share.
2. 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

OPPENHEIMER MAIN STREET SMALL CAP FUND/VA

- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS CONTINUED
- -----------------------------------------------------------------------------

SERVICE SHARES  YEAR ENDED DECEMBER 31,                     2003
2002         2001 1
- -----------------------------------------------------------------------------
 PER SHARE OPERATING DATA

 Net asset value, beginning of period                       $ 9.29
$11.05        $10.61
- -----------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                                 (.02)
(.01)           -- 2
 Net realized and unrealized gain (loss)                      4.13
(1.75)          .44

- ------------------------------------
 Total from investment operations                             4.11
(1.76)          .44
- -----------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Distributions from net realized gain                           --
- --            --
- -----------------------------------------------------------------------------------------------
 Net asset value, end of period                             $13.40        $
9.29        $11.05

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

- -----------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE 3                          44.24%
(15.93)%        4.15%

- -----------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA

 Net assets, end of period (in thousands)                  $62,660
$6,111          $108
- -----------------------------------------------------------------------------------------------
 Average net assets (in thousands)                         $25,018
$2,228          $ 26
- -----------------------------------------------------------------------------------------------
 Ratios to average net assets: 4
 Net investment loss                                         (0.43)%
(0.26)%       (0.34)%
 Total expenses                                               1.23%
1.21%         1.19%
 Expenses after expense reimbursement or fee waiver
 and reduction to custodian expenses                           N/A 5
1.19%          N/A 5
- -----------------------------------------------------------------------------------------------
 Portfolio turnover rate                                       130%
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, 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. Returns do not reflect the deduction
of
shareholder would pay on Fund distributions or the redemption of Fund shares.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.

INFORMATION OF 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

PR0297.001.0404
Printed on recycled paper.

                         Appendix to Prospectus of
                Oppenheimer Main Street Small Cap Fund(R)/VA
             (a series of Oppenheimer Variable Account Funds)

      Graphic material included in the Prospectus of Oppenheimer Main
Street Small Cap 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 $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%
12/31/03                                   44.36%

Oppenheimer
Money Fund/VA
A series of Oppenheimer Variable Account Funds

Prospectus dated April 29, 2004          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 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 Investment Objective and Principal 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 Principal 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 Q '00) and the lowest return (not
annualized) for a calendar quarter was 0.17% (3rd & 4th Q '03).


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

Average Annual Total Returns
for the periods ended December      1 Year          5 Years        10 Years
31, 2003

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

Oppenheimer Money Fund/VA
(inception 4/3/85)                   0.79%           3.45%          4.27%

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

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, 2003.


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, 2003, 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.

|X|   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.

|X|   Bank Obligations. The Fund can invest in time deposits, certificates of
deposit and bankers' acceptances. These investments must be:
o     obligations  of a  domestic  bank  having  total  assets  of at least $1
               billion, or
o     U.S. dollar-denominated obligations of a foreign bank with total assets
               of at least U.S. $1 billion.

|X|   Commercial Paper. Commercial paper is a short-term, unsecured
promissory note of a domestic or foreign company.

|X|   Corporate Debt Obligations. The Fund can invest in other short-term
corporate debt obligations, besides commercial paper.

|X|   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. The Fund can invest in
bank loan participation agreements, which are described in the Statement of
Additional Information, but has rarely done so.

What Credit Quality and Maturity and 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.

      |X|   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.

      |X|   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.

|X|   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.

|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.
      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.

|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.
      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 $155 billion in assets as of March
31, 2004, including other Oppenheimer funds, with more than 7 million
shareholder accounts. The Manager is located at Two World Financial Center,
225 Liberty Street, 11th Floor, New York, NY 10281-1008.

|X|   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, 2003, 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.

     Excessive  Short-Term  Exchange  Activity.  The Fund discourages  excessive
short-term  activity and has asked its  participating  insurance  companies  for
their  cooperation in trying to prevent such activity in their separate accounts
by investors and their financial  advisors.  While the Fund recognizes that some
contract owners may engage in periodic asset allocation and re-balancing of fund
investments in their accounts, making an exchange out of the Fund within 30 days
of buying  shares  (either by  purchase or  exchange),  or making more than four
"round trip"  exchanges  between funds in a year,  may be  considered  excessive
short-term  exchange  activity.  Separate  accounts  under  common  ownership or
control are combined for these limits.  There may be other types of transactions
that  demonstrate a pattern of harmful  short-term  exchanges,  and transactions
involving  larger amounts of money raise special  concerns because of the effect
of exchanges on Fund liquidity,  investment  programs and transaction costs. The
Fund seeks the cooperation of  participating  insurance  companies in preventing
excessive  short-term  exchange  activity by their  respective  separate account
investors,  and the Fund's Transfer Agent attempts to selectively  monitor flows
into and out of the  Fund,  but  there can be no  assurance  that the Fund,  the
Transfer  Agent  or  the  Fund's  participating   insurance  companies  will  be
successful in curbing abusive short-term exchanges.

- ------------------------------------------------------------------------------
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.

     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, 2003, 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.

OPPENHEIMER MONEY FUND/VA

FINANCIAL HIGHLIGHTS

YEAR ENDED DECEMBER 31
2003          2002          2001           2000      1999
- -----------------------------------------------------------------------------
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           .01           .04           .06       .05
- -----------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
(.01)         (.01)         (.04)         (.06)     (.05)
Dividends from net realized gain
- --            -- 1          --            --
- --
- -----------------------------------------------------------
Total dividends and/or distributions to shareholders
(.01)         (.01)         (.04)         (.06)     (.05)
- -----------------------------------------------------------------------------
Net asset value, end of period
$1.00         $1.00         $1.00         $1.00     $1.00
- -----------------------------------------------------------------------------
TOTAL RETURN 2                                                      0.79%
1.47%         3.85%         6.26%     4.96%
- -----------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)                        $237,613
$379,969      $370,229      $215,771  $201,066
- -----------------------------------------------------------------------------
Average net assets (in thousands)                               $316,096
$386,457      $288,106      $204,586  $166,727
- -----------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                               0.80%
1.46%         3.59%         5.98%     4.87%
Total expenses                                                      0.47%
4       0.47% 4       0.52% 4       0.51% 4   0.48% 4

1. Less than $0.005 per share.
2. 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.

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.

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                     The  Fund's   shares  are
distributed by:
PR0660.001.0404                     [logo] OppenheimerFunds Distributor, Inc.
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
- -----                               --------------------


12/31/94                                   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%
12/31/03                                   0.79%

Oppenheimer
Strategic Bond Fund/VA
A series of Oppenheimer Variable Account Funds


Prospectus dated April 29, 2004    Oppenheimer Strategic Bond Fund/VA is
                                   a mutual fund that seeks a high level of
                                   current income principally derived from
                                   interest on 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
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 Investment Objective and Principal 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 Principal 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.

|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.

|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 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.

|X|   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.

|X|   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.

|X|   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.

|X|   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.

|X|   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 (Non-Service Shares) (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 6.10% (2nd Q '03) and the lowest return (not
annualized) for a calendar quarter was -3.70% (1st Q '94).


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

Average Annual Total Returns     1 Year       5 Years            10 Years
for the periods ended December              (or life of        (or life of
31, 2003                                  class, if less)    class, if less)

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Oppenheimer    Strategic   Bond

Fund/VA                          18.07%        7.02%              6.92%
Non-Service Shares (inception

5/3/93)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Lehman Brothers Aggregate Bond   4.10%         6.62%              6.95%1
Index

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

Citigroup World Government       14.91%        5.75%              6.79%1
Bond Index

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Oppenheimer Strategic Bond

Fund/VA                          17.16%        9.22%               N/A
Service 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 Citigroup  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,
2003.


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                            0.03%                   0.05%

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

Total Annual Operating Expenses           0.75%                   1.02%

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


Expenses may vary in future years. "Other expenses" 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, 2003, 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 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             $77         $240        $417         $930

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

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

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

About the Fund's Investments


The Fund's Principal Investment Policies and Risks. 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.

      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 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").

|_|   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. 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.

|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."

      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.


|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,
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, as
well as interest rate and prepayment risks.

|X|   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.

|_|   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.


|X|   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.


|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. 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.

|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
      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 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.

|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 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.

|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 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.


|X|   Loans of Portfolio Securities. The Fund has entered into a Securities
         Lending Agreement with JP Morgan Chase. Under that agreement,
         portfolio securities of the Fund may be loaned to brokers, dealers
         and other financial institutions. The Securities Lending Agreement
         provides that loans must be adequately collateralized and may be
         only in conformity with the Fund's Securities Lending Guidelines,
         adopted by the Fund's Board of Trustees. The value of the securities
         loaned may not exceed 25% of the value of the Fund's net assets.


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 $155 billion in assets as of March
31, 2004 including other Oppenheimer funds, with more than 7 million
shareholder accounts. The Manager is located at Two World Financial Center,
225 Liberty Street, 11th Floor, New York, New York 10281-1008.

|X|   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 serves as officer and portfolio manager for
         other Oppenheimer funds. Mr. Steinmetz has been employed by the
         Manager since 1986.

|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, 2003, was 0.72% 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.

     Excessive  Short-Term  Exchange  Activity.  The Fund discourages  excessive
short-term  activity and has asked its  participating  insurance  companies  for
their  cooperation in trying to prevent such activity in their separate accounts
by investors and their financial  advisors.  While the Fund recognizes that some
contract owners may engage in periodic asset allocation and re-balancing of fund
investments in their accounts, making an exchange out of the Fund within 30 days
of buying  shares  (either by  purchase or  exchange),  or making more than four
"round trip"  exchanges  between funds in a year,  may be  considered  excessive
short-term  exchange  activity.  Separate  accounts  under  common  ownership or
control are combined for these limits.  There may be other types of transactions
that  demonstrate a pattern of harmful  short-term  exchanges,  and transactions
involving  larger amounts of money raise special  concerns because of the effect
of exchanges on Fund liquidity,  investment  programs and transaction costs. The
Fund seeks the cooperation of  participating  insurance  companies in preventing
excessive  short-term  exchange  activity by their  respective  separate account
investors,  and the Fund's Transfer Agent attempts to selectively  monitor flows
into and out of the  Fund,  but  there can be no  assurance  that the Fund,  the
Transfer  Agent  or  the  Fund's  participating   insurance  companies  will  be
successful in curbing abusive short-term exchanges.

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

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.

      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.

OPPENHEIMER STRATEGIC BOND FUND/VA

FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------

NON-SERVICE SHARES    YEAR ENDED DECEMBER 31                 2003
2002       2001        2000      1999
- ---------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA

Net asset value, beginning of period                        $4.57
$4.62      $4.69       $4.97     $5.12
- ---------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                         .22
..29        .41         .41       .45
Net realized and unrealized gain (loss)                       .56
..03       (.19)       (.28)     (.31)

- ---------------------------------------------------
Total from investment operations                              .78
..32        .22         .13       .14
- ---------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                         (.30)
(.37)      (.29)       (.41)     (.29)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period                              $5.05
$4.57      $4.62       $4.69     $4.97

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

- -----------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1                          18.07%
7.44%      4.85%       2.63%     2.83%

- ---------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)                 $571,445
$406,126   $351,686    $304,562  $282,086
- ---------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                        $472,213
$374,519   $330,711    $289,923  $278,668
- ---------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                                        5.61%
6.89%      8.78%       9.23%     9.08%
Total expenses                                               0.75%
0.79%      0.79%       0.79%     0.78%
Expenses after expense reimbursement
or fee waiver and reduction to
custodian expenses                                            N/A 3
0.78%       N/A 3       N/A 3     N/A 3
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                       117%
65%       104%        104%       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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.


FINANCIAL HIGHLIGHTS  Continued
- -----------------------------------------------------------------------------
SERVICE SHARES    YEAR ENDED DECEMBER
31                                                2003         2002
2001 1
- -------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------

Net asset value, beginning of
period                                                   $4.67
$4.73         $4.64
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment
income
..27          .03           .15
Net realized and unrealized gain
(loss)                                                  .49
..28          (.06)

- -----------------------------------
Total from investment
operations
..76          .31           .09
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment
income                                                    (.30)
(.37)           --
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period                                                         $5.13
$4.67         $4.73

- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE
2                                                     17.16%
7.03%         1.94%
- -------------------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in
thousands)                                             $79,782
$8,138            $4
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in
thousands)                                                    $34,744
$2,307            $2
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment
income
4.57%        5.40%         8.17%
Total
expenses
1.02%        1.06%         0.92%
Expenses after expense reimbursement or fee waiver and reduction to custodian
expense    N/A 4       1.03%          N/A 4
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate
117%          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, 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.

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 SEC File No. 811-4108                     The  Fund's   shares  are
distributed by:
PR0265.001.0404                     [logo] OppenheimerFunds Distributor, Inc.
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%
12/31/03                                  18.07%

Oppenheimer
Value Fund/VA
A series of Oppenheimer Variable
Account Funds
                                         Oppenheimer Value Fund/VA is a mutual

Prospectus dated April 29, 2004          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   Investment   Objective  and   Principal   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 Principal Investment 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 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 calendar year for non-service shares and by showing how the average
annual total returns for the past calendar year of the Fund's non-service
shares compare to those of a broad-based market index. Because service shares
are not offered at this time, no performance information is available for
service shares.  The Fund's past investment performance is not necessarily an
indication of how the Fund will perform in the future.


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

Average Annual Total
Returns for the periods         1 Year            5 Years          10 Years
ended                         (or life of       (or life of       (or life of
- --------------------------  class if less)    class if less)    class if less)
December 31, 2003

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

Oppenheimer Value Fund/VA
Non-Service Shares              29.00%*             N/A               N/A
(inception 1/2/03)

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

Russell 1000 Value Index        30.03%              N/A               N/A
(from 12/31/02)

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

Oppenheimer Value Fund/VA
Service Shares (inception         N/A               N/A               N/A
1/2/03)

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

*Cumulative return.
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 1000 Value 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 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-Service Shares       Service Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Management Fees                           0.75%                   0.75%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distribution     and     Service           N/A                    0.25%
(12b-1) Fees
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Other Expenses                            0.64%                   0.64%

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

Total Annual Operating Expenses           1.39%                   1.64%

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

Expenses may vary in future years. "Other Expenses" include transfer agent
fees, custodial expenses, 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, 2003, the transfer agent fees did not exceed
the expense limitation described above.


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 Year      3 Years     5 Years     10 Years
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Non-Service Shares             $142        $440        $761        $1,669

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

Service Shares                 $167        $517        $892        $1,944

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

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 but is not required to sell them due to decline in the Fund's
share price. 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 temporary investments that are inconsistent with the
Fund's principal investment strategies.  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. 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. Increased portfolio turnover creates higher brokerage and
transaction costs for the Fund (and may reduce performance).


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 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 $155
billion in assets as of March 31, 2004, including other Oppenheimer funds
with more than 7 million shareholder accounts.  The Manager is located at Two
World Financial Center, 225 Liberty Street, 11th Floor, New York, New York
10281-1008.


|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.  The Fund's management fee for
its last fiscal year ended December 31, 2003, was 0.75% of the Fund's average
annual net assets for each class of shares. The Fund's management fee for its
last fiscal year ended December 31, 2003, 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 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.


      Excessive Short-Term Exchange Activity.  The Fund discourages excessive
short-term activity and has asked its participating insurance companies for
their cooperation in trying to prevent such activity in their separate
accounts by investors and their financial advisors. While the Fund recognizes
that some contract owners may engage in periodic asset allocation and
re-balancing of fund investments in their accounts, making an exchange out of
the Fund within 30 days of buying shares (either by purchase or exchange), or
making more than four "round trip" exchanges between funds in a year, may be
considered excessive short-term exchange activity. Separate accounts under
common ownership or control are combined for these limits. There may be other
types of transactions that demonstrate a pattern of harmful short-term
exchanges, and transactions involving larger amounts of money raise special
concerns because of the effect of exchanges on Fund liquidity, investment
programs and transaction costs. The Fund seeks the cooperation of
participating insurance companies in preventing excessive short-term exchange
activity by their respective separate account investors, and the Fund's
Transfer Agent attempts to selectively monitor flows into and out of the
Fund, but there can be no assurance that the Fund, the Transfer Agent or the
Fund's participating insurance companies will be successful in curbing
abusive short-term exchanges.

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

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 participating insurance company must receive that order before
the close of the Exchange (usually 4:00 p.m. EST) 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


The Financial  Highlights  Table is presented to help you  understand the Fund's
financial  performance  for its  non-service  shares  since  inception.  Because
service  shares were recently made  available,  no  performance  information  is
available for that share class.  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.

OPPENHEIMER VALUE FUND/VA

FINANCIAL HIGHLIGHTS

 NON-SERVICE SHARES  PERIOD  DECEMBER 31                               2003 1
- -------------------------------------------------------------------------------
 PER SHARE OPERATING DATA
 Net asset value, beginning of period                                  $10.00
- -------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                                    .03
 Net realized and unrealized gain                                        2.87

- --------
 Total from investment operations                                        2.90
- -----------------------------------------------------------------------------
 Net asset value, end of period                                        $12.90

- -----------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE 2                                     29.00%
- -----------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA
 Net assets, end of period (in thousands)                              $3,871
- -----------------------------------------------------------------------------
 Average net assets (in thousands)                                     $3,205
- -----------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment income                                                   0.27%
 Total expenses
1.39% 4
- -----------------------------------------------------------------------------
 Portfolio turnover rate                                                  120%

1. For the period from January 2, 2003 (commencement of operations) to
December
31, 2003.
2. 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.

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, 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 PR0642.001.0404
Printed on recycled paper.

EX-99

- ------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
- ------------------------------------------------------------------------------

6803 S. Tucson Way, Centennial, Colorado 80112
1.800.981.2871


Statement of Additional Information dated April 29, 2004


OPPENHEIMER  VARIABLE  ACCOUNT FUNDS (the  "Trust") is an  investment  company
consisting of 11 separate Funds (the "Funds"):


Oppenheimer Aggressive Growth Fund/VA
Oppenheimer Balanced Fund/VA
      (named "Oppenheimer Multiple Strategies Fund" prior to April 29, 2004)

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 Street Small Cap Fund(R)/VA
Oppenheimer Money 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 April 29, 2004. It
should be read together with the Prospectuses. You can obtain a Prospectus by
writing to the Funds' Transfer Agent, OppenheimerFunds Services, at P.O. Box
5270, Denver, Colorado 80217, or by calling the Transfer Agent at the
toll-free number shown above.



Contents
                                                                        Page
About the Funds

Additional Information About the Funds' Investment Policies and Risks.. 3
    The Funds' Investment Policies..................................... 3
    Other Investment Techniques and Strategies......................... 17
    Other Investment Restrictions...................................... 39
How the Funds are Managed ............................................. 42
    Organization and History........................................... 42
    Board of Trustees and Oversight Committees......................... 44
    Trustees and Officers of the Funds................................. 45
    The Manager........................................................ 56
Brokerage Policies of the Funds........................................ 59
Distribution and Service Plans (Service and Class 4 Shares)............ 62
Performance of the Funds............................................... 63


About Your Account

How To Buy and Sell Shares............................................. 69
Dividends, Capital Gains and Taxes..................................... 69
Additional Information About the Funds................................. 74


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. 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.

- ------------------------------------------------------------------------------
ABOUT THE FUNDS
- ------------------------------------------------------------------------------

Additional Information About the Funds' Investment Policies and Risks

.......The investment objective, the principal investment policies and the
main risks of the Funds are described in the 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 Small Cap Fund(R)/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." Balanced 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 (the "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 Maes. 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.


|X|   Passive Foreign Investment Companies. Some securities of corporations
domiciled outside the U.S. which the Fund may purchase, may be considered
passive foreign investment companies ("PFICs") under U.S. tax laws. PFICs are
those foreign corporations which generate primarily passive income. They tend
to be growth companies or "start-up" companies. For federal tax purposes, a
corporation is deemed a PFIC if 75% or more of the foreign corporation's
gross income for the income year is passive income or if 50% or more of its
assets are assets that produce or are held to produce passive income. Passive
income is further defined as any income to be considered foreign personal
holding company income within the subpart F provisions defined by IRCss.954.

      Investing in PFICs involves the risks associated with investing in
foreign securities, as described above. There are also the risks that the
Fund may not realize that a foreign corporation it invests in is a PFIC for
federal tax purposes. Federal tax laws impose severe tax penalties for
failure to properly report investment income from PFICs. Following industry
standards, the Fund makes every effort to ensure compliance with federal tax
reporting of these investments. PFICs are considered foreign securities for
the purposes of the Fund's minimum percentage requirements or limitations of
investing in foreign securities.

      Subject to the limits under the Investment Company Act, the Fund may
also invest in foreign mutual funds which are also deemed PFICs (since nearly
all of the income of a mutual fund is generally passive income). Investing in
these types of PFICs may allow exposure to various countries because some
foreign countries limit, or prohibit, all direct foreign investment in the
securities of companies domiciled therein.

      In addition to bearing their proportionate share of a fund's expenses
(management fees and operating expenses), shareholders will also indirectly
bear similar expenses of such entities. Additional risks of investing in
other investment companies are described below under "Investment in Other
Investment Companies."


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 intend to invest less than 5% of their total assets in
securities of issuers of Eastern European countries. The social, political
and economic reforms in most Eastern European countries are still in their
early stages, and there can be no assurance that these reforms will continue.
Eastern European countries in many cases do not have a sophisticated or
well-established capital market structure for the sale and trading of
securities. Participation in the investment markets in some of those
countries may be available initially or solely through investment in joint
ventures, state enterprises, private placements, unlisted securities or other
similar illiquid investment vehicles.

      In addition, although investment opportunities may exist in Eastern
European countries, any change in the leadership or policies of the
governments of those countries, or changes in the leadership or policies of
any other government that exercises a significant influence over those
countries, may halt the expansion of or reverse the liberalization of foreign
investment policies now occurring. As a result investment opportunities which
may currently exist may be threatened.

      The prior authoritarian governments of a number of the Eastern European
countries previously expropriated large amounts of real and personal
property, which may include property which will be represented by or held by
entities issuing the securities a Fund might wish to purchase. In many cases,
the claims of the prior property owners against those governments were never
finally settled. There can be no assurance that any property represented by
or held by entities issuing securities purchased by a Fund will not also be
expropriated, nationalized, or confiscated. If that property were
confiscated, 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 "SEC"), 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.


      Loans of Portfolio Securities. To raise cash for liquidity purposes or
income, the Fund can lend its portfolio securities to brokers, dealers and
other types of financial institutions approved by the Fund's Board of
Trustees.

      The Fund may lend its portfolio securities pursuant to the Securities
Lending Agreement (the "Securities Lending Agreement") with JP Morgan Chase,
subject to the restrictions stated in the Prospectus. The Fund will lend such
portfolio securities to attempt to increase the Fund's income. Under the
Securities Lending Agreement and applicable regulatory requirements (which
are subject to change), the loan collateral must, on each business day, be at
least equal to the value of the loaned securities and 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 the Fund is
permitted to invest. To be acceptable as collateral, letters of credit must
obligate a bank to pay to JP Morgan Chase, as agent, amounts demanded by the
Fund if the demand meets the terms of the letter. Such terms of the letter of
credit and the issuing bank must be satisfactory to JP Morgan Chase and the
Fund. The Fund will receive, pursuant to the Securities Lending Agreement,
80% of all annual net income (i.e., net of rebates to the Borrower) from
securities lending transactions. JP Morgan Chase has agreed, in general, to
guarantee the obligations of borrowers to return loaned securities and to be
responsible for expenses relating to securities lending. The Fund will be
responsible, however, for risks associated with the investment of cash
collateral, including the risk that the issuer of the security in which the
cash collateral has been invested in defaults. The Securities Lending
Agreement may be terminated by either JP Morgan Chase or the Fund on 30 days'
written notice. The terms of the Fund's loans must also meet applicable tests
under the Internal Revenue Code and permit the Fund to reacquire loaned
securities on five business days' notice or in time to vote on any important
matter.


      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.

      Interfund Borrowing and Lending Arrangements. Consistent with its
fundamental policies and pursuant to an exemptive order issued by the 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. 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 Balanced/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 SEC 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 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.


      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 Balanced 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 Fund(R)/VA was organized in 1995,
Main Street Small Cap Fund(R)/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 Small Cap Fund(R)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." Prior to April 29, 2004, Oppenheimer Balanced Fund/VA was
named "Oppenheimer Multiple Strategies Fund/VA." 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, 2003, 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 offers two
additional share classes, referred to in this Statement of Additional
Information and the Prospectus as "Class 3"and "Class 4" which are subject to
a redemption fee.  In addition, Class 4 shares are subject to a Distribution
and Service Plan. Money Fund/VA and Value Fund/VA currently only offer 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 six
meetings during the fiscal year ended December 31, 2003. 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
financial statement audits and the audit fees charged; (ii) reviewing reports
from the Fund's independent auditors regarding the Fund's internal accounting
procedures and controls; (iii) review reports from the Manager's Internal
Audit Department; (iv) maintaining a separate line of communication between
the Fund's independent auditors and its Independent Trustees; and (v)
exercise all other functions outlined in the Audit Committee Charter,
including but not limited to reviewing the independence of the Fund's
independent auditors and the pre-approval of the performance by the Fund's
independent auditors of any non-audit service, including tax service, for the
Fund and the Manager and certain other affiliates of the Manager.

      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 of 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 six meetings during the fiscal year ended December
31, 2003. 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 as "Board II Funds"):

                                           Oppenheimer   Principal   Protected
Oppenheimer Cash Reserves                  Trust II
Oppenheimer Champion Income Fund           Oppenheimer Real Asset Fund
                                           Oppenheimer  Senior  Floating  Rate

Oppenheimer Capital Income Fund            Fund

Oppenheimer Equity Fund, Inc.              Oppenheimer Strategic Income Fund
Oppenheimer High Yield Fund                Oppenheimer Variable Account Funds
Oppenheimer International Bond Fund        Panorama Series Fund, Inc.
Oppenheimer Integrity Funds
Oppenheimer Limited-Term Government Fund   Centennial America Fund, L. P.
                                           Centennial  California  Tax  Exempt
Oppenheimer Main Street Funds, Inc.        Trust
Oppenheimer Main Street Opportunity Fund   Centennial Government Trust
Oppenheimer Main Street Small Cap Fund     Centennial Money Market Trust

                                           Centennial   New  York  Tax  Exempt
Oppenheimer Municipal Fund                 Trust

Oppenheimer Principal Protected Trust      Centennial Tax Exempt Trust

      Messrs. Ferreira, Kourkoulakos, Leavy, Manioudakis, Monoyios, Murphy,
O'Hare, Petersen, Putnam, Reinganum, Steinmetz, Vottiero, Weiss, Wilby,
Wixted, Zack and Zavanelli, and Messes. Bechtolt, Ives, Putnam and Wolf 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, 2004, 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.

      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 5  Dollar      Aggregate
                                                                       Dollar
                                                                      Range of
                                                                     y Shares
                                                                     Beneficially
                                                                      Owned in
                   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,

                                                                   2003

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

William L.         Chairman  of  the  following   private    $0         Over
Armstrong,         mortgage  banking  companies:   Cherry             $100,000
Chairman since     Creek  Mortgage  Company (since 1991),
2003 and Trustee   Centennial   State  Mortgage   Company
since 1999         (since  1994),  The El  Paso  Mortgage
Age: 67            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),   and   International    Family
                   Entertainment   (television   channel)
                   (1992-1997),   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
                   38 portfolios in the  OppenheimerFunds
                   complex.

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

Robert G. Avis,    Formerly,  Director  and  President of    $0         Over
Trustee since 1993 A.G.  Edwards Capital,  Inc.  (General             $100,000
Age: 72            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  38
                   portfolios  in  the   OppenheimerFunds
                   complex.

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

George C. Bowen,   Formerly  Assistant  Secretary  and  a    $0         Over
Trustee since 1999 director  (December  1991-April  1999)             $100,000
Age: 67            of   Centennial    Asset    Management
                   Corporation;  President, Treasurer and
                   a director (June  1989-April  1999) of
                   Centennial Capital Corporation;  Chief
                   Executive  Officer  and a director  of
                   MultiSource   Services,   Inc.  (March
                   1996-April  1999).  Until  April  1999
                   Mr.  Freedman  held several  positions
                   in subsidiary or affiliated  companies
                   of   the    Manager.    Oversees    38
                   portfolios  in  the   OppenheimerFunds
                   complex.

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

Edward L. Cameron, A member  of The  Life  Guard of Mount    $0       $50,001-
Trustee since 1999 Vernon,   George   Washington's   home             $100,000
Age: 65            (since June 2000).  Formerly  Director
                   (March  2001-May  2002) of Genetic ID,
                   Inc.   and   its    subsidiaries    (a
                   privately  held  biotech  company);  a
                   partner  (July  1974-June  1999)  with
                   PricewaterhouseCoopers     LLP     (an
                   accounting  firm);  and Chairman (July
                   1994-June  1998) of  Price  Waterhouse
                   LLP   Global   Investment   Management
                   Industry  Services Group.  Oversees 38
                   portfolios  in  the   OppenheimerFunds
                   complex.

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

Jon S. Fossel,     Director   (since  February  1998)  of    $0         Over
Trustee since      Rocky   Mountain  Elk   Foundation  (a             $100,000
1990               not-for-profit      foundation);     a
Age: 62            director   (since   1997)  of   Putnam
                   Lovell Finance  (finance  company);  a
                   director    (since   June   2002)   of
                   UNUMProvident (an insurance  company).
                   Formerly    a    director     (October
                   1999-October     2003)     of     P.R.
                   Pharmaceuticals   (a  privately   held
                   company);   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  (until  October  1995)
                   of  Oppenheimer   Acquisition   Corp.,
                   Shareholders    Services    Inc.   and
                   Shareholder  Financial Services,  Inc.
                   Oversees   38    portfolios   in   the
                   OppenheimerFunds complex.

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

Sam Freedman,      Director   of   Colorado   Uplift   (a    $0         Over
Trustee since      non-profit  charity) (since  September             $100,000
1996               1984).  Formerly  (until October 1994)
Age: 63            Mr.  Freedman  held several  positions
                   in subsidiary or affiliated  companies
                   of   the    Manager.    Oversees    38
                   portfolios  in  the   OppenheimerFunds
                   complex.

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

Beverly L.         Trustee  of  MassMutual  Institutional    $0      $50,001 -
Hamilton           Funds  (open-end  investment  company)             $100,000
Trustee since 2002 (since    1996)   and   of    Monterey
Age: 57            International  Studies (an educational
                   organization)  (since  February 2000);
                   a   director    of   The    California
                   Endowment       (a       philanthropic
                   organization)  (since  April 2002) and
                   of  Community   Hospital  of  Monterey
                   Peninsula  (educational  organization)
                   (since  February  2002); a director of
                   the  following  investment  companies:
                   MML  Series   Investment  Fund  (since
                   April  1989),   MML  Services   (since
                   April   1987)   and   America    Funds
                   Emerging  Markets  Growth  Fund (since
                   October  1991);  an  advisor to Credit
                   Suisse First  Boston's  Sprout venture
                   capital unit. Mrs.  Hamilton also is a
                   member  of the  investment  committees
                   of the  Rockefeller  Foundation and of
                   the University of Michigan.  Formerly,
                   member  of  the  investment  committee
                   (2000-2003) of Hartford  Hospital;  an
                   advisor    (2000-2003)   to   Unilever
                   (Holland)'s    pension    fund;    and
                   President  (February  1991-April 2000)
                   of    ARCO    Investment    Management
                   Company.  Oversees  37  portfolios  in
                   the OppenheimerFunds complex.

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

Robert J. Malone,  Director of Steele  Street  State Bank    $0     Over
Trustee since 2002 (a commercial  banking  entity) (since           $100,000
Age: 59            August 2003),  Jones  Knowledge,  Inc.
                   (a  privately  held  company)   (since
                   2001),  U.S.  Exploration,  Inc.  (oil
                   and gas exploration)  (since 1997) and
                   Colorado    UpLIFT    (a    non-profit
                   organization)  (since 1986); a trustee
                   (since 2000) of the  Gallagher  Family
                   Foundation (non-profit  organization).
                   Formerly,     Chairman     of     U.S.
                   Bank-Colorado  (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   37    portfolios   in   the
                   OppenheimerFunds complex.

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

F. William         Trustee  of  MassMutual  Institutional    $0         Over
Marshall, Jr.,     Funds  (since  1996)  and  MML  Series             $100,000
Trustee since 2000 Investment  Fund  (since  1987)  (both
Age: 61            open-end  investment   companies)  and
                   the  Springfield  Library  and  Museum
                   Association   (since  1995)  (museums)
                   and  the  Community  Music  School  of
                   Springfield   (music   school)  (since
                   1996); Trustee (since 1987),  Chairman
                   of  the   Board   (since   2003)   and
                   Chairman of the  investment  committee
                   (since   1994)   for   the   Worcester
                   Polytech       Institute      (private
                   university);    and    President   and
                   Treasurer  (since January 1999) of the
                   SIS  Fund (a  private  not for  profit
                   charitable fund). 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)    (commercial     bank);    and
                   Executive  Vice   President   (January
                   1999-July  1999) of  Peoples  Heritage
                   Financial  Group,   Inc.   (commercial
                   bank).  Oversees 38  portfolios in the
                   OppenheimerFunds complex.

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

     The address of Mr. Murphy in the chart below is Two World Financial Center,
225 Liberty Street,  11th Floor, New York, NY 10281-1008.  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
                                                                      Shares
                                                                      Beneficially
Age,                                                       Range of   Owned in
Position(s)                                                Shares     any of
Held with Fund  Years /  Other  Trusteeships/Directorships Beneficiallthe
and Length of   Held by Trustee / Number of  Portfolios in Owned in   Oppenheimer
Service         Fund Complex Currently Overseen by Trustee each Funds   Funds
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
                                                            As of December 31,

                                                                   2003

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

John V.         Chairman,   Chief  Executive  Officer  and     $0      Over
Murphy,         director  (since June 2001) and  President             $100,000
President and   (since  September  2000)  of the  Manager;
Trustee, since  President  and a  director  or  trustee of
2001            other Oppenheimer  funds;  President and a
Age: 54         director  (since July 2001) of Oppenheimer
                Acquisition  Corp.  (the Manager's  parent
                holding   company)   and  of   Oppenheimer
                Partnership  Holdings,   Inc.  (a  holding
                company  subsidiary  of  the  Manager);  a
                director    (since   November   2001)   of
                OppenheimerFunds   Distributor,   Inc.  (a
                subsidiary of the  Manager);  Chairman and
                a   director    (since   July   2001)   of
                Shareholder   Services,    Inc.   and   of
                Shareholder   Financial   Services,   Inc.
                (transfer   agent   subsidiaries   of  the
                Manager);  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   the   Manager:    OFI
                Institutional   Asset  Management,   Inc.,
                Centennial Asset  Management  Corporation,
                Trinity Investment Management  Corporation
                and  Tremont  Capital   Management,   Inc.
                (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.;  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 the  shares of David L.
                Babson & Company,  Inc.);  a member of the
                Investment  Company  Institute's  Board of
                Governors  (elected to serve from  October
                3,  2003  through   September  30,  2006).
                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      73       portfolios       as
                Trustee/Director   and  10  portfolios  as
                Officer in the OppenheimerFunds complex.

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


      The address of the Officers in the chart below is as follows: for
Messrs. Ferreira, Kourkoulakos, Leavy, Manioudakis, Monoyios, O'Hare, Putnam,
Reinganum, Steinmetz, Wilby, Zavanelli and Zack and Ms. Putnam, Two World
Financial Center, 225 Liberty Street, 11th Floor, New York, NY 10281-1008;
for Messrs. Petersen, Vottiero, Weiss and Wixted and Messes. 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
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Emmanuel Ferreira       Vice President of the Manager since January 2003. An
Vice President and      officer of 4 portfolios in the OppenheimerFunds
Portfolio Manager       complex. Formerly, Portfolio Manager at Lashire
since 2003              Investments (July 1999-December 2002), and a Senior
Age: 36                 Analyst at Mark Asset Management (July 1997-June
                        1999).

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

Dimitrios Kourkoulakos  Vice President of the Manager since December 2001; an
Vice President and      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: 37

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

Christopher Leavy       Senior Vice President of the Manager since September
Vice President and      2000; an officer of 7 portfolios in the
Portfolio Manager       OppenheimerFunds complex. Formerly a portfolio
since 2002              manager of Morgan Stanley Dean Witter Investment
Age: 33                 Management (1997 - September 2000).

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

Angelo Manioudakis      Senior Vice President of the Manager (since April
Vice President and      2002), of HarbourView Asset Management Corporation
Portfolio Manager       (since April, 2002 and of OFI Institutional Asset
since 2002              Management, Inc. (since June 2002); an officer of 14
Age: 37                 portfolios in the OppenheimerFunds complex. Formerly
                        Executive Director and portfolio manager for Miller,
                        Anderson & Sherrerd, a division of Morgan Stanley
                        Investment Management (August 1993-April 2002).

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

Nikolaos D. Monoyios    Vice President of the Manager since April 1998; a
Vice President and      Certified Financial Analyst; an officer of 6
Portfolio Manager       portfolios in the OppenheimerFunds complex. Formerly
since 1999              a Vice President and portfolio manager for Guardian
Age: 54                 Investor Services, the investment management
                        subsidiary of The Guardian Life Insurance Company
                        (1979 - March 1998).

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

John O'Hare, Vice       Vice President of the Manager since September 2003;
President and           an officer of 3 portfolios in the OppenheimerFunds
Portfolio Manager       complex. Formerly Executive Vice President and
since 2003              Portfolio Manager (June 2000 - August 2003) and
Age: 45                 Portfolio Manager and Senior Vice President (August
                        1997 - June 2000) at Geneva Capital Management, Ltd.
                        (an investment advisor). Mr. O'Hare holds a BBA in
                        Finance and Economics from the University of
                        Wisconsin and is a Chartered Financial Analyst.

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

Jane Putnam             Vice President of the Manager since October 1995; an
Vice President and      officer of 2 portfolios in the OppenheimerFunds
Portfolio Manager       complex.
since 1994
Age: 43

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

Dr. Marc Reinganum,     Vice President of the Manager since September 2002; a
Vice President and      Director of Quantitative Research and Portfolio
Portfolio Manager       Strategist for Equities; an officer of 3 portfolio in
since 2003              the OppenheimerFunds complex. Formerly the Mary Jo
Age: 50                 Vaughn Rauscher Chair in Financial Investments at
                        Southern Methodist University since 1995. At Southern
                        Methodist University he also served as the Director
                        of the Finance Institute, Chairman of the Finance
                        Department, President of the Faculty at the Cox
                        School of Business and member of the Board of Trustee
                        Investment Committee.

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

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 6 portfolios in the
since 1993              OppenheimerFunds complex.
Age: 45

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

Barry D. Weiss          Vice  President  of the Manager  (since July 2001) and
Vice President and      of HarbourView  Asset  Management  Corporation  (since
Portfolio Manager       June  2003);   an  officer  of  6  portfolios  in  the
since 2001              OppenheimerFunds   complex.  Formerly  Assistant  Vice
Age: 39                 President  and Senior  Credit  Analyst of the  Manager
                        (February   2000-June  2001).  Prior  to  joining  the
                        Manager in February  2000, he was Associate  Director,
                        Structured  Finance,  Fitch  IBCA Inc.  (April  1998 -
                        February 2000).

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

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 1995              of International Equities for the Manager (since May
Age: 59                 2000); 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  of the  Manager  (since  June
Vice President and      2000) and of HarbourView Asset Management  Corporation
Portfolio Manager       (since June 2003);  an officer of 9 portfolios  in the
since 1998              OppenheimerFunds  complex.  Formerly Vice President of
Age: 52                 the Manager (June 1990 - June 2000).

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

Mark Zavanelli          Vice President of the Manager since November 2000; a
Vice President and      Chartered Financial Analyst; an officer of 2
Portfolio Manager       portfolios in the OppenheimerFunds complex. Prior to
since 2001              joining the Manager in May 1998 he was President of
Age: 33                 Waterside Capital Management, a registered investment
                        advisor (August 1995 - April 1998).

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

Brian W. Wixted,        Senior Vice President and Treasurer (since March
Treasurer since 1999    1999) of the Manager; Treasurer of HarbourView Asset
Age: 44                 Management Corporation, Shareholder Financial
                        Services, Inc., Shareholder Services, Inc.,
                        Oppenheimer Real Asset Management Corporation, and
                        Oppenheimer Partnership Holdings, Inc. (since March
                        1999), of OFI Private Investments, Inc. (since March
                        2000), of OppenheimerFunds International Ltd. and
                        OppenheimerFunds plc (since May 2000), of OFI
                        Institutional Asset Management, Inc. (since November
                        2000), and of OppenheimerFunds Legacy Program (a
                        Colorado non-profit corporation) (since June 2003);
                        Treasurer and Chief Financial Officer (since May
                        2000) of OFI Trust Company (a trust company
                        subsidiary of the Manager); Assistant Treasurer
                        (since March 1999) of Oppenheimer Acquisition Corp.
                        Formerly Assistant Treasurer of Centennial Asset
                        Management Corporation (March 1999-October 2003) and
                        OppenheimerFunds Legacy Program (April 2000-June
                        2003); Principal and Chief Operating Officer (March
                        1995-March 1999) at Bankers Trust Company-Mutual Fund
                        Services Division. An officer of 83 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: 40                 officer of 83 portfolios in the OppenheimerFunds
                        complex.

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

Brian Petersen,         Assistant Vice President of the Manager since August
Assistant Treasurer     2002; formerly Manager/Financial Product Accounting
since 2004              (November 1998-July 2002) of the Manager. An officer
Age: 33                 of 83 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: 40                 prior to which he was Chief Financial Officer at
                        Sovlink Corporation (April 1996-June 1999). An
                        officer of 83 portfolios in the OppenheimerFunds
                        complex.

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

Robert G. Zack,         Executive Vice President (since January 2004) and
Vice President &        General Counsel (since February 2002) of the Manager;
Secretary since         General Counsel and a director (since November 2001)
Age: 55                 of the Distributor; General Counsel (since November
                        2001) of Centennial Asset Management Corporation;
                        Senior Vice President and General Counsel (since
                        November 2001) of HarbourView Asset Management
                        Corporation; Secretary and General Counsel (since
                        November 2001) of Oppenheimer Acquisition Corp.;
                        Assistant Secretary and a director (since October
                        1997) of OppenheimerFunds International Ltd. and
                        OppenheimerFunds plc; Vice President and a director
                        (since November 2001) of Oppenheimer Partnership
                        Holdings, Inc.; a director (since November 2001) of
                        Oppenheimer Real Asset Management, Inc.; Senior Vice
                        President, General Counsel and a director (since
                        November 2001) of Shareholder Financial Services,
                        Inc., Shareholder Services, Inc., OFI Private
                        Investments, Inc. and OFI Trust Company; Vice
                        President (since November 2001) of OppenheimerFunds
                        Legacy Program; Senior Vice President and General
                        Counsel (since November 2001) of OFI Institutional
                        Asset Management, Inc.; a director (since June 2003)
                        of OppenheimerFunds (Asia) Limited. Formerly Senior
                        Vice President (May 1985-December 2003), 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); and OppenheimerFunds International Ltd.
                        (October 1997-November 2001). An officer of 83
                        portfolios in the OppenheimerFunds complex.

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

Kathleen T. Ives,       Vice President (since June 1998) and Senior Counsel
Assistant Secretary     and Assistant Secretary (since October 2003) of the
since 2001              Manager; Vice President (since 1999) and Assistant
Age: 38                 Secretary (since October 2003) of the Distributor;
                        Assistant Secretary (since October 2003) of
                        Centennial Asset Management Corporation; Vice
                        President and Assistant Secretary (since 1999) of
                        Shareholder Services, Inc.; Assistant Secretary
                        (since December 2001) of OppenheimerFunds Legacy
                        Program and of Shareholder Financial Services, Inc..
                        Formerly an Assistant Counsel (August 1994-October
                        2003) and Assistant Vice President of the Manager
                        (August 1997-June 1998). 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, 2003. 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 2003.

Trustee Name and            Aggregate Compensation  Total Compensation From All
Other Fund                   from the Funds as of      Oppenheimer Funds For
Position(s)                  Fiscal Year Ended       Which Individual Serve As
(as applicable)             December 31,2003(1)         Trustee/Director
                                                     As of December 31, 2003
                                                          (44 Funds)
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

William L. Armstrong                  $25,639                $118,649
  Chairman   of  the  Board  of
  Trustees  &  Audit  Committee
  Member

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

Robert G. Avis                        $21,930                $101,499
  Review Committee Member

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

George Bowen                          $21,930                $101,499
 Audit Committee Member

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

Edward L. Cameron                     $24,955                $115,503
  Audit Committee Chairman

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

Jon S. Fossel                         $24,955                $155,503
  Review Committee Chairman

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

Sam Freedman                          $21,930                $101,499
  Review Committee Member

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

Beverly Hamilton                      $21,6442            $150,5423 & 4

  Review Committee Member
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Robert J. Malone                      $21,6445              $100,1793
  Audit Committee Member

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

F. William Marshall, Jr.              $21,930               $149,4996
  Review Committee Member

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


Effective December 15, 2003, James C. Swain retired as Trustee from the Board II
Funds.  For the fiscal year ended December 31, 2003, Mr. Swain received  $38,461
aggregate  compensation from the Trust. For the calendar year ended December 31,
2003, Mr. Swain received $178,000 total compensation from all of the Oppenheimer
funds for which he served as Trustee.


1.   Aggregate  Compensation from Fund includes fees and deferred  compensation,
     if any, for a Trustee.


Includes $21,644 deferred under Deferred Compensation Plan described below.


3.   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 37  Oppenheimer
     funds at December 31, 2003).


4.   Includes $50,363  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 $21,644 deferred under Deferred Compensation Plan described below.

6.   Includes $48,000 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.


*    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 SEC, 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 April 1, 2004, 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;

Allstate Financial Advisors, ("Allstate Financial"), Lincoln, NE;
(iv) Allstate Life Insurance  Company of New York ("Allstate NY"), Vernon Hills,
     IL;
(v)  Allstate Life Insurance Company ("Allstate"), Northbrook, IL;
(vi) American   Enterprise  Life  Insurance  Company  ("American   Enterprise"),

     Minneapolis, MN;
(vii)American General Annuity Insurance Company ("American  General"),  Houston,
     TX;

(viii) Columbus Life Insurance Company ("Columbus"), Cincinnati, OH;
(ix) CUNA Mutual Life Insurance Company ("CUNA"), Waverly, IA;
(x)  GE Life & Annuity Assurance Company ("GE"), Richmond, VA;
(xi) ING Life Insurance and Annuity Company ("ING"), Hartford, CT;
(xii) Kemper Investors Life Insurance Company ("Kemper"), Schaumberg, IL;
(xiii) Lincoln Benefit Life Company ("Lincoln"), Lincoln, NE;
(xiv)Massachusetts  Mutual Life Insurance Company  ("MassMutual"),  Springfield,

     MA;

(xv) Mony Life Insurance Company of America ("Mony"), New York, NY;
(xvi) Minnesota Life Insurance Company ("Minnesota"), St. Paul, MN;
(xvii)  Merrill  Lynch,   Pierce,   Fenner  &  Smith,  Inc.  ("Merrill  Lynch"),
     Jacksonville, FL;
(xviii) Nationwide Life Insurance Company ("Nationwide"), Columbus, OH;
(xix) Protective Life Insurance Company ("Protective"), Birmingham, AL;
PrucoLife Insurance Company of Arizona ("Pruco"), Newark, NJ;
(xxi)Sage Life Assurance of America, Inc. ("Sage"), Wethersfield, CT;
(xxii) Sun Life  Assurance  Company of Canada  (U.S.)  ("Sun  Life"),  Wellesley
     Hills, MA;
(xxiii) Transamerica Life Insurance Company ("Transamerica"), Cedar Rapids, IA;
(xxiv) The Travelers Insurance Company ("Travelers"), Hartford, CT; and
(xxv)The Union Central Life Insurance  Company  ("Union  Central"),  Cincinnati,
     OH.

(xxvi) Such shares were held as shown in Appendix D.

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 SEC 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.


     Portfolio  Proxy  Voting.  The Fund  (except  Money  Fund/VA)  has  adopted
Portfolio  Proxy  Voting  Policies  and  Procedures  under  which the Fund votes
proxies  relating to  securities  ("portfolio  proxies")  held by the Fund.  The
Fund's  primary  consideration  in voting  portfolio  proxies  is the  financial
interests  of  the  Fund  and  its  shareholders.   The  Fund  has  retained  an
unaffiliated  third-party as its agent to vote  portfolio  proxies in accordance
with the Fund's  Portfolio  Proxy Voting  Guidelines and to maintain  records of
such portfolio proxy voting.  The Proxy Voting Guidelines  include provisions to
address  conflicts of interest  that may arise between the fund and OFI where an
OFI directly-controlled affiliate manages or administers the assets of a pension
plan of a company  soliciting  the proxy.  The  Fund's  Portfolio  Proxy  Voting
Guidelines on routine and non-routine proxy proposals are summarized below.

o    The Fund  votes  with the  recommendation  of the  issuer's  management  on
     routine matters,  including  election of directors  nominated by management
     and ratification of auditors, unless circumstances indicate otherwise.

o    In  general,  the  Fund  opposes   anti-takeover   proposals  and  supports
     elimination of anti-takeover proposals, absent unusual circumstances.

o    The Fund supports  shareholder  proposals to reduce a  super-majority  vote
     requirement,  and opposes management proposals to add a super-majority vote
     requirement.

o    The Fund opposes proposals to classify the board of directors.

o    The Fund supports proposals to eliminate cumulative voting.

o    The Fund opposes re-pricing of stock options.

o    The Fund generally considers executive compensation questions such as stock
     option  plans and bonus plans to be ordinary  business  activity.  The Fund
     analyzes stock option plans, paying particular  attention to their dilutive
     effect.

While the Fund generally supports management  proposals,  the Fund opposes plans
it considers to be excessive.

     The Fund will be required to file new Form N-PX,  with its  complete  proxy
voting  record for the 12 months  ended June 30th,  no later than August 31st of
each year.  The first such filing is due no later than August 31, 2004,  for the
twelve months ended June 30, 2004. Once filed,  the Fund's Form N-PX filing will
be available (i) without charge,  upon request, by calling the Fund toll-free at
1.800.225.5677 and (ii) on the SEC's website at www.sec.gov.
                                                -----------


|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.

Management Fees for the Fiscal
    Year Ended December 31
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Fund                             2001             2002             2003

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

Aggressive Growth Fund/VA     $12,164,540      $8,292,465       $7,110,272

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

Bond Fund/VA                  $ 4,571,739      $4,896,856       $4,954,407

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

Capital Appreciation          $12,843,798      $10,670,415      $9,930,998
Fund/VA

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

Global Securities Fund/VA     $12,404,364      $11,712,612      $12,206,333

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

High Income Fund/VA           $2,563,318       $2,518,441       $3,196,862

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

Main Street Fund(R)/VA          $7,073,905       $7,045,796       $7,442,344

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

Main Street Small Cap          $114,814         $170,358         $338,340

Fund(R)/VA
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Money Fund/VA                 $1,294,520       $1,738,866       $1,424,167

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

Balanced Fund/VA              $4,312,500       $3,758,161       $3,526,680

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

Strategic Bond Fund/VA        $2,440,218       $2,771,6432      $3,673,166

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

Value Fund/VA                    N/A1             N/A1            $23,894

- ------------------------------------------------------------------------------
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.


      After careful deliberation, the Board, including the Independent
Trustees concluded that it was in the best interest of shareholders to
continue the investment advisory agreement for another year. 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
agreement, including the investment advisory fee, 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 and that the fees charged
thereunder are fair and reasonable.


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, 2001, 2002 and 2003; and (ii) for the Funds'
fiscal year ended December 31, 2003, 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 Funds         Research2       For
                                                                       Research2
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------

Fund                        2001       2002      2003        2003         2003

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

Aggressive Growth Fund/VA $2,943,962$1,393,475 $3,477,965$404,154,929   $658,178

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

Bond Fund/VA              $759,725   $389,802   $84,234       $0           $0

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

Capital Appreciation      $2,151,288$1,335,268 $2,183,642$166,790,151   $293,217
Fund/VA

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

Global Securities Fund/VA $2,591,256$2,699,449 $2,836,950$310,494,239   $649,194

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

High Income Fund/VA        $8,024     $4,865    $2,592        $0           $0

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

Main Street Fund(R)/VA      $1,563,519$2,349,576 $1,722,472$222,161,491   $282,908

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

Main Street Small Cap      $73,472   $136,159  $214,694   $2,993,734     $4,949
Fund(R)/VA

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

Balanced Fund/VA          $565,744   $478,215  $827,890  $40,684,045    $90,068

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

Strategic Bond Fund/VA     $38,184   $61,906    $63,992       $0           $0

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

Value Fund/VA               N/A1       N/A1     $17,817   $2,181,439     $4,388

- -----------------------------------------------------------------------------------
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 and Class 4 Shares)


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 and Class 4 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 and Class 4
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 insurance company separate account sponsors or their affiliates (each is
referred to as a "Recipient") for personal services and account maintenance
services they provide for their customers who hold Service and Class 4
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 Recipient in any
quarter if the aggregate net assets of a Fund's Service and Class 4 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. The Plans provide for a fee of 0.25% of average
annual net assets (although the Board of Trustees has set the fee at 0.15% of
average annual net assets for Money Fund, and had set the fee at 0.15% of
average net assets for all series prior to May 1, 2003). The Board has set no
minimum asset amount. For the fiscal year ended December 31, 2003, 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,
2003, 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                   $9,523
Service Shares

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

Oppenheimer Bond Fund/VA Service Shares                 $9,743

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

Oppenheimer Capital Appreciation Fund/VA               $119,754
Service Shares

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

Oppenheimer Global Securities Fund/VA                  $228,953
Service Shares

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

Oppenheimer High Income Fund/VA Service                $102,739
Shares

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

Oppenheimer Main Street Fund(R)/VA Service              $244,739
Shares

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

Oppenheimer Main Street Small Cap Fund(R)/VA              $62,135
Service Shares

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

Oppenheimer Balanced Fund/VA Service Shares             $24,612

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

Oppenheimer Strategic Bond Fund/VA Service              $86,361
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 and Class 4 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 and Class 4 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 calling the Funds' Transfer Agent
at 1.800.981.2871 or by visiting the Oppenheimerfunds Internet website at
www.oppenheimerfunds.com.
- ------------------------

      The Funds' illustrations of their performance data in advertisements
must comply with rules of the SEC. 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 12/31/03


- ---------------------------------------------------------------------------
  Fund and Class/Inception       1 Year         5 Years        10 Years
            Date                  (or             (or            (or
                             life-of-class) life-of-class)  life-of-class)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Aggressive Growth Fund/VA        25.59%          0.31%          6.50%
Non-Service Shares (8/15/86)

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

Aggressive Growth Fund/VA        25.44%         -22.10%          N/A
Service Shares (10/16/00)

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

Bond Fund/VA                     6.78%           5.57%          6.28%
Non-Service Shares (4/3/85)

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

Bond Fund/VA                     6.56%           8.82%           N/A
Service Shares (5/1/02)

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

Capital Appreciation Fund/VA     30.94%          3.42%          12.37%
Non-Service Shares (4/3/85)

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

Capital Appreciation Fund/VA     30.69%          4.29%           N/A
Service Shares (9/18/01)

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Global Securities Fund/VA

Non-Service Shares               43.02%         10.28%          9.97%

(11/12/90)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Global Securities Fund/VA        42.86%         -2.87%           N/A
Service Shares (7/13/00)

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

Global Securities Fund/VA         N/A1           N/A1            N/A1
Class 3 shares (5/1/03)

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

Global Securities Fund/VA         N/A2           N/A2            N/A2
Class 4 shares (5/3/04)

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

High Income Fund/VA              23.96%          4.37%          6.47%
Non-Service Shares (4/30/86)

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

High Income Fund/VA              23.79%          9.28%           N/A
Service Shares (9/18/01)

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

Main Street Fund(R)/VA             26.72%          0.52%          10.66%
Non-Service Shares (7/5/95)

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

Main Street Fund(R)/VA             26.44%         -5.82%           N/A
Service Shares (7/13/00)

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

Main Street Small Cap
Fund(R)/VA                         44.36%          7.72%          6.02%
Non-Service Shares (5/1/98)

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

Main Street Small Cap
Fund(R)/VA                         44.24%          9.96%           N/A
Service Shares (7/16/01)

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

Money Fund/VA (4/3/85)           0.79%           3.45%          4.27%

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

Balanced Fund/VA                 24.96%          6.37%          8.87%
Non-Service Shares(2/9/87)

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

Balanced Fund/VA                 24.69%          7.56%           N/A
Service Shares (5/1/02)

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

Strategic Bond Fund/VA           18.07%          7.02%          6.92%
Non-Service Shares (5/3/93)

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

Strategic Bond Fund/VA           17.16%          9.22%           N/A
Service Shares (3/19/01)

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

(1)   Because  Class 3 shares of Global  Securities  Fund/VA  were not offered
    for a full calendar year during the Fund's fiscal year ended  December 31,
    2003, no performance  information is included in the table above for Class
    3 shares.
(2)                                              Because  Class  4  shares  of
    Global  Securities  Fund/VA  were not offered for sales  during the Fund's
    fiscal  year ended  December  31,  2003,  no  performance  information  is
    included in the table above for Class 4 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 SEC, 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.


o     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, 2004. 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)

- ----------------------------------------------------------------------------
                      Standardized Yield for the   Dividend Yield for the
        Fund                    30-Day                     30-Day

                        Period Ended 12/31/03       Period Ended 3/31/04

- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Bond Fund/VA

Non-Service Shares              3.60%                       5.75%

- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Bond Fund/VA

Service Shares                  3.36%                       5.72%

- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
High Income Fund/VA

Non-Service Shares              6.30%                       8.12%

- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
High Income Fund/VA

Service Shares                  6.07%                       8.07%

- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Strategic Bond

Fund/VA                         3.96%                       6.85%
Non-Service Shares

- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Strategic Bond

Fund/VA                         3.55%                       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"). 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 or Transfer Agent, and of the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings 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 its advertisements and sales
literature the total return performance of a hypothetical investment account
that includes shares of one or more of the Funds and other Oppenheimer 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, the funds 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 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.

|X|   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:


o     Equity securities with readily available market quotes 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.

o     Equity securities traded on a foreign securities exchange generally are
valued in one of the following ways:

            1. at the last sale price on the principal exchange on which it
               is traded, as reported by such exchange at its trading session
               ending at or most recently prior to the time fixed for
               valuation of securities.

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 by a portfolio pricing service using a methodology acceptable
to the Fund or by the Manager by averaging the mean between the "bid" and
"marked" prices from two active and reliable market makers in the security on
the basis of reasonable inquiry.

o     The following securities are valued at the price determined by a
pricing service using a methodology acceptable to the Fund:
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.


o     The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts to maturity:
1.    money market debt securities held by a non-money market fund that had a
               maturity of 397 days or less 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.


      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 generally
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. 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 averaging 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.


o     Securities (including restricted securities) not having
readily-available market quotations are valued at fair value determined under
the Board's procedures.


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 and Class
4 shares are expected to be lower. That is because of the effect of the
additional fee on Service and Class 4 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.

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, a series of Oppenheimer Variable Account
Funds, including the statement of investments,  as of December 31, 2003, 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, 2003, 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, 2003, 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
February 12, 2004

OPPENHEIMER AGGRESSIVE GROWTH FUND/VA

STATEMENT OF INVESTMENTS December 31, 2003
- --------------------------------------------------------------------------------

                                                   MARKET VALUE
                                       SHARES        SEE NOTE 1
- ----------------------------------------------------------------
COMMON STOCKS--97.3%
- ----------------------------------------------------------------
CONSUMER DISCRETIONARY--24.7%
- ----------------------------------------------------------------
AUTO COMPONENTS--1.7%
Gentex Corp.                          430,300    $   19,002,048
- ----------------------------------------------------------------
AUTOMOBILES--1.0%
Harley-Davidson, Inc.                 241,400        11,473,742
- ----------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--6.2%
Krispy Kreme Doughnuts, Inc. 1        148,300         5,427,780
- ----------------------------------------------------------------
P.F. Chang's China Bistro, Inc. 1     230,000        11,702,400
- ----------------------------------------------------------------
Panera Bread Co., Cl. A 1             250,700         9,910,171
- ----------------------------------------------------------------
Ruby Tuesday, Inc.                    616,200        17,555,538
- ----------------------------------------------------------------
Starbucks Corp. 1                     747,500        24,712,350
                                                ----------------
                                                     69,308,239

- ----------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--1.0%
Marvel Enterprises, Inc. 1            376,200        10,951,182
- ----------------------------------------------------------------
MEDIA--1.7%
Univision Communications, Inc.,
Cl. A 1                               479,400        19,027,386
- ----------------------------------------------------------------
MULTILINE RETAIL--3.9%
Family Dollar Stores, Inc.            805,100        28,886,988
- ----------------------------------------------------------------
Fred's, Inc.                          478,700        14,830,126
                                                ----------------
                                                     43,717,114


- ----------------------------------------------------------------
SPECIALTY RETAIL--7.1%
Bed Bath & Beyond, Inc. 1             727,600        31,541,460
- ----------------------------------------------------------------
Chico's FAS, Inc. 1                   462,700        17,096,765
- ----------------------------------------------------------------
O'Reilly Automotive, Inc. 1           407,097        15,616,241
- ----------------------------------------------------------------
PetsMart, Inc.                        672,200        15,998,360
                                                ----------------
                                                     80,252,826


- ----------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--2.1%
Coach, Inc. 1                         643,400        24,288,350
- ----------------------------------------------------------------
CONSUMER STAPLES--2.1%
- ----------------------------------------------------------------
FOOD & STAPLES RETAILING--2.1%
Whole Foods Market, Inc. 1            354,000        23,764,020
- ----------------------------------------------------------------
ENERGY--4.7%
- ----------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--1.6%
Smith International, Inc. 1           439,400        18,243,888
- ----------------------------------------------------------------
OIL & GAS--3.1%
Apache Corp.                          249,500        20,234,450
- ----------------------------------------------------------------
XTO Energy, Inc.                      493,600        13,968,880
                                                ----------------
                                                     34,203,330

- ----------------------------------------------------------------
FINANCIALS--8.2%
- ----------------------------------------------------------------
COMMERCIAL BANKS--1.6%
Commerce Bancorp, Inc.                347,100        18,285,228


                                                   MARKET VALUE
                                       SHARES        SEE NOTE 1
- ----------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--3.3%
Investors Financial Services Corp.    497,200    $   19,097,452
- ----------------------------------------------------------------
Legg Mason, Inc.                      232,500        17,944,350
                                                ----------------
                                                     37,041,802


- ----------------------------------------------------------------
INSURANCE--1.4%
AMBAC Financial Group, Inc.           235,100        16,313,589
- ----------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--1.9%
Doral Financial Corp.                 385,200        12,434,256
- ----------------------------------------------------------------
Radian Group, Inc.                    176,000         8,580,000
                                                ----------------
                                                     21,014,256

- ----------------------------------------------------------------
HEALTH CARE--17.4%
- ----------------------------------------------------------------
BIOTECHNOLOGY--5.3%
Gilead Sciences, Inc. 1               559,400        32,523,516
- ----------------------------------------------------------------
Idexx Laboratories, Inc. 1            201,641         9,331,945
- ----------------------------------------------------------------
Invitrogen Corp. 1                    257,900        18,053,000
                                                ----------------
                                                     59,908,461


- ----------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--4.1%
Stryker Corp.                         158,900        13,508,089
- ----------------------------------------------------------------
Varian Medical Systems, Inc. 1        482,200        33,320,020
                                                ----------------
                                                     46,828,109


- ----------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--7.0%
Coventry Health Care, Inc. 1           62,600         4,037,074
- ----------------------------------------------------------------
Health Management Associates,
Inc., Cl. A                         1,245,200        29,884,800
- ----------------------------------------------------------------
Lincare Holdings, Inc. 1              604,200        18,144,126
- ----------------------------------------------------------------
Patterson Dental Co. 1                415,800        26,677,728
                                                ----------------
                                                     78,743,728


- ----------------------------------------------------------------
PHARMACEUTICALS--1.0%
Mylan Laboratories, Inc.              429,700        10,854,222
- ----------------------------------------------------------------
INDUSTRIALS--15.7%
- ----------------------------------------------------------------
AIR FREIGHT & LOGISTICS--2.5%
Expeditors International of
Washington, Inc.                      763,500        28,753,410
- ----------------------------------------------------------------
AIRLINES--2.2%
JetBlue Airways Corp. 1               204,700         5,428,644
- ----------------------------------------------------------------
Southwest Airlines Co.              1,214,500        19,602,030
                                                ----------------
                                                     25,030,674


- ----------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--5.7%
Apollo Group, Inc., Cl. A 1           467,900        31,817,200
- ----------------------------------------------------------------
Corporate Executive Board Co. 1       349,100        16,292,497
- ----------------------------------------------------------------
Stericycle, Inc. 1                    339,800        15,868,660
                                                ----------------
                                                     63,978,357

STATEMENT OF INVESTMENTS  Continued
- ----------------------------------------------------------------
                                                   MARKET VALUE
                                       SHARES        SEE NOTE 1
- ----------------------------------------------------------------
MACHINERY--1.6%
Donaldson Co., Inc.                   302,700    $   17,907,732
- ----------------------------------------------------------------
ROAD & RAIL--2.0%
C.H. Robinson Worldwide, Inc.         589,100        22,332,781
- ----------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--1.7%
Fastenal Co.                          377,300        18,842,362
- ----------------------------------------------------------------
INFORMATION TECHNOLOGY--24.5%
- ----------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--1.4%
QLogic Corp. 1                        306,900        15,836,040
- ----------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--3.4%
CDW Corp.                             380,500        21,977,680
- ----------------------------------------------------------------
Thermo Electron Corp. 1               646,600        16,294,320
                                                ----------------
                                                     38,272,000

- ----------------------------------------------------------------
IT SERVICES--5.0%
Affiliated Computer Services, Inc.,
Cl. A 1                               237,000        12,907,020
- ----------------------------------------------------------------
Fiserv, Inc. 1                        331,500        13,097,565
- ----------------------------------------------------------------
Paychex, Inc.                         343,300        12,770,760
- ----------------------------------------------------------------
Sungard Data Systems, Inc. 1          624,600        17,307,666
                                                ----------------
                                                     56,083,011


- ----------------------------------------------------------------
OFFICE ELECTRONICS--2.4%
Zebra Technologies Corp., Cl. A 1     408,100        27,085,597
- ----------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--1.5%
Linear Technology Corp.               400,200        16,836,414
- ----------------------------------------------------------------
SOFTWARE--10.8%
Adobe Systems, Inc.                   520,700        20,463,510
- ----------------------------------------------------------------
Amdocs Ltd. 1                         557,200        12,525,856
- ----------------------------------------------------------------
Citrix Systems, Inc. 1                226,537         4,804,850
- ----------------------------------------------------------------
Electronic Arts, Inc. 1               578,800        27,655,064
- ----------------------------------------------------------------
Intuit, Inc. 1                        484,600        25,640,186
- ----------------------------------------------------------------
Symantec Corp. 1                      863,400        29,916,810
                                                ----------------
                                                    121,006,276
                                                ----------------
Total Common Stocks
(Cost $980,655,647)                               1,095,186,174


                                                   MARKET VALUE
                                       SHARES        SEE NOTE 1
- ----------------------------------------------------------------
PREFERRED STOCKS--0.3%
Axsun Technologies, Inc., Cv.,
Series C 1,2,3                      3,170,523    $    1,350,326
- ----------------------------------------------------------------
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            95,104
- ----------------------------------------------------------------
MicroPhotonix Integration Corp.,
Cv., Series C 1,2,3                   633,383                --
- ----------------------------------------------------------------
Multiplex, Inc., Cv.,
Series C 1,2,3                      2,330,253         1,447,786
- ----------------------------------------------------------------
Questia Media, Inc., Cv.,
Series B 1,2,3                      2,329,735           168,440
                                                ----------------
Total Preferred Stocks
(Cost $113,962,357)                                   3,061,656

                                    PRINCIPAL
                                       AMOUNT
- ----------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--2.4%
Undivided interest of 12.06% in joint
repurchase agreement (Principal Amount/
Market Value $226,368,000, with a
maturity value of $226,378,061) with DB
Alex Brown LLC, 0.80%, dated 12/31/03,
to be repurchased at $27,305,214 on
1/2/04, collateralized by U.S. Treasury
Nts., 6.75%, 5/31/05, with a value of
$231,043,540
(Cost $27,304,000)                $27,304,000        27,304,000

- ----------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $1,121,922,004)                   100.0%    1,125,551,830
- ----------------------------------------------------------------
LIABILITIES IN EXCESS
OF OTHER ASSETS                          (0.0)         (110,865)
                                 -------------------------------
NET ASSETS                              100.0%   $1,125,440,965
                                 ===============================



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.

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,
2003.
The aggregate fair value of securities of affiliated companies held by the
Fund
as of December 31, 2003 amounts to $3,061,656. Transactions during the period
in
which the issuer was an affiliate are as follows:




SHARES        GROSS        GROSS              SHARES    UNREALIZED
                                                      DECEMBER 31, 2002
ADDITIONS   REDUCTIONS   DECEMBER 31, 2003  DEPRECIATION
- ------------------------------------------------------------------------------------------------------------------------------------


STOCKS AND/OR WARRANTS
Axsun Technologies, Inc., Cv., Series C
3,170,523           --           --           3,170,523  $ 35,649,677
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    14,370,264
MicroPhotonix Integration Corp., Cv., Series C
633,383           --           --             633,383     4,000,004
Multiplex, Inc., Cv., Series C
2,330,253           --           --           2,330,253    15,702,876
Questia Media, Inc., Cv., Series B
2,329,735           --           --           2,329,735     8,831,559

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

                                           $110,900,701

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


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENT OF ASSETS AND LIABILITIES  December 31, 2003
- --------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------
ASSETS


Investments, at value--see accompanying statement:
Unaffiliated companies (cost
$1,007,959,647)
$1,122,490,174
Affiliated companies (cost $113,962,357)
                                                                3,061,656

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

                                             1,125,551,830
- ------------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest and dividends
                                                                  210,737
Shares of beneficial interest
sold
197,806
Other
                                                    7,240

- ---------------
Total assets
                             1,125,967,613

- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Bank
overdraft
                                     823
- ------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest
redeemed
344,583
Investments
purchased
76,847
Shareholder
reports
51,113
Legal, auditing and other professional
fees
34,661
Distribution and service plan
fees
5,478
Trustees'
compensation
5,287
Transfer and shareholder servicing agent fees
                                                                    848
Other
7,008

                                         ---------------
Total
liabilities
526,648

- ------------------------------------------------------------------------------------------------------------------------
NET
ASSETS
$1,125,440,965

            ===============
- ------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Par value of shares of beneficial
interest
$       30,657
- ------------------------------------------------------------------------------------------------------------------------
Additional paid-in
capital
          1,909,596,778
- ------------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on
investments
(787,816,296)
- ------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on
investments
3,629,826


- ---------------
NET
ASSETS
$1,125,440,965


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

- ------------------------------------------------------------------------------------------------------------------------
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
$1,113,743,024 and 30,337,235 shares of beneficial interest
outstanding)                                         $36.71
- ------------------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of
$11,697,941 and 320,169 shares of beneficial interest
outstanding)                                               $36.54


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENT OF OPERATIONS  For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME


Dividends (net of foreign withholding taxes of
$21,019)                          $  1,809,704
- ----------------------------------------------------------------------------------------------
Interest
                                                                  1,014,753

- -------------
Total investment
income                                                             2,824,457

- ----------------------------------------------------------------------------------------------
EXPENSES
Management
fees
7,110,272
- ----------------------------------------------------------------------------------------------
Distribution and service plan fees--Service
shares                                      9,523
- ----------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service
shares
10,406
Service
shares
176
- ----------------------------------------------------------------------------------------------
Shareholder
reports
92,622
- ----------------------------------------------------------------------------------------------
Trustees'
compensation
27,749
- ----------------------------------------------------------------------------------------------
Custodian fees and expenses
                            1,629
- ----------------------------------------------------------------------------------------------
Other
97,254

                                                -------------
Total
expenses
7,349,631
Less reduction to custodian
expenses                                                   (1,629)


- -------------
Net
expenses
7,348,002


- ----------------------------------------------------------------------------------------------
NET INVESTMENT
LOSS
(4,523,545)

- ----------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
Net realized gain on:
Investments (including premiums on options
exercised)                              62,484,464
Closing and expiration of option contracts
written                                    335,012

                        -------------
Net realized
gain
62,819,476
- ----------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on
investments               175,024,712

- ----------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
               $233,320,643

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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENTS OF CHANGES IN NET ASSETS

FINANCIAL HIGHLIGHTS


NON-SERVICE SHARES    YEAR ENDED DECEMBER 31
2003          2002          2001          2000        1999
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA


Net asset value, beginning of period                            $29.23
$ 40.72       $ 70.77       $ 82.31      $44.83
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)
(.15)         (.10)          .23           .53        (.09)
Net realized and unrealized gain (loss)                           7.63
(11.16)       (21.38)        (8.59)      37.57

- --------------------------------------------------------------
Total from investment operations                                  7.48
(11.26)       (21.15)        (8.06)      37.48
- ------------------------------------------------------------------------------------------------------------------------------
Dividends andor distributions to shareholders:
Dividends from net investment income
- --          (.23)         (.54)           --          --
Distributions from net realized gain
- --            --         (8.36)        (3.48)         --

- --------------------------------------------------------------
Total dividends andor distributions to shareholders
- --          (.23)        (8.90)        (3.48)         --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                                  $36.71
$ 29.23       $ 40.72       $ 70.77      $82.31

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

- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1                               25.59%
(27.79)%      (31.27)%      (11.24)%     83.60%

- ------------------------------------------------------------------------------------------------------------------------------
RATIOSSUPPLEMENTAL DATA
Net assets, end of period (in thousands)                    $1,113,743    $
979,919    $1,621,550    $2,595,101  $2,104,128
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                           $1,041,584
$1,240,435    $1,898,088    $2,978,465  $1,314,349
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss)
(0.43)%       (0.29)%        0.47%         0.65%      (0.17)%
Total expenses                                                    0.70%
3       0.68% 3       0.68% 3       0.64% 3     0.67% 3
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
154%           54%          134%           39%         66%


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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


AGGRESSIVE GROWTH FUND/VA

FINANCIAL HIGHLIGHTS  Continued

SERVICE SHARES    YEAR ENDED DECEMBER 31                       2003
2002          2001      2000 1
- -----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA


Net asset value, beginning of period                         $29.13       $
40.70       $ 70.77   $ 97.75
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                            -- 2
..16           .19       .20
Net realized and unrealized gain (loss)                        7.41
(11.53)       (21.36)   (27.18)

- ----------------------------------------------
Total from investment operations                               7.41
(11.37)       (21.17)   (26.98)
- -----------------------------------------------------------------------------------------------------------
Dividends andor distributions to shareholders:
Dividends from net investment income                             --
(.20)         (.54)       --
Distributions from net realized gain
- --            --         (8.36)       --

- ----------------------------------------------
Total dividends andor distributions to shareholders             --
(.20)        (8.90)       --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period                               $36.54       $
29.13       $ 40.70   $ 70.77

==============================================
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3                            25.44%
(28.05)%      (31.31)%  (27.60)%

- -----------------------------------------------------------------------------------------------------------
RATIOSSUPPLEMENTAL DATA
Net assets, end of period (in thousands)                    $11,698
$144           $54        $1
- -----------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                           $ 3,858
$ 72           $31        $1
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income (loss)                                  (0.72)%
(0.56)%        0.09%     1.14%
Total expenses                                                 0.95%
1.55%         0.83%     0.64%
Expenses after expense reimbursement or fee waiver and
reduction to custodian expenses                                 NA 5
0.98%          NA 5     NA 5
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
154%           54%          134%       39%


1. For the period from October 16, 2000 (inception of offering) to December
31, 2000.
2. Less than $0.005 per share.
3. 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.

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

YEAR ENDED DECEMBER
31,
2003            2002
- --------------------------------------------------------------------------------------------------------------------
OPERATIONS

Net investment
loss                                                                  $
(4,523,545) $   (3,634,134)
- --------------------------------------------------------------------------------------------------------------------
Net realized gain
(loss)
62,819,476    (236,178,562)
- --------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation)                                    175,024,712    (188,237,967)

                                 -------------------------------
Net increase (decrease) in net assets resulting from
operations                         233,320,643    (428,050,663)

- --------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Non-Service
shares
- --      (8,907,419)
Service
shares
- --            (359)

- --------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Non-Service
shares
(98,877,573)   (204,697,344)
Service shares

10,935,179         114,405

- --------------------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase (decrease)
                                                          145,378,249
(641,541,380)
- --------------------------------------------------------------------------------------------------------------------
Beginning of period
                                    980,062,716   1,621,604,096

- -------------------------------
End of period
          $1,125,440,965  $  980,062,716

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


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 with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. 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. Securities traded on NASDAQ are valued based on the closing price
provided by NASDAQ 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. Securities whose values have been
materially affected by what the Manager identifies as a significant event
occurring before the Fund's assets are valued but after the close of their
respective foreign exchanges will be fair valued. Fair value is determined in
good faith using 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. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated
funds
advised by the Manager, may transfer uninvested cash balances into joint
trading
accounts on a daily basis. Secured by U.S. government securities, these
balances
are invested in one or more repurchase agreements. 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. 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 on a
daily basis 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 comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company 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
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses
the
Fund may be able to offset against income and gains realized in future years
and
unrealized appreciation or depreciation of securities and other investments
for
federal income tax purposes.

                                                                 NET
UNREALIZED

APPRECIATION
                                                               BASED ON COST
OF
                                                                 SECURITIES
AND
   UNDISTRIBUTED      UNDISTRIBUTED          ACCUMULATED      OTHER
INVESTMENTS
   NET INVESTMENT         LONG-TERM                 LOSS     FOR FEDERAL
INCOME
   INCOME                      GAIN     CARRYFORWARD 1,2           TAX
PURPOSES

- ----------------------------------------------------------------------------
   $--                          $--         $787,400,423
$3,213,944

1. As of December 31, 2003, the Fund had $787,400,423 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of December 31, 2003,
details of the capital loss carryforwards were as follows:

                              EXPIRING
                              -------------------------
                              2009         $557,175,601
                              2010          230,224,822
                                           ------------
                              Total        $787,400,423
                                           ============

2. During the fiscal year December 31, 2003, the Fund utilized $32,872,643 of
capital loss carryforward to offset capital gains realized in that fiscal
year.
During the fiscal year December 31, 2002, the Fund did not utilize any capital
loss carryforwards.



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. Accordingly,
the
following amounts have been reclassified for December 31, 2003. Net assets of
the Fund were unaffected by the reclassifications.


                                                    REDUCTION TO
                                                     ACCUMULATED
                 REDUCTION TO                     NET INVESTMENT
                 PAID-IN CAPITAL                            LOSS
                 -----------------------------------------------
                 $4,523,545                           $4,523,545

The tax character of distributions paid during the years ended December 31,
2003
and December 31, 2002 was as follows:
                                          YEAR ENDED               YEAR ENDED
                                   DECEMBER 31, 2003        DECEMBER 31, 2002
   --------------------------------------------------------------------------
   Distributions paid from:
   Ordinary income                               $--               $8,907,778

The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments
for
federal income tax purposes as of December 31, 2003 are noted below. The
primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of
losses
or tax realization of financial statement unrealized gain or loss.

                 Federal tax cost of securities           $1,122,337,886
                                                          ==============
                 Gross unrealized appreciation            $  139,443,578
                 Gross unrealized depreciation             (136,229,634)
                                                          --------------
                 Net unrealized appreciation              $    3,213,944
                                                          ==============

- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. Under the plan, deferred amounts are treated as
though
equal dollar amounts had been invested in shares of the Fund or are invested
in
other Oppenheimer funds selected by the Trustee. Deferral of trustees' fees
under the plan will not affect the net assets of the Fund, and will not
materially affect the Fund's assets, liabilities or net investment income per
share. Amounts will be deferred until distributed in accordance to the Plan.

- --------------------------------------------------------------------------------
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. Income and capital gain distributions,
if
any, are declared and paid annually.

- --------------------------------------------------------------------------------
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.

- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
represents earnings on cash balances maintained by the Fund.

- --------------------------------------------------------------------------------
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,
2003          YEAR ENDED DECEMBER 31, 2002
                                                      SHARES
AMOUNT              SHARES            AMOUNT
- ---------------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES


Sold                                               7,581,692     $
249,645,333           7,012,727     $ 240,059,154
Dividends and/or distributions reinvested                 --
- --             230,762         8,907,419
Redeemed                                         (10,767,148)
(348,522,906)        (13,538,032)     (453,663,917)

- --------------------------------------------------------------------
Net decrease                                      (3,185,456)    $
(98,877,573)         (6,294,543)    $(204,697,344)

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

- ---------------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold                                                 328,184     $
11,390,813               5,604     $     188,927
Dividends and/or distributions reinvested                 --
- --                   9               359
Redeemed                                             (12,954)
(455,634)             (1,993)          (74,881)

- --------------------------------------------------------------------
Net increase                                         315,230     $
10,935,179               3,620     $     114,405

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

- --------------------------------------------------------------------------------
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, 2003, were
$1,475,858,581 and $1,488,037,400, respectively.

- --------------------------------------------------------------------------------
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 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, 0.60% of the next $700 million and 0.58% of average annual
net assets over $1.5 billion.

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 per account fee. For the year ended December 31, 2003, the Fund paid
$10,185 to OFS for services to the Fund.
   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. Fees incurred by the Fund under the plan are detailed in the
Statement
of Operations..


- --------------------------------------------------------------------------------
5. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
   The Fund generally purchases put options or writes covered call options to
hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to sell
or
purchase the underlying security at a fixed price, upon exercise of the
option.
   Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a
written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
   Securities designated to cover outstanding call options are noted in the
Statement of Investments where applicable. Shares subject to call, expiration
date, exercise price, premium received and market value are detailed in a note
to the Statement of Investments. Options written are reported as a liability
in
the Statement of Assets and Liabilities. 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, 2003 was as
follows:

                                                             CALL OPTIONS
                                             ----------------------------
                                                NUMBER OF       AMOUNT OF
                                                CONTRACTS        PREMIUMS
- -------------------------------------------------------------------------
Options outstanding as of December 31, 2002            --     $        --
Options written                                     2,840         436,467
Options closed or expired                          (2,460)       (335,012)
Options exercised                                    (380)       (101,455)
                                             ----------------------------
Options outstanding as of December 31, 2003            --     $        --
                                             ============================




                   16 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA


- --------------------------------------------------------------------------------
6. ILLIQUID OR RESTRICTED SECURITIES
As of December 31, 2003, investments in securities included issues that are
illiquid or restricted. Restricted securities are 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, 2003 was $3,061,656,
which represents 0.27% 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, 2003     DEPRECIATION
- ---------------------------------------------------------------------------------------------------------------


STOCKS AND/OR WARRANTS
Axsun Technologies, Inc., Cv., Series C            12/13/00
$37,000,003          $1,350,326      $35,649,677
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              95,104       14,370,264
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           1,447,786       15,702,876
Questia Media, Inc., Cv., Series B                  8/18/00
8,999,999             168,440        8,831,559

- --------------------------------------------------------------------------------
7. BORROWING AND LENDING ARRANGEMENTS
The Fund entered into an "interfund borrowing and lending arrangement" with
other funds in the Oppenheimer funds complex, to allow funds to borrow for
liquidity purposes. The arrangement was initiated pursuant to exemptive relief
granted by the Securities and Exchange Commission (the SEC) to allow these
affiliated funds to lend money to, and borrow money from, each other, in an
attempt to reduce borrowing costs below those of bank loan facilities. The
SEC's
order requires the Fund's Board of Trustees to adopt operating policies and
procedures to administer interfund borrowing and lending. Under the
arrangement
the Fund may lend money to other Oppenheimer funds and may borrow from other
Oppenheimer funds at a rate set by the Fund's Board of Trustees, based upon a
recommendation by the Manager. The Fund's borrowings, if any, are subject to
asset coverage requirements under the Investment Company Act and the
provisions
of the SEC order and other applicable regulations. If the Fund borrows money,
there is a risk that the loan could be called on one day's notice, in which
case
the Fund might have to borrow from a bank at higher rates if a loan were not
available from another Oppenheimer fund. If the Fund lends money to another
fund, it will be subject to the risk that the other fund might not repay the
loan in a timely manner, or at all.
   The Fund had no interfund borrowings or loans outstanding during the year
ended or at December 31, 2003.

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, 2003, 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, 2003, 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, 2003, 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
February 12, 2004

OPPENHEIMER MULTIPLE STRATEGIES FUND/VA
STATEMENT OF INVESTMENTS  December 31, 2003
- --------------------------------------------------------------------------------

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
COMMON STOCKS--56.4%
- ----------------------------------------------------------------
CONSUMER DISCRETIONARY--10.1%
- ----------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--1.6%
Brinker International, Inc. 1           117,700   $   3,902,932
- ----------------------------------------------------------------
McDonald's Corp.                        192,000       4,767,360
                                                  --------------
                                                      8,670,292

- ----------------------------------------------------------------
HOUSEHOLD DURABLES--1.0%
Toll Brothers, Inc. 1                   111,100       4,417,336
- ----------------------------------------------------------------
WCI Communities, Inc. 1                  61,000       1,257,210
                                                  --------------
                                                      5,674,546

- ----------------------------------------------------------------
MEDIA--5.7%
AMC Entertainment, Inc. 1               144,500       2,197,850
- ----------------------------------------------------------------
EchoStar Communications
Corp., Cl. A 1,2                         94,600       3,216,400
- ----------------------------------------------------------------
Gilat Satellite Networks Ltd. 1          44,600         218,094
- ----------------------------------------------------------------
Liberty Media Corp., Cl. A 1            779,900       9,273,011
- ----------------------------------------------------------------
Regal Entertainment Group                46,600         956,232
- ----------------------------------------------------------------
UnitedGlobalCom, Inc., Cl. A 1          978,171       8,294,890
- ----------------------------------------------------------------
Viacom, Inc., Cl. B 2                   169,800       7,535,724
                                                  --------------
                                                     31,692,201

- ----------------------------------------------------------------
MULTILINE RETAIL--1.2%
Sears Roebuck & Co.                     142,300       6,473,227
- ----------------------------------------------------------------
SPECIALTY RETAIL--0.5%
Gap, Inc. (The) 2                       126,900       2,945,349
- ----------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--0.1%
Nike, Inc., Cl. B 2                      11,500         787,290
- ----------------------------------------------------------------
CONSUMER STAPLES--3.8%
- ----------------------------------------------------------------
BEVERAGES--1.0%
Adolph Coors Co., Cl. B                  22,900       1,284,690
- ----------------------------------------------------------------
Constellation Brands, Inc., Cl. A 1     133,900       4,409,327
                                                  --------------
                                                      5,694,017

- ----------------------------------------------------------------
FOOD PRODUCTS--1.1%
Tyson Foods, Inc., Cl. A                308,500       4,084,540
- ----------------------------------------------------------------
Unilever NV, NY Shares                   30,000       1,947,000
                                                  --------------
                                                      6,031,540

- ----------------------------------------------------------------
PERSONAL PRODUCTS--0.4%
Estee Lauder Cos., Inc. (The), Cl. A     58,000       2,277,080
- ----------------------------------------------------------------
TOBACCO--1.3%
Altria Group, Inc.                      136,300       7,417,446
- ----------------------------------------------------------------
ENERGY--3.3%
- ----------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.3%
Halliburton Co.                          42,600       1,107,600
- ----------------------------------------------------------------
Schlumberger Ltd.                        16,100         880,992
                                                  --------------
                                                      1,988,592


                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
OIL & GAS--3.0%
BP plc, ADR                              34,800   $   1,717,380
- ----------------------------------------------------------------
Devon Energy Corp.                       17,900       1,024,954
- ----------------------------------------------------------------
Houston Exploration Co. 1                18,300         668,316
- ----------------------------------------------------------------
LUKOIL, Sponsored ADR                     9,300         865,830
- ----------------------------------------------------------------
Petroleo Brasileiro SA, Preference       81,000       2,145,026
- ----------------------------------------------------------------
Pioneer Natural Resources Co. 1          46,000       1,468,780
- ----------------------------------------------------------------
Talisman Energy, Inc.                    56,300       3,203,077
- ----------------------------------------------------------------
Total SA, B Shares                        1,700         316,069
- ----------------------------------------------------------------
TotalFinaElf SA, Sponsored ADR           24,000       2,220,240
- ----------------------------------------------------------------
Westport Resources Corp. 1               53,900       1,609,454
- ----------------------------------------------------------------
YUKOS, ADR                               36,617       1,537,914
                                                  --------------
                                                     16,777,040

- ----------------------------------------------------------------
FINANCIALS--9.3%
- ----------------------------------------------------------------
CAPITAL MARKETS--0.9%
Bank of New York Co., Inc. (The) 2       87,700       2,904,624
- ----------------------------------------------------------------
UBS AG                                   25,042       1,715,025
                                                  --------------
                                                      4,619,649

- ----------------------------------------------------------------
COMMERCIAL BANKS--2.6%
FleetBoston Financial Corp.             146,200       6,381,630
- ----------------------------------------------------------------
SunTrust Banks, Inc.                     41,500       2,967,250
- ----------------------------------------------------------------
U.S. Bancorp                            106,700       3,177,526
- ----------------------------------------------------------------
Wells Fargo & Co.                        35,300       2,078,817
                                                  --------------
                                                     14,605,223

- ----------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--2.5%
CIT Group, Inc.                          72,000       2,588,400
- ----------------------------------------------------------------
Citigroup, Inc.                          98,900       4,800,606
- ----------------------------------------------------------------
J.P. Morgan Chase & Co. 2               144,500       5,307,485
- ----------------------------------------------------------------
Merrill Lynch & Co., Inc. 2              23,000       1,348,950
                                                  --------------
                                                     14,045,441

- ----------------------------------------------------------------
INSURANCE--2.3%
American International Group, Inc. 2      6,000         397,680
- ----------------------------------------------------------------
Chubb Corp.                              49,900       3,398,190
- ----------------------------------------------------------------
Platinum Underwriters Holdings Ltd.      55,400       1,662,000
- ----------------------------------------------------------------
Prudential Financial, Inc.               96,600       4,034,982
- ----------------------------------------------------------------
XL Capital Ltd., Cl. A                   44,200       3,427,710
                                                  --------------
                                                     12,920,562

- ----------------------------------------------------------------
REAL ESTATE--1.0%
Developers Diversified Realty Corp.      42,800       1,436,796
- ----------------------------------------------------------------
Host Marriott Corp. 1                   334,900       4,125,968
                                                  --------------
                                                      5,562,764


                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
HEALTH CARE--8.4%
- ----------------------------------------------------------------
BIOTECHNOLOGY--0.8%
Applera Corp./Celera
Genomics Group 1                             48   $         668
- ----------------------------------------------------------------
Medimmune, Inc. 1                        25,500         647,700
- ----------------------------------------------------------------
Wyeth                                    93,100       3,952,095
                                                  --------------
                                                      4,600,463

- ----------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.4%
Applera Corp./Applied
Biosystems Group                            192           3,976
- ----------------------------------------------------------------
Beckman Coulter, Inc.                    61,000       3,100,630
- ----------------------------------------------------------------
Guidant Corp. 2                          54,400       3,274,880
- ----------------------------------------------------------------
Millipore Corp. 1                        29,800       1,282,890
                                                  --------------
                                                      7,662,376

- ----------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--1.6%
Aetna, Inc.                              58,400       3,946,672
- ----------------------------------------------------------------
Covance, Inc. 1                          63,800       1,709,840
- ----------------------------------------------------------------
Province Healthcare Co. 1               206,600       3,305,600
                                                  --------------
                                                      8,962,112

- ----------------------------------------------------------------
PHARMACEUTICALS--4.6%
Abbott Laboratories 2                    96,500       4,496,900
- ----------------------------------------------------------------
GlaxoSmithKline plc, ADR                 62,600       2,918,412
- ----------------------------------------------------------------
Johnson & Johnson 2                      12,000         619,920
- ----------------------------------------------------------------
Novartis AG                              89,813       4,077,623
- ----------------------------------------------------------------
Pfizer, Inc.                            140,700       4,970,931
- ----------------------------------------------------------------
Schering-Plough Corp.                   175,200       3,046,728
- ----------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd., Sponsored ADR                      51,800       2,937,578
- ----------------------------------------------------------------
Watson Pharmaceuticals, Inc. 1           54,200       2,493,200
                                                  --------------
                                                     25,561,292

- ----------------------------------------------------------------
INDUSTRIALS--6.6%
- ----------------------------------------------------------------
AEROSPACE & DEFENSE--2.6%
Boeing Co.                               38,700       1,630,818
- ----------------------------------------------------------------
Empresa Brasileira de
Aeronautica SA, ADR                     101,400       3,552,042
- ----------------------------------------------------------------
Northrop Grumman Corp. 2                  5,000         478,000
- ----------------------------------------------------------------
Orbital Sciences Corp. 1                433,164       5,206,631
- ----------------------------------------------------------------
Raytheon Co.                            121,800       3,658,872
                                                  --------------
                                                     14,526,363

- ----------------------------------------------------------------
AIRLINES--0.1%
Singapore Airlines Ltd.                 116,000         765,000
- ----------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--2.7%
Brink's Co. (The)                        74,000       1,673,140
- ----------------------------------------------------------------
Cendant Corp. 1                         484,500      10,789,815
- ----------------------------------------------------------------
ChoicePoint, Inc. 1                      67,500       2,571,075
                                                  --------------
                                                     15,034,030


                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.4%
Tyco International Ltd. 2                76,000   $   2,014,000
- ----------------------------------------------------------------
ROAD & RAIL--0.8%
Burlington Northern Santa Fe Corp.       40,600       1,313,410
- ----------------------------------------------------------------
Canadian National Railway Co.            22,000       1,392,160
- ----------------------------------------------------------------
Swift Transportation Co., Inc. 1         87,000       1,828,740
                                                  --------------
                                                      4,534,310

- ----------------------------------------------------------------
INFORMATION TECHNOLOGY--9.7%
- ----------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.2%
Cisco Systems, Inc. 1,2                  20,000         485,800
- ----------------------------------------------------------------
QUALCOMM, Inc.                           14,300         771,199
                                                  --------------
                                                      1,256,999

- ----------------------------------------------------------------
COMPUTERS & PERIPHERALS--3.1%
Hewlett-Packard Co.                     334,200       7,676,574
- ----------------------------------------------------------------
International Business
Machines Corp. 2                        103,500       9,592,380
                                                  --------------
                                                     17,268,954

- ----------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--1.3%
Flextronics International Ltd. 1        347,800       5,161,352
- ----------------------------------------------------------------
Keyence Corp.                             9,160       1,930,805
                                                  --------------
                                                      7,092,157

- ----------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.6%
Net2Phone, Inc. 1                       466,000       3,168,800
- ----------------------------------------------------------------
IT SERVICES--0.5%
Infosys Technologies Ltd.,
Sponsored ADR                            10,700       1,023,990
- ----------------------------------------------------------------
Titan Corp. (The) 1                      91,000       1,984,710
                                                  --------------
                                                      3,008,700

- ----------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--2.8%
Analog Devices, Inc. 2                   40,200       1,835,130
- ----------------------------------------------------------------
ASML Holding NV 1                        82,100       1,646,105
- ----------------------------------------------------------------
Brooks Automation, Inc. 1                54,900       1,326,933
- ----------------------------------------------------------------
Intel Corp. 2                           164,600       5,300,120
- ----------------------------------------------------------------
KLA-Tencor Corp. 1,2                     20,500       1,202,735
- ----------------------------------------------------------------
Novellus Systems, Inc. 1                 30,600       1,286,730
- ----------------------------------------------------------------
STMicroelectronics NV 2                  43,000       1,161,430
- ----------------------------------------------------------------
Teradyne, Inc. 1                         69,500       1,768,775
                                                  --------------
                                                     15,527,958

- ----------------------------------------------------------------
SOFTWARE--1.2%
BEA Systems, Inc. 1,2                    30,000         369,000
- ----------------------------------------------------------------
Compuware Corp. 1                       120,800         729,632
- ----------------------------------------------------------------
Microsoft Corp.                          72,500       1,996,650
- ----------------------------------------------------------------
Oracle Corp. 1                            4,200          55,440
- ----------------------------------------------------------------
Take-Two Interactive Software, Inc. 1   123,800       3,566,678
                                                  --------------
                                                      6,717,400


STATEMENT OF INVESTMENTS  Continued
- ----------------------------------------------------------------
                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
MATERIALS--2.0%
- ----------------------------------------------------------------
CHEMICALS--0.9%
Dow Chemical Co.                         95,300   $   3,961,621
- ----------------------------------------------------------------
Praxair, Inc.                            35,000       1,337,000
- ----------------------------------------------------------------
Sterling Chemicals, Inc. 1                   18             473
                                                  --------------
                                                      5,299,094

- ----------------------------------------------------------------
METALS & MINING--0.5%
Companhia Vale do Rio Doce,
Sponsored ADR                            54,900       2,827,899
- ----------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.6%
Boise Cascade Corp.                      48,433       1,591,509
- ----------------------------------------------------------------
Bowater, Inc.                            33,700       1,560,647
                                                  --------------
                                                      3,152,156

- ----------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.5%
- ----------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.2%
IDT Corp., Cl. B 1                      224,800       5,199,624
- ----------------------------------------------------------------
Qwest Communications
International, Inc. 1                   365,700       1,579,824
- ----------------------------------------------------------------
WorldCom, Inc./
WorldCom Group 1                        375,000           5,175
                                                  --------------
                                                      6,784,623

- ----------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.3%
AT&T Corp.                               57,000       1,157,100
- ----------------------------------------------------------------
AT&T Wireless Services, Inc. 1,2         72,000         575,280
                                                  --------------
                                                      1,732,380

- ----------------------------------------------------------------
UTILITIES--1.7%
- ----------------------------------------------------------------
ELECTRIC UTILITIES--1.3%
AES Corp. (The) 1                       389,900       3,680,656
- ----------------------------------------------------------------
Dominion Resources, Inc.                 19,600       1,251,068
- ----------------------------------------------------------------
Edison International 1,2                 25,500         559,215
- ----------------------------------------------------------------
PG&E Corp. 1                             58,100       1,613,437
                                                  --------------
                                                      7,104,376

- ----------------------------------------------------------------
GAS UTILITIES--0.1%
Kinder Morgan, Inc.                      13,600         803,760
- ----------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--0.3%
Equitable Resources, Inc.                42,600       1,828,392
                                                  --------------
Total Common Stocks (Cost $214,617,654)             315,415,853

- ----------------------------------------------------------------
PREFERRED STOCKS--0.3%
Rouse Co. (The), $3 Cum. Cv.,
Series B (Cost $995,900)                 23,000       1,409,900



                                                   MARKET VALUE
                                          UNITS      SEE NOTE 1
- ----------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
Covergent Communications, Inc.
Wts., Exp. 4/1/08 1,3                     1,000   $          10
- ----------------------------------------------------------------
HF Holdings, Inc. Wts., Exp. 9/27/09 1,3  2,593             350
- ----------------------------------------------------------------
Sterling Chemicals, Inc. Wts.,
Exp. 12/19/08 1,3                           692              --
- ----------------------------------------------------------------
Sun Healthcare Group, Inc. Wts.,
Exp. 2/28/05 1,3                          1,241             312
- ----------------------------------------------------------------
United Mexican States Bonds,
Series E Rts., Exp. 6/30/07 1,3       4,450,000           5,563
- ----------------------------------------------------------------
United Mexican States Collateralized
Fixed Rate Par Bonds:
Series B, 6.25%, 12/31/19 Rts.,
Exp. 6/30/04 1                        4,450,000          44,500
Series C, 6.25%, 12/31/19 Rts.,
Exp. 6/30/05 1,3                      4,450,000           8,900
Series D, 6.25%, 12/31/19 Rts.,
Exp. 6/30/06 1,3                      4,450,000           8,900
- ----------------------------------------------------------------
XO Communications, Inc.:
Cl. A Wts., Exp. 1/16/10 1                  506             987
Cl. B Wts., Exp. 1/16/10 1                  379             644
Cl. C Wts., Exp. 1/16/10 1                  379             417
                                                  --------------
Total Rights, Warrants and
Certificates (Cost $40,537)                              70,583


                                      PRINCIPAL
                                         AMOUNT
- ----------------------------------------------------------------
ASSET-BACKED SECURITIES--9.3%
Bank One Auto Securitization
Trust, Automobile Receivables,
Series 2003-1, Cl. A2,
1.29%, 8/21/06                      $ 1,250,000       1,249,710
- ----------------------------------------------------------------
BMW Vehicle Owner Trust,
Automobile Loan Certificates,
Series 2003-A, Cl. A2,
1.45%, 11/25/05 3                     1,759,658       1,762,517
- ----------------------------------------------------------------
Capital Auto Receivables Asset Trust,
Automobile Mtg.-Backed Nts.,
Series 2003-2, Cl. A2A,
1.20%, 5/16/05                        1,470,000       1,470,782
- ----------------------------------------------------------------
Caterpillar Financial Asset Trust,
Equipment Loan Pass-Through
Certificates, Series 2003-A,
Cl. A2,1.25%, 10/25/05                  880,000         880,358
- ----------------------------------------------------------------
Centex Home Equity Co. LLC, Home
Equity Loan Asset-Backed Certificates:
Series 2003-A, Cl. AF1, 1.836%,
10/25/17                                270,603         270,842
Series 2003-B, Cl. AF1, 1.64%,
2/25/18 3                               420,526         420,415
Series 2003-C, Cl. AF1, 2.14%,
7/25/18                               1,274,467       1,277,429

                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
Chase Funding Mortgage Loan
Asset-Backed Certificates, Home
Equity Mtg. Obligations:
Series 2003-3, Cl. 1A1,
1.199%, 8/25/17 4                   $   648,200   $     648,281
Series 2003-4, Cl. 1A1,
1.24%, 9/25/17 4                      1,430,738       1,431,090
- ----------------------------------------------------------------
Chase Manhattan Auto Owner
Trust, Automobile Loan Pass-Through
Certificates:
Series 2003-A, Cl. A2,1.26%, 1/16/06 3  560,000         560,367
Series 2003-B, Cl. A2,1.287%, 3/15/06   690,000         690,235
- ----------------------------------------------------------------
CitiFinancial Mortgage Securities,
Inc., Home Equity Collateralized
Mtg. Obligations:
Series 2003-1, Cl. AF1, 1.94%, 1/25/33  491,394         491,814
Series 2003-2, Cl. AF1, 1.219%,
5/25/33 3,4                             666,554         666,525
Series 2003-3, Cl. AF1, 1.261%,
8/25/33 3,4                           1,021,633       1,021,656
- ----------------------------------------------------------------
DaimlerChrysler Auto Trust,
Automobile Loan Pass-Through
Certificates:
Series 2002-B, Cl. A2, 2.20%, 4/6/05    119,581         119,779
Series 2003-A, Cl. A2, 1.52%, 12/8/05 2,080,000       2,083,765
Series 2003-B, Cl. A2, 1.61%, 7/8/06  2,470,000       2,451,228
- ----------------------------------------------------------------
Ford Credit Auto Owner Trust,
Automobile Loan Pass-Through
Certificates, Series 2003-A, Cl. A2A,
1.62%, 8/15/05                          597,795         599,077
- ----------------------------------------------------------------
Harley-Davidson Motorcycle Trust,
Motorcycle Receivable Nts.:
Series 2002-2, Cl. A1, 1.91%, 4/16/07   619,148         621,266
Series 2003-3, Cl. A1, 1.50%, 1/15/08 1,827,112       1,830,249
- ----------------------------------------------------------------
Honda Auto Receivables Owner
Trust, Automobile
Receivables Obligations:
Series 2003-1, Cl. A2,
1.46%, 9/19/05                        1,094,314       1,095,991
Series 2003-2, Cl. A2,
1.34%, 12/21/05                       1,603,000       1,604,634
Series 2003-3, Cl. A2,
1.52%, 4/21/06                        2,310,000       2,313,790
Series 2003-4, Cl. A2,
1.58%, 7/17/06                        2,170,000       2,173,529
- ----------------------------------------------------------------
Household Automotive Trust,
Automobile Loan Certificates,
Series 2003-2, Cl. A2,
1.56%, 12/18/06                       1,080,000       1,081,449
- ----------------------------------------------------------------
M&I Auto Loan Trust, Automobile
Loan Certificates:
Series 2002-1, Cl. A3,
2.49%, 10/22/07                       1,590,000       1,603,812
Series 2003-1, Cl. A2,
1.60%, 7/20/06                        1,780,000       1,780,684
- ----------------------------------------------------------------
Nissan Auto Lease Trust, Auto
Lease Obligations, Series 2003-A,
Cl. A2, 1.69%, 12/15/05               1,390,000       1,393,851
- ----------------------------------------------------------------
Nissan Auto Receivables Owner
Trust, Automobile Receivable Nts.:
Series 2003-A, Cl. A2,
1.45%, 5/16/05                        1,585,470       1,587,537
Series 2003-B, Cl. A2,
1.20%, 11/15/05                       2,140,000       2,140,837




                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
Residential Funding Mortgage
Securities II, Inc., Home Equity
Loan Pass-Through Certificates,
Serie 2003-HS1, Cl. AI2, 1.241%,
1/25/33 4                           $   547,113   $     547,419
- ----------------------------------------------------------------
Toyota Auto Receivables Owner
Trust, Automobile Mtg.-Backed
Obligations:
Series 2002-B, Cl. A3,
3.76%, 6/15/06                          571,105         578,747
Series 2003-A, Cl. A2,
1.28%, 8/15/05                        1,919,011       1,920,760
Series 2003-B, Cl. A2,
1.43%, 2/15/06                        1,510,000       1,510,782
- ----------------------------------------------------------------
USAA Auto Owner Trust,
Automobile Loan
Asset-Backed Nts.:
Series 2002-1, Cl. A3, 2.41%, 10/16/06  909,950         916,488
Series 2003-1, Cl. A2,
1.22%, 4/17/06                        1,280,000       1,280,488
- ----------------------------------------------------------------
Volkswagen Auto Loan Enhanced
Trust, Automobile Loan Receivables:
Series 2003-1, Cl. A2,
1.11%, 12/20/05                       2,770,000       2,768,972
Series 2003-2, Cl. A2,
1.55%, 6/20/06                        1,200,000       1,201,937
- ----------------------------------------------------------------
Whole Auto Loan Trust,
Automobile Loan Receivables:
Series 2002-1, Cl. A2, 1.88%, 6/15/05 1,519,986       1,524,122
Series 2003-1, Cl. A2A, 1.40%,
4/15/06                               2,240,000       2,241,947
                                                  --------------
Total Asset-Backed Securities (Cost $51,784,349)     51,815,161

- ----------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--24.0%
CIT Equipment Collateral, Equipment
Receivable-Backed Nts.,
Series 2003-EF1, Cl. A2, 1.49%,
12/20/05                                600,000         600,292
- ----------------------------------------------------------------
Federal Home Loan
Mortgage Corp.:
5%, 1/1/34 5                          2,672,000       2,637,766
7%, 5/1/29-11/1/33                    3,841,335       4,072,957
- ----------------------------------------------------------------
Federal Home Loan Mortgage
Corp., Gtd. Real Estate Mtg.
Investment Conduit Multiclass
Pass-Through Certificates:
Series 2500, Cl. FD,
1.62%, 3/15/32 4                        509,042         505,721
Series 2526, Cl. FE,
1.52%, 6/15/29 4                        556,460         554,878
Series 2551, Cl. FD,
1.52%, 1/15/33 4                        480,961         482,916
- ----------------------------------------------------------------
Federal Home Loan Mortgage
Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 176, Cl. IO, 0.11%, 6/1/26 6     776,041         129,710
Series 177, Cl. B, 2.489%, 7/1/26 6   1,325,734         233,985
Series 183, Cl. IO, 3.34%, 4/1/27 6   1,278,610         217,735
Series 184, Cl. IO,
0.119%, 12/1/26 6                     1,253,253         211,110
- ----------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Structured Pass-Through Securities,
Collateralized Mtg. Obligations:
Series H006, Cl. A1, 1.724%, 4/15/08    302,204         301,969
Series T-42, Cl. A2, 5.50%, 2/25/42     276,035         280,202

STATEMENT OF INVESTMENTS  Continued
- ----------------------------------------------------------------
                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
Federal National Mortgage Assn.:
5%, 1/1/34 5                        $ 7,578,000   $   7,499,856
5.50%, 1/14/34 5                     19,268,000      19,520,893
6%, 5/1/16                            4,566,251       4,796,106
6.50%, 11/1/27-12/1/27                  423,538         444,023
6.50%, 1/25/34 5                     42,266,000      44,207,616
7%, 9/1/33-11/1/33                    1,855,125       1,967,553
7%, 7/1/32-1/25/34 5                 37,260,017      39,460,899
8.50%, 7/1/32                           174,277         188,205
- ----------------------------------------------------------------
Federal National Mortgage Assn.,
Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates,
Trust 2002-77, Cl. WF,
1.52%, 12/18/32 4                       834,958         837,555
- ----------------------------------------------------------------
Federal National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates,
Trust 2003-81, Cl. PA, 5%, 2/25/12      473,112         484,583
- ----------------------------------------------------------------
Federal National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates
Interest-Only Stripped
Mtg.-Backed Security:
Trust 2002-47, Cl. NS,
24.442%, 4/25/32 6                    1,879,860         192,999
Trust 2002-51, Cl. S,
24.442%, 8/25/32 6                    1,726,155         175,590
- ----------------------------------------------------------------
Federal National Mortgage Assn.,
Interest-Only Stripped
Mtg.-Backed Security:
Trust 2002-52, Cl. SD,
6.90%, 9/25/32 6                      2,332,251         213,994
Trust 222, Cl. 2,
(2.144)%, 6/1/23 6                    1,634,395         306,960
Trust 240, Cl. 2,
(4.534)%, 9/1/23 6                    2,615,342         483,523
Trust 252, Cl. 2,
(6.48)%, 11/1/23 6                    1,832,083         367,296
Trust 273, Cl. 2,
(0.977)%, 7/1/26 6                      561,834          94,857
- ----------------------------------------------------------------
Government National
Mortgage Assn., 8%, 4/15/23             417,675         457,924
- ----------------------------------------------------------------
Prudential Mortgage Capital Co.
II LLC, Commercial Mtg.
Pass-Through Certificates, Series
PRU-HTG 2000-C1, Cl. A2, 7.306%,
10/6/15                                 983,000       1,134,033
- ----------------------------------------------------------------
Washington Mutual Mortgage
Securities Corp., Collateralized Mtg.
Obligations Pass-Through
Certificates, Series 2003-AR7, Cl. A1,
1.507%, 8/25/33 4                     1,164,590       1,165,473
                                                  --------------
Total Mortgage-Backed Obligations
(Cost $133,254,209)                                 134,229,179

- ----------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--5.7%
Federal Home Loan Bank
Unsec. Bonds:
2.875%, 12/15/06                      1,385,000       1,395,911
4.875%, 11/15/13                        760,000         769,712
Series EY06, 5.25%, 8/15/06           2,045,000       2,190,925


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS Continued
Federal Home Loan Mortgage
Corp. Unsec. Nts.:
4.50%, 1/15/13                      $ 1,695,000   $   1,689,540
5.50%, 7/15/06 7                     12,500,000      13,476,113
- ----------------------------------------------------------------
Federal National Mortgage Assn.
Unsec. Nts.:
4.25%, 7/15/07                        5,550,000       5,801,104
7.25%, 1/15/10                        3,300,000       3,895,680
- ----------------------------------------------------------------
Freddie Mac Unsec. Nts., 6.875%,
9/15/10                               1,500,000       1,744,517
- ----------------------------------------------------------------
Tennessee Valley Authority Bonds:
5.375%, 11/13/08                        247,000         266,749
7.125%, 5/1/30                          460,000         553,622
                                                  --------------
Total U.S. Government
Obligations (Cost $31,715,476)                       31,783,873

- ----------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--0.1%
United Mexican States Nts.,
7.50%, 1/14/12 (Cost $527,240)          475,000         536,988

- ----------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--10.7%
ABN Amro Bank NV (NY Branch),
7.125% Sub. Nts., Series B, 10/15/93    400,000         443,375
- ----------------------------------------------------------------
Aetna, Inc., 7.375% Sr. Unsec. Nts.,
3/1/06                                  400,000         440,302
- ----------------------------------------------------------------
Allied Waste North America, Inc.,
10% Sr. Unsec. Sub. Nts.,
Series B, 8/1/09                        400,000         434,000
- ----------------------------------------------------------------
American Honda Finance Corp.,
3.85% Nts., 11/6/08                     310,000         312,488
- ----------------------------------------------------------------
Amgen, Inc., 8.125% Unsec.
Debs., 4/1/97                            91,000         112,727
- ----------------------------------------------------------------
AT&T Wireless Services, Inc., 7.50%
Sr. Unsec. Nts., 5/1/07                 885,000         992,989
- ----------------------------------------------------------------
AXA, 8.60% Unsec. Sub. Nts., 12/15/30   750,000         948,783
- ----------------------------------------------------------------
Bank of America Corp., 7.80% Jr.
Unsec. Sub. Nts., 2/15/10               400,000         476,273
- ----------------------------------------------------------------
Bankers Trust Corp., 7.375% Unsec.
Sub. Nts., 5/1/08                       100,000         114,474
- ----------------------------------------------------------------
Beazer Homes USA, Inc., 8.625% Sr.
Unsec. Nts., 5/15/11                    565,000         624,325
- ----------------------------------------------------------------
Boeing Capital Corp.:
6.50% Nts., 2/15/12 7                   750,000         821,311
7.375% Sr. Nts., 9/27/10              1,340,000       1,542,356
- ----------------------------------------------------------------
British Sky Broadcasting Group plc,
8.20% Sr. Unsec. Nts., 7/15/09          505,000         602,028
- ----------------------------------------------------------------
British Telecommunications plc,
7.875% Nts., 12/15/05                   770,000         849,014
- ----------------------------------------------------------------
Cambridge Industries, Inc.,
Liquidating Trust Interests,
7/15/07 3,8                             309,823              --

                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
CenterPoint Energy, Inc.,
5.875% Nts., 6/1/08 9               $   690,000   $     719,504
- ----------------------------------------------------------------
CIT Group, Inc., 7.75% Sr. Unsec.
Unsub. Nts., 4/2/12                   1,000,000       1,183,293
- ----------------------------------------------------------------
Citigroup, Inc., 6.875%
Unsec. Nts., 2/15/98                    450,000         498,395
- ----------------------------------------------------------------
Citizens Communications Co.,
9.25% Sr. Nts., 5/15/11                 555,000         657,228
- ----------------------------------------------------------------
Coca-Cola Co. (The), 7.375%
Unsec. Debs., 7/29/93                   360,000         420,836
- ----------------------------------------------------------------
Conoco, Inc., 6.95% Sr. Unsec.
Nts., 4/15/29                           400,000         455,051
- ----------------------------------------------------------------
Credit Suisse First Boston, Inc.
(USA), 6.125% Nts., 11/15/11            880,000         959,589
- ----------------------------------------------------------------
CSX Corp., 6.25% Unsec. Nts.,
10/15/08                                585,000         641,789
- ----------------------------------------------------------------
D.R. Horton, Inc., 9.375% Sr. Unsec.
Sub. Nts., 3/15/11                      520,000         592,800
- ----------------------------------------------------------------
DaimlerChrysler NA Holding
Corp., 6.40% Nts., 5/15/06 7          1,055,000       1,130,956
- ----------------------------------------------------------------
Delphi Corp., 6.55% Nts., 6/15/06       515,000         552,929
- ----------------------------------------------------------------
Deutsche Telekom International
Finance BV, 8.50% Unsub. Nts., 6/15/10  770,000         932,448
- ----------------------------------------------------------------
Doman Industries Ltd.,
8.75% Sr. Nts., 3/15/04 1,3,10          700,000         122,500
- ----------------------------------------------------------------
Dominion Resources, Inc.,
8.125% Sr. Unsub. Nts., 6/15/10         530,000         636,746
- ----------------------------------------------------------------
DTE Energy Co.,
6.375% Sr. Nts., 4/15/33                605,000         594,922
- ----------------------------------------------------------------
EOP Operating LP:
6.763% Sr. Unsec. Nts., 6/15/07         180,000         199,516
8.375% Nts., 3/15/06                    425,000         476,129
- ----------------------------------------------------------------
Ford Motor Co.:
7.70% Unsec. Debs., 5/15/97             400,000         385,190
8.90% Unsec. Unsub. Debs., 1/15/32      340,000         382,106
- ----------------------------------------------------------------
France Telecom SA:
8.45% Sr. Unsec. Nts., 3/1/06           115,000         128,531
9% Sr. Unsec. Nts., 3/1/11              540,000         649,645
9.75% Sr. Unsec. Nts., 3/1/31 4         230,000         306,645
- ----------------------------------------------------------------
Franklin Resources, Inc.,
3.70% Nts., 4/15/08                     425,000         423,108
- ----------------------------------------------------------------
Gap, Inc. (The),
6.90% Nts., 9/15/07                     495,000         548,831
- ----------------------------------------------------------------
General Electric Capital Corp.:
6.75% Nts., Series A, 3/15/32           195,000         216,606
7.25% Nts., Series A, 2/1/05            400,000         423,743
- ----------------------------------------------------------------
General Motors Acceptance
Corp., 6.875% Unsec.
Unsub. Nts., 8/28/12                  1,665,000       1,794,187
- ----------------------------------------------------------------
General Motors Corp.,
8.375% Sr. Unsec. Debs., 7/15/33        790,000         919,799



                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
Goldman Sachs Group, Inc.
(The), 7.80% Sr. Unsec.
Unsub. Nts., Series B, 1/28/10      $   400,000   $     474,908
- ----------------------------------------------------------------
Hartford Financial Services Group,
Inc. (The), 2.375% Nts., 6/1/06         345,000         343,471
- ----------------------------------------------------------------
Health Net, Inc., 8.375% Sr. Unsec.
Unsub. Nts., 4/15/11                    480,000         577,565
- ----------------------------------------------------------------
Hertz Corp. (The),
7.625% Sr. Nts., 6/1/12               1,280,000       1,388,799
- ----------------------------------------------------------------
Household Finance Corp.,
7% Nts., 5/15/12                        820,000         936,611
- ----------------------------------------------------------------
Huntsman Corp./ICI Chemical
Co. plc, 13.08% Sr. Unsec.
Disc. Nts., 12/31/09 11                 500,000         243,750
- ----------------------------------------------------------------
Hutchison Whampoa
International Ltd.,
7.45% Sr. Bonds., 11/24/33 9            495,000         517,450
- ----------------------------------------------------------------
IT Group, Inc., 11.25% Sr. Unsec.
Sub. Nts., Series B, 4/1/09 1,3,10      400,000              --
- ----------------------------------------------------------------
John Hancock Global
Funding II, 7.90% Nts., 7/2/10 9        920,000       1,097,715
- ----------------------------------------------------------------
Kaiser Aluminum & Chemical
Corp., 10.875% Sr. Nts.,
Series B, 10/15/06 1,3,10               250,000         226,250
- ----------------------------------------------------------------
Kinder Morgan, Inc.,
6.50% Sr. Unsec. Nts., 9/1/12           595,000         657,682
- ----------------------------------------------------------------
Kroger Co. (The),
7.80% Sr. Nts., 8/15/07                 905,000       1,033,442
- ----------------------------------------------------------------
Leap Wireless International, Inc.:
0%/14.50% Sr. Unsec. Disc. Nts.,
4/15/10 1,3, 10, 12                     300,000          37,500
12.50% Sr. Nts., 4/15/10 3,10           400,000          58,000
- ----------------------------------------------------------------
Liberty Media Corp.,
3.50% Nts., 9/25/06                     600,000         603,464
- ----------------------------------------------------------------
MeadWestvaco Corp.,
2.75% Nts., 12/1/05                     945,000         937,443
- ----------------------------------------------------------------
Merrill Lynch & Co., Inc.,
3.375% Nts., Series B, 9/14/07          685,000         694,448
- ----------------------------------------------------------------
Metallurg, Inc.,
11% Sr. Nts., 12/1/07                   450,000         254,250
- ----------------------------------------------------------------
Morgan Stanley,
6.60% Nts., 4/1/12                      570,000         637,624
- ----------------------------------------------------------------
News America Holdings, Inc.,
7.75% Sr. Unsec. Debs., 12/1/45         825,000         978,879
- ----------------------------------------------------------------
Nextlink Communications, Inc.,
Escrow Shares, 6/1/09 3,8               350,000              --
- ----------------------------------------------------------------
Niagara Mohawk Power Corp.,
5.375% Sr. Unsec. Nts., 10/1/04         370,000         380,178
- ----------------------------------------------------------------
NiSource Finance Corp.:
3.20% Nts., 11/1/06                     180,000         181,575
7.875% Sr. Unsec. Nts., 11/15/10        790,000         940,899


STATEMENT OF INVESTMENTS  Continued
- ----------------------------------------------------------------


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
Northrop Grumman Corp.,
7.125% Sr. Nts., 2/15/11            $   635,000   $     735,477
- ----------------------------------------------------------------
Orbcomm Global LP, Escrow
Shares, 8/15/04 3,8                     200,000              --
- ----------------------------------------------------------------
Petroleos Mexicanos,
9.50% Sr. Sub. Nts., 9/15/27            365,000         432,525
- ----------------------------------------------------------------
PF Export Receivables Master Trust,
3.748% Sr. Nts., Series B, 6/1/13 9     445,000         434,020
- ----------------------------------------------------------------
Progress Energy, Inc., 6.55% Sr.
Unsec. Nts., 3/1/04                   1,160,000       1,168,708
- ----------------------------------------------------------------
Prudential Holdings LLC, 8.695%
Bonds, Series C, 12/18/23 9             900,000       1,114,210
- ----------------------------------------------------------------
Prudential Insurance Co. of America,
8.30% Nts., 7/1/25 9                    920,000       1,128,512
- ----------------------------------------------------------------
PSEG Energy Holdings, 7.75% Unsec.
Nts., 4/16/07                           595,000         634,419
- ----------------------------------------------------------------
Pulte Homes, Inc.,
8.375% Sr. Nts., 8/15/04                225,000         231,249
- ----------------------------------------------------------------
R&B Falcon Corp.,
9.50% Sr. Unsec. Nts., 12/15/08         500,000         618,073
- ----------------------------------------------------------------
Raytheon Co.,
6.50% Unsec. Nts., 7/15/05              835,000         890,165
- ----------------------------------------------------------------
Rogers Wireless Communications,
Inc., 9.625% Sr. Sec. Nts., 5/1/11      168,000         201,600
- ----------------------------------------------------------------
Safeway, Inc.,
3.80% Sr. Unsec. Nts., 8/15/05        1,080,000       1,103,157
- ----------------------------------------------------------------
Sears Roebuck Acceptance Corp.,
3.07% Nts., Series VII, 2/25/04 4       825,000         826,422
- ----------------------------------------------------------------
Shopping Center Associates,
6.75% Sr. Unsec. Nts., 1/15/04 9        195,000         195,256
- ----------------------------------------------------------------
Sprint Capital Corp.,
8.75% Nts., 3/15/32                     920,000       1,090,671
- ----------------------------------------------------------------
Sterling Chemicals, Inc.:
10% Sr. Sec. Nts., 12/19/07 3           221,615         214,413
11.25% Sr. Sub. Nts., 8/15/06 1,3,10    335,000              --
- ----------------------------------------------------------------
TCI Communications, Inc.,
9.80% Sr. Unsec. Debs., 2/1/12        1,400,000       1,828,932
- ----------------------------------------------------------------
TECO Energy, Inc.,
10.50% Sr. Unsec. Nts., 12/1/07         475,000         556,938
- ----------------------------------------------------------------
Telefonos de Mexico SA,
8.25% Sr. Unsec. Nts., 1/26/06          475,000         526,101
- ----------------------------------------------------------------
Time Warner Cos., Inc.,
9.125% Debs., 1/15/13                   530,000         674,668
- ----------------------------------------------------------------
Time Warner Entertainment Co. LP:
8.375% Sr. Debs., 3/15/23                10,000          12,430
10.15% Sr. Nts., 5/1/12                 500,000         668,460
- ----------------------------------------------------------------
Toll Corp., 8.25% Sr. Sub.
Nts., 12/1/11                           565,000         626,444
- ----------------------------------------------------------------
Tyco International Group SA:
6.375% Nts., 10/15/11                   750,000         805,313
6.75% Sr. Unsub. Nts., 2/15/11        1,910,000       2,096,225



                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
Vornado Realty LP, 5.625% Sr. Unsec.
Unsub. Nts., 6/15/07                $   680,000   $     726,567
- ----------------------------------------------------------------
Waste Management, Inc.:
7% Sr. Nts., 7/15/28                    220,000         237,509
7.375% Sr. Unsub. Nts., 8/1/10          435,000         503,322
- ----------------------------------------------------------------
Weyerhaeuser Co., 5.50% Unsec.
Unsub. Nts., 3/15/05                    845,000         879,941
                                                  --------------
Total Non-Convertible Corporate
Bonds and Notes (Cost $57,824,667)                   60,031,097

- ----------------------------------------------------------------
STRUCTURED NOTES--2.5%
Deutsche Bank AG, COUNTS
Corp. Sec. Credit Linked Nts.,
Series 2003-1, 2.89%, 1/7/05 3,4      3,550,000       3,499,590
- ----------------------------------------------------------------
JPMorgan Chase Bank, TRAC-X NA
High Yield T1 Credit Default
Swap Bonds, 7.375%, 3/25/09 9           447,000         468,233
- ----------------------------------------------------------------
JPMorgan Chase Bank, TRAC-X NA
High Yield T2 Credit Default Swap
Bonds, 6.05%, 3/25/09 9               6,100,000       6,275,375
- ----------------------------------------------------------------
UBS AG, High Grade Credit Linked
Nts., 2.814%, 12/10/04 3,4            3,550,000       3,581,063
                                                  --------------
Total Structured Notes (Cost $13,647,000)            13,824,261

- ----------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--12.1% 13
Undivided interest of 4.22% in joint
repurchase agreement (Principal
Amount/Market Value $1,603,898,000, with
a maturity value of $1,603,979,086) with
PaineWebber, Inc., 0.91%, dated
12/31/03, to be repurchased at
$67,634,419 on 1/2/04, collateralized by
Federal Home Loan Mortgage Corp.,
5%--5.50%, 9/1/33--11/1/33, with a value
of $405,980,626 and Federal National
Mortgage Assn., 4.50%, 10/1/33, with a
value of $1,234,398,060
(Cost $67,631,000)                   67,631,000      67,631,000

- ----------------------------------------------------------------
TOTAL INVESTMENTS,
AT VALUE (COST $572,038,032)              121.1%    676,747,895
- ----------------------------------------------------------------
LIABILITIES IN EXCESS
OF OTHER ASSETS                           (21.1)   (117,735,883)
                                    ----------------------------
NET ASSETS                                100.0%   $559,012,012
                                    ============================

FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. 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         $     --
Abbott Laboratories                                        200
1/20/04          60.00            17,800               --
American International Group, Inc.                          60
1/20/04          90.00            11,820               --
Analog Devices, Inc.                                       150
1/20/04          55.00            24,750              750
Bank of New York Co., Inc. (The)                            66
1/20/04          40.00             7,722               --
BEA Systems, Inc.                                          300
1/20/04          25.00            26,700               --
Cisco Systems, Inc.                                        200
1/20/04          25.00            15,800            4,000
EchoStar Communications Corp., Cl. A                       220
1/20/04          35.00            27,528           12,100
Edison International                                       255
1/20/04          15.00            33,772          178,500
Gap, Inc. (The)                                            450
1/20/04          20.00            43,424          148,500
Guidant Corp.                                              180
1/20/04          50.00            15,523          181,800
Intel Corp.                                                360
1/20/04          30.00            33,839           86,400
International Business Machines Corp.                      128
1/20/04         130.00            20,096               --
J.P. Morgan Chase & Co.                                    440
1/20/04          35.00            44,879           79,200
Johnson & Johnson                                          120
1/20/04          75.00            16,440               --
KLA-Tencor Corp.                                           150
1/20/04          50.00            56,549          126,000
Merrill Lynch & Co., Inc.                                  223
1/20/04          60.00            39,470           10,035
Nike, Inc., Cl. B                                          115
1/20/04          60.00            29,555           96,600
Northrop Grumman Corp.                                      50
1/20/04         135.00            18,850               --
STMicroelectronics NV                                      180
1/20/04          40.00            31,860               --
Tyco International Ltd.                                    420
1/20/04          25.00            74,339           71,400
Viacom, Inc., Cl. B                                        300
1/20/04          60.00            84,819               --

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

$745,373         $995,285

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


3. Identifies issues considered to be illiquid. See Note 9 of Notes to
Financial
Statements.
4. Represents the current interest rate for a variable or increasing rate
security.
5. When-issued security to be delivered and settled after December 31, 2003.
See
Note 1 of Notes to Financial Statements.
6. 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 $2,627,759 or 0.47% of the Fund's net assets
as of December 31, 2003.
7. Securities with an aggregate market value of $2,056,608 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
8. Received as the result of issuer reorganization. Currently has minimal
market
value.
9. 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 $11,950,275 or 2.14% of the Fund's net
assets as of December 31, 2003.
10. Issue is in default. See Note 1 of Notes to Financial Statements.
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. 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, 2003
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS


Investments, at value (including cost and market value of $67,631,000 in
repurchase agreements)
(including securities loaned of approximately $11,172,000) (cost
$572,038,032)--see accompanying statement     $676,747,895
- ----------------------------------------------------------------------------------------------------------------------------
Collateral for securities loaned
                                               11,372,436
- ----------------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold on a when-issued basis

4,230,766
Interest, dividends and principal
paydowns
2,745,933
Shares of beneficial interest sold
                                                                 596,016
Futures
margins
48,158
Swap contracts
                                                           7,964
Other
4,731

                                            -------------
Total
assets
695,753,899

- ----------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Bank
overdraft
6,039,241
- ----------------------------------------------------------------------------------------------------------------------------
Return of collateral for securities
loaned
11,372,436
- ----------------------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $745,373)--see accompanying
statement                                  995,285
- ----------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $117,363,430 purchased on a when-issued
basis)                                 118,065,502
Shares of beneficial interest redeemed
                                                           187,067
Shareholder
reports
33,896
Distribution and service plan fees
                                                    12,442
Trustees'
compensation
3,730
Transfer and shareholder servicing agent fees
                                               845
Other
31,443

                                                            -------------
Total
liabilities
136,741,887

- ----------------------------------------------------------------------------------------------------------------------------
NET
ASSETS
$559,012,012

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

COMPOSITION OF NET ASSETS
Par value of shares of beneficial
interest
$     35,117
- ----------------------------------------------------------------------------------------------------------------------------
Additional paid-in
capital
478,197,495
- ----------------------------------------------------------------------------------------------------------------------------
Accumulated net investment
income
5,770,535
- ----------------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency
transactions                                  (29,943,928)
- ----------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and
liabilities
denominated in foreign
currencies
     104,952,793

- -------------
NET
ASSETS
$559,012,012

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

- ----------------------------------------------------------------------------------------------------------------------------
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 $533,709,907 and 33,522,899 shares of beneficial
interest outstanding)                       $15.92
- ----------------------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $25,302,105 and 1,594,246 shares of beneficial
interest outstanding)                         $15.87




SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


STATEMENT OF OPERATIONS  For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------




- -------------------------------------------------------------------------------------------------
INVESTMENT INCOME

Interest
$  8,230,452
- -------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $107,442)
                           4,271,870
- -------------------------------------------------------------------------------------------------
Portfolio lending
fees                                                                     8,348

                                                            -------------
Total investment
income
12,510,670

- -------------------------------------------------------------------------------------------------
EXPENSES
Management
fees
3,526,680
- -------------------------------------------------------------------------------------------------
Distribution and service plan fees--Service
shares                                        24,612
- -------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service
shares
10,410
Service
shares
140
- -------------------------------------------------------------------------------------------------
Shareholder
reports
73,256
- -------------------------------------------------------------------------------------------------
Custodian fees and expenses
                                                   21,676
- -------------------------------------------------------------------------------------------------
Trustees'
compensation
19,746
- -------------------------------------------------------------------------------------------------
Other
40,490

                    -------------
Total
expenses
3,717,010
Less reduction to custodian
expenses                                                      (2,429)

                                                         -------------
Net
expenses
3,714,581

- -------------------------------------------------------------------------------------------------
NET INVESTMENT
INCOME
8,796,089

- -------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (including premiums on options
exercised)                                  2,398,673
Closing of futures
contracts                                                          (1,666,008)
Closing and expiration of option contracts
written                                       977,861
Foreign currency
transactions
(358,495)

                       -------------
Net realized
gain
1,352,031
- -------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments
95,352,119
Translation of assets and liabilities denominated in foreign
currencies                1,670,853
Futures contracts
                                                          2,155,452

- -------------
Net change in unrealized appreciation
(depreciation)                                  99,178,424

- -------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS                                $109,326,544

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


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENTS OF CHANGES IN NET ASSETS
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
NON-SERVICE SHARES    YEAR ENDED DECEMBER 31
2003          2002          2001          2000      1999
- ---------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of period                           $13.16
$15.40        $16.55        $17.46    $17.05
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
..27           .50           .53           .72       .82
Net realized and unrealized gain (loss)                          2.90
(2.02)         (.19)          .38      1.04

- ------------------------------------------------------------
Total from investment operations                                 3.17
(1.52)          .34          1.10      1.86
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
(.41)         (.51)         (.64)         (.82)     (.59)
Distributions from net realized gain
- --          (.21)         (.85)        (1.19)     (.86)

- ------------------------------------------------------------
Total dividends and/or distributions to shareholders
(.41)         (.72)        (1.49)        (2.01)    (1.45)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                                 $15.92
$13.16        $15.40        $16.55    $17.46

============================================================
- -----------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1                              24.96%
(10.40)%        2.22%         6.44%    11.80%

- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)                     $533,710
$458,848      $593,033      $589,298  $578,783
- ---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                            $475,389
$517,516      $599,324      $566,724  $593,151
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income
1.82%         3.31%         3.42%         4.36%     4.46%
Total expenses                                                   0.76% 3
  0.74% 3       0.76% 3       0.76% 3   0.73% 3
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
248%           42%           30%           42%       17%

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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

FINANCIAL HIGHLIGHTS  Continued
- -----------------------------------------------------------------------------

SERVICE SHARES    YEAR ENDED DECEMBER 31                          2003
2002 1
- --------------------------------------------------------------------------------------
PER SHARE OPERATING DATA

Net asset value, beginning of period                            $13.14
$14.51
- --------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
..39           .13
Net realized and unrealized gain (loss)
2.74         (1.50)

- ----------------------
Total from investment operations
3.13         (1.37)
- --------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
(.40)           --
Distributions from net realized gain
- --            --

- ----------------------
Total dividends and/or distributions to shareholders
(.40)           --
- --------------------------------------------------------------------------------------
Net asset value, end of period                                  $15.87
$13.14

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

- --------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2
24.69%        (9.44)%

- --------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)                       $25,302
$2,306
- --------------------------------------------------------------------------------------
Average net assets (in thousands)                               $9,908
$1,037
- --------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income
1.37%         3.30%
Total expenses                                                    1.01%
4       0.99% 4
- --------------------------------------------------------------------------------------
Portfolio turnover rate
248%           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, 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
                                                     2003            2002
- ----------------------------------------------------------------------------------------------------------------
OPERATIONS

Net investment
income                                                              $
8,796,089    $ 17,145,616
- ----------------------------------------------------------------------------------------------------------------
Net realized gain
(loss)
1,352,031     (31,600,661)
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation                                                99,178,424
(46,421,985)

- -----------------------------
Net increase (decrease) in net assets resulting from
operations                     109,326,544     (60,877,030)

- ----------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Non-Service
shares
(13,791,025)    (19,151,437)
Service shares
             (86,954)              --
- ----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Non-Service shares
                          --      (7,948,868)
Service
shares
- --               --

- ----------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Non-Service
shares
(18,122,603)    (46,188,223)
Service
shares
20,531,465       2,287,406

- ----------------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase
(decrease)
97,857,427    (131,878,152)
- ----------------------------------------------------------------------------------------------------------------
Beginning of
period
461,154,585     593,032,737

- -----------------------------
End of period [including accumulated net investment income of
$5,770,535 and $13,848,088,
respectively]                                          $559,012,012
$461,154,585

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



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 with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. 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. Securities traded on NASDAQ are valued based on the closing price
provided by NASDAQ 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. Securities whose values have been
materially affected by what the Manager identifies as a significant event
occurring before the Fund's assets are valued but after the close of their
respective foreign exchanges will be fair valued. Fair value is determined in
good faith using 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 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, 2003, the market
value
of these securities comprised 2.5% of the Fund's net assets, and resulted in
unrealized gains of $177,261.

- --------------------------------------------------------------------------------
SECURITIES 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 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 executes such purchases while remaining substantially fully
invested. As of December 31, 2003, the Fund had entered into net when issued
commitments of $113,132,664.
   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 Fund records the

NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
incremental difference between the forward purchase and sale of each forward
roll as free income or realized gain (loss) on investments.
   Risks 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, market fluctuations and 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, 2003, securities with an
aggregate market value of $444,250, representing 0.08% of the Fund's net
assets,
were in default.

- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records 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. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated
funds
advised by the Manager, may transfer uninvested cash balances into joint
trading
accounts on a daily basis. Secured by U.S. government securities, these
balances
are invested in one or more repurchase agreements. 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. 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 on a
daily basis 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 comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders.

The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses
the
Fund may be able to offset against income and gains realized in future years
and
unrealized appreciation or depreciation of securities and other investments
for
federal income tax purposes.



NET UNREALIZED

APPRECIATION

                        BASED ON COST OF

SECURITIES AND
    UNDISTRIBUTED          UNDISTRIBUTED               ACCUMULATED
OTHER INVESTMENTS
    NET INVESTMENT             LONG-TERM                      LOSS
FOR FEDERAL INCOME
    INCOME                          GAIN        CARRYFORWARD
1,2,3                 TAX PURPOSES

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

    $5,770,532                       $--
$29,278,783                 $104,287,645


1. As of December 31, 2003, the Fund had $28,540,378 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of December 31, 2003,
details of the capital loss carryforwards were as follows:


                              EXPIRING
                              -------------------------
                              2010          $13,317,573
                              2011           15,222,805
                                            -----------
                              Total         $28,540,378
                                            ===========

2. During the fiscal years ended December 31, 2003 and December 31, 2002, the
Fund did not utilize any capital loss carryforwards. 3. The Fund had $738,405
of
straddle losses which were deferred.

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. Accordingly,
the
following amounts have been reclassified for December 31, 2003. Net assets of
the Fund were unaffected by the reclassifications.

                 REDUCTION TO                       REDUCTION TO
                 ACCUMULATED                     ACCUMULATED NET
                 NET INVESTMENT                 REALIZED LOSS ON
                 INCOME                              INVESTMENTS
                 -----------------------------------------------
                 $2,995,663                           $2,995,663

The tax character of distributions paid during the years ended December 31,
2003
and December 31, 2002 was as follows:
                                           YEAR ENDED               YEAR ENDED
                                    DECEMBER 31, 2003        DECEMBER 31, 2002
    --------------------------------------------------------------------------
    Distributions paid from:
    Ordinary income                       $13,877,979              $23,577,984
    Long-term capital gain                         --                3,522,321
                                          ------------------------------------
    Total                                 $13,877,979              $27,100,305
                                          ====================================

The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments
for
federal income tax purposes as of December 31, 2003 are noted below. The
primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of
losses
or tax realization of financial statement unrealized gain or loss.

                 Federal tax cost of securities             $572,220,690
                 Federal tax cost of other investments        79,313,454
                                                            ------------
                 Total federal tax cost                     $651,534,144
                                                            ============

                 Gross unrealized appreciation              $111,351,997
                 Gross unrealized depreciation                (7,064,352)
                                                            ------------
                 Net unrealized appreciation (depreciation) $104,287,645
                                                            ============

- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. Under the plan, deferred amounts are treated as
though
equal dollar amounts had been invested in shares of the Fund or are invested
in
other Oppenheimer funds selected by the Trustee. Deferral of trustees' fees
under the plan will not affect the net assets of the Fund, and will not
materially affect the Fund's assets, liabilities or net investment income per
share. Amounts will be deferred until distributed in accordance to the Plan.

- --------------------------------------------------------------------------------
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. Income and capital gain distributions,
if
any, are declared and paid annually.

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


NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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.

- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
represents earnings on cash balances maintained by the Fund.

- --------------------------------------------------------------------------------
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,
2003        YEAR ENDED DECEMBER 31, 2002 1
                                                        SHARES
AMOUNT              SHARES            AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES

Sold                                                 2,968,658      $
42,421,336           3,369,152      $ 47,017,452
Dividends and/or distributions reinvested            1,109,495
13,791,025           1,834,820        27,100,305
Redeemed                                            (5,419,511)
(74,334,964)         (8,852,327)     (120,305,980)

- -------------------------------------------------------------------
Net decrease                                        (1,341,358)
$(18,122,603)         (3,648,355)     $(46,188,223)

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

- -----------------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold                                                 1,500,492      $
21,676,028             205,258      $  2,669,841
Dividends and/or distributions reinvested                7,012
86,954                  --                --
Redeemed                                               (88,818)
(1,231,517)            (29,698)         (382,435)

- -------------------------------------------------------------------
Net increase                                         1,418,686      $
20,531,465             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.


- --------------------------------------------------------------------------------
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, 2003, were
$1,285,127,765 and $1,199,348,827, respectively.

- --------------------------------------------------------------------------------
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 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.

- --------------------------------------------------------------------------------
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 per account fee. For the year ended December 31, 2003, the Fund paid
$10,148 to OFS for services to the Fund.
   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. Fees incurred by the Fund under the plan are detailed in the
Statement
of Operations.

- --------------------------------------------------------------------------------
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 for protection from 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
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
   As of December 31, 2003, the Fund had no outstanding foreign currency
contracts.

- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. 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 protection from 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 as a 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 has expired.
   Cash held by the broker to cover initial margin requirements on open
futures
contracts is noted in the Statement of Assets and Liabilities. 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. The net change in
unrealized appreciation and depreciation is reported on the Statement of
Operations.
   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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS Continued
As of December 31, 2003, the Fund had outstanding futures contracts as
follows:




UNREALIZED
                           EXPIRATION   NUMBER OF     VALUATION AS OF
APPRECIATION
CONTRACT DESCRIPTION            DATES   CONTRACTS   DECEMBER 31, 2003
(DEPRECIATION)
- -------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE

U.S. Long Bonds               3/22/04         157         $17,162,063
$ 90,247
U.S. Treasury Nts., 10 yr.    3/22/04         225          25,259,766
465,375

- --------

555,622

- --------
CONTRACTS TO SELL
U.S. Treasury Nts., 2 yr.     3/30/04          90
19,264,219          (3,479)
U.S. Treasury Nts., 5 yr.     3/22/04         149          16,632,125
(69,652)

- --------

(73,131)

- --------

$482,491

========



- --------------------------------------------------------------------------------
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, 2003 was as follows:

                                                   CALL OPTIONS
                                      -------------------------
                                      NUMBER OF       AMOUNT OF
                                      CONTRACTS        PREMIUMS
- ---------------------------------------------------------------
Options outstanding as of
December 31, 2002                        12,390      $2,063,251
Options closed or expired                (6,409)     (1,129,063)
Options exercised                          (694)       (188,815)
                                      -------------------------
Options outstanding as of
December 31, 2003                         5,287      $  745,373
                                      =========================

- --------------------------------------------------------------------------------
8. TOTAL RETURN SWAP CONTRACTS
The Fund may enter into a total return swap transaction 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 notional. The Fund records an increase or decrease to interest
income, in the amount due to or owed by the Fund at termination or settlement.
Total return swaps are subject to risks (if the counterparty fails to meet its
obligations).

As of December 31, 2003, the Fund had entered into the following total return
swap agreements:



                                             PAID BY             RECEIVED BY
SWAP                   NOTIONAL          THE FUND AT             THE FUND
AT   TERMINATION      UNREALIZED
COUNTERPARTY             AMOUNT    DECEMBER 31, 2003       DECEMBER 31,
2003          DATE    APPRECIATION
- ----------------------------------------------------------------------------------------------------------

                                                       Value of total return
                                     One-Month LIBOR      of Lehman Brothers
Deutsche Bank AG     $8,704,000                 Flat              CMBS
Index       6/30/04          $7,964



- --------------------------------------------------------------------------------
9. ILLIQUID SECURITIES
As of December 31, 2003, 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, 2003 was $12,194,831, which represents 2.18% of the Fund's net assets.


- --------------------------------------------------------------------------------
10. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of US
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities
loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the
collateral.
Cash collateral is invested in cash equivalents. As of December 31, 2003, the
Fund had on loan securities valued at approximately $11,172,000. Cash of
$11,372,436 was received as collateral for the loans, and has been invested in
approved instruments.


- --------------------------------------------------------------------------------
11. BORROWING AND LENDING ARRANGEMENTS
The Fund entered into an "interfund borrowing and lending arrangement" with
other funds in the Oppenheimer funds complex, to allow funds to borrow for
liquidity purposes. The arrangement was initiated pursuant to exemptive relief
granted by the Securities and Exchange Commission (the SEC) to allow these
affiliated funds to lend money to, and borrow money from, each other, in an
attempt to reduce borrowing costs below those of bank loan facilities. The
SEC's
order requires the Fund's Board of Trustees to adopt operating policies and
procedures to administer interfund borrowing and lending. Under the
arrangement
the Fund may lend money to other Oppenheimer funds and may borrow from other
Oppenheimer funds at a rate set by the Fund's Board of Trustees, based upon a
recommendation by the Manager. The Fund's borrowings, if any, are subject to
asset coverage requirements under the Investment Company Act and the
provisions
of the SEC order and other applicable regulations. If the Fund borrows money,
there is a risk that the loan could be called on one day's notice, in which
case
the Fund might have to borrow from a bank at higher rates if a loan were not
available from another Oppenheimer fund. If the Fund lends money to another
fund, it will be subject to the risk that the other fund might not repay the
loan in a timely manner, or at all.
   The Fund had no interfund borrowings or loans outstanding during the year
ended or at December 31, 2003.

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,  a series of  Oppenheimer  Variable  Account  Funds,
including the statement of investments, as of December 31, 2003, 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, 2003, 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, 2003, 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
February 12, 2004

OPPENHEIMER BOND FUND/VA

STATEMENT OF INVESTMENTS  December 31, 2003
- --------------------------------------------------------------------------------


                                     PRINCIPAL    MARKET VALUE
                                        AMOUNT      SEE NOTE 1
- ---------------------------------------------------------------
ASSET-BACKED SECURITIES--26.0%
- ---------------------------------------------------------------
AQ Finance NIM Trust, Home
Equity Collateralized Mtg.
Obligations, Series 2002-1,
Cl. Note, 9.50%, 6/25/32 1        $     79,630    $     79,630
- ---------------------------------------------------------------
Bank One Auto Securitization
Trust, Automobile Receivables,
Series 2003-1, Cl. A2,
1.29%, 8/21/06                       3,640,000       3,639,155
- ---------------------------------------------------------------
BMW Vehicle Owner Trust,
Automobile Loan Certificates,
Series 2003-A, Cl. A2,
1.45%, 11/25/05 1                    5,733,623       5,742,939
- ---------------------------------------------------------------
Capital Auto Receivables Asset
Trust, Automobile Mtg.-Backed
Nts., Series 2002-4, Cl. A2B,
1.74%, 1/17/05 1                     1,753,792       1,756,488
- ---------------------------------------------------------------
Caterpillar Financial Asset Trust,
Equipment Loan Pass-Through
Certificates, Series 2003-A,
Cl. A2, 1.25%, 10/25/05              2,990,000       2,991,218
- ---------------------------------------------------------------
Centex Home Equity Co. LLC,
Home Equity Loan Asset-Backed
Certificates:
Series 2003-B, Cl. AF1,
1.64%, 2/25/18 1                     1,409,540       1,409,169
Series 2003-C, Cl. AF1,
2.14%, 7/25/18                       3,915,755       3,924,853
- ---------------------------------------------------------------
Chase Funding Mortgage Loan
Asset-Backed Certificates,
Home Equity Mtg. Obligations:
Series 2003-3, Cl. 1A1,
1.199%, 8/25/17 2                    2,190,751       2,191,024
Series 2003-4, Cl. 1A1,
1.24%, 9/25/17 2                     4,821,771       4,822,958
- ---------------------------------------------------------------
Chase Manhattan Auto Owner
Trust, Automobile Loan
Pass-Through Certificates:
Series 2003-A, Cl. A2,
1.26%, 1/16/06 1                     1,890,000       1,891,239
Series 2003-B, Cl. A2,
1.287%, 3/15/06                      2,330,000       2,330,794
- ---------------------------------------------------------------
CitiFinancial Mortgage
Securities, Inc., Home Equity
Collateralized Mtg. Obligations:
Series 2002-1, Cl. AF1,
2.474%, 9/25/32                      1,895,922       1,900,607
Series 2003-2, Cl. AF1,
1.219%, 5/25/33 1,2                  2,243,209       2,243,114
Series 2003-3, Cl. AF1,
1.261%, 8/25/33 1,2                  2,979,761       2,979,831


                                     PRINCIPAL    MARKET VALUE
                                        AMOUNT      SEE NOTE 1
- ---------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
DaimlerChrysler Auto Trust,
Automobile Loan Pass-Through
Certificates:
Series 2002-B, Cl. A2,
2.20%, 4/6/05                     $    865,858    $    867,287
Series 2003-A, Cl. A2,
1.52%, 12/8/05                       6,370,000       6,381,530
Series 2003-B, Cl. A2,
1.61%, 7/8/06                        6,440,000       6,391,056
- ---------------------------------------------------------------
Ford Credit Auto Owner Trust,
Automobile Loan Pass-Through
Certificates, Series 2002-D, Cl.
A2A, 2.10%, 3/15/05                  2,320,123       2,325,890
- ---------------------------------------------------------------
Harley-Davidson Motorcycle
Trust, Motorcycle Receivable Nts.:
Series 2002-2, Cl. A1,
1.91%, 4/16/07                       2,929,047       2,939,064
Series 2003-3, Cl. A1,
1.50%, 1/15/08                       5,637,009       5,646,688
- ---------------------------------------------------------------
Honda Auto Receivables Owner
Trust, Automobile Receivables
Obligations:
Series 2002-3, Cl. A2,
2.26%, 12/18/04                        527,120         527,724
Series 2002-4, Cl. A2,
1.66%, 6/15/05                       1,919,287       1,922,590
Series 2003-2, Cl. A2,
1.34%, 12/21/05                      5,416,000       5,421,520
Series 2003-3, Cl. A2,
1.52%, 4/21/06                       7,070,000       7,081,599
Series 2003-4, Cl. A2,
1.58%, 7/17/06                       5,640,000       5,649,172
- ---------------------------------------------------------------
Household Automotive Trust,
Automobile Loan Certificates:
Series 2002-2, Cl. A2,
2.15%, 12/19/05                        846,530         848,073
Series 2003-2, Cl. A2,
1.56%, 12/18/06                      2,830,000       2,833,796
- ---------------------------------------------------------------
Lease Investment Flight Trust,
Collateralized Aviation
Obligations, Series 1A,
Cl. D2, 8%, 7/15/31 1                5,614,047          84,211
- ---------------------------------------------------------------
Litigation Settlement
Monetized Fee Trust,
Asset-Backed Certificates, Series
2001-1A, Cl. A1, 8.33%, 4/25/31 1    4,591,066       4,523,634
- ---------------------------------------------------------------
M&I Auto Loan Trust,
Automobile Loan Certificates:
Series 2002-1, Cl. A2,
1.95%, 7/20/05                         159,249         159,414
Series 2002-1, Cl. A3,
2.49%, 10/22/07                      4,300,000       4,337,352
Series 2003-1, Cl. A2,
1.60%, 7/20/06                       4,790,000       4,791,839


STATEMENT OF INVESTMENTS  Continued
- ---------------------------------------------------------------

                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ---------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- ---------------------------------------------------------------
MMCA Auto Lease Trust, Auto
Retail Installment Contracts,
Series 2002-A, Cl. A2,
1.29%, 5/16/05 2,3               $   1,202,570    $  1,203,465
- ---------------------------------------------------------------
MSF Funding LLC, Collateralized
Mtg. Obligations,
Series 2000-1, Cl. C,
8.491%, 7/25/07 1,2                    602,879          90,432
- ---------------------------------------------------------------
NC Finance Trust, Collateralized
Mtg. Obligations, Series 1999-I,
Cl. ECFD, 8.75%, 12/25/28 1          3,449,128         999,283
- ---------------------------------------------------------------
Nissan Auto Lease Trust, Auto
Lease Obligations:
Series 2002-A, Cl. A2,
1.86%, 11/15/04 1                    1,852,715       1,854,465
Series 2003-A, Cl. A2,
1.69%, 12/15/05                      3,770,000       3,780,445
- ---------------------------------------------------------------
Nissan Auto Receivables Owner
Trust, Automobile Receivable
Nts., Series 2003-B, Cl. A2,
1.20%, 11/15/05                      7,240,000       7,242,830
- ---------------------------------------------------------------
Salomon Smith Barney Auto
Loan Trust, Asset-Backed Auto
Loan Obligations, Series 2002-1,
Cl. A2, 1.83%, 9/15/05 1             2,702,243       2,707,897
- ---------------------------------------------------------------
Tobacco Settlement Authority,
Asset-Backed Securities,
Series 2001-A, 6.79%, 6/1/10         2,000,000       2,026,580
- ---------------------------------------------------------------
Toyota Auto Receivables
Owner Trust, Automobile
Mtg.-Backed Obligations:
Series 2002-B, Cl. A3,
3.76%, 6/15/06                       1,755,307       1,778,797
Series 2003-A, Cl. A2,
1.28%, 8/15/05                       6,893,886       6,900,170
Series 2003-B, Cl. A2,
1.43%, 2/15/06                       4,670,000       4,672,417
- ---------------------------------------------------------------
USAA Auto Owner Trust,
Automobile Loan
Asset-Backed Nts.:
Series 2002-1, Cl. A3,
2.41%, 10/16/06                      2,542,232       2,560,499
Series 2003-1, Cl. A2,
1.22%, 4/17/06                       4,310,000       4,311,645
- ---------------------------------------------------------------
Volkswagen Auto Lease Trust,
Automobile Lease Asset-Backed
Securities, Series 2002-A, Cl. A2,
1.77%, 2/20/05                       3,850,350       3,856,872


                                     PRINCIPAL    MARKET VALUE
                                        AMOUNT      SEE NOTE 1
- ---------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
Volkswagen Auto Loan Enhanced
Trust, Automobile
Loan Receivables:
Series 2003-1, Cl. A2,
1.11%, 12/20/05                   $  2,859,000    $  2,857,939
Series 2003-2, Cl. A2,
1.55%, 6/20/06                       3,230,000       3,235,214
- ---------------------------------------------------------------
Whole Auto Loan Trust,
Automobile Loan Receivables:
Series 2002-1, Cl. A2,
1.88%, 6/15/05                       4,368,668       4,380,554
Series 2003-1, Cl. A2A,
1.40%, 4/15/06                       6,530,000       6,535,675
                                                  -------------
Total Asset-Backed Securities
(Cost $168,606,254)                                161,630,637

- ---------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--44.1%
- ---------------------------------------------------------------
GOVERNMENT AGENCY--41.0%
- ---------------------------------------------------------------
FHLMC/FNMA/SPONSORED--40.9%
Federal Home Loan
Mortgage Corp.:
5%, 1/1/34 4                         4,180,000       4,126,446
7%, 9/1/33-11/1/33                   8,988,642       9,533,275
8%, 4/1/16                           2,273,595       2,440,388
9%, 8/1/22-5/1/25                      609,724         680,631
- ---------------------------------------------------------------
Federal Home Loan
Mortgage Corp., Gtd.
Mtg. Pass-Through
Participation Certificates,
Series 151, Cl. F, 9%, 5/15/21         118,510         118,710
- ---------------------------------------------------------------
Federal Home Loan Mortgage
Corp., Gtd. Real Estate Mtg.
Investment Conduit Multiclass
Pass-Through Certificates:
Series 2500, Cl. FD,
1.62%, 3/15/32 2                     1,560,259       1,550,079
Series 2526, Cl. FE,
1.52%, 6/15/29 2                     1,874,556       1,869,225
Series 2551, Cl. FD,
1.52%, 1/15/33 2                     1,625,064       1,631,670
- ---------------------------------------------------------------
Federal Home Loan Mortgage
Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 176, Cl. IO, (0.11)%,
6/1/26 5                             2,095,713         350,284
Series 177, Cl. B, (2.489)%,
7/1/26 5                             3,454,129         609,635
Series 183, Cl. IO, 3.34%,
4/1/27 5                             3,331,373         567,302
Series 184, Cl. IO, 0.119%,
12/1/26 5                            3,298,796         555,681
Series 206, Cl. IO,
(20.375)%, 12/15/29 5                2,413,313         436,509
- ---------------------------------------------------------------
Federal Home Loan Mortgage
Corp., Structured Pass-Through
Securities, Collateralized
Mtg. Obligations:
Series H006, Cl. A1,
1.724%, 4/15/08                      1,085,794       1,084,950
Series T-42, Cl. A2,
5.50%, 2/25/42                         689,347         701,174


                                     PRINCIPAL    MARKET VALUE
                                        AMOUNT      SEE NOTE 1
- ---------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.:
5%, 1/1/34 4                      $ 15,661,000    $ 15,499,504
5.50%, 1/14/34 4                    23,671,000      23,981,682
6.50%, 3/1/11                           83,119          88,206
6.50%, 1/25/34 4                    63,617,000      66,539,438
7%, 11/1/25-11/1/33                  5,180,211       5,494,532
7%, 7/1/32-1/25/34 4                99,912,485     105,814,097
7.50%, 1/1/08-1/1/26                   295,280         316,262
8%, 5/1/17                              83,792          91,685
8.50%, 7/1/32                          622,881         672,657
- ---------------------------------------------------------------
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      115,581         119,734
Trust 2002-77, Cl. WF,
1.52%, 12/18/32 2                    2,821,091       2,829,867
- ---------------------------------------------------------------
Federal National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Trust 1989-17, Cl. E,
10.40%, 4/25/19                        177,174         195,041
Trust 2003-81, Cl. PA, 5%, 2/25/12   1,337,450       1,369,880
- ---------------------------------------------------------------
Federal National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates
Interest-Only Stripped
Mtg.-Backed Security:
Trust 2002-47, Cl. NS,
24.442%, 4/25/32 5                   4,893,182         502,366
Trust 2002-51, Cl. S,
24.442%, 8/25/32 5                   4,491,956         456,936
- ---------------------------------------------------------------
Federal National Mortgage Assn.,
Interest-Only Stripped
Mtg.-Backed Security:
Trust 2002-52, Cl. SD,
6.90%, 9/25/32 5                     6,095,415         559,280
Trust 222, Cl. 2,
(2.144)%, 6/1/23 5                   4,413,900         828,985
Trust 240, Cl. 2,
(4.52)%, 9/1/23 5                    6,932,091       1,281,602
Trust 252, Cl. 2,
(6.48)%, 11/1/23 5                   4,792,933         960,888
Trust 273, Cl. 2,
(0.977)%, 7/1/26 5                   1,517,334         256,177
Trust 303, Cl. IO,
(17.835)%, 11/1/29 5                   990,881         183,901
                                                  -------------
                                                   254,298,679

- ---------------------------------------------------------------
GNMA/GUARANTEED--0.1%
Government National
Mortgage Assn.:
7%, 1/15/09-5/15/09                    108,282         116,215
8.50%, 8/15/17-12/15/17                761,221         844,932
                                                  -------------
                                                       961,147


                                     PRINCIPAL    MARKET VALUE
                                        AMOUNT      SEE NOTE 1
- ---------------------------------------------------------------
PRIVATE--3.1%
- ---------------------------------------------------------------
COMMERCIAL--1.7%
Asset Securitization Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 1996-MD6,
Cl. A3, 7.361%, 11/13/29 2        $  1,200,000    $  1,352,373
- ---------------------------------------------------------------
Asset Securitization Corp.,
Interest-Only Stripped
Mtg.-Backed Security
Collateralized Mtg. Obligations,
Series 1997-D4, Cl. PS1,
8.347%, 4/14/29 5                   48,836,513       2,214,775
- ---------------------------------------------------------------
Capital Lease Funding
Securitization LP, Interest-Only
Corporate-Backed Pass-Through
Certificates, Series 1997-CTL1,
9.929%, 6/22/24 3,5                 26,528,861       1,002,940
- ---------------------------------------------------------------
Commercial Mortgage
Acceptance Corp., Commercial
Mtg. Obligations, Series 1996-C1,
Cl. D, 7.699%, 12/25/20 1,2            438,622         439,751
- ---------------------------------------------------------------
DLJ Commercial Mortgage Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 1999-STF1,
Cl. B6, 7/5/08 1,6                  34,282,670          34,283
- ---------------------------------------------------------------
DLJ Mortgage Acceptance Corp.,
Commercial Mtg. Obligations,
Series 1996-CF1, Cl. A3,
8.033%, 3/13/28 2                    2,000,000       2,152,815
- ---------------------------------------------------------------
Lehman Brothers Commercial
Conduit Mortgage Trust,
Interest-Only Stripped
Mtg.-Backed Security, Series
1998-C1, Cl. IO, 6.928%,
2/18/28 5                           22,265,016         788,925
- ---------------------------------------------------------------
Lehman Structured Securities Corp.,
Collateralized Mtg. Obligations,
Series 2002-GE1, Cl. A,
2.514%, 7/26/24 1                      614,746         585,495
- ---------------------------------------------------------------
Salomon Brothers Mortgage
Securities VII, Inc., Interest-
Only Commercial Mtg. Pass-Through
Certificates, Series 1999-C1,
Cl. X, 10.299%, 5/18/32 5          403,139,867       1,899,474
                                                  -------------
                                                    10,470,831

- ---------------------------------------------------------------
OTHER--0.3%
CIT Equipment Collateral,
Equipment Receivable-Backed
Nts., Series 2003-EF1, Cl. A2,
1.49%, 12/20/05                      1,740,000       1,740,845
- ---------------------------------------------------------------
Salomon Brothers Mortgage
Securities VI, Inc., Interest-Only
Stripped Mtg.-Backed Security,
Series 1987-3, Cl. B,
6.986%, 10/23/17 5                      33,453           8,554


STATEMENT OF INVESTMENTS  Continued
- --------------------------------------------------------------------------------


                                     PRINCIPAL    MARKET VALUE
                                        AMOUNT      SEE NOTE 1
- ---------------------------------------------------------------
OTHER Continued
Salomon Brothers Mortgage
Securities VI, Inc., Principal-Only
Stripped Mtg.-Backed Security,
Series1987-3, Cl. A,
11.28%, 10/23/17 7                $     49,510    $     45,483
                                                  -------------
                                                     1,794,882

- ---------------------------------------------------------------
RESIDENTIAL--1.1%
Structured Asset Securities Corp.,
Collateralized Mtg. Obligations
Pass-Through Certificates,
Series 2002-AL1, Cl. B2,
3.45%, 2/25/32                       3,072,330       2,771,756
- ---------------------------------------------------------------
Washington Mutual Mortgage
Securities Corp., Collateralized
Mtg. Obligations Pass-Through
Certificates, Series 2003-AR7,
Cl. A1, 1.507%, 8/25/33 2            3,938,227       3,941,213
                                                  -------------
                                                     6,712,969
                                                  -------------
Total Mortgage-Backed
Obligations (Cost $272,178,638)                    274,238,508

- ---------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--19.8%
- ---------------------------------------------------------------
Federal Home Loan Mortgage
Corp. Unsec. Nts., 6.25%, 7/15/32    2,500,000       2,728,208
- ---------------------------------------------------------------
Federal National Mortgage
Assn. Unsec. Nts.:
5.25%, 6/15/06                      15,000,000      16,055,160
5.50%, 2/15/06                      21,170,000      22,674,848
6.375%, 6/15/09                     21,500,000      24,340,580
7.25%, 5/15/30 8                     2,705,000       3,313,825
- ---------------------------------------------------------------
Freddie Mac Unsec. Nts.,
6.875%, 9/15/10                      7,300,000       8,489,980
- ---------------------------------------------------------------
Tennessee Valley Authority
Bonds, 7.125%, 5/1/30                1,850,000       2,226,523
- ---------------------------------------------------------------
U.S. Treasury Bonds:
4.25%, 8/15/13                      10,266,000      10,282,046
5.375%, 2/15/31                      4,145,000       4,323,919
5.50%, 8/15/28                       3,265,000       3,401,852
6.125%, 11/15/27                     9,697,000      10,935,646
STRIPS, 2.99%, 2/15/10 9             2,698,000       2,147,818
STRIPS, 3.23%, 2/15/11 9             8,007,000       6,022,161
STRIPS, 3.66%, 2/15/13 9             3,354,000       2,246,912
STRIPS, 4.96%, 2/15/16 9             2,721,000       1,500,637
STRIPS, 5.52%, 11/15/26 9            3,155,000         898,008
- ---------------------------------------------------------------
U.S. Treasury Nts., 3.25%,
12/15/08                             1,906,000       1,919,552
                                                  -------------

Total U.S. Government
Obligations (Cost $121,953,363)                    123,507,675

- ---------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--0.5%
- ---------------------------------------------------------------
United Mexican States Nts.,
7.50%, 1/14/12 (Cost $2,635,439)     2,610,000       2,950,605


                                     PRINCIPAL    MARKET VALUE
                                        AMOUNT      SEE NOTE 1
- ---------------------------------------------------------------
CORPORATE BONDS AND NOTES--34.7%
- ---------------------------------------------------------------
CONSUMER DISCRETIONARY--8.3%
- ---------------------------------------------------------------
AUTO COMPONENTS--0.6%
Delphi Corp., 6.55% Nts.,
6/15/06                           $  3,305,000    $  3,548,407
- ---------------------------------------------------------------
AUTOMOBILES--2.9%
American Honda Finance Corp.,
3.85% Nts., 11/6/08                    815,000         821,542
- ---------------------------------------------------------------
DaimlerChrysler NA Holding Corp.,
6.40% Nts., 5/15/06                  3,525,000       3,778,786
- ---------------------------------------------------------------
Ford Motor Co., 8.90% Unsec.
Unsub. Debs., 1/15/32                  880,000         988,981
- ---------------------------------------------------------------
General Motors Corp., 8.375%
Sr. Unsec. Debs., 7/15/33            5,490,000       6,392,023
- ---------------------------------------------------------------
Hertz Corp. (The), 7.625%
Sr. Nts., 6/1/12                     5,575,000       6,048,869
                                                  -------------
                                                    18,030,201

- ---------------------------------------------------------------
HOUSEHOLD DURABLES--0.9%
Beazer Homes USA, Inc.,
8.625% Sr. Unsec. Nts., 5/15/11      1,440,000       1,591,200
- ---------------------------------------------------------------
D.R. Horton, Inc., 9.375%
Sr. Unsec. Sub. Nts., 3/15/11        1,330,000       1,516,200
- ---------------------------------------------------------------
Pulte Homes, Inc., 8.375%
Sr. Nts., 8/15/04                      665,000         683,468
- ---------------------------------------------------------------
Toll Corp., 8.25%
Sr. Sub. Nts., 12/1/11               1,440,000       1,596,600
                                                  -------------
                                                     5,387,468

- ---------------------------------------------------------------
MEDIA--3.4%
British Sky Broadcasting Group
plc, 8.20% Sr. Unsec. Nts.,
7/15/09                              1,490,000       1,776,281
- ---------------------------------------------------------------
Liberty Media Corp.,
3.50% Nts., 9/25/06                  1,660,000       1,669,585
- ---------------------------------------------------------------
News America Holdings, Inc.,
7.75% Sr. Unsec. Debs., 12/1/45      2,340,000       2,776,457
- ---------------------------------------------------------------
TCI Communications, Inc.,
9.80% Sr. Unsec. Debs., 2/1/12       4,700,000       6,139,986
- ---------------------------------------------------------------
Time Warner Cos., Inc.,
9.125% Debs., 1/15/13                2,840,000       3,615,201
- ---------------------------------------------------------------
Time Warner
Entertainment Co. LP:
8.375% Sr. Debs., 3/15/23              505,000         627,723
10.15% Sr. Nts., 5/1/12              1,073,000       1,434,514
- ---------------------------------------------------------------
Walt Disney Co. (The),
6.75% Sr. Nts., 3/30/06              2,965,000       3,226,555
                                                  -------------
                                                    21,266,302

- ---------------------------------------------------------------
MULTILINE RETAIL--0.2%
Sears Roebuck Acceptance Corp.,
3.07% Nts., Series VII, 2/25/04 2    1,370,000       1,372,362
- ---------------------------------------------------------------
SPECIALTY RETAIL--0.3%
Gap, Inc. (The), 6.90%
Nts., 9/15/07                        1,635,000       1,812,806



                                     PRINCIPAL    MARKET VALUE
                                        AMOUNT      SEE NOTE 1
- ---------------------------------------------------------------
CONSUMER STAPLES--1.4%
- ---------------------------------------------------------------
FOOD & STAPLES RETAILING--1.4%
Kroger Co. (The),
7.80% Sr. Nts., 8/15/07           $  4,300,000    $  4,910,278
- ---------------------------------------------------------------
Safeway, Inc., 4.80% Sr.
Unsec. Nts., 7/16/07                 3,980,000       4,134,309
                                                  -------------
                                                     9,044,587

- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS--0.0%
Styling Technology Corp.,
10.875% Sr. Unsec. Sub.
Nts., 7/1/08 1,6,10                    360,000              --
- ---------------------------------------------------------------
ENERGY--0.6%
- ---------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.0%
Ocean Rig Norway AS, 10.25%
Sr. Sec. Nts., 6/1/08                  400,000         378,000
- ---------------------------------------------------------------
OIL & GAS--0.6%
Petroleos Mexicanos, 9.50%
Sr. Sub. Nts., 9/15/27               1,730,000       2,050,050
- ---------------------------------------------------------------
PF Export Receivables Master
Trust, 3.748% Sr. Nts.,
Series B, 6/1/13 3                   1,595,000       1,555,643
                                                  -------------
                                                     3,605,693

- ---------------------------------------------------------------
FINANCIALS--10.1%
- ---------------------------------------------------------------
CAPITAL MARKETS--0.6%
Credit Suisse First Boston, Inc.
(USA), 6.125% Nts., 11/15/11         3,305,000       3,603,911
- ---------------------------------------------------------------
COMMERCIAL BANKS--1.5%
Dime Capital Trust I, 9.33%
Capital Securities,
Series A, 5/6/27                     4,848,000       5,940,953
- ---------------------------------------------------------------
Household Finance Corp., 7%
Nts., 5/15/12                        2,755,000       3,146,786
                                                  -------------
                                                     9,087,739

- ---------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--2.1%
CIT Group, Inc., 7.75% Sr. Unsec.
Unsub. Nts., 4/2/12                  3,080,000       3,644,542
- ---------------------------------------------------------------
Citigroup, Inc., 6.625%
Unsec. Sub. Nts., 6/15/32            2,120,000       2,304,226
- ---------------------------------------------------------------
Franklin Resources, Inc., 3.70%
Nts., 4/15/08                        1,430,000       1,423,634
- ---------------------------------------------------------------
Merrill Lynch & Co., Inc.,
3.375% Nts., Series B, 9/14/07       2,000,000       2,027,584
- ---------------------------------------------------------------
Morgan Stanley, 6.60% Nts.,
4/1/12                               3,410,000       3,814,556
                                                  -------------
                                                    13,214,542

- ---------------------------------------------------------------
INSURANCE--4.6%
AXA, 8.60%
Unsec. Sub. Nts., 12/15/30           2,520,000       3,187,911
- ---------------------------------------------------------------
Farmers Insurance Exchange,
8.625% Nts., 5/1/24 3                1,800,000       1,886,510

                                     PRINCIPAL    MARKET VALUE
                                        AMOUNT      SEE NOTE 1
- ---------------------------------------------------------------
INSURANCE Continued
Hartford Financial Services
Group, Inc. (The), 2.375% Nts.,
6/1/06                            $  1,185,000    $  1,179,749
- ---------------------------------------------------------------
John Hancock Global Funding II:
5% Nts., 7/27/07 3                   4,015,000       4,268,712
7.90% Nts., 7/2/10 3                 2,495,000       2,976,954
- ---------------------------------------------------------------
Nationwide Financial
Services, Inc., 5.90% Nts.,
7/1/12                               3,185,000       3,329,710
- ---------------------------------------------------------------
Prudential Holdings LLC,
8.695% Bonds, Series C,
12/18/23 3                           4,640,000       5,744,371
- ---------------------------------------------------------------
Prudential Insurance Co. of
America, 8.30% Nts., 7/1/25 3        4,875,000       5,979,885
                                                  -------------
                                                    28,553,802

- ---------------------------------------------------------------
REAL ESTATE--1.3%
EOP Operating LP, 7.75%
Unsec. Nts., 11/15/07                3,595,000       4,124,669
- ---------------------------------------------------------------
Shopping Center Associates,
6.75% Sr. Unsec. Nts., 1/15/04 3       645,000         645,848
- ---------------------------------------------------------------
Vornado Realty LP, 5.625%
Sr. Unsec. Unsub. Nts., 6/15/07      3,260,000       3,483,248
                                                  -------------
                                                     8,253,765

- ---------------------------------------------------------------
HEALTH CARE--1.7%
- ---------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--1.0%
Aetna, Inc., 7.375% Sr.
Unsec. Nts., 3/1/06                  1,290,000       1,419,975
- ---------------------------------------------------------------
Cardinal Health, Inc.,
4.45% Nts., 6/30/05                  3,230,000       3,352,540
- ---------------------------------------------------------------
Health Net, Inc., 8.375%
Sr. Unsec. Unsub. Nts., 4/15/11      1,575,000       1,895,136
                                                  -------------
                                                     6,667,651

- ---------------------------------------------------------------
PHARMACEUTICALS--0.7%
Wyeth, 5.875% Nts., 3/15/04          4,145,000       4,182,521
- ---------------------------------------------------------------
INDUSTRIALS--3.6%
- ---------------------------------------------------------------
AEROSPACE & DEFENSE--1.0%
Boeing Capital Corp.,
7.375% Sr. Nts., 9/27/10             3,260,000       3,752,299
- ---------------------------------------------------------------
Northrop Grumman Corp.,
7.125% Sr. Nts., 2/15/11             2,210,000       2,559,693
                                                  -------------
                                                     6,311,992

- ---------------------------------------------------------------
BUILDING PRODUCTS--0.1%
Green Star Products, Inc.,
10.15% Bonds, 6/24/10 3                772,652         793,958
- ---------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.7%
Allied Waste North America, Inc.,
10% Sr. Unsec. Sub. Nts.,
Series B, 8/1/09                     1,390,000       1,508,150
- ---------------------------------------------------------------
Protection One, Inc./Protection
One Alarm Monitoring, Inc.,
7.375% Sr. Unsec. Nts., 8/15/05 1      300,000         277,500



STATEMENT OF INVESTMENTS  Continued
- ---------------------------------------------------------------


                                     PRINCIPAL    MARKET VALUE
                                        AMOUNT      SEE NOTE 1
- ---------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES Continued
Safety-Kleen Corp.,
9.25% Sr. Unsec. Nts.,
5/15/09 1,6,10                    $    800,000    $     40,000
- ---------------------------------------------------------------
Waste Management, Inc.:
7% Sr. Nts., 7/15/28                   920,000         993,219
7.375% Sr. Unsub. Nts., 8/1/10       1,185,000       1,371,120
                                                  -------------
                                                     4,189,989

- ---------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--1.4%
General Electric Capital Corp.,
6.75% Nts., Series A, 3/15/32        1,110,000       1,232,989
- ---------------------------------------------------------------
Hutchison Whampoa
International Ltd., 7.45%
Sr. Bonds, 11/24/33 3                1,675,000       1,750,968
- ---------------------------------------------------------------
Tyco International Group SA,
6.75% Sr. Unsub. Nts., 2/15/11       5,150,000       5,652,125
                                                  -------------
                                                     8,636,082

- ---------------------------------------------------------------
ROAD & RAIL--0.4%
CSX Corp., 6.25%
Unsec. Nts., 10/15/08                2,012,000       2,207,315
- ---------------------------------------------------------------
MATERIALS--0.9%
- ---------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.9%
MeadWestvaco Corp.,
2.75% Nts., 12/1/05                  2,465,000       2,445,287
- ---------------------------------------------------------------
Weyerhaeuser Co., 5.50%
Unsec. Unsub. Nts., 3/15/05          2,950,000       3,072,006
                                                  -------------
                                                     5,517,293

- ---------------------------------------------------------------
TELECOMMUNICATION SERVICES--3.5%
- ---------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--3.0%
British Telecommunications plc,
7.875% Nts., 12/15/05                2,525,000       2,784,105
- ---------------------------------------------------------------
Citizens Communications Co.,
9.25% Sr. Nts., 5/15/11              1,885,000       2,232,208
- ---------------------------------------------------------------
Deutsche Telekom International
Finance BV, 8.50%
Unsub. Nts., 6/15/10                 2,630,000       3,184,856
- ---------------------------------------------------------------
France Telecom SA:
8.45% Sr. Unsec. Nts., 3/1/06        2,070,000       2,313,560
9.75% Sr. Unsec. Nts., 3/1/31 2      1,150,000       1,533,226
- ---------------------------------------------------------------
Sprint Capital Corp.,
8.75% Nts., 3/15/32                  3,865,000       4,582,004
- ---------------------------------------------------------------
Telefonos de Mexico SA,
8.25% Sr. Unsec. Nts., 1/26/06       1,565,000       1,733,363
                                                  -------------
                                                    18,363,322


                                     PRINCIPAL    MARKET VALUE
                                        AMOUNT      SEE NOTE 1
- ---------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.5%
AT&T Wireless Services, Inc.,
7.50% Sr. Unsec. Nts., 5/1/07     $  2,395,000    $  2,687,243
- ---------------------------------------------------------------
Rogers Wireless Communications,
Inc., 9.625% Sr. Sec. Nts.,
5/1/11                                 605,000         726,000
                                                  -------------
                                                     3,413,243

- ---------------------------------------------------------------
UTILITIES--4.6%
- ---------------------------------------------------------------
ELECTRIC UTILITIES--3.5%
CenterPoint Energy, Inc.,
5.875% Nts., 6/1/08 3                2,425,000       2,528,693
- ---------------------------------------------------------------
Dominion Resources, Inc.,
8.125% Sr. Unsub. Nts., 6/15/10      3,390,000       4,072,770
- ---------------------------------------------------------------
DTE Energy Co.,
6.375% Sr. Nts., 4/15/33             2,140,000       2,104,352
- ---------------------------------------------------------------
MidAmerican Energy Holdings
Co., 5.875% Sr. Nts., 10/1/12        3,750,000       3,938,708
- ---------------------------------------------------------------
Niagara Mohawk Power Corp.,
5.375% Sr. Unsec. Nts., 10/1/04      1,110,000       1,140,534
- ---------------------------------------------------------------
Progress Energy, Inc., 6.55%
Sr. Unsec. Nts., 3/1/04              3,720,000       3,747,926
- ---------------------------------------------------------------
PSEG Energy Holdings, 7.75%
Unsec. Nts., 4/16/07                 1,575,000       1,679,344
- ---------------------------------------------------------------
South Carolina Electric & Gas Co.,
9% Bonds, 7/15/06                      500,000         576,241
- ---------------------------------------------------------------
TECO Energy, Inc., 10.50%
Sr. Unsec. Nts., 12/1/07             1,690,000       1,981,525
                                                  -------------
                                                    21,770,093

- ---------------------------------------------------------------
GAS UTILITIES--1.1%
Kinder Morgan, Inc., 6.50%
Sr. Unsec. Nts., 9/1/12              1,980,000       2,188,589
- ---------------------------------------------------------------
NiSource Finance Corp.,
7.875% Sr. Unsec. Nts., 11/15/10     3,920,000       4,668,756
                                                  -------------
                                                     6,857,345
                                                  -------------
Total Corporate Bonds and Notes
(Cost $202,679,183)                                216,070,389

                                         UNITS
- ---------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- ---------------------------------------------------------------
Pathmark Stores, Inc. Wts.,
Exp. 9/19/10 10 (Cost $14,872)           5,408           5,084


                                     PRINCIPAL    MARKET VALUE
                                        AMOUNT      SEE NOTE 1
- ---------------------------------------------------------------
STRUCTURED NOTES--8.3%
- ---------------------------------------------------------------
Deutsche Bank AG, COUNTS
Corp. Sec. Credit Linked Nts.,
Series 2003-1, 2.89%,
1/7/05 1,2                        $ 15,300,000    $ 15,082,740
- ---------------------------------------------------------------
JPMorgan Chase Bank, TRAC-X
NA High Yield T2 Credit Default
Swap Bonds, 6.05%, 3/25/09 3        20,260,000      20,842,475
- ---------------------------------------------------------------
UBS AG, High Grade Credit
Linked Nts., 2.814%,
12/10/04 1,2                        15,300,000      15,433,875
                                                  -------------
Total Structured Notes
(Cost $50,860,000)                                  51,359,090

- ---------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--1.1%
- ---------------------------------------------------------------
Undivided interest of 3.05% in joint
repurchase agreement (Principal
Amount/Market Value $226,368,000, with a
maturity value of $226,378,061) with DB
Alex Brown LLC, 0.80%, dated 12/31/03,
to be repurchased at $6,893,306 on
1/2/04, collateralized by U.S. Treasury
Nts., 6.75%, 5/31/05, with a value of
$231,043,540
(Cost $6,893,000)                    6,893,000       6,893,000

- ---------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $825,820,749)                      134.5%    836,654,988
- ---------------------------------------------------------------
LIABILITIES IN EXCESS OF
OTHER ASSETS                             (34.5)   (214,586,264)
                                  -----------------------------
NET ASSETS                               100.0%   $622,068,724
                                  =============================

FOOTNOTES TO STATEMENT OF INVESTMENTS

1. Identifies issues considered to be illiquid. See Note 8 of Notes to
Financial
Statements.

2. Represents the current interest rate for a variable or increasing rate
security.

3. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities
have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $51,180,422 or 8.23% of the Fund's net
assets as of December 31, 2003.

4. When-issued security to be delivered and settled after December 31, 2003.
See
Note 1 of Notes to Financial Statements.

5. 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 $13,464,214 or 2.16% of the Fund's net
assets
as of December 31, 2003.

6. Issue is in default. See Note 1 of Notes to Financial Statements.

7. 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.

8. Securities with an aggregate market value of $2,450,148 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.

9. Zero coupon bond reflects effective yield on the date of purchase.

10. Non-income producing security.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


STATEMENT OF ASSETS AND LIABILITIES  December 31, 2003
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------------------------------


Investments, at value (including securities loaned of approximately
$83,699,000)
(cost $825,820,749)--see accompanying
statement                                                 $836,654,988
- ------------------------------------------------------------------------------------------------------------
Collateral for securities
loaned
85,256,900
- ------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold on a when-issued
basis                                                           8,136,933
Interest and principal paydowns
                                                       6,340,909
Futures
margins
95,088
Shares of beneficial interest
sold                                                                   36,604
Swap
contracts
13,850
Other
4,869


- -------------
Total
assets
936,540,141

- ------------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------------
Bank
overdraft
                   4,027,119
- ------------------------------------------------------------------------------------------------------------
Return of collateral for securities
loaned                                                       85,256,900
- ------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $223,515,504 purchased on a when-issued
basis)                 224,135,218
Shares of beneficial interest
redeemed                                                              976,854
Shareholder
reports
33,930
Trustees' compensation
                                                              3,939
Distribution and service plan
fees                                                                    2,390
Transfer and shareholder servicing agent
fees                                                           835
Other
34,232

- -------------
Total
liabilities
314,471,417

- ------------------------------------------------------------------------------------------------------------
NET ASSETS
                                              $622,068,724

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

- ------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial
interest                                                         $ 54,454
- ------------------------------------------------------------------------------------------------------------
Additional paid-in
capital
626,655,275
- ------------------------------------------------------------------------------------------------------------
Accumulated net investment
income
27,335,903
- ------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency
transactions                  (43,159,908)
- ------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on
investments                                                       11,183,000

- -------------
NET ASSETS
                                                          $622,068,724

=============
- ------------------------------------------------------------------------------------------------------------
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 $618,234,033 and 54,117,384 shares of beneficial
interest outstanding)       $11.42
- ------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $3,834,691 and 336,650 shares of beneficial interest
outstanding)            $11.39


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENT OF OPERATIONS  For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
INVESTMENT INCOME
- -------------------------------------------------------------------------------
Interest                                                           $31,883,941
- -------------------------------------------------------------------------------
Fee income                                                           1,185,324
- -------------------------------------------------------------------------------
Portfolio lending fees                                                  42,988

- ------------
Total investment income                                             33,112,253

- -------------------------------------------------------------------------------
EXPENSES
- -------------------------------------------------------------------------------
Management fees                                                      4,954,407
- -------------------------------------------------------------------------------
Distribution and service plan fees--Service shares                       9,743
- -------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares                                                      10,412
Service shares                                                              24
- -------------------------------------------------------------------------------
Shareholder reports                                                     61,119
- -------------------------------------------------------------------------------
Trustees' compensation                                                  17,481
- -------------------------------------------------------------------------------
Custodian fees and expenses                                             15,127
- -------------------------------------------------------------------------------
Other                                                                   53,363

- ------------
Total expenses                                                       5,121,676
Less reduction to custodian expenses
(11,724)

- ------------
Net expenses                                                         5,109,952

- -------------------------------------------------------------------------------
NET INVESTMENT INCOME                                               28,002,301

- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments                                                         14,431,139
Closing of futures contracts                                           583,500
Foreign currency transactions
(20,432)

- ------------
Net realized gain                                                   14,994,207
- -------------------------------------------------------------------------------
Net change in unrealized appreciation on:
Investments                                                          1,281,674
Futures contracts                                                    1,044,458

- ------------
Net change in unrealized appreciation                                2,326,132

- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS               $45,322,640

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


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENTS OF CHANGES IN NET ASSETS
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------

NON-SERVICE SHARES    YEAR ENDED DECEMBER 31
2003          2002         2001          2000        1999
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------------

Net asset value, beginning of period
$11.31        $11.21       $11.25        $11.52      $12.32
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
..51           .65          .81           .94         .88
Net realized and unrealized gain (loss)
..23           .27          .03          (.29)      (1.06)
Payment from affiliate
- --           .01           --            --          --

- -------------------------------------------------------------
Total from investment operations
..74           .93          .84           .65        (.18)
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
(.63)         (.83)        (.88)         (.92)       (.57)
Distributions from net realized gain
- --            --           --            --        (.05)

- -------------------------------------------------------------
Total dividends and/or distributions to shareholders
(.63)         (.83)        (.88)         (.92)       (.62)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period
$11.42        $11.31       $11.21        $11.25      $11.52

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

- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
- -----------------------------------------------------------------------------------------------------------------------------------
Total return at net asset value 1
6.78%         9.02%        7.79%         6.10%      (1.52)%
Total return before payment from affiliate 2
N/A          8.93%         N/A           N/A         N/A

- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)
$618,234      $724,787     $693,701      $562,345    $601,064
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)
$691,931      $686,932     $638,820      $557,873    $633,059
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income before payment from affiliate
4.03%         5.91% 2      7.93%         7.94%       7.22%
Net investment income after payment from affiliate
N/A          6.07%         N/A           N/A         N/A
Total expenses                                                          0.73%
4       0.73% 4      0.77% 4       0.76% 4     0.73% 4
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
101%          157%         186%          260%        256%


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. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
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. Reduction to custodian expenses less than 0.01%.



FINANCIAL HIGHLIGHTS  Continued
- -----------------------------------------------------------------------------

SERVICE SHARES    YEAR ENDED DECEMBER 31
2003         2002 1
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------

Net asset value, beginning of period                              $11.30
$10.46
- -----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income
..43         .11
Net realized and unrealized gain
..28         .72
Payment from affiliate
- --         .01

- -----------------------
Total from investment operations
..71         .84
- -----------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
(.62)         --
Distributions from net realized gain
- --          --

- -----------------------
Total dividends and/or distributions to shareholders
(.62)         --
- -----------------------------------------------------------------------------------------
Net asset value, end of period                                    $11.39
$11.30

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

- -----------------------------------------------------------------------------------------
TOTAL RETURN:
- -----------------------------------------------------------------------------------------
Total return at net asset value 2
6.56%       8.03%
Total return before payment from affiliate 3
N/A        7.94%

- -----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------
Net assets, end of period (in thousands)                          $3,835
$2,435
- -----------------------------------------------------------------------------------------
Average net assets (in thousands)                                 $3,903
$  834
- -----------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income before payment from affiliate
3.73%       4.37% 3
Net investment income after payment from affiliate
N/A        5.04%
Total expenses                                                      0.98%
5     0.98% 5,6
- -----------------------------------------------------------------------------------------
Portfolio turnover rate                                              101% 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, 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
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. Reduction to custodian expenses less than 0.01%.
6. Voluntary waiver of transfer agent fees less than 0.01%.
- --------------------------------------------------------------------------------

YEAR ENDED DECEMBER 31,
                                                          2003            2002
- ------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------

Net investment
income                                                                $
28,002,301    $ 40,646,500
- ------------------------------------------------------------------------------------------------------------------
Net realized gain
(loss)
14,994,207     (14,911,913)
- ------------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation                                                   2,326,132
33,764,082
- ------------------------------------------------------------------------------------------------------------------
Payment from
affiliate
- --       1,111,427

                                -----------------------------
Net increase in net assets resulting from
operations                                   45,322,640      60,610,096

- ------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares

(40,547,869)    (50,820,794)
Service
shares
(196,017)             --

- ------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Non-Service
shares
(111,087,827)     21,383,866
Service
shares
1,355,244       2,348,380

- ------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
Total increase
(decrease)
(105,153,829)     33,521,548
- ------------------------------------------------------------------------------------------------------------------
Beginning of period

727,222,553     693,701,005

- -----------------------------
End of period [including accumulated net investment income of $27,335,903
and $40,713,852,
respectively]
$622,068,724    $727,222,553

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


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 with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. 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. Securities traded on NASDAQ are valued based on the closing price
provided by NASDAQ 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. Securities whose values have been
materially affected by what the Manager identifies as a significant event
occurring before the Fund's assets are valued but after the close of their
respective foreign exchanges will be fair valued. Fair value is determined in
good faith using 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, increasing 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, 2003, the market value of these securities comprised 8.3% of the
Fund's net assets and resulted in unrealized gains of $499,090. The Fund also
hedges a portion of the foreign currency exposure generated by these
securities,
as discussed in Note 5.

- --------------------------------------------------------------------------------
SECURITIES 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 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 executes such purchases while remaining substantially fully
invested. As of December 31, 2003, the Fund had entered into net when issued
commitments of $215,378,571.
   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


NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
and maturity) but not identical securities on a specified future date. The
Fund
records the incremental difference between the forward purchase and sale of
each
forward roll as fee income or realized gain (loss) on investments.
   Risks 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, market fluctuations and 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, 2003, securities with an
aggregate market value of $74,283, representing 0.01% of the Fund's net
assets,
were in default.

- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records 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. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated
funds
advised by the Manager, may transfer uninvested cash balances into joint
trading
accounts on a daily basis. Secured by U.S. government securities, these
balances
are invested in one or more repurchase agreements. 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. 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 on a
daily basis 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 comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders.

The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses
the
Fund may be able to offset against income and gains realized in future years
and
unrealized appreciation or depreciation of securities and other investments
for
federal income tax purposes.


                                                                NET UNREALIZED
                                                                  APPRECIATION
                                                              BASED ON COST OF
                                                                SECURITIES AND
    UNDISTRIBUTED    UNDISTRIBUTED           ACCUMULATED     OTHER INVESTMENTS
    NET INVESTMENT       LONG-TERM                  LOSS    FOR FEDERAL INCOME
    INCOME                    GAIN    CARRYFORWARD 1,2,3          TAX PURPOSES
    --------------------------------------------------------------------------
    $27,335,900                $--           $42,528,767
$10,551,859

1. As of December 31, 2003, the Fund had $39,452,115 of net capital loss
carryforward available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of December 31, 2003,
details of the capital loss carryforward were as follows:

                              EXPIRING
                              -------------------------
                              2010           39,452,115

2. During the fiscal year December 31, 2003, the Fund utilized $18,880,076 of
capital loss carryforward to offset capital gains realized in that fiscal
year.
During the fiscal year December 31, 2002, the Fund did not utilize any capital
loss carryforwards.
3. As of December 31, 2003, the Fund had $3,076,652 of post-October losses
available to offset future realized capital gains, if any. Such losses, if
unutilized, will expire in 2012.


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. Accordingly,
the
following amounts have been reclassified for December 31, 2003. Net assets of
the Fund were unaffected by the reclassifications.


                     REDUCTION TO                REDUCTION TO
                      ACCUMULATED             ACCUMULATED NET
                   NET INVESTMENT               REALIZED LOSS
                           INCOME              ON INVESTMENTS
                   ------------------------------------------
                         $636,364                    $636,364

The tax character of distributions paid during the years ended December 31,
2003
and December 31, 2002 was as follows:
                                         YEAR ENDED               YEAR ENDED
                                  DECEMBER 31, 2003        DECEMBER 31, 2002
     -----------------------------------------------------------------------
     Distributions paid from:
     Ordinary income                    $40,743,886             $50,820,794

The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments
for
federal income tax purposes as of December 31, 2003 are noted below. The
primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of
losses
or tax realization of financial statement unrealized gain or loss.

                 Federal tax cost of securities             $826,116,978
                 Federal tax cost of other investments       154,869,484
                                                            ------------
                 Total federal tax cost                     $980,986,462
                                                            ============

                 Gross unrealized appreciation              $ 21,330,253
                 Gross unrealized depreciation               (10,778,394)
                                                            ------------
                 Net unrealized appreciation                $ 10,551,859
                                                            ============

- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. Under the plan, deferred amounts are treated as
though
equal dollar amounts had been invested in shares of the Fund or are invested
in
other Oppenheimer funds selected by the Trustee. Deferral of trustees' fees
under the plan will not affect the net assets of the Fund, and will not
materially affect the Fund's assets, liabilities or net investment income per
share. Amounts will be deferred until distributed in accordance to the Plan.

- --------------------------------------------------------------------------------
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. Income and capital gain distributions,
if
any, are declared and paid annually.

- --------------------------------------------------------------------------------
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.


NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
represents earnings on cash balances maintained by the Fund.

- --------------------------------------------------------------------------------
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,
2003    YEAR ENDED DECEMBER 31, 2002 1
                                                    SHARES
AMOUNT          SHARES            AMOUNT
- --------------------------------------------------------------------------------------------------------------
 NON-SERVICE SHARES

 Sold                                            6,666,784     $
75,024,613      18,951,559     $ 204,469,491
 Dividends and/or distributions reinvested       3,719,988
40,547,869       4,914,970        50,820,794
 Redeemed                                      (20,335,565)
(226,660,309)    (21,695,172)     (233,906,419)

- ---------------------------------------------------------------
 Net increase (decrease)                        (9,948,793)
$(111,087,827)      2,171,357     $  21,383,866

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

- --------------------------------------------------------------------------------------------------------------
 SERVICE SHARES
 Sold                                              507,273     $
5,712,858         309,112     $   3,377,815
 Dividends and/or distributions reinvested          18,016
196,017              --                --
 Redeemed                                         (404,048)
(4,553,631)        (93,703)       (1,029,435)

- ---------------------------------------------------------------
 Net increase                                      121,241     $
1,355,244         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, 2003, were
$776,630,392 and $855,796,793, respectively.

- --------------------------------------------------------------------------------
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 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, 0.60% of 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 per account fee. For the year ended December 31, 2003, the Fund paid
$10,036 to OFS for services to the Fund.
   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. Fees incurred by the Fund under the plan are detailed in the
Statement
of Operations.


- --------------------------------------------------------------------------------
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 for protection from 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
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
   As of December 31, 2003, the Fund had no outstanding foreign currency
contracts.


- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. 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 protection from 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 as a 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 has expired.
   Cash held by the broker to cover initial margin requirements on open
futures
contracts is noted in the Statement of Assets and Liabilities. 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. The net change in
unrealized appreciation and depreciation is reported on the Statement of
Operations.
   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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS Continued
As of December 31, 2003, the Fund had outstanding futures contracts as
follows:

UNREALIZED
                               EXPIRATION    NUMBER OF    VALUATION AS
OF          APPRECIATION
CONTRACT DESCRIPTION                DATES    CONTRACTS  DECEMBER 31,
2003         (DEPRECIATION)
- -----------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE


U.S. Long Bonds                   3/22/04          166
$18,145,875             $  87,128
U.S. Treasury Nts., 5 yr.         3/22/04           28
3,125,500                17,176
U.S. Treasury Nts., 10 yr.        3/22/04          435
48,835,547               688,822

- ---------

               793,126

- ---------
CONTRACTS TO SELL
U.S. Treasury Nts., 2 yr.         3/30/04          396
84,762,563              (458,214)

                                                                ---------

$ 334,912

=========
- --------------------------------------------------------------------------------
7. TOTAL RETURN SWAP CONTRACTS
The Fund may enter into a total return swap transaction 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 notional. The Fund records an increase or decrease to interest
income, in the amount due to or owed by the Fund at termination or settlement.
Total return swaps are subject to risks (if the counterparty fails to meet its
obligations).

As of December 31, 2003, the Fund had entered into the following total return
swap agreements:


                                            PAID BY             RECEIVED BY
SWAP                  NOTIONAL          THE FUND AT              THE FUND AT
TERMINATION     UNREALIZED
COUNTERPARTY            AMOUNT    DECEMBER 31, 2003        DECEMBER 31,
2003         DATE   APPRECIATION
- --------------------------------------------------------------------------------------------------------

                                                       Value of total return
                                          One-Month       of Lehman Brothers
Deutsche Bank AG   $15,136,000           LIBOR Flat               CMBS
Index      6/30/04        $13,850



- --------------------------------------------------------------------------------
8. ILLIQUID SECURITIES
As of December 31, 2003, 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, 2003 was $58,255,976, which represents 9.36% of the Fund's net assets.


- --------------------------------------------------------------------------------
9. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of US
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities
loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the
collateral.
Cash collateral is invested in cash equivalents. As of December 31, 2003, the
Fund had on loan securities valued at approximately $83,699,000. Cash of
$85,256,900 was received as collateral for the loans, and has been invested in
approved instruments.

- --------------------------------------------------------------------------------
10. BORROWING AND LENDING ARRANGEMENTS
The Fund entered into an "interfund borrowing and lending arrangement" with
other funds in the Oppenheimer funds complex, to allow funds to borrow for
liquidity purposes. The arrangement was initiated pursuant to exemptive relief
granted by the Securities and Exchange Commission (the SEC) to allow these
affiliated funds to lend money to, and borrow money from, each other, in an
attempt to reduce borrowing costs below those of bank loan facilities. The
SEC's
order requires the Fund's Board of Trustees to adopt operating policies and
procedures to administer interfund borrowing and lending. Under the
arrangement
the Fund may lend money to other Oppenheimer funds and may borrow from other
Oppenheimer funds at a rate set by the Fund's Board of Trustees, based upon a
recommendation by the Manager. The Fund's borrowings, if any, are subject to
asset coverage requirements under the Investment Company Act and the
provisions
of the SEC order and other applicable regulations. If the Fund borrows money,
there is a risk that the loan could be called on one day's notice, in which
case
the Fund might have to borrow from a bank at higher rates if a loan were not
available from another Oppenheimer fund. If the Fund lends money to another
fund, it will be subject to the risk that the other fund might not repay the
loan in a timely manner, or at all.
   The Fund had no interfund borrowings or loans outstanding during the year
ended or at December 31, 2003.

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,  a series of  Oppenheimer  Variable
Account Funds, including the statement of investments,  as of December 31, 2003,
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, 2003, 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, 2003, 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
February 12, 2004

OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENT OF INVESTMENTS  December 31, 2003
- --------------------------------------------------------------------------------

                                                   MARKET VALUE
                                        SHARES       SEE NOTE 1
- ----------------------------------------------------------------
COMMON STOCKS--94.0%
- ----------------------------------------------------------------
CONSUMER DISCRETIONARY--20.6%
- ----------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--4.3%
Carnival Corp.                         746,400  $    29,654,472
- ----------------------------------------------------------------
International Game Technology          382,000       13,637,400
- ----------------------------------------------------------------
Royal Caribbean Cruises Ltd.           882,500       30,702,175
- ----------------------------------------------------------------
Starwood Hotels & Resorts
Worldwide, Inc.                        110,700        3,981,879
                                                ----------------
                                                     77,975,926

- ----------------------------------------------------------------
HOUSEHOLD DURABLES--0.4%
Ethan Allen Interiors, Inc.            181,500        7,601,220
- ----------------------------------------------------------------
MEDIA--13.5%
Clear Channel Communications, Inc.     521,200       24,407,796
- ----------------------------------------------------------------
Comcast Corp., Cl. A Special,
Non-Vtg. 1                           1,844,700       57,702,216
- ----------------------------------------------------------------
Cox Communications, Inc., Cl. A 1      150,300        5,177,835
- ----------------------------------------------------------------
Liberty Media Corp., Cl. A 1           491,000        5,837,990
- ----------------------------------------------------------------
New York Times Co., Cl. A              202,900        9,696,591
- ----------------------------------------------------------------
News Corp. Ltd. (The),
Sponsored ADR                          633,300       22,862,130
- ----------------------------------------------------------------
Omnicom Group, Inc.                    103,300        9,021,189
- ----------------------------------------------------------------
Time Warner, Inc. 1                  2,185,200       39,311,748
- ----------------------------------------------------------------
Univision Communications, Inc.,
Cl. A 1                                444,165       17,628,909
- ----------------------------------------------------------------
Viacom, Inc., Cl. B                  1,264,300       56,109,634
                                                ----------------
                                                    247,756,038

- ----------------------------------------------------------------
MULTILINE RETAIL--1.4%
Federated Department Stores, Inc.      105,000        4,948,650
- ----------------------------------------------------------------
Nordstrom, Inc.                         37,900        1,299,970
- ----------------------------------------------------------------
Target Corp.                           496,000       19,046,400
                                                ----------------
                                                     25,295,020

- ----------------------------------------------------------------
SPECIALTY RETAIL--1.0%
Abercrombie & Fitch Co., Cl. A 1        71,000        1,754,410
- ----------------------------------------------------------------
Gap, Inc. (The)                        590,600       13,707,826
- ----------------------------------------------------------------
Weight Watchers International, Inc. 1   89,500        3,434,115
                                                ----------------
                                                     18,896,351

- ----------------------------------------------------------------
CONSUMER STAPLES--6.6%
- ----------------------------------------------------------------
BEVERAGES--3.7%
Anheuser-Busch Cos., Inc.              626,100       32,982,948
- ----------------------------------------------------------------
Coca-Cola Co. (The)                    167,900        8,520,925
- ----------------------------------------------------------------
PepsiCo, Inc.                          571,300       26,634,006
                                                ----------------
                                                     68,137,879

- ----------------------------------------------------------------
FOOD & STAPLES RETAILING--0.9%
Costco Wholesale Corp. 1               193,000        7,175,740
- ----------------------------------------------------------------
Wal-Mart Stores, Inc.                  172,700        9,161,735
                                                ----------------
                                                     16,337,475

                                                   MARKET VALUE
                                        SHARES       SEE NOTE 1
- ----------------------------------------------------------------
FOOD PRODUCTS--0.5%
General Mills, Inc.                    215,500  $     9,762,150
- ----------------------------------------------------------------
HOUSEHOLD PRODUCTS--0.8%
Procter & Gamble Corp. (The)           152,300       15,211,724
- ----------------------------------------------------------------
PERSONAL PRODUCTS--0.5%
Estee Lauder Cos., Inc. (The), Cl. A   213,100        8,366,306
- ----------------------------------------------------------------
TOBACCO--0.2%
Altria Group, Inc.                      67,400        3,667,908
- ----------------------------------------------------------------
ENERGY--5.6%
- ----------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--1.5%
BJ Services Co. 1                      253,000        9,082,700
- ----------------------------------------------------------------
Halliburton Co.                        169,200        4,399,200
- ----------------------------------------------------------------
Noble Corp. 1                          139,500        4,991,310
- ----------------------------------------------------------------
Rowan Cos., Inc. 1                     190,100        4,404,617
- ----------------------------------------------------------------
Schlumberger Ltd.                       33,800        1,849,536
- ----------------------------------------------------------------
Varco International, Inc. 1            128,100        2,642,703
                                                ----------------
                                                     27,370,066

- ----------------------------------------------------------------
OIL & GAS--4.1%
Amerada Hess Corp.                      91,500        4,865,055
- ----------------------------------------------------------------
BP plc, ADR                             96,900        4,782,015
- ----------------------------------------------------------------
Burlington Resources, Inc.             125,300        6,939,114
- ----------------------------------------------------------------
ConocoPhillips                          79,300        5,199,701
- ----------------------------------------------------------------
Encana Corp.                           237,340        9,366,872
- ----------------------------------------------------------------
Exxon Mobil Corp.                      764,000       31,324,000
- ----------------------------------------------------------------
TotalFinaElf SA, Sponsored ADR         131,600       12,174,316
                                                ----------------
                                                     74,651,073

- ----------------------------------------------------------------
FINANCIALS--12.1%
- ----------------------------------------------------------------
COMMERCIAL BANKS--2.1%
Bank of America Corp.                  232,900       18,732,147
- ----------------------------------------------------------------
Bank One Corp.                         375,400       17,114,486
- ----------------------------------------------------------------
U.S. Bancorp                            62,500        1,861,250
                                                ----------------
                                                     37,707,883

- ----------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--7.7%
American Express Co.                   502,800       24,250,044
- ----------------------------------------------------------------
Citigroup, Inc.                        977,500       47,447,850
- ----------------------------------------------------------------
Goldman Sachs Group, Inc. (The)         38,300        3,781,359
- ----------------------------------------------------------------
J.P. Morgan Chase & Co.                251,100        9,222,903
- ----------------------------------------------------------------
Merrill Lynch & Co., Inc.              226,300       13,272,495
- ----------------------------------------------------------------
Morgan Stanley                         584,600       33,830,802
- ----------------------------------------------------------------
Schwab (Charles) Corp.                 874,800       10,357,632
                                                ----------------
                                                    142,163,085

- ----------------------------------------------------------------
INSURANCE--1.8%
American International Group, Inc.     328,350       21,763,038
- ----------------------------------------------------------------
Everest Re Group Ltd.                   37,000        3,130,200
- ----------------------------------------------------------------
XL Capital Ltd., Cl. A                 100,300        7,778,265
                                                ----------------
                                                     32,671,503

STATEMENT OF INVESTMENTS  Continued


                                                   MARKET VALUE
                                        SHARES       SEE NOTE 1
- ----------------------------------------------------------------
REAL ESTATE--0.5%
Host Marriott Corp. 1                  763,900  $     9,411,248
- ----------------------------------------------------------------
HEALTH CARE--13.3%
- ----------------------------------------------------------------
BIOTECHNOLOGY--3.2%
Amgen, Inc. 1                          260,300       16,086,540
- ----------------------------------------------------------------
Biogen Idec, Inc. 1                    247,500        9,103,050
- ----------------------------------------------------------------
Celgene Corp. 1                        153,600        6,915,072
- ----------------------------------------------------------------
Chiron Corp. 1                          48,800        2,781,112
- ----------------------------------------------------------------
Gilead Sciences, Inc. 1                185,900       10,808,226
- ----------------------------------------------------------------
Invitrogen Corp. 1                      50,900        3,563,000
- ----------------------------------------------------------------
Serono SA, ADR                         281,300        4,936,815
- ----------------------------------------------------------------
Sicor, Inc. 1                          197,000        5,358,400
                                                ----------------
                                                     59,552,215

- ----------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--3.0%
Applera Corp./Applied
Biosystems Group                       183,400        3,798,214
- ----------------------------------------------------------------
Medtronic, Inc.                        721,300       35,062,393
- ----------------------------------------------------------------
Millipore Corp. 1                      261,500       11,257,575
- ----------------------------------------------------------------
Nektar Therapeutics 1                  120,100        1,634,561
- ----------------------------------------------------------------
Varian Medical Systems, Inc. 1          58,500        4,042,350
- ----------------------------------------------------------------
VISX, Inc. 1                             7,800          180,570
                                                ----------------
                                                     55,975,663

- ----------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--1.3%
Aetna, Inc.                            240,000       16,219,200
- ----------------------------------------------------------------
Apria Healthcare Group, Inc. 1          57,300        1,631,331
- ----------------------------------------------------------------
UnitedHealth Group, Inc.                97,600        5,678,368
                                                ----------------
                                                     23,528,899

- ----------------------------------------------------------------
PHARMACEUTICALS--5.8%
Abbott Laboratories                     58,400        2,721,440
- ----------------------------------------------------------------
Barr Laboratories, Inc. 1              146,300       11,257,785
- ----------------------------------------------------------------
Bristol-Myers Squibb Co.               235,100        6,723,860
- ----------------------------------------------------------------
Dr. Reddy's Laboratories Ltd.,
Sponsored ADR                          141,900        4,491,135
- ----------------------------------------------------------------
GlaxoSmithKline plc, ADR                96,500        4,498,830
- ----------------------------------------------------------------
Medicis Pharmaceutical Corp., Cl. A     67,000        4,777,100
- ----------------------------------------------------------------
Merck & Co., Inc.                       55,800        2,577,960
- ----------------------------------------------------------------
Perrigo Co.                            354,200        5,568,024
- ----------------------------------------------------------------
Pfizer, Inc.                           903,700       31,927,721
- ----------------------------------------------------------------
Roche Holdings AG                      104,534       10,544,262
- ----------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.,
Sponsored ADR                          366,700       20,795,557
                                                ----------------
                                                    105,883,674

- ----------------------------------------------------------------
INDUSTRIALS--10.0%
- ----------------------------------------------------------------
AEROSPACE & DEFENSE--1.9%
Honeywell International, Inc.          394,000       13,171,420


                                                   MARKET VALUE
                                        SHARES       SEE NOTE 1
- ----------------------------------------------------------------
AEROSPACE & DEFENSE Continued
L-3 Communications Holdings, Inc. 1     17,900  $       919,344
- ----------------------------------------------------------------
Northrop Grumman Corp.                  84,200        8,049,520
- ----------------------------------------------------------------
United Technologies Corp.              138,200       13,097,214
                                                ----------------
                                                     35,237,498

- ----------------------------------------------------------------
AIR FREIGHT & LOGISTICS--1.3%
Expeditors International of
Washington, Inc.                       180,500        6,797,630
- ----------------------------------------------------------------
FedEx Corp.                            125,200        8,451,000
- ----------------------------------------------------------------
United Parcel Service, Inc., Cl. B     101,800        7,589,190
                                                ----------------
                                                     22,837,820

- ----------------------------------------------------------------
BUILDING PRODUCTS--0.1%
York International Corp.                52,400        1,928,320
- ----------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--1.1%
Dun & Bradstreet Corp. 1               117,700        5,968,567
- ----------------------------------------------------------------
Waste Management, Inc.                 436,500       12,920,400
                                                ----------------
                                                     18,888,967

- ----------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--3.9%
3M Co.                                  76,000        6,462,280
- ----------------------------------------------------------------
General Electric Co.                 1,917,600       59,407,248
- ----------------------------------------------------------------
Tyco International Ltd.                222,100        5,885,650
                                                ----------------
                                                     71,755,178

- ----------------------------------------------------------------
MACHINERY--1.1%
Danaher Corp.                           54,100        4,963,675
- ----------------------------------------------------------------
Dover Corp.                            108,800        4,324,800
- ----------------------------------------------------------------
Ingersoll-Rand Co., Cl. A              167,100       11,342,748
                                                ----------------
                                                     20,631,223

- ----------------------------------------------------------------
ROAD & RAIL--0.6%
Canadian National Railway Co.           84,400        5,340,832
- ----------------------------------------------------------------
Norfolk Southern Corp.                 258,700        6,118,255
                                                ----------------
                                                     11,459,087

- ----------------------------------------------------------------
INFORMATION TECHNOLOGY--22.2%
- ----------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--3.1%
Cisco Systems, Inc. 1                1,090,100       26,478,529
- ----------------------------------------------------------------
Lucent Technologies, Inc. 1          1,552,900        4,410,236
- ----------------------------------------------------------------
Nokia Oyj, Sponsored ADR             1,514,100       25,739,700
                                                ----------------
                                                     56,628,465

- ----------------------------------------------------------------
COMPUTERS & PERIPHERALS--2.8%
Dell, Inc. 1                           565,000       19,187,400
- ----------------------------------------------------------------
EMC Corp. 1                            357,600        4,620,192
- ----------------------------------------------------------------
International Business Machines Corp.  298,700       27,683,516
- ----------------------------------------------------------------
Maxtor Corp. 1                          69,200          768,120


                                                   MARKET VALUE
                                        SHARES       SEE NOTE 1
- ----------------------------------------------------------------
COMPUTERS & PERIPHERALS Continued
Seagate Technology International,
Inc. (Escrow Shares) 1,2,3             325,000  $            --
                                                ----------------
                                                     52,259,228

- ----------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--1.0%
Sanmina-SCI Corp. 1                    689,400        8,693,334
- ----------------------------------------------------------------
Vishay Intertechnology, Inc. 1         425,900        9,753,110
                                                ----------------
                                                     18,446,444

- ----------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--1.4%
United Online, Inc. 1                   68,500        1,150,115
- ----------------------------------------------------------------
Yahoo!, Inc. 1                         525,600       23,741,352
                                                ----------------
                                                     24,891,467

- ----------------------------------------------------------------
IT SERVICES--1.3%
Accenture Ltd., Cl. A 1                 99,300        2,613,576
- ----------------------------------------------------------------
First Data Corp.                       180,900        7,433,181
- ----------------------------------------------------------------
Infosys Technologies Ltd.              117,000       14,267,461
                                                ----------------
                                                     24,314,218

- ----------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--6.9%
Analog Devices, Inc.                   148,200        6,765,330
- ----------------------------------------------------------------
Applied Materials, Inc. 1              245,400        5,509,230
- ----------------------------------------------------------------
ASML Holding NV1                       316,300        6,341,815
- ----------------------------------------------------------------
ATI Technologies, Inc. 1                97,300        1,471,176
- ----------------------------------------------------------------
Cypress Semiconductor Corp. 1          595,600       12,722,016
- ----------------------------------------------------------------
Intel Corp.                          1,346,200       43,347,640
- ----------------------------------------------------------------
International Rectifier Corp. 1        139,700        6,902,577
- ----------------------------------------------------------------
LSI Logic Corp. 1                      364,300        3,231,341
- ----------------------------------------------------------------
National Semiconductor Corp. 1         186,200        7,338,142
- ----------------------------------------------------------------
STMicroelectronics NV                  207,000        5,591,070
- ----------------------------------------------------------------
Taiwan Semiconductor
Manufacturing Co. Ltd., ADR            863,392        8,841,134
- ----------------------------------------------------------------
Texas Instruments, Inc.                600,900       17,654,442
                                                ----------------
                                                    125,715,913

- ----------------------------------------------------------------
SOFTWARE--5.7%
Adobe Systems, Inc.                    437,400       17,189,820
- ----------------------------------------------------------------
Cadence Design Systems, Inc. 1         496,700        8,930,666
- ----------------------------------------------------------------
Intuit, Inc. 1                          84,900        4,492,059
- ----------------------------------------------------------------
Microsoft Corp.                      2,280,900       62,815,986
- ----------------------------------------------------------------
Network Associates, Inc. 1             188,900        2,841,056
- ----------------------------------------------------------------
Veritas Software Corp. 1               245,400        9,119,064
                                                ----------------
                                                    105,388,651

- ----------------------------------------------------------------
MATERIALS--2.5%
- ----------------------------------------------------------------
CHEMICALS--2.0%
Air Products & Chemicals, Inc.         175,200        9,255,816
- ----------------------------------------------------------------
Dow Chemical Co.                       156,100        6,489,077


                                                   MARKET VALUE
                                        SHARES       SEE NOTE 1
- ----------------------------------------------------------------
CHEMICALS Continued
Ecolab, Inc.                           144,200  $     3,946,754
- ----------------------------------------------------------------
Praxair, Inc.                          451,600       17,251,120
                                                ----------------
                                                     36,942,767

- ----------------------------------------------------------------
METALS & MINING--0.5%
Alcoa, Inc.                            249,900        9,496,200
- ----------------------------------------------------------------
TELECOMMUNICATION SERVICES--0.4%
- ----------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--0.4%
Telefonos de Mexico SA,
Sponsored ADR                          212,800        7,028,784
- ----------------------------------------------------------------
UTILITIES--0.7%
- ----------------------------------------------------------------
GAS UTILITIES--0.6%
Kinder Morgan Management LLC           273,500       11,749,560
- ----------------------------------------------------------------
WATER UTILITIES--0.1%
Philadelphia Suburban Corp.             71,250        1,574,625
                                                ----------------
Total Common Stocks
(Cost $1,594,511,969)                             1,725,097,721

- ----------------------------------------------------------------
OTHER SECURITIES--0.5%
Nasdaq-100 Unit Investment Trust
(Cost $6,838,977)                      242,900        8,856,134

                                     PRINCIPAL
                                        AMOUNT
- ----------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--5.7%
Undivided interest of 6.52% in joint
repurchase agreement (Principal Amount/
Market Value $1,603,898,000, with a
maturity value of $1,603,979,086) with
PaineWebber, Inc., 0.91%, dated
12/31/03, to be repurchased at
$104,628,289 on 1/2/04, collateralized
by Federal Home Loan Mortgage Corp.,
5%--5.50%, 9/1/33--11/1/33, with a value
of $405,980,626 and Federal National
Mortgage Assn., 4.50%, 10/1/33, with a
value of $1,234,398,060 (Cost
$104,623,000)                     $104,623,000      104,623,000

- ----------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $1,705,973,946)                    100.2%   1,838,576,855
- ----------------------------------------------------------------
LIABILITIES IN EXCESS
OF OTHER ASSETS                           (0.2)      (3,638,304)
                                  ------------------------------
NET ASSETS                               100.0%  $1,834,938,551
                                  ==============================


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.
3. Received as the result of issuer reorganization. Currently has minimal
market
value.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.



STATEMENT OF ASSETS AND LIABILITIES  December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSETS

Investments, at value (cost $1,705,973,946)--see accompanying
statement                              $1,838,576,855
- --------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments
sold
5,619,312
Interest and
dividends
1,459,805
Other
9,388


- ---------------
Total
assets
1,845,665,360

- --------------------------------------------------------------------------------------------------------------------
LIABILITIES
Bank
overdraft
2,440,942
- --------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments
purchased
5,803,071
Shares of beneficial interest redeemed
                                                            2,328,574
Shareholder
reports
57,030
Distribution and service plan fees
                                       50,591
Trustees'
compensation
7,128
Transfer and shareholder servicing agent
fees                                                                 1,667
Other
37,806

- ---------------
Total
liabilities
10,726,809

- --------------------------------------------------------------------------------------------------------------------
NET ASSETS

$1,834,938,551

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

- --------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Par value of shares of beneficial interest
                                              $       52,890
- --------------------------------------------------------------------------------------------------------------------
Additional paid-in capital
                        2,065,853,562
- --------------------------------------------------------------------------------------------------------------------
Accumulated net investment
income
      5,752,602
- --------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency
transactions                         (369,323,412)
- --------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and
liabilities
denominated in foreign currencies
                                               132,602,909

- ---------------
NET
ASSETS
                      $1,834,938,551

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

- --------------------------------------------------------------------------------------------------------------------
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 $1,715,239,877 and 49,423,613 shares of beneficial interest
outstanding)                                  $34.70
- --------------------------------------------------------------------------------------------------------------------
Service shares:
Net asset value, redemption price per share and offering price per share
(based on net assets
of $119,698,674 and 3,466,565 shares of beneficial interest
outstanding)                                     $34.53


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENT OF OPERATIONS  For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
INVESTMENT INCOME

Dividends (net of foreign withholding taxes of
$197,252)                             $  15,168,088
- ---------------------------------------------------------------------------------------------------
Interest
913,839

                                       --------------
Total investment
income
16,081,927

- ---------------------------------------------------------------------------------------------------
EXPENSES
Management
fees
9,930,998
- ---------------------------------------------------------------------------------------------------
Distribution and service plan fees--Service
shares                                          119,754
- ---------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares
                                 10,397
Service
shares
11,601
- ---------------------------------------------------------------------------------------------------
Shareholder
reports
95,470
- ---------------------------------------------------------------------------------------------------
Trustees' compensation
                                   38,270
- ---------------------------------------------------------------------------------------------------
Custodian fees and
expenses
23,894
- ---------------------------------------------------------------------------------------------------
Other
93,717

             --------------
Total
expenses
10,324,101
Less reduction to custodian
expenses                                                          (770)

                                                        --------------
Net
expenses
10,323,331

- ---------------------------------------------------------------------------------------------------
NET INVESTMENT
INCOME
5,758,596

- ---------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments
(149,729,911)
Foreign currency
transactions
283,516

                                                    --------------
Net realized
loss
(149,446,395)
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments
557,260,852
Translation of assets and liabilities denominated in foreign
currencies                  1,737,209

- --------------
Net change in unrealized appreciation
(depreciation)                                   558,998,061

- ---------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS                                 $ 415,310,262

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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------

NON-SERVICE SHARES    YEAR ENDED DECEMBER 31                   2003
2002          2001          2000          1999
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA

Net asset value, beginning of period                         $26.62
$36.58        $46.63        $49.84       $ 36.67
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                           .12
..11           .18           .27           .06
Net realized and unrealized gain (loss)                        8.07
(9.89)        (5.86)          .02         14.68

- ----------------------------------------------------------------
Total from investment operations                               8.19
(9.78)        (5.68)          .29         14.74
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                           (.11)
(.18)         (.27)         (.06)         (.13)
Distributions from net realized gain
- --            --         (4.10)        (3.44)        (1.44)

- ----------------------------------------------------------------
Total dividends and/or distributions to shareholders           (.11)
(.18)        (4.37)        (3.50)        (1.57)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                               $34.70
$26.62        $36.58        $46.63        $49.84

================================================================
- -----------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1                            30.94%
(26.86)%      (12.58)%       (0.23)%       41.66%

- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (in thousands)                 $1,715,240
$1,338,769    $1,975,345    $2,095,803    $1,425,197
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                        $1,468,297
$1,630,430    $2,000,314    $1,922,099    $1,002,835
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                                          0.39%
0.35%         0.51%         0.66%         0.21%
Total expenses                                                 0.67% 3
0.66% 3       0.68% 3       0.67% 3       0.70% 3
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
48%           32%           45%           38%           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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

FINANCIAL HIGHLIGHTS  Continued
- -----------------------------------------------------------------------------
SERVICE SHARES    YEAR ENDED DECEMBER 31
2003          2002        2001 1
- -----------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------

Net asset value, beginning of period
$26.53        $36.56        $31.66
- -----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
..08           .20            -- 2
Net realized and unrealized gain (loss)
8.02        (10.05)         4.90

- ------------------------------------
Total from investment operations
8.10         (9.85)         4.90
- -----------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
(.10)         (.18)           --
Distributions from net realized gain
- --            --            --

- ------------------------------------
Total dividends and/or distributions to shareholders
(.10)         (.18)           --
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period
$34.53        $26.53        $36.56

====================================
- -----------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3
30.69%       (27.09)%       15.51%

- -----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)                       $119,699
$18,260           $90
- -----------------------------------------------------------------------------------------------------
Average net assets (in thousands)                              $ 48,178
$ 6,263           $16
- -----------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income                                              0.14%
0.26%         0.11%
Total expenses                                                     0.94%
5       0.81% 5,6     0.81% 5
- -----------------------------------------------------------------------------------------------------
Portfolio turnover rate                                             48%
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, 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.
6. Voluntary waiver of transfer agent fees less than 0.01%.
- --------------------------------------------------------------------------------

YEAR ENDED DECEMBER 31,

2003              2002
- -----------------------------------------------------------------------------------------------------------------------------
OPERATIONS

Net investment
income
$    5,758,596    $    5,733,438
- -----------------------------------------------------------------------------------------------------------------------------
Net realized
loss
(149,446,395)     (179,603,959)
- -----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation)                                           558,998,061
(369,716,665)


- ---------------------------------
Net increase (decrease) in net assets resulting from
operations                                415,310,262      (543,587,186)

- -----------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Non-Service
shares
             (5,643,286)      (10,120,100)
Service
shares
(84,026)           (1,731)

- -----------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Non-Service
shares
(18,705,242)      (83,859,897)
Service
shares
87,031,915        19,162,943

- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase
(decrease)
477,909,623      (618,405,971)
- -----------------------------------------------------------------------------------------------------------------------------
Beginning of
period
1,357,028,928     1,975,434,899


- ---------------------------------
End of period [including accumulated net investment income
of $5,752,602 and $5,696,906,
respectively]
$1,834,938,551    $1,357,028,928

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

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 with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. 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. Securities traded on NASDAQ are valued based on the closing price
provided by NASDAQ 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. Securities whose values have been
materially affected by what the Manager identifies as a significant event
occurring before the Fund's assets are valued but after the close of their
respective foreign exchanges will be fair valued. Fair value is determined in
good faith using 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 Fund's accounting records 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. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated
funds
advised by the Manager, may transfer uninvested cash balances into joint
trading
accounts on a daily basis. Secured by U.S. government securities, these
balances
are invested in one or more repurchase agreements. 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. 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 on a
daily basis 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.


NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders.

The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses
the
Fund may be able to offset against income and gains realized in future years
and
unrealized appreciation or depreciation of securities and other investments
for
federal income tax purposes.


NET UNREALIZED


APPRECIATION

BASED ON COST OF

SECURITIES AND
       UNDISTRIBUTED          UNDISTRIBUTED
ACCUMULATED             OTHER INVESTMENTS
       NET INVESTMENT             LONG-TERM
LOSS            FOR FEDERAL INCOME
       INCOME                          GAIN        CARRYFORWARD
1,2,3                  TAX PURPOSES

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

       $5,752,560                       $--
$360,623,877                  $123,903,415


1. As of December 31, 2003, the Fund had $360,611,657 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of December 31, 2003,
details of the capital loss carryforwards were as follows:

                              EXPIRING
                              -------------------------
                              2009         $ 14,552,938
                              2010          152,282,354
                              2011          193,776,365
                                           ------------
                              Total        $360,611,657
                                           ============

2. During the fiscal years ended December 31, 2003 and December 31, 2002, the
Fund did not utilize any capital loss carryforwards.

3. As of December 31, 2003, the Fund had $12,220 of post-October foreign
currency losses which were deferred.

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. Accordingly,
the
following amounts have been reclassified for December 31, 2003. Net assets of
the Fund were unaffected by the reclassifications.
                                                     INCREASE TO
                 INCREASE TO                     ACCUMULATED NET
                 ACCUMULATED NET                   REALIZED LOSS
                 INVESTMENT INCOME                ON INVESTMENTS
                 -----------------------------------------------
                 $24,412                                 $24,412

The tax character of distributions paid during the years ended December 31,
2003
and December 31, 2002 was as follows:
                                            YEAR ENDED               YEAR
ENDED
                                     DECEMBER 31, 2003        DECEMBER 31,
2002

- --------------------------------------------------------------------------
     Distributions paid from:
     Ordinary income                        $5,727,312
$10,121,831

The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments
for
federal income tax purposes as of December 31, 2003 are noted below. The
primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of
losses
or tax realization of financial statement unrealized gain or loss.

                 Federal tax cost of securities           $1,714,673,440
                                                          ==============

                 Gross unrealized appreciation            $  238,995,026
                 Gross unrealized depreciation              (115,091,611)
                                                          --------------
                 Net unrealized appreciation              $  123,903,415
                                                          ==============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. Under the plan, deferred amounts are treated as
though
equal dollar amounts had been invested in shares of the Fund or are invested
in
other Oppenheimer funds selected by the Trustee. Deferral of trustees' fees
under the plan will not affect the net assets of the Fund, and will not
materially affect the Fund's assets, liabilities or net investment income per
share. Amounts will be deferred until distributed in accordance to the Plan.

- --------------------------------------------------------------------------------
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. Income and capital gain distributions,
if
any, are declared and paid annually.

- --------------------------------------------------------------------------------
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.

- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
represents earnings on cash balances maintained by the Fund.

- --------------------------------------------------------------------------------
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, 2003          YEAR ENDED DECEMBER 31, 2002

SHARES            AMOUNT              SHARES            AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES

Sold
11,371,657     $ 330,561,752          13,374,630     $ 416,985,488
Dividends and/or distributions reinvested
223,231         5,643,286             282,921        10,120,100
Redeemed
(12,455,978)     (354,910,280)        (17,368,883)     (510,965,485)

- --------------------------------------------------------------------
Net decrease
(861,090)    $ (18,705,242)         (3,711,332)    $ (83,859,897)

====================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold
2,961,561     $  92,475,323             733,299     $  20,471,072
Dividends and/or distributions reinvested
3,339            84,026                  48             1,731
Redeemed
(186,681)       (5,527,434)            (47,465)       (1,309,860)

- --------------------------------------------------------------------
Net increase
2,778,219     $  87,031,915             685,882     $  19,162,943

====================================================================
- --------------------------------------------------------------------------------
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, 2003, were
$736,318,474 and $682,956,005, respectively.

NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 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.

- --------------------------------------------------------------------------------
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 per account fee. For the year ended December 31, 2003, the Fund paid
$20,025 to OFS for services to the Fund.

   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.
- --------------------------------------------------------------------------------
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 for protection from 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
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
   As of December 31, 2003, the Fund had no outstanding foreign currency
contracts.

- --------------------------------------------------------------------------------
6. ILLIQUID SECURITIES
As of December 31, 2003, 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, 2003 was zero.
- --------------------------------------------------------------------------------
7. BORROWING AND LENDING ARRANGEMENTS
The Fund entered into an "interfund borrowing and lending arrangement" with
other funds in the Oppenheimer funds complex, to allow funds to borrow for
liquidity purposes. The arrangement was initiated pursuant to exemptive relief
granted by the Securities and Exchange Commission (the SEC) to allow these
affiliated funds to lend money to, and borrow money from, each other, in an
attempt to reduce borrowing costs below those of bank loan facilities. The
SEC's
order requires the Fund's Board of Trustees to adopt operating policies and
procedures to administer interfund borrowing and lending. Under the
arrangement
the Fund may lend money to other Oppenheimer funds and may borrow from other
Oppenheimer funds at a rate set by the Fund's Board of Trustees, based upon a
recommendation by the Manager. The Fund's borrowings, if any, are subject to
asset coverage requirements under the Investment Company Act and the
provisions
of the SEC order and other applicable regulations. If the Fund borrows money,
there is a risk that the loan could be called on one day's notice, in which
case
the Fund might have to borrow from a bank at higher rates if a loan were not
available from another Oppenheimer fund. If the Fund lends money to another
fund, it will be subject to the risk that the other fund might not repay the
loan in a timely manner, or at all.
   The Fund had no interfund borrowings or loans outstanding during the year
ended or at December 31, 2003.

OPPENHEIMER GLOBAL SECURITIES FUND/VA

INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
 TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER GLOBAL SECURITIES
 FUND/VA:

We have  audited  the  accompanying  statement  of  assets  and  liabilities  of
Oppenheimer Global Securities Fund/VA, a series of Oppenheimer  Variable Account
Funds, including the statement of investments,  as of December 31, 2003, 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, 2003, 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, 2003, 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
 February 12, 2004

OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF INVESTMENTS  December 31, 2003


                                                                 MARKET VALUE
                                                     SHARES        SEE NOTE 1
- -------------------------------------------------------------------------------
 COMMON STOCKS--95.4%
- -------------------------------------------------------------------------------
 CONSUMER DISCRETIONARY--16.7%
- -------------------------------------------------------------------------------
 AUTOMOBILES--1.0%
 Porsche AG, Preferred                               45,562      $ 26,953,268
- -------------------------------------------------------------------------------
 HOTELS, RESTAURANTS & LEISURE--1.6%
 International Game Technology                      665,500        23,758,350
- -------------------------------------------------------------------------------
 Panera Bread Co., Cl. A 1                          131,100         5,182,383
- -------------------------------------------------------------------------------
 Starbucks Corp. 1                                  359,500        11,885,070

- ----------------
                                                                   40,825,803

- -------------------------------------------------------------------------------
 HOUSEHOLD DURABLES--0.8%
 Sharp Corp.                                      1,347,000        21,253,868
- -------------------------------------------------------------------------------
 MEDIA--10.0%
 Grupo Televisa SA, Sponsored GDR                   437,699        17,446,682
- -------------------------------------------------------------------------------
 JC Decaux SA 1                                     530,684         8,675,146
- -------------------------------------------------------------------------------
 Pearson plc                                      2,090,128        23,273,034
- -------------------------------------------------------------------------------
 Reed Elsevier plc                                2,157,226        18,044,078
- -------------------------------------------------------------------------------
 Singapore Press Holdings Ltd.                    1,471,033        16,370,797
- -------------------------------------------------------------------------------
 Sirius Satellite Radio, Inc. 1                  26,291,602        83,081,462
- -------------------------------------------------------------------------------
 Societe Television Francaise 1                     378,800        13,225,493
- -------------------------------------------------------------------------------
 Television Broadcasts Ltd.                       5,033,832        25,416,845
- -------------------------------------------------------------------------------
 Vivendi Universal SA 1                             580,710        14,114,868
- -------------------------------------------------------------------------------
 Wolters Kluwer NV                                  782,250        12,234,974
- -------------------------------------------------------------------------------
 WPP Group plc                                    1,173,870        11,526,206
- -------------------------------------------------------------------------------
 Zee Telefilms Ltd.                               5,167,400        16,994,375

- ----------------
                                                                  260,403,960

- -------------------------------------------------------------------------------
 SPECIALTY RETAIL--3.3%
 Circuit City Stores, Inc./
 Circuit City Group                               1,365,149        13,828,959
- -------------------------------------------------------------------------------
 Gap, Inc. (The)                                    561,400        13,030,094
- -------------------------------------------------------------------------------
 Hennes & Mauritz AB, B Shares                    1,022,700        24,304,991
- -------------------------------------------------------------------------------
 New Dixons Group plc                             9,517,970        23,683,663
- -------------------------------------------------------------------------------
 RadioShack Corp.                                   342,500        10,507,900

- ----------------
                                                                   85,355,607

- -------------------------------------------------------------------------------
 CONSUMER STAPLES--7.7%
- -------------------------------------------------------------------------------
 BEVERAGES--1.6%
 Companhia de Bebidas das
 Americas, ADR                                      596,715        15,222,200
- -------------------------------------------------------------------------------
 Diageo plc                                         446,470         5,874,479
- -------------------------------------------------------------------------------
 Fomento Economico Mexicano
 SA de CV, UBD                                    3,065,000        11,313,818
- -------------------------------------------------------------------------------
 Grupo Modelo SA de CV,
 Series C                                         4,073,700         9,751,721

- ----------------
                                                                   42,162,218

                                                                 MARKET VALUE
                                                     SHARES        SEE NOTE 1
- -------------------------------------------------------------------------------
 FOOD & STAPLES RETAILING--1.3%
 Boots Group plc                                  1,081,050    $   13,372,530
- -------------------------------------------------------------------------------
 Carrefour SA                                       194,580        10,681,270
- -------------------------------------------------------------------------------
 Seven-Eleven Japan Co. Ltd.                        347,000        10,523,001

- ----------------
                                                                   34,576,801

- -------------------------------------------------------------------------------
 FOOD PRODUCTS--1.0%
 Cadbury Schweppes plc                            3,512,391        25,795,336
- -------------------------------------------------------------------------------
 HOUSEHOLD PRODUCTS--2.7%
 Hindustan Lever Ltd.                             4,613,900        20,700,610
- -------------------------------------------------------------------------------
 Reckitt Benckiser plc                            2,119,950        47,969,195

- ----------------
                                                                   68,669,805

- -------------------------------------------------------------------------------
 PERSONAL PRODUCTS--1.1%
 Gillette Co.                                       549,900        20,197,827
- -------------------------------------------------------------------------------
 Shiseido Co. Ltd.                                  769,000         9,349,697

- ----------------
                                                                   29,547,524

- -------------------------------------------------------------------------------
 ENERGY--4.5%
- -------------------------------------------------------------------------------
 OIL & GAS--4.5%
 BP plc, ADR                                        434,469        21,441,045
- -------------------------------------------------------------------------------
 Burlington Resources, Inc.                         171,300         9,486,594
- -------------------------------------------------------------------------------
 ChevronTexaco Corp.                                250,872        21,672,832
- -------------------------------------------------------------------------------
 Encana Corp.                                       381,417        15,053,021
- -------------------------------------------------------------------------------
 ENI SpA                                            584,500        11,029,401
- -------------------------------------------------------------------------------
 Husky Energy, Inc.                               1,431,515        25,999,348
- -------------------------------------------------------------------------------
 Total SA, B Shares                                  60,960        11,333,871

- ----------------
                                                                  116,016,112

- -------------------------------------------------------------------------------
 FINANCIALS--17.4%
- -------------------------------------------------------------------------------
 CAPITAL MARKETS--0.2%
 Northern Trust Corp.                               124,600         5,783,932
- -------------------------------------------------------------------------------
 COMMERCIAL BANKS--8.8%
 ABN Amro Holding NV                              1,517,200        35,499,526
- -------------------------------------------------------------------------------
 Australia & New Zealand
 Banking Group Ltd.                                 885,850        11,800,405
- -------------------------------------------------------------------------------
 Bank One Corp.                                   1,006,039        45,865,318
- -------------------------------------------------------------------------------
 ICICI Bank Ltd., Sponsored ADR                   1,870,550        32,136,049
- -------------------------------------------------------------------------------
 Resona Holdings, Inc. 1                          6,533,000         8,229,495
- -------------------------------------------------------------------------------
 Royal Bank of Scotland Group
 plc (The)                                          978,787        28,840,831
- -------------------------------------------------------------------------------
 Societe Generale, Cl. A                            428,820        37,862,465
- -------------------------------------------------------------------------------
 Wachovia Corp.                                     639,929        29,814,292

- ----------------
                                                                  230,048,381

- -------------------------------------------------------------------------------
 DIVERSIFIED FINANCIAL SERVICES--3.2%
 3i Group plc                                       957,363        10,582,867
- -------------------------------------------------------------------------------
 American Express Co.                               448,000        21,607,040
- -------------------------------------------------------------------------------
 Citigroup, Inc.                                    217,566        10,560,654
- -------------------------------------------------------------------------------
 Credit Saison Co. Ltd.                             511,900        11,559,186

STATEMENT OF INVESTMENTS  Continued


                                                                 MARKET VALUE
                                                     SHARES        SEE NOTE 1
- -------------------------------------------------------------------------------
 DIVERSIFIED FINANCIAL SERVICES Continued
 MBNA Corp.                                         450,750    $   11,201,138
- -------------------------------------------------------------------------------
 MLP AG 1                                           377,528         7,428,645
- -------------------------------------------------------------------------------
 Schwab (Charles) Corp.                             956,200        11,321,408

- ----------------
                                                                   84,260,938

- -------------------------------------------------------------------------------
 INSURANCE--4.8%
 ACE Ltd.                                           525,871        21,781,577
- -------------------------------------------------------------------------------
 Aegon NV                                         1,752,350        25,927,144
- -------------------------------------------------------------------------------
 Allianz AG                                         237,130        29,940,317
- -------------------------------------------------------------------------------
 Berkshire Hathaway, Inc., Cl. B 1                    7,760        21,844,400
- -------------------------------------------------------------------------------
 Everest Re Group Ltd.                              134,400        11,370,240
- -------------------------------------------------------------------------------
 Manulife Financial Corp.                           397,413        12,870,369

- ----------------
                                                                  123,734,047

- -------------------------------------------------------------------------------
 THRIFTS & MORTGAGE FINANCE--0.4%
 Fannie Mae                                         123,900         9,299,934
- -------------------------------------------------------------------------------
 HEALTH CARE--16.7%
- -------------------------------------------------------------------------------
 BIOTECHNOLOGY--3.1%
 Affymetrix, Inc. 1                                 447,300        11,008,053
- -------------------------------------------------------------------------------
 Amgen, Inc. 1                                      287,500        17,767,500
- -------------------------------------------------------------------------------
 Biogen Idec, Inc. 1                                 64,600         2,375,988
- -------------------------------------------------------------------------------
 Genentech, Inc. 1                                   64,700         6,053,979
- -------------------------------------------------------------------------------
 Gilead Sciences, Inc. 1                            376,080        21,865,291
- -------------------------------------------------------------------------------
 Human Genome Sciences, Inc. 1                      332,200         4,401,650
- -------------------------------------------------------------------------------
 Millennium Pharmaceuticals, Inc. 1                 303,700         5,670,079
- -------------------------------------------------------------------------------
 Qiagen NV 1                                        882,911        10,847,051

- ----------------
                                                                   79,989,591

- -------------------------------------------------------------------------------
 HEALTH CARE EQUIPMENT & SUPPLIES--1.3%
 Applera Corp./
 Applied Biosystems Group                           535,400        11,088,134
- -------------------------------------------------------------------------------
 Essilor International SA                           188,860         9,766,965
- -------------------------------------------------------------------------------
 Smith & Nephew plc                               1,438,080        12,080,282

- ----------------
                                                                   32,935,381

- -------------------------------------------------------------------------------
 HEALTH CARE PROVIDERS & SERVICES--2.7%
 Express Scripts, Inc. 1                            173,200        11,505,676
- -------------------------------------------------------------------------------
 Fresenius AG, Preference                           200,002        14,001,131
- -------------------------------------------------------------------------------
 IMS Health, Inc.                                   560,700        13,939,002
- -------------------------------------------------------------------------------
 Oxford Health Plans, Inc. 1                        230,400        10,022,400
- -------------------------------------------------------------------------------
 Quest Diagnostics, Inc. 1                          292,300        21,370,053

- ----------------
                                                                   70,838,262

- -------------------------------------------------------------------------------
 PHARMACEUTICALS--9.6%
 Aventis SA                                         290,150        19,177,398
- -------------------------------------------------------------------------------
 Chugai Pharmaceutical Co. Ltd.                     802,500        11,539,167
- -------------------------------------------------------------------------------
 Eli Lilly & Co.                                    171,300        12,047,529
- -------------------------------------------------------------------------------
 Johnson & Johnson                                  340,780        17,604,695

                                                                 MARKET VALUE
                                                     SHARES        SEE NOTE 1
- -------------------------------------------------------------------------------
 PHARMACEUTICALS Continued
 Mylan Laboratories, Inc.                           468,600    $   11,836,836
- -------------------------------------------------------------------------------
 Novartis AG                                        429,798        19,513,368
- -------------------------------------------------------------------------------
 Pfizer, Inc.                                       707,219        24,986,047
- -------------------------------------------------------------------------------
 Roche Holdings AG                                  331,076        33,395,376
- -------------------------------------------------------------------------------
 Sanofi-Synthelabo SA                               645,659        48,619,820
- -------------------------------------------------------------------------------
 Schering-Plough Corp.                              834,000        14,503,260
- -------------------------------------------------------------------------------
 Shionogi & Co. Ltd.                              1,353,000        25,199,104
- -------------------------------------------------------------------------------
 Teva Pharmaceutical Industries
 Ltd., Sponsored ADR                                186,800        10,593,428

- ----------------
                                                                  249,016,028

- -------------------------------------------------------------------------------
 INDUSTRIALS--5.2%
- -------------------------------------------------------------------------------
 AEROSPACE & DEFENSE--3.6%
 Boeing Co.                                         299,800        12,633,572
- -------------------------------------------------------------------------------
 Bombardier, Inc., Cl. B                          1,678,300         7,104,121
- -------------------------------------------------------------------------------
 Empresa Brasileira de
 Aeronautica SA, ADR                                861,434        30,176,033
- -------------------------------------------------------------------------------
 Lockheed Martin Corp.                              254,400        13,076,160
- -------------------------------------------------------------------------------
 Northrop Grumman Corp.                             135,100        12,915,560
- -------------------------------------------------------------------------------
 Raytheon Co.                                       620,400        18,636,816

- ----------------
                                                                   94,542,262

- -------------------------------------------------------------------------------
 COMMERCIAL SERVICES & SUPPLIES--0.9%
 Rentokil Initial plc                             3,102,419        10,552,219
- -------------------------------------------------------------------------------
 Societe BIC SA                                     261,163        12,069,879

- ----------------
                                                                   22,622,098

- -------------------------------------------------------------------------------
 CONSTRUCTION & ENGINEERING--0.3%
 JGC Corp.                                          522,000         5,445,516
- -------------------------------------------------------------------------------
 Leighton Holdings Ltd.                             225,823         2,009,428

- ----------------
                                                                    7,454,944

- -------------------------------------------------------------------------------
 INDUSTRIAL CONGLOMERATES--0.4%
 Hutchison Whampoa Ltd.                           1,524,000        11,238,214
- -------------------------------------------------------------------------------
 INFORMATION TECHNOLOGY--19.8%
- -------------------------------------------------------------------------------
 COMMUNICATIONS EQUIPMENT--5.6%
 Alcatel SA 1                                     1,118,600        14,405,766
- -------------------------------------------------------------------------------
 Cisco Systems, Inc. 1                              570,900        13,867,161
- -------------------------------------------------------------------------------
 JDS Uniphase Corp. 1                             4,819,500        17,591,175
- -------------------------------------------------------------------------------
 Juniper Networks, Inc. 1                           339,700         6,345,596
- -------------------------------------------------------------------------------
 QUALCOMM, Inc.                                   1,117,700        60,277,561
- -------------------------------------------------------------------------------
 Scientific-Atlanta, Inc.                           336,600         9,189,180
- -------------------------------------------------------------------------------
 Telefonaktiebolaget LM Ericsson
 AB, B Shares 1                                  13,818,200        24,773,780

- ----------------
                                                                  146,450,219

                                                                 MARKET VALUE
                                                     SHARES        SEE NOTE 1
- -------------------------------------------------------------------------------
 COMPUTERS & PERIPHERALS--0.5%
 International Business
 Machines Corp.                                     116,217    $   10,770,992
- -------------------------------------------------------------------------------
 SanDisk Corp. 1                                     42,800         2,616,792

- ----------------
                                                                   13,387,784

- -------------------------------------------------------------------------------
 ELECTRONIC EQUIPMENT & INSTRUMENTS--1.7%
 Keyence Corp.                                       54,200        11,424,634
- -------------------------------------------------------------------------------
 Murata Manufacturing Co. Ltd.                      239,300        12,928,497
- -------------------------------------------------------------------------------
 Tandberg ASA 1                                   2,775,250        20,440,604

- ----------------
                                                                   44,793,735

- -------------------------------------------------------------------------------
 INTERNET SOFTWARE & SERVICES--0.5%
 Yahoo Japan Corp. 1                                    900        12,092,936
- -------------------------------------------------------------------------------
 IT SERVICES--1.3%
 Amadeus Global Travel
 Distribution SA                                  1,499,101         9,738,093
- -------------------------------------------------------------------------------
 Infosys Technologies Ltd.                          197,435        24,076,035

- ----------------
                                                                   33,814,128

- -------------------------------------------------------------------------------
 OFFICE ELECTRONICS--0.4%
 Canon, Inc.                                        221,000        10,290,100
- -------------------------------------------------------------------------------
 SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.7%
 Advanced Micro Devices, Inc. 1                   2,046,800        30,497,320
- -------------------------------------------------------------------------------
 National Semiconductor Corp. 1                     601,500        23,705,115
- -------------------------------------------------------------------------------
 Novellus Systems, Inc. 1                           262,900        11,054,945
- -------------------------------------------------------------------------------
 NVIDIA Corp. 1                                     174,900         4,066,425
- -------------------------------------------------------------------------------
 Samsung Electronics Co.                             67,240        25,451,313

- ----------------
                                                                   94,775,118

- -------------------------------------------------------------------------------
 SOFTWARE--6.1%
 Amdocs Ltd. 1                                      441,300         9,920,424
- -------------------------------------------------------------------------------
 BEA Systems, Inc. 1                                921,800        11,338,140
- -------------------------------------------------------------------------------
 Cadence Design Systems, Inc. 1                   3,647,570        65,583,309
- -------------------------------------------------------------------------------
 Electronic Arts, Inc. 1                             89,442         4,273,539
- -------------------------------------------------------------------------------
 Red Hat, Inc. 1                                    370,500         6,954,285
- -------------------------------------------------------------------------------
 Sybase, Inc. 1                                     610,510        12,564,296
- -------------------------------------------------------------------------------
 Symantec Corp. 1                                   140,000         4,851,000
- -------------------------------------------------------------------------------
 Synopsys, Inc. 1                                   637,486        21,521,527
- -------------------------------------------------------------------------------
 Trend Micro, Inc. 1                                560,000        15,022,861
- -------------------------------------------------------------------------------
 Veritas Software Corp. 1                           163,200         6,064,512

- ----------------
                                                                  158,093,893

- -------------------------------------------------------------------------------
 MATERIALS--0.5%
- -------------------------------------------------------------------------------
 CHEMICALS--0.5%
 International Flavors &
 Fragrances, Inc.                                   336,730        11,758,612

                                                                  MARKET VALUE
                                                     SHARES         SEE NOTE 1
- -------------------------------------------------------------------------------
 TELECOMMUNICATION SERVICES--6.4%
- -------------------------------------------------------------------------------
 DIVERSIFIED TELECOMMUNICATION SERVICES--2.3%
 France Telecom SA 1                              1,257,828    $   35,951,497
- -------------------------------------------------------------------------------
 Tele Norte Leste Participacoes
 SA, Preference                               1,459,595,519        22,979,143

- ----------------
                                                                   58,930,640

- -------------------------------------------------------------------------------
 WIRELESS TELECOMMUNICATION SERVICES--4.1%
 KDDI Corp.                                          11,210        64,224,503
- -------------------------------------------------------------------------------
 SK Telecom Co. Ltd.                                 46,540         7,772,942
- -------------------------------------------------------------------------------
 SK Telecom Co. Ltd., ADR                           391,100         7,294,015
- -------------------------------------------------------------------------------
 Vodafone Group plc                              11,596,840        28,752,736

- ----------------
                                                                  108,044,196

- -------------------------------------------------------------------------------
 UTILITIES--0.5%
- -------------------------------------------------------------------------------
 GAS UTILITIES--0.5%
 Hong Kong & China Gas Co. Ltd.                   8,472,000        12,931,269

- ----------------
 Total Common Stocks
 (Cost $1,885,360,779)                                          2,478,686,944

                                                  PRINCIPAL
                                                     AMOUNT
- -------------------------------------------------------------------------------
 NON-CONVERTIBLE CORPORATE BONDS AND NOTES--0.0%

 Hindustan Lever Ltd.,
 9% Sec. Debs., 1/1/05 [INR]
 (Cost $573,468)                                 25,547,400           598,206

- -------------------------------------------------------------------------------
 CONVERTIBLE CORPORATE BONDS AND NOTES--0.2%

 Nektar Therapeutics, 3% Cv.
 Unsec. Sub. Debs., 6/30/10 2
 (Cost $3,568,000)                                3,568,000         4,848,020

- -------------------------------------------------------------------------------
 JOINT REPURCHASE AGREEMENTS--4.2%

 Undivided interest of 6.74% in joint
 repurchase agreement (Principal Amount/
 Market Value $1,603,898,000, with a
 maturity value of $1,603,979,086) with
 PaineWebber, Inc., 0.91%, dated 12/31/03,
 to be repurchased at $108,116,466 on
 1/2/04, collateralized by Federal Home
 Loan Mortgage Corp., 5%--5.50%,
 9/1/33--11/1/33, with a value of
 $405,980,626 and Federal National
 Mortgage Assn., 4.50%, 10/1/33, with
 a value of $1,234,398,060
 (Cost $108,111,000)                            108,111,000       108,111,000

- -------------------------------------------------------------------------------
 TOTAL INVESTMENTS, AT VALUE
 (COST $1,997,613,247)                                 99.8%    2,592,244,170
- -------------------------------------------------------------------------------
 OTHER ASSETS
 NET OF LIABILITIES                                     0.2         4,822,027

- --------------------------------
 NET ASSETS                                           100.0%   $2,597,066,197

================================
STATEMENT OF INVESTMENTS  Continued


FOOTNOTES TO STATEMENT OF INVESTMENTS
Principal amount is reported in U.S. Dollars, except for those denoted in the
following currency:
 INR   Indian Rupee
1. Non-income producing security.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities
have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $4,848,020 or 0.19% of the Fund's net
assets as of December 31, 2003.

DISTRIBUTION OF INVESTMENTS REPRESENTING GEOGRAPHIC HOLDINGS, AS A PERCENTAGE
OF
TOTAL INVESTMENTS AT VALUE, IS AS FOLLOWS:

         GEOGRAPHIC HOLDINGS                      MARKET VALUE      PERCENT
         ------------------------------------------------------------------
         United States                          $1,124,379,033         43.4%
         Great Britain                             281,788,501         10.9
         France                                    235,884,438          9.1
         Japan                                     229,082,565          8.8
         India                                      94,505,275          3.7
         The Netherlands                            84,508,695          3.3
         Germany                                    78,323,361          3.0
         Brazil                                     68,377,376          2.6
         Canada                                     61,026,859          2.4
         Switzerland                                52,908,744          2.0
         Hong Kong                                  49,586,328          1.9
         Sweden                                     49,078,771          1.9
         Korea, Republic of South                   40,518,270          1.6
         Mexico                                     38,512,221          1.5
         Bermuda                                    21,781,577          0.8
         Norway                                     20,440,604          0.8
         Singapore                                  16,370,797          0.6
         Australia                                  13,809,833          0.5
         Italy                                      11,029,401          0.4
         Israel                                     10,593,428          0.4
         Spain                                       9,738,093          0.4
                                                ---------------------------
         Total                                  $2,592,244,170        100.0%
                                                ===========================


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENT OF ASSETS AND LIABILITIES  December 31, 2003


- --------------------------------------------------------------------------------
ASSETS

 Investments, at value (cost $1,997,613,247)--see accompanying
statement          $2,592,244,170
- --------------------------------------------------------------------------------------------------
 Receivables and other assets:
 Shares of beneficial interest sold
                                        5,978,095
 Interest and
dividends
2,482,206
 Investments
sold
1,202,338

Other
11,066

- ----------------
 Total assets
                       2,601,917,875

- --------------------------------------------------------------------------------------------------
 LIABILITIES

 Bank
overdraft
4,622
- --------------------------------------------------------------------------------------------------
 Payables and other liabilities:
 Shares of beneficial interest
redeemed                                                3,589,235
 Foreign capital gains taxes
                                                      979,395
 Distribution and service plan
fees                                                       85,813
 Shareholder
reports
48,768
 Trustees'
compensation
12,174
 Transfer and shareholder servicing agent
fees                                             2,501
 Other
                           129,170

- ----------------
 Total
liabilities
4,851,678

- --------------------------------------------------------------------------------------------------
 NET
ASSETS
$2,597,066,197

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

- --------------------------------------------------------------------------------------------------
 COMPOSITION OF NET ASSETS

 Par value of shares of beneficial
interest                                       $      103,561
- --------------------------------------------------------------------------------------------------
 Additional paid-in
capital                                                        2,294,643,685
- --------------------------------------------------------------------------------------------------
 Accumulated net investment
income                                                    14,682,479
- --------------------------------------------------------------------------------------------------
 Accumulated net realized loss on investments and foreign currency
transactions     (306,095,643)
- --------------------------------------------------------------------------------------------------
 Net unrealized appreciation on investments and translation of
 assets and liabilities denominated in foreign
currencies                            593,732,115

- ----------------
 NET ASSETS

$2,597,066,197

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

- --------------------------------------------------------------------------------------------------
 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 $2,280,751,733 and 90,944,755 shares of beneficial interest
outstanding)   $25.08
- --------------------------------------------------------------------------------------------------
 Service Shares:
 Net asset value, redemption price per share and offering price per share
(based on
 net assets  of $168,738,958 and 6,759,109 shares of beneficial interest
outstanding)     $24.96
- --------------------------------------------------------------------------------------------------
 Class 3 Shares:
 Net asset value, redemption price per share and offering price per share
(based on
 net assets of $147,575,506 and 5,857,374 shares of beneficial interest
outstanding)      $25.19


 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


STATEMENT OF OPERATIONS  For the Year Ended December 31, 2003

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

 INVESTMENT INCOME

 Dividends (net of foreign withholding taxes of $2,762,565)                 $
30,810,084
- ------------------------------------------------------------------------------------------

Interest
706,052

- --------------
 Total investment income
31,516,136

- ------------------------------------------------------------------------------------------
 EXPENSES

 Management fees
12,206,333
- ------------------------------------------------------------------------------------------
 Distribution and service plan fees--Service
shares                              228,953
- ------------------------------------------------------------------------------------------
 Transfer and shareholder servicing agent fees:
 Non-Service
shares                                                               10,062
 Service shares
                                           9,754
 Class 3
shares
6,666
- ------------------------------------------------------------------------------------------
 Custodian fees and
expenses                                                     350,448
- ------------------------------------------------------------------------------------------
 Shareholder reports
     118,036
- ------------------------------------------------------------------------------------------
 Trustees'
compensation                                                           60,983
- ------------------------------------------------------------------------------------------

Other
131,247

- --------------
 Total expenses
13,122,482
 Less reduction to custodian
expenses                                             (2,313)

- --------------
 Net expenses
13,120,169

- ------------------------------------------------------------------------------------------
 NET INVESTMENT INCOME
18,395,967

- ------------------------------------------------------------------------------------------
 REALIZED AND UNREALIZED GAIN (LOSS)

 Net realized gain (loss) on:
 Investments
(99,590,714)
 Foreign currency transactions
32,526,679

- --------------
 Net realized loss
(67,064,035)
- ------------------------------------------------------------------------------------------
 Net change in unrealized appreciation (depreciation) on:
 Investments (net of foreign capital gains tax of $979,395)
680,877,529
 Translation of assets and liabilities denominated in foreign currencies
97,085,854

- --------------
 Net change in unrealized appreciation (depreciation)
777,963,383

- ------------------------------------------------------------------------------------------
 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$729,295,315

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


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENTS OF CHANGES IN NET ASSETS

- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
NON-SERVICE SHARES  YEAR ENDED DECEMBER 31,                   2003
2002           2001           2000           1999
- ----------------------------------------------------------------------------------------------------------------------------------

 PER SHARE OPERATING DATA

 Net asset value, beginning of period                        $17.70
$22.84         $30.33         $33.41         $22.07
- ----------------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income
..19            .16            .17            .27            .14
 Net realized and unrealized gain (loss)                       7.34
(5.19)         (3.85)          1.82          12.21

- ---------------------------------------------------------------------
 Total from investment operations                              7.53
(5.03)         (3.68)          2.09          12.35
- ----------------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                          (.15)
(.11)          (.19)          (.09)          (.14)
 Dividends in excess of net investment income
- --             --             --             --           (.13)
 Distributions from net realized gain
- --             --          (3.62)         (5.08)          (.74)

- ---------------------------------------------------------------------
 Total dividends and/or distributions to shareholders          (.15)
(.11)         (3.81)         (5.17)         (1.01)
- ----------------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $25.08
$17.70         $22.84         $30.33         $33.41

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

- ----------------------------------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE 1                           43.02%
(22.13)%       (12.04)%         5.09%         58.48%

- ----------------------------------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA

 Net assets, end of period (in thousands)                $2,280,752
$1,549,993     $1,905,890     $2,136,420     $1,762,366
- ----------------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                       $1,751,226
$1,776,289     $1,918,335     $2,116,100     $1,251,190
- ----------------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 2
 Net investment income                                         0.99%
0.80%          0.70%          0.83%          0.57%
 Total expenses                                                0.67% 3
0.67% 3        0.70% 3        0.68% 3        0.69% 3
- ----------------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate
34%            34%            39%            50%            64%

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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

 SERVICE SHARES  YEAR ENDED DECEMBER 31,
2003           2002           2001           2000 1
- ----------------------------------------------------------------------------------------------------------------------------------


 PER SHARE OPERATING DATA

 Net asset value, beginning of period
$17.61         $22.78         $30.30         $32.65
- ----------------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment
income                                                         .12
..12            .21            .03
 Net realized and unrealized gain (loss)
7.36          (5.19)         (3.92)         (2.38)

- ------------------------------------------------------
 Total from investment operations
7.48          (5.07)         (3.71)         (2.35)
- ----------------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income
(.13)          (.10)          (.19)            --
 Distributions from net realized
gain                                           --             --
(3.62)            --

- ------------------------------------------------------
 Total dividends and/or distributions to shareholders
(.13)          (.10)         (3.81)            --
- ----------------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period
$24.96         $17.61         $22.78         $30.30

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

- ----------------------------------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE 2
42.86%        (22.37)%       (12.17)%        (7.20)%

- ----------------------------------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA

 Net assets, end of period (in thousands)
$168,739        $52,830        $20,467           $983
- ----------------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                                        $
91,800        $34,847        $ 8,502           $325
- ----------------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment income
0.68%          0.51%          0.44%          0.60%
 Total expenses
0.93% 4        0.90% 4        0.85% 4        0.83% 4
- ----------------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover
rate                                                        34%
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, 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

OPPENHEIMER GLOBAL SECURITIES FUND/VA



FINANCIAL HIGHLIGHTS  Continued

 CLASS 3 SHARES  PERIOD ENDED DECEMBER
31,
2003 1
- ----------------------------------------------------------------------------------------------------------------------------------

 PER SHARE OPERATING DATA

 Net asset value, beginning of
period
$ 17.55
- ----------------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment
income
..07
 Net realized and unrealized gain
                                                           7.57

- ----------
 Total from investment operations
                                                              7.64
- ----------------------------------------------------------------------------------------------------------------------------------
 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
$ 25.19


==========

- ----------------------------------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE
2
43.53%

- ----------------------------------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA

 Net assets, end of period (in
thousands)
$147,576
- ----------------------------------------------------------------------------------------------------------------------------------
 Average net assets (in
thousands)
$ 80,579
- ----------------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment
income
0.73%
 Total expenses
                                                             0.68% 4
- -----------------------------------------------------------------------------
 Portfolio turnover
rate
                34%

1. For the period from May 1, 2003 (inception of offering) to December 31,
2003.
2. 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.

 YEAR ENDED DECEMBER
31,
2003              2002
- -----------------------------------------------------------------------------------------------------------------

 OPERATIONS

 Net investment income
                                      $   18,395,967    $   14,349,649
- -----------------------------------------------------------------------------------------------------------------
 Net realized loss
           (67,064,035)     (172,795,488)
- -----------------------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation
(depreciation)                             777,963,383      (283,662,127)

- ----------------------------------
 Net increase (decrease) in net assets resulting from
operations                  729,295,315      (442,107,966)

- -----------------------------------------------------------------------------------------------------------------
 DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS

 Dividends from net investment income:
 Non-Service shares
                            (13,324,089)       (9,494,638)
 Service
shares
(449,100)         (108,690)
 Class 3
shares
       --                --

- -----------------------------------------------------------------------------------------------------------------
 BENEFICIAL INTEREST TRANSACTIONS

 Net increase in net assets resulting from beneficial interest transactions:
 Non-Service
shares
79,623,681        86,880,795
 Service
shares
77,667,391        41,295,581
 Class 3 shares
                                                 121,430,754                --

- -----------------------------------------------------------------------------------------------------------------
 NET ASSETS

 Total increase (decrease)
                                 994,243,952      (323,534,918)
- -----------------------------------------------------------------------------------------------------------------
 Beginning of period
  1,602,822,245     1,926,357,163

- ----------------------------------
 End of period [including accumulated net investment income of
 $14,682,479 and $16,334,525, respectively]
                                  $2,597,066,197    $1,602,822,245

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

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 its 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  Non-Service,  Service and Class 3 shares. All 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 with respect to the
 Fund in general and exclusive voting rights on matters that affect that
class
 alone.  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 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 fee,
which
 is retained by the Fund, is accounted for as an addition to paid-in capital.
    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. Securities traded on NASDAQ are valued based on the
closing
 price provided by NASDAQ 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. Securities whose values have been
 materially affected by what the Manager identifies as a significant event
 occurring before the Fund's assets are valued but after the close of their
 respective foreign exchanges will be fair valued. Fair value is determined in
 good faith using 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 Fund's accounting records 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. Pursuant to an Exemptive Order issued by the
 Securities and Exchange Commission, the Fund, along with other affiliated
funds
 advised by the Manager, may transfer uninvested cash balances into joint
 trading accounts on a daily basis. Secured by U.S. government securities,
these
 balances are invested in one or more repurchase agreements. 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. In the
 event of default by the other party to the agreement, retention of the
 collateral may be subject to legal proceedings.



NOTES TO FINANCIAL STATEMENTS  Continued

- --------------------------------------------------------------------------------
 1. SIGNIFICANT  ACCOUNTING POLICIES Continued

 ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other
than
 those attributable to a specific class), gains and losses are allocated on a
 daily basis 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 comply with provisions of the Internal
 Revenue Code applicable to regulated investment companies and to distribute
 substantially all of its investment company taxable income, including any net
 realized gain on investments not offset by capital loss carryforwards, if
any,
 to shareholders.
    The tax components of capital shown in the table below represent
 distribution requirements the Fund must satisfy under the income tax
 regulations, losses the Fund may be able to offset against income and gains
 realized in future years and unrealized appreciation or depreciation of
 securities and other investments for federal income tax purposes.

NET UNREALIZED

                                           APPRECIATION

BASED ON COST OF

SECURITIES AND
         UNDISTRIBUTED        UNDISTRIBUTED              ACCUMULATED
OTHER INVESTMENTS
         NET INVESTMENT           LONG-TERM                     LOSS
FOR FEDERAL INCOME
         INCOME                        GAIN       CARRYFORWARD 1,2,3
           TAX PURPOSES
- -------------------------------------------------------------------------------------------------


         $35,066,177                    $--
$302,670,033               $569,922,654



 1. As of December 31, 2003, the Fund had $300,780,388 of net capital loss
 carryforwards available to offset future realized capital gains, if any, and
 thereby reduce future taxable gain distributions. As of December 31, 2003,
 details of the capital loss carryforwards were as follows:

                              EXPIRING
                              -------------------------
                              2009         $ 47,254,011
                              2010          147,620,574
                              2011          105,905,803
                                           ------------
                              Total        $300,780,388
                                           ============

 2. During the fiscal years ended December 31, 2003 and December 31, 2002, the
 Fund did not utilize any capital loss carryforwards.
 3. As of December 31, 2003, the Fund had $1,844,693 of post-October losses
 available to offset future realized capital gains, if any. Such losses, if
 unutilized, will expire in 2012. Additionally, the Fund had $44,952 of
 post-October foreign currency losses which were deferred.

 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. Accordingly,
 the following amounts have been reclassified for December 31, 2003. Net
assets
 of the Fund were unaffected by the reclassifications.

                 REDUCTION TO           REDUCTION TO
                 ACCUMULATED         ACCUMULATED NET
                 NET INVESTMENT        REALIZED LOSS
                 INCOME               ON INVESTMENTS
                 -----------------------------------
                 $6,274,824               $6,274,824

 The tax character of distributions paid during the years ended December 31,
 2003 and December 31, 2002 was as follows:
                                              YEAR ENDED              YEAR
ENDED
                                       DECEMBER 31, 2003       DECEMBER 31,
2002

- ---------------------------------------------------------------
                 Distributions paid from:
                 Ordinary income             $13,773,189
$9,603,328


 The aggregate cost of securities and other investments and the composition of
 unrealized appreciation and depreciation of securities and other investments
 for federal income tax purposes as of December 31, 2003 are noted below. The
 primary difference between book and tax appreciation or depreciation of
 securities and other investments, if applicable, is attributable to the tax
 deferral of losses or tax realization of financial statement unrealized gain
or
 loss.

                 Federal tax cost of securities           $2,022,402,103
                                                          ==============

                 Gross unrealized appreciation            $  611,728,385
                 Gross unrealized depreciation               (41,805,731)
                                                          --------------
                 Net unrealized appreciation              $  569,922,654
                                                          ==============

 Certain foreign countries impose a tax on capital gains which is accrued by
the
 Fund based on unrealized appreciation, if any, on affected securities. The
tax
 is paid when the gain is realized.

- -------------------------------------------------------------------------------
 TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
 compensation plan for independent trustees that enables trustees to elect to
 defer receipt of all or a portion of the annual compensation they are
entitled
 to receive from the Fund. Under the plan, deferred amounts are treated as
 though equal dollar amounts had been invested in shares of the Fund or are
 invested in other Oppenheimer funds selected by the Trustee. Deferral of
 trustees' fees under the plan will not affect the net assets of the Fund, and
 will not materially affect the Fund's assets, liabilities or net investment
 income per share. Amounts will be deferred until distributed in accordance to
 the Plan.
- --------------------------------------------------------------------------------
 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. Income and capital gain distributions,
if
 any, are declared and paid annually.
- --------------------------------------------------------------------------------
 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.
- --------------------------------------------------------------------------------
 EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
 represents earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
 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,
2003 1              YEAR ENDED DECEMBER 31, 2002
                                                            SHARES
AMOUNT                  SHARES            AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------


NON-SERVICE SHARES
Sold                                                    56,815,585
$1,050,428,269             148,964,909   $ 2,936,874,923
Dividends and/or distributions reinvested                  828,612
13,324,089                 405,580         9,494,638
Redeemed                                               (54,266,655)
(984,128,677)           (145,263,047)   (2,859,488,766)

- -------------------------------------------------------------------------
Net increase                                             3,377,542    $
79,623,681               4,107,442   $    86,880,795

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

NOTES TO FINANCIAL STATEMENTS  Continued

 2. SHARES OF BENEFICIAL INTEREST Continued

                                                  YEAR ENDED DECEMBER 31,
2003 1            YEAR ENDED DECEMBER 31, 2002
                                                        SHARES
AMOUNT              SHARES              AMOUNT
- -------------------------------------------------------------------------------------------------------------------------

SERVICE SHARES
Sold                                                 9,204,619     $
180,268,510           5,676,692        $108,715,377
Dividends and/or distributions reinvested               28,051
449,100               4,653             108,690
Redeemed                                            (5,472,867)
(103,050,219)         (3,580,556)        (67,528,486)

- ---------------------------------------------------------------------
Net increase                                         3,759,803     $
77,667,391           2,100,789        $ 41,295,581

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

- -------------------------------------------------------------------------------------------------------------------------
CLASS 3 SHARES
Sold                                                 6,450,195     $
132,821,158                  --        $         --
Dividends and/or distributions reinvested                   --
- --                  --                  --
Redeemed                                              (592,821)
(11,390,404)                 --                  --

- ---------------------------------------------------------------------
Net increase                                         5,857,374     $
121,430,754                  --        $         --

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

1. For the year ended December 31, 2003, for Non-Service and Service shares
and
for the period from May 5, 2003 (inception of offering) to December 31, 2003,
for Class 3 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, 2003, were
 $841,778,088 and $625,248,280, respectively.

- --------------------------------------------------------------------------------
 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 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.
- --------------------------------------------------------------------------------
 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 per account fee. For the year ended December 31, 2003, the
Fund
 paid $25,856 to OFS for services to the Fund.
    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. Fees incurred by the Fund under the plan are detailed in the
 Statement of Operations.

- --------------------------------------------------------------------------------
 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 for protection from 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 foreign transaction. Contracts closed or settled with the same broker
are recorded as net realized gains or losses. Such realized gains and losses
are reported with all other foreign currency gains and losses in the
Statement of Operations.
   As of December 31, 2003, the Fund had no outstanding foreign currency
 contracts.

- --------------------------------------------------------------------------------
 6. BORROWING AND LENDING ARRANGEMENTS
 The Fund entered into an "interfund borrowing and lending arrangement" with
 other funds in the Oppenheimer funds complex, to allow funds to borrow for
 liquidity purposes. The arrangement was initiated pursuant to exemptive
relief
 granted by the Securities and Exchange Commission (the SEC) to allow these
 affiliated funds to lend money to, and borrow money from, each other, in an
 attempt to reduce borrowing costs below those of bank loan facilities. The
 SEC's order requires the Fund's Board of Trustees to adopt operating policies
 and procedures to administer interfund borrowing and lending. Under the
 arrangement the Fund may lend money to other Oppenheimer funds and may borrow
 from other Oppenheimer funds at a rate set by the Fund's Board of Trustees,
 based upon a recommendation by the Manager. The Fund's borrowings, if any,
are
 subject to asset coverage requirements under the Investment Company Act and
the
 provisions of the SEC order and other applicable regulations. If the Fund
 borrows money, there is a risk that the loan could be called on one day's
 notice, in which case the Fund might have to borrow from a bank at higher
rates
 if a loan were not available from another Oppenheimer fund. If the Fund lends
 money to another fund, it will be subject to the risk that the other fund
might
 not repay the loan in a timely manner, or at all.
    The Fund had no interfund borrowings or loans outstanding during the year
 ended or at December 31, 2003.

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, a series of Oppenheimer Variable Account Funds,
including the statement of investments, as of December 31, 2003, 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, 2003, 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,  2003,  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
February 12, 2004

OPPENHEIMER HIGH INCOME FUND/VA

STATEMENT OF INVESTMENTS  DECEMBER 31, 2003
- ----------------------------------------------------------------
                                      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   $     526,130

- ----------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--1.2%
Asset Securitization Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 1996-D2,
Cl. A3, 7.515%, 2/14/29 2             3,000,000       3,156,246
- ----------------------------------------------------------------
First Chicago/Lennar Trust 1,
Commercial Mtg. Pass-Through
Certificates:
Series 1997-CHL1, Cl. D,
7.96%, 4/29/39 1,2                      300,000         299,813
Series 1997-CHL1, Cl. E,
7.96%, 4/29/39 1,2                    1,500,000       1,216,875
- ----------------------------------------------------------------
Morgan Stanley Capital I, Inc.,
Commercial Mtg. Pass-Through
Certificates, Series 1997-RR,
Cl. D, 7.709%, 4/30/39 2,3            2,150,116       2,016,793
- ----------------------------------------------------------------
Salomon Brothers Mortgage
Securities VII, Inc., Commercial
Mtg. Pass-Through Certificates,
Series 1996-B, Cl. 1,
6.865%, 4/25/26 1,2                     255,525         222,147
                                                  --------------
Total Mortgage-Backed
Obligations (Cost $6,655,477)                         6,911,874

- ----------------------------------------------------------------
LOAN PARTICIPATIONS--0.0%
Telergy, Inc., Sr. Sec. Credit Facilities
Term Loan Participation Nts.,
Tranche A, 11.111%, 1/1/02 1,4,5
(Cost $966,644)                         986,362              --

- ----------------------------------------------------------------
CORPORATE BONDS AND NOTES--74.3%
- ----------------------------------------------------------------
CONSUMER DISCRETIONARY--21.9%
- ----------------------------------------------------------------
AUTO COMPONENTS--2.3%
Collins & Aikman
Floorcoverings, Inc.,
9.75% Sr. Sub. Nts.,
Series B, 2/15/10                       800,000         860,000
- ----------------------------------------------------------------
Collins & Aikman Products Co.,
10.75% Sr. Nts., 12/31/11               500,000         493,750
- ----------------------------------------------------------------
Dana Corp.:
9% Unsec. Nts., 8/15/11               1,480,000       1,790,800
10.125% Nts., 3/15/10                   500,000         585,000
- ----------------------------------------------------------------
Dura Operating Corp.:
8.625% Sr. Nts., Series B, 4/15/12    1,000,000       1,070,000
9% Sr. Sub. Nts., Series B,
5/1/09 [EUR]                            100,000         122,982
9% Sr. Unsec. Sub. Nts., Series D,
5/1/09                                  200,000         201,000
- ----------------------------------------------------------------
Eagle-Picher, Inc.,
9.75% Sr. Nts., 9/1/13 3              1,200,000       1,302,000


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
AUTO COMPONENTS Continued
Keystone Automotive Operations,
Inc., 9.75% Sr.
Sub. Nts., 11/1/13 3                $   200,000   $     216,000
- ----------------------------------------------------------------
Lear Corp., 8.11% Sr. Unsec. Nts.,
Series B, 5/15/09                     1,300,000       1,535,625
- ----------------------------------------------------------------
Metaldyne Corp.:
10% Sr. Nts., 11/1/13 3                 500,000         507,500
11% Sr. Sub. Nts., 6/15/12              750,000         693,750
- ----------------------------------------------------------------
Stoneridge, Inc., 11.50%
Sr. Nts., 5/1/12                      1,400,000       1,659,000
- ----------------------------------------------------------------
Tenneco Automotive, Inc.,
10.25% Sr. Sec. Nts.,
Series B, 7/15/13                       900,000       1,028,250
- ----------------------------------------------------------------
United Components, Inc.,
9.375% Sr. Sub. Nts., 6/15/13           400,000         439,000
                                                  --------------
                                                     12,504,657

- ----------------------------------------------------------------
AUTOMOBILES--0.5%
DirecTV Holdings LLC/DirecTV
Financing Co., Inc., 8.375%
Sr. Unsec. Nts., 3/15/13              2,300,000       2,679,500
- ----------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--5.6%
Apcoa, Inc., 9.25% Sr. Unsec.
Sub. Nts., 3/15/08 1                    940,000         343,100
- ----------------------------------------------------------------
Aztar Corp., 9% Sr.
Unsec. Sub. Nts., 8/15/11               450,000         496,125
- ----------------------------------------------------------------
Boca Resorts, Inc., 9.875%
Sr. Sub. Nts., 4/15/09                  800,000         856,000
- ----------------------------------------------------------------
Boyd Gaming Corp., 8.75%
Sr. Sub. Nts., 4/15/12                  800,000         882,000
- ----------------------------------------------------------------
Capital Gaming International, Inc.,
11.50% Promissory Nts., 8/1/1995 1,4,5    9,500              --
- ----------------------------------------------------------------
Coast Hotels & Casinos, Inc.,
9.50% Sr. Unsec. Sub. Nts., 4/1/09    1,100,000       1,168,750
- ----------------------------------------------------------------
Dominos, Inc., 8.25%
Sr. Sub. Nts., 7/1/11 3                 800,000         861,000
- ----------------------------------------------------------------
Gaylord Entertainment Co.,
8% Sr. Nts., 11/15/13 3                 700,000         742,000
- ----------------------------------------------------------------
Herbst Gaming, Inc.,
10.75% Sr. Sec. Nts., 9/1/08 1          250,000         282,500
- ----------------------------------------------------------------
Hilton Hotels Corp.:
7.625% Nts., 5/15/08                    700,000         782,250
7.625% Nts., 12/1/12                    500,000         564,375
- ----------------------------------------------------------------
Hollywood Park, Inc., 9.25% Sr.
Unsec. Sub. Nts., Series B, 2/15/07   1,000,000       1,040,000
- ----------------------------------------------------------------
Intrawest Corp., 7.50% Sr. Nts.,
10/15/13 3                              917,000         958,265
- ----------------------------------------------------------------
Isle of Capri Casinos, Inc., 9%
Sr. Sub. Nts., 3/15/12                  600,000         670,500
- ----------------------------------------------------------------
John Q. Hammons Hotels, Inc.,
8.875% Sr. Nts., Series B, 5/15/12      900,000         996,750
- ----------------------------------------------------------------
Jupiters Ltd., 8.50%
Sr. Unsec. Nts., 3/1/06 1             1,000,000       1,095,000



STATEMENT OF INVESTMENTS  CONTINUED
- ----------------------------------------------------------------

                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE Continued
Mandalay Resort Group, 10.25%
Sr. Unsec. Sub. Nts.,
Series B, 8/1/07                    $   800,000   $     928,000
- ----------------------------------------------------------------
MGM Mirage, Inc.:
8.375% Sr. Unsec. Sub. Nts., 2/1/11   1,700,000       1,933,750
9.75% Sr. Unsec. Sub. Nts., 6/1/07      500,000         572,500
- ----------------------------------------------------------------
Mohegan Tribal Gaming Authority:
6.375% Sr. Sub. Nts., 7/15/09           800,000         830,000
8% Sr. Sub. Nts., 4/1/12                700,000         761,250
8.375% Sr. Sub. Nts., 7/1/11 1        1,200,000       1,314,000
- ----------------------------------------------------------------
Park Place Entertainment Corp.:
7.875% Sr. Sub. Nts., 3/15/10         1,500,000       1,668,750
9.375% Sr. Unsec. Sub. Nts., 2/15/07    500,000         567,500
- ----------------------------------------------------------------
Penn National Gaming, Inc., 8.875%
Sr. Sub. Nts., 3/15/10 1                600,000         654,000
- ----------------------------------------------------------------
Prime Hospitality Corp., 8.375% Sr.
Sub. Nts., 5/1/12                       400,000         415,000
- ----------------------------------------------------------------
River Rock Entertainment LLC,
9.75% Sr. Nts., 11/1/11 3               600,000         648,000
- ----------------------------------------------------------------
Royal Caribbean Cruises Ltd.:
8% Sr. Unsec. Nts., 5/15/10             200,000         219,000
8.75% Sr. Unsub. Nts., 2/2/11           600,000         681,000
- ----------------------------------------------------------------
Six Flags, Inc.:
8.875% Sr. Nts., 2/1/10                 400,000         412,500
9.75% Sr. Nts., 4/15/13               1,500,000       1,586,250
- ----------------------------------------------------------------
Starwood Hotels & Resorts
Worldwide, Inc.,
7.875% Sr. Nts., 5/1/12               1,500,000       1,695,000
- ----------------------------------------------------------------
Sun International Hotels Ltd.,
8.875% Sr. Unsec. Sub. Nts., 8/15/11  1,000,000       1,097,500
- ----------------------------------------------------------------
Trump Casino Holdings LLC/Trump
Casino Funding, Inc., 11.625%
Sr. Sec. Nts., 3/15/10                  600,000         577,500
- ----------------------------------------------------------------
Universal City Development
Partners Ltd., 11.75% Sr. Nts.,
4/1/10 3                              1,000,000       1,175,000
- ----------------------------------------------------------------
Vail Resorts, Inc., 8.75%
Sr. Unsec. Sub. Nts., 5/15/09           700,000         742,000
- ----------------------------------------------------------------
Venetian Casino Resort LLC/
Las Vegas Sands, Inc., 11%
Sec. Nts., 6/15/10                      850,000         990,250
                                                  --------------
                                                     31,207,365

- ----------------------------------------------------------------
HOUSEHOLD DURABLES--1.8%
Beazer Homes USA, Inc., 8.375%
Sr. Nts., 4/15/12                       500,000         553,750
- ----------------------------------------------------------------
Blount, Inc., 13% Sr. Sub.
Nts., 8/1/09                            650,000         703,625
- ----------------------------------------------------------------
D.R. Horton, Inc., 9.75% Sr. Sub. Nts.,
9/15/10                                 300,000         358,500
- ----------------------------------------------------------------
K. Hovnanian Enterprises, Inc.,
8.875% Sr. Sub. Nts., 4/1/12            800,000         884,000
- ----------------------------------------------------------------
KB Home:
8.625% Sr. Sub. Nts., 12/15/08          150,000         168,750
9.50% Sr. Unsec. Sub. Nts., 2/15/11     350,000         392,000


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
HOUSEHOLD DURABLES Continued
Meritage Corp., 9.75%
Sr. Unsec. Nts., 6/1/11             $ 1,200,000   $   1,347,000
- ----------------------------------------------------------------
Norcraft Cos. LP, 9%
Sr. Sub. Nts., 11/1/11 3                300,000         325,500
- ----------------------------------------------------------------
Salton, Inc., 10.75% Sr. Unsec.
Sub. Nts., 12/15/05                     500,000         512,500
- ----------------------------------------------------------------
Standard Pacific Corp., 9.25%
Sr. Sub. Nts., 4/15/12                  700,000         784,000
- ----------------------------------------------------------------
Toll Corp., 8.25%
Sr. Sub. Nts., 12/1/11                  500,000         554,375
- ----------------------------------------------------------------
WCI Communities, Inc.:
9.125% Sr. Sub. Nts., 5/1/12            800,000         884,000
10.625% Sr. Unsec. Sub. Nts., 2/15/11   600,000         681,000
- ----------------------------------------------------------------
William Lyon Homes, Inc.,
10.75% Sr. Nts., 4/1/13                 800,000         914,000
- ----------------------------------------------------------------
Williams Scotsman, Inc.,
9.875% Sr. Unsec. Nts., 6/1/07        1,000,000       1,017,500
                                                  --------------
                                                     10,080,500

- ----------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.2%
Remington Arms Co., Inc.,
10.50% Sr. Unsec. Nts., 2/1/11          800,000         856,000
- ----------------------------------------------------------------
MEDIA--9.3%
Adelphia Communications Corp.:
7.875% Sr. Unsec. Nts., 5/1/09 4,5      360,000         331,200
8.125% Sr. Nts., Series B,
7/15/03 4,5                           1,000,000         930,000
8.375% Sr. Nts., Series B,
2/1/08 4,5                            1,000,000         937,500
10.875% Sr. Unsec. Nts.,
10/1/10 4,5                           1,000,000         940,000
- ----------------------------------------------------------------
Allbritton Communications Co.,
7.75% Sr. Unsec. Sub. Nts., 12/15/12    700,000         729,750
- ----------------------------------------------------------------
AMC Entertainment, Inc., 9.50%
Sr. Unsec. Sub. Nts., 2/1/11          2,200,000       2,321,000
- ----------------------------------------------------------------
American Media Operations, Inc.,
8.875% Sr. Unsec. Sub. Nts., 1/15/11    600,000         654,000
- ----------------------------------------------------------------
Block Communications, Inc.,
9.25% Sr. Sub. Nts., 4/15/09            600,000         648,000
- ----------------------------------------------------------------
British Sky Broadcasting Group plc,
8.20% Sr. Unsec. Nts., 7/15/09          700,000         834,495
- ----------------------------------------------------------------
CanWest Media, Inc., 7.625%
Sr. Unsec. Sub. Nts., Cl. B, 4/15/13    300,000         330,000
- ----------------------------------------------------------------
Carmike Cinemas, Inc., 10.375%
Gtd. Sr. Sub. Nts., Series B, 2/1/09  1,250,000       1,318,750
- ----------------------------------------------------------------
CBD Media LLC/CBD Finance, Inc.,
8.625% Sr. Sub. Nts., 6/1/11 3          200,000         221,000
- ----------------------------------------------------------------
Charter Communications Holdings II,
10.25% Sr. Unsec. Nts., 9/15/10 3     1,600,000       1,688,000
- ----------------------------------------------------------------
Charter Communications Holdings
LLC/Charter Communications
Holdings Capital Corp.:
0%/11.75% Sr. Unsec. Sub.
Disc. Nts., 5/15/11 6                 1,500,000       1,012,500

                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
MEDIA Continued
Charter Communications Holdings
LLC/Charter Communications
Holdings Capital Corp.: Continued
0%/9.92% Sr. Unsec.
Disc. Nts., 4/1/11 6                $ 3,200,000   $   2,752,000
8.625% Sr. Unsec. Nts., 4/1/09        3,500,000       3,071,250
10% Sr. Nts., 4/1/09                    500,000         447,500
11.125% Sr. Unsec. Nts., 1/15/11        600,000         553,500
- ----------------------------------------------------------------
Cinemark USA, Inc., 9%
Sr. Unsec. Sub. Nts., 2/1/13            800,000         904,000
- ----------------------------------------------------------------
Corus Entertainment, Inc.,
8.75% Sr. Sub. Nts., 3/1/12             800,000         884,000
- ----------------------------------------------------------------
CSC Holdings, Inc., 7.625% Sr.
Unsec. Unsub. Nts., Series B, 4/1/11  2,800,000       2,961,000
- ----------------------------------------------------------------
Diva Systems Corp., 12.625% Sr.
Unsec. Disc. Nts., Series B,
3/1/08 1,4,5                            500,000          32,500
- ----------------------------------------------------------------
EchoStar DBS Corp.:
9.125% Sr. Nts., 1/15/09                195,000         219,131
9.375% Sr. Unsec. Nts., 2/1/09          450,000         473,063
10.375% Sr. Unsec. Nts., 10/1/07      3,000,000       3,303,750
- ----------------------------------------------------------------
Emmis Communications Corp.:
0%/12.50% Sr. Unsec. Disc. Nts.,
3/15/11 6                               500,000         465,625
8.125% Sr. Unsec. Sub. Nts.,
Series B, 3/15/09                     1,300,000       1,369,875
- ----------------------------------------------------------------
Entravision Communications Corp.,
8.125% Sr. Sub. Nts., 3/15/09           600,000         645,000
- ----------------------------------------------------------------
Granite Broadcasting Corp., 9.75%
Sr. Sec. Nts., 12/1/10                1,200,000       1,203,000
- ----------------------------------------------------------------
Gray Television, Inc., 9.25% Sr. Sub.
Nts., 12/15/11                          500,000         560,000
- ----------------------------------------------------------------
Hollinger International Publishing,
Inc., 9% Sr. Unsec. Nts., 12/15/10      600,000         640,500
- ----------------------------------------------------------------
Houghton Mifflin Co., 8.25% Sr.
Unsec. Nts., 2/1/11                     500,000         537,500
- ----------------------------------------------------------------
Lamar Media Corp., 7.25% Sr.
Unsec. Sub. Nts., 1/1/13                200,000         216,000
- ----------------------------------------------------------------
Liberty Media Corp., 7.875%
Sr. Nts., 7/15/09                     1,750,000       2,029,937
- ----------------------------------------------------------------
Lin Television Corp., 6.50%
Sr. Sub. Nts., 5/15/13 3                500,000         503,125
- ----------------------------------------------------------------
LodgeNet Entertainment Corp.,
9.50% Sr. Sub. Debs., 6/15/13 1         400,000         440,000
- ----------------------------------------------------------------
Mediacom LLC/Mediacom Capital
Corp., 9.50% Sr. Unsec. Nts.,
1/15/13                               1,000,000       1,065,000
- ----------------------------------------------------------------
News America Holdings, Inc.,
8.875% Sr. Debs., 4/26/23               625,000         803,294
- ----------------------------------------------------------------
PanAmSat Corp., 8.50% Sr. Unsec.
Nts., 2/1/12                          1,200,000       1,338,000
- ----------------------------------------------------------------
PRIMEDIA, Inc., 8% Sr. Nts.,
5/15/13 3                             1,700,000       1,742,500
- ----------------------------------------------------------------
R.H. Donnelley Financial Corp. I:
8.875% Sr. Nts., 12/15/10 3             700,000         791,000
10.875% Sr. Sub. Nts., 12/15/12 3     1,000,000       1,191,250


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
MEDIA Continued
Radio One, Inc., 8.875% Sr. Unsec.
Sub. Nts., Series B, 7/1/11         $   300,000   $     332,250
- ----------------------------------------------------------------
Regal Cinemas, Inc., 9.375% Sr. Sub.
Nts., Series B, 2/1/12                1,200,000       1,362,000
- ----------------------------------------------------------------
Sinclair Broadcast Group, Inc., 8%
Sr. Unsec. Sub. Nts., 3/15/12         1,600,000       1,736,000
- ----------------------------------------------------------------
Spanish Broadcasting System, Inc.,
9.625% Sr. Unsec. Sub. Nts., 11/1/09    600,000         643,500
- ----------------------------------------------------------------
Time Warner, Inc.,
6.875% Nts., 5/1/12                     850,000         958,358
- ----------------------------------------------------------------
Vertis, Inc.:
9.75% Sr. Sec. Nts., 4/1/09             500,000         545,625
10.875% Sr. Unsec. Nts.,
Series B, 6/15/09                       200,000         213,500
- ----------------------------------------------------------------
Vivendi Universal SA,
9.25% Sr. Nts., 4/15/10 3               800,000         952,000
- ----------------------------------------------------------------
WRC Media, Inc./Weekly Reader
Corp./CompassLearning, Inc., 12.75%
Sr. Sub. Nts., 11/15/09               1,100,000       1,056,000
                                                  --------------
                                                     51,838,728

- ----------------------------------------------------------------
MULTILINE RETAIL--0.5%
J.C. Penney Co., Inc.:
7.60% Nts., 4/1/07                    1,000,000       1,108,750
8% Nts., 3/1/10                         800,000         921,000
- ----------------------------------------------------------------
Saks, Inc.:
8.25% Sr. Unsec. Nts., 11/15/08         250,000         278,750
9.875% Nts., 10/1/11                    600,000         717,000
                                                  --------------
                                                      3,025,500

- ----------------------------------------------------------------
SPECIALTY RETAIL--1.3%
Asbury Automotive Group, Inc.,
9% Sr. Sub. Nts., 6/15/12               600,000         637,500
- ----------------------------------------------------------------
AutoNation, Inc.,
9% Sr. Unsec. Nts., 8/1/08            1,200,000       1,383,000
- ----------------------------------------------------------------
Building Materials Corp.,
8% Sr. Nts., 12/1/08                    300,000         297,000
- ----------------------------------------------------------------
CSK Auto, Inc., 12% Sr.
Unsec. Nts., 6/15/06                    900,000       1,037,250
- ----------------------------------------------------------------
Finlay Enterprises, Inc.,
9% Debs., 5/1/08                        700,000         720,125
- ----------------------------------------------------------------
Finlay Fine Jewelry Corp., 8.375%
Sr. Nts., 5/1/08                        600,000         624,000
- ----------------------------------------------------------------
Gap, Inc. (The), 10.55% Unsub. Nts.,
12/15/08                                200,000         247,500
- ----------------------------------------------------------------
Hollywood Entertainment Corp.,
9.625% Sr. Sub. Nts., 3/15/11 1         800,000         864,000
- ----------------------------------------------------------------
Petco Animal Supplies, Inc.,
10.75% Sr. Sub. Nts., 11/1/11 1         750,000         881,250
- ----------------------------------------------------------------
Rent-A-Center, Inc., 7.50%
Sr. Sub. Nts., Cl. B, 5/1/10            350,000         371,000


STATEMENT OF INVESTMENTS  CONTINUED
- ----------------------------------------------------------------


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
SPECIALTY RETAIL--1.3%
United Auto Group, Inc.,
9.625% Sr. Unsec. Sub. Nts., 3/15/12  $ 200,000   $     225,000
                                                  --------------
                                                      7,287,625

- ----------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--0.4%
Broder Bros. Co., 11.25%
Sr. Nts., 10/15/10 3                    700,000         693,000
- ----------------------------------------------------------------
Galey & Lord, Inc., 9.125%
Sr. Unsec. Sub. Nts., 3/1/08 1,4,5      700,000           8,750
- ----------------------------------------------------------------
Levi Strauss & Co.:
7% Unsec. Nts., 11/1/06                 300,000         194,250
11.625% Sr. Unsec. Nts., 1/15/08        100,000          65,750
12.25% Sr. Nts., 12/15/12               300,000         196,500
- ----------------------------------------------------------------
Oxford Industries, Inc.,
8.875% Sr. Nts., 6/1/11 3               500,000         549,375
- ----------------------------------------------------------------
Russell Corp., 9.25% Sr. Nts., 5/1/10   600,000         624,750
                                                  --------------
                                                      2,332,375

- ----------------------------------------------------------------
CONSUMER STAPLES--3.7%
- ----------------------------------------------------------------
BEVERAGES--0.1%
Constellation Brands, Inc.,
8.125% Sr. Sub. Nts., 1/15/12           500,000         550,000
- ----------------------------------------------------------------
FOOD & STAPLES RETAILING--0.7%
Delhaize America, Inc., 8.125%
Unsub. Debs., 4/15/11                 1,500,000       1,732,500
- ----------------------------------------------------------------
Fleming Cos., Inc., 10.125%
Sr. Unsec. Nts., 4/1/08 4               500,000         112,500
- ----------------------------------------------------------------
Great Atlantic & Pacific Tea Co., Inc.
(The), 9.125% Sr. Nts., 12/15/11        400,000         368,000
- ----------------------------------------------------------------
Pantry, Inc. (The), 10.25% Sr. Sub.
Nts., 10/15/07                          325,000         338,000
- ----------------------------------------------------------------
Real Time Data Co., 13%
Disc. Nts., 5/31/09 1,4,5,7             476,601              --
- ----------------------------------------------------------------
Rite Aid Corp.:
8.125% Sr. Sec. Nts., 5/1/10            900,000         972,000
9.50% Sr. Sec. Nts., 2/15/11            450,000         509,625
                                                  --------------
                                                      4,032,625

- ----------------------------------------------------------------
FOOD PRODUCTS--2.3%
American Seafoods Group LLC,
10.125% Sr. Sub. Nts., 4/15/10 1        500,000         596,875
- ----------------------------------------------------------------
Aurora Foods, Inc., 8.75%
Sr. Sub. Nts., Series B, 7/1/08 4       500,000         392,500
- ----------------------------------------------------------------
Burns Philp Capital Pty Ltd.,
9.75% Sr. Sub. Nts., 7/15/12 3          400,000         430,000
- ----------------------------------------------------------------
Del Monte Corp.:
8.625% Sr. Sub. Nts., 12/15/12        1,000,000       1,100,000
9.25% Sr. Unsec. Sub. Nts., 5/15/11     100,000         111,000
- ----------------------------------------------------------------
Doane Pet Care Co.:
9.75% Sr. Unsec. Sub. Nts., 5/15/07     700,000         630,000
10.75% Sr. Nts., 3/1/10 1             1,100,000       1,144,000
- ----------------------------------------------------------------
Dole Food Co., Inc.:
8.625% Sr. Nts., 5/1/09                 900,000         992,250
8.875% Sr. Unsec. Nts., 3/15/11         400,000         441,000


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
FOOD PRODUCTS Continued
Hines Nurseries, Inc.,
10.25% Sr. Nts., 10/1/11 3          $   600,000   $     657,000
- ----------------------------------------------------------------
Michael Foods, Inc., 8%
Sr. Sub. Nts., 11/15/13 3               500,000         523,750
- ----------------------------------------------------------------
New World Pasta Co.,
9.25% Sr. Nts., 2/15/09 1               200,000          53,000
- ----------------------------------------------------------------
Pinnacle Foods Holding Corp.,
8.25% Sr. Sub. Nts., 12/1/13 3          500,000         520,000
- ----------------------------------------------------------------
Smithfield Foods, Inc.:
7.625% Sr. Unsec. Sub. Nts., 2/15/08    925,000         938,875
8% Sr. Nts., Series B, 10/15/09         900,000         954,000
- ----------------------------------------------------------------
Swift & Co., 10.125% Sr.
Nts., 10/1/09                         1,000,000       1,065,000
- ----------------------------------------------------------------
Tembec Industries, Inc., 7.75%
Sr. Nts., 3/15/12                       700,000         700,000
- ----------------------------------------------------------------
United Biscuits Finance plc,
10.625% Sr. Sub. Nts.,
4/15/11 1 [EUR]                       1,000,000       1,431,633
                                                  --------------
                                                     12,680,883

- ----------------------------------------------------------------
HOUSEHOLD PRODUCTS--0.5%
AKI, Inc., 10.50%
Sr. Unsec. Nts., 7/1/08 1             1,000,000       1,045,000
- ----------------------------------------------------------------
Armkel LLC/Armkel Finance, Inc.,
9.50% Sr. Sub. Nts., 8/15/09            600,000         661,500
- ----------------------------------------------------------------
Holmes Products Corp., 9.875% Sr.
Unsec. Sub. Nts., Series B, 11/15/07 1  300,000         311,250
- ----------------------------------------------------------------
Playtex Products, Inc., 9.375%
Sr. Unsec. Sub. Nts., 6/1/11            500,000         507,500
- ----------------------------------------------------------------
Revlon Consumer Products Corp.,
12% Sr. Sec. Nts., 12/1/05              400,000         402,000
- ----------------------------------------------------------------
Styling Technology Corp., 10.875%
Sr. Unsec. Sub. Nts., 7/1/08 1,4,5      600,000              --
                                                  --------------
                                                      2,927,250

- ----------------------------------------------------------------
PERSONAL PRODUCTS--0.1%
French Fragrances, Inc., 10.375%
Sr. Unsec. Nts., Series B, 5/15/07      382,000         397,120
- ----------------------------------------------------------------
ENERGY--4.6%
- ----------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--1.4%
BRL Universal Equipment Corp.,
8.875% Sr. Sec. Nts., 2/15/08 1         750,000         808,125
- ----------------------------------------------------------------
Dresser, Inc., 9.375% Sr.
Sub. Nts., 4/15/11                      400,000         437,000
- ----------------------------------------------------------------
Grant Prideco Escrow Corp., 9%
Sr. Unsec. Nts., 12/15/09               300,000         332,250
- ----------------------------------------------------------------
Hanover Compress Co.,
8.625% Sr. Nts., 12/15/10               700,000         731,500
- ----------------------------------------------------------------
Hanover Equipment Trust 2001A,
8.50% Sr. Sec. Nts., Series A, 9/1/08   500,000         532,500
- ----------------------------------------------------------------
Hornbeck-Leevac
Marine Services, Inc., 10.625%
Sr. Nts., 8/1/08                      1,750,000       1,942,500
- ----------------------------------------------------------------
Ocean Rig Norway AS,
10.25% Sr. Sec. Nts., 6/1/08          1,600,000       1,512,000



                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES Continued
Petroleum Helicopters, Inc.,
9.375% Sr. Nts., 5/1/09             $   600,000   $     640,500
- ----------------------------------------------------------------
Universal Compression, Inc.,
7.25% Sr. Unsec. Sub. Nts., 5/15/10     800,000         836,000
                                                  --------------
                                                      7,772,375

- ----------------------------------------------------------------
OIL & GAS--3.2%
Belden & Blake Corp.,
9.875% Sr. Sub. Nts., 6/15/07           500,000         495,000
- ----------------------------------------------------------------
Chesapeake Energy Corp.:
8.125% Sr. Unsec. Nts., 4/1/11        1,000,000       1,115,000
8.375% Sr. Unsec. Nts., 11/1/08       1,000,000       1,105,000
9% Sr. Nts., 8/15/12                    300,000         346,500
- ----------------------------------------------------------------
El Paso Energy Partners LP, 8.50%
Sr. Unsec. Sub. Nts., Series B, 6/1/11  469,000         529,970
- ----------------------------------------------------------------
Forest Oil Corp.,
7.75% Sr. Nts., 5/1/14                1,000,000       1,062,500
- ----------------------------------------------------------------
Frontier Oil Corp.,
11.75% Sr. Nts., 11/15/09               800,000         908,000
- ----------------------------------------------------------------
GulfTerra Energy Partners LP:
8.50% Sr. Unsec. Sub. Nts.,
Series B, 6/1/10                        425,000         484,500
10.625% Sr. Sub. Nts., 12/1/12          469,000         583,905
- ----------------------------------------------------------------
Leviathan Gas Pipeline Partners
LP/Leviathan Finance Corp., 10.375%
Sr. Unsec. Sub. Nts.,
Series B, 6/1/09 1                      500,000         545,000
- ----------------------------------------------------------------
Newfield Exploration Co., 8.375%
Sr. Sub. Nts., 8/15/12                  600,000         675,000
- ----------------------------------------------------------------
Paramount Resources Ltd., 7.875%
Sr. Nts., 11/1/10                       700,000         700,000
- ----------------------------------------------------------------
Pioneer Natural Resources Co.,
7.50% Sr. Nts., 4/15/12               1,000,000       1,151,148
- ----------------------------------------------------------------
Premcor Refining Group, Inc.,
9.50% Sr. Nts., 2/1/13 1              1,300,000       1,488,500
- ----------------------------------------------------------------
Stone Energy Corp., 8.25% Sr.
Unsec. Sub. Nts., 12/15/11              800,000         876,000
- ----------------------------------------------------------------
Teekay Shipping Corp., 8.875%
Sr. Nts., 7/15/11                       575,000         655,500
- ----------------------------------------------------------------
Tesoro Petroleum Corp.:
8% Sr. Sec. Nts., 4/15/08             1,000,000       1,067,500
9.625% Sr. Sub. Nts., 4/1/12            700,000         770,000
- ----------------------------------------------------------------
Tom Brown, Inc., Units (each unit
consists of $512 principal amount
of 7.25% sr. sub. nts., due 2013 and
$488 principal amount of Tom
Brown Resources Funding Corp.,
7.25% sr. sub. nts., due 2013) 8        400,000         425,000
- ----------------------------------------------------------------
Westport Resources Corp., 8.25% Sr.
Unsec. Sub. Nts., 11/1/11             1,400,000       1,547,000
- ----------------------------------------------------------------
XTO Energy, Inc., 7.50%
Sr. Nts., 4/15/12                     1,000,000       1,135,000
                                                  --------------
                                                     17,666,023




                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
FINANCIALS--2.6%
- ----------------------------------------------------------------
CAPITAL MARKETS--0.6%
American Color Graphics, Inc.,
10% Sr. Sec. Nts., 6/15/10 3        $   400,000   $     412,000
- ----------------------------------------------------------------
Berry Plastics Corp.:
10.75% Sr. Sub. Nts., 7/15/12           800,000         925,000
10.75% Sr. Sub. Nts., 7/15/12 3         800,000         925,000
- ----------------------------------------------------------------
Decrane Aircraft Holdings, Inc.,
12% Sr. Unsec. Sub. Nts.,
Series B, 9/30/08                     1,550,000         798,250
                                                  --------------
                                                      3,060,250

- ----------------------------------------------------------------
COMMERCIAL BANKS--0.3%
Bank Plus Corp.,
12% Sr. Nts., 7/18/07 1                 517,000         555,775
- ----------------------------------------------------------------
Local Financial Corp.,
11% Sr. Nts., 9/8/04 1                  800,000         838,000
- ----------------------------------------------------------------
Western Financial Bank,
9.625% Unsec. Sub. Debs., 5/15/12       400,000         448,000
                                                  --------------
                                                      1,841,775

- ----------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--0.3%
Bombardier Recreational, Inc.,
8.375% Sr. Sub. Nts., 12/15/13 3        550,000         577,500
- ----------------------------------------------------------------
Couche-Tard US LP/Couche-Tard
Finance Corp., 7.50% Sr. Sub.
Nts., 12/15/13 3                        300,000         315,750
- ----------------------------------------------------------------
Finova Group, Inc. (The),
7.50% Nts., 11/15/09                    500,000         302,500
- ----------------------------------------------------------------
LaBranche & Co., Inc., 12%
Sr. Unsec. Sub. Nts., 3/2/07            600,000         609,000
                                                  --------------
                                                      1,804,750

- ----------------------------------------------------------------
REAL ESTATE--1.2%
Capstar Hotel Co., 8.75% Sr. Sub.
Nts., 8/15/07 1                         200,000         203,500
- ----------------------------------------------------------------
Corrections Corp. of America:
7.50% Sr. Nts., 5/1/11                  500,000         527,500
9.875% Sr. Nts., 5/1/09                 500,000         560,625
- ----------------------------------------------------------------
Felcor Lodging LP:
9% Sr. Nts., 6/1/11                     780,000         850,200
10% Sr. Unsec. Nts., 9/15/08            200,000         217,000
- ----------------------------------------------------------------
Felcor Suites LP, 7.375%
Sr. Nts., 10/1/04                       200,000         205,750
- ----------------------------------------------------------------
HMH Properties, Inc., 7.875%
Sr. Nts., Series B, 8/1/08            1,750,000       1,828,750
- ----------------------------------------------------------------
MeriStar Hospitality Corp.:
9.125% Sr. Unsec. Nts., 1/15/11         400,000         426,000
10.50% Sr. Unsec. Nts., 6/15/09         350,000         381,500
- ----------------------------------------------------------------
Saul (B.F.) Real Estate Investment
Trust, 9.75% Sr. Sec. Nts.,
Series B, 4/1/08                      1,300,000       1,363,375
                                                  --------------
                                                      6,564,200
STATEMENT OF INVESTMENTS  CONTINUED
- ----------------------------------------------------------------


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.2%
WMC Finance Co., 11.75%
Sr. Nts., 12/15/08 3                $ 1,000,000   $   1,002,500
- ----------------------------------------------------------------
HEALTH CARE--4.7%
- ----------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.7%
Dade Behring Holdings, Inc., 11.91%
Sr. Unsec. Sub. Nts., 10/3/10 1         200,000         231,000
- ----------------------------------------------------------------
Fisher Scientific International, Inc.,
8.125% Sr. Sub. Nts., 5/1/12            782,000         842,605
- ----------------------------------------------------------------
HMP Equity Holdings Corp., Units
(each unit consists of $1,000
principal amount of 15.43% sr. sec.
disc. nts., 5/15/08 and one warrant
to purchase 2.8094 shares of
Huntsman Corp. common stock) 8,9      1,000,000         615,000
- ----------------------------------------------------------------
Sybron Dental Specialties, Inc.,
8.125% Sr. Sub. Nts., 6/15/12           700,000         764,750
- ----------------------------------------------------------------
Universal Hospital Services, Inc.,
10.125% Sr. Nts., 11/1/11 3             800,000         844,000
- ----------------------------------------------------------------
Vanguard Health Systems, Inc.,
9.75% Sr. Unsec. Sub. Nts., 8/1/11      500,000         545,000
                                                  --------------
                                                      3,842,355

- ----------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--3.9%
Alderwoods Group, Inc.,
12.25% Sr. Nts., 1/2/09                 700,000         791,000
- ----------------------------------------------------------------
Alliance Imaging, Inc., 10.375% Sr.
Unsec. Sub. Nts., 4/15/11               300,000         319,500
- ----------------------------------------------------------------
AmeriPath, Inc., 10.50% Sr.
Unsec. Sub. Nts., 4/1/13                700,000         749,000
- ----------------------------------------------------------------
AmerisourceBergen Corp.,
7.25% Sr. Unsec. Nts., 11/15/12         200,000         216,500
- ----------------------------------------------------------------
Beverly Enterprises, Inc.,
9.625% Sr. Unsec. Nts., 4/15/09         925,000       1,024,438
- ----------------------------------------------------------------
Extendicare Health Services, Inc.,
9.50% Sr. Unsec. Sub. Nts., 7/1/10 1    500,000         557,500
- ----------------------------------------------------------------
Fresenius Medical Care Capital
Trust II, 7.875% Nts., 2/1/08 1       1,600,000       1,716,000
- ----------------------------------------------------------------
Genesis Healthcare Corp., 8%
Sr. Sub. Nts., 10/15/13 3               400,000         419,000
- ----------------------------------------------------------------
Hanger Orthopedic Group, Inc.,
10.375% Sr. Nts., 2/15/09 1             400,000         456,000
- ----------------------------------------------------------------
HCA, Inc.:
6.30% Sr. Unsec. Nts., 10/1/12          300,000         309,823
6.95% Sr. Nts., 5/1/12                1,000,000       1,073,915
7.875% Sr. Nts., 2/1/11                 305,000         348,336
8.75% Sr. Nts., 9/1/10                  400,000         476,912
- ----------------------------------------------------------------
Healthsouth Corp.,
7.625% Nts., 6/1/12                   1,000,000         940,000
- ----------------------------------------------------------------
InSight Health Services Corp.,
9.875% Sr. Sub. Nts., 11/1/11           500,000         532,500


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES Continued
Magellan Health Services, Inc.:
9% Sr. Sub. Nts., 2/15/08 4,5       $   300,000   $     223,500
9.375% Sr. Nts., 11/15/07 3           2,000,000       2,110,000
- ----------------------------------------------------------------
Medquest, Inc., 11.875% Sr.
Unsec. Sub. Nts., Series B, 8/15/12     700,000         768,250
- ----------------------------------------------------------------
National Nephrology Assn., 9%
Sr. Sub. Nts., 11/1/11 3                200,000         210,500
- ----------------------------------------------------------------
NDCHealth Corp., 10.50% Sr.
Unsec. Sub. Nts., 12/1/12               600,000         678,000
- ----------------------------------------------------------------
PacifiCare Health Systems, Inc.,
10.75% Sr. Unsec. Unsub. Nts., 6/1/09   714,000         846,090
- ----------------------------------------------------------------
Quintiles Transnational Corp., 10%
Sr. Sub. Nts., 10/1/13 3                600,000         651,000
- ----------------------------------------------------------------
Rotech Healthcare, Inc., 9.50% Sr.
Unsec. Sub. Nts., 4/1/12                600,000         630,000
- ----------------------------------------------------------------
Stewart Enterprises, Inc., 10.75% Sr.
Unsec. Sub. Nts., 7/1/08 1            1,800,000       2,043,000
- ----------------------------------------------------------------
Tenet Healthcare Corp., 6.375% Sr.
Nts., 12/1/11                           760,000         733,400
- ----------------------------------------------------------------
Triad Hospitals, Inc., 7%
Sr. Sub. Nts., 11/15/13 3             1,420,000       1,437,750
- ----------------------------------------------------------------
US Oncology, Inc., 9.625%
Sr. Sub. Nts., 2/1/12                   300,000         330,750
- ----------------------------------------------------------------
Vicar Operating, Inc.,
9.875% Sr. Sub. Nts., 12/1/09 1       1,000,000       1,115,000
                                                  --------------
                                                     21,707,664

- ----------------------------------------------------------------
PHARMACEUTICALS--0.1%
aaiPharma, Inc., 11%
Sr. Sub. Nts., 4/1/10                   100,000         114,000
- ----------------------------------------------------------------
Valeant Pharmaceuticals
International, Inc., 7%
Sr. Nts., 12/15/11 3                    800,000         828,000
                                                  --------------
                                                        942,000

- ----------------------------------------------------------------
INDUSTRIALS--8.1%
- ----------------------------------------------------------------
AEROSPACE & DEFENSE--1.0%
Alliant Techsystems, Inc., 8.50%
Sr. Unsec. Sub. Nts., 5/15/11           900,000         994,500
- ----------------------------------------------------------------
American Plumbing & Mechanical,
Inc., 11.625% Sr. Sub. Nts.,
Series B, 10/15/08 1,4                  500,000         125,625
- ----------------------------------------------------------------
K&F Industries, Inc., 9.625%
Sr. Unsec. Sub. Nts., 12/15/10          300,000         337,875
- ----------------------------------------------------------------
L-3 Communications Corp.,
7.625% Sr. Sub. Nts., 6/15/12           800,000         871,000
- ----------------------------------------------------------------
Rexnord Corp., 10.125%
Sr. Unsec. Sub. Nts., 12/15/12          700,000         770,000
- ----------------------------------------------------------------
TransDigm, Inc., 8.375%
Sr. Sub. Nts., 7/15/11                  800,000         855,000


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
AEROSPACE & DEFENSE Continued
TRW Automotive, Inc.:
9.375% Sr. Nts., 2/15/13            $   650,000   $     745,875
11% Sr. Sub. Nts., 2/15/13              700,000         827,750
- ----------------------------------------------------------------
Vought Aircraft Industries, Inc.,
8% Sr. Nts., 7/15/11 3                  300,000         307,875
                                                  --------------
                                                      5,835,500

- ----------------------------------------------------------------
AIR FREIGHT & LOGISTICS--0.0%
Atlas Air, Inc., 9.25% Sr. Nts.,
4/15/08 4                               500,000         187,500
- ----------------------------------------------------------------
AIRLINES--0.4%
America West Airlines, Inc.,
10.75% Sr. Nts., 9/1/05               1,000,000         975,000
- ----------------------------------------------------------------
Amtran, Inc., 10.50% Sr.
Nts., 8/1/04                          1,500,000       1,301,250
                                                  --------------
                                                      2,276,250

- ----------------------------------------------------------------
BUILDING PRODUCTS--0.5%
Associated Materials, Inc.,
9.75% Sr. Sub. Nts., 4/15/12            700,000         770,000
- ----------------------------------------------------------------
Green Star Products, Inc.,
10.15% Bonds, 6/24/10 3                 321,938         330,815
- ----------------------------------------------------------------
Jacuzzi Brands, Inc., 9.625%
Sr. Sec. Nts., 7/1/10 3                 544,000         601,120
- ----------------------------------------------------------------
Nortek, Inc.:
9.125% Sr. Unsec. Nts.,
Series B, 9/1/07                        200,000         207,750
9.875% Sr. Unsec. Sub. Nts., 6/15/11    400,000         443,000
- ----------------------------------------------------------------
North America Energy Partners, Inc.,
8.75% Sr. Unsec. Nts., 12/1/11 3        300,000         316,500
                                                  --------------
                                                      2,669,185

- ----------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--2.9%
Allied Waste North America, Inc.:
7.875% Sr. Nts., 4/15/13                800,000         870,000
7.875% Sr. Unsec. Nts.,
Series B, 1/1/09                        400,000         419,000
8.50% Sr. Sub. Nts., 12/1/08          1,000,000       1,117,500
8.875% Sr. Nts., Series B, 4/1/08     1,900,000       2,137,500
9.25% Sr. Sec. Debs.,
Series B, 9/1/12                      2,000,000       2,280,000
10% Sr. Unsec. Sub. Nts.,
Series B, 8/1/09                        400,000         434,000
- ----------------------------------------------------------------
American Pad & Paper Co., 13%
Sr. Sub. Nts., Series B,
11/15/05 1,4,5                          200,000           1,305
- ----------------------------------------------------------------
Budget Group, Inc., 9.125%
Sr. Unsec. Nts., 4/1/06 4,5             900,000         166,500
- ----------------------------------------------------------------
Buhrmann US, Inc., 12.25%
Sr. Unsec. Sub. Nts., 11/1/09           600,000         675,000
- ----------------------------------------------------------------
Coinmach Corp., 9% Sr. Nts., 2/1/10     800,000         872,000
- ----------------------------------------------------------------
Comforce Operating, Inc., 12%
Sr. Nts., Series B,12/1/07 1            350,000         229,250
- ----------------------------------------------------------------
Hydrochem Industrial Services, Inc.,
10.375% Sr. Sub. Nts., 8/1/07 1         250,000         239,375


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES Continued
IT Group, Inc., 11.25% Sr. Unsec.
Sub. Nts., Series B, 4/1/09 1,4,5   $   550,000   $          --
- ----------------------------------------------------------------
Kindercare Learning Centers, Inc.,
9.50% Sr. Sub. Nts., 2/15/09 1          750,000         765,000
- ----------------------------------------------------------------
Mail-Well I Corp., 9.625% Sr.
Nts., 3/15/12                           700,000         780,500
- ----------------------------------------------------------------
Moore North American Finance,
Inc., 7.875% Sr. Nts., 1/15/11 3        400,000         455,000
- ----------------------------------------------------------------
Protection One, Inc./Protection
One Alarm Monitoring, Inc.,
7.375% Sr. Unsec. Nts., 8/15/05 1       900,000         832,500
- ----------------------------------------------------------------
Stericycle, Inc., 12.375% Sr. Unsec.
Sub. Nts., Series B, 11/15/09           488,000         563,640
- ----------------------------------------------------------------
Synagro Technologies, Inc.,
9.50% Sr. Sub. Nts., 4/1/09             700,000         763,000
- ----------------------------------------------------------------
United Rentals
(North America), Inc.:
9% Sr. Unsec. Sub. Nts.,
Series B, 4/1/09                      1,000,000       1,063,750
10.75% Sr. Unsec. Nts.,
Series B, 4/15/08                       400,000         452,000
10.75% Sr. Unsec. Nts.,
Series B, 4/15/08                       700,000         791,000
                                                  --------------
                                                     15,907,820

- ----------------------------------------------------------------
CONSTRUCTION & ENGINEERING--0.2%
Integrated Electrical Services, Inc.:
9.375% Sr. Sub. Nts.,
Series B, 2/1/09 1                      100,000         105,500
9.375% Sr. Sub. Nts.,
Series C, 2/1/09                        100,000         105,500
- ----------------------------------------------------------------
URS Corp., 11.50% Sr.
Unsec. Nts., 9/15/09 1                  700,000         795,375
                                                  --------------
                                                      1,006,375

- ----------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.1%
Dayton Superior Corp., 13%
Sr. Unsec. Sub. Nts., 6/15/09 1         100,000          87,500
- ----------------------------------------------------------------
General Cable Corp., 9.50%
Sr. Nts., 11/15/10 3                    500,000         537,500
                                                  --------------
                                                        625,000

- ----------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.8%
Great Lakes Dredge & Dock Co.,
7.75% Sr. Sub. Nts., 12/15/13 3         550,000         568,563
- ----------------------------------------------------------------
Norse CBO Ltd., 9.342% Sub. Bonds,
Series 1A, Cl. C2, 8/13/10 1          1,500,000         577,500
- ----------------------------------------------------------------
Tyco International Group SA:
6.375% Nts., 10/15/11                 2,900,000       3,113,875
6.75% Sr. Unsub. Nts., 2/15/11          100,000         109,750
                                                  --------------
                                                      4,369,688

STATEMENT OF INVESTMENTS  CONTINUED
- ----------------------------------------------------------------


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
MACHINERY--1.1%
Actuant Corp., 13%
Sr. Sub. Nts., 5/1/09               $   378,000   $     493,290
- ----------------------------------------------------------------
AGCO Corp., 9.50%
Sr. Unsec. Nts., 5/1/08               1,000,000       1,100,000
- ----------------------------------------------------------------
Insilco Corp., 12% Sr. Sub. Nts.,
8/15/07 1,4,5                         1,200,000          10,950
- ----------------------------------------------------------------
Manitowoc Co., Inc. (The):
7.125% Sr. Nts., 11/1/13                150,000         155,813
10.50% Sr. Sub. Nts., 8/1/12            800,000         915,000
- ----------------------------------------------------------------
NMHG Holding Co., 10%
Sr. Nts., 5/15/09 1                     600,000         666,000
- ----------------------------------------------------------------
Roller Bearing Co. of America, Inc.,
9.625% Sr. Sub. Nts.,
Series B, 6/15/07                       560,000         524,300
- ----------------------------------------------------------------
SPX Corp., 7.50% Sr. Nts., 1/1/13       900,000         983,250
- ----------------------------------------------------------------
Terex Corp.:
9.25% Sr. Unsec. Sub. Nts., 7/15/11     800,000         884,000
10.375% Sr. Unsec. Sub. Nts.,
Series B, 4/1/11 1                      500,000         562,500
                                                  --------------
                                                      6,295,103

- ----------------------------------------------------------------
MARINE--0.6%
CP Ships Ltd., 10.375%
Sr. Nts., 7/15/12                     1,000,000       1,165,000
- ----------------------------------------------------------------
Millenium Seacarriers, Inc.,
12% Sr. Sec. Nts., 7/15/05 1,4,5        700,000         269,290
- ----------------------------------------------------------------
Navigator Gas Transport plc,
10.50% First Priority Ship Mtg. Nts.,
6/30/07 1,4,5                         1,000,000         425,000
- ----------------------------------------------------------------
Pacific & Atlantic Holdings, Inc.,
3.75% Sec. Nts., 12/31/07 3             387,497         117,702
- ----------------------------------------------------------------
Sea Containers Ltd., 7.875%
Sr. Nts., 2/15/08                     1,500,000       1,485,000
                                                  --------------
                                                      3,461,992

- ----------------------------------------------------------------
ROAD & RAIL--0.4%
Kansas City Southern Railway Co.
(The), 7.50% Sr. Nts., 6/15/09          500,000         515,000
- ----------------------------------------------------------------
Stena AB:
7.50% Sr. Nts., 11/1/13                 928,000         960,480
9.625% Sr. Nts., 12/1/12                600,000         679,500
                                                  --------------
                                                      2,154,980

- ----------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE--0.1%
Worldspan LP/Worldspan Financial
Corp., 9.625% Sr. Nts., 6/15/11 3       350,000         362,250
- ----------------------------------------------------------------
INFORMATION TECHNOLOGY--1.8%
- ----------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.1%
Orion Network Systems, Inc.,
12.50% Sr. Disc. Nts., 1/15/07 1,4    1,150,000         606,625


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.1%
Seagate Technology Hdd Holdings,
8% Sr. Nts., 5/15/09                $   700,000   $     757,750
- ----------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.4%
Ingram Micro, Inc., 9.875% Sr. Unsec.
Sub. Nts., 8/15/08 1                  1,200,000       1,332,000
- ----------------------------------------------------------------
Sensus Metering Systems, Inc.,
8.625% Sr. Sub. Nts., 12/15/13 3      1,000,000       1,031,250
                                                  --------------
                                                      2,363,250

- ----------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.0%
Exodus Communications, Inc.,
10.75% Sr. Nts., 12/15/09 1,4 [EUR]     846,550          48,051
- ----------------------------------------------------------------
Globix Corp., 11% Sr. Nts., 4/26/08 1   109,359          96,783
- ----------------------------------------------------------------
NorthPoint Communications
Group, Inc., 12.875% Nts., 2/15/10 1,4  240,208              24
- ----------------------------------------------------------------
PSINet, Inc.:
10.50% Sr. Unsec. Nts.,
12/1/06 1,4,5 [EUR]                   1,000,000          52,031
11% Sr. Nts., 8/1/09 1,4,5              901,558          51,840
- ----------------------------------------------------------------
Verado Holdings, Inc., 0%/13% Sr.
Disc. Nts., 4/15/08 1,4,5,6             500,000              50
                                                  --------------
                                                        248,779

- ----------------------------------------------------------------
IT SERVICES--0.5%
Iron Mountain, Inc.:
7.75% Sr. Sub. Nts., 1/15/15            500,000         526,250
8.625% Sr. Unsec. Sub. Nts., 4/1/13   1,600,000       1,736,000
- ----------------------------------------------------------------
Titan Corp. (The),
8% Sr. Sub. Nts., 5/15/11 3             400,000         456,000
                                                  --------------
                                                      2,718,250

- ----------------------------------------------------------------
OFFICE ELECTRONICS--0.1%
ASAT Finance LLC,
12.50% Sr. Unsec. Nts., 11/1/06 1       325,000         346,531
- ----------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.6%
AMI Semiconductor, Inc.,
10.75% Sr. Unsec. Sub. Nts., 2/1/13     682,000         816,695
- ----------------------------------------------------------------
Amkor Technology, Inc.:
7.75% Sr. Nts., 5/15/13                 600,000         646,500
9.25% Sr. Unsec. Sub. Nts., 2/15/08   1,000,000       1,140,000
- ----------------------------------------------------------------
ChipPAC International Co. Ltd.,
12.75% Sr. Unsec. Sub. Nts.,
Series B, 8/1/09                        500,000         555,000
                                                  --------------
                                                      3,158,195

- ----------------------------------------------------------------
MATERIALS--9.8%
- ----------------------------------------------------------------
CHEMICALS--3.6%
Applied Extrusion Technologies, Inc.,
10.75% Sr. Nts., Series B, 7/1/11       450,000         375,750
- ----------------------------------------------------------------
Avecia Group plc, 11%
Sr. Unsec. Nts., 7/1/09                 200,000         181,000

                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
CHEMICALS Continued
ClimaChem, Inc., 10.75% Sr. Unsec.
Nts., Series B, 12/1/07 1           $   250,000   $     101,250
- ----------------------------------------------------------------
Compass Minerals Group, Inc.,
10% Sr. Sub. Nts., 8/15/11            1,200,000       1,350,000
- ----------------------------------------------------------------
Equistar Chemicals LP/Equistar
Funding Corp.:
8.75% Sr. Unsec. Nts., 2/15/09          600,000         630,000
10.625% Sr. Nts., 5/1/11 3            1,000,000       1,110,000
10.625% Sr. Unsec. Nts., 5/1/11         800,000         888,000
- ----------------------------------------------------------------
Huntsman Corp./
ICI Chemical Co. plc:
13.09% Sr. Unsec.
Disc. Nts., 12/31/09 9                  400,000         195,000
10.125% Sr. Unsec. Sub. Nts., 7/1/09  1,800,000       1,863,000
10.125% Sr. Unsec.
Sub. Nts., 7/1/09 [EUR]                 100,000         123,770
- ----------------------------------------------------------------
Huntsman International LLC,
9.875% Sr. Nts., 3/1/09               1,800,000       1,980,000
- ----------------------------------------------------------------
IMC Global, Inc.,
7.625% Bonds, 11/1/05 1                   3,000           3,090
- ----------------------------------------------------------------
ISP Chemco, Inc., 10.25%
Sr. Unsec. Sub. Nts., 7/1/11 1          500,000         565,000
- ----------------------------------------------------------------
ISP Holdings, Inc., 10.625%
Sr. Sec. Nts., 12/15/09 1               300,000         331,500
- ----------------------------------------------------------------
Koppers Industry, Inc.,
9.875% Sr. Sec. Nts., 10/15/13 3        900,000         996,750
- ----------------------------------------------------------------
Kraton Polymers LLC/Capital
Corp., 8.125% Sr. Sub. Nts., 1/15/14 3  400,000         418,000
- ----------------------------------------------------------------
Lyondell Chemical Co.:
9.50% Sec. Nts., 12/15/08               500,000         525,000
9.50% Sr. Sec. Nts., 12/15//08          100,000         105,000
9.625% Sr. Sec. Nts., Series A, 5/1/07  900,000         958,500
9.875% Sec. Nts., Series B, 5/1/07      600,000         636,000
- ----------------------------------------------------------------
Millennium America, Inc.,
9.25% Sr. Nts., 6/15/08 3               800,000         876,000
- ----------------------------------------------------------------
Noveon, Inc., 11% Sr. Unsec.
Sub. Nts., Series B, 2/28/11 1        1,200,000       1,398,000
- ----------------------------------------------------------------
OM Group, Inc., 9.25%
Sr. Sub. Nts., 12/15/11                 100,000         104,500
- ----------------------------------------------------------------
PCI Chemicals Canada,
10% Sr. Sec. Nts., 12/31/08             319,909         291,117
- ----------------------------------------------------------------
Pioneer Cos., Inc., 4.64%
Sr. Sec. Nts., 12/31/06 1,2             101,304          92,187
- ----------------------------------------------------------------
Polyone Corp., 8.875%
Sr. Unsec. Nts., 5/1/12               1,700,000       1,572,500
- ----------------------------------------------------------------
Resolution Performance Products
LLC, 8% Sec. Nts., 12/15/09 3           450,000         468,000
- ----------------------------------------------------------------
Rockwood Specialties Corp.,
10.625% Sr. Sub. Nts., 5/15/11 3        400,000         448,000
- ----------------------------------------------------------------
Sterling Chemicals, Inc.:
10% Sr. Sec. Nts., 12/19/07 1           409,135         395,838
11.25% Sr. Sub. Nts., 8/15/06 1,4,5     300,000              --


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
CHEMICALS Continued
Westlake Chemical Corp.,
8.75% Sr. Nts., 7/15/11 3           $   800,000   $     880,000
                                                  --------------
                                                     19,862,752

- ----------------------------------------------------------------
CONSTRUCTION MATERIALS--0.2%
Texas Industries, Inc., 10.25%
Sr. Unsec. Nts., 6/15/11                800,000         908,000
- ----------------------------------------------------------------
CONTAINERS & PACKAGING--2.5%
Ball Corp.:
6.875% Sr. Unsec. Nts., 12/15/12 3      300,000         315,000
7.75% Sr. Unsec. Nts., 8/1/06           700,000         756,000
- ----------------------------------------------------------------
Crown Euro Holdings SA,
9.50% Sr. Sec. Nts., 3/1/11             900,000       1,023,750
- ----------------------------------------------------------------
Graphic Packaging
International Corp.:
8.50% Sr. Nts., 8/15/11 3             1,000,000       1,100,000
9.50% Sr. Sub. Nts., 8/15/13 3          700,000         777,000
- ----------------------------------------------------------------
Jefferson Smurfit Corp., 8.25%
Sr. Unsec. Nts., 10/1/12                900,000         981,000
- ----------------------------------------------------------------
MDP Acquisitions plc,
9.625% Sr. Nts., 10/1/12                800,000         900,000
- ----------------------------------------------------------------
Owens-Brockway Glass
Container, Inc.:
7.75% Sr. Sec. Nts., 5/15/11          1,000,000       1,078,750
8.25% Sr. Unsec. Nts., 5/15/13          500,000         539,375
8.75% Sr. Sec. Nts., 11/15/12         1,350,000       1,510,313
8.875% Sr. Sec. Nts., 2/15/09         1,300,000       1,431,625
- ----------------------------------------------------------------
Stone Container Corp.:
8.375% Sr. Nts., 7/1/12                 400,000         436,000
9.25% Sr. Unsec. Nts., 2/1/08         1,000,000       1,110,000
9.75% Sr. Unsec. Nts., 2/1/11         1,000,000       1,110,000
- ----------------------------------------------------------------
TriMas Corp., 9.875% Sr. Unsec.
Sub. Nts., 6/15/12                    1,000,000       1,047,500
                                                  --------------
                                                     14,116,313

- ----------------------------------------------------------------
METALS & MINING--2.0%
AK Steel Corp., 7.875%
Sr. Unsec. Nts., 2/15/09                300,000         264,750
- ----------------------------------------------------------------
Arch Western Finance LLC,
6.75% Sr. Nts., 7/1/13 3                800,000         826,000
- ----------------------------------------------------------------
California Steel Industries Corp.,
8.50% Sr. Unsec. Nts.,
Series B, 4/1/09                        300,000         316,125
- ----------------------------------------------------------------
Century Aluminum Co.,
11.75% Sr. Sec. Nts., 4/15/08         1,385,000       1,551,200
- ----------------------------------------------------------------
IMCO Recycling, Inc.,
10.375% Sr. Sec. Nts., 10/15/10 3       700,000         722,750
- ----------------------------------------------------------------
IPSCO, Inc., 8.75% Sr. Nts., 6/1/13     300,000         333,000
- ----------------------------------------------------------------
Jorgensen (Earle M.) Co., 9.75%
Sr. Sec. Nts., 6/1/12                   800,000         892,000
- ----------------------------------------------------------------
Kaiser Aluminum & Chemical Corp.,
10.875% Sr. Nts., Series B,
10/15/06 1,4,5                        1,000,000         905,000



STATEMENT OF INVESTMENTS  CONTINUED
- ----------------------------------------------------------------


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
METALS & MINING Continued
Massey Energy Co., 6.625%
Sr. Nts., 11/15/10 3                $   400,000   $     412,000
- ----------------------------------------------------------------
Metallurg, Inc., 11% Sr. Nts., 12/1/07  740,000         418,100
- ----------------------------------------------------------------
Northwest Pipeline Corp.,
8.125% Sr. Nts., 3/1/10                 200,000         223,000
- ----------------------------------------------------------------
Oregon Steel Mills, Inc.,
10% Sr. Nts., 7/15/09                 1,100,000         970,750
- ----------------------------------------------------------------
Peabody Energy Corp., 6.875%
Sr. Unsec. Nts., Series B, 3/15/13    1,000,000       1,060,000
- ----------------------------------------------------------------
Steel Dynamics, Inc.,
9.50% Sr. Nts., 3/15/09                 400,000         446,000
- ----------------------------------------------------------------
UCAR Finance, Inc.,
10.25% Sr. Nts., 2/15/12                400,000         462,000
- ----------------------------------------------------------------
United States Steel Corp.:
9.75% Sr. Nts., 5/15/10                 600,000         678,000
10.75% Sr. Nts., 8/1/08                 600,000         705,000
                                                  --------------
                                                     11,185,675

- ----------------------------------------------------------------
PAPER & FOREST PRODUCTS--1.5%
Abitibi-Consolidated, Inc.,
8.55% Nts., 8/1/10                      300,000         334,590
- ----------------------------------------------------------------
Ainsworth Lumber Co. Ltd.:
12.50% Sr. Nts., 7/15/07 1,7            400,000         472,000
13.875% Sr. Sec. Nts., 7/15/07          250,000         288,750
- ----------------------------------------------------------------
Boise Cascade Co.:
6.50% Sr. Nts., 11/1/10                 400,000         417,837
7% Sr. Nts., 11/1/13                    650,000         676,718
- ----------------------------------------------------------------
Buckeye Technologies, Inc.,
8.50% Sr. Nts., 10/1/13                 350,000         376,250
- ----------------------------------------------------------------
Doman Industries Ltd.,
8.75% Sr. Nts., 3/15/04  1,4,5        2,000,000         350,000
- ----------------------------------------------------------------
Georgia-Pacific Corp.:
8.125% Sr. Unsec. Nts., 5/15/11       2,200,000       2,431,000
9.375% Sr. Unsec. Nts., 2/1/13        1,600,000       1,848,000
- ----------------------------------------------------------------
Inland Fiber Group LLC,
9.625% Sr. Unsec. Nts., 11/15/07 4      300,000         157,500
- ----------------------------------------------------------------
Louisiana-Pacific Corp., 10.875%
Sr. Sub. Nts., 11/15/08 1               250,000         298,750
- ----------------------------------------------------------------
Tekni-Plex, Inc., 8.75%
Sr. Sec. Nts., 11/15/13 3               700,000         733,250
                                                  --------------
                                                      8,384,645

- ----------------------------------------------------------------
TELECOMMUNICATION SERVICES--8.4%
- ----------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--3.8%
360networks, Inc.:
13% Sr. Unsec. Nts., 5/1/08 1,4,5 [EUR] 500,000              63
13% Sr. Unsec. Nts., 5/1/08 1,4,5       400,000              40
- ----------------------------------------------------------------
American Tower Corp.,
9.375% Sr. Nts., 2/1/09                 850,000         909,500
- ----------------------------------------------------------------
COLO.com, Inc., 13.875%
Sr. Nts., 3/15/10 1,4,5                 504,605           3,785


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES Continued
Concentric Network Corp.,
Escrow Shares, 12/15/07 1,10        $   800,000   $          --
- ----------------------------------------------------------------
Crown Castle International Corp.,
7.50% Sr. Nts., 12/1/13 3               700,000         707,000
- ----------------------------------------------------------------
Dex Media East LLC/Dex Media
East Finance Co., 9.875%
Sr. Unsec. Nts., 11/15/09               800,000         920,000
- ----------------------------------------------------------------
Dex Media West LLC/Dex
Media West Finance Co.:
8.50% Sr. Nts., 8/15/10 3               700,000         783,125
9.875% Sr. Sub. Nts., 8/15/13 3       1,200,000       1,401,000
- ----------------------------------------------------------------
Dex Media, Inc., 8% Nts., 11/15/13 3  1,500,000       1,582,500
- ----------------------------------------------------------------
Diamond Holdings plc,
9.125% Sr. Nts., 2/1/08                 200,000         207,750
- ----------------------------------------------------------------
Focal Communications Corp.,
11.875% Sr. Unsec. Nts.,
Series B, 1/15/10 1,4                   100,000           8,000
- ----------------------------------------------------------------
Intermedia Communications, Inc.,
0%/12.25% Sr. Disc. Nts.,
Series B, 3/1/09 4,5,6                  200,000          75,000
- ----------------------------------------------------------------
IPC Acquisition Corp.,
11.50% Sr. Sub. Nts., 12/15/09          350,000         383,250
- ----------------------------------------------------------------
Level 3 Communications, Inc.:
0%/10.50% Sr. Disc. Nts., 12/1/08 6     200,000         189,500
9.125% Sr. Unsec. Nts., 5/1/08        1,000,000         915,000
- ----------------------------------------------------------------
MCI Communications Corp.,
7.75% Sr. Unsec. Debs., 3/23/25 4,5     600,000         486,000
- ----------------------------------------------------------------
Metromedia Fiber Network, Inc.,
10% Sr. Unsec. Nts.,
Series B, 11/15/08  1,4,5               600,000          39,000
- ----------------------------------------------------------------
Nextlink Communications, Inc.:
Escrow Shares, 10/1/07 1,10             500,000              --
Escrow Shares, 3/15/08 1,10             800,000              --
Escrow Shares, 11/15/08 1,10            200,000              --
Escrow Shares, 6/1/09 1,10              500,000              --
- ----------------------------------------------------------------
Qwest Capital Funding, Inc.,
5.875% Nts., 8/3/04                   1,400,000       1,410,500
- ----------------------------------------------------------------
Qwest Corp.:
7.20% Unsec. Nts., 11/1/04              400,000         411,000
8.875% Nts., 3/15/12 3                1,600,000       1,844,000
- ----------------------------------------------------------------
Qwest Services Corp.,
13.50% Nts., 12/15/10 3               3,400,000       4,148,000
- ----------------------------------------------------------------
Sprint Capital Corp.,
8.375% Nts., 3/15/12                    750,000         877,619
- ----------------------------------------------------------------
Telewest Communications plc:
0%/9.25% Sr. Disc. Nts.,
4/15/09 4,5,6                         1,000,000         525,000
0%/9.875% Sr. Disc. Nts.,
4/15/09 4,5,6 [GBP]                     500,000         456,489
11.25% Sr. Nts., 11/1/08 4,5            800,000         518,000
- ----------------------------------------------------------------
Teligent, Inc., 11.50% Sr. Nts.,
12/1/07 1,4,5                           400,000              --

                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES Continued
Time Warner Telecom LLC/
Time Warner Telecom, Inc.,
9.75% Sr. Nts., 7/15/08             $ 1,500,000   $   1,552,500
- ----------------------------------------------------------------
Time Warner Telecom, Inc.,
10.125% Sr. Unsec. Sub. Nts., 2/1/11    700,000         749,000
- ----------------------------------------------------------------
Viatel, Inc., 11.25%
Sr. Sec. Nts., 4/15/08 1,4,5            600,000              --
- ----------------------------------------------------------------
Winstar Communications, Inc.,
12.75% Sr. Nts., 4/15/10 1,4,5        1,000,000             100
                                                  --------------
                                                     21,102,721

- ----------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--4.6%
Alamosa Delaware, Inc.,
12.50% Sr. Unsec. Nts., 2/1/11        1,000,000       1,025,000
- ----------------------------------------------------------------
American Tower Escrow Corp.,
12.25% Sr. Sub. Disc. Nts., 8/1/08 9  1,400,000         973,000
- ----------------------------------------------------------------
CellNet Data Systems, Inc.,
Sr. Unsec. Disc. Nts., 10/1/07 1,4,5  1,834,000              --
- ----------------------------------------------------------------
Centennial Cellular Operating Co./
Centennial Communications Corp.,
10.125% Sr. Nts., 6/15/13             1,000,000       1,102,500
- ----------------------------------------------------------------
Crown Castle International Corp.,
10.75% Sr. Nts., 8/1/11               1,350,000       1,525,500
- ----------------------------------------------------------------
CTI Holdings SA, 0%/11.50% Sr.
Deferred Coupon Nts.,
4/15/08 1,4,5,6                       1,000,000         125,000
- ----------------------------------------------------------------
Dobson Communications Corp.:
8.875% Sr. Nts., 10/1/13 3            1,650,000       1,678,875
10.875% Sr. Unsec. Nts., 7/1/10         700,000         766,500
- ----------------------------------------------------------------
IPCS, Inc., 0%/14% Sr. Unsec. Disc.
Nts., 7/15/10 1,4,6                     350,000          49,000
- ----------------------------------------------------------------
Leap Wireless International, Inc.:
0%/14.50% Sr. Unsec. Disc. Nts.,
4/15/10 1,4,5,6                         400,000          50,000
12.50% Sr. Nts., 4/15/10 1,4            400,000          58,000
- ----------------------------------------------------------------
Nextel Communications, Inc.:
7.375% Sr. Nts., 8/1/15                 490,000         529,200
9.375% Sr. Unsec. Nts., 11/15/09      5,050,000       5,529,750
9.50% Sr. Unsec. Nts., 2/1/11         1,200,000       1,362,000
- ----------------------------------------------------------------
Nextel Partners, Inc.:
11% Sr. Nts., 3/15/10                   300,000         333,000
12.50% Sr. Nts., 11/15/09             1,162,000       1,353,730
- ----------------------------------------------------------------
Orbcomm Global LP,
Escrow Shares, 8/15/04 1,10             600,000              --
- ----------------------------------------------------------------
Rural Cellular Corp.:
9.625% Sr. Sub. Nts.,
Series B, 5/15/08                       950,000         931,000
9.75% Sr. Sub. Nts., 1/15/10            500,000         491,250
9.875% Sr. Nts., 2/1/10               1,100,000       1,177,000
- ----------------------------------------------------------------
SBA Communications Corp.:
10.25% Sr. Unsec. Nts., 2/1/09        1,600,000       1,580,000
12% Sr. Unsec. Disc. Nts., 3/1/08 1     445,000         486,163


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES Continued
SBA Telecommunications, Inc./
SBA Communications Corp.,
0%/9.75% Sr. Disc. Nts.,
12/15/11 3,6                       $  1,500,000   $   1,065,000
- ----------------------------------------------------------------
SpectraSite, Inc., 8.25%
Sr. Nts., 5/15/10 1                     400,000         429,000
- ----------------------------------------------------------------
Triton PCS, Inc.:
8.50% Sr. Unsec. Nts., 6/1/13           800,000         864,000
8.75% Sr. Unsec. Sub. Nts., 11/15/11    300,000         297,000
9.375% Sr. Unsec. Sub. Nts., 2/1/11     300,000         307,500
- ----------------------------------------------------------------
US Unwired, Inc., 0%/13.375%
Sr. Unsec. Sub. Disc. Nts.,
Series B, 11/1/09 6                     800,000         584,000
- ----------------------------------------------------------------
Western Wireless Corp., 9.25%
Sr. Unsec. Nts., 7/15/13                900,000         954,000
                                                  --------------
                                                     25,626,968

- ----------------------------------------------------------------
UTILITIES--8.7%
- ----------------------------------------------------------------
ELECTRIC UTILITIES--4.0%
AES Corp. (The):
8.75% Sr. Sec. Nts., 5/15/13 3        2,200,000       2,469,500
8.75% Sr. Unsec. Unsub. Nts., 6/15/08   451,000         485,953
8.875% Sr. Unsec. Nts., 2/15/11         144,000         157,680
9.375% Sr. Unsec. Nts., 9/15/10         252,000         280,665
9.50% Sr. Unsec. Nts., 6/1/09            58,000          64,598
10% Sec. Nts., 7/15/05 3                583,574         596,705
- ----------------------------------------------------------------
AES Drax Holdings Ltd., 10.41%
Sr. Sec. Sub. Nts., Series B,
12/31/20 1,4                            300,000         261,000
- ----------------------------------------------------------------
Allegheny Energy, Inc., 7.75%
Nts., 8/1/05                            300,000         304,125
- ----------------------------------------------------------------
Caithness Coso Funding Corp.,
9.05% Sr. Sec. Nts., Series B,
12/15/09                                418,500         456,165
- ----------------------------------------------------------------
Calpine Corp.:
7.625% Sr. Nts., 4/15/06                550,000         489,500
8.25% Sr. Unsec. Nts., 8/15/05          400,000         389,000
8.50% Sr. Sec. Nts., 7/15/10 3        3,400,000       3,332,000
8.625% Sr. Nts., 8/15/10                200,000         157,000
8.75% Sr. Nts., 7/15/07                 800,000         660,000
8.75% Sr. Sec. Nts., 7/15/13 3          950,000         931,000
9.875% Sr. Sec. Nts., 12/1/11 3       1,000,000       1,032,500
- ----------------------------------------------------------------
CMS Energy Corp.:
7.50% Sr. Nts., 1/15/09                 300,000         310,500
7.75% Sr. Nts., 8/1/10 3                400,000         422,500
9.875% Sr. Unsec. Nts., 10/15/07      1,400,000       1,568,000
- ----------------------------------------------------------------
CMS Energy X-TRAS Pass-Through
Trust I, 7% Sr. Unsec. Pass-Through
Certificates, 1/15/05                   500,000         515,000
- ----------------------------------------------------------------
Edison Mission Energy, 10%
Sr. Unsec. Nts., 8/15/08                200,000         208,500
- ----------------------------------------------------------------
ESI Tractebel Acquisition Corp.,
7.99% Sec. Bonds, Series B, 12/30/11    922,000         977,320
- ----------------------------------------------------------------
Mirant Americas Generation LLC,
8.30% Sr. Unsec. Nts., 5/1/11 4         200,000         170,000


STATEMENT OF INVESTMENTS  CONTINUED
- --------------------------------------------------------------------------------


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
ELECTRIC UTILITIES Continued
MSW Energy Holdings LLC/MSW
Energy Finance Co., Inc.:
7.375% Sr. Sec. Nts., 9/1/10 3      $   700,000   $     735,000
8.50% Sr. Sec. Nts., 9/1/10 3           400,000         438,000
- ----------------------------------------------------------------
NRG Energy, Inc., 8% Sr. Sec. Nts.,
12/15/13 3                            1,600,000       1,690,000
- ----------------------------------------------------------------
PG&E Corp., 6.875% Sr. Sec.
Nts., 7/15/08 3                         800,000         870,000
- ----------------------------------------------------------------
Reliant Resources, Inc.:
9.25% Sr. Sec. Nts., 7/15/10 3        1,200,000       1,278,000
9.50% Sr. Sec. Nts., 7/15/13 3          700,000         752,500
                                                  --------------
                                                     22,002,711

- ----------------------------------------------------------------
GAS UTILITIES--2.2%
AmeriGas Partners LP/AmeriGas
Eagle Finance Corp., 8.875% Sr.
Unsec. Nts., Series B, 5/20/11 11     1,400,000       1,547,000
- ----------------------------------------------------------------
ANR Pipeline Co., 8.875%
Sr. Nts., 3/15/10                       400,000         452,000
- ----------------------------------------------------------------
El Paso Corp., 7.875%
Sr. Unsec. Nts., 6/15/12              1,200,000       1,140,000
- ----------------------------------------------------------------
El Paso Energy Corp.,
7.625% Nts., 7/15/11                    800,000         745,000
- ----------------------------------------------------------------
SEMCO Energy, Inc.:
7.125% Sr. Nts., 5/15/08                400,000         418,500
7.75% Sr. Nts., 5/15/13                 400,000         422,500
- ----------------------------------------------------------------
Southern Natural Gas Co.:
7.35% Nts., 2/15/31                     600,000         595,500
8% Sr. Unsub. Nts., 3/1/32              900,000         933,750
8.875% Sr. Nts., 3/15/10                700,000         791,000
- ----------------------------------------------------------------
Tennessee Gas Pipeline Co.,
7.50% Bonds, 4/1/17                   2,365,000       2,453,688
- ----------------------------------------------------------------
Williams Cos., Inc. (The),
7.125% Nts., 9/1/11                   2,850,000       3,028,125
                                                  --------------
                                                     12,527,063

- ----------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--2.4%
AES Red Oak LLC, 8.54% Sr. Sec.
Bonds, Series A, 11/30/19             1,057,581       1,147,476
- ----------------------------------------------------------------
Aquila, Inc., 7% Sr.
Unsec. Nts., 7/15/04                    300,000         301,500
- ----------------------------------------------------------------
Consumers Energy Co.:
6.25% Nts., 9/15/06                     300,000         324,130
6.375% Sr. Sec. Nts., 2/1/08            450,000         490,094
7.375% Nts., 9/15/23                    350,000         358,843
- ----------------------------------------------------------------
Dynegy Holdings, Inc.:
6.875% Sr. Unsec. Unsub.
Nts., 4/1/11                          3,540,000       3,278,925
8.75% Sr. Nts., 2/15/12                 600,000         608,250
10.125% Sr. Sec. Nts., 7/15/13 3      1,800,000       2,079,000
- ----------------------------------------------------------------
El Paso Production Holding Co.,
7.75% Sr. Nts., 6/1/13 3              1,100,000       1,089,000


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER Continued
Mirant Mid-Atlantic LLC, 8.625%
Sec. Pass-Through Certificates,
Series A, 6/30/12 1                 $   868,851   $     873,739
- ----------------------------------------------------------------
Transcontinental Gas Pipe
Line Corp.:
6.125% Nts., 1/15/05                    200,000         204,250
8.875% Sr. Unsub. Nts.,
Series B, 7/15/12                       200,000         237,500
- ----------------------------------------------------------------
Williams Cos., Inc. (The):
8.625% Sr. Nts., 6/1/10               1,350,000       1,522,109
9.25% Sr. Unsec. Unsub. Nts., 3/15/04   700,000         712,250
- ----------------------------------------------------------------
Williams Holdings of Delaware, Inc.,
6.50% Nts., 12/1/08                     300,000         311,625
                                                  --------------
                                                     13,538,691

- ----------------------------------------------------------------
WATER UTILITIES--0.1%
National Waterworks, Inc., 10.50%
Sr. Unsec. Sub. Nts., Series B,
12/1/12 1                               300,000         336,750
                                                  --------------
Total Corporate Bonds and Notes
(Cost $393,156,285)                                 413,547,332

                                         SHARES
- ----------------------------------------------------------------
PREFERRED STOCKS--0.7%
- ----------------------------------------------------------------
AmeriKing, Inc., 13% Cum. Sr.
Exchangeable, Non-Vtg. 1,5,7             13,764             138
- ----------------------------------------------------------------
Dobson Communications Corp.,
6% Cv., Series F (converts into
Dobson Communications Corp.,
Cl. A common stock), Non-Vtg.               800         144,000
- ----------------------------------------------------------------
e.spire Communications, Inc.,
12.75% Jr. Redeemable, Non-Vtg. 1,5,7       498              50
- ----------------------------------------------------------------
Eagle-Picher Holdings, Inc., 11.75%
Cum. Exchangeable, Series B,
Non-Vtg. 1,5                              8,000         586,000
- ----------------------------------------------------------------
ICG Holdings, Inc., 14.25%
Exchangeable, Non-Vtg. 1,5,7                342              --
- ----------------------------------------------------------------
McLeodUSA, Inc., 2.50% Cv., Series A 5    3,258          24,826
- ----------------------------------------------------------------
Nebco Evans Holdings, Inc., 11.25%
Sr. Redeemable Exchangeable,
Non-Vtg. 1,5,7                            7,274              --
- ----------------------------------------------------------------
NTL Europe, Inc., 10% Cum.,
Series A, Non-Vtg.                           23             189
- ----------------------------------------------------------------
Pacific & Atlantic Holdings, Inc.,
7.50% Cum. Cv., Series A 1,5,7           19,640          39,280
- ----------------------------------------------------------------
Paxson Communications Corp.:
14.25% Cum. 5,7                              --           3,192
14.25% Cum. Jr. Exchangeable,
Non-Vtg. 7                                   80         738,000
- ----------------------------------------------------------------
Rural Cellular Corp., 11.375% Cum.,
Series B, Non-Vtg. 7                      1,177         921,003
- ----------------------------------------------------------------
Sovereign Real Estate Investment
Trust, 12% Non-Cum., Series A 1,5        10,000       1,497,500


                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
PREFERRED STOCKS Continued
XO Communications, Inc., 13.50%
Sr., Series E, Non-Vtg. 1,5,7                 1   $          --
                                                  --------------
Total Preferred Stocks
(Cost $5,061,967)                                     3,954,178

- ----------------------------------------------------------------
COMMON STOCKS--1.0%
Charles River Laboratories
International, Inc. 5                     8,360         286,999
- ----------------------------------------------------------------
Chesapeake Energy Corp.                 100,909       1,370,344
- ----------------------------------------------------------------
Classic Cable, Inc. 5                     2,645              --
- ----------------------------------------------------------------
Covad Communications Group, Inc. 5       20,660          74,376
- ----------------------------------------------------------------
Dobson Communications
Corp., Cl. A 5                           51,491         270,637
- ----------------------------------------------------------------
Equinix, Inc. 5                          16,434         463,439
- ----------------------------------------------------------------
Geotek Communications, Inc.,
Liquidating Trust 1,5,10                    226              --
- ----------------------------------------------------------------
Globix Corp. 5                           11,467          45,868
- ----------------------------------------------------------------
Gulfstream Holding, Inc. 1,5                 56              --
- ----------------------------------------------------------------
Horizon Natural Resources Co. 1,5        20,000              --
- ----------------------------------------------------------------
ICO Global Communication
Holdings Ltd 1,5                         42,107          21,475
- ----------------------------------------------------------------
Manitowoc Co., Inc. (The)                 1,039          32,417
- ----------------------------------------------------------------
Microcell Telecommunications, Inc. 5      1,861          24,828
- ----------------------------------------------------------------
Microcell
Telecommunications, Inc., Cl. A 5            15             210
- ----------------------------------------------------------------
Microcell
Telecommunications, Inc., Cl. B 5         1,850          24,753
- ----------------------------------------------------------------
NTL, Inc. 5                              18,902       1,318,415
- ----------------------------------------------------------------
Orbital Sciences Corp. 5                  2,235          26,865
- ----------------------------------------------------------------
Pioneer Cos., Inc. 5                     20,688         168,607
- ----------------------------------------------------------------
Polymer Group, Inc., Cl. A 5             20,634         154,755
- ----------------------------------------------------------------
Prandium, Inc. 5                         62,829           2,513
- ----------------------------------------------------------------
Southern Pacific Funding Corp.,
Liquidating Trust 1,10                  251,604              --
- ----------------------------------------------------------------
Sterling Chemicals, Inc. 5                  380           9,975
- ----------------------------------------------------------------
TVMAX Holdings, Inc. 1,5                  7,500          18,750
- ----------------------------------------------------------------
UnitedGlobalCom, Inc., Cl. A 5          112,362         952,830
- ----------------------------------------------------------------
Viatel Holding Ltd. (Bermuda) 1,5         2,349           5,168
- ----------------------------------------------------------------
WRC Media Corp. 1,5                       1,353              27
- ----------------------------------------------------------------
XO Communications, Inc. 5                 2,646          15,215
                                                  --------------
Total Common Stocks
(Cost $5,822,865)                                     5,288,466

                                          UNITS
- ----------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.1%
American Tower Corp. Wts.,
Exp. 8/1/08 1,5                           1,400         175,700

                                                   MARKET VALUE
                                          UNITS      SEE NOTE 1
- ----------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES Continued
ASAT Finance LLC Wts.,
Exp. 11/1/06 1,5                            500   $         563
- ----------------------------------------------------------------
Chesapeake Energy Corp. Wts.,
Exp. 9/1/04 5                             2,671             298
- ----------------------------------------------------------------
Citigroup, Inc. Litigation Wts., Exp.
12/31/50 5                               15,626          16,564
- ----------------------------------------------------------------
COLO.com, Inc. Wts., Exp. 3/15/10 1,5       600               6
- ----------------------------------------------------------------
Concentric Network Corp.
Wts., Exp. 12/15/07 1,5                     750              --
- ----------------------------------------------------------------
Covergent Communications, Inc.
Wts., Exp. 4/1/08 1,5                     2,000              20
- ----------------------------------------------------------------
Decrane Aircraft Holdings, Inc.
Wts., Exp. 9/30/08 1,5                    1,750              --
- ----------------------------------------------------------------
Diva Systems Corp. Wts., Exp. 3/1/08 1,5  1,500              15
- ----------------------------------------------------------------
e.spire Communications, Inc. Wts.,
Exp. 11/1/05 1,5                            475               5
- ----------------------------------------------------------------
Horizon PCS, Inc. Wts., Exp. 10/1/10 1,5  1,300              --
- ----------------------------------------------------------------
ICG Communications, Inc. Wts.,
Exp. 9/15/05 1,5                          5,940              59
- ----------------------------------------------------------------
ICO Global Communication
Holdings Ltd. Wts.:
Exp. 5/16/06 1,5                         10,561              53
Exp. 5/16/06 1,5                             16              --
- ----------------------------------------------------------------
Imperial Credit Industries, Inc.
Wts., Exp. 1/31/08 1,5                    5,148              --
- ----------------------------------------------------------------
Insilco Corp. Wts., Exp. 8/15/07 1,5        765              --
- ----------------------------------------------------------------
IPCS, Inc. Wts., Exp. 6/15/10 1,5           750               8
- ----------------------------------------------------------------
Leap Wireless International, Inc.
Wts., Exp. 4/15/10 1,5                      550              --
- ----------------------------------------------------------------
Long Distance International, Inc.
Wts., Exp. 4/13/08 1,5                      800              --
- ----------------------------------------------------------------
Loral Space & Communications Ltd.
Wts., Exp. 1/15/07 1,5                      800               8
- ----------------------------------------------------------------
McLeodUSA, Inc. Wts., Exp. 4/16/07 5      7,220           3,682
- ----------------------------------------------------------------
Microcell Telecommunications, Inc.:
Cl. A Wts., Exp. 5/1/05 5                   687           1,047
Cl. B Wts., Exp. 5/1/08 5                 1,145           2,437
- ----------------------------------------------------------------
Millenium Seacarriers, Inc. Wts.,
Exp. 7/15/05 1,5                          1,500              15
- ----------------------------------------------------------------
Ntelos, Inc. Wts., Exp. 8/15/10 1,5       1,000             500
- ----------------------------------------------------------------
Pathmark Stores, Inc. Wts.,
Exp. 9/19/10 5                           20,000          18,800
- ----------------------------------------------------------------
Protection One, Inc.
Wts., Exp. 6/30/05 1,5                    1,600              --
- ----------------------------------------------------------------
Real Time Data Co. Wts.,
Exp. 5/31/04 1,5                        121,440              --
- ----------------------------------------------------------------
Republic Technologies International
LLC Wts., Exp. 7/15/09 1,5                  500              --
- ----------------------------------------------------------------
Sterling Chemicals, Inc. Wts.,
Exp. 12/19/08 1,5                           619              --


STATEMENT OF INVESTMENTS  CONTINUED
- ----------------------------------------------------------------
                                                   MARKET VALUE
                                          UNITS      SEE NOTE 1
- ----------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES Continued
Telergy, Inc. Wts., Exp. 9/25/10 1,5      2,019   $          --
- ----------------------------------------------------------------
Telus Corp. Wts., Exp. 9/15/05 5          1,079           8,816
- ----------------------------------------------------------------
Transocean, Inc. Wts., Exp. 5/1/09 3,5    1,000         190,125
- ----------------------------------------------------------------
XO Communications, Inc.:
Cl. A Wts., Exp. 1/16/10 5                5,300          10,335
Cl. B Wts., Exp. 1/16/10 5                3,975           6,758
Cl. C Wts., Exp. 1/16/10 5                3,975           4,373
                                                  --------------
Total Rights, Warrants and
Certificates (Cost $173,416)                            440,187

                                      PRINCIPAL
                                         AMOUNT
- ----------------------------------------------------------------
STRUCTURED NOTES--6.6%
Bear Stearns Cos., Inc. (The),
High Yield Index Linked Nts.:
5%, 3/11/04                         $ 3,000,000       3,162,600
8.65%, 5/31/04                        3,000,000       3,066,900
- ----------------------------------------------------------------
JPMorgan Chase Bank,
TRAC-X NA High Yield T3 Credit
Default Swap Bonds, 8%, 3/25/09 3    28,900,000      30,308,875
                                                  --------------
Total Structured Notes (Cost $34,900,000)            36,538,375


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--14.1% 12
Undivided interest of 4.91% in joint
repurchase agreement (Principal
Amount/Market Value $1,603,898,000, with
a maturity value of $1,603,979,086) with
PaineWebber, Inc., 0.91%, dated
12/31/03, to be repurchased at
$78,700,979 on 1/2/04, collateralized by
Federal Home Loan Mortgage Corp.,
5%--5.50%, 9/1/33--11/1/33, with a value
of $405,980,626 and Federal National
Mortgage Assn., 4.50%, 10/1/33, with a
value of $1,234,398,060
(Cost $78,697,000)                  $78,697,000    $ 78,697,000

- ----------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $525,931,260)                        98.1%    545,903,542
- ----------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES             1.9      10,561,839
                                    ----------------------------
NET ASSETS                                100.0%   $556,465,381
                                    ============================

FOOTNOTES TO STATEMENT OF INVESTMENTS
Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
EUR   Euro
GBP   British Pound Sterling

1. Identifies issues considered to be illiquid or restricted. See Note 7 of
Notes to Financial Statements.
2. Represents the current interest rate for a variable or increasing rate
security.
3. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities
have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $105,538,588 or 18.97% of the Fund's net
assets as of December 31, 2003.
4. Issue is in default. See Note 1 of Notes to Financial Statements.
5. Non-income producing security.
6. Denotes a step bond: a zero coupon bond that converts to a fixed or
variable
interest rate at a designated future date.
7. Interest or dividend is paid-in-kind.
8. Units may be comprised of several components, such as debt and equity
and/or
warrants to purchase equity at some point in the future. For units, which
represent debt securities, principal amount disclosed represents total
underlying principal.
9. Zero coupon bond reflects effective yield on the date of purchase.
10. Received as the result of issuer reorganization. Currently has minimal
market value.
11. Securities with an aggregate market value of $243,100 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
12. 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, 2003
- --------------------------------------------------------------------------------


ASSETS

Investments, at value (including cost and market value of $78,697,000 in
repurchase agreements)
(including securities loaned of approximately $2,143,000) (cost
$525,931,260)--see accompanying statement   $ 545,903,542
- --------------------------------------------------------------------------------------------------------------------------
Cash

665,365
- --------------------------------------------------------------------------------------------------------------------------
Collateral for securities loaned

2,164,744
- --------------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal
paydowns
8,962,318
Shares of beneficial interest
sold
1,660,275
Futures margins

906
Other
4,827


- --------------
Total
assets
559,361,977

- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Return of collateral for securities
loaned
2,164,744
- --------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest
redeemed
621,566
Distribution and service plan
fees
40,110
Shareholder
reports
29,620
Trustees' compensation

3,596
Transfer and shareholder servicing agent
fees
1,664
Other
                                                              35,296

- --------------
Total
liabilities
2,896,596

- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS

$ 556,465,381

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

- --------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Par value of shares of beneficial
interest
$      64,644
- --------------------------------------------------------------------------------------------------------------------------
Additional paid-in
capital
612,593,582
- --------------------------------------------------------------------------------------------------------------------------
Accumulated net investment
income
33,660,739
- --------------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency
transactions                               (109,833,855)
- --------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated
in foreign
currencies
                            19,980,271

- --------------
NET
ASSETS
               $ 556,465,381

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

- --------------------------------------------------------------------------------------------------------------------------
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 $480,111,635
and 55,747,289 shares of beneficial interest
outstanding)                                                           $8.61
- --------------------------------------------------------------------------------------------------------------------------
Service shares:
Net asset value, redemption price per share and offering price per share
(based
on net assets of $76,353,746
and 8,896,395 shares of beneficial interest
outstanding)                                                            $8.58


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENT OF OPERATIONS  FOR THE YEAR ENDED DECEMBER 31, 2003
- --------------------------------------------------------------------------------




- ------------------------------------------------------------------------------------------------------
INVESTMENT INCOME

Interest
$39,300,227
- ------------------------------------------------------------------------------------------------------
Dividends
296,800
- ------------------------------------------------------------------------------------------------------
Portfolio lending
fees
40,956

- ------------
Total investment
income
39,637,983

- ------------------------------------------------------------------------------------------------------
EXPENSES
Management fees
                                 3,196,862
- ------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Service
shares                                            102,739
- ------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service
shares
10,394
Service
shares
10,845
- ------------------------------------------------------------------------------------------------------
Shareholder reports
                                        48,921
- ------------------------------------------------------------------------------------------------------
Trustees'
compensation
17,679
- ------------------------------------------------------------------------------------------------------
Custodian fees and
expenses
8,998
- ------------------------------------------------------------------------------------------------------
Other
45,981

- ------------
Total
expenses
3,442,419
Less reduction to custodian
expenses                                                           (2,707)

                                    ------------
Net
expenses
3,439,712


- ------------------------------------------------------------------------------------------------------
NET INVESTMENT
INCOME
36,198,271

- ------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments
(7,092,371)
Closing of futures
contracts
(142,823)
Foreign currency
transactions
3,861,537

- ------------
Net realized loss
                      (3,373,657)
- ------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments
                             59,477,154
Translation of assets and liabilities denominated in foreign
currencies                       892,393
Futures
contracts
(104,277)
- ------------
Net change in unrealized appreciation
(depreciation)                                       60,265,270

- ------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS                                      $93,089,884

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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENTS OF CHANGES IN NET ASSETS

- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------

NON-SERVICE SHARES    YEAR ENDED DECEMBER 31                   2003
2002          2001          2000        1999
- ---------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA

Net asset value, beginning of period                          $7.51
$8.54         $9.27        $10.72      $11.02
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                           .60
..58           .84          1.00        1.01
Net realized and unrealized gain (loss)                        1.09
(.76)         (.62)        (1.36)       (.55)

- -------------------------------------------------------------
Total from investment operations                               1.69
(.18)          .22          (.36)        .46
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                           (.59)
(.85)         (.95)        (1.09)       (.76)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                                $8.61
$7.51         $8.54        $ 9.27      $10.72

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

- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1                            23.96%
(2.40)%        1.97%        (3.74)%      4.29%

- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)                   $480,112
$345,670      $344,788      $333,533    $340,829
- ---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                          $396,858
$335,894      $347,723      $329,260    $340,519
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                                          8.31%
8.29%         9.94%        10.47%       9.61%
Total expenses                                                 0.76% 3
0.77% 3       0.79% 3       0.79% 3     0.75% 3
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
48%           75%           46%           31%         33%


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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.


OPPENHEIMER HIGH INCOME FUND/VA


SERVICE SHARES    YEAR ENDED DECEMBER 31                   2003
2002          2001 1
- --------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA

Net asset value, beginning of period                      $7.49       $
8.54         $8.40
- --------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                       .61
..88           .20
Net realized and unrealized gain (loss)                    1.06
(1.08)         (.06)

- ----------------------------------
Total from investment operations                           1.67
(.20)          .14
- --------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                       (.58)
(.85)           --
- --------------------------------------------------------------------------------------------
Net asset value, end of period                            $8.58       $
7.49         $8.54

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

- --------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                        23.79%
(2.67)%        1.67%

- --------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)                $76,354
$17,705            $3
- --------------------------------------------------------------------------------------------
Average net assets (in thousands)                       $41,246      $
5,602            $2
- --------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                      7.84%
8.91%        12.51%
Total expenses                                             1.04% 4      1.02%
4,5     0.96% 4
- --------------------------------------------------------------------------------------------
Portfolio turnover rate                                      48%
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, 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.

- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER
31,
2003            2002
- ----------------------------------------------------------------------------------------------------------------
OPERATIONS

Net investment
income                                                              $
36,198,271    $ 28,331,405
- ----------------------------------------------------------------------------------------------------------------
Net realized loss
                                                      (3,373,657)
(54,882,881)
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
                        60,265,270      18,653,181

- -----------------------------
Net increase (decrease) in net assets resulting from
operations                      93,089,884      (7,898,295)

- ----------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Non-Service shares
                                                (26,819,814)    (35,408,403)
Service
shares
(1,672,018)           (306)

- ----------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from beneficial interest transactions:
Non-Service
shares
76,658,765      44,572,082
Service
shares
51,833,851      17,318,687

- ----------------------------------------------------------------------------------------------------------------
NET ASSETS
Total
increase
193,090,668      18,583,765
- ----------------------------------------------------------------------------------------------------------------
Beginning of period
                                               363,374,713     344,790,948

- -----------------------------
End of period [including accumulated net investment
income of $33,660,739 and $25,973,552,
respectively]                               $556,465,381    $363,374,713

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



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 with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. 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. Securities traded on NASDAQ are valued based on the closing price
provided by NASDAQ 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. Securities whose values have been
materially affected by what the Manager identifies as a significant event
occurring before the Fund's assets are valued but after the close of their
respective foreign exchanges will be fair valued. Fair value is determined in
good faith using 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, increasing 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, 2003, the market value of these securities comprised 6.6% of the
Fund's net assets and resulted in unrealized gains of $1,638,375. The Fund
also
hedges a portion of the foreign currency exposure generated by these
securities,
as discussed in Note 5.

- --------------------------------------------------------------------------------
SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be
subject to a greater degree of credit risk, market fluctuations and 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, 2003, securities with an
aggregate market value of $10,090,218, representing 1.81% of the Fund's net
assets, were in default.

- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records 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. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated
funds
advised by the Manager, may transfer uninvested cash balances into joint
trading
accounts on a daily basis. Secured by U.S. government securities, these
balances
are invested in one or more repurchase agreements. 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. 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 on a
daily basis 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 comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders.

The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses
the
Fund may be able to offset against income and gains realized in future years
and
unrealized appreciation or depreciation of securities and other investments
for
federal income tax purposes.
                                                                NET UNREALIZED
                                                                  APPRECIATION
                                                              BASED ON COST OF
                                                                SECURITIES AND
  UNDISTRIBUTED     UNDISTRIBUTED           ACCUMULATED      OTHER INVESTMENTS
  NET INVESTMENT        LONG-TERM                  LOSS     FOR FEDERAL INCOME
  INCOME                     GAIN    CARRYFORWARD 1,2,3           TAX PURPOSES
  ----------------------------------------------------------------------------
  $34,835,883                 $--          $107,217,947
$17,364,325

1. As of December 31, 2003, the Fund had $107,195,065 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of December 31, 2003,
details of the capital loss carryforwards were as follows:

                              EXPIRING
                              -------------------------
                              2006         $  3,401,577
                              2007            4,933,260
                              2008           11,572,833
                              2009           22,696,701
                              2010           56,061,391
                              2011            8,529,303
                                           ------------
                              Total        $107,195,065
                                           ============

2. During the fiscal years ended December 31, 2003 and December 31, 2002, the
Fund did not utilize any capital loss carryforwards.
3. As of December 31, 2003, the Fund had $22,882 of post-October losses
available to offset future realized capital gains, if any. Such losses, if
unutilized, will expire in 2012.

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. Accordingly,
the
following amounts have been reclassified for December 31, 2003. Net assets of
the Fund were unaffected by the reclassifications.

NOTES TO FINANCIAL STATEMENTS  CONTINUED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued

                 REDUCTION TO                      REDUCTION TO
                 ACCUMULATED NET       ACCUMULATED NET REALIZED
                 INVESTMENT INCOME          LOSS ON INVESTMENTS
                 ----------------------------------------------
                 $19,252                                $19,252

The tax character of distributions paid during the years ended December 31,
2003
and December 31, 2002 was as follows:

                                           YEAR ENDED              YEAR ENDED
                                    DECEMBER 31, 2003       DECEMBER 31, 2002
    -------------------------------------------------------------------------
    Distributions paid from:
    Ordinary income                       $28,491,832             $35,408,709

The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments
for
federal income tax purposes as of December 31, 2003 are noted below. The
primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of
losses
or tax realization of financial statement unrealized gain or loss.

                 Federal tax cost of securities             $528,541,326
                 Federal tax cost of other investments           782,016
                                                            ------------
                 Total federal tax cost                     $529,323,342
                                                            ============

                 Gross unrealized appreciation              $ 42,939,083
                 Gross unrealized depreciation               (25,574,758)
                                                            ------------
                 Net unrealized appreciation                $ 17,364,325
                                                            ============

- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. Under the plan, deferred amounts are treated as
though
equal dollar amounts had been invested in shares of the Fund or are invested
in
other Oppenheimer funds selected by the Trustee. Deferral of trustees' fees
under the plan will not affect the net assets of the Fund, and will not
materially affect the Fund's assets, liabilities or net investment income per
share. Amounts will be deferred until distributed in accordance to the Plan.

- --------------------------------------------------------------------------------
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. Income and capital gain distributions,
if
any, are declared and paid annually.

- --------------------------------------------------------------------------------
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.

- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
represents earnings on cash balances maintained by the Fund.

- --------------------------------------------------------------------------------
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,
2003          YEAR ENDED DECEMBER 31, 2002
                                                  SHARES
AMOUNT              SHARES            AMOUNT
- -----------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES

Sold                                          28,774,062     $
229,684,313          22,935,486     $ 176,263,288
Dividends and/or distributions reinvested      3,719,807
26,819,814           4,568,826        35,408,403
Redeemed                                     (22,801,608)
(179,845,362)        (21,816,082)     (167,099,609)

- --------------------------------------------------------------------
Net increase                                   9,692,261     $
76,658,765           5,688,230     $  44,572,082

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

- -----------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold                                          13,073,333     $
104,602,083           2,741,181     $  20,012,961
Dividends and/or distributions reinvested        232,224
1,672,018                  39               306
Redeemed                                      (6,772,325)
(54,440,250)           (378,418)       (2,694,580)

- --------------------------------------------------------------------
Net increase                                   6,533,232     $
51,833,851           2,362,802     $  17,318,687

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




- --------------------------------------------------------------------------------
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, 2003, were
$259,809,157 and $176,211,604, respectively.


- --------------------------------------------------------------------------------
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 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, 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 per account fee. For the year ended December 31, 2003, the Fund paid
$20,025 to OFS for services to the Fund.
   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. Fees incurred by the Fund under the plan are detailed in the
Statement
of Investments.

NOTES TO FINANCIAL STATEMENTS  CONTINUED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into
foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from 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
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
   As of December 31, 2003, the Fund had no outstanding foreign currency
contracts.


- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. 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 protection from 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 as a 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 has expired.
   Cash held by the broker to cover initial margin requirements on open
futures
contracts is noted in the Statement of Assets and Liabilities. 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. The net change in
unrealized appreciation and depreciation is reported on the Statement of
Operations.
   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, 2003, the Fund had outstanding futures contracts as
follows:



                            EXPIRATION    NUMBER OF      VALUATION AS OF
UNREALIZED
CONTRACT DESCRIPTION             DATES    CONTRACTS    DECEMBER 31, 2003
APPRECIATION
- ---------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE

U.S. Treasury Nts., 5 yr.      3/22/04            6
$669,750        $3,681
U.S. Treasury Nts., 10 yr.     3/22/04            1
112,266         2,199

- ------

                               $5,880

======

- --------------------------------------------------------------------------------
7. ILLIQUID OR RESTRICTED SECURITIES
As of December 31, 2003, investments in securities included issues that are
illiquid or restricted. Restricted securities are 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, 2003 was $41,523,423,
which represents 7.50% 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,
2003    DEPRECIATION
- --------------------------------------------------------------------------------

STOCKS AND/OR WARRANTS
Geotek Communications, Inc.,
Liquidating Trust                    4/6/00     $   --
$--          $   --
Real Time Data Co. Wts.             6/30/99      1,214
- --           1,214
- --------------------------------------------------------------------------------
8. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of US
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities
loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the
collateral.
Cash collateral is invested in cash equivalents. As of December 31, 2003, the
Fund had on loan securities valued at approximately $2,143,000. Cash of
$2,164,744 was received as collateral for the loans, and has been invested in
approved instruments.
- --------------------------------------------------------------------------------
9. BORROWING AND LENDING ARRANGEMENTS
The Fund entered into an "interfund borrowing and lending arrangement" with
other funds in the Oppenheimer funds complex, to allow funds to borrow for
liquidity purposes. The arrangement was initiated pursuant to exemptive relief
granted by the Securities and Exchange Commission (the SEC) to allow these
affiliated funds to lend money to, and borrow money from, each other, in an
attempt to reduce borrowing costs below those of bank loan facilities. The
SEC's
order requires the Fund's Board of Trustees to adopt operating policies and
procedures to administer interfund borrowing and lending. Under the
arrangement
the Fund may lend money to other Oppenheimer funds and may borrow from other
Oppenheimer funds at a rate set by the Fund's Board of Trustees, based upon a
recommendation by the Manager. The Fund's borrowings, if any, are subject to
asset coverage requirements under the Investment Company Act and the
provisions
of the SEC order and other applicable regulations. If the Fund borrows money,
there is a risk that the loan could be called on one day's notice, in which
case
the Fund might have to borrow from a bank at higher rates if a loan were not
available from another Oppenheimer fund. If the Fund lends money to another
fund, it will be subject to the risk that the other fund might not repay the
loan in a timely manner, or at all.
   The Fund had no interfund borrowings or loans outstanding during the year
ended or at December 31, 2003.

EX-99.K

OPPENHEIMER MAIN STREET FUND/VA

INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER MAIN STREET FUND/VA:

     We have audited the  accompanying  statement of assets and  liabilities  of
Oppenheimer Main Street Fund/VA, a series of Oppenheimer Variable Account Funds,
including the statement of investments, as of December 31, 2003, 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, 2003, 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  Fund/VA as of December  31,  2003,  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
 February 12, 2004

OPPENHEIMER MAIN STREET FUND/VA

STATEMENT OF INVESTMENTS  DECEMBER 31, 2003
- -------------------------------------------------------------------------------

                                                                   MARKET
VALUE
                                                      SHARES         SEE NOTE
1
- --------------------------------------------------------------------------------
 COMMON STOCKS--98.3%
- --------------------------------------------------------------------------------
 CONSUMER DISCRETIONARY--16.3%
- --------------------------------------------------------------------------------
 AUTO COMPONENTS--0.7%
 Aftermarket Technology Corp. 1                        6,100    $
83,692
- --------------------------------------------------------------------------------
 American Axle & Manufacturing
 Holdings, Inc. 1                                     60,300
2,437,326
- --------------------------------------------------------------------------------
 ArvinMeritor, Inc.                                   14,600
352,152
- --------------------------------------------------------------------------------
 Autoliv, Inc.                                         3,700
139,305
- --------------------------------------------------------------------------------
 Dana Corp.                                          137,200
2,517,620
- --------------------------------------------------------------------------------
 Delphi Corp.                                         96,100
981,181
- --------------------------------------------------------------------------------
 Goodyear Tire & Rubber Co. 1                         10,600
83,316
- --------------------------------------------------------------------------------
 Johnson Controls, Inc.                               19,700
2,287,564
- --------------------------------------------------------------------------------
 Lear Corp. 1                                         11,000
674,630
- --------------------------------------------------------------------------------
 Visteon Corp.                                        35,700
371,637

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

9,928,423

- --------------------------------------------------------------------------------
 AUTOMOBILES--1.0%
 Ford Motor Co.                                      694,115
11,105,840
- --------------------------------------------------------------------------------
 Harley-Davidson, Inc.                                42,900
2,039,037
- --------------------------------------------------------------------------------
 Thor Industries, Inc.                                 3,900
219,258

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

13,364,135


- --------------------------------------------------------------------------------
 HOTELS, RESTAURANTS & LEISURE--1.6%
 Alliance Gaming Corp. 1                              17,700
436,305
- --------------------------------------------------------------------------------
 Applebee's International, Inc.                       22,000
863,940
- --------------------------------------------------------------------------------
 Aztar Corp. 1                                         3,800
85,500
- --------------------------------------------------------------------------------
 Brinker International, Inc. 1                        90,000
2,984,400
- --------------------------------------------------------------------------------
 CBRL Group, Inc.                                     38,700
1,480,662
- --------------------------------------------------------------------------------
 CEC Entertainment, Inc. 1                            27,200
1,289,008
- --------------------------------------------------------------------------------
 Choice Hotels International, Inc. 1                   2,800
98,700
- --------------------------------------------------------------------------------
 GTech Holdings Corp.                                 20,200
999,698
- --------------------------------------------------------------------------------
 Harrah's Entertainment, Inc.                         24,900
1,239,273
- --------------------------------------------------------------------------------
 McDonald's Corp.                                    145,450
3,611,524
- --------------------------------------------------------------------------------
 Multimedia Games, Inc. 1                              9,500
390,450
- --------------------------------------------------------------------------------
 Outback Steakhouse, Inc.                             33,700
1,489,877
- --------------------------------------------------------------------------------
 P.F. Chang's China Bistro, Inc. 1                     8,700
442,656
- --------------------------------------------------------------------------------
 Panera Bread Co., Cl. A 1                            16,100
636,433
- --------------------------------------------------------------------------------
 Park Place Entertainment Corp. 1                     10,900
118,047
- --------------------------------------------------------------------------------
 Rare Hospitality International, Inc. 1               22,600
552,344
- --------------------------------------------------------------------------------
 Ruby Tuesday, Inc.                                   83,200
2,370,368
- --------------------------------------------------------------------------------
 Ryan's Family Steak Houses, Inc. 1                    8,750
132,475
- --------------------------------------------------------------------------------
 Starbucks Corp. 1                                    13,200
436,392
- --------------------------------------------------------------------------------
 Station Casinos, Inc.                                 6,900
211,347
- --------------------------------------------------------------------------------
 WMS Industries, Inc. 1                                2,700
70,740
- --------------------------------------------------------------------------------
 Yum! Brands, Inc. 1                                  78,400
2,696,960

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

22,637,099


                                                                   MARKET
VALUE
                                                      SHARES         SEE NOTE
1
- --------------------------------------------------------------------------------
 HOUSEHOLD DURABLES--2.9%
 Beazer Homes USA, Inc.                               28,000    $
2,734,480
- --------------------------------------------------------------------------------
 Cavco Industries, Inc. 1                              1,015
24,360
- --------------------------------------------------------------------------------
 Centex Corp.                                         41,900
4,510,535
- --------------------------------------------------------------------------------
 D.R. Horton, Inc.                                    49,300
2,132,718
- --------------------------------------------------------------------------------
 Harman International Industries, Inc.                36,600
2,707,668
- --------------------------------------------------------------------------------
 Hovnanian Enterprises, Inc., Cl. A 1                 27,400
2,385,444
- --------------------------------------------------------------------------------
 KB Home                                              50,000
3,626,000
- --------------------------------------------------------------------------------
 Lennar Corp.                                         34,700
3,331,200
- --------------------------------------------------------------------------------
 Lennar Corp., Cl. B                                   4,580
418,612
- --------------------------------------------------------------------------------
 M.D.C. Holdings, Inc.                                19,430
1,253,235
- --------------------------------------------------------------------------------
 Meritage Corp. 1                                      5,300
351,443
- --------------------------------------------------------------------------------
 Newell Rubbermaid, Inc.                              36,400
828,828
- --------------------------------------------------------------------------------
 NVR, Inc. 1                                           2,800
1,304,800
- --------------------------------------------------------------------------------
 Pulte Homes, Inc.                                    31,344
2,934,425
- --------------------------------------------------------------------------------
 Ryland Group, Inc. (The)                             57,000
5,052,480
- --------------------------------------------------------------------------------
 Standard Pacific Corp.                               41,300
2,005,115
- --------------------------------------------------------------------------------
 Toll Brothers, Inc. 1                                52,400
2,083,424
- --------------------------------------------------------------------------------
 Whirlpool Corp.                                      30,800
2,237,620
- --------------------------------------------------------------------------------
 Yankee Candle, Inc. (The) 1                          17,500
478,275

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

40,400,662


- --------------------------------------------------------------------------------
 LEISURE EQUIPMENT & PRODUCTS--1.1%
 Action Performance Cos., Inc.                        37,700
738,920
- --------------------------------------------------------------------------------
 Brunswick Corp.                                      27,300
868,959
- --------------------------------------------------------------------------------
 Eastman Kodak Co.                                   139,100
3,570,697
- --------------------------------------------------------------------------------
 Hasbro, Inc.                                        134,100
2,853,648
- --------------------------------------------------------------------------------
 Marvel Enterprises, Inc. 1                           95,700
2,785,827
- --------------------------------------------------------------------------------
 Mattel, Inc.                                        197,700
3,809,679
- --------------------------------------------------------------------------------
 Polaris Industries, Inc.                              1,400
124,012

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

14,751,742


- --------------------------------------------------------------------------------
 MEDIA--2.8%
 Cablevision Systems New York Group,
 Cl. A 1                                              57,100
1,335,569
- --------------------------------------------------------------------------------
 Charter Communications, Inc., Cl. A 1                22,100
88,842
- --------------------------------------------------------------------------------
 Clear Channel Communications, Inc.                   14,200
664,986
- --------------------------------------------------------------------------------
 Comcast Corp., Cl. A 1                              383,315
12,599,564
- --------------------------------------------------------------------------------
 Cox Communications, Inc., Cl. A 1                    26,400
909,480
- --------------------------------------------------------------------------------
 EchoStar Communications Corp., Cl. A 1               78,700
2,675,800
- --------------------------------------------------------------------------------
 McGraw-Hill Cos., Inc. (The)                          3,400
237,728
- --------------------------------------------------------------------------------
 Metro-Goldwyn-Mayer, Inc. 1                          14,800
252,932
- --------------------------------------------------------------------------------
 New York Times Co., Cl. A                             6,100
291,519
- --------------------------------------------------------------------------------
 News Corp. Ltd. (The), Sponsored
 ADR, Preference                                          82
2,481
- --------------------------------------------------------------------------------
 Time Warner, Inc. 1                                 251,700
4,528,083
- --------------------------------------------------------------------------------
 TiVo, Inc. 1                                         22,800
168,720


STATEMENT OF INVESTMENTS  CONTINUED
- --------------------------------------------------------------------------------

                                                                   MARKET
VALUE
                                                      SHARES         SEE NOTE
1
- --------------------------------------------------------------------------------
 MEDIA Continued
 Viacom, Inc., Cl. B                                 273,330    $
12,130,385
- --------------------------------------------------------------------------------
 Walt Disney Co. (The)                               113,500
2,647,955

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

38,534,044


- --------------------------------------------------------------------------------
 MULTILINE RETAIL--0.7%
 Big Lots, Inc. 1                                     12,000
170,520
- --------------------------------------------------------------------------------
 Dollar General Corp.                                 62,200
1,305,578
- --------------------------------------------------------------------------------
 Dollar Tree Stores, Inc. 1                           18,300
550,098
- --------------------------------------------------------------------------------
 Federated Department Stores, Inc.                    66,600
3,138,858
- --------------------------------------------------------------------------------
 Neiman Marcus Group, Inc.
 (The), Cl. A 1                                        1,900
101,973
- --------------------------------------------------------------------------------
 Sears Roebuck & Co.                                  97,900
4,453,471
- --------------------------------------------------------------------------------
 Shopko Stores, Inc. 1                                 1,900
28,975

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

9,749,473


- --------------------------------------------------------------------------------
 SPECIALTY RETAIL--4.8%
 Abercrombie & Fitch Co., Cl. A 1                    100,100
2,473,471
- --------------------------------------------------------------------------------
 Advance Auto Parts, Inc. 1                            5,900
480,260
- --------------------------------------------------------------------------------
 Aeropostale, Inc. 1                                  40,100
1,099,542
- --------------------------------------------------------------------------------
 AutoNation, Inc. 1                                   57,500
1,056,275
- --------------------------------------------------------------------------------
 AutoZone, Inc. 1                                     22,200
1,891,662
- --------------------------------------------------------------------------------
 Bed Bath & Beyond, Inc. 1                            65,200
2,826,420
- --------------------------------------------------------------------------------
 Best Buy Co., Inc.                                   74,300
3,881,432
- --------------------------------------------------------------------------------
 Borders Group, Inc. 1                                24,000
526,080
- --------------------------------------------------------------------------------
 Chico's FAS, Inc. 1                                  31,300
1,156,535
- --------------------------------------------------------------------------------
 Christopher & Banks Corp.                            44,200
863,226
- --------------------------------------------------------------------------------
 Claire's Stores, Inc.                                53,800
1,013,592
- --------------------------------------------------------------------------------
 Electronics Boutique Holdings Corp. 1                 3,300
75,537
- --------------------------------------------------------------------------------
 Foot Locker, Inc.                                    15,400
361,130
- --------------------------------------------------------------------------------
 Gap, Inc. (The)                                     382,900
8,887,109
- --------------------------------------------------------------------------------
 Hollywood Entertainment Corp. 1                      25,100
345,125
- --------------------------------------------------------------------------------
 Home Depot, Inc.                                    349,200
12,393,108
- --------------------------------------------------------------------------------
 Hot Topic, Inc. 1                                    48,900
1,440,594
- --------------------------------------------------------------------------------
 Lowe's Cos., Inc.                                    97,000
5,372,830
- --------------------------------------------------------------------------------
 Men's Wearhouse, Inc. (The) 1                        10,800
270,108
- --------------------------------------------------------------------------------
 Movie Gallery, Inc. 1                                 2,300
42,964
- --------------------------------------------------------------------------------
 NetFlix.com, Inc. 1                                  37,400
2,045,406
- --------------------------------------------------------------------------------
 Pacific Sunwear of California, Inc.                  79,475
1,678,512
- --------------------------------------------------------------------------------
 Pier 1 Imports, Inc.                                 20,718
452,895
- --------------------------------------------------------------------------------
 RadioShack Corp.                                     90,600
2,779,608
- --------------------------------------------------------------------------------
 Regis Corp.                                           5,000
197,600
- --------------------------------------------------------------------------------
 Rent-A-Center, Inc. 1                                 6,300
188,244
- --------------------------------------------------------------------------------
 Ross Stores, Inc.                                    50,700
1,340,001
- --------------------------------------------------------------------------------
 Select Comfort Corp. 1                                4,600
113,896
- --------------------------------------------------------------------------------
 Sherwin-Williams Co.                                  8,600
298,764
- --------------------------------------------------------------------------------
 Staples, Inc. 1                                     214,100
5,844,930



                                                                   MARKET
VALUE
                                                      SHARES         SEE NOTE
1
- --------------------------------------------------------------------------------
 SPECIALTY RETAIL Continued
 Talbots, Inc. (The)                                  42,800    $
1,317,384
- --------------------------------------------------------------------------------
 TJX Cos., Inc. (The)                                129,900
2,864,295
- --------------------------------------------------------------------------------
 Tractor Supply Co. 1                                  2,700
105,003
- --------------------------------------------------------------------------------
 Zale Corp. 1                                         12,100
643,720

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

66,327,258

- --------------------------------------------------------------------------------
 TEXTILES, APPAREL & LUXURY GOODS--0.7%
 Coach, Inc. 1                                       109,200
4,122,300
- --------------------------------------------------------------------------------
 Columbia Sportswear Co. 1                            10,800
588,600
- --------------------------------------------------------------------------------
 Kellwood Co.                                          3,000
123,000
- --------------------------------------------------------------------------------
 Liz Claiborne, Inc.                                  25,700
911,322
- --------------------------------------------------------------------------------
 Nike, Inc., Cl. B                                    12,500
855,750
- --------------------------------------------------------------------------------
 Timberland Co., Cl. A 1                              41,500
2,160,905
- --------------------------------------------------------------------------------
 Tommy Hilfiger Corp. 1                                8,000
118,480
- --------------------------------------------------------------------------------
 VF Corp.                                              6,000
259,440

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

9,139,797

- --------------------------------------------------------------------------------
 CONSUMER STAPLES--8.2%
- --------------------------------------------------------------------------------
 BEVERAGES--2.3%
 Anheuser-Busch Cos., Inc.                            74,500
3,924,660
- --------------------------------------------------------------------------------
 Coca-Cola Co. (The)                                 215,600
10,941,700
- --------------------------------------------------------------------------------
 Pepsi Bottling Group, Inc. (The)                     33,300
805,194
- --------------------------------------------------------------------------------
 PepsiAmericas, Inc.                                   2,600
44,512
- --------------------------------------------------------------------------------
 PepsiCo, Inc.                                       330,650
15,414,903

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

31,130,969

- --------------------------------------------------------------------------------
 FOOD & STAPLES RETAILING--1.8%
 CVS Corp.                                             6,600
238,392
- --------------------------------------------------------------------------------
 Kroger Co. (The) 1                                   83,900
1,552,989
- --------------------------------------------------------------------------------
 Rite Aid Corp. 1                                     72,300
436,692
- --------------------------------------------------------------------------------
 SUPERVALU, Inc.                                       9,600
274,464
- --------------------------------------------------------------------------------
 Sysco Corp.                                          24,100
897,243
- --------------------------------------------------------------------------------
 Wal-Mart Stores, Inc.                               393,600
20,880,480
- --------------------------------------------------------------------------------
 Winn-Dixie Stores, Inc.                             100,800
1,002,960

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

25,283,220

- --------------------------------------------------------------------------------
 FOOD PRODUCTS--1.3%
 American Italian Pasta Co. 1                          3,900
163,410
- --------------------------------------------------------------------------------
 Campbell Soup Co.                                   198,500
5,319,800
- --------------------------------------------------------------------------------
 Dean Foods Co. 1                                     34,950
1,148,807
- --------------------------------------------------------------------------------
 Del Monte Foods Co. 1                                20,000
208,000
- --------------------------------------------------------------------------------
 Fresh Del Monte Produce, Inc.                        19,600
467,068
- --------------------------------------------------------------------------------
 Heinz (H.J.) Co.                                     16,200
590,166
- --------------------------------------------------------------------------------
 Hershey Foods Corp.                                  24,300
1,870,857
- --------------------------------------------------------------------------------
 Kellogg Co.                                          39,800
1,515,584
- --------------------------------------------------------------------------------
 Kraft Foods, Inc., Cl. A                            155,200
5,000,544
- --------------------------------------------------------------------------------
 Sara Lee Corp.                                       22,138
480,616


                                                                   MARKET
VALUE
                                                      SHARES         SEE NOTE
1
- --------------------------------------------------------------------------------
 FOOD PRODUCTS Continued
 Wm. Wrigley Jr. Co.                                  27,400    $
1,540,154

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

18,305,006

- --------------------------------------------------------------------------------
 HOUSEHOLD PRODUCTS--1.6%
 Clorox Co. (The)                                     19,600
951,776
- --------------------------------------------------------------------------------
 Colgate-Palmolive Co.                                25,700
1,286,285
- --------------------------------------------------------------------------------
 Energizer Holdings, Inc. 1                           45,100
1,693,956
- --------------------------------------------------------------------------------
 Procter & Gamble Corp. (The)                        180,000
17,978,400

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

21,910,417


- --------------------------------------------------------------------------------
 PERSONAL PRODUCTS--0.3%
 Avon Products, Inc.                                  38,900
2,625,361
- --------------------------------------------------------------------------------
 Gillette Co.                                         40,900
1,502,257
- --------------------------------------------------------------------------------
 USANA Health Sciences, Inc. 1                        10,500
321,300

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

4,448,918


- --------------------------------------------------------------------------------
 TOBACCO--0.9%
 Altria Group, Inc.                                  185,300
10,084,026
- --------------------------------------------------------------------------------
 R.J. Reynolds Tobacco Holdings, Inc.                 43,700
2,541,155

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

12,625,181

- --------------------------------------------------------------------------------
 ENERGY--7.6%

- --------------------------------------------------------------------------------
 ENERGY EQUIPMENT & SERVICES--0.0%
 Key Energy Services, Inc. 1                           9,200
94,852
- --------------------------------------------------------------------------------
 Rowan Cos., Inc. 1                                   10,200
236,334

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

331,186


- --------------------------------------------------------------------------------
 OIL & GAS--7.6%
 Amerada Hess Corp.                                      800
42,536
- --------------------------------------------------------------------------------
 Apache Corp.                                         54,495
4,419,545
- --------------------------------------------------------------------------------
 Brown (Tom), Inc. 1                                 126,600
4,082,850
- --------------------------------------------------------------------------------
 Burlington Resources, Inc.                          115,200
6,379,776
- --------------------------------------------------------------------------------
 Canadian Natural Resources Ltd.                      85,000
4,299,826
- --------------------------------------------------------------------------------
 Chesapeake Energy Corp.                             256,200
3,479,196
- --------------------------------------------------------------------------------
 ChevronTexaco Corp.                                  87,650
7,572,084
- --------------------------------------------------------------------------------
 Cimarex Energy Co. 1                                  3,039
81,111
- --------------------------------------------------------------------------------
 Compton Petroleum Corp. 1                           194,500
903,076
- --------------------------------------------------------------------------------
 ConocoPhillips                                      100,721
6,604,276
- --------------------------------------------------------------------------------
 Cross Timbers Royalty Trust                             692
19,736
- --------------------------------------------------------------------------------
 Devon Energy Corp.                                   12,800
732,928
- --------------------------------------------------------------------------------
 EOG Resources, Inc.                                  72,500
3,347,325
- --------------------------------------------------------------------------------
 Esprit Exploration Ltd. 1                           430,000
925,053
- --------------------------------------------------------------------------------
 Exxon Mobil Corp.                                   720,116
29,524,756
- --------------------------------------------------------------------------------
 Frontier Oil Corp.                                  142,200
2,448,684
- --------------------------------------------------------------------------------
 Marathon Oil Corp.                                   18,500
612,165
- --------------------------------------------------------------------------------
 Murphy Oil Corp.                                     22,600
1,476,006
- --------------------------------------------------------------------------------
 Newfield Exploration Co. 1                           50,900
2,267,086


                                                                   MARKET
VALUE
                                                      SHARES         SEE NOTE
1
- --------------------------------------------------------------------------------
 OIL & GAS Continued
 Noble Energy, Inc.                                   47,400   $
2,105,982
- --------------------------------------------------------------------------------
 Occidental Petroleum Corp.                          132,700
5,605,248
- --------------------------------------------------------------------------------
 Paramount Energy Trust                               38,796
350,658
- --------------------------------------------------------------------------------
 Paramount Resources Ltd.                            152,700
1,234,835
- --------------------------------------------------------------------------------
 Pogo Producing Co.                                   63,300
3,057,390
- --------------------------------------------------------------------------------
 Sunoco, Inc.                                         50,000
2,557,500
- --------------------------------------------------------------------------------
 Talisman Energy, Inc.                                49,900
2,838,962
- --------------------------------------------------------------------------------
 Tesoro Petroleum Corp. 1                             12,400
180,668
- --------------------------------------------------------------------------------
 Unocal Corp.                                         40,600
1,495,298
- --------------------------------------------------------------------------------
 Valero Energy Corp.                                  53,600
2,483,824
- --------------------------------------------------------------------------------
 Western Gas Resources, Inc.                           9,700
458,325
- --------------------------------------------------------------------------------
 XTO Energy, Inc.                                    113,533
3,212,984

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

104,799,689

- --------------------------------------------------------------------------------
 FINANCIALS--22.9%
- --------------------------------------------------------------------------------
 CAPITAL MARKETS--0.6%
 Mellon Financial Corp.                              235,600
7,565,116
- --------------------------------------------------------------------------------
 Northern Trust Corp.                                 14,400
668,448

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

8,233,564

- --------------------------------------------------------------------------------
 COMMERCIAL BANKS--7.5%
 AmSouth Bancorp                                      45,300
1,109,850
- --------------------------------------------------------------------------------
 Astoria Financial Corp.                              13,200
491,040
- --------------------------------------------------------------------------------
 Bank of America Corp.                               226,600
18,225,438
- --------------------------------------------------------------------------------
 Bank One Corp.                                      112,700
5,137,993
- --------------------------------------------------------------------------------
 Banknorth Group, Inc.                                40,100
1,304,453
- --------------------------------------------------------------------------------
 Charter One Financial, Inc.                         105,900
3,658,845
- --------------------------------------------------------------------------------
 City National Corp.                                   1,800
111,816
- --------------------------------------------------------------------------------
 Compass Bancshares, Inc.                              8,300
326,273
- --------------------------------------------------------------------------------
 First Midwest Bancorp, Inc.                             400
12,964
- --------------------------------------------------------------------------------
 First Tennessee National Corp.                       25,500
1,124,550
- --------------------------------------------------------------------------------
 Flagstar Bancorp, Inc.                               25,200
539,784
- --------------------------------------------------------------------------------
 FleetBoston Financial Corp.                         189,000
8,249,850
- --------------------------------------------------------------------------------
 Golden West Financial Corp.                          76,900
7,935,311
- --------------------------------------------------------------------------------
 Greenpoint Financial Corp.                           48,300
1,705,956
- --------------------------------------------------------------------------------
 Hudson United Bancorp                                 3,100
114,545
- --------------------------------------------------------------------------------
 Huntington Bancshares, Inc.                          24,400
549,000
- --------------------------------------------------------------------------------
 Independence Community
 Bank Corp.                                            6,400
230,208
- --------------------------------------------------------------------------------
 Indymac Mortgage Holdings, Inc.                       7,600
226,404
- --------------------------------------------------------------------------------
 KeyCorp                                              77,400
2,269,368
- --------------------------------------------------------------------------------
 M&T Bank Corp.                                        6,800
668,440
- --------------------------------------------------------------------------------
 National City Corp.                                 160,300
5,440,582
- --------------------------------------------------------------------------------
 North Fork Bancorp, Inc.                              7,400
299,478
- --------------------------------------------------------------------------------
 PNC Financial Services Group                         32,500
1,778,725
- --------------------------------------------------------------------------------
 Prosperity Bancshares, Inc.                          72,400
1,630,448


STATEMENT OF INVESTMENTS  CONTINUED
- --------------------------------------------------------------------------------


                                                                   MARKET
VALUE
                                                      SHARES         SEE NOTE
1
- --------------------------------------------------------------------------------
 COMMERCIAL BANKS Continued
 Regions Financial Corp.                              24,900    $
926,280
- --------------------------------------------------------------------------------
 Sky Financial Group, Inc.                             1,000
25,940
- --------------------------------------------------------------------------------
 SunTrust Banks, Inc.                                 31,700
2,266,550
- --------------------------------------------------------------------------------
 U.S. Bancorp                                        261,670
7,792,533
- --------------------------------------------------------------------------------
 UnionBanCal Corp.                                    31,800
1,829,772
- --------------------------------------------------------------------------------
 W. Holding Co., Inc.                                 17,634
328,169
- --------------------------------------------------------------------------------
 Wachovia Corp.                                      163,700
7,626,783
- --------------------------------------------------------------------------------
 Washington Mutual, Inc.                             136,500
5,476,380
- --------------------------------------------------------------------------------
 Webster Financial Corp.                               3,600
165,096
- --------------------------------------------------------------------------------
 Wells Fargo & Co.                                   232,100
13,668,369
- --------------------------------------------------------------------------------
 Zions Bancorp                                         5,200
318,916

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

103,566,109

- --------------------------------------------------------------------------------
 DIVERSIFIED FINANCIAL SERVICES--7.5%
 Affiliated Managers Group, Inc. 1                    12,100
842,039
- --------------------------------------------------------------------------------
 American Express Co.                                106,000
5,112,380
- --------------------------------------------------------------------------------
 Bear Stearns Cos., Inc. (The)                        48,600
3,885,570
- --------------------------------------------------------------------------------
 Capital One Financial Corp.                          43,600
2,672,244
- --------------------------------------------------------------------------------
 Chicago Mercantile Exchange (The)                     8,200
593,352
- --------------------------------------------------------------------------------
 CIT Group, Inc.                                      37,400
1,344,530
- --------------------------------------------------------------------------------
 Citigroup, Inc.                                     594,088
28,837,032
- --------------------------------------------------------------------------------
 Instinet Group, Inc. 1                                3,500
18,025
- --------------------------------------------------------------------------------
 iShares Russell 2000 Index Fund                     150,000
16,620,000
- --------------------------------------------------------------------------------
 J.P. Morgan Chase & Co.                             283,200
10,401,936
- --------------------------------------------------------------------------------
 Knight Trading Group, Inc. 1                         27,300
399,672
- --------------------------------------------------------------------------------
 Lehman Brothers Holdings, Inc.                        1,600
123,552
- --------------------------------------------------------------------------------
 MBNA Corp.                                          292,800
7,276,080
- --------------------------------------------------------------------------------
 Merrill Lynch & Co., Inc.                           159,300
9,342,945
- --------------------------------------------------------------------------------
 Moody's Corp.                                         3,200
193,760
- --------------------------------------------------------------------------------
 Morgan Stanley                                      174,700
10,109,889
- --------------------------------------------------------------------------------
 Principal Financial Group, Inc. (The)               108,700
3,594,709
- --------------------------------------------------------------------------------
 Schwab (Charles) Corp.                              127,100
1,504,864
- --------------------------------------------------------------------------------
 SLM Corp.                                            30,700
1,156,776
- --------------------------------------------------------------------------------
 WFS Financial, Inc. 1                                   400
16,984

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

104,046,339

- --------------------------------------------------------------------------------
 INSURANCE--5.4%
 AFLAC, Inc.                                          81,400
2,945,052
- --------------------------------------------------------------------------------
 Allmerica Financial Corp. 1                           5,600
172,312
- --------------------------------------------------------------------------------
 Allstate Corp.                                      241,200
10,376,424
- --------------------------------------------------------------------------------
 AMBAC Financial Group, Inc.                          18,600
1,290,654
- --------------------------------------------------------------------------------
 American International Group, Inc.                  202,640
13,430,979
- --------------------------------------------------------------------------------
 Aon Corp.                                            80,400
1,924,776
- --------------------------------------------------------------------------------
 Cincinnati Financial Corp.                            4,000
167,520
- --------------------------------------------------------------------------------
 Everest Re Group Ltd.                                 2,500
211,500
- --------------------------------------------------------------------------------
 Fidelity National Financial, Inc.                   140,872
5,463,016


                                                                   MARKET
VALUE
                                                      SHARES         SEE NOTE
1
- --------------------------------------------------------------------------------
 INSURANCE Continued
 First American Corp. (The)                            3,800    $
113,126
- --------------------------------------------------------------------------------
 Hartford Financial Services Group,
 Inc. (The)                                           19,000
1,121,570
- --------------------------------------------------------------------------------
 John Hancock Financial Services, Inc.               133,200
4,995,000
- --------------------------------------------------------------------------------
 LandAmerica Financial Group, Inc.                     8,000
418,080
- --------------------------------------------------------------------------------
 Lincoln National Corp.                               57,300
2,313,201
- --------------------------------------------------------------------------------
 Loews Corp.                                          14,700
726,915
- --------------------------------------------------------------------------------
 Marsh & McLennan Cos., Inc.                         107,600
5,152,964
- --------------------------------------------------------------------------------
 MBIA, Inc.                                            6,500
384,995
- --------------------------------------------------------------------------------
 Mercury General Corp.                                 1,000
46,550
- --------------------------------------------------------------------------------
 MetLife, Inc.                                       121,600
4,094,272
- --------------------------------------------------------------------------------
 Old Republic International Corp.                     33,450
848,292
- --------------------------------------------------------------------------------
 Progressive Corp.                                    91,900
7,681,921
- --------------------------------------------------------------------------------
 Prudential Financial, Inc.                          114,800
4,795,196
- --------------------------------------------------------------------------------
 Reinsurance Group of America, Inc.                   28,100
1,086,065
- --------------------------------------------------------------------------------
 RenaissanceRe Holdings Ltd.                          46,300
2,271,015
- --------------------------------------------------------------------------------
 Safeco Corp.                                         11,600
451,588
- --------------------------------------------------------------------------------
 St. Paul Cos., Inc.                                   2,900
114,985
- --------------------------------------------------------------------------------
 StanCorp Financial Group, Inc.                          200
12,576
- --------------------------------------------------------------------------------
 Travelers Property Casualty Corp.,
 Cl. B                                                96,241
1,633,210

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

74,243,754


- --------------------------------------------------------------------------------
 REAL ESTATE--0.0%
 Catellus Development Corp.                            9,477
228,585
- --------------------------------------------------------------------------------
 THRIFTS & MORTGAGE FINANCE--1.9%
 Countrywide Financial Corp.                          59,733
4,530,748
- --------------------------------------------------------------------------------
 Doral Financial Corp.                                51,225
1,653,543
- --------------------------------------------------------------------------------
 Fannie Mae                                          147,700
11,086,362
- --------------------------------------------------------------------------------
 Freddie Mac                                          53,900
3,143,448
- --------------------------------------------------------------------------------
 Fremont General Corp.                                76,000
1,285,160
- --------------------------------------------------------------------------------
 MGIC Investment Corp.                                43,700
2,488,278
- --------------------------------------------------------------------------------
 New Century Financial Corp.                          38,300
1,519,361
- --------------------------------------------------------------------------------
 Radian Group, Inc.                                   10,700
521,625

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

26,228,525

- --------------------------------------------------------------------------------
 HEALTH CARE--12.6%
- --------------------------------------------------------------------------------
 BIOTECHNOLOGY--1.8%
 Alkermes, Inc. 1                                     33,600
453,600
- --------------------------------------------------------------------------------
 Amgen, Inc. 1                                       190,500
11,772,900
- --------------------------------------------------------------------------------
 Gen-Probe, Inc. 1                                    22,700
827,869
- --------------------------------------------------------------------------------
 Genentech, Inc. 1                                    67,600
6,325,332
- --------------------------------------------------------------------------------
 Geron Corp. 1                                        13,700
136,589
- --------------------------------------------------------------------------------
 Idexx Laboratories, Inc. 1                            1,900
87,932
- --------------------------------------------------------------------------------
 Invitrogen Corp. 1                                   27,900
1,953,000
- --------------------------------------------------------------------------------
 Wyeth                                                62,300
2,644,635

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

24,201,857


                                                                   MARKET
VALUE
                                                      SHARES         SEE NOTE
1
- --------------------------------------------------------------------------------
 HEALTH CARE EQUIPMENT & SUPPLIES--2.2%
 Bausch & Lomb, Inc.                                  49,400    $
2,563,860
- --------------------------------------------------------------------------------
 Becton, Dickinson & Co.                              81,900
3,369,366
- --------------------------------------------------------------------------------
 Bio-Rad Laboratories, Inc., Cl. A 1                  15,000
865,050
- --------------------------------------------------------------------------------
 Biosite, Inc. 1                                       5,400
156,330
- --------------------------------------------------------------------------------
 Boston Scientific Corp. 1                           117,600
4,322,976
- --------------------------------------------------------------------------------
 Cooper Cos., Inc. (The)                              19,600
923,748
- --------------------------------------------------------------------------------
 Cytyc Corp. 1                                        11,200
154,112
- --------------------------------------------------------------------------------
 Hillenbrand Industries, Inc.                          2,000
124,120
- --------------------------------------------------------------------------------
 Inamed Corp. 1                                        7,300
350,838
- --------------------------------------------------------------------------------
 Medtronic, Inc.                                     197,900
9,619,919
- --------------------------------------------------------------------------------
 PolyMedica Corp.                                      3,000
78,930
- --------------------------------------------------------------------------------
 St. Jude Medical, Inc. 1                              9,800
601,230
- --------------------------------------------------------------------------------
 Stryker Corp.                                        64,000
5,440,640
- --------------------------------------------------------------------------------
 VISX, Inc. 1                                         63,400
1,467,710
- --------------------------------------------------------------------------------
 Zimmer Holdings, Inc. 1                              11,000
774,400

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

30,813,229

- --------------------------------------------------------------------------------
 HEALTH CARE PROVIDERS & SERVICES--3.0%
 Aetna, Inc.                                          59,400
4,014,252
- --------------------------------------------------------------------------------
 AMERIGROUP Corp. 1                                   16,800
716,520
- --------------------------------------------------------------------------------
 Andrx Corp. 1                                        33,700
810,148
- --------------------------------------------------------------------------------
 Apria Healthcare Group, Inc. 1                       63,600
1,810,692
- --------------------------------------------------------------------------------
 Covance, Inc. 1                                      39,000
1,045,200
- --------------------------------------------------------------------------------
 Coventry Health Care, Inc. 1                         47,700
3,076,173
- --------------------------------------------------------------------------------
 DaVita, Inc. 1                                       37,300
1,454,700
- --------------------------------------------------------------------------------
 eResearch Technology, Inc. 1                          4,300
109,306
- --------------------------------------------------------------------------------
 First Health Group Corp. 1                           25,800
502,068
- --------------------------------------------------------------------------------
 Health Management Associates,
 Inc., Cl. A                                          10,600
254,400
- --------------------------------------------------------------------------------
 Health Net, Inc. 1                                   71,600
2,341,320
- --------------------------------------------------------------------------------
 Humana, Inc. 1                                       58,800
1,343,580
- --------------------------------------------------------------------------------
 IMS Health, Inc.                                     48,700
1,210,682
- --------------------------------------------------------------------------------
 McKesson Corp.                                        9,400
302,304
- --------------------------------------------------------------------------------
 Medco Health Solutions, Inc. 1                      106,381
3,615,890
- --------------------------------------------------------------------------------
 Mid Atlantic Medical Services, Inc. 1                45,000
2,916,000
- --------------------------------------------------------------------------------
 Oxford Health Plans, Inc. 1                          64,700
2,814,450
- --------------------------------------------------------------------------------
 Pediatrix Medical Group, Inc. 1                      40,300
2,220,127
- --------------------------------------------------------------------------------
 Per-Se Technologies, Inc. 1                           6,500
99,190
- --------------------------------------------------------------------------------
 Pharmaceutical Product
 Development, Inc. 1                                   2,800
75,516
- --------------------------------------------------------------------------------
 Renal Care Group, Inc. 1                              4,300
177,160
- --------------------------------------------------------------------------------
 Select Medical Corp.                                 78,000
1,269,840
- --------------------------------------------------------------------------------
 Sunrise Senior Living, Inc. 1                         4,000
154,960
- --------------------------------------------------------------------------------
 Universal Health Services, Inc., Cl. B                4,100
220,252
- --------------------------------------------------------------------------------
 US Oncology, Inc. 1                                  61,600
662,816


                                                                   MARKET
VALUE
                                                      SHARES         SEE NOTE
1
- --------------------------------------------------------------------------------
 HEALTH CARE PROVIDERS & SERVICES Continued
 WellPoint Health Networks, Inc. 1                    77,100    $
7,477,929

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

40,695,475

- --------------------------------------------------------------------------------
 PHARMACEUTICALS--5.6%
 Abbott Laboratories                                 149,200
6,952,720
- --------------------------------------------------------------------------------
 Alpharma, Inc., Cl. A                                   800
16,080
- --------------------------------------------------------------------------------
 American Pharmaceutical
 Partners, Inc. 1                                     52,250
1,755,600
- --------------------------------------------------------------------------------
 Bradley Pharmaceuticals, Inc. 1                      38,400
976,512
- --------------------------------------------------------------------------------
 Bristol-Myers Squibb Co.                            254,700
7,284,420
- --------------------------------------------------------------------------------
 Eli Lilly & Co.                                     102,400
7,201,792
- --------------------------------------------------------------------------------
 Endo Pharmaceuticals Holdings, Inc. 1                 7,000
134,820
- --------------------------------------------------------------------------------
 Forest Laboratories, Inc. 1                           2,700
166,860
- --------------------------------------------------------------------------------
 Hi-Tech Pharmacal Co., Inc. 1                           500
11,750
- --------------------------------------------------------------------------------
 Johnson & Johnson                                   249,006
12,863,650
- --------------------------------------------------------------------------------
 Kos Pharmaceuticals, Inc. 1                          47,400
2,040,096
- --------------------------------------------------------------------------------
 Merck & Co., Inc.                                   278,700
12,875,940
- --------------------------------------------------------------------------------
 Pfizer, Inc.                                        707,600
24,999,508
- --------------------------------------------------------------------------------
 Valeant Pharmaceuticals
 International, Inc.                                  21,500
540,725

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

77,820,473

- --------------------------------------------------------------------------------
 INDUSTRIALS--6.8%
- --------------------------------------------------------------------------------
 AEROSPACE & DEFENSE--1.1%
 General Dynamics Corp.                               44,400
4,013,316
- --------------------------------------------------------------------------------
 Goodrich Corp.                                       33,400
991,646
- --------------------------------------------------------------------------------
 Honeywell International, Inc.                        56,100
1,875,423
- --------------------------------------------------------------------------------
 Precision Castparts Corp.                            15,700
712,937
- --------------------------------------------------------------------------------
 United Defense Industries, Inc. 1                    24,200
771,496
- --------------------------------------------------------------------------------
 United Technologies Corp.                            70,700
6,700,239

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

15,065,057

- --------------------------------------------------------------------------------
 AIR FREIGHT & LOGISTICS--0.4%
 FedEx Corp.                                          27,500
1,856,250
- --------------------------------------------------------------------------------
 United Parcel Service, Inc., Cl. B                   51,600
3,846,780

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

5,703,030

- --------------------------------------------------------------------------------
 AIRLINES--0.1%
 America West Holdings Corp., Cl. B 1                 43,000
533,200
- --------------------------------------------------------------------------------
 Continental Airlines, Inc., Cl. B 1                  51,500
837,905
- --------------------------------------------------------------------------------
 ExpressJet Holdings, Inc. 1                           9,400
141,000
- --------------------------------------------------------------------------------
 Mesa Air Group, Inc. 1                                6,300
78,876
- --------------------------------------------------------------------------------
 Northwest Airlines Corp., Cl. A 1                    33,000
416,460

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

2,007,441

- --------------------------------------------------------------------------------
 BUILDING PRODUCTS--0.0%
 USG Corp. 1                                           8,700
144,159


STATEMENT OF INVESTMENTS  CONTINUED
- --------------------------------------------------------------------------------


                                                                   MARKET
VALUE
                                                      SHARES         SEE NOTE
1
- --------------------------------------------------------------------------------
 COMMERCIAL SERVICES & SUPPLIES--0.8%
 Arbitron, Inc. 1                                      1,600    $
66,752
- --------------------------------------------------------------------------------
 Corinthian Colleges, Inc. 1                           9,200
511,152
- --------------------------------------------------------------------------------
 Deluxe Corp.                                         15,500
640,615
- --------------------------------------------------------------------------------
 H&R Block, Inc.                                     122,800
6,799,436
- --------------------------------------------------------------------------------
 ITT Educational Services, Inc. 1                     33,700
1,582,889
- --------------------------------------------------------------------------------
 Republic Services, Inc.                              29,300
750,959
- --------------------------------------------------------------------------------
 Right Management
 Consultants, Inc. 1                                   1,775
33,122
- --------------------------------------------------------------------------------
 Robert Half International, Inc. 1                    10,700
249,738
- --------------------------------------------------------------------------------
 United Rentals, Inc. 1                               24,200
466,092
- --------------------------------------------------------------------------------
 Valassis Communications, Inc. 1                       7,000
205,450

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

11,306,205

- --------------------------------------------------------------------------------
 ELECTRICAL EQUIPMENT--0.1%
 Emerson Electric Co.                                 14,300
925,925
- --------------------------------------------------------------------------------
 Hubbell, Inc., Cl. B                                    300
13,230
- --------------------------------------------------------------------------------
 Molex, Inc., Cl. A                                   20,750
609,220
- --------------------------------------------------------------------------------
 Thomas & Betts Corp.                                 13,700
313,593

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

1,861,968

- --------------------------------------------------------------------------------
 INDUSTRIAL CONGLOMERATES--3.0%
 3M Co.                                               73,800
6,275,214
- --------------------------------------------------------------------------------
 Carlisle Cos., Inc.                                   1,500
91,290
- --------------------------------------------------------------------------------
 General Electric Co.                              1,120,000
34,697,600

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

41,064,104

- --------------------------------------------------------------------------------
 MACHINERY--0.8%
 Actuant Corp., Cl. A 1                                2,500
90,500
- --------------------------------------------------------------------------------
 Briggs & Stratton Corp.                              16,800
1,132,320
- --------------------------------------------------------------------------------
 Cummins, Inc.                                        12,100
592,174
- --------------------------------------------------------------------------------
 Deere & Co.                                           7,000
455,350
- --------------------------------------------------------------------------------
 Eaton Corp.                                           8,100
874,638
- --------------------------------------------------------------------------------
 Ingersoll-Rand Co., Cl. A                            19,700
1,337,236
- --------------------------------------------------------------------------------
 Oshkosh Truck Corp.                                   8,200
418,446
- --------------------------------------------------------------------------------
 Paccar, Inc.                                         29,100
2,476,992
- --------------------------------------------------------------------------------
 Pall Corp.                                           79,600
2,135,668
- --------------------------------------------------------------------------------
 SPX Corp. 1                                          16,400
964,484
- --------------------------------------------------------------------------------
 Trinity Industries, Inc.                              3,300
101,772
- --------------------------------------------------------------------------------
 Wabash National Corp. 1                              13,800
404,340

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

10,983,920

- --------------------------------------------------------------------------------
 ROAD & RAIL--0.5%
 Burlington Northern Santa Fe Corp.                   42,500
1,374,875
- --------------------------------------------------------------------------------
 CSX Corp.                                            43,800
1,574,172
- --------------------------------------------------------------------------------
 Hunt (J.B.) Transport Services, Inc. 1               65,500
1,769,155
- --------------------------------------------------------------------------------
 Norfolk Southern Corp.                                2,900
68,585
- --------------------------------------------------------------------------------
 Ryder Systems, Inc.                                  42,300
1,444,545

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

6,231,332


                                                                   MARKET
VALUE
                                                      SHARES         SEE NOTE
1
- --------------------------------------------------------------------------------
 INFORMATION TECHNOLOGY--16.6%
- --------------------------------------------------------------------------------
 COMMUNICATIONS EQUIPMENT--2.5%
 3Com Corp. 1                                         79,100   $
646,247
- --------------------------------------------------------------------------------
 ADTRAN, Inc.                                         55,100
1,708,100
- --------------------------------------------------------------------------------
 Avocent Corp. 1                                       1,000
36,520
- --------------------------------------------------------------------------------
 Cisco Systems, Inc. 1                               874,100
21,231,889
- --------------------------------------------------------------------------------
 Corning, Inc. 1                                     345,100
3,599,393
- --------------------------------------------------------------------------------
 Ditech Communications Corp. 1                         5,100
97,410
- --------------------------------------------------------------------------------
 Emulex Corp. 1                                       11,800
314,824
- --------------------------------------------------------------------------------
 F5 Networks, Inc. 1                                  10,400
261,040
- --------------------------------------------------------------------------------
 Foundry Networks, Inc. 1                             18,900
517,104
- --------------------------------------------------------------------------------
 Juniper Networks, Inc. 1                             65,900
1,231,012
- --------------------------------------------------------------------------------
 McDATA Corp., Cl. A 1                                72,300
689,019
- --------------------------------------------------------------------------------
 Powerwave Technologies, Inc. 1                       33,800
258,570
- --------------------------------------------------------------------------------
 QUALCOMM, Inc.                                       32,600
1,758,118
- --------------------------------------------------------------------------------
 Scientific-Atlanta, Inc.                             72,100
1,968,330
- --------------------------------------------------------------------------------
 Zhone Technologies, Inc. 1                           11,200
55,328

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

34,372,904

- --------------------------------------------------------------------------------
 COMPUTERS & PERIPHERALS--3.9%
 Avid Technology, Inc. 1                              14,800
710,400
- --------------------------------------------------------------------------------
 Dell, Inc. 1                                        406,700
13,811,532
- --------------------------------------------------------------------------------
 EMC Corp. 1                                         458,600
5,925,112
- --------------------------------------------------------------------------------
 Hewlett-Packard Co.                                 121,100
2,781,667
- --------------------------------------------------------------------------------
 Imation Corp.                                         5,300
186,295
- --------------------------------------------------------------------------------
 International Business Machines Corp.               133,600
12,382,048
- --------------------------------------------------------------------------------
 Lexmark International, Inc., Cl. A 1                 66,400
5,221,696
- --------------------------------------------------------------------------------
 Maxtor Corp. 1                                      295,800
3,283,380
- --------------------------------------------------------------------------------
 Network Appliance, Inc. 1                            20,200
414,706
- --------------------------------------------------------------------------------
 SanDisk Corp. 1                                      11,300
690,882
- --------------------------------------------------------------------------------
 Seagate Technology International, Inc.
 (Escrow Shares) 1,2,3                                31,000
- --
- --------------------------------------------------------------------------------
 Storage Technology Corp. 1                           86,200
2,219,650
- --------------------------------------------------------------------------------
 Sun Microsystems, Inc. 1                            820,100
3,682,249
- --------------------------------------------------------------------------------
 Western Digital Corp. 1                             244,800
2,886,192

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

54,195,809

- --------------------------------------------------------------------------------
 ELECTRONIC EQUIPMENT & INSTRUMENTS--0.5%
 Agilent Technologies, Inc. 1                         38,900
1,137,436
- --------------------------------------------------------------------------------
 Avnet, Inc. 1                                        17,300
374,718
- --------------------------------------------------------------------------------
 Benchmark Electronics, Inc. 1                        20,000
696,200
- --------------------------------------------------------------------------------
 Brightpoint, Inc. 1                                  19,800
341,550
- --------------------------------------------------------------------------------
 FARO Technologies, Inc. 1                            16,200
404,676
- --------------------------------------------------------------------------------
 Kemet Corp. 1                                        18,200
249,158
- --------------------------------------------------------------------------------
 Molex, Inc.                                           6,500
226,785
- --------------------------------------------------------------------------------
 Solectron Corp. 1                                   159,400
942,054
- --------------------------------------------------------------------------------
 Superconductor Technologies, Inc. 1                  22,400
124,992


                                                                   MARKET
VALUE
                                                      SHARES         SEE NOTE
1
- --------------------------------------------------------------------------------
 ELECTRONIC EQUIPMENT & INSTRUMENTS Continued
 Symbol Technologies, Inc.                            30,500    $
515,145
- --------------------------------------------------------------------------------
 UNOVA, Inc. 1                                        30,700
704,565
- --------------------------------------------------------------------------------
 Veeco Instruments, Inc. 1                             6,200
174,840
- --------------------------------------------------------------------------------
 Waters Corp. 1                                       13,600
450,976

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

6,343,095

- --------------------------------------------------------------------------------
 INTERNET SOFTWARE & SERVICES--0.3%
 Akamai Technologies, Inc. 1                         131,000
1,408,250
- --------------------------------------------------------------------------------
 Ask Jeeves, Inc. 1                                   17,000
308,040
- --------------------------------------------------------------------------------
 Digital River, Inc. 1                                32,300
713,830
- --------------------------------------------------------------------------------
 EarthLink, Inc. 1                                    19,000
190,000
- --------------------------------------------------------------------------------
 Internap Network Services Corp. 1                    79,100
193,795
- --------------------------------------------------------------------------------
 j2 Global Communications, Inc. 1                      4,800
118,896
- --------------------------------------------------------------------------------
 United Online, Inc. 1                                69,600
1,168,584
- --------------------------------------------------------------------------------
 WebEx Communications, Inc. 1                          4,300
86,430

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

4,187,825

- --------------------------------------------------------------------------------
 IT SERVICES--0.4%
 Anteon International Corp. 1                          2,400
86,520
- --------------------------------------------------------------------------------
 CheckFree Corp. 1                                    16,500
456,225
- --------------------------------------------------------------------------------
 Cognizant Technology Solutions
 Corp. 1                                              46,400
2,117,696
- --------------------------------------------------------------------------------
 Concord EFS, Inc. 1                                  31,500
467,460
- --------------------------------------------------------------------------------
 Convergys Corp. 1                                   102,400
1,787,904
- --------------------------------------------------------------------------------
 Evolving Systems, Inc. 1                              8,600
114,380
- --------------------------------------------------------------------------------
 Global Payments, Inc.                                 4,000
188,480

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

5,218,665

- --------------------------------------------------------------------------------
 SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--4.4%
 Advanced Energy Industries, Inc. 1                    2,900
75,545
- --------------------------------------------------------------------------------
 Altera Corp. 1                                       52,000
1,180,400
- --------------------------------------------------------------------------------
 Amkor Technology, Inc. 1                             31,400
571,794
- --------------------------------------------------------------------------------
 Analog Devices, Inc.                                 30,000
1,369,500
- --------------------------------------------------------------------------------
 Applied Materials, Inc. 1                           184,100
4,133,045
- --------------------------------------------------------------------------------
 Applied Micro Circuits Corp. 1                       88,000
526,240
- --------------------------------------------------------------------------------
 Asyst Technologies, Inc. 1                           23,900
414,665
- --------------------------------------------------------------------------------
 Atmel Corp. 1                                       174,800
1,050,548
- --------------------------------------------------------------------------------
 Axcelis Technologies, Inc. 1                          8,100
82,782
- --------------------------------------------------------------------------------
 Broadcom Corp., Cl. A 1                             100,700
3,432,863
- --------------------------------------------------------------------------------
 Brooks Automation, Inc. 1                             3,800
91,846
- --------------------------------------------------------------------------------
 Credence Systems Corp. 1                             31,900
419,804
- --------------------------------------------------------------------------------
 Cypress Semiconductor Corp. 1                       115,900
2,475,624
- --------------------------------------------------------------------------------
 Integrated Device Technology, Inc. 1                 52,800
906,576
- --------------------------------------------------------------------------------
 Intel Corp.                                         755,000
24,311,000
- --------------------------------------------------------------------------------
 KLA-Tencor Corp. 1                                   24,300
1,425,681
- --------------------------------------------------------------------------------
 Kulicke & Soffa Industries, Inc. 1                   49,400
710,372
- --------------------------------------------------------------------------------
 Lam Research Corp. 1                                 10,600
342,380


                                                                   MARKET
VALUE
                                                      SHARES         SEE NOTE
1
- --------------------------------------------------------------------------------
 SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Continued
 National Semiconductor Corp. 1                      115,800   $
4,563,678
- --------------------------------------------------------------------------------
 NVE Corp. 1                                           5,800
297,540
- --------------------------------------------------------------------------------
 NVIDIA Corp. 1                                      102,000
2,371,500
- --------------------------------------------------------------------------------
 Photronics, Inc. 1                                    9,000
179,280
- --------------------------------------------------------------------------------
 Silicon Storage Technology, Inc. 1                   31,100
342,100
- --------------------------------------------------------------------------------
 Teradyne, Inc. 1                                     80,300
2,043,635
- --------------------------------------------------------------------------------
 Texas Instruments, Inc.                             257,600
7,568,288
- --------------------------------------------------------------------------------
 TriQuint Semiconductor, Inc. 1                       48,400
342,188

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

61,228,874


- --------------------------------------------------------------------------------
 SOFTWARE--4.6%
 Adobe Systems, Inc.                                   5,000
196,500
- --------------------------------------------------------------------------------
 Amdocs Ltd. 1                                       117,700
2,645,896
- --------------------------------------------------------------------------------
 Ascential Software Corp. 1                           13,000
337,090
- --------------------------------------------------------------------------------
 Citrix Systems, Inc. 1                               76,800
1,628,928
- --------------------------------------------------------------------------------
 Computer Associates
 International, Inc.                                  24,800
678,032
- --------------------------------------------------------------------------------
 Compuware Corp. 1                                    13,400
80,936
- --------------------------------------------------------------------------------
 Electronic Arts, Inc. 1                             145,600
6,956,768
- --------------------------------------------------------------------------------
 FactSet Research Systems, Inc.                        6,900
263,649
- --------------------------------------------------------------------------------
 Henry (Jack) & Associates, Inc.                       1,300
26,754
- --------------------------------------------------------------------------------
 Hyperion Solutions Corp. 1                              400
12,056
- --------------------------------------------------------------------------------
 Macromedia, Inc. 1                                   15,600
278,304
- --------------------------------------------------------------------------------
 Microsoft Corp.                                   1,138,000
31,340,520
- --------------------------------------------------------------------------------
 Novell, Inc. 1                                       92,300
970,996
- --------------------------------------------------------------------------------
 Oracle Corp. 1                                      462,800
6,108,960
- --------------------------------------------------------------------------------
 Red Hat, Inc. 1                                      69,600
1,306,392
- --------------------------------------------------------------------------------
 Reynolds & Reynolds Co., Cl. A                        3,100
90,055
- --------------------------------------------------------------------------------
 Sybase, Inc. 1                                       38,700
796,446
- --------------------------------------------------------------------------------
 Symantec Corp. 1                                     95,400
3,305,610
- --------------------------------------------------------------------------------
 Synopsys, Inc. 1                                     55,100
1,860,176
- --------------------------------------------------------------------------------
 Take-Two Interactive Software, Inc. 1                80,600
2,322,086
- --------------------------------------------------------------------------------
 Veritas Software Corp. 1                             66,400
2,467,424

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

63,673,578

- --------------------------------------------------------------------------------
 MATERIALS--1.9%
- --------------------------------------------------------------------------------
 CHEMICALS--0.8%
 Cytec Industries, Inc. 1                              4,700
180,433
- --------------------------------------------------------------------------------
 Dow Chemical Co.                                     26,700
1,109,919
- --------------------------------------------------------------------------------
 Du Pont (E.I.) de Nemours & Co.                      96,100
4,410,029
- --------------------------------------------------------------------------------
 Engelhard Corp.                                      11,300
338,435
- --------------------------------------------------------------------------------
 Hercules, Inc. 1                                     96,100
1,172,420
- --------------------------------------------------------------------------------
 Monsanto Co.                                        101,300
2,915,414
- --------------------------------------------------------------------------------
 OM Group, Inc. 1                                     18,300
479,277

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

10,605,927

STATEMENT OF INVESTMENTS  CONTINUED
- --------------------------------------------------------------------------------


                                                                   MARKET
VALUE
                                                      SHARES         SEE NOTE
1
- --------------------------------------------------------------------------------
 CONSTRUCTION MATERIALS--0.0%
 Florida Rock Industries, Inc.                         1,300   $
71,305
- --------------------------------------------------------------------------------
 CONTAINERS & PACKAGING--0.1%
 Sealed Air Corp. 1                                   33,900
1,835,346
- --------------------------------------------------------------------------------
 METALS & MINING--0.7%
 Alcan, Inc.                                          39,500
1,854,525
- --------------------------------------------------------------------------------
 Alcoa, Inc.                                         145,200
5,517,600
- --------------------------------------------------------------------------------
 CONSOL Energy, Inc.                                   6,300
163,170
- --------------------------------------------------------------------------------
 GrafTech International Ltd. 1                        24,400
329,400
- --------------------------------------------------------------------------------
 Peabody Energy Corp.                                 29,600
1,234,616
- --------------------------------------------------------------------------------
 Schnitzer Steel Industries, Inc.                      9,800
592,900

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

9,692,211

- --------------------------------------------------------------------------------
 PAPER & FOREST PRODUCTS--0.3%
 Georgia-Pacific Corp.                                83,900
2,573,213
- --------------------------------------------------------------------------------
 Louisiana-Pacific Corp. 1                           115,300
2,061,564

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

4,634,777

- --------------------------------------------------------------------------------
 TELECOMMUNICATION SERVICES--4.4%
- --------------------------------------------------------------------------------
 DIVERSIFIED TELECOMMUNICATION SERVICES--3.2%
 BellSouth Corp.                                     172,000
4,867,600
- --------------------------------------------------------------------------------
 Citizens Communications Co. 1                       115,400
1,433,268
- --------------------------------------------------------------------------------
 Hughes Electronics Corp. 1                              740
12,247
- --------------------------------------------------------------------------------
 NTL, Inc. 1                                          16,300
1,136,925
- --------------------------------------------------------------------------------
 SBC Communications, Inc.                            668,800
17,435,616
- --------------------------------------------------------------------------------
 Sprint Corp. (Fon Group)                             64,400
1,057,448
- --------------------------------------------------------------------------------
 Verizon Communications, Inc.                        519,456
18,222,516

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

44,165,620

- --------------------------------------------------------------------------------
 WIRELESS TELECOMMUNICATION SERVICES--1.2%
 AT&T Wireless Services, Inc. 1                      537,000
4,290,630
- --------------------------------------------------------------------------------
 Nextel Communications, Inc., Cl. A 1                421,600
11,830,096
- --------------------------------------------------------------------------------
 Wireless Facilities, Inc. 1                           5,400
80,244

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

16,200,970

- --------------------------------------------------------------------------------
 UTILITIES--1.0%
- --------------------------------------------------------------------------------
 ELECTRIC UTILITIES--0.7%
 Allegheny Energy, Inc. 1                              9,100
116,116
- --------------------------------------------------------------------------------
 CenterPoint Energy, Inc.                             19,500
188,955
- --------------------------------------------------------------------------------
 Constellation Energy Group, Inc.                     53,100
2,079,396
- --------------------------------------------------------------------------------
 Edison International 1                               30,900
677,637
- --------------------------------------------------------------------------------
 Exelon Corp.                                         68,224
4,527,345
- --------------------------------------------------------------------------------
 FirstEnergy Corp.                                     7,200
253,440
- --------------------------------------------------------------------------------
 Progress Energy, Inc., Contingent
- --------------------------------------------------------------------------------
 Value Obligation 1,2                                 32,000
7,360
- --------------------------------------------------------------------------------
 Puget Energy, Inc.                                    2,400
57,048
- --------------------------------------------------------------------------------
 TXU Corp.                                             9,000
213,480
- --------------------------------------------------------------------------------
 Wisconsin Energy Corp.                               29,100
973,395

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

9,094,172


                                                                   MARKET
VALUE
                                                      SHARES         SEE NOTE
1
- --------------------------------------------------------------------------------
 GAS UTILITIES--0.0%
 ONEOK, Inc.                                          16,600     $
366,528
- --------------------------------------------------------------------------------
 MULTI-UTILITIES & UNREGULATED POWER--0.3%
 Dynegy, Inc. 1                                       87,600
374,928
- --------------------------------------------------------------------------------
 Equitable Resources, Inc.                             7,100
304,732
- --------------------------------------------------------------------------------
 MDU Resources Group, Inc.                             3,900
92,855
- --------------------------------------------------------------------------------
 Questar Corp.                                         2,200
77,330
- --------------------------------------------------------------------------------
 Williams Cos., Inc. (The)                           303,500
2,980,370

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

3,830,215

- ---------------
 Total Common Stocks
 (Cost $1,141,180,373)
1,357,830,166

- --------------------------------------------------------------------------------
 PREFERRED STOCKS--0.0%
 Wachovia Corp., Dividend Equalization
 Preferred Shares (Cost $0)                            6,000
30

                                                       UNITS
- --------------------------------------------------------------------------------
 RIGHTS, WARRANTS AND CERTIFICATES--0.0%
 Dime Bancorp, Inc. Wts.,
 Exp. 1/2/10 1 (Cost $0)                              31,900
5,423

                                                   PRINCIPAL
                                                      AMOUNT
- --------------------------------------------------------------------------------
 JOINT REPURCHASE AGREEMENTS--1.9%
 Undivided interest of 23.74% in joint
 repurchase agreement (Principal Amount/
 Market Value $109,556,000, with a
 maturity value of $109,560,869) with
 Banc One Capital Markets, Inc., 0.80%,
 dated 12/31/03, to be repurchased at
 $26,009,156 on 1/2/04, collateralized
 by U.S. Treasury Bonds, 4.25%,
 11/30/13, with a value of $111,861,618
 (Cost $26,008,000)                              $26,008,000
26,008,000

- --------------------------------------------------------------------------------
 TOTAL INVESTMENTS, AT VALUE
 (COST $1,167,188,373)                                 100.2%
1,383,843,619
- --------------------------------------------------------------------------------
 LIABILITIES IN EXCESS
 OF OTHER ASSETS                                        (0.2)
(2,166,925)

- -------------------------------
 NET ASSETS                                            100.0%
$1,381,676,694

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


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.
3. Received as the result of issuer reorganization. Currently has minimal
market
value.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENT OF ASSETS AND LIABILITIES  DECEMBER 31, 2003
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
 ASSETS

 Investments, at value (including securities loaned of approximately
$81,930,000)
 (cost $1,167,188,373)--see accompanying
statement                                                     $1,383,843,619
- ----------------------------------------------------------------------------------------------------------------------
 Collateral for securities loaned
                                         84,039,380
- ----------------------------------------------------------------------------------------------------------------------
 Receivables and other assets:
 Investments sold
                                                     12,187,417
 Shares of beneficial interest
sold
2,302,969
 Interest and dividends
                                  1,467,055

Other
7,676

         ---------------
 Total
assets
1,483,848,116

- ----------------------------------------------------------------------------------------------------------------------
 LIABILITIES
 Bank
overdraft
59,452
- ----------------------------------------------------------------------------------------------------------------------
 Return of collateral for securities
loaned
84,039,380
- ----------------------------------------------------------------------------------------------------------------------
 Payables and other liabilities:
 Investments
purchased
12,717,345
 Shares of beneficial interest redeemed
                                                     5,176,326
 Distribution and service plan
fees
65,451
 Shareholder reports
                                    58,885
 Trustees'
compensation
5,576
 Transfer and shareholder servicing agent
fees                                                                  1,666

Other
47,341

- ---------------
 Total
liabilities
102,171,422

- ----------------------------------------------------------------------------------------------------------------------
 NET ASSETS

$1,381,676,694

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

- ----------------------------------------------------------------------------------------------------------------------
 COMPOSITION OF NET ASSETS
 Par value of shares of beneficial
interest                                                            $
72,000
- ----------------------------------------------------------------------------------------------------------------------
 Additional paid-in
capital
1,490,502,126
- ----------------------------------------------------------------------------------------------------------------------
 Accumulated net investment
income
11,726,476
- ----------------------------------------------------------------------------------------------------------------------
 Accumulated net realized loss on investments and foreign currency
transactions                          (337,279,334)
- ----------------------------------------------------------------------------------------------------------------------
 Net unrealized appreciation on investments and translation of assets and
 liabilities denominated in foreign
currencies
216,655,426

- ---------------
 NET
ASSETS
$1,381,676,694


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

- ----------------------------------------------------------------------------------------------------------------------
 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 $1,214,959,557 and 63,273,559 shares of beneficial interest
outstanding)                                   $19.20
- ----------------------------------------------------------------------------------------------------------------------
 Service Shares:
 Net asset value, redemption price per share and offering price per share
(based on net assets
 of $166,717,137 and 8,726,601 shares of beneficial interest
outstanding)                                      $19.10


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENT OF OPERATIONS  FOR THE YEAR ENDED DECEMBER 31, 2003
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
 INVESTMENT INCOME

 Dividends (net of foreign withholding taxes of $47,489)
              $ 19,404,870
- --------------------------------------------------------------------------------------------

Interest
312,889
- --------------------------------------------------------------------------------------------
 Portfolio lending
fees                                                              46,733

- -------------
 Total investment
income                                                         19,764,492

- --------------------------------------------------------------------------------------------
 EXPENSES
 Management fees
                             7,442,344
- --------------------------------------------------------------------------------------------
 Distribution and service plan fees--Service
shares                                  244,739
- --------------------------------------------------------------------------------------------
 Transfer and shareholder servicing agent fees:
 Non-Service
shares                                                                  10,054
 Service shares
                                9,759
- --------------------------------------------------------------------------------------------
 Shareholder
reports                                                                103,929
- --------------------------------------------------------------------------------------------
 Trustees'
compensation
28,387
- --------------------------------------------------------------------------------------------
 Custodian fees and
expenses                                                         17,027
- --------------------------------------------------------------------------------------------

Other
   71,340

- -------------
 Total
expenses
7,927,579
 Less reduction to custodian expenses
                          (892)

- -------------
 Net
expenses
7,926,687


- --------------------------------------------------------------------------------------------
 NET INVESTMENT
INCOME                                                           11,837,805

- --------------------------------------------------------------------------------------------
 REALIZED AND UNREALIZED GAIN (LOSS)
 Net realized gain (loss) on:

Investments
(28,888,782)
 Foreign currency
transactions                                                      138,800

- -------------
 Net realized
loss                                                              (28,749,982)
- --------------------------------------------------------------------------------------------
 Net change in unrealized appreciation (depreciation) on:

Investments
286,964,752
 Translation of assets and liabilities denominated in foreign
currencies          1,315,110

- -------------
 Net change in unrealized appreciation
(depreciation)                           288,279,862

- --------------------------------------------------------------------------------------------
 NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS                          $271,367,685

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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


STATEMENTS OF CHANGES IN NET ASSETS
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------

 NON-SERVICE SHARES    DECEMBER 31                              2003
2002          2001         2000          1999
- ------------------------------------------------------------------------------------------------------------------------------
 PER SHARE OPERATING DATA

 Net asset value, beginning of period                         $15.32
$18.99        $21.26       $24.63        $20.48
- ------------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income
..18           .16           .13          .10           .11
 Net realized and unrealized gain (loss)                        3.86
(3.70)        (2.29)       (2.14)         4.29

- ----------------------------------------------------------------
 Total from investment operations                               4.04
(3.54)        (2.16)       (2.04)         4.40
- ------------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                           (.16)
(.13)         (.11)        (.09)         (.09)
 Distributions from net realized gain
- --            --            --        (1.24)         (.16)

- ----------------------------------------------------------------
 Total dividends and/or distributions to shareholders           (.16)
(.13)         (.11)       (1.33)         (.25)
- ------------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                               $19.20
$15.32        $18.99       $21.26        $24.63

================================================================
- ------------------------------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE 1                            26.72%
(18.80)%      (10.16)%      (8.78)%       21.71%

- ------------------------------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA
 Net assets, end of period (in thousands)                 $1,214,960
$890,740    $1,074,945   $1,009,823      $555,311
- ------------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                        $1,003,396
$999,275    $1,028,913   $  809,662      $391,063
- ------------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 2
 Net investment income                                          1.10%
0.94%         0.73%        0.69%         0.63%
 Total expenses                                                 0.70% 3
0.69% 3       0.73% 3      0.73%         0.78% 3
- ------------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate
85%           98%           69%          63%          118%


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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


SERVICE SHARES    DECEMBER 31                                   2003
2002          2001        2000 1
- -----------------------------------------------------------------------------------------------------------------
 PER SHARE OPERATING DATA

 Net asset value, beginning of period                          $15.26
$18.95        $21.24        $24.04
- -----------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income
..14           .13           .14           .02
 Net realized and unrealized gain (loss)                         3.85
(3.70)        (2.32)        (2.82)

- --------------------------------------------------
 Total investment operations                                     3.99
(3.57)        (2.18)        (2.80)
- -----------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income
(.15)         (.12)         (.11)           --
 Distributions from net realized gain
- --            --            --            --

- --------------------------------------------------
 Total dividends and/or distributions to shareholders
(.15)         (.12)         (.11)           --
- -----------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                                $19.10
$15.26        $18.95        $21.24

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

- -----------------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE 2                             26.44%
(18.99)%      (10.27)%      (11.61)%
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA
 Net assets, end of period (in thousands)                    $166,717
$51,929       $21,545        $1,698
- -----------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                           $ 98,210
$34,604       $10,306        $  543
- -----------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment income
0.83%         0.87%         0.66%         0.50%
 Total expenses                                                  0.96%
4       0.84% 4       0.88% 4       0.88%
- -----------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate
85%           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, 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
- --------------------------------------------------------------------------------

 YEAR ENDED DECEMBER
31,
2003             2002
- -----------------------------------------------------------------------------------------------------------------
 OPERATIONS

 Net investment income
                                                      $   11,837,805   $
9,734,475
- -----------------------------------------------------------------------------------------------------------------
 Net realized loss
                            (28,749,982)    (127,037,616)
- -----------------------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation
(depreciation)                               288,279,862     (101,668,854)

- --------------------------------
 Net increase (decrease) in net assets resulting from
operations                    271,367,685     (218,971,995)

- -----------------------------------------------------------------------------------------------------------------
 DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
 Dividends from net investment income:
 Non-Service shares
                                 (9,176,729)      (7,425,251)
 Service
shares
(594,874)        (162,528)

- -----------------------------------------------------------------------------------------------------------------
 BENEFICIAL INTEREST TRANSACTIONS
 Net increase in net assets resulting from beneficial interest transactions:
 Non-Service
shares
88,259,594       34,464,855
 Service
shares
89,152,120       38,273,092

- -----------------------------------------------------------------------------------------------------------------
 NET ASSETS
 Total increase
(decrease)
439,007,796     (153,821,827)
- -----------------------------------------------------------------------------------------------------------------
 Beginning of period
                                           942,668,898    1,096,490,725

- --------------------------------
 End of period [including accumulated net investment income of
 $11,726,476 and $9,701,404,
respectively]                                       $1,381,676,694   $
942,668,898

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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 1. SIGNIFICANT ACCOUNTING POLICIES
 Oppenheimer Main Street Fund/VA (the Fund), formerly Oppenheimer Main Street
 Growth & Income Fund/VA, 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 with respect to the Fund in general
and
 exclusive voting rights on matters that affect that class alone. 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. Securities traded on NASDAQ are valued based on the
closing
 price provided by NASDAQ 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. Securities whose values have been
 materially affected by what the Manager identifies as a significant event
 occurring before the Fund's assets are valued but after the close of their
 respective foreign exchanges will be fair valued. Fair value is determined in
 good faith using 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 Fund's accounting records 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. Pursuant to an Exemptive Order issued by the
 Securities and Exchange Commission, the Fund, along with other affiliated
funds
 advised by the Manager, may transfer uninvested cash balances into joint
 trading accounts on a daily basis. Secured by U.S. government securities,
these
 balances are invested in one or more repurchase agreements. 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. 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 on a
 daily basis 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 comply with provisions of the Internal
 Revenue Code applicable to regulated investment companies and to distribute
 substantially all of its investment company taxable income, including any net
 realized gain on investments not offset by capital loss carryforwards, if
any,
 to shareholders.

 The tax components of capital shown in the table below represent distribution
 requirements the Fund must satisfy under the income tax regulations, losses
the
 Fund may be able to offset against income and gains realized in future years
 and unrealized appreciation or depreciation of securities and other
investments
 for federal income tax purposes.
                                                             NET UNREALIZED
                                                               APPRECIATION
                                                           BASED ON COST OF
                                                             SECURITIES AND
   UNDISTRIBUTED    UNDISTRIBUTED          ACCUMULATED    OTHER INVESTMENTS
   NET INVESTMENT       LONG-TERM                 LOSS   FOR FEDERAL INCOME
   INCOME                    GAIN   CARRYFORWARD 1,2,3         TAX PURPOSES
   ------------------------------------------------------------------------
   $11,726,473                $--         $323,985,981         $203,362,073

 1. As of December 31, 2003, the Fund had $323,017,642 of net capital loss
 carryforwards available to offset future realized capital gains, if any, and
 thereby reduce future taxable gain distributions. As of December 31, 2003,
 details of the capital loss carryforwards were as follows:

                              EXPIRING
                              ---------------------------------------
                              2008                       $ 28,801,633
                              2009                        140,898,750
                              2010                        126,747,906
                              2011                         26,569,353
                                                         ------------
                              Total                      $323,017,642
                                                         ============

 2. During the fiscal years ended December 31, 2003 and December 31, 2002, the
 Fund did not utilize any capital loss carryforwards.
 3. As of December 31, 2003, the Fund had $968,194 of post-October losses
 available to offset future realized capital gains, if any. Such losses, if
 unutilized, will expire in 2012. Additionally, the Fund had $147 of
 post-October foreign currency losses which were deferred.

 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. Accordingly,
 the following amounts have been reclassified for December 31, 2003. Net
assets
 of the Fund were unaffected by the reclassifications.

                                                    REDUCTION TO
                 REDUCTION TO                    ACCUMULATED NET
                 ACCUMULATED NET                   REALIZED LOSS
                 INVESTMENT INCOME                ON INVESTMENTS
                 -----------------------------------------------
                 $41,130                                 $41,130

 The tax character of distributions paid during the years ended December 31,
 2003 and December 31, 2002 was as follows:

                                         YEAR ENDED           YEAR ENDED
                                  DECEMBER 31, 2003    DECEMBER 31, 2002
     -------------------------------------------------------------------
     Distributions paid from:
     Ordinary income                     $9,771,603           $7,587,779

 The aggregate cost of securities and other investments and the composition of
 unrealized appreciation and depreciation of securities and other investments
 for federal income tax purposes as of December 31, 2003 are noted below. The
 primary difference between book and tax appreciation or depreciation of
 securities and other investments, if applicable, is attributable to the tax
 deferral of losses or tax realization of financial statement unrealized gain
or
 loss.

             Federal tax cost of securities                $1,180,481,726
                                                           ==============

             Gross unrealized appreciation                 $  218,060,847
             Gross unrealized depreciation                   (14,698,774)
                                                           --------------
             Net unrealized appreciation                   $  203,362,073
                                                           ==============

NOTES TO FINANCIAL STATEMENTS  CONTINUED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 1. SIGNIFICANT ACCOUNTING POLICIES Continued
 TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
 compensation plan for independent trustees that enables trustees to elect to
 defer receipt of all or a portion of the annual compensation they are
entitled
 to receive from the Fund. Under the plan, deferred amounts are treated as
 though equal dollar amounts had been invested in shares of the Fund or are
 invested in other Oppenheimer funds selected by the Trustee. Deferral of
 trustees' fees under the plan will not affect the net assets of the Fund, and
 will not materially affect the Fund's assets, liabilities or net investment
 income per share. Amounts will be deferred until distributed in accordance to
 the Plan.

- --------------------------------------------------------------------------------
 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. Income and capital gain distributions,
if
 any, are declared and paid annually.

- --------------------------------------------------------------------------------
 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.

- --------------------------------------------------------------------------------
 EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
 represents earnings on cash balances maintained by the Fund.

- --------------------------------------------------------------------------------
 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,
2003         YEAR ENDED DECEMBER 31, 2002
                                                    SHARES
AMOUNT          SHARES               AMOUNT
- ---------------------------------------------------------------------------------------------------------------------
 NON-SERVICE SHARES

 Sold                                           19,380,163        $
327,567,787      11,919,835        $ 204,743,555
 Dividends and/or distributions reinvested         639,048
9,176,729         383,139            7,425,251
 Redeemed                                      (14,871,791)
(248,484,922)    (10,772,337)        (177,703,951)

- ----------------------------------------------------------------------
 Net increase                                    5,147,420        $
88,259,594       1,530,637        $  34,464,855

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


- ---------------------------------------------------------------------------------------------------------------------
 SERVICE SHARES
 Sold                                            5,793,833        $
97,063,016       2,415,625        $  40,562,767
 Dividends and/or distributions reinvested          41,628
594,874           8,403              162,528
 Redeemed                                         (511,472)
(8,505,770)       (158,496)          (2,452,203)

- ----------------------------------------------------------------------
 Net increase                                    5,323,989        $
89,152,120       2,265,532        $  38,273,092

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

- --------------------------------------------------------------------------------
 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, 2003, were
 $1,096,324,880 and $912,038,186, respectively.

- --------------------------------------------------------------------------------
 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 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.

- --------------------------------------------------------------------------------
 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 per account fee. For the year ended December 31, 2003, the
Fund
 paid $20,025 to OFS for services to the Fund.
    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. Fees incurred by the Fund under the plan are detailed in the
 Statement of Operations.


- --------------------------------------------------------------------------------
 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 for protection from 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
 foreign transaction. Contracts closed or settled with the same broker are
 recorded as net realized gains or losses. Such realized gains and losses are
 reported with all other foreign currency gains and losses in the Statement of
 Operations.
    As of December 31, 2003, the Fund had no outstanding foreign currency
 contracts.


- --------------------------------------------------------------------------------
 6. ILLIQUID SECURITIES
 As of December 31, 2003, investments in securities included issues that are
 illiquid or restricted. Restricted securities are 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, 2003
was
 $7,360, which represents less than 0.01% of the Fund's net assets.


NOTES TO FINANCIAL STATEMENTS  CONTINUED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 7. SECURITIES LENDING
 The Fund lends portfolio securities from time to time in order to earn
 additional income. In return, the Fund receives collateral in the form of US
 Treasury obligations or cash, against the loaned securities and maintains
 collateral in an amount not less than 100% of the market value of the loaned
 securities during the period of the loan. The market value of the loaned
 securities is determined at the close of business of the funds and any
 additional required collateral is delivered to the Fund on the next business
 day. If the borrower defaults on its obligation to return the securities
loaned
 because of insolvency or other reasons, the Fund could experience delays and
 cost in recovering the securities loaned or in gaining access to the
 collateral. Cash collateral is invested in cash equivalents. As of December
31,
 2003, the Fund had on loan securities valued at approximately $81,930,000.
Cash
 of $84,039,380 was received as collateral for the loans, and has been
invested
 in approved instruments.

- --------------------------------------------------------------------------------
 8. BORROWING AND LENDING ARRANGEMENTS
 The Fund entered into an "interfund borrowing and lending arrangement" with
 other funds in the Oppenheimer funds complex, to allow funds to borrow for
 liquidity purposes. The arrangement was initiated pursuant to exemptive
relief
 granted by the Securities and Exchange Commission (the SEC) to allow these
 affiliated funds to lend money to, and borrow money from, each other, in an
 attempt to reduce borrowing costs below those of bank loan facilities. The
 SEC's order requires the Fund's Board of Trustees to adopt operating policies
 and procedures to administer interfund borrowing and lending. Under the
 arrangement the Fund may lend money to other Oppenheimer funds and may borrow
 from other Oppenheimer funds at a rate set by the Fund's Board of Trustees,
 based upon a recommendation by the Manager. The Fund's borrowings, if any,
are
 subject to asset coverage requirements under the Investment Company Act and
the
 provisions of the SEC order and other applicable regulations. If the Fund
 borrows money, there is a risk that the loan could be called on one day's
 notice, in which case the Fund might have to borrow from a bank at higher
rates
 if a loan were not available from another Oppenheimer fund. If the Fund lends
 money to another fund, it will be subject to the risk that the other fund
might
 not repay the loan in a timely manner, or at all.
    The Fund had no interfund borrowings or loans outstanding during the year
 ended or at December 31, 2003.

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,  a series of  Oppenheimer  Variable
Account Funds, including the statement of investments,  as of December 31, 2003,
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, 2003, 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, 2003,  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
 February 12, 2004

OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS  December 31, 2003
- ----------------------------------------------------------------

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 COMMON STOCKS--98.3%
- ----------------------------------------------------------------
 CONSUMER DISCRETIONARY--17.5%
- ----------------------------------------------------------------
 AUTO COMPONENTS--1.3%
 ArvinMeritor, Inc.                       6,700    $    161,604
- ----------------------------------------------------------------
 Cooper Tire & Rubber Co.                 2,000          42,760
- ----------------------------------------------------------------
 Dana Corp.                               5,900         108,265
- ----------------------------------------------------------------
 Drew Industries, Inc. 1                  6,500         180,700
- ----------------------------------------------------------------
 Dura Automotive Systems, Inc. 1          1,700          21,709
- ----------------------------------------------------------------
 Goodyear Tire & Rubber Co. 1             6,500          51,090
- ----------------------------------------------------------------
 IMPCO Technologies, Inc. 1               3,500          30,520
- ----------------------------------------------------------------
 Keystone Automotive Industries, Inc. 1   1,400          35,504
- ----------------------------------------------------------------
 Modine Manufacturing Co.                 6,700         180,766
- ----------------------------------------------------------------
 Quantum Fuel Systems
 Technologies Worldwide, Inc. 1           7,300          58,692
- ----------------------------------------------------------------
 Raytech Corp. 1                            100             332
- ----------------------------------------------------------------
 Sauer-Danfoss, Inc.                      1,400          22,680
- ----------------------------------------------------------------
 Spartan Motors, Inc.                     1,500          15,150
- ----------------------------------------------------------------
 Stoneridge, Inc. 1                         400           6,020
- ----------------------------------------------------------------
 Strattec Security Corp. 1                  300          18,273
- ----------------------------------------------------------------
 Tenneco Automotive, Inc. 1              15,500         103,695
- ----------------------------------------------------------------
 Tower Automotive, Inc. 1                 1,900          12,977
- ----------------------------------------------------------------
 Universal Technical Institute, Inc. 1    2,900          87,000
- ----------------------------------------------------------------
 Visteon Corp.                            7,100          73,911
                                                   -------------
                                                      1,211,648

- ----------------------------------------------------------------
 AUTOMOBILES--0.1%
 Coachmen Industries, Inc.                1,200          21,732
- ----------------------------------------------------------------
 Thor Industries, Inc.                    1,200          67,464
- ----------------------------------------------------------------
 Winnebago Industries, Inc.                 500          34,375
                                                   -------------
                                                        123,571

- ----------------------------------------------------------------
 DISTRIBUTORS--0.2%
 Andersons, Inc. (The)                      400           6,387
- ----------------------------------------------------------------
 Handleman Co.                            5,200         106,756
- ----------------------------------------------------------------
 Pomeroy Computer Resources, Inc.           400           5,896
- ----------------------------------------------------------------
 Source Information
 Management Co. (The) 1                   4,500          47,790
- ----------------------------------------------------------------
 WESCO International, Inc. 1                100             885
                                                   -------------
                                                        167,714

- ----------------------------------------------------------------
 HOTELS, RESTAURANTS & LEISURE--3.2%
 Alliance Gaming Corp. 1                  7,600         187,340
- ----------------------------------------------------------------
 Ambassadors Group, Inc.                  1,100          25,839
- ----------------------------------------------------------------
 Argosy Gaming Co. 1                      2,200          57,178
- ----------------------------------------------------------------
 Aztar Corp. 1                           12,300         276,750
- ----------------------------------------------------------------
 Buffalo Wild Wings, Inc. 1               1,300          33,735
- ----------------------------------------------------------------
 CBRL Group, Inc.                         1,600          61,216
- ----------------------------------------------------------------
 CEC Entertainment, Inc. 1                5,500         260,645

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 HOTELS, RESTAURANTS & LEISURE Continued
 Checkers Drive-In Restaurants, Inc. 1    2,000    $     20,820
- ----------------------------------------------------------------
 Choice Hotels International, Inc. 1      6,400         225,600
- ----------------------------------------------------------------
 Dave & Buster's, Inc. 1                  7,600          96,368
- ----------------------------------------------------------------
 Dover Downs Gaming
 & Entertainment, Inc.                    1,300          12,298
- ----------------------------------------------------------------
 Frisch's Restaurants, Inc.                 100           2,880
- ----------------------------------------------------------------
 Isle of Capri Casinos, Inc. 1            8,000         171,760
- ----------------------------------------------------------------
 Jack in the Box, Inc. 1                  7,700         164,472
- ----------------------------------------------------------------
 Multimedia Games, Inc. 1                 3,600         147,960
- ----------------------------------------------------------------
 Orbitz, Inc., Cl. A 1                    1,900          44,080
- ----------------------------------------------------------------
 Papa John's International, Inc. 1        2,700          90,126
- ----------------------------------------------------------------
 Penn National Gaming, Inc. 1             4,100          94,628
- ----------------------------------------------------------------
 Pinnacle Entertainment, Inc. 1           3,200          29,824
- ----------------------------------------------------------------
 Prime Hospitality Corp. 1                6,300          64,260
- ----------------------------------------------------------------
 Rare Hospitality International, Inc. 1   7,950         194,298
- ----------------------------------------------------------------
 Ryan's Family Steak Houses, Inc. 1       2,000          30,280
- ----------------------------------------------------------------
 Scientific Games Corp., Cl. A 1          7,900         134,379
- ----------------------------------------------------------------
 Shuffle Master, Inc. 1                   2,800          96,936
- ----------------------------------------------------------------
 Six Flags, Inc. 1                       15,300         115,056
- ----------------------------------------------------------------
 Steak n Shake Co. (The) 1                3,500          62,475
- ----------------------------------------------------------------
 Total Entertainment Restaurant Corp. 1   3,100          37,448
- ----------------------------------------------------------------
 WMS Industries, Inc. 1                   6,500         170,300
                                                   -------------
                                                      2,908,951

- ----------------------------------------------------------------
 HOUSEHOLD DURABLES--3.0%
 Beazer Homes USA, Inc.                   3,100         302,746
- ----------------------------------------------------------------
 Blount International, Inc. 1               100             787
- ----------------------------------------------------------------
 Boyds Collection Ltd. (The) 1              900           3,825
- ----------------------------------------------------------------
 Brookfield Homes Corp.                   2,900          74,733
- ----------------------------------------------------------------
 Chromcraft Revington, Inc. 1               200           2,268
- ----------------------------------------------------------------
 CSS Industries, Inc.                     2,600          80,626
- ----------------------------------------------------------------
 Department 56, Inc. 1                    2,100          27,510
- ----------------------------------------------------------------
 Emerson Radio Corp. 1                    2,000           7,520
- ----------------------------------------------------------------
 Enesco Group, Inc. 1                       800           8,256
- ----------------------------------------------------------------
 Flexsteel Industries, Inc.                 100           2,250
- ----------------------------------------------------------------
 Helen of Troy Ltd. 1                     6,600         152,790
- ----------------------------------------------------------------
 Hooker Furniture Corp.                   1,100          44,880
- ----------------------------------------------------------------
 Hovnanian Enterprises, Inc., Cl. A 1     1,000          87,060
- ----------------------------------------------------------------
 Interface, Inc., Cl. A 1                 2,100          11,613
- ----------------------------------------------------------------
 Jarden Corp. 1                           8,200         224,188
- ----------------------------------------------------------------
 Kimball International, Inc., Cl. B       1,500          23,325
- ----------------------------------------------------------------
 Libbey, Inc.                               100           2,848
- ----------------------------------------------------------------
 M.D.C. Holdings, Inc.                    1,619         104,426
- ----------------------------------------------------------------
 M/I Schottenstein Homes, Inc.            3,400         132,770
- ----------------------------------------------------------------
 Meritage Corp. 1                         4,000         265,240
- ----------------------------------------------------------------
 Mestek, Inc. 1                           1,000          19,260

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 HOUSEHOLD DURABLES Continued
 Movado Group, Inc.                       1,700   $      47,991
- ----------------------------------------------------------------
 National Presto Industries, Inc.           500          18,075
- ----------------------------------------------------------------
 Russ Berrie & Co., Inc.                    800          27,120
- ----------------------------------------------------------------
 Ryland Group, Inc. (The)                   500          44,320
- ----------------------------------------------------------------
 Standard Pacific Corp.                   6,300         305,865
- ----------------------------------------------------------------
 Stanley Furniture Co., Inc.                600          18,900
- ----------------------------------------------------------------
 Technical Olympic USA, Inc. 1            5,300         145,909
- ----------------------------------------------------------------
 Tempur-Pedic International, Inc. 1       8,300         128,650
- ----------------------------------------------------------------
 Tripath Technology, Inc. 1              12,700          87,630
- ----------------------------------------------------------------
 William Lyon Homes, Inc. 1               2,800         175,756
- ----------------------------------------------------------------
 Yankee Candle, Inc. (The) 1              4,600         125,718
                                                   -------------
                                                      2,704,855

- ----------------------------------------------------------------
 INTERNET & CATALOG RETAIL--0.2%
 Coldwater Creek, Inc. 1                    700           7,700
- ----------------------------------------------------------------
 FTD, Inc., Cl. A 1                         200           4,928
- ----------------------------------------------------------------
 PC Connection, Inc. 1                    5,900          49,383
- ----------------------------------------------------------------
 Provide Commerce, Inc. 1                 3,700          56,129
- ----------------------------------------------------------------
 ValueVision Media, Inc., Cl. A 1         1,300          21,710
                                                   -------------
                                                        139,850

- ----------------------------------------------------------------
 LEISURE EQUIPMENT & PRODUCTS--1.2%
 Action Performance Cos., Inc.            6,800         133,280
- ----------------------------------------------------------------
 Arctic Cat, Inc.                           200           4,940
- ----------------------------------------------------------------
 Callaway Golf Co.                       13,900         234,215
- ----------------------------------------------------------------
 Concord Camera Corp. 1                   5,100          47,175
- ----------------------------------------------------------------
 Marine Products Corp.                      100           1,880
- ----------------------------------------------------------------
 MarineMax, Inc. 1                       10,500         204,015
- ----------------------------------------------------------------
 Marvel Enterprises, Inc. 1               5,500         160,105
- ----------------------------------------------------------------
 Nautilus Group, Inc. (The)               9,900         139,095
- ----------------------------------------------------------------
 RC2 Corp. 1                                500          10,375
- ----------------------------------------------------------------
 SCP Pool Corp. 1                         2,875          93,955
- ----------------------------------------------------------------
 Steinway Musical Instruments, Inc. 1       200           4,940
- ----------------------------------------------------------------
 Sturm, Ruger & Co., Inc.                 1,900          21,603
                                                   -------------
                                                      1,055,578

- ----------------------------------------------------------------
 MEDIA--1.4%
 Acme Communications, Inc. 1                100             879
- ----------------------------------------------------------------
 Advo, Inc.                               2,950          93,692
- ----------------------------------------------------------------
 APAC Teleservices, Inc. 1                1,800           4,680
- ----------------------------------------------------------------
 Carmike Cinemas, Inc. 1                    500          17,425
- ----------------------------------------------------------------
 Courier Corp.                              450          17,312
- ----------------------------------------------------------------
 Digital Generation Systems, Inc. 1       8,800          19,712
- ----------------------------------------------------------------
 Entravision Communications Corp. 1       4,600          51,060
- ----------------------------------------------------------------
 Grey Global Group, Inc.                    300         204,915
- ----------------------------------------------------------------
 Hollinger International, Inc.            3,100          48,422
- ----------------------------------------------------------------
 Insight Communications Co., Inc. 1      12,400         127,844

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 MEDIA Continued
 Knology, Inc. 1                          6,800    $     61,336
- ----------------------------------------------------------------
 Mediacom Communications Corp. 1          7,300          63,291
- ----------------------------------------------------------------
 Pegasus Communications Corp. 1             100           2,808
- ----------------------------------------------------------------
 R.H. Donnelley Corp. 1                   6,800         270,912
- ----------------------------------------------------------------
 RCN Corp. 1                              8,200           6,560
- ----------------------------------------------------------------
 Salem Communications Corp., Cl. A 1      1,200          32,544
- ----------------------------------------------------------------
 Thomas Nelson, Inc.                      3,700          71,521
- ----------------------------------------------------------------
 TiVo, Inc. 1                            17,200         127,280
- ----------------------------------------------------------------
 Young Broadcasting, Inc., Cl. A 1          500          10,020
                                                   -------------
                                                      1,232,213

- ----------------------------------------------------------------
 MULTILINE RETAIL--0.0%
 Bon-Ton Stores, Inc.                     1,000          11,100
- ----------------------------------------------------------------
 Shopko Stores, Inc. 1                      600           9,150
                                                   -------------
                                                         20,250

- ----------------------------------------------------------------
 SPECIALTY RETAIL--5.1%
 Aeropostale, Inc. 1                      7,600         208,392
- ----------------------------------------------------------------
 America's Car-Mart, Inc. 1               2,100          56,532
- ----------------------------------------------------------------
 Asbury Automotive Group, Inc. 1            700          12,537
- ----------------------------------------------------------------
 Big 5 Sporting Goods Corp. 1             2,900          60,755
- ----------------------------------------------------------------
 Blair Corp.                              2,300          55,982
- ----------------------------------------------------------------
 Bombay Co., Inc. (The) 1                15,700         127,798
- ----------------------------------------------------------------
 Borders Group, Inc. 1                    1,200          26,304
- ----------------------------------------------------------------
 Brookstone, Inc. 1                       7,450         158,760
- ----------------------------------------------------------------
 Buckle, Inc. (The)                       1,200          26,580
- ----------------------------------------------------------------
 Building Materials Holding Corp.         6,200          96,286
- ----------------------------------------------------------------
 Cache, Inc. 1                            2,200          45,826
- ----------------------------------------------------------------
 Casual Male Retail Group, Inc. 1         1,900          13,186
- ----------------------------------------------------------------
 Christopher & Banks Corp.                8,800         171,864
- ----------------------------------------------------------------
 Claire's Stores, Inc.                    6,400         120,576
- ----------------------------------------------------------------
 Cost Plus, Inc. 1                          300          12,300
- ----------------------------------------------------------------
 CSK Auto Corp. 1                         3,600          67,572
- ----------------------------------------------------------------
 Dress Barn, Inc. (The) 1                 5,000          74,950
- ----------------------------------------------------------------
 Finish Line, Inc. (The), Cl. A 1         6,800         203,796
- ----------------------------------------------------------------
 Finlay Enterprises, Inc. 1               1,800          25,434
- ----------------------------------------------------------------
 Footstar, Inc. 1                        16,200          62,856
- ----------------------------------------------------------------
 Friedman's, Inc., Cl. A                  1,000           6,710
- ----------------------------------------------------------------
 GameStop Corp. 1                         5,200          80,132
- ----------------------------------------------------------------
 Goody's Family Clothing, Inc.            7,700          72,072
- ----------------------------------------------------------------
 Guess?, Inc. 1                           7,600          91,732
- ----------------------------------------------------------------
 Hancock Fabrics, Inc.                    4,300          62,264
- ----------------------------------------------------------------
 Hibbett Sporting Goods, Inc. 1           3,150          93,870
- ----------------------------------------------------------------
 Hollywood Entertainment Corp. 1         13,000         178,750
- ----------------------------------------------------------------
 Hot Topic, Inc. 1                        5,550         163,503
- ----------------------------------------------------------------
 Jos. A. Banks Clothiers, Inc. 1          3,600         124,884


STATEMENT OF INVESTMENTS  Continued
- ----------------------------------------------------------------

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 SPECIALTY RETAIL Continued
 Loehmann's Holdings, Inc. 1              1,400    $     26,852
- ----------------------------------------------------------------
 Men's Wearhouse, Inc. (The) 1            9,100         227,591
- ----------------------------------------------------------------
 Monro Muffler Brake, Inc. 1              2,700          54,027
- ----------------------------------------------------------------
 Movie Gallery, Inc. 1                    8,325         155,511
- ----------------------------------------------------------------
 NetFlix.com, Inc. 1                      4,800         262,512
- ----------------------------------------------------------------
 Pacific Sunwear of California, Inc.      5,875         124,080
- ----------------------------------------------------------------
 Rent-Way, Inc. 1                         1,600          13,104
- ----------------------------------------------------------------
 Restoration Hardware, Inc. 1             3,800          18,050
- ----------------------------------------------------------------
 Rex Stores Corp. 1                       1,500          21,240
- ----------------------------------------------------------------
 Select Comfort Corp. 1                   6,900         170,844
- ----------------------------------------------------------------
 Sharper Image Corp. 1                    5,700         186,105
- ----------------------------------------------------------------
 Shoe Carnival, Inc. 1                      700          12,460
- ----------------------------------------------------------------
 Sports Authority, Inc. (The) 1           4,261         163,622
- ----------------------------------------------------------------
 Syms Corp. 1                               400           2,756
- ----------------------------------------------------------------
 TBC Corp. 1                              5,500         141,955
- ----------------------------------------------------------------
 Tractor Supply Co. 1                     2,600         101,114
- ----------------------------------------------------------------
 Trans World Entertainment Corp. 1          900           6,408
- ----------------------------------------------------------------
 Tuesday Morning Corp. 1                  4,800         145,200
- ----------------------------------------------------------------
 Tweeter Home Entertainment
 Group, Inc. 1                            2,600          24,570
- ----------------------------------------------------------------
 United Auto Group, Inc.                  5,800         181,540
- ----------------------------------------------------------------
 Whitehall Jewellers, Inc. 1                900           8,883
- ----------------------------------------------------------------
 Wilsons The Leather Experts, Inc. 1      2,500           8,725
- ----------------------------------------------------------------
 Zale Corp. 1                               900          47,880
                                                   -------------
                                                      4,607,232

- ----------------------------------------------------------------
 TEXTILES, APPAREL & LUXURY GOODS--1.8%
 Ashworth, Inc. 1                           600           4,842
- ----------------------------------------------------------------
 Brown Shoe Co., Inc.                     4,600         174,478
- ----------------------------------------------------------------
 Cherokee, Inc.                             900          20,466
- ----------------------------------------------------------------
 Culp, Inc. 1                             2,100          22,890
- ----------------------------------------------------------------
 Deckers Outdoor Corp. 1                  2,100          43,050
- ----------------------------------------------------------------
 DHB Industries, Inc. 1                   9,000          63,000
- ----------------------------------------------------------------
 Gildan Activewear, Inc., Cl. A 1           200           6,176
- ----------------------------------------------------------------
 Hampshire Group Ltd. 1                   3,400         106,658
- ----------------------------------------------------------------
 K-Swiss, Inc., Cl. A                    10,200         245,412
- ----------------------------------------------------------------
 Kenneth Cole Productions, Inc., Cl. A    4,000         117,600
- ----------------------------------------------------------------
 OshKosh B'Gosh, Inc., Cl. A              1,700          36,482
- ----------------------------------------------------------------
 Perry Ellis International, Inc. 1        1,000          25,780
- ----------------------------------------------------------------
 Russell Corp.                            1,000          17,560
- ----------------------------------------------------------------
 Steven Madden Ltd. 1                     5,100         104,040
- ----------------------------------------------------------------
 Stride Rite Corp.                       11,100         126,318
- ----------------------------------------------------------------
 Timberland Co., Cl. A 1                    400          20,828
- ----------------------------------------------------------------
 Tommy Hilfiger Corp. 1                   9,500         140,695
- ----------------------------------------------------------------
 Unifi, Inc. 1                            5,700          36,765
- ----------------------------------------------------------------
 UniFirst Corp.                             100           2,371

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 TEXTILES, APPAREL & LUXURY GOODS Continued
 Vans, Inc. 1                             2,400    $     27,384
- ----------------------------------------------------------------
 Warnaco Group, Inc. (The) 1              6,500         103,675
- ----------------------------------------------------------------
 Weyco Group, Inc.                          300          10,095
- ----------------------------------------------------------------
 Wolverine World Wide, Inc.               7,300         148,774
                                                   -------------
                                                      1,605,339

- ----------------------------------------------------------------
 CONSUMER STAPLES--2.6%
- ----------------------------------------------------------------
 BEVERAGES--0.0%
 Coca-Cola Bottling Co. Consolidated        200          10,698
- ----------------------------------------------------------------
 National Beverage Corp. 1                  500           8,150
                                                   -------------
                                                         18,848

- ----------------------------------------------------------------
 FOOD & STAPLES RETAILING--0.6%
 Arden Group, Inc., Cl. A                   300          23,250
- ----------------------------------------------------------------
 BJ's Wholesale Club, Inc. 1              1,300          29,848
- ----------------------------------------------------------------
 Casey's General Stores, Inc.             1,400          24,724
- ----------------------------------------------------------------
 Central European Distribution Corp. 1    1,300          41,080
- ----------------------------------------------------------------
 Chronimed, Inc. 1                        5,600          47,488
- ----------------------------------------------------------------
 Ingles Markets, Inc., Cl. A                200           2,054
- ----------------------------------------------------------------
 Longs Drug Stores, Inc.                  1,200          29,688
- ----------------------------------------------------------------
 Pantry, Inc. (The) 1                     1,500          34,050
- ----------------------------------------------------------------
 Pathmark Stores, Inc. 1                  3,800          28,880
- ----------------------------------------------------------------
 Ruddick Corp.                            2,000          35,800
- ----------------------------------------------------------------
 Smart & Final, Inc. 1                    2,900          29,232
- ----------------------------------------------------------------
 United Natural Foods, Inc. 1               400          14,364
- ----------------------------------------------------------------
 Weis Markets, Inc.                       4,300         156,090
- ----------------------------------------------------------------
 Winn-Dixie Stores, Inc.                  3,600          35,820
                                                   -------------
                                                        532,368
- ----------------------------------------------------------------
 FOOD PRODUCTS--1.0%
 Alico, Inc.                                300          10,428
- ----------------------------------------------------------------
 Central Garden & Pet Co. 1               1,000          28,030
- ----------------------------------------------------------------
 Chiquita Brands International, Inc. 1    8,400         189,252
- ----------------------------------------------------------------
 Corn Products International, Inc.          600          20,670
- ----------------------------------------------------------------
 Del Monte Foods Co. 1                    1,100          11,440
- ----------------------------------------------------------------
 Flowers Foods, Inc.                      8,100         208,980
- ----------------------------------------------------------------
 Horizon Organic Holding Corp. 1            100           2,395
- ----------------------------------------------------------------
 International Multifoods Corp. 1           800          14,400
- ----------------------------------------------------------------
 J&J Snack Foods Corp. 1                  1,300          49,088
- ----------------------------------------------------------------
 M&F Worldwide Corp. 1                    8,100         108,216
- ----------------------------------------------------------------
 MGP Ingredients, Inc.                      300           4,725
- ----------------------------------------------------------------
 Omega Protein Corp. 1                   10,900          84,148
- ----------------------------------------------------------------
 Peet's Coffee & Tea, Inc. 1              2,200          38,302
- ----------------------------------------------------------------
 Sanderson Farms, Inc.                    3,300         132,990
- ----------------------------------------------------------------
 Sanfilippo (John B.) & Son, Inc. 1         200          10,208
- ----------------------------------------------------------------
 Seaboard Corp.                             100          28,200
                                                   -------------
                                                        941,472

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 HOUSEHOLD PRODUCTS--0.5%
 Chattem, Inc. 1                          2,500    $     44,750
- ----------------------------------------------------------------
 Energizer Holdings, Inc. 1                 600          22,536
- ----------------------------------------------------------------
 Nu Skin Asia Pacific, Inc., Cl. A          700          11,963
- ----------------------------------------------------------------
 Rayovac Corp. 1                          8,600         180,170
- ----------------------------------------------------------------
 Revlon, Inc., Cl. A 1                      100             224
- ----------------------------------------------------------------
 WD-40 Co.                                4,900         173,264
                                                   -------------
                                                        432,907
- ----------------------------------------------------------------
 PERSONAL PRODUCTS--0.4%
 Del Laboratories, Inc.                   2,537          63,425
- ----------------------------------------------------------------
 First Years, Inc. (The)                    900          13,446
- ----------------------------------------------------------------
 Nature's Sunshine Products, Inc.           500           4,225
- ----------------------------------------------------------------
 NBTY, Inc. 1                               600          16,116
- ----------------------------------------------------------------
 USANA Health Sciences, Inc. 1            8,900         272,340
                                                   -------------
                                                        369,552
- ----------------------------------------------------------------
 TOBACCO--0.1%
 Standard Commercial Corp.                  400           8,028
- ----------------------------------------------------------------
 Star Scientific, Inc. 1                    700           1,288
- ----------------------------------------------------------------
 Universal Corp.                          1,100          48,587
- ----------------------------------------------------------------
 Vector Group Ltd.                          300           4,896
                                                   -------------
                                                         62,799
- ----------------------------------------------------------------
 ENERGY--5.1%
- ----------------------------------------------------------------
 ENERGY EQUIPMENT & SERVICES--0.7%
 Carbo Ceramics, Inc.                       200          10,250
- ----------------------------------------------------------------
 CHC Helicopter Corp., Cl. A                700          17,876
- ----------------------------------------------------------------
 Ensign Resource Service Group, Inc.      3,700          58,982
- ----------------------------------------------------------------
 Gulf Island Fabrication, Inc. 1          1,200          20,436
- ----------------------------------------------------------------
 Gulfmark Offshore, Inc. 1                  700           9,800
- ----------------------------------------------------------------
 Key Energy Services, Inc. 1             10,000         103,100
- ----------------------------------------------------------------
 Matrix Service Co. 1                     5,600         101,640
- ----------------------------------------------------------------
 Oil States International, Inc. 1        13,200         184,008
- ----------------------------------------------------------------
 Seabulk International, Inc. 1              400           3,248
- ----------------------------------------------------------------
 Tesco Corp. 1                            2,400          19,594
- ----------------------------------------------------------------
 Trican Well Service Ltd. 1               4,100          87,885
- ----------------------------------------------------------------
 Unit Corp. 1                               500          11,775
                                                   -------------
                                                        628,594
- ----------------------------------------------------------------
 OIL & GAS--4.4%
 BlackRock Ventures, Inc. 1              20,000          64,229
- ----------------------------------------------------------------
 Brown (Tom), Inc. 1                      2,200          70,950
- ----------------------------------------------------------------
 Cabot Oil & Gas Corp., Cl. A             1,900          55,765
- ----------------------------------------------------------------
 Callon Petroleum Co. 1                   4,600          47,702
- ----------------------------------------------------------------
 Canadian Superior Energy, Inc. 1        35,000          88,296
- ----------------------------------------------------------------
 Chesapeake Energy Corp.                  6,500          88,270
- ----------------------------------------------------------------
 Cimarex Energy Co. 1                     5,490         146,528
- ----------------------------------------------------------------
 Clear Energy, Inc. 1                     9,133          25,090
- ----------------------------------------------------------------

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 OIL & GAS Continued
 Compton Petroleum Corp. 1                6,800    $     31,573
- ----------------------------------------------------------------
 Comstock Resources, Inc. 1              11,900         229,670
- ----------------------------------------------------------------
 Crew Energy, Inc. 1                      5,666          16,618
- ----------------------------------------------------------------
 Denbury Resources, Inc. 1               10,200         141,882
- ----------------------------------------------------------------
 Dominion Resources Black
 Warrior Trust                              300           8,550
- ----------------------------------------------------------------
 Encore Acquisition Co. 1                 1,100          27,115
- ----------------------------------------------------------------
 Energy Partners Ltd. 1                   6,100          84,790
- ----------------------------------------------------------------
 Esprit Exploration Ltd. 1,2             10,600          22,804
- ----------------------------------------------------------------
 Esprit Exploration Ltd. 1                9,700          20,867
- ----------------------------------------------------------------
 Frontier Oil Corp.                      11,000         189,420
- ----------------------------------------------------------------
 Holly Corp.                              4,900         134,750
- ----------------------------------------------------------------
 Houston Exploration Co. 1                2,900         105,908
- ----------------------------------------------------------------
 Impact Energy, Inc. 1                   61,500          64,248
- ----------------------------------------------------------------
 Kaneb Services LLC                         600          19,122
- ----------------------------------------------------------------
 Ketch Resources Ltd. 1                   4,900          34,127
- ----------------------------------------------------------------
 Magnum Hunter Resources, Inc. 1          5,000          47,550
- ----------------------------------------------------------------
 Maritrans, Inc.                          2,500          41,775
- ----------------------------------------------------------------
 McMoRan Exploration Co. 1                2,400          45,000
- ----------------------------------------------------------------
 Meridian Resource Corp. (The) 1         10,300          61,182
- ----------------------------------------------------------------
 North Coast Energy, Inc. 1                 100           1,069
- ----------------------------------------------------------------
 Nuevo Energy Co. 1                       2,900          70,093
- ----------------------------------------------------------------
 OMI Corp. 1                             22,000         196,460
- ----------------------------------------------------------------
 Overseas Shipholding Group, Inc.         1,400          47,670
- ----------------------------------------------------------------
 Paramount Resources Ltd.                 5,400          43,668
- ----------------------------------------------------------------
 Patina Oil & Gas Corp.                   3,556         174,208
- ----------------------------------------------------------------
 Penn Virginia Corp.                      2,700         150,255
- ----------------------------------------------------------------
 Petroleum Development Corp. 1              800          18,960
- ----------------------------------------------------------------
 Pogo Producing Co.                       1,000          48,300
- ----------------------------------------------------------------
 Prima Energy Corp. 1                       300          10,548
- ----------------------------------------------------------------
 Progress Energy Ltd. 1                   9,700          93,266
- ----------------------------------------------------------------
 Purcell Energy Ltd. 1                    3,600           7,104
- ----------------------------------------------------------------
 Range Resources Corp. 1                  2,500          23,625
- ----------------------------------------------------------------
 Real Resources, Inc. 1                   3,800          16,173
- ----------------------------------------------------------------
 Remington Oil & Gas Corp. 1              4,600          90,574
- ----------------------------------------------------------------
 Resource America, Inc., Cl. A              800          12,000
- ----------------------------------------------------------------
 Rio Alto Resources
 International, Inc. 1                   12,600           8,678
- ----------------------------------------------------------------
 St. Mary Land & Exploration Co.          1,000          28,500
- ----------------------------------------------------------------
 StarPoint Energy Ltd. 1                  1,800           6,282
- ----------------------------------------------------------------
 Stelmar Shipping Ltd.                    1,600          34,976
- ----------------------------------------------------------------
 Stone Energy Corp. 1                     5,300         224,985
- ----------------------------------------------------------------
 Swift Energy Co. 1                       1,800          30,330
- ----------------------------------------------------------------
 Tesoro Petroleum Corp. 1                17,200         250,604
- ----------------------------------------------------------------
 TransMontaigne, Inc. 1                     200           1,290
- ----------------------------------------------------------------
 Tusk Energy, Inc. 1                     11,700          34,224
- ----------------------------------------------------------------
 Upton Resources, Inc. 1                 10,000          37,686


STATEMENT OF INVESTMENTS Continued

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 OIL & GAS Continued
 Western Gas Resources, Inc.              3,600    $    170,100
- ----------------------------------------------------------------
 Whiting Petroleum Corp. 1                2,100          38,640
- ----------------------------------------------------------------
 Williams (Clayton) Energy, Inc. 1          400          11,628
- ----------------------------------------------------------------
 World Fuel Services Corp.                4,300         145,985
                                                   -------------
                                                      3,941,662
- ----------------------------------------------------------------
 FINANCIALS--16.3%
- ----------------------------------------------------------------
 CAPITAL MARKETS--0.1%
 National Financial Partners Corp.        1,600          44,080
- ----------------------------------------------------------------
 SWS Group, Inc.                          1,900          33,820
                                                   -------------
                                                         77,900
- ----------------------------------------------------------------
 COMMERCIAL BANKS--9.1%
 Allegiant Bancorp, Inc.                    600          16,830
- ----------------------------------------------------------------
 Alliance Financial Corp.                   600          19,158
- ----------------------------------------------------------------
 AmericanWest Bancorporation              2,100          47,880
- ----------------------------------------------------------------
 Anchor BanCorp Wisconsin, Inc.           7,300         181,770
- ----------------------------------------------------------------
 Arrow Financial Corp.                      551          15,301
- ----------------------------------------------------------------
 Bank of the Ozarks, Inc.                   800          18,008
- ----------------------------------------------------------------
 BankAtlantic Bancorp, Inc.                 900          17,100
- ----------------------------------------------------------------
 BankUnited Financial Corp., Cl. A 1      2,200          56,738
- ----------------------------------------------------------------
 Bay View Capital Corp.                   4,800          10,272
- ----------------------------------------------------------------
 Berkshire Hills Bancorp, Inc.            1,300          47,060
- ----------------------------------------------------------------
 Brookline Bancorp, Inc.                  5,760          88,358
- ----------------------------------------------------------------
 Bryn Mawr Bank Corp.                       200           4,898
- ----------------------------------------------------------------
 C&F Financial Corp.                        200           7,940
- ----------------------------------------------------------------
 Camco Financial Corp.                    1,000          17,330
- ----------------------------------------------------------------
 Camden National Corp.                      600          18,216
- ----------------------------------------------------------------
 Capital City Bank Group, Inc.              825          37,942
- ----------------------------------------------------------------
 Capital Corp of the West                   200           7,928
- ----------------------------------------------------------------
 Capital Crossing Bank 1                    200           9,468
- ----------------------------------------------------------------
 Capitol Bancorp Ltd.                     1,200          34,080
- ----------------------------------------------------------------
 Cascade Bancorp                            700          13,482
- ----------------------------------------------------------------
 CB Bancshares, Inc.                      1,415          89,110
- ----------------------------------------------------------------
 Chemical Financial Corp.                   105           3,821
- ----------------------------------------------------------------
 Chester Valley Bancorp, Inc.               105           2,432
- ----------------------------------------------------------------
 Citizens First Bancorp, Inc.             1,500          34,200
- ----------------------------------------------------------------
 City Holding Co.                         2,500          87,500
- ----------------------------------------------------------------
 CNB Financial Corp.                        100           4,208
- ----------------------------------------------------------------
 CNB Florida Bancshares, Inc.               300           6,900
- ----------------------------------------------------------------
 Coastal Bancorp, Inc.                      100           4,111
- ----------------------------------------------------------------
 Columbia Bancorp, Eastern US               400          12,780
- ----------------------------------------------------------------
 Columbia Banking System, Inc.            6,100         132,126
- ----------------------------------------------------------------
 Commercial Bankshares, Inc.                125           4,195
- ----------------------------------------------------------------
 Community Bank System, Inc.              3,800         186,200
- ----------------------------------------------------------------
 Community First Bankshares, Inc.         7,200         208,368

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 COMMERCIAL BANKS Continued
 Community Trust Bancorp, Inc.              550    $     16,610
- ----------------------------------------------------------------
 Connecticut Bancshares, Inc.             1,400          72,156
- ----------------------------------------------------------------
 CVB Financial Corp.                      2,310          44,560
- ----------------------------------------------------------------
 Dime Community Bancshares, Inc.          4,475         137,651
- ----------------------------------------------------------------
 East West Bancorp, Inc.                  3,800         203,984
- ----------------------------------------------------------------
 Exchange National Bancshares, Inc.         300          10,845
- ----------------------------------------------------------------
 Fidelity Bankshares, Inc.                4,216         132,382
- ----------------------------------------------------------------
 First BanCorp, Puerto Rico               4,150         164,133
- ----------------------------------------------------------------
 First Busey Corp.                          200           5,400
- ----------------------------------------------------------------
 First Citizens BancShares, Inc., Cl. A     500          60,765
- ----------------------------------------------------------------
 First Community Bancshares, Inc.         1,610          53,388
- ----------------------------------------------------------------
 First Defiance Financial Corp.             500          13,325
- ----------------------------------------------------------------
 First Essex Bancorp, Inc.                  500          29,070
- ----------------------------------------------------------------
 First Federal Capital Corp.              2,700          60,804
- ----------------------------------------------------------------
 First Federal Financial Corp.
 of Kentucky                                100           2,515
- ----------------------------------------------------------------
 First Financial Corp.                      800          24,008
- ----------------------------------------------------------------
 First Financial Holdings, Inc.           2,100          65,646
- ----------------------------------------------------------------
 First Indiana Corp.                        475           8,906
- ----------------------------------------------------------------
 First M&F Corp.                            300          11,370
- ----------------------------------------------------------------
 First Merchants Corp.                    1,915          48,871
- ----------------------------------------------------------------
 First National Corp.                       200           6,002
- ----------------------------------------------------------------
 First Niagara Financial Group, Inc.      2,028          30,237
- ----------------------------------------------------------------
 First Oak Brook Bancshares, Inc.           300           9,003
- ----------------------------------------------------------------
 First of Long Island Corp. (The)           100           4,300
- ----------------------------------------------------------------
 First Place Financial Corp.              1,700          33,201
- ----------------------------------------------------------------
 First Republic Bank                      5,200         186,160
- ----------------------------------------------------------------
 First SecurityFed Financial, Inc.          100           3,034
- ----------------------------------------------------------------
 First Sentinel Bancorp, Inc.             1,900          40,014
- ----------------------------------------------------------------
 First South Bancorp, Inc.                  300          10,950
- ----------------------------------------------------------------
 First United Corp.                         100           2,437
- ----------------------------------------------------------------
 Firstbank Corp.                            210           6,544
- ----------------------------------------------------------------
 FirstFed America Bancorp, Inc.           2,900          75,487
- ----------------------------------------------------------------
 FirstFed Financial Corp. 1               3,900         169,650
- ----------------------------------------------------------------
 Flagstar Bancorp, Inc.                   6,750         144,585
- ----------------------------------------------------------------
 Flushing Financial Corp.                 3,075          56,211
- ----------------------------------------------------------------
 FNB Corp., North Carolina                  300           6,354
- ----------------------------------------------------------------
 Foothill Independent Bancorp               200           4,732
- ----------------------------------------------------------------
 Frontier Financial Corp.                   500          16,580
- ----------------------------------------------------------------
 Glacier Bancorp, Inc.                    2,840          92,016
- ----------------------------------------------------------------
 Hancock Holding Co.                        400          21,828
- ----------------------------------------------------------------
 Hanmi Financial Corp.                    2,500          49,425
- ----------------------------------------------------------------
 Harbor Florida Bancshares, Inc.          6,100         181,231
- ----------------------------------------------------------------
 Harleysville National Corp.              2,025          60,953
- ----------------------------------------------------------------
 Hawthorne Financial Corp. 1              2,550          71,349

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 COMMERCIAL BANKS Continued
 Heritage Commerce Corp. 1                  100    $      1,225
- ----------------------------------------------------------------
 Heritage Financial Corp.                   400           8,752
- ----------------------------------------------------------------
 Home Federal Bancorp                     1,300          36,634
- ----------------------------------------------------------------
 Horizon Financial Corp.                    200           3,502
- ----------------------------------------------------------------
 Hudson River Bancorp, Inc.                 100           3,903
- ----------------------------------------------------------------
 Humboldt Bancorp                           100           1,752
- ----------------------------------------------------------------
 IBERIABANK Corp.                         3,400         200,600
- ----------------------------------------------------------------
 IBT Bancorp, Inc.                          200          11,846
- ----------------------------------------------------------------
 Independence Community Bank Corp.          600          21,582
- ----------------------------------------------------------------
 Independent Bank Corp.,
 Massachusetts                            1,200          34,584
- ----------------------------------------------------------------
 Independent Bank Corp., Michigan         2,543          72,119
- ----------------------------------------------------------------
 Indymac Mortgage Holdings, Inc.          3,300          98,307
- ----------------------------------------------------------------
 International Bancshares Corp.           1,331          62,757
- ----------------------------------------------------------------
 Irwin Financial Corp.                    5,100         160,140
- ----------------------------------------------------------------
 ITLA Capital Corp. 1                     3,200         160,320
- ----------------------------------------------------------------
 LNB Bancorp, Inc.                          400           8,120
- ----------------------------------------------------------------
 Local Financial Corp. 1                  2,500          52,100
- ----------------------------------------------------------------
 Macatawa Bank Corp.                        510          14,438
- ----------------------------------------------------------------
 MAF Bancorp, Inc.                        8,364         350,452
- ----------------------------------------------------------------
 MainSource Financial Group, Inc.           210           6,441
- ----------------------------------------------------------------
 MB Financial, Inc.                         900          32,760
- ----------------------------------------------------------------
 Middleburg Financial Corp.                 200           8,000
- ----------------------------------------------------------------
 MutualFirst Financial, Inc.                300           7,602
- ----------------------------------------------------------------
 Nara Bancorp, Inc.                       3,900         106,470
- ----------------------------------------------------------------
 NASB Financial, Inc.                     1,100          46,101
- ----------------------------------------------------------------
 National Bankshares, Inc.                  600          30,147
- ----------------------------------------------------------------
 National Penn Bancshares, Inc.              25             803
- ----------------------------------------------------------------
 NBT Bancorp, Inc.                        3,500          75,040
- ----------------------------------------------------------------
 Net.B@nk, Inc.                           9,400         125,490
- ----------------------------------------------------------------
 NewMil Bancorp, Inc.                       100           2,905
- ----------------------------------------------------------------
 Oak Hill Financial, Inc.                   500          15,405
- ----------------------------------------------------------------
 OceanFirst Financial Corp.               1,500          40,740
- ----------------------------------------------------------------
 Old Second Bancorp, Inc.                   458          22,671
- ----------------------------------------------------------------
 Oneida Financial Corp.                     100           2,211
- ----------------------------------------------------------------
 Oriental Financial Group, Inc.           4,743         121,895
- ----------------------------------------------------------------
 Pacific Capital Bancorp                  6,833         251,591
- ----------------------------------------------------------------
 Parkvale Financial Corp.                   200           5,370
- ----------------------------------------------------------------
 Patriot Bank Corp.                         300           8,583
- ----------------------------------------------------------------
 PennFed Financial Services, Inc.           600          20,100
- ----------------------------------------------------------------
 PennRock Financial Services Corp.          720          22,378
- ----------------------------------------------------------------
 Penns Woods Bancorp, Inc.                  200           9,340
- ----------------------------------------------------------------
 PFF Bancorp, Inc.                        3,940         142,943
- ----------------------------------------------------------------
 PrivateBancorp, Inc.                       500          22,760
- ----------------------------------------------------------------
 Progress Financial Corp.                   315           9,715

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 COMMERCIAL BANKS Continued
 Prosperity Bancshares, Inc.              1,500    $     33,780
- ----------------------------------------------------------------
 Provident Bankshares Corp.               1,300          38,272
- ----------------------------------------------------------------
 Provident Financial Holdings, Inc.         200           7,254
- ----------------------------------------------------------------
 Provident Financial Services, Inc.         400           7,560
- ----------------------------------------------------------------
 Quaker City Bancorp, Inc.                  900          41,895
- ----------------------------------------------------------------
 R&G Financial Corp., Cl. B               5,200         206,960
- ----------------------------------------------------------------
 Redwood Empire Bancorp                   1,250          33,219
- ----------------------------------------------------------------
 Republic Bancorp, Inc.                   2,234          30,138
- ----------------------------------------------------------------
 Republic Bancorp, Inc., Cl. A            2,500          48,850
- ----------------------------------------------------------------
 Republic Bancshares, Inc.                  100           3,147
- ----------------------------------------------------------------
 S&T Bancorp, Inc.                        2,900          86,710
- ----------------------------------------------------------------
 S.Y. Bancorp, Inc.                         200           4,112
- ----------------------------------------------------------------
 Sandy Spring Bancorp, Inc.               2,200          82,280
- ----------------------------------------------------------------
 Seacoast Banking Corp. of Florida        1,930          33,505
- ----------------------------------------------------------------
 Second Bancorp, Inc.                       500          13,200
- ----------------------------------------------------------------
 Simmons First National Corp.               400          11,160
- ----------------------------------------------------------------
 Sky Financial Group, Inc.                  200           5,188
- ----------------------------------------------------------------
 Sound Federal Bancorp, Inc.              1,200          18,708
- ----------------------------------------------------------------
 Southern Financial Bancorp, Inc.         1,243          53,536
- ----------------------------------------------------------------
 Southwest Bancorp of Texas, Inc.           700          27,195
- ----------------------------------------------------------------
 Southwest Bancorp, Inc.                  2,900          51,852
- ----------------------------------------------------------------
 State Bancorp, Inc.                      2,102          50,995
- ----------------------------------------------------------------
 State Financial Services Corp.             700          18,592
- ----------------------------------------------------------------
 Sterling Bancorp, New York               4,400         125,400
- ----------------------------------------------------------------
 Sterling Financial Corp.                 6,370         218,045
- ----------------------------------------------------------------
 Sterling Financial Corp., Eastern US       300           8,325
- ----------------------------------------------------------------
 Sun Bancorp, Inc., New Jersey            2,120          55,968
- ----------------------------------------------------------------
 Texas Capital Bancshares, Inc. 1           900          13,016
- ----------------------------------------------------------------
 Troy Financial Corp.                       595          20,825
- ----------------------------------------------------------------
 Trust Co. of New Jersey (The)              600          23,808
- ----------------------------------------------------------------
 U.S.B. Holding Co., Inc.                   315           6,108
- ----------------------------------------------------------------
 Union Bankshares Corp.                     800          24,400
- ----------------------------------------------------------------
 United Bankshares, Inc.                    200           6,240
- ----------------------------------------------------------------
 United Community Financial Corp.           500           5,705
- ----------------------------------------------------------------
 United Security Bancshares, Inc.,
 Southern US                                200           5,790
- ----------------------------------------------------------------
 Univest Corp. of Pennsylvania              300          12,720
- ----------------------------------------------------------------
 Virginia Commerce Bancorp, Inc. 1          400          12,812
- ----------------------------------------------------------------
 W. Holding Co., Inc.                     3,366          62,641
- ----------------------------------------------------------------
 Washington Trust Bancorp, Inc.             200           5,240
- ----------------------------------------------------------------
 Waypoint Financial Corp.                 3,710          80,470
- ----------------------------------------------------------------
 West Coast Bancorp                         100           2,134
- ----------------------------------------------------------------
 Westcorp                                 2,000          73,100
- ----------------------------------------------------------------
 Willow Grove Bancorp, Inc.               2,500          44,400
- ----------------------------------------------------------------
 Wilshire State Bank                        200           3,884


STATEMENT OF INVESTMENTS  Continued

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 COMMERCIAL BANKS Continued
 WSFS Financial Corp.                     2,700    $    121,095
- ----------------------------------------------------------------
 Yadkin Valley Bank & Trust Co.             300           5,130
                                                   -------------
                                                      8,180,340

- ----------------------------------------------------------------
 CONSUMER FINANCE--0.3%
 Education Lending Group, Inc. 1          5,000          66,950
- ----------------------------------------------------------------
 First Marblehead Corp. (The) 1           6,300         137,844
- ----------------------------------------------------------------
 Nelnet, Inc., Cl. A 1                    3,500          78,400
- ----------------------------------------------------------------
 Rewards Network, Inc. 1                    700           7,462
                                                   -------------
                                                        290,656

- ----------------------------------------------------------------
 DIVERSIFIED FINANCIAL SERVICES--2.6%
 Ace Cash Express, Inc. 1                 1,600          34,013
- ----------------------------------------------------------------
 Affiliated Managers Group, Inc. 1        4,400         306,196
- ----------------------------------------------------------------
 Cash America International, Inc.        12,600         266,868
- ----------------------------------------------------------------
 Chicago Mercantile Exchange (The)        1,000          72,360
- ----------------------------------------------------------------
 CompuCredit Corp. 1                     12,200         259,616
- ----------------------------------------------------------------
 Credit Acceptance Corp. 1                3,800          58,140
- ----------------------------------------------------------------
 First Albany Cos., Inc.                  2,500          35,100
- ----------------------------------------------------------------
 First Cash Financial Services, Inc. 1    6,100         156,410
- ----------------------------------------------------------------
 iShares Russell 2000 Index Fund          2,000         221,600
- ----------------------------------------------------------------
 iShares S&P SmallCap 600 Index Fund      1,600         214,400
- ----------------------------------------------------------------
 Knight Trading Group, Inc. 1            19,200         281,088
- ----------------------------------------------------------------
 Marlin Business Services, Inc. 1         4,300          74,820
- ----------------------------------------------------------------
 MCG Capital Corp.                          400           7,800
- ----------------------------------------------------------------
 Medallion Financial Corp.                  400           3,796
- ----------------------------------------------------------------
 Metris Cos., Inc. 1                     17,200          76,368
- ----------------------------------------------------------------
 Newtek Business Services, Inc. 1         3,200          22,208
- ----------------------------------------------------------------
 Piper Jaffray Cos., Inc. 1               2,500         103,925
- ----------------------------------------------------------------
 Sanders Morris Harris Group, Inc.          400           4,960
- ----------------------------------------------------------------
 United PanAm Financial Corp. 1             500           8,355
- ----------------------------------------------------------------
 WFS Financial, Inc. 1                    1,400          59,444
- ----------------------------------------------------------------
 World Acceptance Corp. 1                 6,600         131,406
                                                   -------------
                                                      2,398,873

- ----------------------------------------------------------------
 INSURANCE--2.9%
 Alfa Corp.                               4,600          59,156
- ----------------------------------------------------------------
 Allmerica Financial Corp. 1              8,200         252,314
- ----------------------------------------------------------------
 American Medical Security Group, Inc. 1  5,800         130,036
- ----------------------------------------------------------------
 American Physicians Capital, Inc. 1        700          12,880
- ----------------------------------------------------------------
 AmerUs Group Co.                         6,100         213,317
- ----------------------------------------------------------------
 Arch Capital Group Ltd. 1                4,700         187,342
- ----------------------------------------------------------------
 Argonaut Group, Inc. 1                   2,100          32,634
- ----------------------------------------------------------------
 Aspen Insurance Holdings Ltd. 1          2,000          49,620
- ----------------------------------------------------------------
 Baldwin & Lyons, Inc., Cl. B, Non-Vtg.     300           8,418
- ----------------------------------------------------------------
 Ceres Group, Inc. 1                      1,500           8,760
- ----------------------------------------------------------------
 Citizens, Inc.                             914           8,619

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 INSURANCE Continued
 Crawford & Co., Cl. A, Non-Vtg.            700    $      4,963
- ----------------------------------------------------------------
 Delphi Financial Group, Inc., Cl. A      6,300         226,800
- ----------------------------------------------------------------
 Direct General Corp.                     1,200          39,720
- ----------------------------------------------------------------
 Donegal Group, Inc., Cl. A               2,300          50,646
- ----------------------------------------------------------------
 EMC Insurance Group, Inc.                  100           2,114
- ----------------------------------------------------------------
 Enstar Group, Inc. (The) 1                 200           9,410
- ----------------------------------------------------------------
 FBL Financial Group, Inc., Cl. A         2,700          69,660
- ----------------------------------------------------------------
 Fidelity National Financial, Inc.        1,287          49,910
- ----------------------------------------------------------------
 Financial Industries Corp.                 200           2,820
- ----------------------------------------------------------------
 Great American Financial
 Resources, Inc.                          1,400          22,708
- ----------------------------------------------------------------
 Hub International Ltd.                     400           6,704
- ----------------------------------------------------------------
 Independence Holding Co.                   300           7,176
- ----------------------------------------------------------------
 IPC Holdings Ltd.                          300          11,682
- ----------------------------------------------------------------
 Kansas City Life Insurance Co.             100           4,620
- ----------------------------------------------------------------
 LandAmerica Financial Group, Inc.        5,200         271,752
- ----------------------------------------------------------------
 National Western Life
 Insurance Co., Cl. A 1                     400          61,940
- ----------------------------------------------------------------
 Navigators Group, Inc. (The) 1             900          27,783
- ----------------------------------------------------------------
 Ohio Casualty Corp. 1                    6,100         105,896
- ----------------------------------------------------------------
 Penn-America Group, Inc.                   300           3,981
- ----------------------------------------------------------------
 Phoenix Cos., Inc. (The)                11,600         139,664
- ----------------------------------------------------------------
 PMA Capital Corp., Cl. A                 4,800          24,576
- ----------------------------------------------------------------
 Presidential Life Corp.                  1,400          18,424
- ----------------------------------------------------------------
 Reinsurance Group of America, Inc.       1,200          46,380
- ----------------------------------------------------------------
 RLI Corp.                                  300          11,238
- ----------------------------------------------------------------
 StanCorp Financial Group, Inc.             500          31,440
- ----------------------------------------------------------------
 State Auto Financial Corp.               1,500          35,085
- ----------------------------------------------------------------
 Stewart Information Services Corp.       6,700         271,685
- ----------------------------------------------------------------
 Universal American Financial Corp. 1    10,100         100,091
                                                   -------------
                                                      2,621,964
- ----------------------------------------------------------------
 REAL ESTATE--0.4%
 Agree Realty Corp.                       1,700          48,076
- ----------------------------------------------------------------
 American Financial Realty Trust          2,900          49,445
- ----------------------------------------------------------------
 Bluegreen Corp. 1                        4,400          27,456
- ----------------------------------------------------------------
 Capital Automotive REIT                    300           9,600
- ----------------------------------------------------------------
 Capital Trust, Cl. A                       300           6,810
- ----------------------------------------------------------------
 Chelsea Property Group, Inc.               200          10,962
- ----------------------------------------------------------------
 Consolidated-Tomoka Land Co.               400          13,080
- ----------------------------------------------------------------
 Correctional Properties Trust              200           5,760
- ----------------------------------------------------------------
 Friedman, Billings, Ramsey Group,
 Inc., Cl. A                                200           4,616
- ----------------------------------------------------------------
 Maguire Properties, Inc.                 1,200          29,160
- ----------------------------------------------------------------
 Orleans Homebuilders, Inc. 1             3,500          99,155
- ----------------------------------------------------------------
 Pan Pacific Retail Properties, Inc.        200           9,530


                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 REAL ESTATE Continued
 Prentiss Properties Trust                  200    $      6,598
- ----------------------------------------------------------------
 Ramco-Gershenson Properties Trust          400          11,320
- ----------------------------------------------------------------
 Regency Centers Corp.                      300          11,955
- ----------------------------------------------------------------
 Tanger Factory Outlet Centers, Inc.        100           4,070
- ----------------------------------------------------------------
 Trammell Crow Co. 1                      2,600          34,450
                                                   -------------
                                                        382,043

- ----------------------------------------------------------------
 THRIFTS & MORTGAGE FINANCE--0.9%
 Accredited Home Lenders Holding Co. 1    1,000          30,600
- ----------------------------------------------------------------
 American Home Mortgage
 Investment Corp.                         3,000          67,530
- ----------------------------------------------------------------
 Bank Mutual Corp.                        5,136          58,499
- ----------------------------------------------------------------
 CharterMac                                 900          19,017
- ----------------------------------------------------------------
 Federal Agricultural Mortgage
 Corp., Non-Vtg. 1                        1,400          44,744
- ----------------------------------------------------------------
 Franklin Bank Corp. 1                    2,000          38,000
- ----------------------------------------------------------------
 Fremont General Corp.                   16,600         280,706
- ----------------------------------------------------------------
 New Century Financial Corp.              5,650         224,136
- ----------------------------------------------------------------
 Ocwen Financial Corp. 1                  1,700          15,062
- ----------------------------------------------------------------
 Severn Bancorp, Inc.                       300           9,585
                                                   -------------
                                                        787,879
- ----------------------------------------------------------------
 HEALTH CARE--13.4%
- ----------------------------------------------------------------
 BIOTECHNOLOGY--2.4%
 Aclara Biosciences, Inc. 1               1,000           3,650
- ----------------------------------------------------------------
 Adolor Corp. 1                          10,300         206,206
- ----------------------------------------------------------------
 Aphton Corp. 1                           3,000          18,000
- ----------------------------------------------------------------
 Array BioPharma, Inc. 1                  1,600           9,104
- ----------------------------------------------------------------
 Bentley Pharmaceuticals, Inc. 1          1,100          14,630
- ----------------------------------------------------------------
 BioReliance Corp. 1                      3,200         153,024
- ----------------------------------------------------------------
 Caliper Technologies Corp. 1             2,100          13,818
- ----------------------------------------------------------------
 Celsion Corp. 1                         10,600          13,886
- ----------------------------------------------------------------
 Cepheid, Inc. 1                         10,100          96,758
- ----------------------------------------------------------------
 Ciphergen Biosystems, Inc. 1             7,200          80,928
- ----------------------------------------------------------------
 Cubist Pharmaceuticals, Inc. 1           8,200          99,712
- ----------------------------------------------------------------
 Curis, Inc. 1                           10,400          46,800
- ----------------------------------------------------------------
 Digene Corp. 1                           3,900         156,390
- ----------------------------------------------------------------
 Diversa Corp. 1                          4,600          42,550
- ----------------------------------------------------------------
 Gen-Probe, Inc. 1                        8,800         320,936
- ----------------------------------------------------------------
 Genaera Corp. 1                         35,000         114,450
- ----------------------------------------------------------------
 Gene Logic, Inc. 1                       2,700          14,013
- ----------------------------------------------------------------
 Geron Corp. 1                            7,400          73,778
- ----------------------------------------------------------------
 ID Biomedical Corp. 1                      800           9,488
- ----------------------------------------------------------------
 Idexx Laboratories, Inc. 1               4,100         189,748
- ----------------------------------------------------------------
 Immtech International, Inc. 1              200           2,208
- ----------------------------------------------------------------
 ImmunoGen, Inc. 1                        2,000          10,100
- ----------------------------------------------------------------
 Luminex Corp. 1                          1,800          16,884

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 BIOTECHNOLOGY Continued
 Neose Technologies, Inc. 1               1,200    $     11,040
- ----------------------------------------------------------------
 Peregrine Pharmaceuticals, Inc. 1       16,400          36,244
- ----------------------------------------------------------------
 QLT PhotoTherapeutics, Inc. 1            6,100         114,985
- ----------------------------------------------------------------
 Regeneron Pharmaceuticals, Inc. 1        6,900         101,499
- ----------------------------------------------------------------
 Repligen Corp. 1                         6,700          29,279
- ----------------------------------------------------------------
 Savient Pharmaceuticals, Inc. 1         24,900         114,789
- ----------------------------------------------------------------
 Sirna Therapeutics, Inc. 1                 600           3,120
- ----------------------------------------------------------------
 Tanox, Inc. 1                            1,200          17,820
- ----------------------------------------------------------------
 Telik, Inc. 1                              900          20,709
                                                   -------------
                                                      2,156,546
- ----------------------------------------------------------------
 HEALTH CARE EQUIPMENT & SUPPLIES--4.4%
 Abaxis, Inc. 1                           3,800          68,856
- ----------------------------------------------------------------
 Advanced Medical Optics, Inc. 1          6,500         127,725
- ----------------------------------------------------------------
 Aksys Ltd. 1                             1,300          11,479
- ----------------------------------------------------------------
 Alaris Medical Systems, Inc. 1           9,800         149,058
- ----------------------------------------------------------------
 Analogic Corp.                             300          12,300
- ----------------------------------------------------------------
 Arrow International, Inc.                2,300          57,454
- ----------------------------------------------------------------
 ArthroCare Corp. 1                       5,200         127,400
- ----------------------------------------------------------------
 Bio-Rad Laboratories, Inc., Cl. A 1      1,900         109,573
- ----------------------------------------------------------------
 Closure Medical Corp. 1                    900          30,537
- ----------------------------------------------------------------
 CNS, Inc.                                3,200          43,840
- ----------------------------------------------------------------
 Cooper Cos., Inc. (The)                  6,200         292,206
- ----------------------------------------------------------------
 Cyberonics, Inc. 1                       2,000          64,020
- ----------------------------------------------------------------
 Cytyc Corp. 1                            1,500          20,640
- ----------------------------------------------------------------
 Dade Behring Holdings, Inc. 1            2,800         100,072
- ----------------------------------------------------------------
 Diagnostic Products Corp.                2,500         114,775
- ----------------------------------------------------------------
 DJ Orthopedics, Inc. 1                     800          21,440
- ----------------------------------------------------------------
 E-Z-EM, Inc.                               500           6,475
- ----------------------------------------------------------------
 Encore Medical Corp. 1                   6,500          52,975
- ----------------------------------------------------------------
 EPIX Medical, Inc. 1                    11,500         187,220
- ----------------------------------------------------------------
 Exactech, Inc. 1                         1,700          25,075
- ----------------------------------------------------------------
 Haemonetics Corp. 1                      4,200         100,338
- ----------------------------------------------------------------
 HealthTronics Surgical Services, Inc. 1  5,700          35,625
- ----------------------------------------------------------------
 I-Flow Corp. 1                           1,100          15,301
- ----------------------------------------------------------------
 I-STAT Corp. 1                           3,000          45,900
- ----------------------------------------------------------------
 Illumina, Inc. 1                         7,500          52,875
- ----------------------------------------------------------------
 Immucor, Inc. 1                          2,150          43,839
- ----------------------------------------------------------------
 Inamed Corp. 1                           2,550         122,553
- ----------------------------------------------------------------
 Interpore International, Inc. 1          3,200          41,600
- ----------------------------------------------------------------
 IVAX Diagnostics, Inc. 1                   300           1,455
- ----------------------------------------------------------------
 Kensey Nash Corp. 1                      6,600         153,450
- ----------------------------------------------------------------
 Lifeline Systems, Inc. 1                 3,000          57,000
- ----------------------------------------------------------------
 Matthews International Corp., Cl. A      1,100          32,549
- ----------------------------------------------------------------
 Medical Action Industries, Inc. 1          500           9,355
- ----------------------------------------------------------------
 Meridian Bioscience, Inc.                3,600          37,548


STATEMENT OF INVESTMENTS  Continued

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 HEALTH CARE EQUIPMENT & SUPPLIES Continued
 Merit Medical Systems, Inc. 1            9,979    $    222,133
- ----------------------------------------------------------------
 Microtek Medical Holdings, Inc. 1        7,000          35,000
- ----------------------------------------------------------------
 Mine Safety Applicances Co.                800          63,608
- ----------------------------------------------------------------
 Nutraceutical International Corp. 1      3,600          39,672
- ----------------------------------------------------------------
 PolyMedica Corp.                         3,400          89,454
- ----------------------------------------------------------------
 Possis Medical, Inc. 1                   1,100          21,725
- ----------------------------------------------------------------
 Quidel Corp. 1                           3,300          35,706
- ----------------------------------------------------------------
 Regeneration Technologies, Inc. 1        4,000          43,840
- ----------------------------------------------------------------
 Respironics, Inc. 1                        100           4,509
- ----------------------------------------------------------------
 Sola International, Inc. 1               7,900         148,520
- ----------------------------------------------------------------
 Spectranetics Corp. (The) 1                200             750
- ----------------------------------------------------------------
 SurModics, Inc. 1                        2,400          57,360
- ----------------------------------------------------------------
 Sybron Dental Specialties, Inc. 1        8,500         238,850
- ----------------------------------------------------------------
 Synovis Life Technologies, Inc. 1        6,100         124,074
- ----------------------------------------------------------------
 Theragenics Corp. 1                      1,500           8,205
- ----------------------------------------------------------------
 Ventana Medical Systems, Inc. 1          1,800          70,920
- ----------------------------------------------------------------
 Viasys Healthcare, Inc. 1                2,400          49,440
- ----------------------------------------------------------------
 VISX, Inc. 1                             1,700          39,355
- ----------------------------------------------------------------
 Vital Images, Inc. 1                     6,200         110,608
- ----------------------------------------------------------------
 West Pharmaceutical Services, Inc.         400          13,560
- ----------------------------------------------------------------
 Young Innovations, Inc.                  3,850         138,600
                                                   -------------
                                                      3,928,397

- ----------------------------------------------------------------
 HEALTH CARE PROVIDERS & SERVICES--4.7%
 Advisory Board Co. (The) 1               3,600         125,676
- ----------------------------------------------------------------
 American Healthways, Inc. 1              5,500         131,285
- ----------------------------------------------------------------
 AMERIGROUP Corp. 1                       4,100         174,865
- ----------------------------------------------------------------
 Apria Healthcare Group, Inc. 1           3,700         105,339
- ----------------------------------------------------------------
 Bio-Reference Laboratories, Inc. 1       8,000         104,800
- ----------------------------------------------------------------
 Cantel Medical Corp. 1                     700          11,333
- ----------------------------------------------------------------
 Centene Corp. 1                          2,950          82,630
- ----------------------------------------------------------------
 CorVel Corp. 1                           3,100         116,560
- ----------------------------------------------------------------
 Covance, Inc. 1                          3,200          85,760
- ----------------------------------------------------------------
 Coventry Health Care, Inc. 1               600          38,694
- ----------------------------------------------------------------
 Curative Health Services, Inc. 1         1,600          22,080
- ----------------------------------------------------------------
 DaVita, Inc. 1                           3,700         144,300
- ----------------------------------------------------------------
 Dendrite International, Inc. 1          11,400         178,638
- ----------------------------------------------------------------
 Eclipsys Corp. 1                        11,300         131,532
- ----------------------------------------------------------------
 Gentiva Health Services, Inc. 1          8,500         107,440
- ----------------------------------------------------------------
 Hanger Orthopedic Group, Inc. 1          7,600         118,332
- ----------------------------------------------------------------
 HealthExtras, Inc. 1                     4,800          64,320
- ----------------------------------------------------------------
 IDX Systems Corp. 1                      4,900         131,418
- ----------------------------------------------------------------
 Inveresk Research Group, Inc. 1          2,900          71,717
- ----------------------------------------------------------------
 LabOne, Inc. 1                           3,500         113,645
- ----------------------------------------------------------------
 LCA-Vision, Inc. 1                       7,000         148,190
- ----------------------------------------------------------------
 Mid Atlantic Medical Services, Inc. 1      700          45,360

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 HEALTH CARE PROVIDERS & SERVICES Continued
 Molina Healthcare, Inc. 1                1,100    $     27,753
- ----------------------------------------------------------------
 National HealthCare Corp. 1                500           9,950
- ----------------------------------------------------------------
 Omnicell, Inc. 1                         4,800          77,760
- ----------------------------------------------------------------
 Option Care, Inc. 1                        100           1,068
- ----------------------------------------------------------------
 Owens & Minor, Inc.                      5,100         111,741
- ----------------------------------------------------------------
 Parexel International Corp. 1            4,300          69,918
- ----------------------------------------------------------------
 PDI, Inc. 1                                900          24,129
- ----------------------------------------------------------------
 Pediatrix Medical Group, Inc. 1          4,200         231,378
- ----------------------------------------------------------------
 Per-Se Technologies, Inc. 1             10,600         161,756
- ----------------------------------------------------------------
 Prime Medical Services, Inc. 1             900           4,221
- ----------------------------------------------------------------
 PSS World Medical, Inc. 1               13,800         166,566
- ----------------------------------------------------------------
 Res-Care, Inc. 1                         6,300          51,030
- ----------------------------------------------------------------
 Select Medical Corp.                    13,400         218,152
- ----------------------------------------------------------------
 SFBC International, Inc. 1               2,300          61,088
- ----------------------------------------------------------------
 Sunrise Senior Living, Inc. 1            5,300         205,322
- ----------------------------------------------------------------
 U.S. Physical Therapy, Inc. 1            2,900          45,617
- ----------------------------------------------------------------
 United Surgical Partners
 International, Inc. 1                    3,900         130,572
- ----------------------------------------------------------------
 US Oncology, Inc. 1                     21,400         230,264
- ----------------------------------------------------------------
 VCA Antech, Inc. 1                       3,500         108,430
- ----------------------------------------------------------------
 Ventiv Health, Inc. 1                      900           8,235
- ----------------------------------------------------------------
 VitalWorks, Inc. 1                       4,200          18,564
                                                   -------------
                                                      4,217,428

- ----------------------------------------------------------------
 PHARMACEUTICALS--1.9%
 Able Laboratories, Inc. 1                  500           9,035
- ----------------------------------------------------------------
 American Pharmaceutical
 Partners, Inc. 1                         4,450         149,520
- ----------------------------------------------------------------
 Angiotech Pharmaceuticals, Inc. 1        1,500          69,000
- ----------------------------------------------------------------
 AtheroGenics, Inc. 1                     5,300          79,235
- ----------------------------------------------------------------
 Bradley Pharmaceuticals, Inc. 1          9,100         231,413
- ----------------------------------------------------------------
 Caraco Pharmaceutical
 Laboratories Ltd. 1                      2,300          17,204
- ----------------------------------------------------------------
 CollaGenex Pharmaceuticals, Inc. 1       4,100          45,961
- ----------------------------------------------------------------
 DepoMed, Inc. 1                         18,600         131,874
- ----------------------------------------------------------------
 Encysive Pharmaceuticals, Inc. 1         3,400          30,430
- ----------------------------------------------------------------
 Endo Pharmaceuticals Holdings, Inc. 1    2,000          38,520
- ----------------------------------------------------------------
 Hi-Tech Pharmacal Co., Inc. 1            2,400          56,400
- ----------------------------------------------------------------
 Hollis-Eden Pharmaceuticals, Inc. 1        500           5,505
- ----------------------------------------------------------------
 InKine Pharmaceutical Co., Inc. 1        2,800          13,524
- ----------------------------------------------------------------
 Kos Pharmaceuticals, Inc. 1              5,800         249,632
- ----------------------------------------------------------------
 Lannett Co., Inc. 1                      5,700          95,817
- ----------------------------------------------------------------
 Nabi Biopharmaceuticals 1                9,900         125,829
- ----------------------------------------------------------------
 NexMed, Inc. 1                           2,200           8,778
- ----------------------------------------------------------------
 Orphan Medical, Inc. 1                     100           1,025
- ----------------------------------------------------------------
 Perrigo Co.                              7,900         124,188

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 PHARMACEUTICALS Continued
 PRAECIS Pharmaceuticals, Inc. 1          5,300    $     34,132
- ----------------------------------------------------------------
 Salix Pharmaceuticals Ltd. 1             6,400         145,088
- ----------------------------------------------------------------
 SciClone Pharmaceuticals, Inc. 1        11,700          79,326
- ----------------------------------------------------------------
 Virbac Corp. 1,2                           100             520
                                                   -------------
                                                      1,741,956

- ----------------------------------------------------------------
 INDUSTRIALS--15.0%
- ----------------------------------------------------------------
 AEROSPACE & DEFENSE--1.4%
 AAR Corp. 1                             12,300         183,885
- ----------------------------------------------------------------
 Applied Signal Technology, Inc.          6,900         158,769
- ----------------------------------------------------------------
 Aviall, Inc. 1                           1,800          27,918
- ----------------------------------------------------------------
 Ducommun, Inc. 1                         1,100          24,585
- ----------------------------------------------------------------
 Engineered Support Systems, Inc.         2,950         162,427
- ----------------------------------------------------------------
 ESCO Technologies, Inc. 1                  400          17,460
- ----------------------------------------------------------------
 HEICO Corp.                                300           5,460
- ----------------------------------------------------------------
 Herley Industries, Inc. 1                2,300          47,610
- ----------------------------------------------------------------
 KVH Industries, Inc. 1                   4,700         129,109
- ----------------------------------------------------------------
 Moog, Inc., Cl. A 1                      4,900         242,060
- ----------------------------------------------------------------
 MTC Technologies, Inc. 1                 2,000          64,440
- ----------------------------------------------------------------
 Precision Castparts Corp.                  900          40,869
- ----------------------------------------------------------------
 Sequa Corp., Cl A 1                        100           4,900
- ----------------------------------------------------------------
 Teledyne Technologies, Inc. 1            5,200          98,020
- ----------------------------------------------------------------
 United Defense Industries, Inc. 1        2,900          92,452
                                                   -------------
                                                      1,299,964

- ----------------------------------------------------------------
 AIR FREIGHT & LOGISTICS--0.2%
 ABX Air, Inc. 1                         32,000         137,600
- ----------------------------------------------------------------
 Forward Air Corp. 1                        400          11,000
                                                   -------------
                                                        148,600

- ----------------------------------------------------------------
 AIRLINES--1.2%
 AirTran Holdings, Inc. 1                 2,100          24,990
- ----------------------------------------------------------------
 Alaska Air Group, Inc. 1                 4,700         128,263
- ----------------------------------------------------------------
 America West Holdings Corp., Cl. B 1     9,100         112,840
- ----------------------------------------------------------------
 Continental Airlines, Inc., Cl. B 1      2,100          34,167
- ----------------------------------------------------------------
 ExpressJet Holdings, Inc. 1             10,700         160,500
- ----------------------------------------------------------------
 Frontier Airlines, Inc. 1                9,700         138,322
- ----------------------------------------------------------------
 Mair Holdings, Inc. 1                      200           1,456
- ----------------------------------------------------------------
 Mesa Air Group, Inc. 1                  15,300         191,556
- ----------------------------------------------------------------
 Northwest Airlines Corp., Cl. A 1       19,200         242,304
- ----------------------------------------------------------------
 SkyWest, Inc.                              800          14,496
                                                   -------------
                                                      1,048,894

- ----------------------------------------------------------------
 BUILDING PRODUCTS--0.6%
 Aaon, Inc. 1                             2,150          41,732
- ----------------------------------------------------------------
 Griffon Corp. 1                          1,170          23,704
- ----------------------------------------------------------------
 Jacuzzi Brands, Inc. 1                  28,000         198,520

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 BUILDING PRODUCTS Continued
 Simpson Manufacturing Co., Inc. 1        4,400    $    223,784
- ----------------------------------------------------------------
 Universal Forest Products, Inc.          1,800          57,924
- ----------------------------------------------------------------
 USG Corp. 1                              1,700          28,169
- ----------------------------------------------------------------
 Watsco, Inc.                               600          13,638
                                                   -------------
                                                        587,471

- ----------------------------------------------------------------
 COMMERCIAL SERVICES & SUPPLIES--4.4%
 Administaff, Inc. 1                      9,100         158,158
- ----------------------------------------------------------------
 Angelica Corp.                           2,000          44,000
- ----------------------------------------------------------------
 Arbitron, Inc. 1                         1,400          58,408
- ----------------------------------------------------------------
 Banta Corp.                              5,700         230,850
- ----------------------------------------------------------------
 Bowne & Co., Inc.                        1,300          17,628
- ----------------------------------------------------------------
 Bright Horizons Family
 Solutions, Inc. 1                        3,500         147,000
- ----------------------------------------------------------------
 CDI Corp.                                2,200          72,050
- ----------------------------------------------------------------
 Charles River Associates, Inc. 1         2,300          73,577
- ----------------------------------------------------------------
 Concorde Career Colleges, Inc. 1         1,900          47,443
- ----------------------------------------------------------------
 Consolidated Graphics, Inc. 1            2,900          91,582
- ----------------------------------------------------------------
 Cornell Corrections, Inc. 1                800          10,920
- ----------------------------------------------------------------
 CPI Corp.                                2,200          44,462
- ----------------------------------------------------------------
 Darling International, Inc. 1           38,700         106,812
- ----------------------------------------------------------------
 Duratek, Inc. 1                            900          11,736
- ----------------------------------------------------------------
 Electro Rent Corp. 1                       100           1,334
- ----------------------------------------------------------------
 Ennis Business Forms, Inc.               4,100          62,730
- ----------------------------------------------------------------
 Exponent, Inc. 1                         4,200          89,880
- ----------------------------------------------------------------
 Exult, Inc. 1                           17,500         124,600
- ----------------------------------------------------------------
 General Binding Corp. 1                  1,200          21,600
- ----------------------------------------------------------------
 Gevity HR, Inc.                          7,700         171,248
- ----------------------------------------------------------------
 Gundle/SLT Environmental, Inc. 1         3,300          68,508
- ----------------------------------------------------------------
 Harland (John H.) Co.                      700          19,110
- ----------------------------------------------------------------
 Heidrick & Struggles
 International, Inc. 1                    3,400          74,120
- ----------------------------------------------------------------
 ICT Group, Inc. 1                          900          10,575
- ----------------------------------------------------------------
 Imagistics International, Inc. 1         6,800         255,000
- ----------------------------------------------------------------
 Interpool, Inc.                          2,100          29,925
- ----------------------------------------------------------------
 ITT Educational Services, Inc. 1           400          18,788
- ----------------------------------------------------------------
 Korn-Ferry International 1               4,300          57,362
- ----------------------------------------------------------------
 Labor Ready, Inc. 1                        100           1,310
- ----------------------------------------------------------------
 Layne Christensen Co. 1                    200           2,350
- ----------------------------------------------------------------
 LECG Corp. 1                             2,500          57,225
- ----------------------------------------------------------------
 Mail-Well, Inc. 1                        1,300           5,993
- ----------------------------------------------------------------
 McGrath Rentcorp                           500          13,625
- ----------------------------------------------------------------
 MemberWorks, Inc. 1                        600          16,302
- ----------------------------------------------------------------
 Navigant Consulting, Inc. 1             11,200         211,232
- ----------------------------------------------------------------
 NCO Group, Inc. 1                        7,600         173,052
- ----------------------------------------------------------------
 New England Business Service, Inc.       2,400          70,800
- ----------------------------------------------------------------
 Pico Holdings, Inc. 1                      700          10,969
- ----------------------------------------------------------------
 Princeton Review, Inc. (The) 1             600           5,850

STATEMENT OF INVESTMENTS  Continued

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 COMMERCIAL SERVICES & SUPPLIES Continued
 Right Management Consultants, Inc. 1     3,175    $     59,246
- ----------------------------------------------------------------
 Rollins, Inc.                            8,700         196,185
- ----------------------------------------------------------------
 Schawk, Inc.                               700           9,541
- ----------------------------------------------------------------
 School Specialty, Inc. 1                 6,300         214,263
- ----------------------------------------------------------------
 Sotheby's Holdings, Inc., Cl. A 1       10,900         148,894
- ----------------------------------------------------------------
 Spherion Corp. 1                         4,200          41,118
- ----------------------------------------------------------------
 Strayer Education, Inc.                    800          87,064
- ----------------------------------------------------------------
 Tetra Tech, Inc. 1                       7,900         196,394
- ----------------------------------------------------------------
 United Rentals, Inc. 1                   1,400          26,964
- ----------------------------------------------------------------
 United Stationers, Inc. 1                2,700         110,484
- ----------------------------------------------------------------
 University of Phoenix Online 1           1,600         110,288
- ----------------------------------------------------------------
 Wackenhut Corrections Corp. 1            2,000          45,600
- ----------------------------------------------------------------
 Watson Wyatt & Co. Holdings 1            2,800          67,620
                                                   -------------
                                                      4,001,775

- ----------------------------------------------------------------
 CONSTRUCTION & ENGINEERING--0.9%
 Comfort Systems USA, Inc. 1              5,000          27,400
- ----------------------------------------------------------------
 Dycom Industries, Inc. 1                 7,600         203,832
- ----------------------------------------------------------------
 Integrated Electrical Services, Inc. 1  14,600         135,050
- ----------------------------------------------------------------
 MasTec, Inc. 1                           9,500         140,695
- ----------------------------------------------------------------
 Perini Corp. 1                           3,600          32,940
- ----------------------------------------------------------------
 URS Corp. 1                              7,900         197,579
- ----------------------------------------------------------------
 Washington Group International, Inc. 1   1,400          47,558
                                                   -------------
                                                        785,054

- ----------------------------------------------------------------
 ELECTRICAL EQUIPMENT--0.8%
 Acuity Brands, Inc.                      9,700         250,260
- ----------------------------------------------------------------
 Franklin Electric Co., Inc.              1,300          78,637
- ----------------------------------------------------------------
 General Cable Corp. 1                    2,300          18,745
- ----------------------------------------------------------------
 Genlyte Group, Inc. (The) 1              1,800         105,084
- ----------------------------------------------------------------
 II-VI, Inc. 1                            7,100         183,180
- ----------------------------------------------------------------
 LSI Industries, Inc.                       375           5,063
- ----------------------------------------------------------------
 Ultralife Batteries, Inc. 1              2,700          33,426
- ----------------------------------------------------------------
 Vicor Corp. 1                              900          10,269
                                                   -------------
                                                        684,664

- ----------------------------------------------------------------
 INDUSTRIAL CONGLOMERATES--0.3%
 Raven Industries, Inc.                   1,700          50,150
- ----------------------------------------------------------------
 Standex International Corp.              1,400          39,200
- ----------------------------------------------------------------
 United Capital Corp.                       500          10,360
- ----------------------------------------------------------------
 United Industrial Corp.                  3,300          59,565
- ----------------------------------------------------------------
 Walter Industries, Inc.                  6,400          85,440
                                                   -------------
                                                        244,715

- ----------------------------------------------------------------
 MACHINERY--3.3%
 A.S.V., Inc. 1                           2,100          78,456
- ----------------------------------------------------------------
 Actuant Corp., Cl. A 1                   1,100          39,820

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 MACHINERY Continued
 Alamo Group, Inc.                          500    $      7,630
- ----------------------------------------------------------------
 Albany International Corp., Cl. A        7,300         247,470
- ----------------------------------------------------------------
 Ampco-Pittsburgh Corp.                   1,400          19,138
- ----------------------------------------------------------------
 BHA Group, Inc., Cl. A                   1,100          27,665
- ----------------------------------------------------------------
 Briggs & Stratton Corp.                  5,100         343,740
- ----------------------------------------------------------------
 Cascade Corp.                            5,800         129,340
- ----------------------------------------------------------------
 Ceradyne, Inc. 1                         4,500         153,270
- ----------------------------------------------------------------
 Chicago Bridge & Iron Co. NV             6,400         184,960
- ----------------------------------------------------------------
 CIRCOR International, Inc.                 700          16,870
- ----------------------------------------------------------------
 Clarcor, Inc.                            1,000          44,100
- ----------------------------------------------------------------
 Cuno, Inc. 1                             1,000          45,030
- ----------------------------------------------------------------
 Dionex Corp. 1                           3,900         179,478
- ----------------------------------------------------------------
 Encore Wire Corp. 1                        900          15,939
- ----------------------------------------------------------------
 EnPro Industries, Inc. 1                 3,700          51,615
- ----------------------------------------------------------------
 Flanders Corp. 1                         3,000          19,740
- ----------------------------------------------------------------
 Greenbrier Cos., Inc. 1                    600          10,050
- ----------------------------------------------------------------
 Joy Global, Inc. 1                       2,800          73,220
- ----------------------------------------------------------------
 Kadant, Inc. 1                           4,400          95,260
- ----------------------------------------------------------------
 Middleby Corp. (The)                     5,400         218,538
- ----------------------------------------------------------------
 NACCO Industries, Inc., Cl. A              500          44,740
- ----------------------------------------------------------------
 Oshkosh Truck Corp.                      3,300         168,399
- ----------------------------------------------------------------
 Pall Corp.                                 400          10,732
- ----------------------------------------------------------------
 Penn Engineering &
 Manufacturing Corp.                        500           9,515
- ----------------------------------------------------------------
 Thomas Industries, Inc.                    600          20,796
- ----------------------------------------------------------------
 Toro Co. (The)                           6,000         278,400
- ----------------------------------------------------------------
 Trinity Industries, Inc.                 5,400         166,536
- ----------------------------------------------------------------
 Wabash National Corp. 1                  7,300         213,890
- ----------------------------------------------------------------
 Wabtec Corp.                             4,500          76,680
                                                   -------------
                                                      2,991,017

- ----------------------------------------------------------------
 MARINE--0.3%
 Alexander & Baldwin, Inc.                5,700         192,033
- ----------------------------------------------------------------
 UTI Worldwide, Inc.                      2,300          87,239
                                                   -------------
                                                        279,272

- ----------------------------------------------------------------
 ROAD & RAIL--1.4%
 Arkansas Best Corp.                      1,300          40,807
- ----------------------------------------------------------------
 Central Freight Lines, Inc. 1            2,500          44,375
- ----------------------------------------------------------------
 Covenant Transport, Inc., Cl. A 1        1,300          24,713
- ----------------------------------------------------------------
 Florida East Coast
 Industries, Inc., Cl. A                  1,600          52,960
- ----------------------------------------------------------------
 Genesee & Wyoming, Inc., Cl. A 1         3,800         119,700
- ----------------------------------------------------------------
 Heartland Express, Inc.                  2,600          62,894
- ----------------------------------------------------------------
 Hunt (J.B.) Transport Services, Inc. 1   3,200          86,432
- ----------------------------------------------------------------
 Knight Transportation, Inc. 1              925          23,726
- ----------------------------------------------------------------
 Landstar System, Inc. 1                  6,200         235,848


                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 ROAD & RAIL Continued
 Marten Transport Ltd. 1                    150    $      2,307
- ----------------------------------------------------------------
 Mullen Transportation, Inc.              1,300          39,737
- ----------------------------------------------------------------
 Old Dominion Freight Line, Inc. 1        1,150          39,192
- ----------------------------------------------------------------
 Overnite Corp. 1                         4,900         111,475
- ----------------------------------------------------------------
 Pacer International, Inc. 1              7,800         157,716
- ----------------------------------------------------------------
 Quality Distribution, Inc. 1             2,000          39,100
- ----------------------------------------------------------------
 Ryder Systems, Inc.                      1,100          37,565
- ----------------------------------------------------------------
 SCS Transportation, Inc. 1               6,900         121,302
- ----------------------------------------------------------------
 U.S. Xpress Enterprises, Inc., Cl. A 1   1,300          15,925
- ----------------------------------------------------------------
 USF Corp.                                  400          13,676
                                                   -------------
                                                      1,269,450

- ----------------------------------------------------------------
 TRADING COMPANIES & DISTRIBUTORS--0.2%
 Aceto Corp.                                200           5,108
- ----------------------------------------------------------------
 Applied Industrial Technologies, Inc.    5,400         128,844
- ----------------------------------------------------------------
 Lawson Products, Inc.                      200           6,636
- ----------------------------------------------------------------
 MSC Industrial Direct Co., Inc., Cl. A   3,100          85,250
                                                   -------------
                                                        225,838

- ----------------------------------------------------------------
 INFORMATION TECHNOLOGY--21.3%
- ----------------------------------------------------------------
 COMMUNICATIONS EQUIPMENT--3.0%
 Aspect Communications Corp. 1           13,800         217,488
- ----------------------------------------------------------------
 Audiovox Corp., Cl. A 1                  2,500          32,100
- ----------------------------------------------------------------
 C-COR.net Corp. 1                       12,300         136,899
- ----------------------------------------------------------------
 Computer Network Technology Corp. 1      7,500          71,550
- ----------------------------------------------------------------
 Comtech Telecommunications Corp. 1       7,750         223,743
- ----------------------------------------------------------------
 CyberGuard Corp. 1                       6,800          59,296
- ----------------------------------------------------------------
 Digi International, Inc. 1               4,800          46,080
- ----------------------------------------------------------------
 Ditech Communications Corp. 1            5,800         110,780
- ----------------------------------------------------------------
 Enterasys Networks, Inc. 1               5,900          22,125
- ----------------------------------------------------------------
 F5 Networks, Inc. 1                        700          17,570
- ----------------------------------------------------------------
 FalconStor Software, Inc. 1              4,000          34,960
- ----------------------------------------------------------------
 Foundry Networks, Inc. 1                 1,500          41,040
- ----------------------------------------------------------------
 Glenayre Technologies, Inc. 1            7,700          20,713
- ----------------------------------------------------------------
 Harmonic, Inc. 1                        24,200         175,450
- ----------------------------------------------------------------
 McDATA Corp., Cl. A 1                    2,200          20,966
- ----------------------------------------------------------------
 McDATA Corp., Cl. B 1                    2,800          26,684
- ----------------------------------------------------------------
 Network Equipment Technologies, Inc. 1   1,400          15,400
- ----------------------------------------------------------------
 New Focus, Inc. 1                        7,600          38,152
- ----------------------------------------------------------------
 NICE Systems Ltd., Sponsored ADR 1         800          20,280
- ----------------------------------------------------------------
 Packeteer, Inc. 1                       12,500         212,250
- ----------------------------------------------------------------
 Performance Technologies, Inc. 1         5,300          75,525
- ----------------------------------------------------------------
 Plantronics, Inc. 1                      4,600         150,190
- ----------------------------------------------------------------
 Powerwave Technologies, Inc. 1          17,900         136,935
- ----------------------------------------------------------------
 Proxim Corp., Cl. A 1                   22,500          37,575
- ----------------------------------------------------------------
 SeaChange International, Inc. 1          9,700         149,380
- ----------------------------------------------------------------
 SpectraLink Corp.                        8,500         162,945

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 COMMUNICATIONS EQUIPMENT Continued
 Symmetricom, Inc. 1                      8,100    $     58,968
- ----------------------------------------------------------------
 Terayon Communication Systems, Inc. 1    6,500          29,250
- ----------------------------------------------------------------
 Verso Technologies, Inc. 1              39,600         126,720
- ----------------------------------------------------------------
 Westell Technologies, Inc., Cl. A 1     22,700         143,237
- ----------------------------------------------------------------
 Zhone Technologies, Inc. 1              11,500          56,810
                                                   -------------
                                                      2,671,061

- ----------------------------------------------------------------
 COMPUTERS & PERIPHERALS--1.6%
 Advanced Digital Information Corp. 1    10,500         147,000
- ----------------------------------------------------------------
 Avid Technology, Inc. 1                  2,600         124,800
- ----------------------------------------------------------------
 Hutchinson Technology, Inc. 1            7,700         236,698
- ----------------------------------------------------------------
 Immersion Corp. 1                          800           4,760
- ----------------------------------------------------------------
 InFocus Corp. 1                         11,200         108,416
- ----------------------------------------------------------------
 Maxtor Corp. 1                           4,300          47,730
- ----------------------------------------------------------------
 Neoware Systems, Inc. 1                  2,600          35,620
- ----------------------------------------------------------------
 Network Engines, Inc. 1                  6,500          28,340
- ----------------------------------------------------------------
 Overland Storage, Inc. 1                 2,200          41,360
- ----------------------------------------------------------------
 Presstek, Inc. 1                         5,900          42,893
- ----------------------------------------------------------------
 Quantum Corp. 1                         23,200          72,384
- ----------------------------------------------------------------
 Rainbow Technologies, Inc. 1             9,400         105,844
- ----------------------------------------------------------------
 SimpleTech, Inc. 1                      12,800          76,928
- ----------------------------------------------------------------
 Storage Technology Corp. 1               1,000          25,750
- ----------------------------------------------------------------
 Stratasys, Inc. 1                        5,800         158,108
- ----------------------------------------------------------------
 Synaptics, Inc. 1                          300           4,494
- ----------------------------------------------------------------
 Western Digital Corp. 1                 13,000         153,270
- ----------------------------------------------------------------
 Xybernaut Corp. 1                       26,200          41,134
                                                   -------------
                                                      1,455,529

- ----------------------------------------------------------------
 ELECTRONIC EQUIPMENT & INSTRUMENTS--3.2%
 Agilysys, Inc.                          10,800         120,420
- ----------------------------------------------------------------
 Brightpoint, Inc. 1                      6,350         109,538
- ----------------------------------------------------------------
 CellStar Corp. 1                         8,900         112,407
- ----------------------------------------------------------------
 Checkpoint Systems, Inc. 1              10,900         206,119
- ----------------------------------------------------------------
 Cognex Corp.                             8,600         242,864
- ----------------------------------------------------------------
 Daktronics, Inc. 1                       4,500         113,220
- ----------------------------------------------------------------
 Digital Theater Systems, Inc. 1          3,500          86,415
- ----------------------------------------------------------------
 Excel Technology, Inc. 1                 1,700          55,862
- ----------------------------------------------------------------
 Fargo Electronics, Inc. 1                  600           7,632
- ----------------------------------------------------------------
 FARO Technologies, Inc. 1                2,000          49,960
- ----------------------------------------------------------------
 GTSI Corp. 1                             1,000          13,851
- ----------------------------------------------------------------
 Hypercom Corp. 1                         6,700          31,892
- ----------------------------------------------------------------
 Innovex, Inc. 1                          6,400          53,952
- ----------------------------------------------------------------
 Kemet Corp. 1                            1,200          16,428
- ----------------------------------------------------------------
 Komag, Inc. 1                            1,800          26,334
- ----------------------------------------------------------------
 Landauer, Inc.                           1,000          40,780
- ----------------------------------------------------------------
 LeCroy Corp. 1                             100           1,801


STATEMENT OF INVESTMENTS Continued

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 ELECTRONIC EQUIPMENT & INSTRUMENTS Continued
 Maxwell Technologies, Inc. 1               200    $      1,420
- ----------------------------------------------------------------
 Measurement Specialties, Inc. 1,2        2,400          49,032
- ----------------------------------------------------------------
 Methode Electronics, Inc., Cl. A         3,600          44,028
- ----------------------------------------------------------------
 MTS Systems Corp.                        7,600         146,148
- ----------------------------------------------------------------
 Park Electrochemical Corp.               2,900          76,821
- ----------------------------------------------------------------
 Pemstar, Inc. 1                          3,800          12,502
- ----------------------------------------------------------------
 Planar Systems, Inc. 1                   4,900         119,168
- ----------------------------------------------------------------
 RadiSys Corp. 1                          5,600          94,416
- ----------------------------------------------------------------
 Rofin-Sinar Technologies, Inc. 1         6,700         231,552
- ----------------------------------------------------------------
 ScanSource, Inc. 1                       2,800         127,736
- ----------------------------------------------------------------
 Superconductor Technologies, Inc. 1     17,500          97,650
- ----------------------------------------------------------------
 Sypris Solutions, Inc.                     300           5,043
- ----------------------------------------------------------------
 Trimble Navigation Ltd. 1                3,000         111,720
- ----------------------------------------------------------------
 UNOVA, Inc. 1                            6,700         153,765
- ----------------------------------------------------------------
 Varian, Inc. 1                           1,900          79,287
- ----------------------------------------------------------------
 Veeco Instruments, Inc. 1                6,800         191,760
- ----------------------------------------------------------------
 WJ Communications, Inc. 1                  600           3,071
- ----------------------------------------------------------------
 Woodhead Industries, Inc.                1,200          20,280
- ----------------------------------------------------------------
 X-Rite, Inc.                             1,100          12,452
- ----------------------------------------------------------------
 Zomax, Inc. 1                            3,300          16,467
                                                   -------------
                                                      2,883,793

- ----------------------------------------------------------------
 INTERNET SOFTWARE & SERVICES--4.2%
 24/7 Media, Inc. 1                      27,000          36,180
- ----------------------------------------------------------------
 Akamai Technologies, Inc. 1             12,900         138,675
- ----------------------------------------------------------------
 BroadVision, Inc. 1                      2,900          12,354
- ----------------------------------------------------------------
 Corillian Corp. 1                       27,300         172,263
- ----------------------------------------------------------------
 CyberSource Corp. 1                      7,200          37,152
- ----------------------------------------------------------------
 Digital Insight Corp. 1                  8,100         201,690
- ----------------------------------------------------------------
 Digital River, Inc. 1                    3,600          79,560
- ----------------------------------------------------------------
 Digitas, Inc. 1                         20,641         192,374
- ----------------------------------------------------------------
 EarthLink, Inc. 1                       22,000         220,000
- ----------------------------------------------------------------
 eCollege.com, Inc. 1                       900          16,614
- ----------------------------------------------------------------
 Embarcadero Technologies, Inc. 1         8,400         133,980
- ----------------------------------------------------------------
 FindWhat.com 1                           3,200          60,000
- ----------------------------------------------------------------
 HomeStore.com, Inc. 1                   24,200         114,466
- ----------------------------------------------------------------
 InfoSpace, Inc. 1                        1,900          43,795
- ----------------------------------------------------------------
 Internap Network Services Corp. 1       67,700         165,865
- ----------------------------------------------------------------
 Interwoven, Inc. 1                       3,414          43,153
- ----------------------------------------------------------------
 ITXC Corp. 1                               900           3,888
- ----------------------------------------------------------------
 Ivillage, Inc. 1                         3,100          11,098
- ----------------------------------------------------------------
 j2 Global Communications, Inc. 1         1,900          47,063
- ----------------------------------------------------------------
 Lionbridge Technologies, Inc. 1          9,100          87,451
- ----------------------------------------------------------------
 LookSmart Ltd. 1                        34,500          53,475
- ----------------------------------------------------------------
 MatrixOne, Inc. 1                        8,300          51,128
- ----------------------------------------------------------------
 National Information Consortium, Inc. 1 12,000          96,360
- ----------------------------------------------------------------

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 INTERNET SOFTWARE & SERVICES Continued
 Netegrity, Inc. 1                       15,400    $    158,774
- ----------------------------------------------------------------
 On2 Technologies, Inc. 1                25,800          33,798
- ----------------------------------------------------------------
 Open Text Corp. 1                        6,800         130,356
- ----------------------------------------------------------------
 RADWARE Ltd. 1                           4,000         109,000
- ----------------------------------------------------------------
 Raindance Communications, Inc. 1         8,800          24,200
- ----------------------------------------------------------------
 Retek, Inc. 1                            6,000          55,680
- ----------------------------------------------------------------
 S1 Corp. 1                              15,000         120,750
- ----------------------------------------------------------------
 Secure Computing Corp. 1                14,000         250,740
- ----------------------------------------------------------------
 SeeBeyond Technology Corp. 1            18,000          77,220
- ----------------------------------------------------------------
 Selectica, Inc. 1                        4,300          18,404
- ----------------------------------------------------------------
 SonicWALL, Inc. 1                       18,400         143,520
- ----------------------------------------------------------------
 Stellent, Inc. 1                         1,300          12,792
- ----------------------------------------------------------------
 SupportSoft, Inc. 1                     19,100         251,165
- ----------------------------------------------------------------
 TheStreet.com, Inc. 1                      700           2,884
- ----------------------------------------------------------------
 United Online, Inc. 1                    7,200         120,888
- ----------------------------------------------------------------
 ValueClick, Inc. 1                       2,500          22,700
- ----------------------------------------------------------------
 Vastera, Inc. 1                          2,300           9,200
- ----------------------------------------------------------------
 Vitria Technology, Inc. 1                2,800          19,880
- ----------------------------------------------------------------
 WatchGuard Technologies, Inc. 1          3,700          21,534
- ----------------------------------------------------------------
 WebEx Communications, Inc. 1             7,200         144,720
                                                   -------------
                                                      3,746,789
- ----------------------------------------------------------------
 IT SERVICES--1.7%
 Acxiom Corp. 1                           7,700         142,989
- ----------------------------------------------------------------
 Anteon International Corp. 1               700          25,235
- ----------------------------------------------------------------
 Aquantive, Inc. 1                        9,500          97,375
- ----------------------------------------------------------------
 CACI International, Inc., Cl. A 1          600          29,172
- ----------------------------------------------------------------
 Computer Horizons Corp. 1                  700           2,751
- ----------------------------------------------------------------
 Convergys Corp. 1                          300           5,238
- ----------------------------------------------------------------
 Corio, Inc. 1                            7,000          19,180
- ----------------------------------------------------------------
 Euronet Worldwide, Inc. 1                3,100          55,800
- ----------------------------------------------------------------
 Evolving Systems, Inc. 1                 6,800          90,440
- ----------------------------------------------------------------
 Forrester Research, Inc. 1                 100           1,787
- ----------------------------------------------------------------
 Gartner, Inc., Cl. B 1                   5,800          63,104
- ----------------------------------------------------------------
 Global Payments, Inc.                    1,200          56,544
- ----------------------------------------------------------------
 Information Resources, Inc. 1            3,500           6,300
- ----------------------------------------------------------------
 infoUSA, Inc. 1                         14,700         109,074
- ----------------------------------------------------------------
 Intrado, Inc. 1                          5,800         127,310
- ----------------------------------------------------------------
 iPayment Holdings, Inc. 1                  200           6,800
- ----------------------------------------------------------------
 Lawson Software, Inc. 1                 10,800          88,884
- ----------------------------------------------------------------
 Lightbridge, Inc. 1                      9,800          89,180
- ----------------------------------------------------------------
 ManTech International Corp. 1            2,000          49,900
- ----------------------------------------------------------------
 MAPICS, Inc. 1                             200           2,618
- ----------------------------------------------------------------
 QAD, Inc. 1                              7,000          85,820
- ----------------------------------------------------------------
 SM&A 1                                   6,500          76,050
- ----------------------------------------------------------------
 SS&C Technologies, Inc.                  7,500         209,625


                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 IT SERVICES Continued
 Startek, Inc.                              800    $     32,632
- ----------------------------------------------------------------
 Sykes Enterprises, Inc. 1                1,200          10,272
- ----------------------------------------------------------------
 Tyler Technologies, Inc. 1               7,900          76,077
                                                   -------------
                                                      1,560,157

- ----------------------------------------------------------------
 OFFICE ELECTRONICS--0.3%
 Gerber Scientific, Inc. 1                7,100          56,516
- ----------------------------------------------------------------
 Metrologic Instruments, Inc. 1           9,400         253,800
                                                   -------------
                                                        310,316

- ----------------------------------------------------------------
 SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.2%
 ADE Corp. 1                              1,600          29,632
- ----------------------------------------------------------------
 Advanced Energy Industries, Inc. 1         800          20,840
- ----------------------------------------------------------------
 AMIS Holdings, Inc. 1                    2,400          43,872
- ----------------------------------------------------------------
 ANADIGICS, Inc. 1                       12,800          76,288
- ----------------------------------------------------------------
 Asyst Technologies, Inc. 1               3,700          64,195
- ----------------------------------------------------------------
 August Technology Corp. 1                1,100          20,405
- ----------------------------------------------------------------
 Axcelis Technologies, Inc. 1             6,300          64,386
- ----------------------------------------------------------------
 Brooks Automation, Inc. 1                1,000          24,170
- ----------------------------------------------------------------
 Cirrus Logic, Inc. 1                    25,700         197,119
- ----------------------------------------------------------------
 Credence Systems Corp. 1                11,300         148,708
- ----------------------------------------------------------------
 Diodes, Inc. 1                           5,550         105,450
- ----------------------------------------------------------------
 DSP Group, Inc. 1                        2,200          54,802
- ----------------------------------------------------------------
 Helix Technology Corp.                   2,500          51,450
- ----------------------------------------------------------------
 Integrated Device Technology, Inc. 1     5,400          92,718
- ----------------------------------------------------------------
 Integrated Silicon Solution, Inc. 1      6,200          97,154
- ----------------------------------------------------------------
 Kulicke & Soffa Industries, Inc. 1       6,900          99,222
- ----------------------------------------------------------------
 Micrel, Inc. 1                           1,300          20,254
- ----------------------------------------------------------------
 Microsemi Corp. 1                        4,200         103,236
- ----------------------------------------------------------------
 Mindspeed Technologies, Inc. 1          21,600         147,960
- ----------------------------------------------------------------
 MKS Instruments, Inc. 1                  1,064          30,856
- ----------------------------------------------------------------
 NPTest Holding Corp. 1                   6,800          75,072
- ----------------------------------------------------------------
 NVE Corp. 1                              2,400         123,120
- ----------------------------------------------------------------
 O2Micro International Ltd. 1               300           6,720
- ----------------------------------------------------------------
 OmniVision Technologies, Inc. 1          1,100          60,775
- ----------------------------------------------------------------
 Photronics, Inc. 1                       8,300         165,336
- ----------------------------------------------------------------
 Power Integrations, Inc. 1                 300          10,038
- ----------------------------------------------------------------
 Rambus, Inc. 1                           2,100          64,470
- ----------------------------------------------------------------
 Sigmatel, Inc. 1                         1,600          39,488
- ----------------------------------------------------------------
 Siliconix, Inc. 1                          400          18,280
- ----------------------------------------------------------------
 Sipex Corp. 1                            2,200          16,962
- ----------------------------------------------------------------
 Supertex, Inc. 1                         1,000          19,100
- ----------------------------------------------------------------
 Tessera Technologies, Inc. 1             1,700          31,977
- ----------------------------------------------------------------
 Transmeta Corp. 1                       10,000          34,000
- ----------------------------------------------------------------
 TranSwitch Corp. 1                      43,300          99,590
- ----------------------------------------------------------------
 Trident Microsystems, Inc. 1             6,000         104,520

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Continued
 TriQuint Semiconductor, Inc. 1          30,300    $    214,221
- ----------------------------------------------------------------
 Ultratech, Inc. 1                        8,400         246,708
- ----------------------------------------------------------------
 Vitesse Semiconductor Corp. 1            3,700          21,719
- ----------------------------------------------------------------
 White Electronic Designs Corp. 1         1,800          15,840
                                                   -------------
                                                      2,860,653

- ----------------------------------------------------------------
 SOFTWARE--4.1%
 Altiris, Inc. 1                            900          32,832
- ----------------------------------------------------------------
 Ansoft Corp. 1                           2,900          37,207
- ----------------------------------------------------------------
 Ansys, Inc. 1                            4,100         162,770
- ----------------------------------------------------------------
 Ascential Software Corp. 1              10,300         267,079
- ----------------------------------------------------------------
 Aspen Technology, Inc. 1                16,400         168,264
- ----------------------------------------------------------------
 BindView Development Corp. 1             7,700          29,029
- ----------------------------------------------------------------
 Bottomline Technologies, Inc. 1            700           6,300
- ----------------------------------------------------------------
 Callidus Software, Inc. 1                  500           8,845
- ----------------------------------------------------------------
 Captaris, Inc. 1                         5,600          31,472
- ----------------------------------------------------------------
 CCC Information Services Group, Inc. 1   1,500          25,350
- ----------------------------------------------------------------
 Cognos, Inc. 1                             500          15,310
- ----------------------------------------------------------------
 Concord Communications, Inc. 1           2,600          51,922
- ----------------------------------------------------------------
 Convera Corp. 1                            100             341
- ----------------------------------------------------------------
 Datastream Systems, Inc. 1               2,400          18,840
- ----------------------------------------------------------------
 Digimarc Corp. 1                         2,300          30,590
- ----------------------------------------------------------------
 Dynamics Research Corp. 1                  500           8,065
- ----------------------------------------------------------------
 E.piphany, Inc. 1                       11,400          82,194
- ----------------------------------------------------------------
 Epicor Software Corp. 1                 15,900         202,884
- ----------------------------------------------------------------
 ePlus, inc. 1                            2,700          33,294
- ----------------------------------------------------------------
 Group 1 Software, Inc. 1                 3,500          61,670
- ----------------------------------------------------------------
 Hyperion Solutions Corp. 1                 900          27,126
- ----------------------------------------------------------------
 Inet Technologies, Inc. 1               11,100         133,200
- ----------------------------------------------------------------
 Informatica Corp. 1                      6,800          70,040
- ----------------------------------------------------------------
 InteliData Technologies Corp. 1          2,100           3,465
- ----------------------------------------------------------------
 InterVoice-Brite, Inc. 1                15,500         183,985
- ----------------------------------------------------------------
 JDA Software Group, Inc. 1               4,100          67,691
- ----------------------------------------------------------------
 Kronos, Inc. 1                           2,850         112,889
- ----------------------------------------------------------------
 Macromedia, Inc. 1                       1,300          23,192
- ----------------------------------------------------------------
 Magma Design Automation, Inc. 1            400           9,336
- ----------------------------------------------------------------
 Manugistics Group, Inc. 1                2,800          17,500
- ----------------------------------------------------------------
 MapInfo Corp. 1                            900           9,072
- ----------------------------------------------------------------
 Midway Games, Inc. 1                    13,200          51,216
- ----------------------------------------------------------------
 Mobius Management Systems, Inc. 1        9,200         116,380
- ----------------------------------------------------------------
 MRO Software, Inc. 1                       200           2,692
- ----------------------------------------------------------------
 MSC.Software Corp. 1                     5,100          48,195
- ----------------------------------------------------------------
 Nuance Communications, Inc. 1            6,700          51,188
- ----------------------------------------------------------------
 Open Solutions, Inc. 1                   2,000          35,140
- ----------------------------------------------------------------
 OPNET Technologies, Inc. 1               1,000          16,460
- ----------------------------------------------------------------
 Parametric Technology Corp. 1           20,200          79,588


STATEMENT OF INVESTMENTS  Continued


                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 SOFTWARE Continued
 Pegasystems, Inc. 1                      2,200    $     18,964
- ----------------------------------------------------------------
 Plumtree Software, Inc. 1               12,300          57,810
- ----------------------------------------------------------------
 Progress Software Corp. 1                8,300         169,818
- ----------------------------------------------------------------
 Pumatech, Inc. 1                         3,500          13,930
- ----------------------------------------------------------------
 QRS Corp. 1                                700           5,684
- ----------------------------------------------------------------
 Quality Systems, Inc. 1                  4,200         187,278
- ----------------------------------------------------------------
 Radiant Systems, Inc. 1                  2,900          24,389
- ----------------------------------------------------------------
 Renaissance Learning, Inc. 1               900          21,672
- ----------------------------------------------------------------
 Roxio, Inc. 1                           12,600          60,354
- ----------------------------------------------------------------
 RSA Security, Inc. 1                    11,900         168,980
- ----------------------------------------------------------------
 Sanchez Computer Associates, Inc. 1      2,200           9,130
- ----------------------------------------------------------------
 SCO Group, Inc. (The) 1                  6,400         108,800
- ----------------------------------------------------------------
 SPSS, Inc. 1                             1,000          17,880
- ----------------------------------------------------------------
 Sybase, Inc. 1                           5,700         117,306
- ----------------------------------------------------------------
 Synplicity, Inc. 1                         100             783
- ----------------------------------------------------------------
 Systems & Computer
 Technology Corp. 1                         900          14,715
- ----------------------------------------------------------------
 Take-Two Interactive Software, Inc. 1    2,300          66,263
- ----------------------------------------------------------------
 Tradestation Group, Inc. 1               3,100          27,466
- ----------------------------------------------------------------
 Transaction Systems Architects,
 Inc., Cl. A 1                            2,700          61,101
- ----------------------------------------------------------------
 Ulticom, Inc. 1                          9,700          93,605
- ----------------------------------------------------------------
 VA Software Corp. 1                     12,100          47,311
- ----------------------------------------------------------------
 Wind River Systems, Inc. 1              10,500          91,980
                                                   -------------
                                                      3,717,832

- ----------------------------------------------------------------
 MATERIALS--4.6%
- ----------------------------------------------------------------
 CHEMICALS--1.3%
 Agrium, Inc.                             3,200          52,672
- ----------------------------------------------------------------
 American Vanguard Corp.                    400          14,908
- ----------------------------------------------------------------
 Calgon Carbon Corp.                      2,600          16,146
- ----------------------------------------------------------------
 Cytec Industries, Inc. 1                 3,100         119,009
- ----------------------------------------------------------------
 Ethyl Corp. 1                            2,400          52,488
- ----------------------------------------------------------------
 Hawkins, Inc.                              400           5,584
- ----------------------------------------------------------------
 Headwaters, Inc. 1                       2,200          43,164
- ----------------------------------------------------------------
 Hercules, Inc. 1                        13,200         161,040
- ----------------------------------------------------------------
 MacDermid, Inc.                          6,900         236,256
- ----------------------------------------------------------------
 Material Sciences Corp.                    100           1,011
- ----------------------------------------------------------------
 Octel Corp.                              3,200          63,008
- ----------------------------------------------------------------
 Olin Corp.                              10,400         208,624
- ----------------------------------------------------------------
 OM Group, Inc. 1                         6,100         159,759
- ----------------------------------------------------------------
 PolyOne Corp. 1                          4,700          30,033
- ----------------------------------------------------------------
 Stepan Co.                               1,800          46,170
                                                   -------------
                                                      1,209,872

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 CONSTRUCTION MATERIALS--0.5%
 AMCOL International Corp.               10,700    $    217,210
- ----------------------------------------------------------------
 Ameron International Corp.               2,800          97,132
- ----------------------------------------------------------------
 Centex Construction Products, Inc.         700          42,189
- ----------------------------------------------------------------
 Florida Rock Industries, Inc.            2,100         115,185
                                                   -------------
                                                        471,716

- ----------------------------------------------------------------
 CONTAINERS & PACKAGING--0.3%
 Caraustar Industries, Inc. 1               900          12,420
- ----------------------------------------------------------------
 Chesapeake Corp.                         2,200          58,256
- ----------------------------------------------------------------
 Graphic Packaging Corp. 1                1,400           5,684
- ----------------------------------------------------------------
 Mod-Pac Corp. 1                            125             999
- ----------------------------------------------------------------
 Packaging Dynamics Corp. 1                 760           7,813
- ----------------------------------------------------------------
 Silgan Holdings, Inc. 1                  4,800         204,432
                                                   -------------
                                                        289,604

- ----------------------------------------------------------------
 METALS & MINING--1.9%
 AK Steel Holding Corp. 1                22,300         113,730
- ----------------------------------------------------------------
 Allegheny Technologies, Inc.            12,600         166,572
- ----------------------------------------------------------------
 Brush Engineered Materials, Inc. 1         300           4,593
- ----------------------------------------------------------------
 Carpenter Technology Corp.               7,500         221,775
- ----------------------------------------------------------------
 Century Aluminum Co.                     5,400         102,654
- ----------------------------------------------------------------
 Cleveland-Cliffs, Inc. 1                 2,300         117,185
- ----------------------------------------------------------------
 Gibraltar Steel Corp.                      500          12,575
- ----------------------------------------------------------------
 Goldcorp, Inc.                           1,500          23,935
- ----------------------------------------------------------------
 GrafTech International Ltd. 1              900          12,150
- ----------------------------------------------------------------
 IMCO Recycling, Inc. 1                   1,200          11,868
- ----------------------------------------------------------------
 International Steel Group, Inc. 1        1,400          54,530
- ----------------------------------------------------------------
 Liquidmetal Technologies, Inc. 1         3,200           9,088
- ----------------------------------------------------------------
 Meridian Gold, Inc. 1                      900          13,184
- ----------------------------------------------------------------
 Metal Management, Inc. 1                 4,900         180,957
- ----------------------------------------------------------------
 Metals USA, Inc. 1                       2,900          29,203
- ----------------------------------------------------------------
 NN, Inc.                                 4,000          50,360
- ----------------------------------------------------------------
 Peabody Energy Corp.                     2,600         108,446
- ----------------------------------------------------------------
 RTI International Metals, Inc. 1         1,300          21,931
- ----------------------------------------------------------------
 Schnitzer Steel Industries, Inc.         5,500         332,750
- ----------------------------------------------------------------
 Steel Technologies, Inc.                 1,100          19,459
- ----------------------------------------------------------------
 Westmoreland Coal Co.                      700          12,250
- ----------------------------------------------------------------
 Wheaton River Minerals Ltd. 1           16,100          48,216
                                                   -------------
                                                      1,667,411

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 PAPER & FOREST PRODUCTS--0.6%
 Buckeye Technologies, Inc. 1             2,600    $     26,130
- ----------------------------------------------------------------
 Deltic Timber Corp.                        500          15,200
- ----------------------------------------------------------------
 Louisiana-Pacific Corp. 1               16,000         286,080
- ----------------------------------------------------------------
 Pope & Talbot, Inc.                        500           8,805
- ----------------------------------------------------------------
 Potlatch Corp.                           4,500         156,465
- ----------------------------------------------------------------
 Schweitzer-Mauduit International, Inc.     300           8,934
                                                   -------------
                                                        501,614

- ----------------------------------------------------------------
 TELECOMMUNICATION SERVICES--1.3%
- ----------------------------------------------------------------
 DIVERSIFIED TELECOMMUNICATION SERVICES--0.6%
 D&E Communications, Inc.                   100           1,451
- ----------------------------------------------------------------
 General Communication, Inc., Cl. A 1     4,200          36,540
- ----------------------------------------------------------------
 Golden Telecom, Inc. 1                   2,200          61,050
- ----------------------------------------------------------------
 Hungarian Telephone & Cable Corp. 1        100             986
- ----------------------------------------------------------------
 McLeodUSA, Inc., Cl. A 1                28,500          42,180
- ----------------------------------------------------------------
 North Pittsburgh Systems, Inc.           3,000          56,730
- ----------------------------------------------------------------
 Primus Telecommunications
 Group, Inc. 1                            4,800          48,864
- ----------------------------------------------------------------
 PTEK Holdings, Inc. 1                    1,100           9,691
- ----------------------------------------------------------------
 Talk America Holdings, Inc. 1            7,900          91,008
- ----------------------------------------------------------------
 Time Warner Telecom, Inc., Cl. A 1      13,100         132,703
- ----------------------------------------------------------------
 US LEC Corp., Cl. A 1                    1,200           9,456
- ----------------------------------------------------------------
 Warwick Valley Telephone Co.               500          14,795
                                                   -------------
                                                        505,454

- ----------------------------------------------------------------
 WIRELESS TELECOMMUNICATION SERVICES--0.7%
 Boston Communications Group, Inc. 1      3,900          36,231
- ----------------------------------------------------------------
 Centennial Communications Corp. 1        5,300          27,878
- ----------------------------------------------------------------
 Cincinnati Bell, Inc. 1                 29,700         149,985
- ----------------------------------------------------------------
 Dobson Communications Corp., Cl. A 1     7,700          50,589
- ----------------------------------------------------------------
 Price Communications Corp. 1             3,000          41,190
- ----------------------------------------------------------------
 Triton PCS Holdings, Inc., Cl. A 1       8,300          46,314
- ----------------------------------------------------------------
 UbiquiTel, Inc. 1                       18,400          49,478
- ----------------------------------------------------------------
 Wireless Facilities, Inc. 1             15,900         236,274
                                                   -------------
                                                        637,939

- ----------------------------------------------------------------
 UTILITIES--1.2%
- ----------------------------------------------------------------
 ELECTRIC UTILITIES--0.5%
 Aquila, Inc. 1                          29,500         100,005
- ----------------------------------------------------------------
 Black Hills Corp.                          100           2,983
- ----------------------------------------------------------------
 Canadian Hydro Developers, Inc. 1       14,000          23,834
- ----------------------------------------------------------------
 Central Vermont Public Service Corp.       600          14,100
- ----------------------------------------------------------------
 CH Energy Group, Inc.                    2,600         121,940
- ----------------------------------------------------------------
 Green Mountain Power Corp.                 700          16,520
- ----------------------------------------------------------------
 UniSource Energy Corp.                     300           7,398
- ----------------------------------------------------------------
 Westar Energy, Inc.                      9,100         184,275
                                                   -------------
                                                        471,055

                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
 GAS UTILITIES--0.6%
 Chesapeake Utilities Corp.               1,200     $    31,260
- ----------------------------------------------------------------
 Energen Corp.                            5,800         237,974
- ----------------------------------------------------------------
 EnergySouth, Inc.                          200           7,000
- ----------------------------------------------------------------
 Laclede Group, Inc. (The)                1,100          31,405
- ----------------------------------------------------------------
 New Jersey Resources Corp.                 500          19,255
- ----------------------------------------------------------------
 South Jersey Industries, Inc.              200           8,100
- ----------------------------------------------------------------
 Southwestern Energy Co. 1                7,700         184,030
- ----------------------------------------------------------------
 UGI Corp.                                1,150          38,985
                                                   -------------
                                                        558,009

- ----------------------------------------------------------------
 MULTI-UTILITIES & UNREGULATED POWER--0.0%
 Avista Corp.                             1,200          21,744
- ----------------------------------------------------------------
 WATER UTILITIES--0.1%
 SJW Corp.                                  300          26,766
                                                   -------------
 Total Common Stocks (Cost $73,551,772)              88,623,413

- ----------------------------------------------------------------
 PREFERRED STOCKS--0.0%

 Astronics Corp., Cl. B 1,2 (Cost $1,733)   250           1,313

                                          UNITS
- ----------------------------------------------------------------
 RIGHTS, WARRANTS AND CERTIFICATES--0.0%

 Canadian Superior Energy, Inc. Wts.,
 Exp. 3/14/04 1,2 (Cost $14)             17,500          17,255

                                      PRINCIPAL
                                         AMOUNT
- ----------------------------------------------------------------
 JOINT REPURCHASE AGREEMENTS--3.3%

 Undivided interest of 2.71% in joint repurchase
 agreement (Principal Amount/Market Value
 $109,556,000, with a maturity value of $109,560,869)
 with Banc One Capital Markets, Inc., 0.80%, dated
 12/31/03, to be repurchased at $2,964,132 on
 1/2/04, collateralized by U.S. Treasury Bonds,
 4.25%, 11/30/13, with a value of $111,861,618
 (Cost $2,964,000)                   $2,964,000       2,964,000

- ----------------------------------------------------------------
 TOTAL INVESTMENTS, AT VALUE
 (COST $76,517,519)                       101.6%     91,605,981
- ----------------------------------------------------------------
 LIABILITIES IN EXCESS
 OF OTHER ASSETS                           (1.6)     (1,394,914)
                                      --------------------------

 NET ASSETS                               100.0%    $90,211,067
                                      ==========================

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, 2003
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
 ASSETS

 Investments, at value (including securities loaned
 of approximately $16,282,000)
 (cost $76,517,519)--see accompanying statement                 $ 91,605,981
- -----------------------------------------------------------------------------
 Collateral for securities loaned                                 16,865,986
- -----------------------------------------------------------------------------
 Receivables and other assets:
 Investments sold                                                  1,146,841
 Shares of beneficial interest sold                                  575,163
 Interest and dividends                                               16,334
 Other                                                                 2,014
                                                                -------------
 Total assets                                                    110,212,319

- -----------------------------------------------------------------------------
 LIABILITIES

 Bank overdraft                                                       42,147
- -----------------------------------------------------------------------------
 Return of collateral for securities loaned                       16,865,986
- -----------------------------------------------------------------------------
 Payables and other liabilities:
 Investments purchased                                             2,903,271
 Shares of beneficial interest redeemed                              110,213
 Distribution and service plan fees                                   31,844
 Shareholder reports                                                  18,811
 Transfer and shareholder servicing agent fees                         1,664
 Trustees' compensation                                                1,201
 Other                                                                26,115
                                                                -------------
 Total liabilities                                                20,001,252

- -----------------------------------------------------------------------------
 NET ASSETS                                                     $ 90,211,067
                                                                =============

- -----------------------------------------------------------------------------
 COMPOSITION OF NET ASSETS

 Par value of shares of beneficial interest                     $      6,725
- -----------------------------------------------------------------------------
 Additional paid-in capital                                       78,382,376
- -----------------------------------------------------------------------------
 Accumulated net investment loss                                     (32,616)
- -----------------------------------------------------------------------------
 Accumulated net realized loss on investments and
 foreign currency transactions                                    (3,233,887)
- -----------------------------------------------------------------------------
 Net unrealized appreciation on investments and translation of
 assets and liabilities denominated in foreign currencies         15,088,469
                                                                -------------
 NET ASSETS                                                     $ 90,211,067
                                                                =============

- -----------------------------------------------------------------------------
 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 $27,550,767 and 2,050,171
 shares of beneficial interest outstanding)                           $13.44
- -----------------------------------------------------------------------------
 Service Shares:
 Net asset value, redemption price per share and offering price
 per share (base on net assets of $62,660,300 and 4,675,294
 shares of beneficial interest outstanding)                           $13.40



 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS  For the Year Ended December 31, 2003
- -----------------------------------------------------------------------------

- -----------------------------------------------------------------------------
 INVESTMENT INCOME

 Dividends (net of foreign withholding taxes of $2,738)          $   308,870
- -----------------------------------------------------------------------------
 Interest                                                             19,620
- -----------------------------------------------------------------------------
 Portfolio lending fees                                               15,150
                                                                 ------------
 Total investment income                                             343,640

- -----------------------------------------------------------------------------
 EXPENSES

 Management fees                                                     338,340
- -----------------------------------------------------------------------------
 Distribution and service plan fees--Service shares                   62,135
- -----------------------------------------------------------------------------
 Transfer and shareholder servicing agent fees:
 Non-Service shares                                                   10,328
 Service shares                                                        6,045
- -----------------------------------------------------------------------------
 Shareholder reports                                                  40,318
- -----------------------------------------------------------------------------
 Legal, auditing and other professional fees                          16,066
- -----------------------------------------------------------------------------
 Trustees' compensation                                                5,590
- -----------------------------------------------------------------------------
 Insurance expenses                                                    2,292
- -----------------------------------------------------------------------------
 Registration and filing fees                                          1,918
- -----------------------------------------------------------------------------
 Custodian fees and expenses                                             779
- -----------------------------------------------------------------------------
 Other                                                                28,986
                                                                 ------------
 Total expenses                                                      512,797
 Less reduction to custodian expenses                                   (656)
                                                                 ------------
 Net expenses                                                        512,141

- -----------------------------------------------------------------------------
 NET INVESTMENT LOSS                                                (168,501)

- -----------------------------------------------------------------------------
 REALIZED AND UNREALIZED GAIN

 Net realized gain on:
 Investments                                                       2,685,493
 Foreign currency transactions                                        18,436
                                                                 ------------
 Net realized gain                                                 2,703,929
- -----------------------------------------------------------------------------
 Net change in unrealized appreciation on:
 Investments                                                      14,947,524
 Translation of assets and liabilities denominated in
 foreign currencies                                                   91,455
                                                                 ------------
 Net change in unrealized appreciation                            15,038,979

- -----------------------------------------------------------------------------
 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS            $17,574,407
                                                                 ============


 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

- -----------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------

NON-SERVICE SHARES   YEAR ENDED DECEMBER 31,           2003
2002          2001          2000         1999
- ---------------------------------------------------------------------------------------------------------------------
 PER SHARE OPERATING DATA

 Net asset value, beginning of period                  $ 9.31
$11.05        $11.09        $14.07       $ 9.60
- ---------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                            (.03)
(.01)           -- 1        (.03)        (.02)
 Net realized and unrealized gain (loss)                 4.16
(1.73)         (.04)        (2.35)        4.49

- --------------------------------------------------------------
 Total from investment operations                        4.13
(1.74)         (.04)        (2.38)        4.47
- ---------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Distributions from net realized gain                      --
- --            --          (.60)          --
- ---------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                        $13.44        $
9.31        $11.05        $11.09       $14.07

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

- ---------------------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE 2                     44.36%
(15.75)%       (0.36)%      (18.34)%      46.56%

- ---------------------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA

 Net assets, end of period (in thousands)             $27,551
$19,577       $18,514       $14,599       $6,927
- ---------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                    $20,271
$20,505       $15,307       $12,576       $2,738
- ---------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment loss                                    (0.30)%
(0.09)%       (0.01)%       (0.29)%      (0.37)%
 Total expenses                                          1.01%
1.00%         1.05%         1.37%        1.83%
 Expenses after expense reimbursement or fee waiver
 and reduction to custodian expenses                      N/A 4         N/A
4         N/A 4        1.35%        1.34%
- ---------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                  130%
121%          213%          162%         176%

1. Less than $0.005 per share.
2. 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

OPPENHEIMER MAIN STREET SMALL CAP FUND/VA

- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS CONTINUED
- -----------------------------------------------------------------------------

SERVICE SHARES  YEAR ENDED DECEMBER 31,                     2003
2002         2001 1
- -----------------------------------------------------------------------------
 PER SHARE OPERATING DATA

 Net asset value, beginning of period                       $ 9.29
$11.05        $10.61
- -----------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                                 (.02)
(.01)           -- 2
 Net realized and unrealized gain (loss)                      4.13
(1.75)          .44

- ------------------------------------
 Total from investment operations                             4.11
(1.76)          .44
- -----------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Distributions from net realized gain                           --
- --            --
- -----------------------------------------------------------------------------------------------
 Net asset value, end of period                             $13.40        $
9.29        $11.05

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

- -----------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE 3                          44.24%
(15.93)%        4.15%

- -----------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA

 Net assets, end of period (in thousands)                  $62,660
$6,111          $108
- -----------------------------------------------------------------------------------------------
 Average net assets (in thousands)                         $25,018
$2,228          $ 26
- -----------------------------------------------------------------------------------------------
 Ratios to average net assets: 4
 Net investment loss                                         (0.43)%
(0.26)%       (0.34)%
 Total expenses                                               1.23%
1.21%         1.19%
 Expenses after expense reimbursement or fee waiver
 and reduction to custodian expenses                           N/A 5
1.19%          N/A 5
- -----------------------------------------------------------------------------------------------
 Portfolio turnover rate                                       130%
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, 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. Returns do not reflect the deduction
of
shareholder would pay on Fund distributions or the redemption of Fund shares.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.
- -----------------------------------------------------------------------------

 YEAR ENDED DECEMBER 31,                                2003            2002
- -----------------------------------------------------------------------------
 OPERATIONS

 Net investment loss                             $  (168,501)    $   (23,905)
- -----------------------------------------------------------------------------
 Net realized gain (loss)                          2,703,929      (2,848,300)
- -----------------------------------------------------------------------------
 Net change in unrealized appreciation            15,038,979      (1,461,310)
                                                 ----------------------------
 Net increase (decrease) in net assets
 resulting from operations                        17,574,407      (4,333,515)

- -----------------------------------------------------------------------------
 BENEFICIAL INTEREST TRANSACTIONS

 Net increase in net assets resulting from
 beneficial interest transactions:
 Non-Service shares                                  536,751       4,845,883
 Service shares                                   46,411,899       6,553,550

- -----------------------------------------------------------------------------
 NET ASSETS

 Total increase                                   64,523,057       7,065,918
- -----------------------------------------------------------------------------
 Beginning of period                              25,688,010      18,622,092
                                                 ----------------------------
 End of period [including accumulated net
 investment loss of $32,616 and
 $11,369, respectively]                          $90,211,067     $25,688,010
                                                 ============================


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 with respect to the Fund in general
and
 exclusive voting rights on matters that affect that class alone. 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. Securities traded on NASDAQ are valued based on the
closing
 price provided by NASDAQ 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. Securities whose values have been
 materially affected by what the Manager identifies as a significant event
 occurring before the Fund's assets are valued but after the close of their
 respective foreign exchanges will be fair valued. Fair value is determined in
 good faith using 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 Fund's accounting records 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. Pursuant to an Exemptive Order issued by the
 Securities and Exchange Commission, the Fund, along with other affiliated
funds
 advised by the Manager, may transfer uninvested cash balances into joint
 trading accounts on a daily basis. Secured by U.S. government securities,
these
 balances are invested in one or more repurchase agreements. 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. 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 on a
 daily basis 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.


NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------
 1. SIGNIFICANT ACCOUNTING POLICIES Continued
 FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
 Revenue Code applicable to regulated investment companies and to distribute
 substantially all of its investment company taxable income, including any net
 realized gain on investments not offset by capital loss carryforwards, if
any,
 to shareholders.

 The tax components of capital shown in the table below represent distribution
 requirements the Fund must satisfy under the income tax regulations, losses
the
 Fund may be able to offset against income and gains realized in future years
 and unrealized appreciation or depreciation of securities and other
investments
 for federal income tax purposes.


NET UNREALIZED

APPRECIATION

                                  BASED ON COST OF

SECURITIES AND
              UNDISTRIBUTED           UNDISTRIBUTED
ACCUMULATED             OTHER INVESTMENTS
              NET INVESTMENT              LONG-TERM
LOSS            FOR FEDERAL INCOME
              INCOME                           GAIN         CARRYFORWARD
1,2                  TAX PURPOSES

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

              $--                               $--
$3,233,886                   $15,055,853


 1. As of December 31, 2003, the Fund had $3,233,886 of net capital loss
 carryforwards available to offset future realized capital gains, if any, and
 thereby reduce future taxable gain distributions. As of December 31, 2003,
 details of the capital loss carryforwards were as follows:

                              EXPIRING
                              -------------------------
                              2009           $  642,572
                              2010            2,591,314
                                             ----------
                              Total          $3,233,886
                                             ==========

2. During the fiscal year  December 31, 2003,  the Fund  utilized  $2,435,654 of
capital loss carryforward to offset capital gains realized in that fiscal year.

During the fiscal year  December 31, 2002,  the Fund did not utilize any capital
loss carryforwards.

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. Accordingly, the
following  amounts have been  reclassified  for December 31, 2003. Net assets of
the Fund were unaffected by the reclassifications.

                                                            INCREASE TO
                                       REDUCTION TO     ACCUMULATED NET
                 REDUCTION TO       ACCUMULATED NET       REALIZED LOSS
                 PAID-IN CAPITAL    INVESTMENT LOSS      ON INVESTMENTS
                 ------------------------------------------------------
                 $144,288                  $147,254              $2,966

 No distributions were paid during the years ended December 31, 2003 and
 December 31, 2002.

 The aggregate cost of securities and other investments and the composition of
 unrealized appreciation and depreciation of securities and other investments
 for federal income tax purposes as of December 31, 2003 are noted below. The
 primary difference between book and tax appreciation or depreciation of
 securities and other investments, if applicable, is attributable to the tax
 deferral of losses or tax realization of financial statement unrealized gain
or
 loss.
                 Federal tax cost of securities              $76,550,135
                                                             ===========

                 Gross unrealized appreciation               $16,011,663
                 Gross unrealized depreciation                  (955,810)
                                                             -----------
                 Net unrealized appreciation                 $15,055,853
                                                             ===========

- --------------------------------------------------------------------------------
TRUSTEES'   COMPENSATION.   The  Board  of  Trustees   has  adopted  a  deferred
compensation  plan for  independent  trustees that enables  trustees to elect to
defer receipt of all or a portion of the annual  compensation  they are entitled
to receive from the Fund. Under the plan, deferred amounts are treated as though
equal dollar  amounts had been invested in shares of the Fund or are invested in
other  Oppenheimer  funds  selected by the Trustee.  Deferral of trustees'  fees
under  the  plan  will not  affect  the net  assets  of the  Fund,  and will not
materially  affect the Fund's assets,  liabilities or net investment  income per
share. Amounts will be deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
     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. Income and capital gain distributions,  if
any, are declared and paid annually.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
 EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
 represents earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
 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,
2003          YEAR ENDED DECEMBER 31, 2002
                                                SHARES
AMOUNT              SHARES            AMOUNT
- --------------------------------------------------------------------------------

 NON-SERVICE SHARES
 Sold                                          826,676      $
9,370,135           1,297,325      $ 13,674,065
 Redeemed                                     (879,995)
(8,833,384)           (869,963)       (8,828,182)

- ------------------------------------------------------------------
 Net increase (decrease)                       (53,319)     $
536,751             427,362      $  4,845,883

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

- ---------------------------------------------------------------------------------------------------------------
 SERVICE SHARES
 Sold                                        4,910,616      $
56,495,920           2,221,410      $ 21,513,500
 Redeemed                                     (892,849)
(10,084,021)         (1,573,671)      (14,959,950)

- ------------------------------------------------------------------
 Net increase                                4,017,767      $
46,411,899             647,739      $  6,553,550

==================================================================
- --------------------------------------------------------------------------------
 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, 2003, were
 $103,688,073 and $58,027,770, respectively.


NOTES TO FINANCIAL STATEMENTS  Continued

- --------------------------------------------------------------------------------
 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 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.
- --------------------------------------------------------------------------------
 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 per account fee. For the year ended December 31, 2003, the
Fund
 paid $15,171 to OFS for services to the Fund.
    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. Fees incurred by the Fund under the plan are detailed in the
 Statement of Operations.

- --------------------------------------------------------------------------------
 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 for protection from 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
 foreign transaction. Contracts closed or settled with the same broker are
 recorded as net realized gains or losses. Such realized gains and losses are
 reported with all other foreign currency gains and losses in the Statement of
 Operations.
    As of December 31, 2003, the Fund had no outstanding foreign currency
contracts.

- --------------------------------------------------------------------------------
 6. ILLIQUID OR RESTRICTED SECURITIES
 As of December 31, 2003, investments in securities included issues that are
 illiquid or restricted. Restricted securities are 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, 2003
was
 $90,924, which represents 0.10% of the Fund's net assets, of which $22,804 is
 considered restricted. Information concerning restricted securities is as
 follows:

                                         ACQUISITION
VALUATION AS OF        UNREALIZED
 SECURITY                                       DATE          COST
DECEMBER 31, 2003      APPRECIATION
- --------------------------------------------------------------------------------

STOCKS AND/OR WARRANTS
Esprit Exploration Ltd.                       6/4/02
$19,418                $22,804            $3,386

- --------------------------------------------------------------------------------
 7. SECURITIES LENDING
 The Fund lends portfolio securities from time to time in order to earn
 additional income. In return, the Fund receives collateral in the form of US
 Treasury obligations or cash, against the loaned securities and maintains
 collateral in an amount not less than 100% of the market value of the loaned
 securities during the period of the loan. The market value of the loaned
 securities is determined at the close of business of the funds and any
 additional required collateral is delivered to the Fund on the next business
 day. If the borrower defaults on its obligation to return the securities
loaned
 because of insolvency or other reasons, the Fund could experience delays and
 cost in recovering the securities loaned or in gaining access to the
 collateral. Cash collateral is invested in cash equivalents. As of December
31,
 2003, the Fund had on loan securities valued at approximately $16,282,000.
Cash
 of $16,865,986 was received as collateral for the loans, and has been
invested
 in approved instruments.

- --------------------------------------------------------------------------------
 8. BORROWING AND LENDING ARRANGEMENTS
 The Fund entered into an "interfund borrowing and lending arrangement" with
 other funds in the Oppenheimer funds complex, to allow funds to borrow for
 liquidity purposes. The arrangement was initiated pursuant to exemptive
relief
 granted by the Securities and Exchange Commission (the SEC) to allow these
 affiliated funds to lend money to, and borrow money from, each other, in an
 attempt to reduce borrowing costs below those of bank loan facilities. The
 SEC's order requires the Fund's Board of Trustees to adopt operating policies
 and procedures to administer interfund borrowing and lending. Under the
 arrangement the Fund may lend money to other Oppenheimer funds and may borrow
 from other Oppenheimer funds at a rate set by the Fund's Board of Trustees,
 based upon a recommendation by the Manager. The Fund's borrowings, if any,
are
 subject to asset coverage requirements under the Investment Company Act and
the
 provisions of the SEC order and other applicable regulations. If the Fund
 borrows money, there is a risk that the loan could be called on one day's
 notice, in which case the Fund might have to borrow from a bank at higher
rates
 if a loan were not available from another Oppenheimer fund. If the Fund lends
 money to another fund, it will be subject to the risk that the other fund
might
 not repay the loan in a timely manner, or at all.
    The Fund had no interfund borrowings or loans outstanding during the year
 ended or at December 31, 2003.

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,  a series of  Oppenheimer  Variable  Account Funds,
including the statement of investments, as of December 31, 2003, 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, 2003, 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, 2003, 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
February 12, 2004

OPPENHEIMER MONEY FUND/VA
STATEMENT OF INVESTMENTS  December 31, 2003
- --------------------------------------------------------------------------------

                                      PRINCIPAL           VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
CERTIFICATES OF DEPOSIT--6.8%
- ----------------------------------------------------------------
DOMESTIC CERTIFICATES OF DEPOSIT--2.5%
Citibank NA, 1.09%, 2/6/04          $ 2,500,000   $   2,500,000
- ----------------------------------------------------------------
National Bank of Commerce,
Tennessee, 1.17%, 6/14/04 1           3,500,000       3,499,841
                                                  --------------
                                                      5,999,841

- ----------------------------------------------------------------
YANKEE CERTIFICATES OF DEPOSIT--4.3%
Bank of Montreal, Chicago, 1.105%,
3/31/04                               1,300,000       1,300,000
- ----------------------------------------------------------------
Canadian Imperial Bank of
Commerce, New York, 1.09%, 3/5/04     2,000,000       2,000,000
- ----------------------------------------------------------------
Lloyds TSB Bank plc, New York,
1.09%, 2/17/04                        2,000,000       2,000,026
- ----------------------------------------------------------------
Svenska Handelsbanken NY, 1.08%,
1/12/04                               5,000,000       4,999,970
                                                  --------------
                                                     10,299,996
                                                  --------------
Total Certificates of Deposit (Cost $16,299,837)     16,299,837

- ----------------------------------------------------------------
DIRECT BANK OBLIGATIONS--16.4%
Bank One NA, 1.06%, 1/28/04           2,000,000       2,000,000
- ----------------------------------------------------------------
BNP Paribas Finance, Inc.,
1.09%, 2/13/04                        3,050,000       3,046,029
- ----------------------------------------------------------------
Credit Lyonnais North America, Inc.:
1.08%, 2/3/04                         5,000,000       4,995,050
1.08%, 2/5/04                         3,500,000       3,496,325
- ----------------------------------------------------------------
Danske Corp., Series A,
1.10%, 1/21/04                        1,500,000       1,499,083
- ----------------------------------------------------------------
Governor & Co. of the Bank of
Ireland, 1.085%, 1/26/04 2            2,000,000       1,998,493
- ----------------------------------------------------------------
HBOS Treasury Services, 1.13%,
3/10/04                               4,000,000       3,991,337
- ----------------------------------------------------------------
LaSalle Bank NA, 1.10%, 2/19/04       2,000,000       2,000,000
- ----------------------------------------------------------------
Nationwide Building Society:
1.09%, 3/16/04                        2,200,000       2,195,004
1.11%, 3/17/04                        2,000,000       1,995,313
- ----------------------------------------------------------------
Nordea North America, Inc., 1.12%,
3/29/04                               2,000,000       1,994,524
- ----------------------------------------------------------------
Societe Generale North America:
1.095%, 4/2/04                        3,000,000       2,991,605
1.105%, 2/2/04                        3,600,000       3,596,464
- ----------------------------------------------------------------
U.S. Bank NA, 1.05%, 1/28/04          2,000,000       1,999,938
- ----------------------------------------------------------------
UBS Finance (Delaware) LLC,
1.06%, 1/20/04                        1,085,000       1,084,382
                                                  --------------
Total Direct Bank Obligations
(Cost $38,883,547)                                   38,883,547

- ----------------------------------------------------------------
SHORT-TERM NOTES--70.3%
- ----------------------------------------------------------------
ASSET-BACKED--24.8%
Barton Capital Corp.,
1.10%, 1/15/04 2                      2,000,000       1,999,144
- ----------------------------------------------------------------
Crown Point Capital Co., 1.12%,
2/6/04 2                              5,000,000       4,994,350


                                      PRINCIPAL           VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
ASSET-BACKED Continued
Eiffel Funding LLC, 1.11%, 2/9/04 2 $ 1,500,000   $   1,498,196
- ----------------------------------------------------------------
FCAR Owner Trust I, 1.11%, 2/12/04    2,500,000       2,496,763
- ----------------------------------------------------------------
Galaxy Funding, Inc.:
1.12%, 3/3/04 2                       2,000,000       1,996,142
1.12%, 4/16/04                        3,000,000       2,990,107
- ----------------------------------------------------------------
Gemini Securitization Corp.,
1.09%, 1/8/04 2                       2,000,000       1,999,576
- ----------------------------------------------------------------
Grampian Funding LLC:
1.11%, 4/14/04 2                      2,800,000       2,791,021
1.12%, 1/23/04 2                      3,500,000       3,497,604
- ----------------------------------------------------------------
Legacy Capital LLC, 1.12%, 1/7/04 2   2,000,000       1,999,627
- ----------------------------------------------------------------
Lexington Parker Capital Co. LLC,
1.13%, 2/5/04 2                       4,000,000       3,995,606
- ----------------------------------------------------------------
Neptune Funding Corp.:
1.14%, 1/29/04 2                      5,000,000       4,995,567
1.14%, 4/1/04 2                       1,750,000       1,744,957
- ----------------------------------------------------------------
New Center Asset Trust, 1.105%,
1/29/04                               2,600,000       2,597,765
- ----------------------------------------------------------------
Perry Global Funding LLC, Series A,
1.15%, 4/5/04 2                       2,000,000       1,993,931
- ----------------------------------------------------------------
Preferred Receivables Funding Corp.,
1.13%, 3/10/04 2                      2,230,000       2,225,170
- ----------------------------------------------------------------
Scaldis Capital LLC:
1.09%, 3/12/04 2                      1,500,000       1,496,775
1.10%, 1/12/04 2                      3,008,000       3,006,989
- ----------------------------------------------------------------
Sheffield Receivables Corp., 1.10%,
1/5/04 2                              2,500,000       2,499,697
- ----------------------------------------------------------------
Victory Receivables Corp.:
1.14%, 1/14/04 2                      3,000,000       2,998,765
1.15%, 2/10/04 2                      5,000,000       4,993,611
                                                  --------------
                                                     58,811,363

- ----------------------------------------------------------------
CAPITAL MARKETS--14.3%
Banc of America Securities LLC,
1.09%, 1/2/04 1                       5,000,000       5,000,000
- ----------------------------------------------------------------
Bear Stearns Cos., Inc.,
1.10%, 3/11/04                        2,000,000       1,995,722
- ----------------------------------------------------------------
Citigroup Global Markets Holdings,
Inc., 1.08%, 1/6/04                   2,000,000       1,999,700
- ----------------------------------------------------------------
Goldman Sachs Group, Inc.:
1.17%, 2/9/04 3                       5,000,000       5,000,000
1.24%, 4/28/04 3                      3,000,000       3,000,000
- ----------------------------------------------------------------
Lehman Brothers, Inc., 1.005%,
12/15/04 1                            2,000,000       2,000,000
- ----------------------------------------------------------------
Morgan Stanley, 0.938%, 8/27/04 1     5,000,000       5,000,000
- ----------------------------------------------------------------
Wachovia Securities LLC, 1.19%,
3/26/04 1                            10,000,000      10,000,000
                                                  --------------
                                                     33,995,422

                                      PRINCIPAL           VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
COMMERCIAL FINANCE--2.0%
Countrywide Home Loans, 1.01%,
1/2/04                              $ 4,700,000   $   4,699,868
- ----------------------------------------------------------------
CONSUMER FINANCE--0.8%
American General Finance Corp.,
1.06%, 1/21/04                        2,000,000       1,998,822
- ----------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--2.1%
GE Capital International Funding,
Inc., Series A, 1.11%, 4/14/04 2      2,000,000       1,993,587
- ----------------------------------------------------------------
General Electric Capital Corp.,
1.09%, 1/27/04                        3,000,000       2,997,638
                                                  --------------
                                                      4,991,225

- ----------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--0.8%
SBC International, Inc.,
1.07%, 1/13/04 2                      2,000,000       1,999,293
- ----------------------------------------------------------------
INSURANCE--5.7%
ING America Insurance Holdings,
Inc., 1.11%, 2/2/04                   1,500,000       1,498,520
- ----------------------------------------------------------------
Metropolitan Life Global Funding I,
Series 2003-5, 1.173%, 1/15/04 1,3    4,000,000       4,000,000
- ----------------------------------------------------------------
Pacific Life Insurance Co., 1.14%,
1/2/04 1,3                            4,000,000       4,000,000
- ----------------------------------------------------------------
United of Omaha Life Insurance Co.,
1.22%, 1/2/04 1,3                     4,000,000       4,000,000
                                                  --------------
                                                     13,498,520

- ----------------------------------------------------------------
LEASING & FACTORING--1.3%
American Honda Finance Corp.,
1.13%, 2/4/04 1,4                     3,000,000       3,000,000
- ----------------------------------------------------------------
METALS & MINING--1.9%
Rio Tinto Ltd., 1.10%, 1/22/04 2      4,500,000       4,497,113
- ----------------------------------------------------------------
OIL & GAS--0.8%
Shell Finance UK plc, 1.09%, 3/18/04  2,000,000       1,995,337
- ----------------------------------------------------------------
SPECIAL PURPOSE FINANCIAL--15.8%
Blue Spice LLC, 1.11%, 1/22/04 2      5,000,000       4,996,763
- ----------------------------------------------------------------
Cooperative Assn. of Tractor Dealers, Inc., Series B:
1.12%, 1/23/04                        1,000,000         999,309
1.12%, 4/16/04                        1,500,000       1,495,053
1.13%, 2/12/04                        1,500,000       1,498,023
1.13%, 4/8/04                         1,000,000         996,924
1.13%, 4/15/04                        1,000,000         996,704
- ----------------------------------------------------------------
K2 (USA) LLC:
1.11%, 1/30/04 2                      2,000,000       1,998,212
1.12%, 3/17/04 2                      5,000,000       4,988,389
- ----------------------------------------------------------------
LINKS Finance LLC:
1.08%, 8/25/04 1,4                    5,000,000       4,999,351
1.13%, 10/15/04 1,4                   2,500,000       2,500,000


                                      PRINCIPAL           VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
SPECIAL PURPOSE FINANCIAL Continued
Parkland (USA) LLC, 1.131%,
2/24/04 1,4                         $ 5,000,000   $   5,000,000
- ----------------------------------------------------------------
Sigma Finance, Inc.:
1.08%, 11/26/04 1,4                   4,000,000       3,999,460
1.15%, 12/20/04 1,4                   3,000,000       2,999,413
                                                  --------------
                                                     37,467,601
                                                  --------------
Total Short-Term Notes (Cost $166,954,564)          166,954,564

- ----------------------------------------------------------------
U.S. GOVERNMENT AGENCIES--8.4%
Federal Home Loan Bank:
1.07%, 7/14/04                        2,000,000       2,000,000
1.23%, 7/6/04                         3,000,000       3,000,000
1.53%, 11/19/04                       2,000,000       2,000,000
- ----------------------------------------------------------------
FNMA Master Credit Facility:
0.95%, 1/2/04                         5,000,000       4,999,868
1.105%, 2/2/04                        3,000,000       2,997,053
1.12%, 5/3/04                         5,000,000       4,981,024
                                                  --------------
Total U.S. Government Agencies
(Cost $19,977,945)                                   19,977,945

- ----------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $242,115,893)                       101.9%     242,115,893
- ----------------------------------------------------------------
LIABILITIES IN EXCESS
OF OTHER ASSETS                            (1.9)     (4,502,994)
                                   -----------------------------
NET ASSETS                                100.0%   $237,612,899
                                   =============================



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 $73,198,578, or 30.81% 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. 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 $22,498,224 or 9.47% of the Fund's net
assets as of December 31, 2003.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENT OF ASSETS AND LIABILITIES  December 31, 2003

- --------------------------------------------------------------------------------------------------------------
ASSETS

Investments, at value (cost $242,115,893)--see accompanying
statement                            $242,115,893
- --------------------------------------------------------------------------------------------------------------
Cash
81,254
- --------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest
sold
528,914
Interest
                    103,638
Other
3,275

- -------------
Total
assets
242,832,974

- --------------------------------------------------------------------------------------------------------------
LIABILITIES
Payables and other liabilities:
Investments
purchased
4,981,022
Shares of beneficial interest
redeemed
128,937
Dividends
                                                                      43,871
Shareholder
reports
14,925
Trustees' compensation
                                   1,276
Transfer and shareholder servicing agent
fees                                                             833
Other
49,211

- -------------
Total
liabilities
5,220,075

- --------------------------------------------------------------------------------------------------------------
NET
ASSETS
$237,612,899

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

- --------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Par value of shares of beneficial
interest                                                       $    237,586
- --------------------------------------------------------------------------------------------------------------
Additional paid-in capital
                                                        237,375,996
- --------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments
                            (683)

- -------------
NET ASSETS--applicable to 237,585,812 shares of beneficial interest
outstanding                  $237,612,899


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

- --------------------------------------------------------------------------------------------------------------
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, 2003
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
INVESTMENT INCOME
Interest
$4,023,684

- --------------------------------------------------------------------------------
EXPENSES
Management fees
1,424,167
- --------------------------------------------------------------------------------
Shareholder reports
17,830
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees
10,412
- --------------------------------------------------------------------------------
Custodian fees and expenses
8,226
- --------------------------------------------------------------------------------
Trustees' compensation
6,152
- --------------------------------------------------------------------------------
Other
24,025

- -----------
Total expenses
1,490,812
Less reduction to custodian expenses
(2,030)

- -----------
Net expenses
1,488,782

- --------------------------------------------------------------------------------
NET INVESTMENT INCOME
2,534,902

- --------------------------------------------------------------------------------
NET REALIZED LOSS ON INVESTMENTS
(683)

- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$2,534,219

===========

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENTS OF CHANGES IN NET ASSETS
FINANCIAL HIGHLIGHTS

YEAR ENDED DECEMBER 31
2003          2002          2001           2000      1999
- -----------------------------------------------------------------------------
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           .01           .04           .06       .05
- -----------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
(.01)         (.01)         (.04)         (.06)     (.05)
Dividends from net realized gain
- --            -- 1          --            --
- --
- -----------------------------------------------------------
Total dividends and/or distributions to shareholders
(.01)         (.01)         (.04)         (.06)     (.05)
- -----------------------------------------------------------------------------
Net asset value, end of period
$1.00         $1.00         $1.00         $1.00     $1.00
- -----------------------------------------------------------------------------
TOTAL RETURN 2                                                      0.79%
1.47%         3.85%         6.26%     4.96%
- -----------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)                        $237,613
$379,969      $370,229      $215,771  $201,066
- -----------------------------------------------------------------------------
Average net assets (in thousands)                               $316,096
$386,457      $288,106      $204,586  $166,727
- -----------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                               0.80%
1.46%         3.59%         5.98%     4.87%
Total expenses                                                      0.47%
4       0.47% 4       0.52% 4       0.51% 4   0.48% 4

1. Less than $0.005 per share.
2. 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.

- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER
31,
2003            2002
- ---------------------------------------------------------------------------------------------------------------------------
OPERATIONS

Net investment income
                                  $  2,534,902    $  5,645,165
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
                                 (683)          6,284

- -----------------------------
Net increase in net assets resulting from operations
                   2,534,219       5,651,449

- ---------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income
                                                         (2,534,902)
(5,603,150)
- ---------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain
                                                         --         (42,015)

- ---------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
Net increase (decrease) in net assets resulting from beneficial interest
transactions         (142,355,858)      9,734,246

- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase
(decrease)
(142,356,541)      9,740,530
- ---------------------------------------------------------------------------------------------------------------------------
Beginning of period

379,969,440     370,228,910

- -----------------------------
End of period
                                                          $237,612,899
$379,969,440

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

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 Fund currently offers Non-Service shares only. The class is sold at
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 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.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income to shareholders.

The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses
the
Fund may be able to offset against income and gains realized in future years
for
federal income tax purposes.

          UNDISTRIBUTED          UNDISTRIBUTED                ACCUMULATED
          NET INVESTMENT             LONG-TERM                      LOSS
          INCOME                         GAINS           CARRYFORWARD 1,2
          ---------------------------------------------------------------
          $91,010                          $--                       $683

1. As of December 31, 2003, the Fund had $683 of net capital loss carryforward
available to offset future realized capital gains, if any, and thereby reduce
future taxable gain distributions. As of December 31, 2003, details of the
capital loss carryforward were as follows:

                              EXPIRING
                              -------------------------
                              2011                 $683

2. During the fiscal year ended December 31, 2003 the Fund did not utilize any
capital loss carryforwards.

The tax character of distributions paid during the years ended December 31,
2003
and December 31, 2002 were as follows:
                                         YEAR ENDED               YEAR ENDED
                                  DECEMBER 31, 2003        DECEMBER 31, 2002
  --------------------------------------------------------------------------
  Distributions paid from:
  Ordinary income                        $2,534,902               $5,603,150

- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. Under the plan, deferred amounts are treated as
though
equal dollar amounts had been invested in shares of the Fund or are invested
in
other Oppenheimer funds selected by the Trustee. Deferral of trustees' fees
under the plan will not affect the net assets of the Fund, and will not
materially affect the Fund's assets, liabilities or net investment income per
share. Amounts will be deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
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. Income distributions, if any, are
declared
daily and paid monthly. Capital gain distributions, if any, are declared and
paid annually.
- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
represents earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
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,
2003          YEAR ENDED DECEMBER 31, 2002
                                                          SHARES
AMOUNT              SHARES            AMOUNT
- --------------------------------------------------------------------------------------------------------------------------

 Sold                                                339,107,835     $
339,107,835       1,008,410,332   $ 1,008,410,332
 Dividends and/or distributions reinvested             2,603,068
2,603,068           5,645,165         5,645,165
 Redeemed                                           (484,066,761)
(484,066,761)     (1,004,321,251)   (1,004,321,251)

- ----------------------------------------------------------------------
 Net increase (decrease)                            (142,355,858)
$(142,355,858)          9,734,246   $     9,734,246

======================================================================
- --------------------------------------------------------------------------------
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 which provides for a fee at an
annual rate of 0.45% of the first $500 million of average annual net assets,
0.425% of the next $500 million, 0.40% of the next $500 million and 0.375% of
average annual net assets in excess of $1.5 billion.
- --------------------------------------------------------------------------------
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 per account fee. For the year ended December 31, 2003, the Fund paid
$10,012 to OFS for services to the Fund.
   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, 2003, 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, 2003 was $20,000,000, which represents 8.42% of the Fund's net assets.

EX-99.K

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,  a series of Oppenheimer  Variable  Account
Funds, including the statement of investments,  as of December 31, 2003, 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, 2003, 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, 2003, 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
February 12, 2004

OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS  December 31, 2003
- -------------------------------------------------------------------------------

                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
ASSET-BACKED SECURITIES--5.3%
American Money Management
Corp., Commercial Debt
Obligations Sub. Bonds, Series I,
Cl. D1, 13.602%, 1/15/12 1          $   172,858   $     146,930
- ----------------------------------------------------------------
Bank One Auto Securitization
Trust, Automobile Receivables,
Series 2003-1, Cl. A 2, 1.29%,
8/21/06                                 620,000         619,856
- ----------------------------------------------------------------
BMW Vehicle Owner Trust,
Automobile Loan Certificates,
Series 2003-A, Cl. A 2,
1.45%, 11/25/05 1                       900,878         902,341
- ----------------------------------------------------------------
Capital Auto Receivables Asset
Trust, Automobile Mtg.-Backed
Nts., Series 2003-2, Cl. A 2A,
1.20%, 5/16/05                          760,000         760,404
- ----------------------------------------------------------------
Caterpillar Financial Asset Trust,
Equipment Loan Pass-Through
Certificates, Series 2003-A,
Cl. A 2, 1.25%, 10/25/05                460,000         460,187
- ----------------------------------------------------------------
Centex Home Equity Co. LLC,
Home Equity Loan
Asset-Backed Certificates:
Series 2003-A, Cl. AF1,
1.836%, 10/25/17                        146,576         146,706
Series 2003-B, Cl. AF1,
1.64%, 2/25/18 1                        218,050         217,993
Series 2003-C, Cl. AF1,
2.14%, 7/25/18                          655,704         657,228
- ----------------------------------------------------------------
Chase Funding Mortgage Loan
Asset-Backed Certificates,
Home Equity Mtg. Obligations:
Series 2003-3, Cl. 1A 1,
1.199%, 8/25/17 2                       336,407         336,449
Series 2003-4, Cl. 1A 1,
1.24%, 9/25/17 2                        733,950         734,130
- ----------------------------------------------------------------
Chase Manhattan Auto Owner
Trust, Automobile Loan
Pass-Through Certificates:
Series 2003-A, Cl. A 2,
1.26%, 1/16/06 1                        290,000         290,190
Series 2003-B, Cl. A 2,
1.287%, 3/15/06                         360,000         360,123
- ----------------------------------------------------------------
CitiFinancial Mortgage Securities,
Inc., Home Equity Collateralized
Mtg. Obligations:
Series 2003-1, Cl. AF1,
1.94%, 1/25/33                          244,026         244,234
Series 2003-2, Cl. AF1,
1.219%, 5/25/33 1,2                     346,095         346,081
Series 2003-3, Cl. AF1,
1.261%, 8/25/33 1,2                     510,816         510,828


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
Conseco Finance
Securitizations Corp., Home
Equity Loan Pass-Through
Certificates, Series 2001-D,
Cl. M2, 2.87%, 11/15/32 2           $ 3,000,000   $   2,947,321
- ----------------------------------------------------------------
Consumer Credit Reference
Index Securities Program, Credit
Card Asset-Backed Certificates,
Series 2002-B, Cl. FX, 10.421%,
3/22/07 1                               500,000         526,130
- ----------------------------------------------------------------
DaimlerChrysler Auto Trust,
Automobile Loan Pass-Through
Certificates:
Series 2002-B, Cl. A 2,
2.20%, 4/6/05                            62,005          62,108
Series 2003-A, Cl. A 2,
1.52%, 12/8/05                        1,070,000       1,071,937
Series 2003-B, Cl. A 2,
1.61%, 7/8/06                           970,000         962,628
- ----------------------------------------------------------------
Embarcadero Aircraft
Securitization Trust, Airplane
Collateral Obligations, Series
2000-A, Cl. B, 0.678%, 8/15/25 1,3    1,820,063           4,550
- ----------------------------------------------------------------
Ford Credit Auto Owner Trust,
Automobile Loan Pass-Through
Certificates, Series 2003-A, Cl.
A 2A, 1.62%, 8/15/05                    404,958         405,826
- ----------------------------------------------------------------
Harley-Davidson Motorcycle
Trust, Motorcycle Receivable Nts.:
Series 2002-2, Cl. A 1,
1.91%, 4/16/07                          224,526         225,294
Series 2003-3, Cl. A 1,
1.50%, 1/15/08                          925,846         927,436
- ----------------------------------------------------------------
Honda Auto Receivables Owner
Trust, Automobile Receivables
Obligations:
Series 2003-1, Cl. A 2,
1.46%, 9/19/05                          543,221         544,053
Series 2003-3, Cl. A 2,
1.52%, 4/21/06                        1,190,000       1,191,952
Series 2003-4, Cl. A 2,
1.58%, 7/17/06                          960,000         961,561
- ----------------------------------------------------------------
Household Automotive Trust,
Automobile Loan Certificates,
Series 2003-2, Cl. A 2, 1.56%,
12/18/06                                430,000         430,577
- ----------------------------------------------------------------
Impac Secured Assets CMN
Owner Trust, Home Equity
Collateralized Mtg. Obligations,
Series 2001-5, Cl.
M1, 7.25%, 8/25/31                    2,197,000       2,324,020


STATEMENT OF INVESTMENTS  Continued
- ----------------------------------------------------------------

                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
Lehman ABS Manufactured
Housing Contract, Commercial
Mtg. Pass-Through Certificates,
Series 2001-B, Cl. A4, 5.27%,
9/15/18                             $ 2,911,035   $   2,810,117
- ----------------------------------------------------------------
M&I Auto Loan Trust,
Automobile Loan Certificates:
Series 2002-1, Cl. A 3,
2.49%, 10/22/07                         730,000         736,341
Series 2003-1, Cl. A 2,
1.60%, 7/20/06                          820,000         820,315
- ----------------------------------------------------------------
NC Finance Trust, Collateralized
Mtg. Obligations, Series 1999-I,
Cl. ECFD, 8.75%, 12/25/28 1              69,314          20,794
- ----------------------------------------------------------------
Nissan Auto Lease Trust, Auto
Lease Obligations, Series 2003-A,
Cl. A 2, 1.69%, 12/15/05                640,000         641,773
- ----------------------------------------------------------------
Nissan Auto Receivables Owner
Trust, Automobile Receivable Nts.:
Series 2003-A, Cl. A 2,
1.45%, 5/16/05                          800,742         801,786
Series 2003-B, Cl. A 2,
1.20%, 11/15/05                       1,110,000       1,110,434
- ----------------------------------------------------------------
Principal Residential Mortgage
Capital Resources Trust, Real
Estate Mtg. Investment Conduit
Participation Certificates,
Series 2000-1, Cl. B,
2.799%, 6/20/05 1,2                   1,000,000         990,625
- ----------------------------------------------------------------
Residential Funding Mortgage
Securities II, Inc., Home Equity
Loan Pass-Through Certificates,
Series 2003-HS1, Cl. AI2, 1.241%,
1/25/33 2                               295,040         295,205
- ----------------------------------------------------------------
Toyota Auto Receivables
Owner Trust, Automobile
Mtg.-Backed Obligations:
Series 2002-B, Cl. A 3,
3.76%, 6/15/06                          285,552         289,374
Series 2003-A, Cl. A 2,
1.28%, 8/15/05                        1,027,717       1,028,653
Series 2003-B, Cl. A 2,
1.43%, 2/15/06                          780,000         780,404
- ----------------------------------------------------------------
USAA Auto Owner Trust,
Automobile Loan
Asset-Backed Nts.:
Series 2002-1, Cl. A 3,
2.41%, 10/16/06                         450,285         453,520
Series 2003-1, Cl. A 2,
1.22%, 4/17/06                          660,000         660,252


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
Volkswagen Auto Loan
Enhanced Trust, Automobile
Loan Receivables:
Series 2003-1, Cl. A 2,
1.11%, 12/20/05                     $ 1,420,000   $   1,419,473
Series 2003-2, Cl. A 2,
1.55%, 6/20/06                          550,000         550,888
- ----------------------------------------------------------------
Whole Auto Loan Trust,
Automobile Loan Receivables:
Series 2002-1, Cl. A 2,
1.88%, 6/15/05                          754,823         756,877
Series 2003-1, Cl. A 2A,
1.40%, 4/15/06                        1,120,000       1,120,973
                                                  --------------
Total Asset-Backed Securities
(Cost $36,475,254)                                   34,606,877

- ----------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--14.6%
Asset Securitization Corp.,
Commercial Mtg.
Pass-Through Certificates:
Series 1996-D2, Cl. A 3,
7.515%, 2/14/29 2                     3,000,000       3,156,246
Series 1996-MD6, Cl. A7,
7.961%, 11/13/29 2                    2,000,000       1,966,478
Series 1997-D4, Cl. B1,
7.525%, 4/14/29                         375,000         359,606
- ----------------------------------------------------------------
CIT Equipment Collateral,
Equipment Receivable-
Backed Nts.,
Series 2003-EF1, Cl. A 2,
1.49%, 12/20/05                         300,000         300,146
- ----------------------------------------------------------------
Federal Home Loan
Mortgage Corp.:
5%, 1/1/34 4                          1,229,000       1,213,254
7%, 9/1/33-11/1/33                    1,559,185       1,653,594
11%, 11/1/14                            116,841         129,985
- ----------------------------------------------------------------
Federal Home Loan Mortgage
Corp., Gtd. Mtg. Pass-Through
Participation Certificates,
Series 151, Cl. F, 9%, 5/15/21          177,765         178,064
- ----------------------------------------------------------------
Federal Home Loan Mortgage
Corp., Gtd. Real Estate Mtg.
Investment Conduit Multiclass
Pass-Through Certificates:
Series 2500, Cl. FD,
1.62%, 3/15/32 2                        262,051         260,342
Series 2526, Cl. FE,
1.52%, 6/15/29 2                        286,002         285,189
Series 2551, Cl. FD,
1.52%, 1/15/33 2                        247,768         248,775


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
Federal Home Loan Mortgage
Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 177, Cl. B,
(2.489)%, 7/1/26 5                  $   717,861   $     126,699
Series 208, Cl. IO,
(34.206)%, 6/1/30 5                   1,395,321         227,770
- ----------------------------------------------------------------
Federal Home Loan Mortgage
Corp., Structured Pass-Through
Securities, Collateralized Mtg.
Obligations:
Series H006, Cl. A 1,
1.724%, 4/15/08                         163,137         163,010
Series T-42, Cl. A 2,
5.50%, 2/25/42                          134,287         136,315
- ----------------------------------------------------------------
Federal National Mortgage Assn.:
5%, 1/1/34 4                          2,201,000       2,178,303
5.50%, 1/14/34 4                      7,120,000       7,213,450
6%, 2/25/34 4                         4,286,000       4,430,653
6.50%, 5/1/29-5/1/32                  2,453,676       2,567,442
6.50%, 1/25/34 4                     17,939,000      18,763,082
7%, 9/1/33-11/1/33                      862,880         915,256
7%, 7/1/32-1/25/34 4                 31,846,794      33,727,817
7.50%, 8/1/25                            37,715          40,454
8.50%, 7/1/32                            93,593         101,073
- ----------------------------------------------------------------
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 6                        219,392         219,368
Trust 2002-77, Cl. WF,
1.52%, 12/18/32 2                       429,914         431,252
- ----------------------------------------------------------------
Federal National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates,
Trust 2003-81, Cl. PA, 5%, 2/25/12      236,556         242,292
- ----------------------------------------------------------------
Federal National Mortgage Assn.,
Interest-Only Stripped
Mtg.-Backed Security:
Trust 294, Cl. 2, (33.063)%, 2/1/28 5   284,563          49,526
Trust 313, Cl. 2,
(27.665)%, 6/25/31 5                  1,750,932         297,578
- ----------------------------------------------------------------
First Chicago/Lennar Trust 1,
Commercial Mtg. Pass-Through
Certificates:
Series 1997-CHL1, Cl. D,
7.96%, 4/29/39 1,2                      350,000         349,781
Series 1997-CHL1, Cl. E,
7.96%, 4/29/39 1,2                      600,000         486,750
- ----------------------------------------------------------------
GMAC Commercial Mortgage
Securities, Inc., Mtg. Pass-Through
Certificates, Series 1998-C1, Cl. F,
7.172%, 5/15/30 2                     1,800,000       1,813,351


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
Government National
Mortgage Assn.:
5.625%, 11/20/25 2                  $    26,732   $      27,528
7%, 3/15/28-7/15/28                   2,094,849       2,236,885
7.50%, 2/15/27                          232,474         249,932
8%, 11/15/25-5/15/26                    165,112         180,333
- ----------------------------------------------------------------
Government National Mortgage
Assn., Gtd. Multiclass Mtg.
Participation Certificates,
Series 1999-27, Cl. PQ,
7.50%, 8/16/28                        4,327,024       4,406,974
- ----------------------------------------------------------------
Lehman Structured Securities Corp.,
Collateralized Mtg. Obligations,
Series 2001-GE4, Cl. A,
111.60%, 10/25/30 2                      32,391          32,847
- ----------------------------------------------------------------
Merrill Lynch Mortgage
Investors, Inc., Mtg. Pass-Through
Certificates,
Series 1995-C2, Cl. D,
7.688%, 6/15/21 2                       183,742         197,779
- ----------------------------------------------------------------
Morgan Stanley Capital I, Inc.,
Commercial Mtg. Pass-Through
Certificates:
Series 1996-C1, Cl. F,
7.457%, 2/15/28 2,7                     162,744         149,120
Series 1997-RR, Cl. D, 7.709%,
4/30/39 2,7                             450,024         422,120
Series 1997-RR, Cl. E,
7.709%, 4/30/39 2,7                     300,016         237,928
Series 1997-RR, Cl. F,
7.709%, 4/30/39 2,7                     600,032         397,482
Series 1997-XL1, Cl. G, 7.695%,
10/3/30 7                               390,000         345,359
- ----------------------------------------------------------------
Prudential Mortgage Capital Co. II
LLC, Commercial Mtg. Pass-Through
Certificates, Series PRU-HTG
2000-C1, Cl. A 2, 7.306%, 10/6/15       556,000         641,427
- ----------------------------------------------------------------
Salomon Brothers Mortgage
Securities VII, Inc., Commercial
Mtg. Pass-Through Certificates:
Series 1996-B, Cl. 1, 6.865%,
4/25/26 1,2                              68,140          59,239
Series 1996-C1, Cl. F,
8.467%, 1/20/06 1,2                   1,000,000         950,000
- ----------------------------------------------------------------
Structured Asset Securities Corp.,
Commercial Mtg. Obligations, Series
1995-C4, Cl. E, 8.964%, 6/25/26 1,2       2,708           2,708
- ----------------------------------------------------------------
Washington Mutual Mortgage
Securities Corp., Collateralized
Mtg. Obligations Pass-Through
Certificates, Series 2003-AR7, Cl. A 1,
1.507%, 8/25/33 2                       601,986         602,443
                                                  --------------
Total Mortgage-Backed Obligations
(Cost $95,874,587)                                   95,373,005


STATEMENT OF INVESTMENTS  Continued
- ----------------------------------------------------------------

                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--9.0%
Federal Home Loan Bank
Unsec. Bonds, 4.875%, 11/15/13      $ 1,540,000   $   1,559,680
- ----------------------------------------------------------------
Federal Home Loan Mortgage
Corp. Unsec. Nts.:
2.375%, 4/15/06                       5,000,000       5,022,505
4.50%, 1/15/13                        3,435,000       3,423,936
4.875%, 3/15/07                       5,000,000       5,326,520
5.50%, 7/15/06                       11,100,000      11,966,788
- ----------------------------------------------------------------
Federal National Mortgage
Assn. Unsec. Nts.:
4.25%, 7/15/07                        8,840,000       9,239,957
5.25%, 6/15/06                        5,150,000       5,512,272
7.25%, 1/15/10-5/15/30                9,000,000      10,802,841
- ----------------------------------------------------------------
Resolution Funding Corp. Federal
Book Entry Principal Strips,
5.85%, 1/15/21 8                      1,220,000         471,770
- ----------------------------------------------------------------
U.S. Treasury Bonds:
8.875%, 2/15/19                         335,000         479,050
8.875%, 8/15/17 9,10                  1,630,000       2,308,998
STRIPS, 4.20%, 2/15/11 8                900,000         676,901
STRIPS, 4.96%, 2/15/16 8                171,000          94,307
- ----------------------------------------------------------------
U.S. Treasury Nts., 1.75%, 12/31/04   1,000,000       1,005,352
- ----------------------------------------------------------------
United States (Government of)
Gtd. Israel Aid Bonds,
5.50%, 12/4/23                          960,000         971,339
                                                  --------------
Total U.S. Government Obligations
(Cost $59,062,788)                                   58,862,216

- ----------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--24.3%
- ----------------------------------------------------------------
ARGENTINA--1.1%
Argentina (Republic of) Bonds:
1.162%, 8/3/12 2                      9,780,000       6,099,698
1.278%, 5/3/05 3                         98,000          91,998
2%, 9/30/081 [ARP]                    1,050,000         313,548
Series PR12, 2%, 1/3/16 1,3,11 [ARP]     15,300           4,357
- ----------------------------------------------------------------
Argentina (Republic of) Disc.
Bonds, 2.345%, 3/31/23 3                260,000         131,300
- ----------------------------------------------------------------
Argentina (Republic of) Par Bonds,
5.984%, 3/31/23 3                       565,000         279,675
- ----------------------------------------------------------------
Argentina (Republic of) Treasury Bills,
14.75%, 10/8/04 8 [ARP]                  17,000           5,384
- ----------------------------------------------------------------
Buenos Aires (Province of) Bonds,
Bonos de Consolidacion de Deudas,
Series PBA 1, 3.257%, 4/1/07 1,3 [ARP]   86,308          30,733
- ----------------------------------------------------------------
JPMorgan Chase Bank, Argentina
(Republic of) Treasury Bills, 8.84%,
2/20/04 1 [ARP]                          35,000          11,410
                                                  --------------
                                                      6,968,103


- ----------------------------------------------------------------
AUSTRIA--0.7%
Austria (Republic of) Nts.:
5.50%, 10/20/07 [EUR]                 2,440,000       3,314,740
Series 98-3, 3.90%, 10/20/05 [EUR]      475,000         613,371



                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
AUSTRIA Continued
Austria (Republic of) Sr. Unsec.
Unsub. Nts., Series 1, 5%,
7/15/12 [EUR]                           529,000   $     704,808
                                                  --------------
                                                      4,632,919


- ----------------------------------------------------------------
BELGIUM--1.0%
Belgium (Kingdom of) Bonds:
5%, 9/28/11 [EUR]                       540,000         721,180
Series 19, 6.50%, 3/31/05 [EUR]       1,180,000       1,563,558
Series 26, 6.25%, 3/28/07 [EUR]       2,170,000       2,996,063
Series 28, 5.75%, 3/28/08 [EUR]         755,000       1,038,409
                                                  --------------
                                                      6,319,210


- ----------------------------------------------------------------
BRAZIL--0.1%
Brazil (Federal Republic of) Bonds,
Series 15 yr., 2.063%, 4/15/09 2         16,177          15,368
- ----------------------------------------------------------------
Brazil (Federal Republic of) Unsec.
Unsub. Bonds, Cl. B, 8.875%, 4/15/24    958,000         935,248
                                                  --------------
                                                        950,616

- ----------------------------------------------------------------
COLOMBIA--0.1%
Colombia (Republic of) Unsec.
Unsub. Bonds, 8.375%, 2/15/27           615,000         568,875
- ----------------------------------------------------------------
DENMARK--0.3%
Denmark (Kingdom of) Nts., 4%,
8/15/08 [DKK]                        12,095,000       2,081,279
- ----------------------------------------------------------------
DOMINICAN REPUBLIC--0.0%
Dominican Republic Unsec.
Unsub. Bonds, 9.50%, 9/27/06            196,000         165,620
- ----------------------------------------------------------------
FINLAND--0.0%
Finland (Republic of) Sr. Unsec.
Unsub. Bonds, 2.75%, 7/4/06 [EUR]       220,000         276,031

- ----------------------------------------------------------------
FRANCE--1.4%
France (Government of) Obligations
Assimilables du Tresor Bonds:
5%, 4/25/12 [EUR]                     1,060,000       1,411,371
5.50%, 10/25/07 [EUR]                 4,115,000       5,587,009
- ----------------------------------------------------------------
France (Government of)
Treasury Nts.:
3 yr., 3.50%, 1/12/05 [EUR]           1,460,000       1,865,448
5 yr., 4.75%, 7/12/07 [EUR]             120,000         159,072
                                                  --------------
                                                      9,022,900

- ----------------------------------------------------------------
GERMANY--1.7%
Germany (Republic of) Bonds:
2%, 6/17/05 [EUR]                     2,120,000       2,659,088
5.375%, 1/4/10 [EUR]                  1,285,000       1,758,039
Series 01, 5%, 7/4/11 [EUR]           3,685,000       4,933,469
Series 140, 4.50%, 8/17/07 [EUR]      1,395,000       1,834,014
                                                  --------------
                                                     11,184,610

                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
GREAT BRITAIN--0.6%
United Kingdom Treasury Nts.,
7.50%, 12/7/06 [GBP]                  1,995,000   $   3,860,631
- ----------------------------------------------------------------
GREECE--1.1%
Greece (Republic of) Bonds:
3.50%, 4/18/08 [EUR]                  1,055,000       1,329,900
4.60%, 5/20/13 [EUR]                  1,545,000       1,975,933
5.35%, 5/18/11 [EUR]                  1,115,000       1,511,443
- ----------------------------------------------------------------
Greece (Republic of)
Sr. Unsub. Bonds,
4.65%, 4/19/07 [EUR]                  1,610,000       2,125,541
                                                  --------------
                                                      6,942,817

- ----------------------------------------------------------------
GUATEMALA--0.1%
Guatemala (Republic of) Nts.:
10.25%, 11/8/11 7                       250,000         291,875
10.25%, 11/8/11                         355,000         414,463
                                                  --------------
                                                        706,338

- ----------------------------------------------------------------
ITALY--1.9%
Italy (Republic of) Treasury
Bonds, Buoni del Tesoro
Poliennali:
4%, 3/1/05 [EUR]                        520,000         667,905
5%, 10/15/07 [EUR]                    5,080,000       6,786,354
5.25%, 12/15/05 [EUR]                 2,590,000       3,423,709
5.25%, 8/1/11 [EUR]                   1,015,000       1,372,450
                                                  --------------
                                                     12,250,418

- ----------------------------------------------------------------
IVORY COAST--0.0%
Ivory Coast (Government of)
Past Due Interest Bonds,
1.90%, 3/29/18 1,3,11 [FRF]           2,194,500          70,155
- ----------------------------------------------------------------
JAPAN--7.5%
Japan (Government of) Bonds,
5 yr., Series 14,
0.40%, 6/20/06 [JPY]              5,194,000,000      48,718,770

- ----------------------------------------------------------------
MEXICO--0.5%
United Mexican States Bonds:
6.75%, 6/6/06 [JPY]                  80,000,000         850,760
7.50%, 4/8/33                           930,000         964,875
8.30%, 8/15/31                          400,000         452,000
- ----------------------------------------------------------------
United Mexican States Unsec.
Unsub. Nts., Series 6 BR, 6.75%,
6/6/06 [JPY]                         75,000,000         797,588
                                                  --------------
                                                      3,065,223

- ----------------------------------------------------------------
NEW ZEALAND--0.3%
New Zealand (Government of)
Bonds, 6.50%, 2/15/06 [NZD]           2,655,000       1,773,719
- ----------------------------------------------------------------
NIGERIA--0.1%
Central Bank of Nigeria Gtd.
Bonds, Series WW, 6.25%,
11/15/20                                275,000         244,750


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
NIGERIA Continued
Nigeria (Federal Republic of)
Promissory Nts., Series RC,
5.092%, 1/5/10                      $   272,611   $     235,786
                                                  --------------
                                                        480,536

- ----------------------------------------------------------------
PERU--0.1%
Peru (Republic of) Sr. Nts.,
4.53%, 2/28/16 8                      1,643,896       1,008,037
- ----------------------------------------------------------------
PHILIPPINES--0.1%
Philippines (Republic of) Nts.,
9.875%, 3/16/10                         250,000         278,125
- ----------------------------------------------------------------
Philippines (Republic of) Unsec.
Bonds, 8.875%, 4/15/08                  400,000         433,000
                                                  --------------
                                                        711,125

- ----------------------------------------------------------------
POLAND--0.5%
Poland (Republic of) Bonds,
Series 0K0805, 5.15%,
8/12/05 8 [PLZ]                      12,605,000       3,076,403
- ----------------------------------------------------------------
PORTUGAL--0.6%
Portugal (Republic of) Obrig
Do Tes Medio Prazo Nts.,
4.875%, 8/17/07 [EUR]                 1,620,000       2,153,915
- ----------------------------------------------------------------
Portugal (Republic of) Obrig
Do Tes Medio Prazo Unsec.
Unsub. Bonds, 5.85%, 5/20/10 [EUR]    1,415,000       1,975,706
                                                  --------------
                                                      4,129,621


- ----------------------------------------------------------------
RUSSIA--1.3%
Ministry Finance of Russia Debs.,
Series V, 3%, 5/14/08                 1,870,000       1,678,699
- ----------------------------------------------------------------
Russian Federation Unsec.
Unsub. Bonds, 7.50%, 3/31/30 7            5,000           4,838
- ----------------------------------------------------------------
Russian Federation Unsec.
Unsub. Nts.:
8.75%, 7/24/05                        3,360,000       3,637,200
10%, 6/26/07                          2,590,000       3,043,250
- ----------------------------------------------------------------
Russian Federation
Unsub. Nts., 5%, 3/31/30 2                4,875           4,704
                                                  --------------
                                                      8,368,691

- ----------------------------------------------------------------
SOUTH AFRICA--0.2%
South Africa (Republic of)
Unsec. Nts., 8.375%, 10/17/06         1,415,000       1,606,025
- ----------------------------------------------------------------
SPAIN--1.0%
Spain (Kingdom of) Bonds,
Bonos y Obligacion del Estado,
4.80%, 10/31/06 [EUR]                 2,530,000       3,350,698
- ----------------------------------------------------------------
Spain (Kingdom of) Treasury
Bills, 2.07%, 2/20/04 8 [EUR]         2,680,000       3,371,695
                                                  --------------
                                                      6,722,393

STATEMENT OF INVESTMENTS  Continued
- ----------------------------------------------------------------

                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
SWEDEN--0.9%
Sweden (Kingdom of) Debs.,
Series 1040, 6.50%, 5/5/08 [SEK]     37,205,000   $   5,674,211
- ----------------------------------------------------------------
THE NETHERLANDS--0.7%
The Netherlands
(Government of) Bonds:
4%, 7/15/05 [EUR]                       175,000         225,615
5%, 7/15/11 [EUR]                       475,000         637,007
Series 1, 5.75%, 2/15/07 [EUR]        2,865,000       3,892,752
                                                  --------------
                                                      4,755,374

- ----------------------------------------------------------------
TURKEY--0.2%
Turkey (Republic of) Nts.,
7.20%, 2/16/06 [JPY]                125,000,000       1,272,511
- ----------------------------------------------------------------
UKRAINE--0.2%
Ukraine (Government of) Bonds,
7.65%, 6/11/13                          665,000         694,925
- ----------------------------------------------------------------
Ukraine (Government of) Sr.
Unsec. Nts., 11%, 3/15/07               359,337         401,451
                                                  --------------
                                                      1,096,376
                                                  --------------
Total Foreign Government
Obligations (Cost $146,096,804)                     158,459,537

- ----------------------------------------------------------------
LOAN PARTICIPATIONS--0.7%
Algeria (Republic of) Loan
Participation Nts.,
2.063%, 3/4/10 1,2                      504,833         494,106
- ----------------------------------------------------------------
Deutsche Bank AG, OAO
Gazprom Loan Participation
Nts., 6.50%, 8/4/05                   1,520,000       1,532,312
- ----------------------------------------------------------------
Deutsche Bank AG, Indonesia
Rupiah Loan Participation Nts.:
2.636%, 3/25/05                       1,490,000       1,363,350
2.636%, 5/21/04 1                     1,330,000       1,260,175
                                                  --------------
Total Loan Participations
(Cost $4,361,704)                                     4,649,943

- ----------------------------------------------------------------
CORPORATE BONDS AND NOTES--32.0%
- ----------------------------------------------------------------
CONSUMER DISCRETIONARY--9.0%
- ----------------------------------------------------------------
AUTO COMPONENTS--0.6%
Cambridge Industries, Inc.,
Liquidating Trust Interests,
7/15/07 1,12                             77,456              --
- ----------------------------------------------------------------
Collins & Aikman
Floorcoverings, Inc., 9.75%
Sr. Sub. Nts., Series B, 2/15/10        200,000         215,000
- ----------------------------------------------------------------
Collins & Aikman
Products Co., 10.75%
Sr. Nts., 12/31/11                      400,000         395,000
- ----------------------------------------------------------------
Dana Corp.:
9% Unsec. Nts., 8/15/11                 420,000         508,200
10.125% Nts., 3/15/10                   200,000         234,000
- ----------------------------------------------------------------
Dura Operating Corp.:
9% Sr. Sub. Nts., Series B,
5/1/09 [EUR]                            200,000         245,963


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
AUTO COMPONENTS Continued
9% Sr. Unsec. Sub. Nts.,
Series D, 5/1/09                    $   500,000   $     502,500
- ----------------------------------------------------------------
Eagle-Picher, Inc., 9.75%
Sr. Nts., 9/1/13 7                      300,000         325,500
- ----------------------------------------------------------------
Metaldyne Corp.:
10% Sr. Nts., 11/1/13 7                 200,000         203,000
11% Sr. Sub. Nts., 6/15/12              300,000         277,500
- ----------------------------------------------------------------
Stoneridge, Inc., 11.50% Sr.
Nts., 5/1/12                            600,000         711,000
- ----------------------------------------------------------------
Tenneco Automotive, Inc.,
10.25% Sr. Sec. Nts.,
Series B, 7/15/13                       150,000         171,375
- ----------------------------------------------------------------
United Components, Inc.,
9.375% Sr. Sub. Nts., 6/15/13           200,000         219,500
                                                  --------------
                                                      4,008,538


- ----------------------------------------------------------------
AUTOMOBILES--0.2%
DirecTV Holdings LLC/DirecTV
Financing Co., Inc., 8.375% Sr.
Unsec. Nts., 3/15/13                    800,000         932,000
- ----------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--2.7%
Apcoa, Inc., 9.25% Sr. Unsec.
Sub. Nts., 3/15/08 1                    100,000          36,500
- ----------------------------------------------------------------
Aztar Corp., 9% Sr. Unsec. Sub.
Nts., 8/15/11                           850,000         937,125
- ----------------------------------------------------------------
Boca Resorts, Inc., 9.875% Sr.
Sub. Nts., 4/15/09                      450,000         481,500
- ----------------------------------------------------------------
Boyd Gaming Corp., 8.75% Sr.
Sub. Nts., 4/15/12                      300,000         330,750
- ----------------------------------------------------------------
Coast Hotels & Casinos, Inc.,
9.50% Sr. Unsec. Sub. Nts., 4/1/09      300,000         318,750
- ----------------------------------------------------------------
Dominos, Inc., 8.25% Sr. Sub.
Nts., 7/1/11 7                          400,000         430,500
- ----------------------------------------------------------------
Gaylord Entertainment Co.,
8% Sr. Nts., 11/15/13 7                 300,000         318,000
- ----------------------------------------------------------------
Hilton Hotels Corp., 7.625%
Nts., 12/1/12                           600,000         677,250
- ----------------------------------------------------------------
Hollywood Park, Inc., 9.25%
Sr. Unsec. Sub. Nts.,
Series B, 2/15/07                       325,000         338,000
- ----------------------------------------------------------------
Intrawest Corp., 7.50% Sr. Nts.,
10/15/13 7                              625,000         653,125
- ----------------------------------------------------------------
Isle of Capri Casinos, Inc., 9%
Sr. Sub. Nts., 3/15/12                  500,000         558,750
- ----------------------------------------------------------------
John Q. Hammons Hotels, Inc.,
8.875% Sr. Nts., Series B, 5/15/12      300,000         332,250
- ----------------------------------------------------------------
Jupiters Ltd., 8.50% Sr. Unsec.
Nts., 3/1/06 1                          400,000         438,000
- ----------------------------------------------------------------
Mandalay Resort Group,
10.25% Sr. Unsec. Sub. Nts.,
Series B, 8/1/07                        650,000         754,000


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE Continued
MGM Mirage, Inc., 8.375%
Sr. Unsec. Sub. Nts., 2/1/11 6      $ 1,200,000   $   1,365,000
- ----------------------------------------------------------------
Mohegan Tribal Gaming
Authority:
6.375% Sr. Sub. Nts., 7/15/09           250,000         259,375
8% Sr. Sub. Nts., 4/1/12                400,000         435,000
8.375% Sr. Sub. Nts., 7/1/11 1          600,000         657,000
- ----------------------------------------------------------------
Park Place Entertainment Corp.,
7.875% Sr. Sub. Nts., 3/15/10           200,000         222,500
- ----------------------------------------------------------------
Premier Cruise Ltd., 11%
Sr. Nts., 3/15/08 1,3,11                250,000              --
- ----------------------------------------------------------------
Premier Parks, Inc., 9.75%
Sr. Nts., 6/15/07                       500,000         524,375
- ----------------------------------------------------------------
Prime Hospitality Corp., 8.375%
Sr. Sub. Nts., 5/1/12                   400,000         415,000
- ----------------------------------------------------------------
River Rock Entertainment LLC,
9.75% Sr. Nts., 11/1/11 7               300,000         324,000
- ----------------------------------------------------------------
Royal Caribbean Cruises Ltd.:
8% Sr. Unsec. Nts., 5/15/10             250,000         273,750
8.75% Sr. Unsub. Nts., 2/2/11           300,000         340,500
- ----------------------------------------------------------------
Six Flags, Inc.:
8.875% Sr. Nts., 2/1/10                 800,000         825,000
9.75% Sr. Nts., 4/15/13               1,000,000       1,057,500
- ----------------------------------------------------------------
Starwood Hotels &
Resorts Worldwide,
Inc., 7.875% Sr. Nts., 5/1/12           900,000       1,017,000
- ----------------------------------------------------------------
Station Casinos, Inc., 9.875%
Sr. Unsec. Sub. Nts., 7/1/10            800,000         884,000
- ----------------------------------------------------------------
Sun International Hotels Ltd.,
8.875% Sr. Unsec. Sub. Nts.,
8/15/11                                 700,000         768,250
- ----------------------------------------------------------------
Trump Atlantic City Associates/
Trump Atlantic City Funding, Inc.,
11.25% First Mtg. Nts., 5/1/06           25,000          19,188
- ----------------------------------------------------------------
Trump Casino Holdings LLC/
Trump Casino Funding, Inc.,
11.625% Sr. Sec. Nts., 3/15/10          350,000         336,875
- ----------------------------------------------------------------
Universal City Development
Partners Ltd., 11.75% Sr. Nts.,
4/1/10 7                                500,000         587,500
- ----------------------------------------------------------------
Vail Resorts, Inc., 8.75% Sr.
Unsec. Sub. Nts., 5/15/09               200,000         212,000
- ----------------------------------------------------------------
Venetian Casino Resort LLC/
Las Vegas Sands, Inc.,
11% Sec. Nts., 6/15/10                  400,000         466,000
                                                  --------------
                                                     17,594,313

- ----------------------------------------------------------------
HOUSEHOLD DURABLES--0.8%
Beazer Homes USA, Inc., 8.375%
Sr. Nts., 4/15/12                       400,000         443,000
- ----------------------------------------------------------------
Blount, Inc., 13% Sr. Sub. Nts.,
8/1/09                                  300,000         324,750


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
HOUSEHOLD DURABLES Continued
D.R. Horton, Inc.:
9.375% Sr. Unsec. Sub. Nts.,
3/15/11                             $   400,000   $     456,000
9.75% Sr. Sub. Nts., 9/15/10            400,000         478,000
- ----------------------------------------------------------------
KB Home:
7.75% Sr. Nts., 10/15/04                300,000         309,000
8.625% Sr. Sub. Nts., 12/15/08          250,000         281,250
9.50% Sr. Unsec. Sub. Nts.,
2/15/11                                 400,000         448,000
- ----------------------------------------------------------------
Meritage Corp., 9.75% Sr.
Unsec. Nts., 6/1/11                     350,000         392,875
- ----------------------------------------------------------------
Salton, Inc., 10.75% Sr. Unsec.
Sub. Nts., 12/15/05                     425,000         435,625
- ----------------------------------------------------------------
Standard Pacific Corp.,
9.25% Sr. Sub. Nts., 4/15/12            200,000         224,000
- ----------------------------------------------------------------
WCI Communities, Inc.,
9.125% Sr. Sub. Nts., 5/1/12            300,000         331,500
- ----------------------------------------------------------------
William Lyon Homes, Inc.,
10.75% Sr. Nts., 4/1/13                 400,000         457,000
- ----------------------------------------------------------------
Williams Scotsman, Inc.,
9.875% Sr. Unsec. Nts., 6/1/07          800,000         814,000
                                                  --------------
                                                      5,395,000


- ----------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.0%
Remington Arms Co., Inc.,
10.50% Sr. Unsec. Nts., 2/1/11          200,000         214,000
- ----------------------------------------------------------------
MEDIA--3.8%
Adelphia Communications Corp.:
7.875% Sr. Unsec. Nts., 5/1/09 3,11     350,000         322,000
10.25% Sr. Unsec. Nts., 11/1/06 3,11    400,000         374,000
10.25% Sr. Unsec. Sub. Nts.,
6/15/11 3,11                            400,000         380,000
10.875% Sr. Unsec. Nts.,
10/1/10 3,11                            400,000         376,000
- ----------------------------------------------------------------
Allbritton Communications Co.,
7.75% Sr. Unsec. Sub. Nts.,
12/15/12                              1,200,000       1,251,000
- ----------------------------------------------------------------
AMC Entertainment, Inc.,
9.50% Sr. Unsec. Sub. Nts., 2/1/11      500,000         527,500
- ----------------------------------------------------------------
Block Communications, Inc.,
9.25% Sr. Sub. Nts., 4/15/09            400,000         432,000
- ----------------------------------------------------------------
Charter Communications
Holdings LLC/Charter
Communications
Holdings Capital Corp.:
0%/9.92% Sr. Unsec.
Disc. Nts., 4/1/11 13                   900,000         774,000
8.625% Sr. Unsec. Nts., 4/1/09        2,000,000       1,755,000
10.75% Sr. Unsec. Nts., 10/1/09       1,100,000       1,014,750
11.125% Sr. Unsec. Nts., 1/15/11        500,000         461,250
- ----------------------------------------------------------------
Cinemark USA, Inc., 9% Sr.
Unsec. Sub. Nts., 2/1/13                400,000         452,000


STATEMENT OF INVESTMENTS  Continued
- ----------------------------------------------------------------

                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
MEDIA Continued
Corus Entertainment, Inc., 8.75%
Sr. Sub. Nts., 3/1/12               $   300,000   $     331,500
- ----------------------------------------------------------------
CSC Holdings, Inc.,
7.625% Sr. Unsec.
Unsub. Nts., Series B, 4/1/11         1,750,000       1,850,625
- ----------------------------------------------------------------
EchoStar DBS Corp.:
9.375% Sr. Unsec. Nts., 2/1/09          750,000         788,438
10.375% Sr. Unsec. Nts., 10/1/07        800,000         881,000
- ----------------------------------------------------------------
Emmis Communications Corp.:
0%/12.50% Sr. Unsec.
Disc. Nts., 3/15/11 13                  548,000         510,325
8.125% Sr. Unsec. Sub. Nts.,
Series B, 3/15/09                       600,000         632,250
- ----------------------------------------------------------------
Entravision Communications
Corp., 8.125% Sr. Sub. Nts.,
3/15/09                                 400,000         430,000
- ----------------------------------------------------------------
Granite Broadcasting Corp.,
9.75% Sr. Sec. Nts., 12/1/10            600,000         601,500
- ----------------------------------------------------------------
Hollinger International
Publishing, Inc., 9% Sr.
Unsec. Nts., 12/15/10                   400,000         427,000
- ----------------------------------------------------------------
Houghton Mifflin Co., 8.25%
Sr. Unsec. Nts., 2/1/11                 400,000         430,000
- ----------------------------------------------------------------
Insight Midwest LP/Insight
Capital, Inc., 9.75% Sr. Nts.,
10/1/09                                 200,000         212,500
- ----------------------------------------------------------------
Lin Television Corp., 6.50%
Sr. Sub. Nts., 5/15/13 7                400,000         402,500
- ----------------------------------------------------------------
LodgeNet Entertainment Corp.,
9.50% Sr. Sub. Debs., 6/15/13 1         200,000         220,000
- ----------------------------------------------------------------
Mediacom LLC/Mediacom
Capital Corp., 9.50% Sr. Unsec.
Nts., 1/15/13                           500,000         532,500
- ----------------------------------------------------------------
News America Holdings, Inc.,
8.875% Sr. Debs., 4/26/23               625,000         803,294
- ----------------------------------------------------------------
PanAmSat Corp., 8.50% Sr.
Unsec. Nts., 2/1/12                     900,000       1,003,500
- ----------------------------------------------------------------
PRIMEDIA, Inc., 8% Sr. Nts.,
5/15/13 7                               900,000         922,500
- ----------------------------------------------------------------
R.H. Donnelley Financial Corp. I,
10.875% Sr. Sub. Nts., 12/15/12 7       400,000         476,500
- ----------------------------------------------------------------
Radio One, Inc., 8.875% Sr.
Unsec. Sub. Nts., Series B, 7/1/11      200,000         221,500
- ----------------------------------------------------------------
Regal Cinemas, Inc., 9.375%
Sr. Sub. Nts., Series B, 2/1/12         200,000         227,000
- ----------------------------------------------------------------
Shaw Communications, Inc.,
8.54% Debs., 9/30/27 [CAD]              340,000         253,169
- ----------------------------------------------------------------
Sinclair Broadcast Group, Inc.:
8% Sr. Unsec. Sub. Nts., 3/15/12      1,050,000       1,139,250
8.75% Sr. Sub. Nts., 12/15/11           300,000         334,500
- ----------------------------------------------------------------
Spanish Broadcasting System, Inc.,
9.625% Sr. Unsec. Sub. Nts., 11/1/09    800,000         858,000


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
MEDIA Continued
Vertis, Inc., 9.75% Sr. Sec. Nts.,
4/1/09                              $   200,000   $     218,250
- ----------------------------------------------------------------
Videotron Ltee, 6.875%
Sr. Nts., 1/15/14 7                     200,000         207,500
- ----------------------------------------------------------------
Vivendi Universal SA, 9.25%
Sr. Nts., 4/15/10 7                     550,000         654,500
- ----------------------------------------------------------------
Von Hoffmann Corp., 10.25%
Sr. Unsec. Nts., 3/15/09 7              200,000         214,000
- ----------------------------------------------------------------
WRC Media, Inc./Weekly Reader
Corp./CompassLearning Inc.,
12.75% Sr. Sub. Nts., 11/15/09          500,000         480,000
                                                  --------------
                                                     24,383,101


- ----------------------------------------------------------------
MULTILINE RETAIL--0.3%
J.C. Penney Co., Inc., 8% Nts.,
3/1/10                                  800,000         921,000
- ----------------------------------------------------------------
Saks, Inc.:
8.25% Sr. Unsec. Nts., 11/15/08         700,000         780,500
9.875% Nts., 10/1/11                    400,000         478,000
                                                  --------------
                                                      2,179,500


- ----------------------------------------------------------------
SPECIALTY RETAIL--0.4%
Asbury Automotive Group, Inc.,
9% Sr. Sub. Nts., 6/15/12               300,000         318,750
- ----------------------------------------------------------------
AutoNation, Inc., 9% Sr.
Unsec. Nts., 8/1/08                     500,000         576,250
- ----------------------------------------------------------------
CSK Auto, Inc., 12%
Sr. Unsec. Nts., 6/15/06                400,000         461,000
- ----------------------------------------------------------------
Eye Care Centers of America, Inc.,
9.125% Sr. Unsec. Sub. Nts., 5/1/08 1   200,000         201,000
- ----------------------------------------------------------------
Finlay Enterprises, Inc.,
9% Debs., 5/1/08                        100,000         102,875
- ----------------------------------------------------------------
Finlay Fine Jewelry Corp., 8.375%
Sr. Nts., 5/1/08                        300,000         312,000
- ----------------------------------------------------------------
Hollywood Entertainment Corp.,
9.625% Sr. Sub. Nts., 3/15/11 1         400,000         432,000
- ----------------------------------------------------------------
Petco Animal Supplies, Inc.,
10.75% Sr. Sub. Nts., 11/1/11 1         200,000         235,000
- ----------------------------------------------------------------
Rent-A-Center, Inc., 7.50%
Sr. Sub. Nts., Cl. B, 5/1/10            150,000         159,000
                                                  --------------
                                                      2,797,875


- ----------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--0.2%
Broder Bros. Co., 11.25%
Sr. Nts., 10/15/10 7                    400,000         396,000
- ----------------------------------------------------------------
Galey & Lord, Inc., 9.125%
Sr. Unsec. Sub. Nts., 3/1/08 1,3,11     400,000           5,000
- ----------------------------------------------------------------
Levi Strauss & Co., 12.25%
Sr. Nts., 12/15/12                      600,000         393,000
- ----------------------------------------------------------------
Oxford Industries, Inc., 8.875%
Sr. Nts., 6/1/11 7                      250,000         274,688


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1

- ----------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS Continued
Phillips/Van Heusen Corp.,
9.50% Sr. Unsec. Sub. Nts., 5/1/08  $   200,000   $     209,000
- ----------------------------------------------------------------
Russell Corp., 9.25% Sr. Nts.,
5/1/10                                  200,000         208,250
                                                  --------------
                                                      1,485,938

- ----------------------------------------------------------------
CONSUMER STAPLES--1.2%
- ----------------------------------------------------------------
BEVERAGES--0.1%
Constellation Brands, Inc.,
8.125% Sr. Sub. Nts., 1/15/12           300,000         330,000
- ----------------------------------------------------------------
FOOD & STAPLES RETAILING--0.4%
Delhaize America, Inc., 8.125%
Unsub. Debs., 4/15/11                 1,132,000       1,307,460
- ----------------------------------------------------------------
Fleming Cos., Inc.:
10.125% Sr. Unsec. Nts., 4/1/08 3,11    400,000          90,000
10.625% Sr. Unsec. Sub. Nts.,
Series D, 7/31/07 1,3                   200,000           1,500
- ----------------------------------------------------------------
Great Atlantic & Pacific Tea
Co., Inc. (The), 9.125% Sr. Nts.,
12/15/11                                400,000         368,000
- ----------------------------------------------------------------
Pantry, Inc. (The), 10.25%
Sr. Sub. Nts., 10/15/07                 200,000         208,000
- ----------------------------------------------------------------
Real Time Data Co., 13%
Disc. Nts., 5/31/09 1,3,11,14           142,981              --
- ----------------------------------------------------------------
Rite Aid Corp.:
8.125% Sr. Sec. Nts., 5/1/10            450,000         486,000
9.50% Sr. Sec. Nts., 2/15/11            200,000         226,500
                                                  --------------
                                                      2,687,460


- ----------------------------------------------------------------
FOOD PRODUCTS--0.6%
American Seafoods Group LLC,
10.125% Sr. Sub. Nts., 4/15/10 1        200,000         238,750
- ----------------------------------------------------------------
Aurora Foods, Inc., 8.75% Sr.
Sub. Nts., Series B, 7/1/08 3           200,000         157,000
- ----------------------------------------------------------------
Burns Philp Capital Pty Ltd.,
9.75% Sr. Sub. Nts., 7/15/12 7          450,000         483,750
- ----------------------------------------------------------------
Del Monte Corp., 8.625%
Sr. Sub. Nts., 12/15/12                 400,000         440,000
- ----------------------------------------------------------------
Doane Pet Care Co., 10.75%
Sr. Nts., 3/1/10 1                      350,000         364,000
- ----------------------------------------------------------------
Dole Food Co., Inc.:
8.625% Sr. Nts., 5/1/09                 400,000         441,000
8.875% Sr. Unsec. Nts., 3/15/11         200,000         220,500
- ----------------------------------------------------------------
Hines Nurseries, Inc.,
10.25% Sr. Nts., 10/1/11 7              200,000         219,000
- ----------------------------------------------------------------
Michael Foods, Inc., 8%
Sr. Sub. Nts., 11/15/13 7               200,000         209,500
- ----------------------------------------------------------------
Pinnacle Foods Holding Corp.,
8.25% Sr. Sub. Nts., 12/1/13 7          200,000         208,000
- ----------------------------------------------------------------
Smithfield Foods, Inc.,
7.625% Sr. Unsec.
Sub. Nts., 2/15/08                      400,000         406,000


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
FOOD PRODUCTS Continued
United Biscuits Finance plc,
10.75% Sr. Sub. Nts.,
4/15/11 1 [GBP]                         400,000   $     801,988
                                                  --------------
                                                      4,189,488


- ----------------------------------------------------------------
HOUSEHOLD PRODUCTS--0.1%
AKI, Inc., 10.50% Sr.
Unsec. Nts., 7/1/08 1                   350,000         365,750
- ----------------------------------------------------------------
Playtex Products, Inc., 9.375% Sr.
Unsec. Sub. Nts., 6/1/11                500,000         507,500
- ----------------------------------------------------------------
Styling Technology Corp.,
10.875% Sr. Unsec. Sub. Nts.,
7/1/08 1,3,11                            70,000              --
                                                  --------------
                                                        873,250

- ----------------------------------------------------------------
ENERGY--2.8%
- ----------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.5%
Dresser, Inc., 9.375%
Sr. Sub. Nts., 4/15/11                  300,000         327,750
- ----------------------------------------------------------------
Hanover Compress Co., 8.625%
Sr. Nts., 12/15/10                      300,000         313,500
- ----------------------------------------------------------------
Hanover Equipment Trust
2001A, 8.50% Sr. Sec. Nts.,
Series A, 9/1/08                        500,000         532,500
- ----------------------------------------------------------------
Hornbeck-Leevac
Marine Services, Inc.,
10.625% Sr. Nts., 8/1/08              1,000,000       1,110,000
- ----------------------------------------------------------------
Ocean Rig Norway AS, 10.25%
Sr. Sec. Nts., 6/1/08                   700,000         661,500
- ----------------------------------------------------------------
Petroleum Helicopters, Inc.,
9.375% Sr. Nts., 5/1/09                 200,000         213,500
- ----------------------------------------------------------------
Universal Compression, Inc.,
7.25% Sr. Unsec. Sub. Nts.,
5/15/10                                 400,000         418,000
                                                  --------------
                                                      3,576,750


- ----------------------------------------------------------------
OIL & GAS--2.3%
Chesapeake Energy Corp.,
8.125% Sr. Unsec. Nts., 4/1/11          600,000         669,000
- ----------------------------------------------------------------
Forest Oil Corp., 7.75%
Sr. Nts., 5/1/14                        300,000         318,750
- ----------------------------------------------------------------
Frontier Oil Corp.,
11.75% Sr. Nts., 11/15/09               400,000         454,000
- ----------------------------------------------------------------
GulfTerra Energy Partners LP:
8.50% Sr. Unsec. Sub. Nts.,
Series B, 6/1/10                        255,000         290,700
10.625% Sr. Sub. Nts., 12/1/12          235,000         292,575
- ----------------------------------------------------------------
Leviathan Gas Pipeline Partners
LP/Leviathan Finance Corp.,
10.375% Sr. Unsec. Sub. Nts.,
Series B, 6/1/09 1                      400,000         436,000


STATEMENT OF INVESTMENTS  Continued
- ----------------------------------------------------------------

                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
OIL & GAS Continued
Newfield Exploration Co.,
8.375% Sr. Sub. Nts., 8/15/12       $   500,000   $     562,500
- ----------------------------------------------------------------
Paramount Resources Ltd.,
7.875% Sr. Nts., 11/1/10                400,000         400,000
- ----------------------------------------------------------------
Pemex Project Funding
Master Trust:
6.625% Nts., 4/4/10 [EUR]               690,000         903,840
8.50% Unsub. Nts., 2/15/08              420,000         480,900
- ----------------------------------------------------------------
Petroleos Mexicanos:
6.50% Unsub. Nts., 2/1/05             4,115,000       4,315,606
9.375% Sr. Unsec. Bonds, 12/2/08        585,000         699,075
- ----------------------------------------------------------------
Pioneer Natural Resources Co.,
7.50% Sr. Nts., 4/15/12                 600,000         690,689
- ----------------------------------------------------------------
Premcor Refining Group, Inc.,
9.50% Sr. Nts., 2/1/13 1                900,000       1,030,500
- ----------------------------------------------------------------
Tesoro Petroleum Corp., 8%
Sr. Sec. Nts., 4/15/08                1,000,000       1,067,500
- ----------------------------------------------------------------
Tom Brown, Inc., Units (each
unit consists of $512 principal
amount of 7.25% sr. sub. nts.,
due 2013 and $488 principal
amount of Tom Brown
Resources Funding Corp.,
7.25% sr. sub. nts., due 2013) 15       150,000         159,375
- ----------------------------------------------------------------
Westport Resources Corp.:
8.25% Sr. Sub. Nts., 11/1/11 7          800,000         884,000
8.25% Sr. Unsec. Sub. Nts., 11/1/11     400,000         442,000
- ----------------------------------------------------------------
XTO Energy, Inc., 7.50%
Sr. Nts., 4/15/12                       500,000         567,500
                                                  --------------
                                                     14,664,510

- ----------------------------------------------------------------
FINANCIALS--1.5%
- ----------------------------------------------------------------
CAPITAL MARKETS--0.2%
American Color Graphics, Inc.,
10% Sr. Sec. Nts., 6/15/10 7            200,000         206,000
- ----------------------------------------------------------------
Berry Plastics Corp.:
10.75% Sr. Sub. Nts., 7/15/12 7         350,000         404,688
10.75% Sr. Sub. Nts., 7/15/12           400,000         462,500
                                                  --------------
                                                      1,073,188


- ----------------------------------------------------------------
COMMERCIAL BANKS--0.1%
Bank Plus Corp., 12%
Sr. Nts., 7/18/07 1                       7,000           7,525
- ----------------------------------------------------------------
BankUnited Capital Trust, 10.25%
Capital Securities, 12/31/26 1          100,000         109,750
- ----------------------------------------------------------------
Local Financial Corp., 11%
Sr. Nts., 9/8/04 1                      150,000         157,125
- ----------------------------------------------------------------
Ongko International Finance
Co. BV, 10.50% Sec. Nts.,
3/29/04 1,3,11                           90,000             563
- ----------------------------------------------------------------
Western Financial Bank, 9.625%
Unsec. Sub. Debs., 5/15/12              500,000         560,000
                                                  --------------
                                                        834,963



                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--0.3%
Bombardier Recreational, Inc.,
8.375% Sr. Sub. Nts., 12/15/13 7    $   200,000   $     210,000
- ----------------------------------------------------------------
Couche-Tard US LP/Couche-Tard
Finance Corp., 7.50% Sr. Sub. Nts.,
12/15/13 7                              150,000         157,875
- ----------------------------------------------------------------
Finova Group, Inc. (The),
7.50% Nts., 11/15/09                    900,000         544,500
- ----------------------------------------------------------------
LaBranche & Co., Inc., 12% Sr.
Unsec. Sub. Nts., 3/2/07                200,000         203,000
- ----------------------------------------------------------------
Pemex Project Funding Master
Trust, 7.375% Unsec. Unsub.
Nts., 12/15/14                          740,000         793,650
- ----------------------------------------------------------------
SBS Agro Finance BV, 10.25%
Bonds, 7/21/00 1,3,11                   339,000              --
                                                  --------------
                                                      1,909,025

- ----------------------------------------------------------------
INSURANCE--0.1%
Arbor I Ltd., 16.67% Nts.,
6/15/06 1,2                             500,000         502,550
- ----------------------------------------------------------------
Conseco, Inc., Escrow Shares,
6/15/09 11,12                           300,000              --
                                                  --------------
                                                        502,550

- ----------------------------------------------------------------
REAL ESTATE--0.7%
Capstar Hotel Co., 8.75%
Sr. Sub. Nts., 8/15/07 1                175,000         178,063
- ----------------------------------------------------------------
Corrections Corp. of America:
7.50% Sr. Nts., 5/1/11                  200,000         211,000
9.875% Sr. Nts., 5/1/09                 300,000         336,375
- ----------------------------------------------------------------
Felcor Lodging LP,
9% Sr. Nts., 6/1/11                     406,000         442,540
- ----------------------------------------------------------------
Felcor Suites LP,
7.375% Sr. Nts., 10/1/04                400,000         411,500
- ----------------------------------------------------------------
HMH Properties, Inc.,
7.875% Sr. Nts., Series B, 8/1/08       800,000         836,000
- ----------------------------------------------------------------
Host Marriott LP, 9.50%
Sr. Nts., 1/15/07                       400,000         447,000
- ----------------------------------------------------------------
MeriStar Hospitality Corp.:
8.75% Sr. Unsec. Sub. Nts., 8/15/07     325,000         330,688
9.125% Sr. Unsec. Nts., 1/15/11       1,300,000       1,384,500
- ----------------------------------------------------------------
Saul (B.F.) Real Estate Investment
Trust, 9.75% Sr. Sec. Nts.,
Series B, 4/1/08                        245,000         256,944
                                                  --------------
                                                      4,834,610


- ----------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.1%
WMC Finance Co., 11.75%
Sr. Nts., 12/15/08 7                    450,000         451,125



                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
HEALTH CARE--1.7%
- ----------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.2%
Fisher Scientific International, Inc.,
8.125% Sr. Sub. Nts., 5/1/12        $   261,000   $     281,228
- ----------------------------------------------------------------
HMP Equity Holdings Corp.,
Units (each unit consists of
$1,000 principal amount of
15.43% sr. sec. disc. nts., 5/15/08
and one warrant to purchase
2.8094 shares of Huntsman
Corp. common stock) 8,15                300,000         184,500
- ----------------------------------------------------------------
Sybron Dental Specialties, Inc.,
8.125% Sr. Sub. Nts., 6/15/12           300,000         327,750
- ----------------------------------------------------------------
Universal Hospital Services, Inc.,
10.125% Sr. Nts., 11/1/11 7             300,000         316,500
- ----------------------------------------------------------------
Vanguard Health Systems, Inc.,
9.75% Sr. Unsec. Sub. Nts., 8/1/11      300,000         327,000
                                                  --------------
                                                      1,436,978


- ----------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--1.4%
AmeriPath, Inc., 10.50% Sr. Unsec.
Sub. Nts., 4/1/13                       300,000         321,000
- ----------------------------------------------------------------
AmerisourceBergen Corp., 7.25%
Sr. Unsec. Nts., 11/15/12               300,000         324,750
- ----------------------------------------------------------------
Beverly Enterprises, Inc., 9.625%
Sr. Unsec. Nts., 4/15/09                800,000         886,000
- ----------------------------------------------------------------
Extendicare Health Services, Inc.,
9.50% Sr. Unsec. Sub. Nts., 7/1/10 1    300,000         334,500
- ----------------------------------------------------------------
Fresenius Medical Care Capital
Trust II, 7.875% Nts., 2/1/08 1         900,000         965,250
- ----------------------------------------------------------------
Fresenius Medical Care
Capital Trust III, 7.375% Nts.,
2/1/08 1 [DEM]                           25,000          17,090
- ----------------------------------------------------------------
Fresenius Medical Care
Capital Trust IV, 7.875%
Trust Preferred Nts., 6/15/11           600,000         651,000
- ----------------------------------------------------------------
Genesis Healthcare Corp.,
8% Sr. Sub. Nts., 10/15/13 7            200,000         209,500
- ----------------------------------------------------------------
Hanger Orthopedic Group, Inc.,
10.375% Sr. Nts., 2/15/09 1             125,000         142,500
- ----------------------------------------------------------------
HCA, Inc., 6.30% Sr. Unsec.
Nts., 10/1/12                           500,000         516,372
- ----------------------------------------------------------------
Healthsouth Corp., 7.625%
Nts., 6/1/12                          1,000,000         940,000
- ----------------------------------------------------------------
Magellan Health Services,
Inc., 9.375% Sr. Nts., 11/15/07 7       700,000         738,500
- ----------------------------------------------------------------
Medquest, Inc., 11.875% Sr.
Unsec. Sub. Nts., Series B,
8/15/12                                 600,000         658,500
- ----------------------------------------------------------------
NDCHealth Corp., 10.50%
Sr. Unsec. Sub. Nts., 12/1/12           250,000         282,500


                                      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                              $   585,000   $     693,225
- ----------------------------------------------------------------
Quintiles Transnational Corp.,
10% Sr. Sub. Nts., 10/1/13 7            300,000         325,500
- ----------------------------------------------------------------
Tenet Healthcare Corp.,
6.375% Sr. Nts., 12/1/11                544,000         524,960
- ----------------------------------------------------------------
Triad Hospitals, Inc., 8.75%
Sr. Unsec. Nts., Series B, 5/1/09       400,000         435,500
- ----------------------------------------------------------------
US Oncology, Inc., 9.625%
Sr. Sub. Nts., 2/1/12                   300,000         330,750
                                                  --------------
                                                      9,297,397


- ----------------------------------------------------------------
PHARMACEUTICALS--0.1%
aaiPharma, Inc.,
11% Sr. Sub. Nts., 4/1/10               200,000         228,000
- ----------------------------------------------------------------
Valeant Pharmaceuticals
International, Inc., 7%
Sr. Nts., 12/15/11 7                    350,000         362,250
                                                  --------------
                                                        590,250

- ----------------------------------------------------------------
INDUSTRIALS--3.8%

- ----------------------------------------------------------------
AEROSPACE & DEFENSE--0.5%
Alliant Techsystems, Inc., 8.50%
Sr. Unsec. Sub. Nts., 5/15/11           300,000         331,500
- ----------------------------------------------------------------
American Plumbing &
Mechanical, Inc., 11.625%
Sr. Sub. Nts., Series B, 10/15/08 1,3   425,000         106,781
- ----------------------------------------------------------------
BE Aerospace, Inc.:
8.50% Sr. Nts., 10/1/10 7               200,000         215,500
8.875% Sr. Unsec. Sub. Nts., 5/1/11     200,000         188,500
- ----------------------------------------------------------------
K&F Industries, Inc., 9.625%
Sr. Unsec. Sub. Nts., 12/15/10          225,000         253,406
- ----------------------------------------------------------------
L-3 Communications Corp., 7.625%
Sr. Sub. Nts., 6/15/12                  300,000         326,625
- ----------------------------------------------------------------
Rexnord Corp., 10.125% Sr. Unsec.
Sub. Nts., 12/15/12                     350,000         385,000
- ----------------------------------------------------------------
TransDigm, Inc., 8.375%
Sr. Sub. Nts., 7/15/11                  400,000         427,500
- ----------------------------------------------------------------
TRW Automotive, Inc.:
9.375% Sr. Nts., 2/15/13                250,000         286,875
11% Sr. Sub. Nts., 2/15/13              300,000         354,750
- ----------------------------------------------------------------
Vought Aircraft Industries, Inc.,
8% Sr. Nts., 7/15/11 7                  200,000         205,250
                                                  --------------
                                                      3,081,687

- ----------------------------------------------------------------
AIR FREIGHT & LOGISTICS--0.0%
Atlas Air, Inc.:
9.25% Sr. Nts., 4/15/08 3,11            100,000          37,500
9.375% Sr. Unsec. Nts., 11/15/06 3,11   650,000         243,750
                                                  --------------
                                                        281,250


STATEMENT OF INVESTMENTS  Continued
- ----------------------------------------------------------------
                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
AIRLINES--0.2%
America West Airlines, Inc.,
10.75% Sr. Nts., 9/1/05             $   450,000   $     438,750
- ----------------------------------------------------------------
Amtran, Inc., 10.50% Sr. Nts.,
8/1/04                                  700,000         607,250
                                                  --------------
                                                      1,046,000

- ----------------------------------------------------------------
BUILDING PRODUCTS--0.3%
Associated Materials, Inc.,
9.75% Sr. Sub. Nts., 4/15/12            200,000         220,000
- ----------------------------------------------------------------
Jacuzzi Brands, Inc., 9.625%
Sr. Sec. Nts., 7/1/10 7                 311,000         343,655
- ----------------------------------------------------------------
Nortek, Inc.:
9.125% Sr. Unsec. Nts.,
Series B, 9/1/07                        650,000         675,188
9.25% Sr. Nts., Series B, 3/15/07       150,000         154,875
9.875% Sr. Unsec. Sub.
Nts., 6/15/11                           250,000         276,875
- ----------------------------------------------------------------
North America Energy Partners,
Inc., 8.75% Sr. Unsec. Nts.,
12/1/11 7                               150,000         158,250
                                                  --------------
                                                      1,828,843

- ----------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--1.4%
Allied Waste
North America, Inc.:
7.875% Sr. Nts., 4/15/13                400,000         435,000
8.50% Sr. Sub. Nts., 12/1/08            900,000       1,005,750
8.875% Sr. Nts., Series B, 4/1/08       800,000         900,000
9.25% Sr. Sec. Debs., Series B,
9/1/12                                1,450,000       1,653,000
10% Sr. Unsec. Sub. Nts.,
Series B, 8/1/09                        500,000         542,500
- ----------------------------------------------------------------
Budget Group, Inc., 9.125%
Sr. Unsec. Nts., 4/1/06 3,11            700,000         129,500
- ----------------------------------------------------------------
Buhrmann US, Inc., 12.25%
Sr. Unsec. Sub. Nts., 11/1/09           500,000         562,500
- ----------------------------------------------------------------
Coinmach Corp., 9% Sr. Nts.,
2/1/10                                  250,000         272,500
- ----------------------------------------------------------------
Hydrochem Industrial
Services, Inc., 10.375% Sr. Sub.
Nts., 8/1/07 1                          150,000         143,625
- ----------------------------------------------------------------
IT Group, Inc., 11.25% Sr. Unsec.
Sub. Nts., Series B, 4/1/09 1,3,11      400,000              --
- ----------------------------------------------------------------
Kindercare Learning
Centers, Inc., 9.50% Sr. Sub. Nts.,
2/15/09 1                               500,000         510,000
- ----------------------------------------------------------------
Mail-Well I Corp., 9.625%
Sr. Nts., 3/15/12                       400,000         446,000
- ----------------------------------------------------------------
Moore North American
Finance, Inc., 7.875% Sr. Nts.,
1/15/11 7                               200,000         227,500


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES Continued
Protection One, Inc./Protection
One Alarm Monitoring, Inc.,
7.375% Sr. Unsec. Nts., 8/15/05 1   $   400,000   $     370,000
- ----------------------------------------------------------------
Safety-Kleen Corp., 9.25% Sr.
Unsec. Nts., 5/15/09 1,3,11             400,000          20,000
- ----------------------------------------------------------------
Synagro Technologies, Inc.,
9.50% Sr. Sub. Nts., 4/1/09             200,000         218,000
- ----------------------------------------------------------------
United Rentals (North
America), Inc.:
9.25% Sr. Unsec. Sub. Nts.,
Series B, 1/15/09                       250,000         263,750
10.75% Sr. Unsec. Nts.,
Series B, 4/15/08                       300,000         339,000
10.75% Sr. Unsec. Nts.,
Series B, 4/15/08                       900,000       1,017,000
                                                  --------------
                                                      9,055,625


- ----------------------------------------------------------------
CONSTRUCTION & ENGINEERING--0.2%
Integrated Electrical Services,
Inc., 9.375% Sr. Sub. Nts.,
Series C, 2/1/09                        700,000         738,500
- ----------------------------------------------------------------
URS Corp.:
11.50% Sr. Unsec. Nts., 9/15/09 1       150,000         170,438
12.25% Sr. Sub. Nts.,
Series B, 5/1/09 1                      375,000         402,656
                                                  --------------
                                                      1,311,594


- ----------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.0%
Dayton Superior Corp.,
13% Sr. Unsec. Sub. Nts.,
6/15/09 1                               200,000         175,000
- ----------------------------------------------------------------
General Cable Corp.,
9.50% Sr. Nts., 11/15/10 7              200,000         215,000
                                                  --------------
                                                        390,000


- ----------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.3%
Great Lakes Dredge & Dock Co.,
7.75% Sr. Sub. Nts., 12/15/13 7         250,000         258,438
- ----------------------------------------------------------------
Tyco International Group SA:
6.375% Nts., 10/15/11                 1,600,000       1,718,000
6.75% Sr. Unsub. Nts., 2/15/11          300,000         329,250
                                                  --------------
                                                      2,305,688


- ----------------------------------------------------------------
MACHINERY--0.6%
Actuant Corp., 13%
Sr. Sub. Nts., 5/1/09                   208,000         271,440
- ----------------------------------------------------------------
AGCO Corp., 9.50%
Sr. Unsec. Nts., 5/1/08                 800,000         880,000
- ----------------------------------------------------------------
Insilco Corp., 12% Sr. Sub. Nts.,
8/15/07 1,3,11                          400,000           3,650
- ----------------------------------------------------------------
Manitowoc Co., Inc. (The),
10.50% Sr. Sub. Nts., 8/1/12            500,000         571,875



                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
MACHINERY Continued
NMHG Holding Co., 10%
Sr. Nts., 5/15/09 1                 $   300,000   $     333,000
- ----------------------------------------------------------------
Roller Bearing Co. of America,
Inc., 9.625% Sr. Sub. Nts.,
Series B, 6/15/07                       540,000         505,575
- ----------------------------------------------------------------
SPX Corp., 7.50% Sr. Nts., 1/1/13       600,000         655,500
- ----------------------------------------------------------------
Terex Corp., 9.25% Sr. Unsec.
Sub. Nts., 7/15/11                      400,000         442,000
                                                  --------------
                                                      3,663,040


- ----------------------------------------------------------------
MARINE--0.1%
CP Ships Ltd., 10.375% Sr. Nts.,
7/15/12                                 600,000         699,000
- ----------------------------------------------------------------
Millenium Seacarriers, Inc., 12%
Sr. Sec. Nts., 7/15/05 1,3,11           250,000          96,175
- ----------------------------------------------------------------
Navigator Gas Transport plc,
10.50% First Priority Ship Mtg.
Nts., 6/30/07 1,3,11                    175,000          74,375
                                                  --------------
                                                        869,550


- ----------------------------------------------------------------
ROAD & RAIL--0.2%
Kansas City Southern
Railway Co. (The), 7.50%
Sr. Nts., 6/15/09                       400,000         412,000
- ----------------------------------------------------------------
Stena AB:
7.50% Sr. Nts., 11/1/13                 387,000         400,545
9.625% Sr. Nts., 12/1/12                250,000         283,125
                                                  --------------
                                                      1,095,670


- ----------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE--0.0%
Worldspan LP/Worldspan
Financial Corp., 9.625% Sr. Nts.,
6/15/11 7                               150,000         155,250
- ----------------------------------------------------------------
INFORMATION TECHNOLOGY--1.0%
- ----------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.1%
Orion Network Systems, Inc.,
12.50% Sr. Disc. Nts., 1/15/07 1,3      675,000         356,063
- ----------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.1%
Seagate Technology Hdd
Holdings, 8% Sr. Nts., 5/15/09          200,000         216,500
- ----------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.2%
Communications & Power
Industries, Inc., 12% Sr. Sub. Nts.,
Series B, 8/1/05 1                      250,000         256,875
- ----------------------------------------------------------------
Ingram Micro, Inc., 9.875%
Sr. Unsec. Sub. Nts., 8/15/08 1         700,000         777,000
- ----------------------------------------------------------------
Sensus Metering Systems, Inc.,
8.625% Sr. Sub. Nts., 12/15/13 7        450,000         464,063
                                                  --------------
                                                      1,497,938




                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.0%
Exodus Communications, Inc.,
10.75% Sr. Nts., 12/15/09 1,3,11 [EUR]  338,620   $      19,220
- ----------------------------------------------------------------
Globix Corp., 11% Sr. Nts.,
4/26/08 1                                65,615          58,069
- ----------------------------------------------------------------
NorthPoint Communications
Group, Inc., 12.875% Nts.,
2/15/10 1,3                             200,173              20
- ----------------------------------------------------------------
PSINet, Inc.:
10.50% Sr. Unsec. Nts.,
12/1/06 1,3,11 [EUR]                    100,000           5,203
11% Sr. Nts., 8/1/09 1,3,11,13          270,467          15,552
- ----------------------------------------------------------------
Verado Holdings, Inc., 0%/13%
Sr. Disc. Nts., 4/15/08 1,3,11,13       250,000              25
                                                  --------------
                                                         98,089


- ----------------------------------------------------------------
IT SERVICES--0.1%
Iron Mountain, Inc.,
7.75% Sr. Sub. Nts., 1/15/15            400,000         421,000
- ----------------------------------------------------------------
Titan Corp. (The),
8% Sr. Sub. Nts., 5/15/11 7             100,000         114,000
                                                  --------------
                                                        535,000


- ----------------------------------------------------------------
OFFICE ELECTRONICS--0.0%
ASAT Finance LLC, 12.50%
Sr. Unsec. Nts., 11/1/06 1              162,500         173,266
- ----------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.5%
AMI Semiconductor, Inc.,
10.75% Sr. Unsec. Sub. Nts., 2/1/13     389,000         465,828
- ----------------------------------------------------------------
Amkor Technology, Inc.:
7.75% Sr. Nts., 5/15/13                 950,000       1,023,625
9.25% Sr. Unsec. Sub. Nts.,
2/15/08                                 250,000         285,000
- ----------------------------------------------------------------
ChipPAC International Co. Ltd.,
12.75% Sr. Unsec. Sub. Nts.,
Series B, 8/1/09                        600,000         666,000
- ----------------------------------------------------------------
Micron Technology, Inc.,
6.50% Sub. Nts., 9/30/05 1            1,000,000         995,000
                                                  --------------
                                                      3,435,453

- ----------------------------------------------------------------
MATERIALS--4.4%
- ----------------------------------------------------------------
CHEMICALS--1.5%
Compass Minerals Group, Inc.,
10% Sr. Sub. Nts., 8/15/11              450,000         506,250
- ----------------------------------------------------------------
Equistar Chemicals LP/Equistar
Funding Corp.:
8.75% Sr. Unsec. Nts., 2/15/09          600,000         630,000
10.625% Sr. Nts., 5/1/11 7              500,000         555,000
10.625% Sr. Unsec. Nts., 5/1/11         400,000         444,000
- ----------------------------------------------------------------
Huntsman Corp./ICI
Chemical Co. plc:
10.125% Sr. Unsec. Sub.
Nts., 7/1/09                          1,000,000       1,035,000


STATEMENT OF INVESTMENTS  Continued
- ----------------------------------------------------------------

                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
CHEMICALS Continued
Huntsman Corp./ICI Chemical
Co. plc: Continued
10.125% Sr. Unsec. Sub. Nts.,
7/1/09 [EUR]                            200,000   $     247,540
13.09% Sr. Unsec. Disc.
Nts., 12/31/09 8                        600,000         292,500
- ----------------------------------------------------------------
Huntsman International LLC:
9.875% Sr. Nts., 3/1/09                 300,000         330,000
9.875% Sr. Nts., 3/1/09 7               450,000         495,000
- ----------------------------------------------------------------
ISP Holdings, Inc., 10.625%
Sr. Sec. Nts., 12/15/09 1               200,000         221,000
- ----------------------------------------------------------------
Koppers Industry, Inc.,
9.875% Sr. Sec. Nts., 10/15/13 7        300,000         332,250
- ----------------------------------------------------------------
Kraton Polymers LLC/Capital
Corp., 8.125% Sr. Sub. Nts.,
1/15/14 7                               150,000         156,750
- ----------------------------------------------------------------
Lyondell Chemical Co.:
9.50% Sec. Nts., 12/15/08               300,000         315,000
9.625% Sr. Sec. Nts.,
Series A, 5/1/07 6                      400,000         426,000
9.875% Sec. Nts., Series B, 5/1/07    1,400,000       1,484,000
- ----------------------------------------------------------------
Millennium America, Inc.,
9.25% Sr. Nts., 6/15/08 7               450,000         492,750
- ----------------------------------------------------------------
OM Group, Inc., 9.25%
Sr. Sub. Nts., 12/15/11                 200,000         209,000
- ----------------------------------------------------------------
PCI Chemicals Canada,
10% Sr. Sec. Nts., 12/31/08             113,061         102,886
- ----------------------------------------------------------------
Pioneer Cos., Inc.,
4.64% Sr. Sec. Nts., 12/31/06 1,2        35,804          32,582
- ----------------------------------------------------------------
Polyone Corp., 8.875%
Sr. Unsec. Nts., 5/1/12                 600,000         555,000
- ----------------------------------------------------------------
Resolution Performance
Products LLC, 8% Sec. Nts.,
12/15/09 7                              250,000         260,000
- ----------------------------------------------------------------
Sterling Chemicals, Inc.:
10% Sr. Sec. Nts., 12/19/07 1           170,473         164,933
11.25% Sr. Sub. Nts., 8/15/06 1,3,11    540,000              --
- ----------------------------------------------------------------
Westlake Chemical Corp.,
8.75% Sr. Nts., 7/15/11 7               400,000         440,000
                                                  --------------
                                                      9,727,441

- ----------------------------------------------------------------
CONSTRUCTION MATERIALS--0.1%
Formica Corp., 10.875% Sr.
Unsec. Sub. Nts.,
Series B, 3/1/09 1,3,11                 200,000          36,000
- ----------------------------------------------------------------
Texas Industries, Inc., 10.25%
Sr. Unsec. Nts., 6/15/11 7              400,000         454,000
                                                  --------------
                                                        490,000

- ----------------------------------------------------------------
CONTAINERS & PACKAGING--1.1%
Ball Corp.:
6.875% Sr. Unsec. Nts., 12/15/12 7      300,000         315,000
7.75% Sr. Unsec. Nts., 8/1/06           125,000         135,000



                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
CONTAINERS & PACKAGING Continued
Consumers International, Inc.,
10.25% Sr. Sec. Nts., 4/1/05 1,3,11 $   250,000   $         625
- ----------------------------------------------------------------
Crown Euro Holdings SA:
9.50% Sr. Sec. Nts., 3/1/11             500,000         568,750
10.875% Sr. Sec. Nts., 3/1/13           200,000         236,250
- ----------------------------------------------------------------
Graphic Packaging
International Corp.:
8.50% Sr. Nts., 8/15/11 7               500,000         550,000
9.50% Sr. Sub. Nts., 8/15/13 7          350,000         388,500
- ----------------------------------------------------------------
Jefferson Smurfit Corp., 8.25%
Sr. Unsec. Nts., 10/1/12                250,000         272,500
- ----------------------------------------------------------------
MDP Acquisitions plc, 9.625%
Sr. Nts., 10/1/12                       400,000         450,000
- ----------------------------------------------------------------
Owens-Brockway Glass
Container, Inc.:
7.75% Sr. Sec. Nts., 5/15/11            450,000         485,438
8.25% Sr. Unsec. Nts., 5/15/13          400,000         431,500
8.75% Sr. Sec. Nts., 11/15/12         1,000,000       1,118,750
8.875% Sr. Sec. Nts., 2/15/09           200,000         220,250
- ----------------------------------------------------------------
Stone Container Corp.:
8.375% Sr. Nts., 7/1/12                 600,000         654,000
9.25% Sr. Unsec. Nts., 2/1/08           200,000         222,000
9.75% Sr. Unsec. Nts., 2/1/11           600,000         666,000
- ----------------------------------------------------------------
TriMas Corp., 9.875% Sr. Unsec.
Sub. Nts., 6/15/12                      500,000         523,750
                                                  --------------
                                                      7,238,313


- ----------------------------------------------------------------
METALS & MINING--0.9%
AK Steel Corp., 7.875%
Sr. Unsec. Nts., 2/15/09                500,000         441,250
- ----------------------------------------------------------------
Arch Western Finance LLC,
6.75% Sr. Nts., 7/1/13 7                400,000         413,000
- ----------------------------------------------------------------
Better Minerals & Aggregates Co.,
13% Sr. Unsec. Sub. Nts., 9/15/09 1     100,000          55,500
- ----------------------------------------------------------------
California Steel Industries Corp.,
8.50% Sr. Unsec. Nts.,
Series B, 4/1/09                        200,000         210,750
- ----------------------------------------------------------------
Century Aluminum Co.,
11.75% Sr. Sec. Nts., 4/15/08           500,000         560,000
- ----------------------------------------------------------------
IMCO Recycling, Inc.,
10.375% Sr. Sec. Nts., 10/15/10 7       300,000         309,750
- ----------------------------------------------------------------
International Utility
Structures, Inc.,
13% Unsec. Sub. Nts., 2/1/08 1,3         71,000             710
- ----------------------------------------------------------------
Jorgensen (Earle M.) Co., 9.75%
Sr. Sec. Nts., 6/1/12                   500,000         557,500
- ----------------------------------------------------------------
Kaiser Aluminum & Chemical
Corp., 10.875% Sr. Nts., Series B,
10/15/06 1,3,11                         500,000         452,500
- ----------------------------------------------------------------
Massey Energy Co.,
6.625% Sr. Nts.,
11/15/10 7                              200,000         206,000


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
METALS & MINING Continued
Metallurg, Inc., 11% Sr. Nts.,
12/1/07                             $   500,000   $     282,500
- ----------------------------------------------------------------
Oregon Steel Mills, Inc.,
10% Sr. Nts., 7/15/09                   400,000         353,000
- ----------------------------------------------------------------
Peabody Energy Corp., 6.875%
Sr. Unsec. Nts., Series B, 3/15/13      400,000         424,000
- ----------------------------------------------------------------
Steel Dynamics, Inc., 9.50%
Sr. Nts., 3/15/09                       200,000         223,000
- ----------------------------------------------------------------
UCAR Finance, Inc., 10.25%
Sr. Nts., 2/15/12                       300,000         346,500
- ----------------------------------------------------------------
United States Steel Corp.:
9.75% Sr. Nts., 5/15/10                 400,000         452,000
10.75% Sr. Nts., 8/1/08                 800,000         940,000
                                                  --------------
                                                      6,227,960


- ----------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.8%
Abitibi-Consolidated, Inc.,
8.55% Nts., 8/1/10                      200,000         223,060
- ----------------------------------------------------------------
Ainsworth Lumber Co. Ltd.:
12.50% Sr. Nts., 7/15/07 1,14           400,000         472,000
13.875% Sr. Sec. Nts., 7/15/07          400,000         462,000
- ----------------------------------------------------------------
Buckeye Technologies, Inc.,
8.50% Sr. Nts., 10/1/13                 100,000         107,500
- ----------------------------------------------------------------
Doman Industries Ltd.,
8.75% Sr. Nts., 3/15/04 1,3,11          900,000         157,500
- ----------------------------------------------------------------
Fort James Corp., 6.875%
Sr. Nts., 9/15/07                       500,000         530,000
- ----------------------------------------------------------------
Georgia-Pacific Corp.:
8.125% Sr. Unsec. Nts., 5/15/11       1,450,000       1,602,250
9.375% Sr. Unsec. Nts., 2/1/13          800,000         924,000
- ----------------------------------------------------------------
Inland Fiber Group LLC,
9.625% Sr. Unsec. Nts., 11/15/07 3      300,000         157,500
- ----------------------------------------------------------------
Tekni-Plex, Inc., 8.75%
Sr. Sec. Nts., 11/15/13 7               300,000         314,250
                                                  --------------
                                                      4,950,060

- ----------------------------------------------------------------
TELECOMMUNICATION SERVICES--3.3%
- ----------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.6%
360networks, Inc., 13% Sr.
Unsec. Nts., 5/1/08 1,3,11 [EUR]        250,000              32
- ----------------------------------------------------------------
Adelphia Business Solutions,
Inc., 12% Sr. Sub. Nts.,
11/1/07 1,3,11                          200,000           1,500
- ----------------------------------------------------------------
American Tower Corp.,
9.375% Sr. Nts., 2/1/09                 700,000         749,000
- ----------------------------------------------------------------
COLO.com, Inc., 13.875%
Sr. Nts., 3/15/10 1,3,11                336,404           2,523
- ----------------------------------------------------------------
Comcast UK Cable Partner Ltd.,
11.20% Sr. Unsec. Disc.
Debs., 11/15/07                         250,000         253,750
- ----------------------------------------------------------------
Concentric Network Corp.,
Escrow Shares, 12/15/07 1,12             80,000              --



                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES Continued
Crown Castle International
Corp., 7.50% Sr. Nts., 12/1/13 7    $   300,000   $     303,000
- ----------------------------------------------------------------
Dex Media East LLC/Dex Media
East Finance Co., 9.875% Sr.
Unsec. Nts., 11/15/09                   200,000         230,000
- ----------------------------------------------------------------
Dex Media West LLC/Dex
Media West Finance Co.:
8.50% Sr. Nts., 8/15/10 7               300,000         335,625
9.875% Sr. Sub. Nts., 8/15/13 7         600,000         700,500
- ----------------------------------------------------------------
Dex Media, Inc., 8% Nts.,
11/15/13 7                              700,000         738,500
- ----------------------------------------------------------------
Focal Communications Corp.:
11.875% Sr. Unsec. Nts.,
Series B, 1/15/10 1,3,11                 75,000           6,000
12.125% Sr. Unsec. Disc.
Nts., 2/15/08 1,3,11                     80,000           6,400
- ----------------------------------------------------------------
Intermedia Communications,
Inc., 0%/12.25% Sr. Disc. Nts.,
Series B, 3/1/09 3,11,13                200,000          75,000
- ----------------------------------------------------------------
IPC Acquisition Corp., 11.50%
Sr. Sub. Nts., 12/15/09                 200,000         219,000
- ----------------------------------------------------------------
Level 3 Communications, Inc.,
0%/10.50% Sr. Disc. Nts.,
12/1/08 13                              700,000         663,250
- ----------------------------------------------------------------
MCI Communications Corp.,
7.75% Sr. Unsec. Debs., 3/23/25 3,11    200,000         162,000
- ----------------------------------------------------------------
Metromedia Fiber Network,
Inc., 10% Sr. Unsec. Nts.,
Series B, 11/15/08 1,3,11               400,000          26,000
- ----------------------------------------------------------------
Nextlink Communications, Inc.:
Escrow Shares, 10/1/07 1,12             200,000              --
Escrow Shares, 11/15/08 1,12            300,000              --
Escrow Shares, 3/15/08 1,12             250,000              --
Escrow Shares, 6/1/09 1,12              400,000              --
- ----------------------------------------------------------------
Qwest Corp.:
7.20% Unsec. Nts., 11/1/04            1,600,000       1,644,000
8.875% Nts., 3/15/12 7                  300,000         345,750
- ----------------------------------------------------------------
Qwest Services Corp.,
13.50% Nts., 12/15/10 7                 300,000         366,000
- ----------------------------------------------------------------
Sprint Capital Corp.,
8.375% Nts., 3/15/12                    950,000       1,111,650
- ----------------------------------------------------------------
Telewest Communications plc:
0%/9.25% Sr. Disc. Nts.,
4/15/09 3,11,13                         600,000         315,000
0%/9.875% Sr. Disc. Nts.,
4/15/09 3,11,13 [GBP]                   200,000         182,595
- ----------------------------------------------------------------
Teligent, Inc., 11.50% Sr. Nts.,
12/1/07 1,3,11                          500,000              --
- ----------------------------------------------------------------
Telus Corp., 7.50% Nts., 6/1/07         790,000         884,929
- ----------------------------------------------------------------
Time Warner Telecom LLC/
Time Warner Telecom, Inc.,
9.75% Sr. Nts., 7/15/08               1,200,000       1,242,000



STATEMENT OF INVESTMENTS  Continued
- ----------------------------------------------------------------
                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES Continued
Viatel, Inc., 11.25% Sr. Sec. Nts.,
4/15/08 1,3,11                      $   500,000   $          --
- ----------------------------------------------------------------
Winstar Communications, Inc.,
12.75% Sr. Nts., 4/15/10 1,3,11         250,000              25
                                                  --------------
                                                     10,564,029


- ----------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--1.7%
Alamosa Delaware, Inc., 12.50%
Sr. Unsec. Nts., 2/1/11                 650,000         666,250
- ----------------------------------------------------------------
American Tower Escrow Corp.,
12.25% Sr. Sub. Disc. Nts., 8/1/08 8    800,000         556,000
- ----------------------------------------------------------------
AT&T Corp., 8.75% Sr. Nts.,
11/15/31 2                              500,000         586,300
- ----------------------------------------------------------------
CellNet Data Systems, Inc., Sr.
Unsec. Disc. Nts., 10/1/07 1,3,11       400,000              --
- ----------------------------------------------------------------
Centennial Cellular
Operating Co./Centennial
Communications Corp.,
10.125% Sr. Nts., 6/15/13               600,000         661,500
- ----------------------------------------------------------------
Dobson Communications Corp.,
8.875% Sr. Nts., 10/1/13 7              400,000         407,000
- ----------------------------------------------------------------
IPCS, Inc., 0%/14% Sr. Unsec.
Disc. Nts., 7/15/10 1,3,11,13           300,000          42,000
- ----------------------------------------------------------------
Leap Wireless International, Inc.:
0%/14.50% Sr. Unsec. Disc. Nts.,
4/15/10 1,3,11,13                       700,000          87,500
12.50% Sr. Nts., 4/15/10 1,3            100,000          14,500
- ----------------------------------------------------------------
Nextel Communications, Inc.:
7.375% Sr. Nts., 8/1/15                 280,000         302,400
9.375% Sr. Unsec. Nts., 11/15/09      2,200,000       2,409,000
- ----------------------------------------------------------------
Nextel Partners, Inc.:
11% Sr. Nts., 3/15/10                   500,000         555,000
11% Sr. Unsec. Nts., 3/15/10            150,000         166,500
12.50% Sr. Nts., 11/15/09               342,000         398,430
- ----------------------------------------------------------------
Orbcomm Global LP,
Escrow Shares, 8/15/04 1,12             200,000              --
- ----------------------------------------------------------------
Rural Cellular Corp.:
9.625% Sr. Sub. Nts.,
Series B, 5/15/08                       500,000         490,000
9.875% Sr. Nts., 2/1/10                 400,000         428,000
- ----------------------------------------------------------------
SBA Communications Corp.:
10.25% Sr. Unsec. Nts., 2/1/09          200,000         197,500
12% Sr. Unsec. Disc. Nts., 3/1/08 1     296,000         323,380
- ----------------------------------------------------------------
SBA Telecommunications, Inc./
SBA Communications Corp.,
0%/9.75% Sr. Disc. Nts., 12/15/11 7,13  650,000         461,500
- ----------------------------------------------------------------
SpectraSite, Inc., 8.25% Sr. Nts.,
5/15/10 1                               200,000         214,500
- ----------------------------------------------------------------
Triton PCS, Inc.:
8.50% Sr. Unsec. Nts., 6/1/13           400,000         432,000
8.75% Sr. Unsec. Sub. Nts.,
11/15/11                                200,000         198,000


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES Continued
US Unwired, Inc., 0%/13.375% Sr.
Unsec. Sub. Disc. Nts., Series B,
11/1/09 13                          $   900,000   $     657,000
- ----------------------------------------------------------------
Western Wireless Corp., 9.25%
Sr. Unsec. Nts., 7/15/13                450,000         477,000
                                                  --------------
                                                     10,731,260

- ----------------------------------------------------------------
UTILITIES--3.3%
- ----------------------------------------------------------------
ELECTRIC UTILITIES--1.8%
AES Corp. (The):
8.75% Sr. Sec. Nts., 5/15/13 7        1,300,000       1,459,250
8.75% Sr. Unsec. Unsub. Nts.,
6/15/08                                 244,000         262,910
8.875% Sr. Unsec. Nts., 2/15/11         103,000         112,785
9.375% Sr. Unsec. Nts., 9/15/10          97,000         108,034
- ----------------------------------------------------------------
AES Drax Holdings Ltd., 10.41%
Sr. Sec. Sub. Nts., Series B,
12/31/20 1,3                            300,000         261,000
- ----------------------------------------------------------------
Caithness Coso Funding Corp.,
9.05% Sr. Sec. Nts., Series B,
12/15/09                                334,800         364,932
- ----------------------------------------------------------------
Calpine Corp.:
8.25% Sr. Unsec. Nts., 8/15/05          200,000         194,500
8.50% Sr. Sec. Nts., 7/15/10 7        1,300,000       1,274,000
8.75% Sr. Nts., 7/15/07                 400,000         330,000
8.75% Sr. Sec. Nts., 7/15/13 7          650,000         637,000
9.875% Sr. Sec. Nts., 12/1/11 7         700,000         722,750
- ----------------------------------------------------------------
Central Termica Guemes SA,
2% Nts., 1/1/12 1                        90,000           9,000
- ----------------------------------------------------------------
CMS Energy Corp.:
7.75% Sr. Nts., 8/1/10 7                200,000         211,250
8.50% Sr. Nts., 4/15/11                 250,000         271,250
9.875% Sr. Unsec. Nts., 10/15/07        900,000       1,008,000
- ----------------------------------------------------------------
CMS Energy X-TRAS Pass-
Through Trust I, 7% Sr. Unsec.
Pass-Through Certificates,
1/15/05                                 300,000         309,000
- ----------------------------------------------------------------
Edison Mission Energy, 10% Sr.
Unsec. Nts., 8/15/08                    800,000         834,000
- ----------------------------------------------------------------
Funding Corp./Beaver Valley
Funding Corp., 9% Second Lease
Obligation Bonds, 6/1/17                199,000         229,129
- ----------------------------------------------------------------
Mirant Americas
Generation LLC, 7.625% Sr.
Unsec. Nts., 5/1/06 3                   200,000         170,000
- ----------------------------------------------------------------
MSW Energy Holdings LLC/
MSW Energy Finance Co., Inc.:
7.375% Sr. Sec. Nts., 9/1/10 7          350,000         367,500
8.50% Sr. Sec. Nts., 9/1/10 7           200,000         219,000
- ----------------------------------------------------------------
NRG Energy, Inc.,
8% Sr. Sec. Nts.,
12/15/13 7                              800,000         845,000


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
ELECTRIC UTILITIES Continued
PG&E Corp., 6.875% Sr. Sec. Nts.,
7/15/08 7                           $   400,000   $     435,000
- ----------------------------------------------------------------
Reliant Resources, Inc.:
9.25% Sr. Sec. Nts., 7/15/10 7          250,000         266,250
9.50% Sr. Sec. Nts., 7/15/13 7          250,000         268,750
- ----------------------------------------------------------------
Westar Energy, Inc., 9.75% Sr.
Unsec. Nts., 5/15/07                    600,000         684,750
                                                  --------------
                                                     11,855,040

- ----------------------------------------------------------------
GAS UTILITIES--0.5%
AmeriGas Partners LP/AmeriGas
Eagle Finance Corp., 8.875% Sr.
Unsec. Nts., Series B, 5/20/11          500,000         552,500
- ----------------------------------------------------------------
El Paso Energy Corp.,
7.625% Nts., 7/15/11                    200,000         186,250
- ----------------------------------------------------------------
SEMCO Energy, Inc.:
7.125% Sr. Nts., 5/15/08 7              150,000         156,938
7.75% Sr. Nts., 5/15/13                 150,000         158,438
- ----------------------------------------------------------------
Southern Natural Gas Co., 8% Sr.
Unsub. Nts., 3/1/32                     300,000         311,250
- ----------------------------------------------------------------
Tennessee Gas Pipeline Co.,
7.50% Bonds, 4/1/17                     800,000         830,000
- ----------------------------------------------------------------
Williams Cos., Inc. (The), 7.125%
Nts., 9/1/11                          1,100,000       1,168,750
                                                  --------------
                                                      3,364,126

- ----------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--1.0%
AES Red Oak LLC, 8.54% Sr. Sec.
Bonds, Series A, 11/30/19               576,863         625,869
- ----------------------------------------------------------------
Consumers Energy Co.,
7.375% Nts., 9/15/23                    250,000         256,316
- ----------------------------------------------------------------
Dynegy Holdings, Inc.:
6.875% Sr. Unsec. Unsub. Nts.,
4/1/11                                1,100,000       1,018,875
8.75% Sr. Nts., 2/15/12                 850,000         861,688
10.125% Sr. Sec. Nts., 7/15/13 7        800,000         924,000
- ----------------------------------------------------------------
El Paso Production Holding Co.,
7.75% Sr. Nts., 6/1/13 7                650,000         643,500
- ----------------------------------------------------------------
Mirant Mid-Atlantic LLC, 8.625%
Sec. Pass-Through Certificates,
Series A, 6/30/12 1                     467,843         470,475
- ----------------------------------------------------------------
Williams Cos., Inc. (The):
8.625% Sr. Nts., 6/1/10                 400,000         451,000
9.25% Sr. Unsec. Unsub. Nts.,
3/15/04                                 800,000         814,000
                                                  --------------
                                                      6,065,723
                                                  --------------
Total Corporate Bonds and Notes
(Cost $200,857,848)                                 208,852,267


                                                   MARKET VALUE
                                         SHARES     SEE NOTE 1
- ----------------------------------------------------------------
PREFERRED STOCKS--0.4%
AmeriKing, Inc., 13% Cum. Sr.
Exchangeable, Non-Vtg. 1,11,14            4,253   $          43
- ----------------------------------------------------------------
Doane Pet Care Co., 14.25% Jr.
Sub. Debs., Non-Vtg. 1,11                 5,000         231,250
- ----------------------------------------------------------------
Dobson Communications Corp.,
6% Cv., Series F (converts into
Dobson Communications Corp.,
Cl. A common stock), Non-Vtg.               550          99,000
- ----------------------------------------------------------------
e.spire Communications, Inc.,
12.75% Jr. Redeemable,
Non-Vtg. 1,11,14                            216              22
- ----------------------------------------------------------------
Eagle-Picher Holdings, Inc.,
11.75% Cum. Exchangeable,
Series B, Non-Vtg. 1,11                   5,000         366,250
- ----------------------------------------------------------------
ICG Holdings, Inc., 14.25%
Exchangeable, Non-Vtg. 1,11,14              151              --
- ----------------------------------------------------------------
Nebco Evans Holdings, Inc.,
11.25% Sr. Redeemable
Exchangeable, Non-Vtg. 1,11,14            6,061              --
- ----------------------------------------------------------------
NTL Europe, Inc., 10% Cum.,
Series A, Non-Vtg.                            8              66
- ----------------------------------------------------------------
Paxson Communications Corp.:
14.25% Cum. 11,14                             1           8,626
14.25% Cum. Jr. Exchangeable,
Non-Vtg. 14                                  38         350,550
- ----------------------------------------------------------------
Pennsylvania Real Estate
Investment Trust, 11%                     2,000         122,000
- ----------------------------------------------------------------
Rural Cellular Corp., 11.375%
Cum., Series B, Non-Vtg. 14                 630         492,975
- ----------------------------------------------------------------
Sovereign Real Estate
Investment Trust, 12%
Non-Cum., Series A 1                      4,600         688,850
                                                  --------------
Total Preferred Stocks
(Cost $2,986,921)                                     2,359,632

- ----------------------------------------------------------------
COMMON STOCKS--1.0%
Adelphia Business
Solutions, Inc. 11                          363               3
- ----------------------------------------------------------------
Banco Bradesco SA,
Sponsored ADR                            10,745         283,775
- ----------------------------------------------------------------
Banco Itau Holding
Financeira SA, ADR                        5,320         259,456
- ----------------------------------------------------------------
Bank Pekao SA, GDR                        6,900         202,377
- ----------------------------------------------------------------
Brasil Telecom Participacoes
SA, ADR                                   9,530         360,234
- ----------------------------------------------------------------
Cesky Telecom AS, GDR                    14,391         161,899
- ----------------------------------------------------------------
Charles River Laboratories
International, Inc. 11                    2,660          91,318
- ----------------------------------------------------------------
Classic Cable, Inc. 11                      529              --
- ----------------------------------------------------------------
Companhia de Bebidas das
Americas, ADR                            17,425         444,512


STATEMENT OF INVESTMENTS  Continued
- ----------------------------------------------------------------


                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
COMMON STOCKS Continued
Conseco, Inc. 11                         13,986   $     304,895
- ----------------------------------------------------------------
Covad Communications
Group, Inc. 11                           16,528          59,501
- ----------------------------------------------------------------
Criimi MAE, Inc. 11                      71,447         745,192
- ----------------------------------------------------------------
Dobson Communications
Corp., Cl. A 11                          35,400         186,062
- ----------------------------------------------------------------
Equinix, Inc. 11                          3,287          92,693
- ----------------------------------------------------------------
Gedeon Richter Rt,
Sponsored GDR                             1,065         125,670
- ----------------------------------------------------------------
Geotek Communications, Inc.,
Liquidating Trust 1,11,12                    90              --
- ----------------------------------------------------------------
Geotek Communications, Inc.,
Series B, Escrow Shares 1,11,12             210              --
- ----------------------------------------------------------------
Globix Corp.11                            6,880          27,520
- ----------------------------------------------------------------
Horizon Natural
Resources Co. 1,11                        6,667              --
- ----------------------------------------------------------------
ICO Global Communication
Holdings Ltd. 1,11                        6,016           3,068
- ----------------------------------------------------------------
KGHM Polska
Miedz SA, GDR 11                          6,162          83,803
- ----------------------------------------------------------------
Komercni Banka AS, GDR                    9,215         285,481
- ----------------------------------------------------------------
Magyar Tavkozlesi Rt,
Sponsored ADR                             7,267         135,966
- ----------------------------------------------------------------
Microcell Telecommunications, Inc. 11       770          10,277
- ----------------------------------------------------------------
Microcell Telecommunications,
Inc., Cl. A 11                                6              90
- ----------------------------------------------------------------
Microcell Telecommunications,
Inc., Cl. B 11                              766          10,245
- ----------------------------------------------------------------
MOL Magyar Olaj-es Gazipari
Rt, Sponsored GDR                         4,581         139,721
- ----------------------------------------------------------------
NTL, Inc. 11                              7,842         546,980
- ----------------------------------------------------------------
Orbital Sciences Corp.11                    745           8,955
- ----------------------------------------------------------------
OTP Bank Rt, GDR 11                       8,952         234,990
- ----------------------------------------------------------------
Petroleo Brasileiro SA, ADR              16,400         479,536
- ----------------------------------------------------------------
Pioneer Cos., Inc. 11                     7,312          59,593
- ----------------------------------------------------------------
Polski Koncern Naftowy Orlen
SA, GDR                                  16,081         215,485
- ----------------------------------------------------------------
Prandium, Inc. 11                        24,165             967
- ----------------------------------------------------------------
Premier Holdings Ltd. 1,11               18,514              --
- ----------------------------------------------------------------
Southern Pacific Funding Corp.,
Liquidating Trust 1,12                   83,868              --
- ----------------------------------------------------------------
Star Gas Partners LP                        187           4,572
- ----------------------------------------------------------------
Sterling Chemicals, Inc. 11                 686          18,008
- ----------------------------------------------------------------
Telekomunikacja Polska SA, GDR           53,266         213,064
- ----------------------------------------------------------------
TVMAX Holdings, Inc. 1,11                 1,000           2,500
- ----------------------------------------------------------------
UnitedGlobalCom, Inc., Cl. A 11          45,361         384,661
- ----------------------------------------------------------------
Viatel Holding Ltd.
(Bermuda) 1,11                            1,958           4,308


                                                   MARKET VALUE
                                         SHARES      SEE NOTE 1
- ----------------------------------------------------------------
COMMON STOCKS Continued
Wilshire Financial Services
Group, Inc. 11                            6,273   $      37,575
- ----------------------------------------------------------------
WRC Media Corp. 1,11                      1,082              22
- ----------------------------------------------------------------
XO Communications, Inc. 11                1,100           6,325
                                                  --------------
Total Common Stocks
(Cost $6,061,070)                                     6,231,299

                                          UNITS
- ----------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.9%
American Tower Corp. Wts.,
Exp. 8/1/08 1,11                            800         100,400
- ----------------------------------------------------------------
ASAT Finance LLC Wts.,
Exp. 11/1/06 1,11                           250             281
- ----------------------------------------------------------------
Chesapeake Energy Corp. Wts.:
Exp. 5/1/05 1,11                            416               4
Exp. 9/1/04 11                              534              60
- ----------------------------------------------------------------
Citigroup, Inc. Litigation Wts.,
Exp. 12/31/50 11                          2,404           2,548
- ----------------------------------------------------------------
COLO.com, Inc. Wts.,
Exp. 3/15/10 1,11                           400               4
- ----------------------------------------------------------------
Concentric Network Corp. Wts.,
Exp. 12/15/07 1,11                          100              --
- ----------------------------------------------------------------
Covergent Communications, Inc.
Wts., Exp. 4/1/08 1,11                      400               4
- ----------------------------------------------------------------
HF Holdings, Inc. Wts.,
Exp. 9/27/09 1,11                           530              72
- ----------------------------------------------------------------
Horizon PCS, Inc. Wts.,
Exp. 10/1/10 1,11                         1,000              --
- ----------------------------------------------------------------
ICG Communications, Inc.
Wts., Exp. 9/15/05 1,11                     825               8
- ----------------------------------------------------------------
ICO Global Communication
Holdings Ltd. Wts.:
Exp. 5/16/06 1,11                         1,509               8
Exp. 5/16/06 1,11                             2              --
- ----------------------------------------------------------------
Imperial Credit Industries, Inc.
Wts., Exp. 1/31/08 1,11                   2,135              --
- ----------------------------------------------------------------
Insilco Corp. Wts., Exp. 8/15/07 1,11       270              --
- ----------------------------------------------------------------
IPCS, Inc. Wts., Exp. 6/15/10 1,11          300               3
- ----------------------------------------------------------------
Leap Wireless International, Inc.
Wts., Exp. 4/15/10 1,11                     275              --
- ----------------------------------------------------------------
Long Distance International, Inc.
Wts., Exp. 4/13/08 1,11                     200              --
- ----------------------------------------------------------------
Loral Space & Communications
Ltd. Wts., Exp. 1/15/07 1,11                150               2
- ----------------------------------------------------------------
Microcell
Telecommunications, Inc.:
Cl. A Wts., Exp. 5/1/05 11                  284             434
Cl. B Wts., Exp. 5/1/08 11                  474           1,009
- ----------------------------------------------------------------
Millenium Seacarriers, Inc. Wts.,
Exp. 7/15/05 1,11                           250               3

                                                   MARKET VALUE
                                          UNITS      SEE NOTE 1
- ----------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES Continued
Morgan Stanley Capital I, Inc.
All Country Asia Free (except
for Japan) Wts., Exp. 3/4/05 11         105,050   $   1,528,183
- ----------------------------------------------------------------
Morgan Stanley Capital I, Inc.
Basket of Countries Wts.,
Exp. 3/4/05 11                          117,454       1,589,787
- ----------------------------------------------------------------
Morgan Stanley Capital III, Inc.
All Country Asia Free (except
for Japan) Wts., Exp. 3/4/05 11         203,221       2,451,638
- ----------------------------------------------------------------
Ntelos, Inc. Wts., Exp. 8/15/10 1,11        450             225
- ----------------------------------------------------------------
Occidente y Caribe Celular SA
Wts., Exp. 3/15/04 1,11                     800              --
- ----------------------------------------------------------------
Pathmark Stores, Inc. Wts.,
Exp. 9/19/10 11                           5,710           5,367
- ----------------------------------------------------------------
PLD Telekom, Inc. Wts., Exp.
6/1/06 (cv. into Metromedia
International Group, Inc.) 1,11             300               3
- ----------------------------------------------------------------
Real Time Data Co. Wts.,
Exp. 5/31/04 1,11                        36,431              --
- ----------------------------------------------------------------
Republic Technologies
International LLC Wts.,
Exp. 7/15/09 1,11                           200              --
- ----------------------------------------------------------------
Sterling Chemicals, Inc.
Wts., Exp. 12/19/08 1,11                  1,115              --
- ----------------------------------------------------------------
Telus Corp. Wts., Exp. 9/15/05 11           269           2,198
- ----------------------------------------------------------------
Verado Holdings, Inc., Cl. B Wts.,
Exp. 4/15/08 1,11                           175              71
- ----------------------------------------------------------------
XO Communications, Inc.:
Cl. A Wts., Exp. 1/16/10 11               2,204           4,298
Cl. B Wts., Exp. 1/16/10 11               1,653           2,810
Cl. C Wts., Exp. 1/16/10 11               1,653           1,818
                                                  --------------
Total Rights, Warrants and
Certificates (Cost $4,265,347)                        5,691,238

                                      PRINCIPAL
                                         AMOUNT
- ----------------------------------------------------------------
STRUCTURED NOTES--9.6%
Citigroup Global Capital
Markets Holdings, Inc., Brazilian
Real Linked Nts., 23.18%,
5/20/04 8 [BRR]                         559,878         183,411
- ----------------------------------------------------------------
Citigroup Global Markets
Holdings, Inc., Argentine Peso
Unsec. Linked Nts., 7/6/04              265,000         269,797
- ----------------------------------------------------------------
Credit Suisse First Boston
Corp. (Cayman), Russia
(Government of) Linked Bonds:
Series 24, 15%, 9/2/05 [RUR]         22,279,000         846,819
Series 26, 15%, 3/11/05 [RUR]        22,587,000         836,899
- ----------------------------------------------------------------
Credit Suisse First Boston Corp.
(Nassau Branch), U.S. Dollar/
Philippine Peso Linked Nts.,
12.50%, 3/5/12 2 [PHP]               47,430,000         836,518


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
STRUCTURED NOTES Continued
Credit Suisse First Boston Corp.
(New York Branch), Russian
Obligatzii Federal'nogo Zaima
Linked Nts., Series 28001,
10.028%, 1/21/04 1,2 [RUR]              277,180   $       9,517
- ----------------------------------------------------------------
Credit Suisse First Boston
International, U.S. Dollar/South
African Rand Linked Nts., Series
FBi 43, 1.10%, 5/23/22 2                825,000         797,693
- ----------------------------------------------------------------
Deutsche Bank AG, Basket of
Emerging Market Currencies
Linked Nts.:
0.85%, 1/20/04                        2,045,000       2,048,477
0.85%, 3/24/04                        2,100,000       2,100,630
- ----------------------------------------------------------------
Deutsche Bank AG, Indonesia
(Republic of) Rupiah Linked Nts.:
14%, 6/22/09                            963,196       1,071,170
14%, 6/22/09                            524,383         551,389
14%, 6/22/09                            470,000         515,355
- ----------------------------------------------------------------
Deutsche Bank AG, Moscow
(City of) Linked Nts.,
15%, 9/2/05 [RUR]                    30,255,000       1,125,671
- ----------------------------------------------------------------
Deutsche Bank AG, Peru
(Republic of) Credit Default
Linked Bonds, 4.621%, 4/29/06 2         575,000         598,518
- ----------------------------------------------------------------
Deutsche Bank AG, Venezuela
(Republic of) Credit Linked
Certificate of Deposit, 8.18%,
9/20/06 2                             1,630,000       1,724,051
- ----------------------------------------------------------------
Deutsche Bank AG, Venezuela
(Republic of) Credit Linked Nts.:
7.32%, 12/20/06 2                     2,570,000       2,654,039
11.39%, 6/15/04 2                       775,000         806,310
- ----------------------------------------------------------------
JPMorgan Chase Bank, EMBI
Plus Turkey (Republic of) Linked
Certificate of Deposit, 1.50%,
4/22/04                               1,212,000       1,082,634
- ----------------------------------------------------------------
JPMorgan Chase Bank, Polish
Zloty/Euro Linked Certificate of
Deposit, 0.91%, 4/7/04                  505,000         490,217
- ----------------------------------------------------------------
JPMorgan Chase Bank, TRAC-X
NA High Yield T1 Credit Default
Swap Bonds, 7.375%, 3/25/09 7         8,200,000       8,589,500
- ----------------------------------------------------------------
JPMorgan Chase Bank, TRAC-X
NA High Yield T3 Credit Default
Swap Bonds, 8%, 3/25/09 7            17,700,000      18,562,875
- ----------------------------------------------------------------
JPMorgan Chase Bank,
Venezuela (Republic of) Credit
Linked Certificate of Deposit:
8.028%, 9/20/05 2                     1,150,000       1,198,645
8.078%, 9/20/05 2                     1,150,000       1,199,680
- ----------------------------------------------------------------
JPMorgan Chase Bank, Venezuela
(Republic of) Credit Linked
Default Bonds, 8.178%, 9/20/05 2      1,150,000       1,201,520


STATEMENT OF INVESTMENTS  Continued
- ----------------------------------------------------------------


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
STRUCTURED NOTES Continued
Lehman Brothers Special Financing,
Inc., High Yield Index Linked Nts.,
0.97%, 1/1/05 2,4                   $10,000,000   $  10,000,000
- ----------------------------------------------------------------
Morgan Stanley Capital Services,
Inc., Venezuela ( Republic of) Credit
Swap Bonds, 6.05%, 12/20/06           1,560,000       1,494,667
- ----------------------------------------------------------------
Pioneer 2002 Ltd. Sec. Catastrophe
Linked Nts.:
Series 2002-1, Cl. E-A,
5.42%, 6/15/06 2                        500,000         500,775
Series 2003-II, Cl. A,
7.17%, 6/15/06 1,2                      500,000         514,900
Series 2003-II, Cl. B,
6.17%, 6/15/06 1,2                      500,000         505,475
Series 2003-II, Cl. C,
6.92%, 6/15/06 1,2                      500,000         504,950
                                                  --------------
Total Structured Notes
(Cost $61,691,382)                                   62,822,102

                 DATE    STRIKE        CONTRACTS
- ----------------------------------------------------------------
OPTIONS PURCHASED--0.1%
Euro Call 1,11 1/8/04   1.25EUR        22,955,000       188,745
- ----------------------------------------------------------------
Japanese
Yen Call 1,11 4/22/04 102.92JPY     3,594,000,000       405,403
- ----------------------------------------------------------------
Japanese
Yen Call 1,11  6/1/04    107JPY       660,000,000       155,826
- ----------------------------------------------------------------
Japanese
Yen Put 1,11  2/25/04    122JPY/EUR 16  3,255,000            65
                                                  --------------
Total Options Purchased (Cost $666,194)                 750,039


                                      PRINCIPAL    MARKET VALUE
                                         AMOUNT      SEE NOTE 1
- ----------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--11.1% 17
Undivided interest of 4.51% in joint
repurchase agreement (Principal
Amount/Market Value $1,603,898,000, with
a maturity value of $1,603,979,086) with
PaineWebber, Inc., 0.91%, dated
12/31/03, to be repurchased at
$72,415,661 on 1/2/04, collateralized by
Federal Home Loan Mortgage Corp.,
5%--5.50%, 9/1/33--11/1/33, with a value
of $405,980,626 and Federal National
Mortgage Assn., 4.50%, 10/1/33, with a
value of $1,234,398,060
(Cost $72,412,000)                  $72,412,000    $ 72,412,000

- ----------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $690,811,899)                       109.0%    711,070,155
- ----------------------------------------------------------------
LIABILITIES IN EXCESS
OF OTHER ASSETS                            (9.0)    (59,842,335)
                                    ----------------------------
NET ASSETS                                100.0%   $651,227,820
                                    ============================





FOOTNOTES TO STATEMENT OF INVESTMENTS
Principal amount, strike, contracts and notional amount are reported in U.S.
Dollars, except for those denoted in the following currencies:

ARP     Argentine Peso                  HUF     Hungarian Forints
BRR     Brazilian Real                  JPY     Japanese Yen
CAD     Canadian Dollar                 NZD     New Zealand Dollar
DEM     German Mark                     PHP     Philippines Peso
DKK     Danish Krone                    PLZ     Polish Zloty
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 11 of
Notes to Financial Statements.

2. Represents the current interest rate for a variable or increasing rate
security.

3. Issue is in default. See Note 1 of Notes to Financial Statements.

4. When-issued security to be delivered and settled after December 31, 2003.
See
Note 1 of Notes to Financial Statements.

5. 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 $701,573 or 0.11% of the Fund's net assets
as
of December 31, 2003.

6. Securities with an aggregate market value of $1,907,993 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.

7. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities
have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $60,904,317 or 9.35% of the Fund's net
assets as of December 31, 2003.

8. Zero coupon bond reflects effective yield on the date of purchase.

9. A sufficient amount of securities has been designated to cover outstanding
foreign currency contracts. See Note 5 of Notes to Financial Statements.

10. 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
- --------------------------------------------------------------------------------------------------------------

Japanese Yen [JPY]               3,255,000EUR       2/25/04
132.000JPY/EUR   $ 37,407         $ 86,713
Japanese Yen [JPY]               6,510,000EUR       4/28/04
141.000JPY/EUR     90,723           30,792

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

128,130          117,505

- --------------------------
                                CONTRACTS
                           SUBJECT TO PUT
- --------------------------------------------------------------------------------------------------------------
Japanese Yen [JPY]            744,000,000JPY         6/1/04
120.000JPY        138,880            8,482

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

$267,010         $125,987

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

11. Non-income producing security.

12. Received as the result of issuer reorganization. Currently has minimal
market value.

13. Denotes a step bond: a zero coupon bond that converts to a fixed or
variable
interest rate at a designated future date.

14. Interest or dividend is paid-in-kind.

15. Units may be comprised of several components, such as debt and equity
and/or
warrants to purchase equity at some point in the future. For units, which
represent debt securities, principal amount disclosed represents total
underlying principal.

16. Represents cross currency strike price.

17. 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, 2003
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS

Investments, at value (including cost and market value of $72,412,000 in
repurchase agreements)
(including securities loaned of approximately $41,571,000) (cost
$690,811,899)--see accompanying statement    $711,070,155
- ---------------------------------------------------------------------------------------------------------------------------
Cash
    10,239,032
- ---------------------------------------------------------------------------------------------------------------------------
Cash--foreign currencies (cost
$4,746)
4,685
- ---------------------------------------------------------------------------------------------------------------------------
Collateral for securities
loaned
42,384,437
- ---------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency
contracts                                                            1,717,081
- ---------------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal
paydowns
           7,934,046
Investments sold on a when-issued
basis
1,823,418
Shares of beneficial interest
sold
 1,145,075
Closed foreign currency
contracts
85,522
Futures
margins
5,441
Other
4,987

- -------------
Total
assets
776,413,879

- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Return of collateral for securities
loaned
42,384,437
- ---------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on foreign currency
contracts                                                              584,268
- ---------------------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $267,010)--see accompanying
statement                                 125,987
- ---------------------------------------------------------------------------------------------------------------------------
Swaptions written, at value (premiums received
$19,758)                                                              4,216
- ---------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $69,252,091 purchased on a when-issued
basis)                                  80,812,128
Swap
contracts
955,652
Shares of beneficial interest
redeemed
200,849
Distribution and service plan
fees
40,448
Shareholder reports

33,511
Trustees'
compensation
3,843
Transfer and shareholder servicing agent
fees
1,667
Other
39,053

- -------------
Total
liabilities
125,186,059


- ---------------------------------------------------------------------------------------------------------------------------
NET
ASSETS
$651,227,820


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

- ---------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Par value of shares of beneficial
interest
$    128,798
- ---------------------------------------------------------------------------------------------------------------------------
Additional paid-in
capital
621,211,693
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated net investment
income
32,618,798
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency
transactions                                 (23,178,329)
- ---------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and
liabilities
denominated in foreign
currencies
20,446,860

                                  -------------
NET
ASSETS
$651,227,820

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

- ---------------------------------------------------------------------------------------------------------------------------
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 $571,445,412 and 113,250,972 shares of beneficial
interest outstanding)                      $5.05
- ---------------------------------------------------------------------------------------------------------------------------
Service shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of
$79,782,408 and 15,547,173 shares of beneficial interest
outstanding)                                                $5.13


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENT OF OPERATIONS  For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------

INVESTMENT INCOME

Interest
$29,938,358
- ---------------------------------------------------------------------------------------------
Fee
income
1,758,979
- ---------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of
$12,964)                              263,694
- ---------------------------------------------------------------------------------------------
Portfolio lending fees
                            38,905

- ------------
Total investment
income                                                           31,999,936

- ---------------------------------------------------------------------------------------------
EXPENSES
Management
fees
3,673,166
- ---------------------------------------------------------------------------------------------
Distribution and service plan fees--Service
shares                                    86,361
- ---------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service
shares
10,405
Service
shares
8,378
- ---------------------------------------------------------------------------------------------
Shareholder
reports
52,830
- ---------------------------------------------------------------------------------------------
Custodian fees and expenses
                                         32,408
- ---------------------------------------------------------------------------------------------
Trustees'
compensation
19,802
- ---------------------------------------------------------------------------------------------
Other
43,360

- ------------
Total
expenses
3,926,710
Less reduction to custodian
expenses                                                  (4,396)

                ------------
Net
expenses
3,922,314

- ---------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
                                           28,077,622

- ---------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (including premiums on options
exercised)                              7,465,283
Closing of futures
contracts                                                      (1,399,854)
Closing and expiration of option contracts
written                                    82,666
Foreign currency
transactions                                                      7,491,181

- ------------
Net realized
gain
13,639,276
- ---------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments

32,105,619
Translation of assets and liabilities denominated in foreign
currencies            9,856,289
Futures
contracts
37,808

- ------------
Net change in unrealized appreciation
(depreciation)                              41,999,716

- ---------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS                             $83,716,614

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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENTS OF CHANGES IN NET ASSETS
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------

NON-SERVICE SHARES    YEAR ENDED DECEMBER 31                 2003
2002       2001        2000      1999
- ---------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA

Net asset value, beginning of period                        $4.57
$4.62      $4.69       $4.97     $5.12
- ---------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                         .22
..29        .41         .41       .45
Net realized and unrealized gain (loss)                       .56
..03       (.19)       (.28)     (.31)

- ---------------------------------------------------
Total from investment operations                              .78
..32        .22         .13       .14
- ---------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                         (.30)
(.37)      (.29)       (.41)     (.29)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period                              $5.05
$4.57      $4.62       $4.69     $4.97

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

- -----------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1                          18.07%
7.44%      4.85%       2.63%     2.83%

- ---------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)                 $571,445
$406,126   $351,686    $304,562  $282,086
- ---------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                        $472,213
$374,519   $330,711    $289,923  $278,668
- ---------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                                        5.61%
6.89%      8.78%       9.23%     9.08%
Total expenses                                               0.75%
0.79%      0.79%       0.79%     0.78%
Expenses after expense reimbursement
or fee waiver and reduction to
custodian expenses                                            N/A 3
0.78%       N/A 3       N/A 3     N/A 3
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                       117%
65%       104%        104%       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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.


FINANCIAL HIGHLIGHTS  Continued
- -----------------------------------------------------------------------------
SERVICE SHARES    YEAR ENDED DECEMBER
31                                                2003         2002
2001 1
- -------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------

Net asset value, beginning of
period                                                   $4.67
$4.73         $4.64
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment
income
..27          .03           .15
Net realized and unrealized gain
(loss)                                                  .49
..28          (.06)

- -----------------------------------
Total from investment
operations
..76          .31           .09
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment
income                                                    (.30)
(.37)           --
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period                                                         $5.13
$4.67         $4.73

- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE
2                                                     17.16%
7.03%         1.94%
- -------------------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in
thousands)                                             $79,782
$8,138            $4
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in
thousands)                                                    $34,744
$2,307            $2
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment
income
4.57%        5.40%         8.17%
Total
expenses
1.02%        1.06%         0.92%
Expenses after expense reimbursement or fee waiver and reduction to custodian
expense    N/A 4       1.03%          N/A 4
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate
117%          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, 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.

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

YEAR ENDED DECEMBER
31,
2003            2002
- -------------------------------------------------------------------------------------------------------------------
OPERATIONS

Net investment income
                                                           $28,077,622
$25,945,473
- -------------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
                                   13,639,276      (2,441,898)
- -------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
           41,999,716       4,037,800

- -----------------------------
Net increase in net assets resulting from
operations                                    83,716,614      27,541,375

- -------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Non-Service shares
                                                            (28,473,133)
(28,654,014)
Service
shares
(842,251)         (2,128)

- -------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from beneficial interest transactions:
Non-Service
shares
115,808,103      55,824,134
Service
shares
66,753,974       7,864,978

- -------------------------------------------------------------------------------------------------------------------
NET ASSETS
Total
increase
236,963,307      62,574,345
- -------------------------------------------------------------------------------------------------------------------
Beginning of
period
414,264,513     351,690,168

- -----------------------------
End of period [including accumulated net investment income of
$32,618,798 and $26,988,087,
respectively]                                            $651,227,820
$414,264,513

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

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 with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. 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. Securities traded on NASDAQ are valued based on the closing price
provided by NASDAQ 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. Securities whose values have been
materially affected by what the Manager identifies as a significant event
occurring before the Fund's assets are valued but after the close of their
respective foreign exchanges will be fair valued. Fair value is determined in
good faith using 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, increasing 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, 2003, the market value of these securities comprised 9.6% of the
Fund's net assets and resulted in unrealized gains of $1,130,720. The Fund
also
hedges a portion of the foreign currency exposure generated by these
securities,
as discussed in Note 5.

- --------------------------------------------------------------------------------
SECURITIES 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 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 executes such purchases while remaining substantially fully
invested. As of December 31, 2003, the Fund had entered into net when issued
commitments of $67,428,673.


NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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 Fund records the
incremental difference between the forward purchase and sale of each forward
roll as fee income or realized gain (loss) on investments.
   Risks 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, market fluctuations and 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, 2003, securities with an
aggregate market value of $5,583,555, representing 0.86% of the Fund's net
assets, were in default.

- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records 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. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated
funds
advised by the Manager, may transfer uninvested cash balances into joint
trading
accounts on a daily basis. Secured by U.S. government securities, these
balances
are invested in one or more repurchase agreements. 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. 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 on a
daily basis 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 comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses
the
Fund may be able to offset against income and gains realized in future years
and
unrealized appreciation or depreciation of securities and other investments
for
federal income tax purposes.

                                                                 NET
UNREALIZED

APPRECIATION
                                                               BASED ON COST
OF
                                                                 SECURITIES
AND
 UNDISTRIBUTED     UNDISTRIBUTED              ACCUMULATED     OTHER
INVESTMENTS
 NET INVESTMENT        LONG-TERM                     LOSS    FOR FEDERAL
INCOME
 INCOME                     GAIN     CARRYFORWARD 1,2,3,4          TAX
PURPOSES

- ------------------------------------------------------------------------------
 $34,467,108                 $--              $22,875,637
$20,144,190

1. As of December 31, 2003, the Fund had $22,767,348 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of December 31, 2003,
details of the capital loss carryforwards were as follows:

                              EXPIRING
                              -------------------------
                              2006          $   347,976
                              2007            5,399,072
                              2008              253,735
                              2009            9,904,928
                              2010            6,861,637
                                            -----------
                              Total         $22,767,348
                                            ===========

2. During the fiscal year December 31, 2003, the Fund utilized $666,406 of
capital loss carryforward to offset capital gains realized in that fiscal
year.
During the fiscal year December 31, 2002, the Fund did not utilize any capital
loss carryforwards.
3. As of December 31, 2003, the Fund had $11,337 of post-October losses
available to offset future realized capital gains, if any. Such losses, if
unutilized, will expire in 2012.
4. The Fund had $96,952 of straddle losses which were deferred.

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. Accordingly,
the
following amounts have been reclassified for December 31, 2003. Net assets of
the Fund were unaffected by the reclassifications.

                 INCREASE TO                         INCREASE TO
                 ACCUMULATED                     ACCUMULATED NET
                 NET INVESTMENT                 REALIZED LOSS ON
                 INCOME                              INVESTMENTS
                 -----------------------------------------------
                 $6,868,473                           $6,868,473

The tax character of distributions paid during the years ended December 31,
2003
and December 31, 2002 was as follows:

                                          YEAR ENDED               YEAR ENDED
                                   DECEMBER 31, 2003        DECEMBER 31, 2002
   --------------------------------------------------------------------------
   Distributions paid from:
   Ordinary income                       $29,315,384              $28,656,142



NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments
for
federal income tax purposes as of December 31, 2003 are noted below. The
primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of
losses
or tax realization of financial statement unrealized gain or loss.

                 Federal tax cost of securities            $ 691,392,501
                 Federal tax cost of other investments       127,440,995
                                                           -------------
                 Total federal tax cost                    $ 818,833,496
                                                           =============

                 Gross unrealized appreciation             $  39,036,965
                 Gross unrealized depreciation               (18,892,775)
                                                           -------------
                 Net unrealized appreciation               $  20,144,190
                                                           =============

- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. Under the plan, deferred amounts are treated as
though
equal dollar amounts had been invested in shares of the Fund or are invested
in
other Oppenheimer funds selected by the Trustee. Deferral of trustees' fees
under the plan will not affect the net assets of the Fund, and will not
materially affect the Fund's assets, liabilities or net investment income per
share. Amounts will be deferred until distributed in accordance to the Plan.

- --------------------------------------------------------------------------------
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. Income and capital gain distributions,
if
any, are declared and paid annually.

- --------------------------------------------------------------------------------
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.

- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
represents earnings on cash balances maintained by the Fund.

- --------------------------------------------------------------------------------
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,
2003       YEAR ENDED DECEMBER 31, 2002
                                                     SHARES
AMOUNT           SHARES            AMOUNT
- -----------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES

Sold                                             46,663,574     $
222,213,838       39,611,608     $ 174,444,145
Dividends and/or distributions reinvested         6,471,166
28,473,133        6,617,555        28,654,014
Redeemed                                        (28,764,717)
(134,878,868)     (33,471,553)     (147,274,025)

- -----------------------------------------------------------------
Net increase                                     24,370,023     $
115,808,103       12,757,610     $  55,824,134

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

- -----------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold                                             14,341,848     $
69,419,263        1,855,564     $   8,365,056
Dividends and/or distributions reinvested           187,166
842,251              479             2,128
Redeemed                                           (725,688)
(3,507,540)        (113,038)         (502,206)

- -----------------------------------------------------------------
Net increase                                     13,803,326     $
66,753,974        1,743,005     $   7,864,978

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

- --------------------------------------------------------------------------------
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, 2003, were
$686,345,267 and $576,876,531, respectively.

- --------------------------------------------------------------------------------
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 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, 0.60% of 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 per account fee. For the year ended December 31, 2003, the Fund paid
$17,581 OFS for services to the Fund.
   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. Fees incurred by the Fund under the plan are detailed in the
Statement
of Operations.

- --------------------------------------------------------------------------------
 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 for protection from adverse exchange
rate
 fluctuation. Risks to the Fund include the potential inability of the
 counterparty to meet the terms of the contract.
NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS Continued
   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
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.

As of December 31, 2003, the Fund had outstanding foreign currency contracts
as
follows:



                                                       CONTRACT
                                          EXPIRATION     AMOUNT
VALUATION AS OF       UNREALIZED        UNREALIZED
CONTRACT DESCRIPTION                           DATES     (000S)      DECEMBER
31, 2003     APPRECIATION      DEPRECIATION
- --------------------------------------------------------------------------------------------------------------------------


CONTRACTS TO PURCHASE
Argentine Peso [ARP]                   2/2/04-6/8/04      6,330ARP         $
2,132,494       $   61,063          $  3,224
Australian Dollar [AUD]                       1/8/04      1,780AUD
1,339,826           67,126                --
British Pound Sterling [GBP]          1/8/04-2/18/04      1,860GBP
3,320,581          105,173                --
Euro [EUR]                           1/12/04-3/15/04     15,435EUR
19,449,007          792,783                --
Japanese Yen [JPY]                   2/10/04-2/13/04  2,302,860JPY
21,516,924          650,835                --
Mexican Nuevo Peso [MXN]              1/12/04-2/2/04     68,835MXN
6,105,936               --            26,651
New Zealand Dollar [NZD]                      1/8/04      1,920NZD
1,259,301           40,101                --


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

1,717,081            29,875

                                              -----------------------------
CONTRACTS TO SELL
British Pound Sterling [GBP]                  3/9/04        580GBP
1,032,740               --           124,170
Canadian Dollar [CAD]                        2/23/04
420CAD             324,241               --            27,222
Euro [EUR]                           3/11/04-4/13/04      2,720EUR
3,423,657               --           186,473
Japanese Yen [JPY]                    1/8/04-5/12/04    495,000JPY
4,633,433               --           146,088
Swiss Franc [CHF]                             1/8/04      1,425CHF
1,152,445               --            70,440

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

- --           554,393

                  -----------------------------
Total Unrealized Appreciation and
Depreciation
$1,717,081          $584,268

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

- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. 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 protection from 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 as a 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 has expired.
   Cash held by the broker to cover initial margin requirements on open
futures
contracts is noted in the Statement of Assets and Liabilities. 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. The net change in
unrealized appreciation and depreciation is reported on the Statement of
Operations.
   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, 2003, the Fund had outstanding futures contracts as
follows:




UNREALIZED
                                     EXPIRATION       NUMBER OF
VALUATION AS OF     APPRECIATION
CONTRACT DESCRIPTION                      DATES       CONTRACTS     DECEMBER
31, 2003   (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE


DAX Index                               3/19/04               4           $
503,910        $  14,127
Euro-Bundesobligation                    3/8/04              10
1,426,840            3,656
FTSE 100 Index                          3/19/04
1                79,957            1,933
NASDAQ 100 Index                        3/18/04              10
1,471,000           53,413
Nikkei 225 Index                        3/11/04               2
107,500            3,200
United Kingdom Long Gilt                3/29/04               2
388,391            1,612
U.S. Long Bonds                         3/22/04             105
11,477,813           45,991
U.S. Treasury Nts., 5 yr.               3/22/04              34
3,795,250           20,857
U.S. Treasury Nts., 10 yr.              3/22/04              49
5,501,016          (28,859)

        ----------

115,930

- ----------
CONTRACTS TO SELL
Japan (Government of) Bonds, 10 yr.     3/11/04               5
6,431,371          (20,995)
Standard & Poor's 500 E-Mini            3/19/04              51
2,831,775          (94,426)
Standard & Poor's 500 Index             3/18/04              10
2,776,500          (95,001)
U.S. Treasury Nts., 2 yr.               3/30/04             220
47,090,313         (183,106)

- ----------


(393,528)

- ----------

                                                         $(277,598)

==========



- --------------------------------------------------------------------------------
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.


NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. OPTION ACTIVITY Continued
Written option activity for the year ended December 31, 2003 was as follows:



CALL OPTIONS                        PUT OPTIONS

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

PRINCIPAL/                           PRINCIPAL/
                                                             NUMBER OF
AMOUNT OF            NUMBER OF     AMOUNT OF
                                                             CONTRACTS
PREMIUMS            CONTRACTS      PREMIUMS
- --------------------------------------------------------------------------------------------------------------------------

Options outstanding as of December 31, 2002                  7,895,000
$  59,288                   --     $      --
Options written
2,569,185,945         512,599          747,746,695       276,313
Options closed or expired
(3,203,835)        (51,602)          (3,746,695)     (137,433)
Options exercised                                       (2,564,112,110)
(392,155)                  --            --

- ------------------------------------------------------------------
Options outstanding as of December 31, 2003                  9,765,000
$ 128,130          744,000,000     $ 138,880

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

- --------------------------------------------------------------------------------
8. CREDIT SWAP CONTRACTS
The Fund may enter into a credit swap transaction 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). The Fund pays an annual interest
fee on the notional amount in exchange for the counterparty paying in a
potential credit event.

During the year ended December 31, 2003 the Fund entered into transactions to
hedge credit risk. Information regarding the credit swaps is as follows:


                                     UNREALIZED
                                         EXPIRATION        NOTIONAL
VALUATION AS OF         APPRECIATION
CONTRACT DESCRIPTION                          DATES          AMOUNT
DECEMBER 31, 2003        (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------

Deutsche Bank AG, Colombia
(Republic of) Credit Nts.                   9/20/13       $
290,000               $ (8,591)           $  (8,591)
Deutsche Bank AG, Colombia
Republic of) Credit Nts.                    9/20/13
290,000                (12,445)             (12,445)
Deutsche Bank AG, United Mexican
States Credit Bonds                         9/20/13
1,235,000                (29,992)             (29,992)
Deutsche Bank AG, Peru (Republic
of) Credit Bonds                           10/20/08
305,000                (10,368)             (10,368)
Deutsche Bank AG, Philippines
(Republic of) 5 yr. Credit Nts.             7/25/08
930,000                 (1,016)              (1,016)
Deutsche Bank AG, Philippines
(Republic of) 10 yr. Credit Bonds           7/25/13
930,000                    258                  258
Deutsche Bank AG, Philippines
(Republic of) Credit Nts.                  12/20/08
315,000                  2,575                2,575
Deutsche Bank AG,
Russian Federation Credit Bonds             9/20/13
1,540,000                (37,623)             (37,623)
Deutsche Bank AG,
Russian Federation Credit Bonds             9/10/13
1,225,000                (25,554)             (25,554)
Deutsche Bank AG,
Russian Federation Credit Bonds            10/30/13
2,560,000                (54,743)             (54,743)
Deutsche Bank AG,
Turkey (Republic of ) Credit Bonds         10/10/13         630,000
          (74,407)             (74,407)
JPMorgan Chase Bank,
Jordan (Kingdom of) Credit Nts.              6/6/06
250,000                    945                  945
JPMorgan Chase Bank,
Peru (Republic of) Credit Bonds             9/20/08
230,000                (21,371)             (21,371)
JPMorgan Chase Bank, Peru
(Republic of) Credit Bonds                  9/20/08
460,000                (41,761)             (41,761)
JPMorgan Chase Bank,
Russian Federation Credit Bonds             10/9/13
730,000                 15,724               15,724


UNREALIZED
                                            EXPIRATION       NOTIONAL
VALUATION AS OF        APPRECIATION
CONTRACT DESCRIPTION                             DATES         AMOUNT
DECEMBER 31, 2003       (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------

JPMorgan Chase Bank, TRAC-X
Emerging Markets Default Bonds1               12/20/08      $
860,000             $(57,306)          $ (57,306)
Morgan Stanley Capital Services, Inc.,
Brazil (Republic of) Credit Nts.               3/20/14      3,450,000
      (26,945)            (26,945)
Morgan Stanley Capital Services, Inc.,
Hungary (Republic of) Credit Bonds             12/2/13
1,880,000              (17,747)            (17,747)
Morgan Stanley Capital Services, Inc.,
Russian Federation Credit Bonds               11/19/13
2,240,000              (35,418)            (35,418)
Morgan Stanley Capital Services, Inc.,
Turkey (Republic of) Credit Bonds              2/16/06
1,300,000              (19,511)            (19,511)


- ----------

$(455,296)

                                             ==========


1. Comprised of emerging markets credit swaps of which the underlying is
comprised of a pool of emerging market entities and associated benchmark
obligations. The Fund received a premium and is obligated to pay a rate that
resets every six months primarily based upon default by an emerging market
entity within the pool.


- --------------------------------------------------------------------------------
9. INTEREST RATE SWAP CONTRACTS
The Fund may enter into an interest rate swap transaction to maintain a total
return or yield spread on a particular investment, or portion of its
portfolio,
or for other non-speculative purposes. Interest rate swaps involve the
exchange
of commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments. The coupon payments are based on an agreed
upon principal amount and a specified index. Because the principal amount is
not
exchanged, it represents neither an asset nor a liability to either
counterparty, and is referred to as notional. The Fund records an increase or
decrease to interest income, in the amount due to or owed by the Fund at
termination or settlement.
   Interest rate swaps are subject to credit risk (if the counterparty fails
to
meet its obligations) and interest rate risk. The Fund could be obligated to
pay
more under its swap agreements than it receives under them, as a result of
interest rate changes. As of December 31, 2003, the Fund had entered into the
following interest rate swap agreements:



                                                          FIXED
FLOATING RATE
                                                   RATE PAID BY
RECEIVED BY                                      UNREALIZED
                               NOTIONAL             THE FUND AT         THE
FUND AT        FLOATING     TERMINATION    APPRECIATION
SWAP COUNTERPARTY                AMOUNT       DECEMBER 31, 2003   DECEMBER
31, 2003      RATE INDEX            DATE   (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------------------------------



Three-Month
Deutsche Bank AG          $   3,185,000
3.1025%               1.18%     LIBOR flat          3/4/08       $  30,679

Three-Month
JPMorgan Chase Bank           6,625,000                   3.052
            1.17      LIBOR flat         3/10/08          78,030

Six-Month
JPMorgan Chase Bank             880,000EUR                3.135
2.081      LIBOR flat         7/14/08          20,128

Six-Month
JPMorgan Chase Bank         245,400,000HUF                 9.13
         7      LIBOR flat         7/14/08         (88,830)
Morgan Stanley
Capital
Three-Month
Services, Inc.               31,000,000
3.82                1.17      LIBOR flat        11/10/08        (399,577)
Morgan Stanley
Capital
Three-Month
Services, Inc.               22,000,000
2.32                1.17      LIBOR flat        11/10/05        (140,786)

- ----------

$(500,356)

       ==========

- --------------------------------------------------------------------------------
10. SWAPTION TRANSACTIONS
The Fund may enter into a swaption transaction, whereby a contract that grants
the holder, in return for payment of the purchase price (the "premium") of the
option, the right, but not the obligation, to enter into an interest rate swap
at a preset rate within a specified period of time, with the writer of the
contract. The writer receives premiums and bears the risk of unfavorable
changes
in the preset rate on the underlying interest rate swap. Swaption contracts
written by the Fund do not give rise to counterparty credit risk as they
obligate the Fund, not its counterparty, to perform. Swaptions written are
reported as a liability in the Statement of Assets and Liabilities.


NOTES TO FINANCIAL STATEMENTS  Continued
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
10. SWAPTION TRANSACTIONS Continued
As of December 31, 2003, the Fund had entered into the following swaption
contracts:


                         NOTIONAL         EXPIRATION
EXERCISE            PREMIUM    MARKET VALUE
SWAPTIONS                  AMOUNT               DATE
PRICE           RECEIVED      SEE NOTE 1
- -------------------------------------------------------------------------------


Deutsche Bank          $2,220,000            5/17/04
2.825%           $19,758          $4,216

- -------------------------------------------------------------------------------
11. ILLIQUID OR RESTRICTED SECURITIES
As of December 31, 2003, investments in securities included issues that are
illiquid or restricted. Restricted securities are 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, 2003 was $27,674,473,
which represents 4.25% of the Fund's net assets, of which $4,685 is considered
restricted. Information concerning restricted securities is as follows:


ACQUISITION                   VALUATION AS OF      UNREALIZED
SECURITY                                                     DATES
COST     DECEMBER 31, 2003    DEPRECIATION
- --------------------------------------------------------------------------------------------------------------------

STOCKS AND/OR WARRANTS
Geotek Communications, Inc., Liquidating Trust              4/6/00      $
- --                $   --            $ --
Geotek Communications, Inc., Series B, Escrow Shares        1/4/01
840                    --             840
Real Time Data Co. Wts., Exp. 5/31/04                      6/30/99
364                    --             364

CURRENCY
Argentine Peso                                     8/6/03-12/10/03
4,746                 4,685              61

- -------------------------------------------------------------------------------
12. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of US
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities
loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the
collateral.
Cash collateral is invested in cash equivalents. As of December 31, 2003, the
Fund had on loan securities valued at approximately $41,571,000. Cash of
$42,384,437 was received as collateral for the loans, and has been invested in
approved instruments.

- -------------------------------------------------------------------------------
13. BORROWING AND LENDING ARRANGEMENTS
The Fund entered into an "interfund borrowing and lending arrangement" with
other funds in the Oppenheimer funds complex, to allow funds to borrow for
liquidity purposes. The arrangement was initiated pursuant to exemptive relief
granted by the Securities and Exchange Commission (the SEC) to allow these
affiliated funds to lend money to, and borrow money from, each other, in an
attempt to reduce borrowing costs below those of bank loan facilities. The
SEC's
order requires the Fund's Board of Trustees to adopt operating policies and
procedures to administer interfund borrowing and lending. Under the
arrangement
the Fund may lend money to other Oppenheimer funds and may borrow from other
Oppenheimer funds at a rate set by the Fund's Board of Trustees, based upon a
recommendation by the Manager. The Fund's borrowings, if any, are subject to
asset coverage requirements under the Investment Company Act and the
provisions
of the SEC order and other applicable regulations. If the Fund borrows money,
there is a risk that the loan could be called on one day's notice, in which
case
the Fund might have to borrow from a bank at higher rates if a loan were not
available from another


Oppenheimer fund. If the Fund lends money to another fund, it will be subject
to the risk that the other fund might not repay the loan in a timely manner,
or at all.  The Fund had no interfund borrowings or loans outstanding during
the year ended or at December 31, 2003.

OPPENHEIMER VALUE FUND/VA

INDEPENDENT AUDITORS' REPORT

- --------------------------------------------------------------------------------
 TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER VALUE FUND/VA:

     We have audited the  accompanying  statement of assets and  liabilities  of
Oppenheimer  Value  Fund/VA,  a series of  Oppenheimer  Variable  Account Funds,
including the statement of investments, as of December 31, 2003, and the related
statement of  operations  and  statement of changes in net assets for the period
from January 2, 2003  (commencement of operations) to December 31, 2003, and the
financial  highlights for the period 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 audit.

     We conducted our audit 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, 2003, 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 audit provides 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 Value Fund/VA as of December 31, 2003, the results of its operations
and  the  changes  in its net  assets  for  the  period  from  January  2,  2003
(commencement of operations) to December 31, 2003, and the financial  highlights
for the period  indicated,  in conformity with accounting  principles  generally
accepted in the United States of America.


/s/DELOITTE & TOUCHE LLP
 DELOITTE & TOUCHE LLP

Denver, Colorado
February 12, 2004

OPPENHEIMER VALUE FUND/VA
STATEMENT OF INVESTMENTS DECEMBER 31, 2003

                                                   MARKET VALUE
                                          SHARES     SEE NOTE 1
- ---------------------------------------------------------------
 COMMON STOCKS--98.2%
- ---------------------------------------------------------------
 CONSUMER DISCRETIONARY--12.3%
- ---------------------------------------------------------------
 HOTELS, RESTAURANTS & LEISURE--2.1%
 McDonald's Corp.                          3,300    $    81,939
- ---------------------------------------------------------------
 MEDIA--9.1%
 EchoStar Communications Corp., Cl. A 1      500         17,000
- ---------------------------------------------------------------
 Liberty Media Corp., Cl. A 1              17,700        210,453
- ---------------------------------------------------------------
 UnitedGlobalCom, Inc., Cl. A 1            14,830        125,758
                                                    -----------
                                                        353,211

- ---------------------------------------------------------------
 TEXTILES, APPAREL & LUXURY GOODS--1.1%
 Nike, Inc., Cl. B                           600         41,076
- ---------------------------------------------------------------
 CONSUMER STAPLES--8.0%
- ---------------------------------------------------------------
 BEVERAGES--0.9%
 Constellation Brands, Inc., Cl. A 1        1,100         36,223
- ---------------------------------------------------------------
 FOOD & STAPLES RETAILING--3.1%
 Costco Wholesale Corp. 1                  3,200        118,976
- ---------------------------------------------------------------
 TOBACCO--4.0%
 Altria Group, Inc.                        2,800        152,376
- ---------------------------------------------------------------
 ENERGY--8.0%
- ---------------------------------------------------------------
 ENERGY EQUIPMENT & SERVICES--1.4%
 Halliburton Co.                           1,600         41,600
- ---------------------------------------------------------------
 Talisman Energy, Inc.                       200         11,320
                                                    -----------
                                                         52,920
- ---------------------------------------------------------------
 OIL & GAS--6.6%
 BP plc, ADR                               4,200        207,270
- ---------------------------------------------------------------
 LUKOIL, Sponsored ADR                       300         27,930
- ---------------------------------------------------------------
 YUKOS, ADR                                  500         21,000
                                                    -----------
                                                        256,200

- ---------------------------------------------------------------
 FINANCIALS--26.3%
- ---------------------------------------------------------------
 CAPITAL MARKETS--2.2%
 Bank of New York Co., Inc. (The)          2,600         86,112
- ---------------------------------------------------------------
 COMMERCIAL BANKS--8.7%
 Bank of America Corp.                       600         48,258
- ---------------------------------------------------------------
 FleetBoston Financial Corp.               2,700        117,855
- ---------------------------------------------------------------
 SunTrust Banks, Inc.                      1,600        114,400
- ---------------------------------------------------------------
 Wells Fargo & Co.                         1,000         58,890
                                                    -----------
                                                        339,403

- ---------------------------------------------------------------
 DIVERSIFIED FINANCIAL SERVICES--8.6%
 Citigroup, Inc.                           2,200        106,788
- ---------------------------------------------------------------
 Franklin Resources, Inc.                  1,200         62,472
- ---------------------------------------------------------------
 Merrill Lynch & Co., Inc.                   700         41,055
- ---------------------------------------------------------------
 Morgan Stanley                            2,100        121,527
                                                    -----------
                                                        331,842


                                                   MARKET VALUE
                                          SHARES     SEE NOTE 1
- ---------------------------------------------------------------
 INSURANCE--6.8%
 Chubb Corp.                               1,100    $    74,910
- ---------------------------------------------------------------
 Platinum Underwriters Holdings Ltd.       2,200         66,000
- ---------------------------------------------------------------
 Prudential Financial, Inc.                2,900        121,133
                                                    -----------
                                                        262,043

- ---------------------------------------------------------------
 HEALTH CARE--4.6%
- ---------------------------------------------------------------
 HEALTH CARE PROVIDERS & SERVICES--2.8%
 Aetna, Inc.                               1,100         74,338
- ---------------------------------------------------------------
 PacifiCare Health Systems, Inc. 1           300         20,280
- ---------------------------------------------------------------
 Service Corp. International 1             2,400         12,936
                                                    -----------
                                                        107,554

- ---------------------------------------------------------------
 PHARMACEUTICALS--1.8%
 Schering-Plough Corp.                     4,100         71,299
- ---------------------------------------------------------------
 INDUSTRIALS--15.2%
- ---------------------------------------------------------------
 AEROSPACE & DEFENSE--6.9%
 Boeing Co.                                1,700         71,638
- ---------------------------------------------------------------
 Raytheon Co.                              6,500        195,260
                                                    -----------
                                                        266,898

- ---------------------------------------------------------------
 COMMERCIAL SERVICES & SUPPLIES--5.9%
 Cendant Corp. 1                           8,200        182,614
- ---------------------------------------------------------------
 ChoicePoint, Inc. 1                       1,200         45,708
                                                    -----------
                                                        228,322

- ---------------------------------------------------------------
 INDUSTRIAL CONGLOMERATES--2.3%
 Tyco International Ltd.                   3,400         90,100
- ---------------------------------------------------------------
 ROAD & RAIL--0.1%
 CNF Transportation, Inc.                    100          3,390
- ---------------------------------------------------------------
 INFORMATION TECHNOLOGY--8.2%
- ---------------------------------------------------------------
 COMMUNICATIONS EQUIPMENT--1.4%
 QUALCOMM, Inc.                            1,000         53,930
- ---------------------------------------------------------------
 COMPUTERS & PERIPHERALS--3.2%
 Hewlett-Packard Co.                       5,400        124,038
- ---------------------------------------------------------------
 ELECTRONIC EQUIPMENT & INSTRUMENTS--2.1%
 Flextronics International Ltd. 1          2,200         32,648
- ---------------------------------------------------------------
 Symbol Technologies, Inc.                 2,300         38,847
- ---------------------------------------------------------------
 Thermo Electron Corp. 1                     400         10,080
                                                    -----------
                                                         81,575

- ---------------------------------------------------------------
 SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.5%
 Brooks Automation, Inc. 1                   700         16,919
- ---------------------------------------------------------------
 SOFTWARE--1.0%
 Compuware Corp. 1                         6,600         39,864


STATEMENT OF INVESTMENTS Continued

                                                   MARKET VALUE
                                          SHARES     SEE NOTE 1
- ---------------------------------------------------------------
 MATERIALS--4.9%
- ---------------------------------------------------------------
 CHEMICALS--2.7%
 Dow Chemical Co.                          2,000    $    83,140
- ---------------------------------------------------------------
 IMC Global, Inc.                          2,200         21,846
                                                    -----------
                                                        104,986

- ---------------------------------------------------------------
 CONTAINERS & PACKAGING--0.5%
 Smurfit-Stone Container Corp.             1,100         20,427
- ---------------------------------------------------------------
 PAPER & FOREST PRODUCTS--1.7%
 Bowater, Inc.                               500         23,155
- ---------------------------------------------------------------
 Sappi Ltd., Sponsored ADR                 3,100         42,377
                                                    -----------
                                                         65,532

- ---------------------------------------------------------------
 TELECOMMUNICATION SERVICES--5.4%
- ---------------------------------------------------------------
 DIVERSIFIED TELECOMMUNICATION SERVICES--3.0%
 IDT Corp., Cl. B 1                        3,300         76,329
- ---------------------------------------------------------------
 Verizon Communications, Inc.              1,100         38,588
                                                    -----------
                                                        114,917

- ---------------------------------------------------------------
 WIRELESS TELECOMMUNICATION SERVICES--2.4%
 AT&T Corp.                                1,900         38,570
- ---------------------------------------------------------------
 Vodafone Group plc, Sponsored ADR         2,200         55,088
                                                    -----------
                                                         93,658

- ---------------------------------------------------------------
 UTILITIES--5.3%
- ---------------------------------------------------------------
 ELECTRIC UTILITIES--4.1%
 AES Corp. (The) 1                         9,100         85,904
- ---------------------------------------------------------------
 Dominion Resources, Inc.                    500         31,915
- ---------------------------------------------------------------
 PG&E Corp. 1                              1,500         41,655
                                                    -----------
                                                        159,474



                                                   MARKET VALUE
                                          SHARES     SEE NOTE 1
- ---------------------------------------------------------------
 GAS UTILITIES--0.3%
 Kinder Morgan, Inc.                         200    $    11,820
- ---------------------------------------------------------------
 MULTI-UTILITIES--0.9%
 Equitable Resources, Inc.                   800         34,336
                                                    -----------
 Total Common Stocks (Cost $3,062,346)                3,801,360

                                       PRINCIPAL
                                          AMOUNT
- ---------------------------------------------------------------
 JOINT REPURCHASE AGREEMENTS--0.9%
- ---------------------------------------------------------------
 Undivided interest of 0.03% in joint
 repurchase agreement (Principal
 Amount/Market Value $109,556,000,
 with a maturity value of $109,560,869)
 with Banc One Capital Markets,
 Inc., 0.80%, dated 12/31/03, to
 be repurchased at $35,002 on 1/2/04,
 collateralized by U.S. Treasury Bonds,
 4.25%, 11/30/13, with a value of
 $111,861,618 (Cost $35,000)             $35,000         35,000

- ---------------------------------------------------------------
 TOTAL INVESTMENTS, AT VALUE
 (COST $3,097,346)                          99.1%     3,836,360
- ---------------------------------------------------------------
 OTHER ASSETS NET OF LIABILITIES             0.9         34,446
                                         -----------------------
 NET ASSETS                                100.0%   $ 3,870,806
                                         =======================

FOOTNOTE TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2003

- --------------------------------------------------------------------------------------------
 ASSETS

 Investments, at value (cost $3,097,346)--see accompanying
statement              $3,836,360
- --------------------------------------------------------------------------------------------

Cash
242
 Receivables and other assets:
 Investments
sold
43,478
 Interest and
dividends                                                                6,606

Other
497

- ----------
 Total
assets
3,887,183

- --------------------------------------------------------------------------------------------
 LIABILITIES
 Payables and other liabilities:
 Legal, auditing and other professional
fees                                           8,344
 Shareholder
reports
3,812
 Investments
purchased
2,419
 Trustees'
compensation
1,143

Other
659
- --------------------------------------------------------------------------------------------
 Total
liabilities
16,377

- --------------------------------------------------------------------------------------------
 NET
ASSETS
$3,870,806

==========

- --------------------------------------------------------------------------------------------
 COMPOSITION OF NET ASSETS
 Par value of shares of beneficial
interest                                       $      300
- --------------------------------------------------------------------------------------------
 Additional paid-in
capital                                                        2,999,700
- --------------------------------------------------------------------------------------------
 Accumulated net investment
income                                                     8,769
- --------------------------------------------------------------------------------------------
 Accumulated net realized gain on
investments                                        123,023
- --------------------------------------------------------------------------------------------
 Net unrealized appreciation on
investments                                          739,014

- ----------
 NET ASSETS--applicable to 300,000 shares of beneficial interest
outstanding      $3,870,806

==========

- --------------------------------------------------------------------------------------------
 NET ASSET VALUE, REDEMPTION PRICE PER SHARE AND OFFERING PRICE PER
SHARE             $12.90


 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


STATEMENT OF OPERATIONS For the Period Ended December 31, 2003 1

- --------------------------------------------------------------------------------
 INVESTMENT INCOME
 Dividends (net of foreign withholding taxes of $767)                  $
51,859
- --------------------------------------------------------------------------------
 Interest
1,471

- ---------
 Total investment income
53,330

- --------------------------------------------------------------------------------
 EXPENSES
 Management fees
23,894
- --------------------------------------------------------------------------------
 Legal, auditing and other professional fees
8,750
- --------------------------------------------------------------------------------
 Shareholder reports
7,143
- --------------------------------------------------------------------------------
 Trustees' compensation
3,179
- --------------------------------------------------------------------------------
 Custodian fees and expenses
162
- --------------------------------------------------------------------------------
 Other
1,451

- ---------
 Total expenses
44,579
 Less reduction to custodian expenses
(18)

- ---------
 Net expenses
44,561

- --------------------------------------------------------------------------------
 NET INVESTMENT INCOME
8,769

- --------------------------------------------------------------------------------
 REALIZED AND UNREALIZED GAIN
 Net realized gain on investments
123,023
- --------------------------------------------------------------------------------
 Net change in unrealized appreciation on investments
739,014

- --------------------------------------------------------------------------------
 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$870,806

=========


1. For the period from January 2, 2003 (commencement of operations) to
   December 31, 2003.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENT OF CHANGES AND NET ASSETS

FINANCIAL HIGHLIGHTS

 NON-SERVICE SHARES  PERIOD  DECEMBER 31                               2003 1
- -------------------------------------------------------------------------------
 PER SHARE OPERATING DATA
 Net asset value, beginning of period                                  $10.00
- -------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                                    .03
 Net realized and unrealized gain                                        2.87

- --------
 Total from investment operations                                        2.90
- -----------------------------------------------------------------------------
 Net asset value, end of period                                        $12.90

- -----------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE 2                                     29.00%
- -----------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA
 Net assets, end of period (in thousands)                              $3,871
- -----------------------------------------------------------------------------
 Average net assets (in thousands)                                     $3,205
- -----------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment income                                                   0.27%
 Total expenses
1.39% 4
- -----------------------------------------------------------------------------
 Portfolio turnover rate                                                  120%

1. For the period from January 2, 2003 (commencement of operations) to
December
31, 2003.
2. 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.

 PERIOD ENDED DECEMBER  31, 2003 1
- -------------------------------------------------------------------------------------------------------------------
 OPERATIONS

 Net investment
income
$    8,769
- -------------------------------------------------------------------------------------------------------------------
 Net realized
gain
123,023
- -------------------------------------------------------------------------------------------------------------------
 Net change in unrealized
appreciation
739,014

            ----------
 Net increase in net assets resulting from
operations                                                       870,806

- -------------------------------------------------------------------------------------------------------------------
 BENEFICIAL INTEREST TRANSACTIONS
 Net increase in net assets resulting from beneficial interest
transactions--Non-Service shares           3,000,000

- -------------------------------------------------------------------------------------------------------------------
 NET ASSETS
 Total
increase
3,870,806
- -------------------------------------------------------------------------------------------------------------------
 Beginning of
period
- --

- ----------
 End of period [including accumulated net investment income of $8,769
 for the period ended December 31,
2003]
$3,870,806

          ==========

1. For the period from January 2, 2003 (commencement of operations) to
   December 31, 2003.


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


NOTES TO FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------
 1. SIGNIFICANT ACCOUNTING POLICIES
 Oppenheimer Value 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 growth of capital by investing
 primarily in common stocks with low price-earnings ratios and
 better-than-anticipated earnings. The Trust's investment advisor is
 OppenheimerFunds, Inc. (the Manager). As of December 31, 2003, all
Non-Service
 shares were owned by the Manager.
    The Fund currently offers Non-Service shares only. The class is sold at
 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 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. Securities traded on NASDAQ are valued based on the
closing
 price provided by NASDAQ 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. Securities whose values have been
 materially affected by what the Manager identifies as a significant event
 occurring before the Fund's assets are valued but after the close of their
 respective foreign exchanges will be fair valued. Fair value is determined in
 good faith using 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 Fund's accounting records 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. Pursuant to an Exemptive Order issued by the
 Securities and Exchange Commission, the Fund, along with other affiliated
funds
 advised by the Manager, may transfer uninvested cash balances into joint
 trading accounts on a daily basis. Secured by U.S. government securities,
these
 balances are invested in one or more repurchase agreements. 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. 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 comply with provisions of the Internal
 Revenue Code applicable to regulated investment companies and to distribute
 substantially all of its investment company taxable income, including any net
 realized gain on investments not offset by capital loss carryforwards, if
any,
 to shareholders.

 The tax components of capital shown in the table below represent distribution
 requirements the Fund must satisfy under the income tax regulations, losses
the
 Fund may be able to offset against income and gains realized in future years
 and unrealized appreciation or depreciation of securities and other
investments
 for federal income tax purposes.


NOTES TO FINANCIAL STATEMENTS Continued


- --------------------------------------------------------------------------------
 1. SIGNIFICANT ACCOUNTING POLICIES Continued



NET UNREALIZED

APPRECIATION

BASED ON COST OF

SECURITIES AND
              UNDISTRIBUTED          UNDISTRIBUTED
ACCUMULATED             OTHER INVESTMENTS
              NET INVESTMENT             LONG-TERM
LOSS            FOR FEDERAL INCOME
              INCOME                          GAIN
CARRYFORWARD                  TAX PURPOSES
- ----------------------------------------------------------------------------------------------------------

              $131,792                         $--
$--                      $739,014


 No distributions were paid during the period ended December 31, 2003.

 The aggregate cost of securities and other investments and the composition of
 unrealized appreciation and depreciation of securities and other investments
 for federal income tax purposes as of December 31, 2003 are noted below. The
 primary difference between book and tax appreciation or depreciation of
 securities and other investments, if applicable, is attributable to the tax
 deferral of losses or tax realization of financial statement unrealized gain
or
 loss.

                 Federal tax cost of securities               $3,097,346
                                                              ==========

                 Gross unrealized appreciation                $  752,953
                 Gross unrealized depreciation                   (13,939)
                                                              ----------
                 Net unrealized appreciation                  $  739,014
                                                              ==========

- --------------------------------------------------------------------------------
 TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
 compensation plan for independent trustees that enables trustees to elect to
 defer receipt of all or a portion of the annual compensation they are
entitled
 to receive from the Fund. Under the plan, deferred amounts are treated as
 though equal dollar amounts had been invested in shares of the Fund or are
 invested in other Oppenheimer funds selected by the Trustee. Deferral of
 trustees' fees under the plan will not affect the net assets of the Fund, and
 will not materially affect the Fund's assets, liabilities or net investment
 income per share. Amounts will be deferred until distributed in accordance to
 the Plan.
- --------------------------------------------------------------------------------
 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. Income and capital gain distributions,
if
 any, are declared and paid annually.
- --------------------------------------------------------------------------------
 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.
- --------------------------------------------------------------------------------
 EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
 represents earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
 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 Trust has authorized an unlimited number of $0.001 par value shares of
 beneficial interest. Transactions in shares of beneficial interest were as
 follows:

                                 PERIOD ENDED DECEMBER 31, 2003 1
                                         SHARES            AMOUNT
- -----------------------------------------------------------------
 NON-SERVICE SHARES
 Sold                                   300,000        $3,000,000
                                        -------------------------
 Net increase                           300,000        $3,000,000
                                        =========================

 1. For the period from January 2, 2003 (commencement of operations) to
    December 31, 2003.

- --------------------------------------------------------------------------------
 3. PURCHASES AND SALES OF SECURITIES
 The aggregate cost of purchases and proceeds from sales of securities, other
 than short-term obligations, for the period ended December 31, 2003, were
 $6,421,883 and $3,482,560, respectively.

- --------------------------------------------------------------------------------
 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 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.
- --------------------------------------------------------------------------------
 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 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.
- --------------------------------------------------------------------------------
 OFFERING AND ORGANIZATIONAL COSTS. The Manager paid all offering and
 organizational costs associated with the registration and seeding of the
Fund.

- --------------------------------------------------------------------------------
 5. BORROWING AND LENDING ARRANGEMENTS

     The Fund entered into an "interfund borrowing and lending arrangement" with
other  funds in the  Oppenheimer  funds  complex,  to allow  funds to borrow for
liquidity  purposes.  The arrangement was initiated pursuant to exemptive relief
granted by the  Securities  and  Exchange  Commission  (the SEC) to allow  these
affiliated  funds to lend money to, and borrow  money from,  each  other,  in an
attempt to reduce borrowing costs below those of bank loan facilities. The SEC's
order  requires  the Fund's  Board of Trustees to adopt  operating  policies and
procedures to administer interfund borrowing and lending.  Under the arrangement
the Fund may lend money to other  Oppenheimer  funds and may  borrow  from other
Oppenheimer  funds at a rate set by the Fund's Board of  Trustees,  based upon a
recommendation  by the Manager.  The Fund's  borrowings,  if any, are subject to
asset coverage  requirements under the Investment Company Act and the provisions
of the SEC order and other  applicable  regulations.  If the Fund borrows money,
there is a risk that the loan could be called on one day's notice, in which case
the Fund  might  have to borrow  from a bank at higher  rates if a loan were not
available  from  another  Oppenheimer  fund.  If the Fund lends money to another
fund,  it will be  subject  to the risk that the other  fund might not repay the
loan in a timely manner, or at all.

     The Fund had no interfund borrowings or loans outstanding during the period
ended or at December 31, 2003.

                                   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, Inc.
- ------------------------------------------------------------------------------


International Long-Term Credit Ratings

Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is highly
unlikely to be adversely affected by foreseeable events.

AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.

A: High Credit Quality. "A" ratings denote a low expectation of credit risk.
The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and
in economic conditions are more likely to impair this capacity. This is the
lowest investment-grade category.

Speculative Grade:

BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met. 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.

D: 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                    Industrial Conglomerates
Air Freight & Couriers                 Insurance
Airlines                               Internet & Catalog Retail
Asset Backed Securities                Internet & Software & Services
Auto Components                        IT Services
Automobiles                            Leasing & Factoring
Beverages                         Leisure Equipment & Products
Biotechnology                     Machinery
Broker-Dealer                          Marine
Building Products                      Media
Capital Markets                        Metals & Mining
Chemicals                              Multiline Retail
Commercial Banks                       Multi-Utilities
Commercial Finance                     Municipal
Commercial Services & Supplies         Office Electronics
Communications Equipment               Oil & Gas
Computers & Peripherals                Paper & Forest Products
Construction & Engineering             Personal Products
Construction Materials                 Pharmaceuticals
Consulting & Services                  Real Estate
Consumer Finance                       Repurchase Agreements
Containers & Packaging                 Road & Rail
Distributors                           Semiconductor and Semiconductor Equipment
Diversified Financial Services         Software
Diversified Telecommunication Services Special Purpose Financial
Electric Utilities                     Specialty Retail
Electrical Equipment                   Textiles, Apparel & Luxury Goods
Electronic Equipment & Instruments     Thrifts & Mortgage Finance
Energy Equipment & Services            Tobacco
Food & Drug Retailing                  Trading Companies & Distributors
Food Products                          Transportation Infrastructure
Foreign Government                     U.S. Government Agencies-Full Faith and Credit
Gas Utilities                          U.S. Government Agencies-Government Sponsored
                                       Enterprises
Health Care Equipment & Supplies       U.S. Government Instrumentalities
Health Care Providers & Services       U.S. Government Obligations
Hotels Restaurants & Leisure           Water Utilities
Household Durables                     Wireless Transportation Services
Household Products

                                  Appendix C

    INDUSTRY CLASSIFICATIONS (all Funds except Oppenheimer Money Fund/VA)


Aerospace & Defense                  Household Products
Air Freight & Couriers               Industrial Conglomerates
Airlines                             Insurance
Auto Components                      Internet & Catalog Retail
Automobiles                          Internet Software & Services
Beverages                            IT Services
Biotechnology                      Leisure Equipment & Products
Building Products                  Machinery
Chemicals                            Marine
Consumer Finance                     Media
Commercial Banks                     Metals & Mining
Commercial Services & Supplies       Multiline Retail
Communications Equipment             Multi-Utilities
Computers & Peripherals              Office Electronics
Construction & Engineering           Oil & Gas
Construction Materials               Paper & Forest Products
Containers & Packaging               Personal Products
Distributors                         Pharmaceuticals
Diversified Financial Services       Real Estate
Diversified Telecommunication        Road & Rail
Services
Electric Utilities                   Semiconductors and Semiconductor

                                     Equipment

Electrical Equipment                 Software
Electronic Equipment & Instruments   Specialty Retail
Energy Equipment & Services          Textiles, Apparel & Luxury Goods
Food & Staples Retailing             Thrifts & Mortgage Finance
Food Products                        Tobacco
Gas Utilities                        Trading Companies & Distributors
Health Care Equipment & Supplies     Transportation Infrastructure
Health Care Providers & Services     Water Utilities
Hotels Restaurants & Leisure         Wireless Telecommunication Services
Household Durables

                                  Appendix D


Major  Shareholders.   As  of  April  1,  2004  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 Shares             Allmerica  Allstate
                        in the fund    Allianz   Financial  Financial
Aggressive Growth Fund/VA
Non-Service Shares           29,341,490.386       *            *          *

Aggressive Growth Fund/VA
Service Shares                398,094.651         *            *          *

Balanced Fund/VA
Non-Service Shares           33,604,839.817       *            *          *

Balanced Fund/VA
Service Shares               2,028,285.037        *       458,767.587     *
                                                              22.62%
Bond Fund/VA
Non-Service Shares           53,439,490.527       *            *          *

Bond Fund/VA
Service Shares                329,448.930         *            *          *

Capital Appreciation Fund/VA
Non-Service Shares           49,548,203.249       *            *          *

Capital Appreciation Fund/VA
Service Shares               4,617,873.980        *       514,491.589     *
                                                              11.14%
Global Securities Fund/VA
Non-Service Shares           95,915,604.397 8,390,196.406      *          *
                                                    8.75%
Global Securities Fund/VA
Service Shares               8,655,790.076        *       972,503.380     *
                                                              11.24%
Global Securities Fund/VA
Class 3 Shares               7,104,951.592        *            *          *

Global Securities Fund/VA
Class 4 Shares               N/ A                 *            *          *

High Income Fund/VA
Non-Service Shares           57,511,339.311 6,686,053.647      *          *
                                                   11.63%
High Income/VA
Service Shares               10,989,053.281       *       3,996,292.770   *
                                                              36.37%
Main Street Fund/VA
Non-Service Shares           64,189,812.671 9,480,709.259      *          *
                                                   14.77%
Main Street Fund/VA
Service Shares               10,900,028.260       *       588,107.486     *
                                                               5.40%
Main Street Small Cap
Fund/VA
Non-Service Shares           2,104,681.925        *            *     258,727.866
                                                                          12.29%
Main Street Small Cap
Fund/VA
Service Shares               6,682,208.286        *            *          *

Money Fund/VA
Non-Service Shares           215,439,509.310      *            *          *

Strategic Bond Fund/VA
Non-Service Shares           120,719,373.261      *            *          *

Strategic Bond Fund/VA
Service Shares               22,592,641.957       *            *          *

Value Fund/VA
Non-Service Shares            310,679.051         *            *          *


                             Allstate Life Allstate Life   American    American
                                 of NY        Ins. Co.    Enterprise   General
Aggressive Growth Fund/VA
Non-Service Shares                 *              *            *           *

Aggressive Growth Fund/VA
Service Shares                  21,271.027    243,450.220      *           *
                                     5.34%         61.15%
Balanced Fund/VA
Non-Service Shares                 *              *            *           *

Balanced Fund/VA
Service Shares                 103,418.661  1,445,387.131      *           *
                                     5.10%         71.26%
Bond Fund/VA
Non-Service Shares                 *              *            *           *

Bond Fund/VA
Service Shares                     *              *            *           *

Capital Appreciation Fund/VA
Non-Service Shares                 *              *            *           *

Capital Appreciation Fund/VA
Service Shares                     *          742,780.768 238,919.971      *
                                                   16.08%       5.17%
Global Securities Fund/VA
Non-Service Shares                 *              *            *           *

Global Securities Fund/VA
Service Shares                     *        779,933.654        *           *
                                                    9.01%
Global Securities Fund/VA
Class 3 Shares                     *              *            *           *

Global Securities Fund/VA
Class 4 Shares                     *              *            *           *

High Income Fund/VA
Non-Service Shares                 *              *            *           *

High Income/VA
Service Shares                     *        2,287,179.914 642,350.200      *
                                                   20.81%       5.85%
Main Street Fund/VA
Non-Service Shares                 *              *            *           *

Main Street Fund/VA
Service Shares                     *        2,204,160.461      *           *
                                                   20.22%
Main Street Small Cap
Fund/VA
Non-Service Shares                 *              *            *      352,004.678
                                                                          16.72%
Main Street Small Cap
Fund/VA
Service Shares                     *        1,322,479.959 497,833.859      *
                                                   19.79%       7.45%
Money Fund/VA
Non-Service Shares                 *              *            *           *

Strategic Bond Fund/VA
Non-Service Shares                 *              *            *           *

Strategic Bond Fund/VA
Service Shares                     *        8,980,296.633 5,248,991.132    *
                                                   39.75%      23.23%
Value Fund/VA
Non-Service Shares                 *              *            *           *

                              American   Columbus
                              General      Life        Cuna            GE
Aggressive Growth Fund/VA
Non-Service Shares                *          *           *       2,996,555.501
                                                                           10.21%
Aggressive Growth Fund/VA
Service Shares                    *          *           *             92,528.532
                                                                           23.24%
Balanced Fund/VA
Non-Service Shares                *          *           *       5,202,786.484
                                                                           15.48%
Balanced Fund/VA
Service Shares                    *          *           *              *

Bond Fund/VA
Non-Service Shares                *          *           *       9,494,998.491
                                                                           17.77%
Bond Fund/VA
Service Shares                    *          *           *              *

Capital Appreciation Fund/VA
Non-Service Shares                *          *           *       5,595,847.693
                                                                           11.29%
Capital Appreciation Fund/VA
Service Shares                    *          *           *            315,214.077
                                                                            6.83%
Global Securities Fund/VA
Non-Service Shares                *          *           *              *

Global Securities Fund/VA
Service Shares                    *          *           *          3,160,876.806
                                                                           36.52%
Global Securities Fund/VA
Class 3 Shares                    *          *           *              *

Global Securities Fund/VA
Class 4 Shares                    *          *           *              *

High Income Fund/VA                                              13,645,278.375
Non-Service Shares                *          *      7,597,088.599
                                                         13.21%            23.73%
High Income/VA
Service Shares                    *          *           *              *

Main Street Fund/VA
Non-Service Shares                *          *           *              *

Main Street Fund/VA
Service Shares                    *          *           *       3,242,142.477
                                                                           29.74%
Main Street Small Cap
Fund/VA
Non-Service Shares           352,004.678     *           *              *
                                 16.72%
Main Street Small Cap
Fund/VA
Service Shares                    *          *           *          1,065,406.833
                                                                           15.94%
Money Fund/VA
Non-Service Shares                *          *           *              *

Strategic Bond Fund/VA
Non-Service Shares                *          *           *              *

Strategic Bond Fund/VA
Service Shares                    *          *           *              *

Value Fund/VA
Non-Service Shares                *          *           *              *

                                                           Lincoln
                                   ING         Kemper      Benefit   Mass Mutual
Aggressive Growth Fund/VA
Non-Service Shares                  *             *           *      15,824,774.028
                                                                           53.93%
Aggressive Growth Fund/VA
Service Shares                      *             *           *            *

Balanced Fund/VA
Non-Service Shares                  *             *           *      9,916,577.478
                                                                           29.51%
Balanced Fund/VA
Service Shares                      *             *           *            *

Bond Fund/VA
Non-Service Shares                  *             *           *      20,055,356.334
                                                                           37.53%
Bond Fund/VA
Service Shares                      *             *           *            *

Capital Appreciation Fund/VA
Non-Service Shares                  *             *           *      13,204,716.592
                                                                           26.65%
Capital Appreciation Fund/VA
Service Shares                      *             *           *            *

Global Securities Fund/VA
Non-Service Shares           23,972,506.117       *           *      33,605,665.499
                                     24.99%                                35.04%
Global Securities Fund/VA
Service Shares                      *        464,258.112      *            *
                                                   5.36%
Global Securities Fund/VA
Class 3 Shares                      *             *           *            *

Global Securities Fund/VA
Class 4 Shares                      *             *           *            *


High Income Fund/VA

Non-Service Shares                  *             *           *      19,749,491.178
                                                                           34.34%

High Income/VA
Service Shares                      *             *           *            *

Main Street Fund/VA

Non-Service Shares           3,890,652.259        *           *      17,235,188.129
                                      6.06%                                26.85%

Main Street Fund/VA
Service Shares                      *             *           *            *

Main Street Small Cap
Fund/VA

Non-Service Shares                  *             *           *      1,007,374.779
                                                                           47.86%

Main Street Small Cap
Fund/VA

Service Shares                      *        370,195.821 2,061,341.624     *
                                                   5.54%      30.85%

Money Fund/VA

Non-Service Shares                  *             *           *      177,026,454.270
                                                                           82.17%
Strategic Bond Fund/VA
Non-Service Shares           23,713,733.840       *           *      66,985,755.745
                                     19.64%                                55.49%
Strategic Bond Fund/VA

Service Shares                      *             *           *            *


Value Fund/VA

Non-Service Shares                  *             *           *            *


                               MONY Life      Minnesota    Merrill   Nationwide
Aggressive Growth Fund/VA
Non-Service Shares                  *             *            *     7,604,427.166
                                                                          25.92%
Aggressive Growth Fund/VA
Service Shares                      *             *            *          *

Balanced Fund/VA
Non-Service Shares                  *             *       2,424,751.712,667,212.844
                                                               7.22%      37.69%
Balanced Fund/VA
Service Shares                      *             *            *          *

Bond Fund/VA
Non-Service Shares                  *             *            *     19,807,690.016
                                                                          37.07%
Bond Fund/VA
Service Shares                      *             *            *          *

Capital Appreciation Fund/VA
Non-Service Shares                  *             *            *     23,238,573.228
                                                                          46.90%
Capital Appreciation Fund/VA                                                     5
Service Shares                      *             *            *     1,297,693.82
                                                                          28.10%
Global Securities Fund/VA
Non-Service Shares                  *             *            *     26,257,440.537
                                                                          27.38%
Global Securities Fund/VA                                                        0
Service Shares                  510,814.516       *            *     1,849,492.38
                                      5.90%                               21.37%
Global Securities Fund/VA                                                        2
Class 3 Shares                      *             *            *     7,104,951.59
                                                                         100.00%
Global Securities Fund/VA
Class 4 Shares                      *             *            *          *

High Income Fund/VA
Non-Service Shares                  *             *            *          *

High Income/VA                                                                   7
Service Shares                      *       1,503,208.355      *     1,986,958.16
                                                   13.68%                 18.08%
Main Street Fund/VA
Non-Service Shares                  *             *            *     24,864,383.784
                                                                          38.74%
Main Street Fund/VA                                                              6
Service Shares                      *             *            *     2,129,525.53
                                                                          19.54%
Main Street Small Cap
Fund/VA
Non-Service Shares                  *             *            *     218,686.141
                                                                          10.39%
Main Street Small Cap
Fund/VA
Service Shares                      *             *            *     488,750.447
                                                                           7.31%
Money Fund/VA                                                             *
Non-Service Shares                  *             *       14,849,394.650
                                                               6.89%
Strategic Bond Fund/VA
Non-Service Shares                  *             *            *          *

Strategic Bond Fund/VA                                                           2
Service Shares                      *             *            *     4,655,560.26
                                                                          20.61%
Value Fund/VA
Non-Service Shares                  *             *            *          *


                                  OFI        Protective     Pruco        Sage
Aggressive Growth Fund/VA
Non-Service Shares                  *             *            *           *

Aggressive Growth Fund/VA
Service Shares                      *             *       25,226.826       *
                                                               6.34%
Balanced Fund/VA
Non-Service Shares                  *             *            *           *

Balanced Fund/VA
Service Shares                      *             *            *           *

Bond Fund/VA
Non-Service Shares                  *             *            *           *

Bond Fund/VA
Service Shares                      *             *            *      329,448.930
                                                                          100.00%
Capital Appreciation Fund/VA
Non-Service Shares                  *             *            *           *

Capital Appreciation Fund/VA
Service Shares                      *             *            *           *

Global Securities Fund/VA
Non-Service Shares                  *             *            *           *

Global Securities Fund/VA
Service Shares                      *             *            *           *

Global Securities Fund/VA
Class 3 Shares                      *             *            *           *

Global Securities Fund/VA
Class 4 Shares                      *             *            *           *

High Income Fund/VA
Non-Service Shares                  *             *            *           *

High Income/VA
Service Shares                      *             *            *           *

Main Street Fund/VA
Non-Service Shares                  *       3,935,745.495      *           *
                                                    6.13%
Main Street Fund/VA
Service Shares                      *             *            *           *

Main Street Small Cap
Fund/VA
Non-Service Shares                  *             *            *      122,774.326
                                                                            5.83%
Main Street Small Cap
Fund/VA
Service Shares                      *             *            *           *

Money Fund/VA
Non-Service Shares                  *       17,570,915.170     *           *
                                                    8.16%
Strategic Bond Fund/VA
Non-Service Shares                  *       21,025,003.073     *           *
                                                   17.42%
Strategic Bond Fund/VA
Service Shares                      *             *            *           *

Value Fund/VA
Non-Service Shares              310,679.051       *            *           *
                                    100.00%

                                SunLife        Trans-     Travelers     Union
Aggressive Growth Fund/VA
Non-Service Shares                  *             *            *           *

Aggressive Growth Fund/VA
Service Shares                      *             *            *           *

Balanced Fund/VA
Non-Service Shares                  *             *            *           *

Balanced Fund/VA
Service Shares                      *             *            *           *

Bond Fund/VA
Non-Service Shares                  *             *            *           *

Bond Fund/VA
Service Shares                      *             *            *           *

Capital Appreciation Fund/VA
Non-Service Shares                  *             *            *           *

Capital Appreciation Fund/VA
Service Shares                  765,441.118       *       263,507.583      *
                                     16.58%                    5.71%
Global Securities Fund/VA
Non-Service Shares                  *             *            *           *

Global Securities Fund/VA
Service Shares                      *             *            *           *

Global Securities Fund/VA
Class 3 Shares                      *             *            *           *

Global Securities Fund/VA
Class 4 Shares                      *             *            *           *

High Income Fund/VA
Non-Service Shares                  *             *            *           *

High Income/VA
Service Shares                      *             *            *           *

Main Street Fund/VA
Non-Service Shares                  *             *            *           *

Main Street Fund/VA
Service Shares               1,331,740.325        *            *           *
                                     12.22%
Main Street Small Cap
Fund/VA
Non-Service Shares                                *            *           *

Main Street Small Cap
Fund/VA
Service Shares                  361,385.387       *            *           *
                                      5.41%
Money Fund/VA
Non-Service Shares                  *             *            *           *

Strategic Bond Fund/VA
Non-Service Shares                  *             *            *           *

Strategic Bond Fund/VA
Service Shares                      *             *            *           *

Value Fund/VA
Non-Service Shares                  *             *            *           *

- ------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
- ------------------------------------------------------------------------------
Investment Advisor

      OppenheimerFunds, Inc.
      Two World Financial Center
      225 Liberty Street, 11th Floor
      New York, New York 10281-1008


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 LLP
      1675 Broadway
      New York, New York 10019



1234



PXOVAF.001.0404

                       OPPENHEIMER VARIABLE ACCOUNT FUNDS

                                  FORM N-1A

                                    PART C

                              OTHER INFORMATION


Item 23. Exhibits
- -----------------

(a)

      (i)   Fifteenth Amended and Restated  Declaration of Trust dated 5/1/04:
            Filed herewith.
      (ii)  Fourteenth  Amended  and  Restated   Declaration  of  Trust  dated
            5/1/03:   Previously   filed  with   Registrant's   Post-Effective
            Amendment No. 41 (4/28/03) and incorporated herein by reference.
      (iii) 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.
      (iv)  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.
(i)   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 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.
(x)   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.
(xi)  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.
(xii) 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.
(xiii)      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.
(xiv) 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.
(xv)  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.
(xvi) 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.
(xvii)      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.
      (xviii)     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.
(xix) 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.
(xx)  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.

(xxi) Oppenheimer   Main  Street   Fund/VA   Service  class   specimen   share
            certificate:  Previously  filed with  Registrant's  Post-Effective
            Amendment No. 41 (4/28/03) and incorporated herein by reference.
(xxii)      Oppenheimer Main Street Fund/VA  Non-Service  class specimen share
            certificate:  Previously  filed with  Registrant's  Post-Effective
            Amendment No. 41 (4/28/03) and incorporated herein by reference.
(xxiii)     Oppenheimer  Global  Securities  Fund/VA  Class 4  specimen  share
            certificate:  Previously  filed with  Registrant's  Post-Effective
            Amendment No. 42 (2/11/04), and incorporated herein by reference.


(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  Distributors  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  Distributors  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  Distributors   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  Distributors  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  Distributors   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  Distributors   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 Distributors  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  Distributors  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  Distributors  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  Distributors  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  Distributors  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:  Previously 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)

      (i)   Global Custody Agreement dated August 16, 2002 between Registrant
            and JPMorgan Chase Bank: Previously filed with Registrant's
            Post-Effective Amendment No. 41 (4/28/03) and incorporated herein
            by reference.

      (ii)  Amendment dated October 2, 2003 to the Global Custody Agreement
            dated August 16, 2002: Previously filed with Pre-Effective
            Amendment No. 1 to the Registration Statement of Oppenheimer
            Principal Protected Trust II (Reg. 333-108093), 11/6/03, and
            incorporated herein by reference.

(h)   Not applicable.

(i)

(i)   Opinion  and Consent of Counsel  dated  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  dated  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  dated  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  dated  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: Filed 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.

(xii) Oppenheimer   Global  Securities   Fund/VA  Class  4  Service  Plan  and
            Agreement  dated  5/1/04:   Previously  filed  with   Registrant's
            Post-Effective   Amendment  No.  42  (2/11/04),  and  incorporated
            herein by reference.

(n)   Oppenheimer  Funds Multiple Class Plan under Rule 18f-3 updated  through
      10/22/03:  Previously filed with Post-Effective  Amendment No. 11 to the
      Registration  Statement of Oppenheimer  Senior  Floating Rate Fund (Reg.
      No. 333-82579), 11/17/03, and incorporated herein by reference.


(o)
      (i)   Powers of Attorney for all Trustees/Directors (except for Richard
            F. Grabish) and Officers dated 10/9/03: Previously filed with
            Pre-Effective Amendment No. 1 to the Registration Statement of
            Oppenheimer Principal Protected Trust II (Reg. No. 333-108093),
            11/6/03, 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),
      11/21/02, 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 Seven 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
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Robert Agan,                   Vice President of  OppenheimerFunds  Distributor,
Vice President                 Inc.,  Shareholder Financial Services,  Inc., OFI
                               Private  Investments,  Inc. and Centennial  Asset
                               Management Corporation;  Senior Vice President of
                               Shareholders Services, Inc.

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Erik Anderson,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Janette Aprilante,             Secretary     (since     December    2001)    of:
Vice President & Secretary     OppenheimerFunds  Distributor,  Inc.,  Centennial
                               Asset   Management    Corporation,    Oppenheimer
                               Partnership  Holdings,   Inc.,  Oppenheimer  Real
                               Asset  Management,  Inc.,  Shareholder  Financial
                               Services,  Inc.,  Shareholder Services,  Inc. and
                               OppenheimerFunds   Legacy   Program.    Secretary
                               (since   June   2003)   of:   HarbourView   Asset
                               Management Corporation,  OFI Private Investments,
                               Inc.  and  OFI  Institutional  Asset  Management,
                               Inc.  Assistant  Secretary  (since December 2001)
                               of OFI Trust Company.

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Hany S. Ayad,                  None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Robert Baker,                  None
Assistant Vice President

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John Michael Banta,            None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Joanne Bardell,                None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kevin Baum,                    None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jeff Baumgartner,              None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Connie Bechtolt,               None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Lalit K. Behal                 Assistant    Secretary   of   HarbourView   Asset
Assistant Vice President       Management Corporation.

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kathleen Beichert,             Vice President of  OppenheimerFunds  Distributor,
Vice President                 Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Gerald Bellamy,                Assistant  Vice  President  of OFI  Institutional
Assistant Vice President       Asset Management, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Erik S. Berg,                  None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Victoria Best,                 Vice   President  of  OFI   Institutional   Asset
Vice President                 Management, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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,              Treasurer     (since     October     2003)     of
Vice President                 OppenheimerFunds     Distributor,     Inc.    and

                               Centennial Asset Management Corporation.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Tracey Blinzer,                Assistant  Vice  President  of   OppenheimerFunds
Vice President                 Distributor, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John R. Blomfield,             None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Veronika Boesch,               None
Assistant Vice President

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Chad Boll,                     None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Antulio N. Bomfim,             A  senior  economist  with  the  Federal  Reserve
Vice President                 Board (June 1992-October 2003).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert Bonomo,                 None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Michelle Borre Massick,        None
Vice President

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

John Boydell,                  None
Assistant Vice President

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

Michael Bromberg,              None
Assistant Vice President

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Lowell Scott Brooks,           Vice President of  OppenheimerFunds  Distributor,
Vice President                 Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Joan Brunelle,                 None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Richard Buckmaster,            None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Paul Burke,                    None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mark Burns,                    None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Bruce Burroughs,               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Claudia Calich,                None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Jeoffrey Caan,                 Formerly  Vice  President  of ABN AMRO  NA,  Inc.
Vice President                 (June  2002 - August  2003);  Vice  President  of
                               Zurich Scudder  Investments  (January 1999 - June
                               2002)

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

Catherine Carroll,             None
Assistant Vice President

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Debra Casey,                   None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Brett Clark,                   None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
H.C. Digby Clements,           None
Vice President: Rochester
Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Peter V. Cocuzza,              None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Susan Cornwell,                Vice  President of  Centennial  Asset  Management
Vice President                 Corporation and Shareholder  Financial  Services,
                               Inc.;   Senior  Vice   President  of  Shareholder

                               Services, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Scott Cottier,                 None
Vice President: Rochester
Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Laura Coulston,                None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Julie C. Cusker,               None
Assistant Vice President:
Rochester Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
George Curry,                  None.
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John Damian,                   None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John M. Davis,                 Assistant  Vice  President  of   OppenheimerFunds
Assistant Vice President       Distributor, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Ruggero de'Rossi,              Vice  President of HarbourView  Asset  Management
Senior Vice President          Corporation.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Craig P. Dinsell,              None
Executive Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Randall C. Dishmon,            None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Rebecca K. Dolan               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Steven D. Dombrower,           Senior    Vice    President    of   OFI   Private
Vice President                 Investments,     Inc.;    Vice    President    of
                               OppenheimerFunds Distributor, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Thomas Doyle,                  None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Bruce C. Dunbar,               None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Richard Edmiston,              None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Daniel R. Engstrom,            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
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Brian Finley,                  None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John E. Forrest,               Senior   Vice   President   of   OppenheimerFunds
Senior Vice President          Distributor, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jordan Hayes Foster,           Vice   President  of  OFI   Institutional   Asset
Vice President                 Management, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Richard Frank,                 Vice President of  OppenheimerFunds  Distributor,
Vice President: Rochester      Inc.
Division

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Dominic Freud,                 Formerly,   a   Partner   and   European   Equity
Vice President                 Portfolio  manager  at  SLS  Management  (January
                               2002-February  2003)  prior  to which he was head
                               of  the  European   equities  desk  and  managing
                               director at SG Cowen (May 1994-January 2002).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Dan Gagliardo,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Hazem Gamal,                   None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Dan P. Gangemi,                None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Subrata Ghose,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Charles W. Gilbert,            None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Alan C. Gilston,               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jill E. Glazerman,             None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mike Goldverg,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Bejamin J. Gord,               Vice  President of HarbourView  Asset  Management
Vice President                 Corporation  and  of  OFI   Institutional   Asset
                               Management,   Inc.  Formerly  Executive  Director
                               with  Miller  Anderson  Sherrerd,  a division  of
                               Morgan  Stanley  Investment  Management.   (April
                               1992-March 2002).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Laura Granger,                 None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert B. Grill,               None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert Gwynn,                  None
Vice President: Rochester
                                    Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert Haley,                  None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Marilyn Hall,                  None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Ping Han,                      None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kelly Haney,                   None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Steve Hauenstein,              None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Thomas B. Hayes,               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael Henry,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Dennis Hess,                   None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Dorothy F. Hirshman,           None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Daniel Hoelscher,              None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Edward Hrybenko,               Vice President of  OppenheimerFunds  Distributor,
Vice President                 Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Scott T. Huebl,                Assistant  Vice  President  of   OppenheimerFunds
Vice President                 Legacy Program.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Margaret Hui,                  None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

John Huttlin,                  Senior   Vice   President    (Director   of   the
Vice President                 International  Division)  (since January 2004) of
                               OFI   Institutional   Asset   Management,   Inc.;
                               Director  (since  June 2003) of  OppenheimerFunds
                               (Asia) Limited

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
James G. Hyland,               None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Steve P. Ilnitzki,             None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Bridget Ireland,               Vice   President    (since   January   2004)   of
Vice President                 OppenheimerFunds   Distributor   Inc.   Formerly,
                               Director  of  INVESCO  Distributors  Inc.  (April
                               2000-December 2003).

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kathleen T. Ives,              Vice   President  and   Assistant   Secretary  of
Vice President and Assistant   OppenheimerFunds     Distributor,     Inc.    and
Secretary                      Shareholder  Services,  Inc.; Assistant Secretary
                               of  Centennial  Asset   Management   Corporation,
                               OppenheimerFunds  Legacy Program and  Shareholder
                               Financial Services, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
William Jaume,                 Senior  Vice  President  of   HarbourView   Asset
Vice President                 Management   Corporation  and  OFI  Institutional
                               Asset  Management,  Inc.;  Director  of OFI Trust
                               Company.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Charles Kandilis,              Formerly  managing  director of Kandilis  Capital
Assistant Vice President       Management (September 1993-August 2002).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jennifer E. Kane,              None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Lynn O. Keeshan,               Assistant  Treasurer of  OppenheimerFunds  Legacy
Senior Vice President          Program
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Thomas W. Keffer,              None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Cristina J. Keller,            Vice President of  OppenheimerFunds  Distributor,
Vice President                 Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael Keogh,                 Vice President of  OppenheimerFunds  Distributor,
Vice President                 Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Walter G. Konops,              None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
James Kourkoulakos,            None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Brian Kramer,                  None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Lisa Lamentino,                None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Tracey Lange,                  Vice President of  OppenheimerFunds  Distributor,
Vice President                 Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John Latino,                   Formerly a Senior  Trader/Portfolio  Engineer  at
Assistant Vice President       Jacobs Levy Equity  Management (June  1996-August
                               2002).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Kristina Lawrence,             Formerly     Assistant    Vice    President    of
Vice President                 OppenheimerFunds,   Inc.   (November   2002-March
                               2004).

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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,                   Formerly    (until   December   2003)   Assistant
Assistant Vice President &     Secretary of OppenheimerFunds Legacy Program.
Assistant Counsel

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

Randy Legg,                    Formerly   an   associate    with   Dechert   LLP
Assistant Vice President &     (September 1998-January 2004).
Assistant Counsel

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Dana Lehrer,                   Assistant Secretary of Oppenheimer Legacy Program
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Laura Leitzinger,              Senior Vice  President of  Shareholder  Services,
Vice President                 Inc.;  Vice  President of  Shareholder  Financial
                               Services, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael S. Levine,             None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Gang Li,                       None
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.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Dongyan Ma,                    Formerly  an  Assistant   Vice   President   with
Assistant Vice President       Standish   Mellon   Asset   Management   (October
                               2001-October 2003).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Steve Macchia,                 None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael Magee,                 Vice President of  OppenheimerFunds  Distributor,
Vice President                 Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jerry Mandzij,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Angelo G. Manioudakis          Senior  Vice  President  of   HarbourView   Asset
Senior Vice President          Management  Corporation and of OFI  Institutional
                               Asset   Management,   Inc.   Formerly   Executive
                               Director  and   portfolio   manager  for  Miller,
                               Anderson  &   Sherrerd,   a  division  of  Morgan
                               Stanley Investment  Management (August 1993-April
                               2002).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
LuAnn Mascia,                  Vice President of  OppenheimerFunds  Distributor,
Vice President                 Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Susan Mattisinko,              Assistant  Secretary  (as  of  January  2004)  of
Vice President                 HarbourView    Asset   Management    Corporation,
                               OppenheimerFunds   Legacy  Program,  OFI  Private
                               Investments,  Inc.  and OFI  Institutional  Asset
                               Management,  Inc. Formerly an Associate at Sidley
                               Austin Brown and Wood LLP (1995 - October 2003).

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Elizabeth McCormack,           Assistant    Secretary   of   HarbourView   Asset
Assistant Vice President       Management Corporation.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Joseph McGovern,               None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Charles L. McKenzie,           As  of  May  2003:   Chief   Executive   Officer,
Senior Vice President          President,  Senior Managing Director and Director
                               of HarbourView  Asset Management  Corporation and
                               OFI   Institutional   Asset   Management,   Inc.;
                               President,   Chairman  and  Director  of  Trinity
                               Investment Management Corporation
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Andrew J. Mika,                None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Joy Milan,                     None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Nikolaos D. Monoyios,          None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Charles Moon,                  Vice  President of HarbourView  Asset  Management
Vice President                 Corporation  and  of  OFI   Institutional   Asset
                               Management,  Inc. Formerly an Executive  Director
                               and  Portfolio  Manager  with  Miller  Anderson &
                               Sherrerd,    a   division   of   Morgan   Stanley
                               Investment Management (June 1999-March 2002).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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.,    Tremont   Capital
                               Management,    Inc.   and   Trinity   Investments
                               Management Corporation;  President and Management
                               Director  of   Oppenheimer   Acquisition   Corp.;
                               President    and    Director    of    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.

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kevin Murray,                  None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Thomas J. Murray,              None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kenneth Nadler,                None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Christina Nasta,               Vice President of  OppenheimerFunds  Distributor,
Vice President                 Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Richard Nichols,               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
William Norman,                None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John O'Hare,                   Formerly  Executive  Vice President and Portfolio
Vice President                 Manager  (June 2000 - August 2003) and  Portfolio
                               Manager and Senior Vice President  (August 1997 -
                               June 2000) at Geneva Capital Management, Ltd.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Lerae A. Palumbo,              None
Assistant Vice President

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

David Pfeffer,                 Formerly,  Director and Chief  Financial  Officer
Senior Vice President and      at   Citigroup   Asset    Management    (February
Chief Financial Officer        2000-February 2004).

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
James F. Phillips,             None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Gary Pilc,                     None
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,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jane C. Putnam,                None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael E. Quinn,              None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Julie S. Radtke,               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Norma J. Rapini,               None
Assistant Vice President:
Rochester Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jill Reiter,                   None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Stacy Roth,                    None
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,                Vice   Chairman,   Treasurer,   Chief   Financial
Executive Vice President and   Officer and  Management  Director of  Oppenheimer
Director                       Acquisition  Corp.;  President  and  Director  of
                               Shareholder   Services,   Inc.  and   Shareholder
                               Financial  Services,  Inc.;  Director  of Trinity
                               Investment  Management  Corporation;  Chairman of
                               the Board,  Chief  Executive  Officer,  President
                               and Director of OFI Trust Company.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Kim Russomanno,                None
Assistant Vice President

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Rohit Sah,                     None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Valerie Sanders,               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Karen Sandler,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Tricia Scarlata,               Formerly,  Marketing Manager of OppenheimerFunds,
Vice President                 Inc. (April 2001-August 2002).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Rudi Schadt,                   Formerly  a   consultant   for  Arthur   Andersen
Assistant Vice President       (August 2001-February 2002).

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Ellen P. Schoenfeld,           None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Maria Schulte,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Scott A. Schwegel,             None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Allan P. Sedmak                None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jennifer L. Sexton,            Senior    Vice    President    of   OFI   Private
Vice President                 Investments, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Martha A. Shapiro,             None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Navin Sharma,                  Formerly,  Manager  at BNP  Paribas  Cooper  Neff
Vice President                 Advisors (May 2001-April 2002).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Steven J. Sheerin,             None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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).

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Enrique H. Smith,              None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Louis Sortino,                 None
Assistant Vice President:
Rochester Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Keith J. Spencer,              None
Senior Vice President

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

Marco Antonio Spinar,          None
Assistant Vice President

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Richard A. Stein,              None
Vice President: Rochester
Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Arthur P. Steinmetz,           Senior  Vice  President  of   HarbourView   Asset
Senior Vice President          Management Corporation.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jennifer Stevens,              None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Gregory J. Stitt,              None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John P. Stoma,                 Senior   Vice   President   of   OppenheimerFunds
Senior Vice President          Distributor, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael Stricker,              Vice President of Shareholder Services, Inc.
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Deborah A. Sullivan,           Secretary  (since  December  2001)  of OFI  Trust
Assistant Vice President,      Company.
Assistant Counsel

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mary Sullivan,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael Sussman,               Vice President of  OppenheimerFunds  Distributor,
Vice President                 Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Susan B. Switzer,              None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Martin Telles,                 Senior   Vice   President   of   OppenheimerFunds
Senior Vice President          Distributor, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Paul Temple,                   Formerly  a  Vice   President  of  Merrill  Lynch
Vice President                 (October 2001-January 2002).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Jeaneen Terrio,                None
Assistant Vice President

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Tane Tyler,                    Formerly Vice  President  and  Assistant  General
Vice President and Associate   Counsel at INVESCO Funds Group,  Inc.  (September
Counsel                        1991 - December 2003)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Cameron Ullyat,                None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Angela Utaro,                  None
Assistant Vice President:
Rochester Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Mark S. Vandehey,              Vice President of  OppenheimerFunds  Distributor,
Senior Vice President and      Inc.,  Centennial  Asset  Management  Corporation
Chief Compliance Officer       and Shareholder  Services,  Inc.  Formerly (until
                               March 2004) Vice  President of  OppenheimerFunds,
                               Inc.

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Maureen Van Norstrand,         None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Rene Vecka,                    Formerly Vice President of Shareholder  Services,
Assistant Vice President,      Inc. (September 2000-July 2003).
Rochester Division

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

Vincent Vermette,              Vice President of  OppenheimerFunds  Distributor,
Assistant Vice President       Inc.

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Phillip F. Vottiero,           None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Lisa Walsh,                    None
Assistant Vice President

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

Patricia Walters,              None
Assistant Vice President

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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
Vice President: Rochester
Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Barry D. Weiss,                Vice  President of HarbourView  Asset  Management
Vice President                 Corporation
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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.
Senior Vice President          and  OppenheimerFunds  plc; Senior Vice President
                               (Managing    Director   of   the    International
                               Division) of OFI Institutional  Asset Management,
                               Inc.;   Director   of   OppenheimerFunds   (Asia)
                               Limited.

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Catherine M. White,            Assistant  Vice  President  of   OppenheimerFunds
Assistant Vice President       Distributor,   Inc.;   member  of  the   American
                               Society of Pension Actuaries (ASPA) since 1995.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Annabel Whiting,               None
Assistant Vice President

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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,               None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Philip Witkower,               Senior   Vice   President   of   OppenheimerFunds
Senior Vice President          Distributor, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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,    Inc.,
                               Shareholder    Services,     Inc.,    Shareholder
                               Financial    Services,    Inc.,    OFI    Private
                               Investments,   Inc.,  OFI   Institutional   Asset
                               Management,   Inc.,   OppenheimerFunds   plc  and
                               OppenheimerFunds  Legacy  Program;  Treasurer and
                               Chief  Financial  Officer  of OFI Trust  Company;
                               Assistant  Treasurer of  Oppenheimer  Acquisition
                               Corp.

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Carol Wolf,                    Senior  Vice  President  of   HarbourView   Asset
Senior Vice President          Management  Corporation;  serves  on the Board of
                               the Colorado Ballet.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Kurt Wolfgruber,               Director  of  Tremont  Capital  Management,  Inc.
Executive Vice President,      (since  July  20012),  and of  HarbourView  Asset
Chief Investment Officer and   Management   Corporation  and  OFI  Institutional
Director                       Asset Management, Inc. (since June 2003)

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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
Executive 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 OFI Trust  Company;  Vice
                               President    and    Director    of    Oppenheimer
                               Partnership   Holdings,    Inc.;   Director   and
                               Assistant  Secretary  of  OppenheimerFunds   plc;
                               Secretary  and  General  Counsel  of  Oppenheimer
                               Acquisition   Corp.;   Director   and   Assistant
                               Secretary   of   OppenheimerFunds   International
                               Ltd.;   Director   of   Oppenheimer   Real  Asset
                               Management,   Inc.  and  OppenheimerFunds  (Asia)
                               Limited);   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.
- ---------------------------------------------------------------------------------

Item 27. Principal Underwriter
- ------------------------------

(a)   OppenheimerFunds Distributor, Inc. is the Distributor of the
Registrant's 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
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
James Barker                    Vice President            None
2901B N. Lakewood Avenue
Chicago, IL 60657
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kathleen Beichert(1)            Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert J. Bishop(1)             Treasurer                 None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Douglas S. Blankenship          Vice President            None
17011 Wood Bark Road
Springs, TX 77379
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Tracey Blinzler(1)              Assistant Vice President  None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
David A Borrelli                Vice President            None
105 Black Calla Ct.
San Ramon, CA 94583
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michelle Brennan                Assistant Vice President  None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
L. Scott Brooks(2)              Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kevin E. Brosmith               Senior Vice President     None
5 Deer Path
South Natlick, MA 01760
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jeffrey W. Bryan                Vice President            None
1048 Malaga Avenue
Coral Gables, FL 33134
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Susan Burton                    Vice President            None
4127 Towne Green Circle
Addison, TX 75001
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Andrew Chonofsky                Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Melissa Clayton                 Assistant Vice President  None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert A. Coli                  Vice President            None
12 White Tail Lane
Bedminster, NJ 07921
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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
522 Lakeland Avenue
Grosse Pointe, MI 48230
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Steven Dombrower(2)             Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
George P. Dougherty             Vice President            None
328 Regency Drive
North Wales, PA 19454
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Cliff H. Dunteman               Vice President            None
N 53 27761 Bantry Road
Sussex, WI 53089-45533
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John Eiler(2)                   Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kent M. Elwell                  Vice President            None
35 Crown Terrace
Yardley, PA 19067
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Gregg A. Everett                Vice President            None
4328 Auston Way
Palm Harbor, FL 34685-4017
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
George R. Fahey                 Senior Vice President     None
2 Pheasant Drive
Ringoes, NJ 08551
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Eric C. Fallon                  Vice President            None
10 Worth Circle
Newton, MA 02458
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Joseph Fernandez                Vice President            None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mark J. Ferro(2)                Senior Vice President     None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Ronald H. Fielding(3)           Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Eric Fishel                     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
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Richard Frank                   Vice Prsident             None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Lucio Giliberti                 Vice President            None
6 Cyndi Court
Flemington, NJ 08822
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Raquel Granahan(2)              Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Ralph Grant                     Senior Vice President     None
10 Boathouse Close
Mt. Pleasant, SC 29464
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael D. Guman                Vice President            None
3913 Pleasant Avenue
Allentown, PA 18103
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Clifford W. Heidinger           Vice President            None
111 Ipswich Road
Boxford, MA 01921
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Phillipe D. Hemery              Vice President            None
5 Duck Pond Lane
Ramsey, NJ 07446
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Kevin Hennessey                 Vice President            None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Elyse R. Jurman Herman          Vice President            None
3150 Equestrian Drive
Boca Raton, FL 33496
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Wendy G. Hetson                 Vice President            None
4 Craig Street
Jericho, NY 11753
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
William E. Hortz(2)             Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Edward Hrybenko(2)              Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Brian F. Husch(2)               Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kathleen T. Ives(1)             Vice President &          Assistant Secretary
                                Assistant Secretary
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Eric K. Johnson(1)              Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mark D. Johnson                 Vice President            None
15792 Scenic Green Court
Chesterfield, MO 63017
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Christina J. Keller(2)          Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Brian G. Kelly                  Vice President            None
76 Daybreak Road
Southport, CT 06490
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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(1)                Senior 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
19102 Miranda Circle
Omaha, NE 68130
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Tracey Lange(2)                 Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Paul R. LeMire                  Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Evan M. Lereah                  Vice President            None
1468 Catlin Lane
Alexandria, VA 22311
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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
1636 N. Wells Street, Apt. 3411
Chicago, IL 60614
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Craig Lyman                     Vice President            None
7578 Massachusetts Pl
Rancho Cucamonga, CA 91730
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John J. Lynch                   Vice President            None
6325 Bryan Parkway
Dallas, TX 75214
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mark Macken                     Vice President            None
462 Lincoln Avenue
Sayville, NY 11782
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael Magee(2)                Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Michael Malik                   Vice President            None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Steven C. Manns                 Vice President            None
1627 N. Hermitage Avenue
Chicago, IL 60622
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Todd A. Marion                  Vice President            None
24 Midland Avenue
Cold Spring Harbor, NY 11724
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
LuAnn Mascia(2)                 Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Theresa-Marie Maynier           Vice President            None
2421 Charlotte Drive
Charlotte, NC 28203
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Anthony P. Mazzariello          Vice President            None
8 Fairway Road
Sewickley, PA 15143
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John C. McDonough               Vice President            None
3812 Leland Street
Chevy Chase, MD 20815
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kent C. McGowan                 Vice President            None
9510 190th Place SE
Edmonds, WA 98020
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Craig Meister                   Vice President            None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Daniel Melehan                  Vice President            None
906 Bridgeport Court
San Marcos, CA 92069
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mark Mezzanotte                 Vice President            None
16 Cullen Way
Exeter, NH 03833
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert Moser(1)                 Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

John V. Murphy(2)               Director                  President & Trustee

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Wendy Jean Murray               Vice President            None
32 Carolin Road
Upper Montclair, NJ 07043
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Christina Nasta(2)              Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kevin P. Neznek(2)              Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Bradford Norford                Vice President            None
2217 Ivan Street #911
Dallas, TX 75201
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Alan Panzer                     Vice President            None
6755 Ridge Mill Lane
Atlanta, GA 30328
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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, Jr.             Vice President            None
18970 Vogel Farm Trail
Eden Paire, MN 55347
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Elaine Puleo-Carter(2)          Senior Vice President     None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Christopher L. Quinson          Vice President            None
7675 Cayuga Drive
Cincinnati, OH 45243
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Minnie Ra                       Vice President            None
100 Dolores Street, #203
Carmel, CA 93923
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Gary D. Rakan                   Vice President            None
10860 Fairwoods Drive
Fishers, IN 46038
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Dusting Raring                  Vice President            None
27 Blakemore Drive
Ladera Ranch, CA 92797
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael A. Raso                 Vice President            None
3 Vine Place
Larchmont, NY 10538
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Douglas Rentschler              Vice President            None
677 Middlesex Road
Grosse Pointe Park, MI 48230
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Ruxandra Risko(2)               Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
David R. Robertson(2)           Senior Vice President     None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Ian Roche                       Vice President            None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kenneth A. Rosenson             Vice President            None
24753 Vantage Pt. Terrace
Malibu, CA 90265
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
James H. Ruff(2)                President & Director      None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
William R. Rylander             Vice President            None
85 Evergreen Road
Vernon, CT 06066
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Thomas Sabow                    Vice President            None
6617 Southcrest Drive
Edina, MN 55435
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John Saunders                   Vice President            None
911 North Orange Avenue #401
Orlando, FL 32801
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jill E. Schmitt (Crockett)(2)   Assistant Vice President  None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Thomas Schmitt(2)               Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

William Schories                Vice President            None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Eric Sharp                      Vice President            None
862 McNeill Circle
Woodland, CA 95695
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Debbie A. Simon                 Vice President            None
1 W. Superior Street, Apt. 4101
Chicago, IL 60610
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Douglas Bruce Smith             Vice President            None
8927 35th Street W.
University Place, WA 98466
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Steven Stablein                 Vice President            None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Bryan Stein                     Vice President            None
5897 NW 120th Terrace
Coral Springs, FL 33076
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John Stoma(2)                   Senior Vice President     None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Wayne Strauss                   Assistant Vice President  None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Brian C. Summe                  Vice President            None
2479 Legends Way
Crestview Hills, KY 41017
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael Sussman(2)              Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
George T. Sweeney               Senior Vice President     None
5 Smoke House Lane
Hummelstown, PA 17036
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
James Taylor(2)                 Assistant Vice President  None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Martin Telles(2)                Senior Vice President     None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
David G. Thomas                 Vice President            None
16628 Elk Run Court
Leesburg, VA 20176
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Bryan K.Toma                    Vice President            None
7311 W. 145th Terrace
Overland Park, KS 66223
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mark Vandehey(1)                Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Vincent Vermete                 Assistant Vice President  None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kenneth Lediard Ward            Vice President            None
1400 Cottonwood Valley Circle
N.
Irving, TX 75038
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John Charles Young              Vice President            None
3914 Southwestern
Houston, TX 77005
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Jill Zachman                    Vice President            None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert G. Zack(2)               General Counsel &         Vice President &
                                Director                  Secretary
- ---------------------------------------------------------------------------------

(1)6803 South Tucson Way, Centennial, CO 80112-3924
(2)Two World Financial  Center,  225 Liberty Street,  11th Floor, New York, NY
10281-1008
(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 80112-3924.

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(a) 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 26th day of April, 2004.



                        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/ William L. Armstrong*    Chairman of the             April 26, 2004
- ---------------------------  Board of Trustees
William L. Armstrong

/s/ John V. Murphy*          President, Principal        April 26, 2004
- ------------------------     Executive Officer & Trustee
John V. Murphy

/s/ Brian W. Wixted*         Treasurer, Principal        April 26, 2004
- -------------------------    Financial &
Brian W. Wixted              Accounting Officer

/s/ Robert G. Avis*          Trustee                     April 26, 2004

- ---------------------
Robert G. Avis


/s/ George Bowen*            Trustee                     April 26, 2004

- ----------------------
George Bowen


/s/ Edward Cameron*          Trustee                     April 26, 2004

- ------------------------
Edward Cameron


/s/ Jon S. Fossel*           Trustee                     April 26, 2004

- --------------------
Jon S. Fossel


/s/ Sam Freedman*            Trustee                     April 26, 2004

- ---------------------
Sam Freedman

/s/ Beverly L. Hamilton*

- -------------------------    Trustee                     April 26, 2004
Beverly L. Hamilton


/s/ Robert J. Malone*

- -----------------------      Trustee                     April 26, 2004
Robert J. Malone

/s/ F. William Marshall, Jr.*  Trustee                   April 26, 2004

- ----------------------------
F. William Marshall, Jr.

*By: /s/ Robert G. Zack

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

 Robert G. Zack, Attorney-in-Fact

                      OPPENHEIMER VARIABLE ACCOUNT FUNDS


                       Post-Effective Amendment No. 43


                           Registration No. 2-93177

                                EXHIBIT INDEX
                                -------------

Exhibit No.       Description
- -----------       -----------


23(a)(i)          Fifteenth Amended and Restated Declaration of Trust

23(j)             Independent Auditors' Consent

EX-99.A

             FIFTEENTH AMENDED AND RESTATED DECLARATION OF TRUST

                                      OF


                      OPPENHEIMER VARIABLE ACCOUNT FUNDS



     This FIFTEENTH AMENDED AND RESTATED DECLARATION OF TRUST, is made as of the
29th day of April 2004, by and among the  individuals  executing  this Fifteenth
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,  (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,  and (xv) by the
Fourteenth  Amended and  Restated  Declaration  of Trust dated May 1, 2003,  the
Trustees amended and restated such Declaration of Trust to create a new class of
shares and to change  the name of the Series  "Oppenheimer  Main  Street  Growth
& Income Fund/VA" to "Oppenheimer Main Street Fund/VA;

      WHEREAS,  the  Trustees  desire to  further  amend such  Declaration  of
Trust, as amended and restated;  to create a new class of shares and to change
the  name  of  the  Series   "Oppenheimer   Multiple  Strategies  Fund/VA"  to
"Oppenheimer Balanced Fund/VA."

      NOW,  THEREFORE,  the Trustees  declare that all money and property held
or  delivered  to the Trust  shall be held and  managed  under this  Fifteenth
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 80112-3924.  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  (the  said
"Oppenheimer  Multiple Strategies Fund/VA" hereby renamed "Oppenheimer  Balanced
Fund/VA" by this Fifteenth  Restated  Declaration of Trust);  (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)  having  been
subsequently  renamed  "Oppenheimer  Main  Street  Fund/VA"  by  the  Fourteenth
Restated  Declaration of Trust dated May 1, 2003;  (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 three 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;  (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 amendments to this Declaration of Trust; and (iii) one class
of the Shares of each Series,  as  established  and designated by the Fourteenth
Amended and Restated  Declaration of Trust dated May 1, 2003, known as the Class
3 Shares.

      The Trustees of the Trust hereby  establish  and  designate a new fourth
class of Shares of each Series which shall be known as "Class 4" 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
29th day of April 2004.



/s/ William L. Armstrong                              /s/ Sam Freedman
- ------------------------                        ------------------------
William L. Armstrong                                  Sam Freedman
11 Carriage Lane                                355 Adams Street
Littleton, Colorado 80121                             Denver, Colorado 80206

/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                                    330 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                                   P.O. Box 2054
Ennis, Montana 59729                            756 Main Street
                                                Cotuit, Massachusetts 02635

EX-99.J

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Post-Effective Amendment No. 43 to Registration
Statement No. 2-93177 of Oppenheimer Variable Account Funds on Form N-1A of
our reports dated February 12, 2004, 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 23, 2004