-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, CvMsaFiOTmxvdvcrdif0edg4OCTs7D1r+5BLJorj/clOLw5UUaUfaaX8/HMK4T7b JcJdaCKun2aT60ffTtlntA== 0000752737-94-000008.txt : 19940511 0000752737-94-000008.hdr.sgml : 19940511 ACCESSION NUMBER: 0000752737-94-000008 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19940510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPPENHEIMER VARIABLE ACCOUNT FUNDS CENTRAL INDEX KEY: 0000752737 STANDARD INDUSTRIAL CLASSIFICATION: 0000 IRS NUMBER: 840974272 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 002-93177 FILM NUMBER: 94526944 BUSINESS ADDRESS: STREET 1: 3410 S GALENA ST CITY: DENVER STATE: CO ZIP: 80231 BUSINESS PHONE: 3036713200 MAIL ADDRESS: STREET 2: 3410 S GALENA ST CITY: DENVER STATE: CO ZIP: 80231 FORMER COMPANY: FORMER CONFORMED NAME: OPPENHEIMER VARIABLE LIFE FUNDS DATE OF NAME CHANGE: 19860609 497 1 OPPENHEIMER VARIABLE ACCOUNT FUNDS Investors are advised to read and retain this Prospectus for future reference. OPPENHEIMER VARIABLE ACCOUNT FUNDS 3410 South Galena Street Denver, Colorado 80231 1-800-525-7048 OPPENHEIMER VARIABLE ACCOUNT FUNDS (the "Trust") is a diversified open-end investment company consisting of eight separate funds (collectively, the "Funds"): OPPENHEIMER MONEY FUND ("Money Fund") seeks the maximum current income from investments in "money market" securities consistent with low capital risk and the maintenance of liquidity. Its shares are neither insured nor guaranteed by the U.S. government, and there is no assurance that this Fund will be able to maintain a stable net asset value of $1.00 per share. OPPENHEIMER HIGH INCOME FUND ("High Income Fund") seeks a high level of current income from investment in high yield fixed-income securities. High Income Fund's investments include unrated securities or high risk securities in the lower rating categories, commonly known as "junk bonds," which are subject to a greater risk of loss of principal and nonpayment of interest than higher-rated securities. These securities may be considered to be speculative. OPPENHEIMER BOND FUND ("Bond Fund") primarily seeks a high level of current income from investment in high yield fixed-income securities rated "Baa" or better by Moody's or "BBB" or better by Standard & Poor's. Secondarily, this Fund seeks capital growth when consistent with its primary objective. OPPENHEIMER CAPITAL APPRECIATION FUND ("Capital Appreciation Fund") seeks to achieve capital appreciation by investing in "growth-type" companies. OPPENHEIMER GROWTH FUND ("Growth Fund") seeks to achieve capital appreciation by investing in securities of well-known established companies. OPPENHEIMER MULTIPLE STRATEGIES FUND ("Multiple Strategies Fund") seeks a total investment return (which includes current income and capital appreciation in the value of its shares) from investments in common stocks and other equity securities, bonds and other debt securities, and "money market" securities. OPPENHEIMER GLOBAL SECURITIES FUND ("Global Securities Fund") seeks long-term capital appreciation by investing a substantial portion of assets in securities of foreign issuers, "growth-type" companies, cyclical industries and special situations which are considered to have appreciation possibilities. Current income is not an objective. These securities may be considered to be speculative. OPPENHEIMER STRATEGIC BOND FUND ("Strategic Bond Fund") seeks a high level of current income principally derived from interest on debt securities and seeks to enhance such income by writing covered call options on debt securities. The Fund intends to invest principally in: (i) foreign government and corporate debt securities, (ii) U.S. Government securities, and (iii) lower-rated high yield domestic debt securities, commonly known as "junk bonds", which are subject to a greater risk of loss of principal and nonpayment of interest than higher-rated securities. These securities may be considered to be speculative. Shares of the Funds are sold only to provide benefits under variable life insurance policies and variable annuity contracts (collectively, the "Accounts"). The Accounts invest in shares of one or more of the Funds in accordance with allocation instructions received from Account owners. Such allocation rights are further described in the accompanying Account Prospectus. Shares are redeemed to the extent necessary to provide benefits under an Account. This Prospectus sets forth concisely information about the Trust and the Funds that prospective investors should know before investing. A Statement of Additional Information about the Trust and the Funds (the "Additional Statement") dated May 1, 1994, has been filed with the Securities and Exchange Commission ("SEC") and is available without charge upon request to Oppenheimer Shareholder Services (the "Transfer Agent"), P.O. Box 5270, Denver, Colorado 80217, or by calling the toll-free number shown above. The Statement of Additional Information (which is incorporated in its entirety by reference in this Prospectus) contains more detailed information about the Trust, the Funds and their management. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. This Prospectus is effective May 1, 1994. Table Of Contents Page Financial Highlights Performance Information The Funds and Their Investment Policies Special Investment Methods Investment Restrictions Management of the Funds Purchase of Shares Redemption of Shares Dividends, Distributions and Taxes Additional Information Appendix A: Description of Terms A-1 Appendix B: Description of Securities Ratings B-1 Financial Highlights Selected data for a share of beneficial interest outstanding throughout each period The information in the following tables has been audited by Deloitte & Touche, independent auditors, whose report on the financial statements of the Funds for the fiscal year ended December 31, 1993, is included in the Statement of Additional Information. Financial Highlights Oppenheimer Variable Account Funds
Oppenheimer Money Fund 1993(2) 1992(2) 1991(2) 1990(2) 1989(2) 1988(2) 1987(2) 1986(2) 1985(1) PER SHARE OPERATING DATA: Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from investment operations-net investment income and net realized gain on investments .03 .04 .06 .08 .09 .07 .06 .06 .05 Dividends and distributions to shareholders (.03) (.04) (.06) (.08) (.09) (.07) (.06) (.06) (.05) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $61,221 $58,266 $58,709 $89,143 $68,440 $69,468 $42,538 $28,218 $2,506 Average net assets (in thousands) $57,654 $61,317 $75,747 $82,966 $67,586 $60,241 $35,138 $12,914 $2,080 Number of shares outstanding at end of period (in thousands) 61,221 58,266 58,703 89,141 68,439 69,468 42,538 28,218 2,506 Ratios to average net assets: Net investment income 3.12% 3.76% 5.97% 7.80% 8.82% 7.31% 6.33% 5.68% 7.25%(3) Expenses .43% .50% .49% .51% .53% .55% .59% .75% .75%(3)
1. For the period from April 3, 1985 (commencement of operations) to December 31, 1985. 2. For the year ended December 31. 3. Annualized. See accompanying Notes to Financial Statements. Financial Highlights (Continued) Oppenheimer Variable Account Funds
Oppenheimer High Income Fund 1993(2) 1992(2) 1991(2) 1990(2) 1989(2) 1988(2) 1987(2) 1986(1) PER SHARE OPERATING DATA: Net asset value, beginning of period $ 9.74 $ 9.40 $ 7.90 $ 8.59 $ 9.30 $ 9.14 $ 10.04 $ 10.00 Income from investment operations: Net investment income .82 1.19 1.28 1.21 1.09 1.12 1.30 .72 Net realized and unrealized gain (loss) on investments and foreign currency transactions 1.65 .43 1.30 (.82) (.65) .23 (.51) (.24) Total income from investment operations 2.47 1.62 2.58 .39 .44 1.35 .79 .48 Dividends and distributions to shareholders: Dividends from net investment income (1.19) (1.28) (1.08) (1.08) (1.08) (1.07) (1.55) (.44) Distributions from net realized gain on investments - - - - (.07) (.12) (.14) - Total dividends and distributions to shareholders (1.19) (1.28) (1.08) (1.08) (1.15) (1.19) (1.69) (.44) Net asset value, end of period $ 11.02 $ 9.74 $ 9.40 $ 7.90 $ 8.59 $ 9.30 $ 9.14 $ 10.04 TOTAL RETURN, AT NET ASSET VALUE(3) 26.34% 17.92% 33.91% 4.65% 4.84% 15.58% 8.07% 4.73% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $93,011 $40,817 $27,308 $19,172 $23,698 $25,551 $21,768 $14,833 Average net assets (in thousands) $67,000 $36,861 $23,663 $21,493 $26,040 $24,530 $20,637 $ 8,036 Number of shares outstanding at end of period (in thousands) 8,443 4,189 2,905 2,427 2,760 2,746 2,382 1,478 Ratios to average net assets: Net investment income 10.50% 12.08% 14.26% 14.32% 11.52% 11.94% 13.13% 11.18%(4) Expenses .68% .73% .75% .75% .75% .75% .75% .75%(4) Portfolio turnover rate(5) 135.7% 144.2% 108.0% 95.1% 78.7% 57.9% 42.1% 18.3%
1. For the period from April 30, 1986 (commencement of operations) to December 31, 1986. 2. For the year ended December 31. 3. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additionalshares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. 4. Annualized. 5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the periodSecurities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. See accompanying Notes to Financial Statements. Financial Highlights (Continued) Oppenheimer Variable Account Funds
Oppenheimer Bond Fund 1993(2) 1992(2) 1991(2) 1990(2) 1989(2) 1988(2) 1987(2) 1986(2) 1985(1) PER SHARE OPERATING DATA: Net asset value, beginning of period $ 10.99 $ 11.15 $ 10.33 $ 10.49 $ 10.15 $ 10.19 $ 11.15 $11.27 $10.00 Income from investment operations: Net investment income .65 .87 .95 .97 .98 .94 .97 .97 .86 Net realized and unrealized gain (loss) on investments and foreign currency transactions .76 (.17) .80 (.18) .32 (.05) (.71) .09 .99 Total income from investment operations 1.41 .70 1.75 .79 1.30 .89 .26 1.06 1.85 Dividends and distributions to shareholders: Dividends from net investment income (.75) (.86) (.93) (.95) (.96) (.93) (1.17) (1.03) (.58) Distributions from net realized gain on investments - - - - - - (.05) (.15) - Total dividends and distributions to shareholders (.75) (.86) (.93) (.95) (.96) (.93) (1.22) (1.18) (.58) Net asset value, end of period $ 11.65 $ 10.99 $ 11.15 $ 10.33 $ 10.49 $ 10.15 $ 10.19 $11.15 $11.27 TOTAL RETURN, AT NET ASSET VALUE(3) 13.04% 6.50% 17.63% 7.92% 13.32% 8.97% 2.53% 10.12% 18.82% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $111,846 $63,354 $32,762 $16,576 $13,422 $ 9,989 $10,415 $7,377 $2,725 Average net assets (in thousands) $ 87,215 $45,687 $22,169 $15,088 $11,167 $11,028 $ 8,748 $4,647 $1,614 Number of shares outstanding at end ofperiod (in thousands) 9,602 5,766 2,939 1,604 1,280 984 1,022 662 242 Ratios to average net assets: Net investment income 7.20% 7.81% 8.73% 9.30% 9.34% 9.08% 9.17% 8.71% 10.52%(4) Expenses .46% .56% .64% .61% .64% .70% .75% .75% .75%(4) Portfolio turnover rate(5) 36.3% 41.3% 7.6% 7.4% 5.4% 36.3% 5.9% 27.7% 101.3%
1. For the period from April 3, 1985 (commencement of operations) to December 31, 1985. 2. For the year ended December 31. 3. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additionalshares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. 4. Annualized. 5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. See accompanying Notes to Financial Statements. Financial Highlights (Continued) Oppenheimer Variable Account Funds
Oppenheimer Capital Appreciation Fund 1993(2) 1992(3) 1991(3) 1990(3) 1989(3) 1988(3) 1987(3) 1986(2) 1986(1) PER SHARE OPERATING DATA: Net asset value, beginning of period $ 26.04 $ 23.24 $ 15.24 $ 20.40 $ 16.31 $ 14.39 $13.12 $16.21 $13.71 Income (loss) from investment operations: Net investment income .05 .06 .08 .32 .50 .33 .21 .12 .09 Net realized and unrealized gain (loss) on investments 6.71 3.43 8.18 (3.54) 3.93 1.60 1.67 (1.24) 3.40 Total income (loss) from investment operations 6.76 3.49 8.26 (3.22) 4.43 1.93 1.88 (1.12) 3.49 Dividends and distributions to shareholders: Dividends from net investment income (.06) (.14) (.26) (.53) (.34) - (.34) (.21) (.20) Distributions from net realized gain on investments (1.10) (.55) - (1.41) - (.01) (.27) (1.76) (.79) Total dividends and distributions to shareholders (1.16) (.69) (.26) (1.94) (.34) (.01) (.61) (1.97) (.99) Net asset value, end of period $ 31.64 $ 26.04 $ 23.24 $ 15.24 $ 20.40 $ 16.31 $14.39 $13.12 $16.21 TOTAL RETURN, AT NET ASSET VALUE(4) 27.32% 15.42% 54.72% (16.82)% 27.57% 13.41% 14.34% (1.65)% N/A RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $136,885 $83,335 $49,371 $23,295 $27,523 $13,667 $9,692 $4,549 $3,852 Average net assets (in thousands) $ 98,228 $56,371 $34,887 $24,774 $21,307 $13,239 $8,598 $3,099 $2,292 Number of shares outstanding at end of period (in thousands) 4,326 3,201 2,125 1,528 1,349 838 674 347 238 Ratios to average net assets: Net investment income .23% .30% .81% 1.93% 3.27% 2.13% 1.68% 2.36%(5) 2.27% Expenses .47% .54% .63% .71% .68% .73% .75% 1.01%(5) 2.17% Portfolio turnover rate(6) 122.8% 78.9% 122.3% 222.0% 130.5% 128.7% 138.7% 100.1% 464.8%
1. For the year ended June 30, 1986Operating results were achieved by Centennial Capital Appreciation Fund, a separate investment company acquired by OCAP on August14, 1986. 2. For the six months ended December 31, 1986Operating results prior to August 15, 1986 were achieved by Centennial Capital Appreciation Fund, a separate investmentcompany acquired by OCAP on August 14, 1986. 3. For the year ended December 31. 4. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additionalshares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. 5. Annualized. 6. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. See accompanying Notes to Financial Statements. Financial Highlights (Continued) Oppenheimer Variable Account Funds
Oppenheimer Growth Fund 1993(2) 1992(2) 1991(2) 1990(2) 1989(2) 1988(2) 1987(2) 1986(2) 1985(1) PER SHARE OPERATING DATA: Net asset value, beginning of period $ 16.96 $ 15.17 $ 12.54 $ 16.38 $ 13.64 $ 11.21 $ 12.53 $10.95 $10.00 Income (loss) from investment operations: Net investment income .46 .16 .30 .56 .66 .29 .20 .13 .16 Net realized and unrealized gain (loss) on investments .74 1.99 2.82 (1.79) 2.50 2.19 .24 1.76 .79 Total income (loss) from investment operations 1.20 2.15 3.12 (1.23) 3.16 2.48 .44 1.89 .95 Dividends and distributions to shareholders: Dividends from net investment income (.14) (.36) (.49) (.62) (.35) - (.34) (.15) - Distributions from net realized gain on investments (.32) - - (1.99) (.07) (.05) (1.42) (.16) - Total dividends and distributions to shareholders (.46) (.36) (.49) (2.61) (.42) (.05) (1.76) (.31) - Net asset value, end of period $ 17.70 $ 16.96 $ 15.17 $ 12.54 $ 16.38 $ 13.64 $ 11.21 $12.53 $10.95 TOTAL RETURN, AT NET ASSET VALUE(3) 7.25% 14.53% 25.54% (8.21)% 23.59% 22.09% 3.32% 17.76% 9.50% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $56,701 $36,494 $22,032 $15,895 $19,301 $17,746 $14,692 $8,287 $ 820 Average net assets (in thousands) $46,389 $25,750 $18,810 $17,235 $18,596 $15,585 $15,121 $3,744 $ 388 Number of shares outstanding at end of period (in thousands) 3,203 2,152 1,453 1,267 1,179 1,301 1,311 661 75 Ratios to average net assets: Net investment income 1.13% 1.36% 2.82% 4.09% 3.72% 2.39% 1.56% 2.62% 4.25%(4) Expenses .50% .61% .70% .71% .70% .70% .75% .75% .75%(4) Portfolio turnover rate(5) 12.6% 48.7% 133.9% 267.9% 148.0% 132.5% 191.0% 100.9% 132.9%
1. For the period from April 3, 1985 (commencement of operations) to December 31, 1985. 2. For the year ended December 31. 3. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additionalshares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period 4. Annualized. 5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. See accompanying Notes to Financial Statements. Financial Highlights (Continued) Oppenheimer Variable Account Funds
Oppenheimer Multiple Strategies Fund 1993(2) 1992(2) 1991(2) 1990(2) 1989(2) 1988(2) 1987(1) PER SHARE OPERATING DATA: Net asset value, beginning of period $ 12.47 $ 11.96 $ 10.90 $ 12.30 $ 11.58 $ 10.04 $ 10.00 Income (loss) from investment operations: Net investment income .55 .55 .69 .73 .73 .66 .44 Net realized and unrealized gain (loss) on investments and options written 1.41 .50 1.15 (.97) 1.04 1.53 .07 Total income (loss) from investment operations 1.96 1.05 1.84 (.24) 1.77 2.19 .51 Dividends and distributions to shareholders: Dividends from net investment income (.55) (.54) (.78) (.70) (.68) (.65) (.43) Distributions from net realized gain on investments and options written - - - (.46) (.37) - (.04) Total dividends and distributions to shareholders (.55) (.54) (.78) (1.16) (1.05) (.65) (.47) Net asset value, end of period $ 13.88 $ 12.47 $ 11.96 $ 10.90 $ 12.30 $ 11.58 $ 10.04 TOTAL RETURN, AT NET ASSET VALUE(3) 15.95% 8.99% 17.48% (1.91)% 15.76% 22.15% 3.97% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $250,290 $159,464 $124,634 $118,888 $121,286 $78,386 $53,291 Average net assets (in thousands) $199,954 $139,011 $117,000 $123,231 $101,057 $64,298 $34,256 Number of shares outstanding at end of period (in thousands) 18,026 12,792 10,421 10,908 9,860 6,766 5,306 Ratios to average net assets: Net investment income 4.44% 4.63% 5.95% 6.53% 6.36% 6.18% 6.12%(4) Expenses .48% .55% .54% .55% .57% .58% .65%(4) Portfolio turnover rate(5) 32.4% 57.8% 80.3% 99.2% 66.9% 110.0% 46.9%
1. For the period from February 9, 1987 (commencement of operations) to December 31, 1987. 2. For the year ended December 31. 3. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. 4. Annualized. 5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. See accompanying Notes to Financial Statements. Financial Highlights (Continued) Oppenheimer Variable Account Funds
Oppenheimer Global Securities Fund 1993(2) 1992(2) 1991(2) 1990(1) PER SHARE OPERATING DATA: Net asset value, beginning of period $ 9.57 $ 10.38 $10.04 $10.00 Income (loss) from investment operations: Net investment income (.02) .07 .04 - Net realized and unrealized gain (loss) on investments 6.75 (.80) .30 .04 Total income (loss) from investment operations 6.73 (.73) .34 .04 Dividends and distributions to shareholders: Dividends from net investment income - (.04) - - Distributions from net realized gain on investments - (.04) - - Total dividends and distributions to shareholders - (.08) - - Net asset value, end of period $ 16.30 $ 9.57 $10.38 $10.04 TOTAL RETURN, AT NET ASSET VALUE(3) 70.32% (7.11)% 3.39% .40% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $96,425 $13,537 $7,339 $ 432 Average net assets (in thousands) $31,696 $11,181 $3,990 $ 263 Number of shares outstanding at end of period (in thousands) 5,917 1,415 707 43 Ratios to average net assets: Net investment income .72% 1.04% .75% .08%(4) Expenses .92% 1.06% 1.32% 6.84%(4) Portfolio turnover rate(5) 65.1% 34.1% 29.5% 0.0%
1. For the period from November 12, 1990 (commencement of operations) to December 31, 1990. 2. For the year ended December 31. 3. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. 4. Annualized. 5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. See accompanying Notes to Financial Statements. Financial Highlights (Continued) Oppenheimer Variable Account Funds
Oppenheimer Strategic Bond Fund 1993(1) PER SHARE OPERATING DATA: Net asset value, beginning of period $ 5.00 Income from investment operations: Net investment income .10 Net realized and unrealized gain on investments and foreign currency transactions .11 Total income from investment operations .21 Dividends and distributions to shareholders: Dividends from net investment income (.09) Distributions from net realized gain on investments - Total dividends and distributions to shareholders (.09) Net asset value, end of period $ 5.12 TOTAL RETURN, AT NET ASSET VALUE(2) 4.25% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $9,887 Average net assets (in thousands) $4,259 Number of shares outstanding at end of period (in thousands) 1,930 Ratios to average net assets: Net investment income 5.67%(3) Expenses .96%(3) Portfolio turnover rate(4) 10.9%
1. For the period from May 3, 1993 (commencement of operations) to December 31, 1993. 2. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested inadditional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. 3. Annualized. 4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during theperiodof acquisition of one year or less are excluded from the calculation. See accompanying Notes to Financial Statements. Performance Information From time to time the "yield" and compounded "effective yield" of Money Fund may be advertised. Money Fund's "yield" is the income generated by an investment in that Fund over a seven-day period, which is then "annualized." In annualizing, the amount of income generated by the investment during that seven days is assumed to be generated each week over a 52-week period, and is shown as a percentage of the investment. The compounded "effective yield" is calculated similarly, but the annualized income earned by an investment in Money Fund is assumed to be reinvested. The compounded effective yield will therefore be slightly higher than the yield because of the effect of the assumed reinvestment. From time to time, the yield of High Income Fund, Strategic Bond Fund or Bond Fund may be advertised. Yield for these Funds will be computed in a standardized manner for mutual funds, by dividing that Fund's net investment income per share earned during a 30-day base period by the maximum offering price (equal to the net asset value) per share on the last day of the period. This yield calculation is compounded on a semi- annual basis, and multiplied by 2 to provide an annualized yield. The Statement of Additional Information describes a dividend yield and a distribution return that may also be quoted for these Funds. From time to time the "total return" and "average annual total return" for any of the Funds other than Money Fund may be advertised. Each such Fund's "average annual total return" for a particular period is computed by determining the average annual compounded rate of return over the period, using the initial amount invested at the beginning of the period and the redeemable value of the investment at the end of the period. "Total return" for a particular period is a cumulative rate of return over the entire period, also using the initial amount invested and the redeemable value at the end of the period. The redeemable value of the investment assumes that all dividends and capital gains distributions have been reinvested at net asset value without sales charge. Each such Fund's "total return" and "average annual total return" indicate the investment results an investor would have experienced over the stated period from changes in share price and reinvestment of dividends and distributions. All such performance information is based on historical per share earnings and is not intended to indicate future performance. "Performance and Tax Information" in the Statement of Additional Information contains more detailed information about calculating yield and total return information and other investment returns. The Funds And Their Investment Policies Introduction. The Trust is an open-end, diversified management investment company organized as a Massachusetts business trust in 1984. It consists of eight separate Funds - Money Fund, Bond Fund and Growth Fund, all organized in 1984, High Income Fund, Capital Appreciation Fund and Multiple Strategies Fund, all organized in 1986, Global Securities Fund, organized in 1990 and Strategic Bond Fund, organized in 1993. Each Fund is a separate series of the Trust and has separate assets and liabilities and a separate net asset value per share, and an investor's interest is limited to the Fund in which shares are held. Since market risks are inherent in all securities to varying degrees, assurance cannot be given that the investment objective of any of the Funds will be met. The investment policies and practices described below for each Fund are not "fundamental" policies unless a particular policy is identified as fundamental. "Fundamental" policies are those that cannot be changed without the approval of a "majority," as defined in the Investment Company Act of 1940 (the "Investment Company Act"), of the Fund's outstanding voting securities. The Fund's Board of Trustees may change non-fundamental policies without shareholder approval. Investment Policies - Money Fund. SEC Rule 2a-7 ("Rule 2a-7") of the Investment Company Act of 1940 (the "Investment Company Act") places restrictions on a money market fund's investments. Under Rule 2a-7, Money Fund may purchase only "Eligible Securities," as defined below, that 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, or (b) an unrated security that is judged by the Trust's investment adviser, Oppenheimer Management Corporation (the "Manager") to be of comparable quality to investments that are "Eligible Securities" rated by Rating Organizations. Rule 2a-7 permits Money Fund 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. Under Rule 2a-7, Money Fund may invest only up to 5% of its assets in "Second Tier Securities," which are Eligible Securities that are not "First Tier Securities." In addition to the overall 5% limit on Second Tier Securities, Money Fund may not invest (i) more than 5% of its total assets in the securities of any one issuer (other than the U.S. Government, its agencies or instrumentalities) or (ii) more than 1% of its total assets or $1 million (whichever is greater) in Second Tier Securities of any one issuer. The Trust's Board must approve or ratify the purchase of Eligible Securities that are unrated or are rated by only one Rating Organization. Additionally, under Rule 2a-7, Money Fund must maintain a dollar-weighted average portfolio maturity of no more than 90 days, and the maturity of any single portfolio investment may not exceed 397 days. The Trust's Board has adopted procedures under Rule 2a-7 pursuant to which the Board has delegated to the Manager the responsibility of conforming Money Fund's investments with the requirements of Rule 2a-7 and those Procedures. Ratings at the time of purchase will determine whether securities may be acquired under the above restrictions. The rating restrictions described in this Prospectus do not apply to banks in which the Trust's cash is kept. Subsequent downgrades in ratings may require reassessments of the credit risk presented by a security and may require their sale. See "Investment Objective and Policies -- Money Fund" in the Statement of Additional Information for further details. The Trust intends to exercise due care in the selection of portfolio securities. However, a risk may exist that the issuers of Money Fund's portfolio securities may not be able to meet their duties and obligations on interest or principal payments at the time called for by the instrument. There is also the risk that because of a redemption demand greater than anticipated by management, some of Money Fund's portfolio may have to be liquidated prior to maturity at prices less than the original cost or maturity value. Any of these risks, if encountered, could cause a reduction in the net asset value of Money Fund's shares. The types of instruments that will form the major part of Money Fund's investments are certificates of deposit, bankers' acceptances, commercial paper, U.S. Treasury bills, securities of U.S. government agencies or instrumentalities and other debt instruments (including bonds) issued by corporations, including variable and floating rate instruments, and variable rate master demand notes. Some of such instruments may be supported by letters of credit or may be subject to repurchase transactions (described below). Except as described below, Money Fund will purchase certificates of deposit or bankers' acceptances only if issued or guaranteed by a domestic bank subject to regulation by the U.S. Government or of a foreign bank having total assets at least equal to U.S. $1 billion. Money Fund 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 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, or (ii) subject to repurchase agreements (explained below), if the collateral for the agreement complies with Rule 2a-7. In addition, the Fund may also invest in other types of securities described above in accordance with the requirements of the rule. For further information, see "Foreign Securities" and "Investment Restrictions" below. See Appendix A below and "Investment Objectives and Policies" in the Statement of Additional Information for further information on the investments which Money Fund may make. See Appendix B below for a description of the rating categories of the Rating Organizations. Investment Policies - High Income Fund, Bond Fund and Strategic Bond Fund. High Income Fund. The objective of High Income Fund is to earn a high level of current income by investing primarily in a diversified portfolio of high yield, fixed-income securities (long-term debt and preferred stock issues, including convertible securities) believed by the Manager not to involve undue risk. The Fund may also acquire participation interests in loans that are made to corporations (see Participation Interests," below). High Income Fund's investment policy is to assume certain risks (discussed below) in seeking high yield, which is ordinarily associated with high risk securities, commonly known as "junk bonds," in the lower rating categories of the established securities ratings services (i.e., securities rated "Baa" or lower by Moody's Investor Service, Inc. ("Moody's") or "BBB" or lower by Standard & Poor's Corporation ("Standard & Poor's")), and unrated securities. The investments in which High Income Fund will invest principally will be in the lower rating categories; it may invest in securities rated as low as "C" by Moody's or "D" by Standard & Poor's. Such ratings indicate that the obligations are speculative in a high degree and may be in default. Appendix B of this Prospectus describes these rating categories. High Income Fund is not obligated to dispose of securities whose issuers subsequently are in default or if the rating is subsequently downgraded. High Income Fund may invest, without limit, in unrated securities if such securities offer, in the opinion of the Manager, yields and risks comparable to rated securities. Risks of high yield securities are discussed under "Risk Factors" below. High Income Fund's portfolio at December 31, 1993 contained domestic and foreign corporate bonds in the following rating categories as rated by Standard & Poor's (the percentages relate to the weighted average value of the bonds in each rating category as a percentage of that Fund's total assets): AAA, 2.75%; A, 2.73%; BBB, 1.85%; BB, 9.48%; B, 30.50%; CCC, 9.26%; CC, 1.28%; and unrated, 14.74%. If a bond was not rated by Standard & Poor's but was rated by Moody's, it is included in the comparable category. The Manager will not rely principally on the ratings assigned by rating services. The Manager's analysis may include consideration of the financial strength of the issuer, including its historic and current financial condition, the trading activity in its securities, present and anticipated cash flow, estimated current value of assets in relation to historical cost, the issuer's experience and managerial expertise, responsiveness to changes in interest rates and business conditions, debt maturity schedules, current and future borrowing requirements, and any change in the financial condition of the issuer and the issuer's continuing ability to meet its future obligations. The Manager also may consider anticipated changes in business conditions, levels of interest rates of bonds as contrasted with levels of cash dividends, industry and regional prospects, the availability of new investment opportunities and the general economic, legislative and monetary outlook for specific industries, the nation and the world. Bond Fund. Bond Fund's primary objective is also to earn a high level of current income by investing primarily in a diversified portfolio of high yield fixed-income securities. As a secondary objective, Bond Fund seeks capital growth when consistent with its primary objective. As a matter of non-fundamental policy, Bond Fund will, under normal market conditions, invest at least 65% of its total assets in bonds. Bond Fund will invest only in securities rated "Baa" or better by Moody's or "BBB" or better by Standard & Poor's. However, Bond Fund is not obligated to dispose of securities if the rating is reduced, and therefore will from time to time hold securities rated lower than "Baa" by Moody's or "BBB" by Standard & Poor's. Strategic Bond Fund. The investment objective of Strategic Bond Fund is to seek a high level of current income principally derived from interest on debt securities and to enhance such income by writing covered call options on debt securities. Although the premiums received by Strategic Bond Fund from writing covered calls are a form of capital gain, the Fund will not make investments in securities with the objective of seeking capital appreciation. The Fund intends to invest principally in: (i) lower-rated high yield domestic debt securities; (ii) U.S. Government securities, and (iii) foreign government and corporate debt securities. Under normal circumstances, the Fund's assets will be invested in each of these three sectors. However, Strategic Bond Fund may from time to time invest up to 100% of its total assets in any one sector if, in the judgment of the Manager, the Fund has the opportunity of seeking a high level of current income without undue risk to principal. Accordingly, the Fund's investments should be considered speculative. Distributable income will fluctuate as the Fund assets are shifted among the three sectors. - High Yield Securities. The higher yields and high income sought by Strategic Bond Fund are generally obtainable from securities in the lower rating categories of the established rating services, commonly known as "junk bonds." Such securities are rated "Baa" or lower by Moody's or "BBB" or lower by Standard & Poor's. Strategic Bond Fund may invest in securities rated as low as "C" by Moody's or "D" by Standard & Poor's. Such ratings indicate that the obligations are speculative in a high degree and may be in default. Risks of high yield, high risk securities are discussed under "Risk Factors" below. Strategic Bond Fund's portfolio at December 31, 1993, contained securities in the following rating categories as rated by Standard & Poor's (the percentages relate to the weighted average of the bonds in each rating category as a percentage of that Fund's total assets): AAA, 35.51%; BB, 7.57%; B, 27.51%, CCC, 2.07%; and unrated 21.18%. Strategic Bond Fund is not obligated to dispose of securities whose issuers subsequently are in default or if the rating of such securities is reduced. Appendix B of this Prospectus describes these rating categories. Strategic Bond Fund may also invest in unrated securities which, in the opinion of the Manager, offer yields and risks comparable to those of securities which are rated. - International Securities. The Fund may invest in foreign government and foreign corporate debt securities (which may be denominated in U.S. dollars or in non-U.S. currencies) issued or guaranteed by foreign corporations, certain supranational entities (such as the World Bank) and foreign governments (including political subdivisions having taxing authority) or their agencies or instrumentalities. These investments may include (i) U.S. dollar-denominated debt obligations known as "Brady Bonds," which are issued for the exchange of existing commercial bank loans to foreign entities for new obligations that are generally collateralized by zero coupon Treasury securities having the same maturity, (ii) debt obligations such as bonds (including sinking fund and callable bonds), (iii) debentures and notes (including variable rate and floating rate instruments), and (iv) preferred stocks and zero coupon securities. Further information about investments in foreign securities is set forth below under "Special Investment Methods - Foreign Securities." - U.S. Government Securities. U.S. Government Securities are debt obligations issued by or guaranteed by the United States Government or one of its agencies or instrumentalities. Although U.S. Government Securities are considered among the most creditworthy of fixed-income investments and their yields are generally lower than the yields available from corporate debt securities, the values of U.S. Government Securities (and of fixed- income securities generally) will vary inversely to changes in prevailing interest rates. To compensate for the lower yields available on U.S. Government securities, Strategic Bond Fund will attempt to augment these yields by writing covered call options against them. See "Writing Covered Calls," below. Certain of these obligations, including U.S. Treasury notes and bonds, and mortgage-backed securities guaranteed by the Government National Mortgage Association ("Ginnie Maes"), are supported by the full faith and credit of the United States. Certain other U.S. Government Securities, issued or guaranteed by Federal agencies or government-sponsored enterprises, are not supported by the full faith and credit of the United States. These latter securities may include obligations supported by the right of the issuer to borrow from the U.S. Treasury, such as obligations of Federal Home Loan Mortgage Corporation ("Freddie Macs"), and obligations supported by the credit of the instrumentality, such as Federal National Mortgage Association bonds ("Fannie Maes"). U.S. Government Securities in which the Fund may invest include zero coupon U.S. Treasury securities, mortgage-backed securities and money market instruments. Zero coupon Treasury securities are: (i) U.S. Treasury notes and bonds which have been stripped of their unmatured interest coupons and receipts; or (ii) certificates representing interests in such stripped debt obligations or coupons. Because a zero coupon security pays no interest to its holder during its life or for a substantial period of time, it usually trades at a deep discount from its face or par value and will be subject to greater fluctuations of market value in response to changing interest rates than debt obligations of comparable maturities which make current distributions of interest. Because the Fund accrues taxable income from these securities without receiving cash, the Fund may be required to sell portfolio securities in order to pay cash dividends or to meet redemptions. The Fund may invest up to 50% of its total assets at the time of purchase in zero coupon securities issued by either corporations or the U.S. Treasury. - Domestic Securities. The Fund's investments in domestic securities may include preferred stocks, participation interests and zero coupon securities. Domestic investments include fixed-income securities and dividend-paying common stocks issued by domestic corporations in any industry which may be denominated in U.S. dollars or non-U.S. currencies. The Fund's investments may include securities which represent participation interests in loans made to corporations (see "Participation Interests," below) and in pools of residential mortgage loans which may be guaranteed by agencies or instrumentalities of the U.S. Government (e.g. Ginnie Maes, Freddie Macs and Fannie Maes), including collateralized mortgage-backed obligations ("CMOs"), or which may not be guaranteed. Such securities differ from conventional debt securities which provide for periodic payment of interest in fixed amounts (usually semi-annually) with principal payments at maturity or specified call dates. Mortgage-backed securities provide monthly payments which are, in effect, a "pass-through" of the monthly interest and principal payments (including any prepayments) made by the individual borrowers on the pooled mortgage loans. The Fund's reinvestment of scheduled principal payments and unscheduled prepayments it receives may occur at lower rates than the original investment, thus reducing the yield of the Fund. CMOs in which the Fund may invest are securities issued by a U.S. Government instrumentality or private corporation that are collateralized by a portfolio of mortgages or mortgage-backed securities which may or may not be guaranteed by the U.S. Government. The issuer's obligation to make interest and principal payments is secured by the underlying portfolio of mortgages or mortgage- backed securities. Mortgage-backed securities may be less effective than debt obligations of similar maturity at maintaining yields during periods of declining interest rates. The Fund may invest in CMOs that are "stripped"; that is, the security is divided into two parts, one of which receives some or all of the principal payments and the other which receives some or all of the interest. Stripped securities that receive interest only are subject to increased volatility due to interest rate changes, and have the additional risk that if the principal underlying the CMO is prepaid, which is more likely to happen if interest rates fall, the Fund will lose the anticipated cash flow from the interest on the mortgages that were prepaid. See "Mortgage-Backed Securities" in the Statement of Additional Information for more details. The Fund may also invest in asset-backed securities, which are securities that represent fractional undivided interests in pools of consumer loans and trade receivables, similar in structure to the mortgage-backed securities in which the Fund may invest, described above. Payments of principal and interest are passed through to holders of asset- backed securities and are typically supported by some form of credit enhancement, such as a letter of credit, surety bond, limited guarantee by another entity or having a priority to certain of the borrower's other securities. The degree of credit enhancement varies, and generally applies to only a fraction of the asset-backed security's par value until exhausted. Risk Factors. The securities in which High Income Fund and Strategic Bond Fund principally invest are considered speculative and involve greater risk than lower yielding, higher rated fixed-income securities, while providing higher yield than such securities. Lower rated securities may be less liquid, and significant losses could be experienced if a substantial number of other holders of such securities decide to sell at the same time. Other risks may involve the default of the issuer or price changes in the issuer's securities due to changes in the issuer's financial strength or economic conditions. Issuers of lower rated or unrated securities are generally not as financially secure or creditworthy as issuers of higher-rated securities. These Funds are not obligated to dispose of securities when issuers are in default or if the rating of the security is reduced. These risks are discussed in more detail in the Statement of Additional Information. Investment Policies - Capital Appreciation Fund, Growth Fund, Multiple Strategies Fund and Global Securities Fund. Capital Appreciation Fund. In seeking its objective of capital appreciation, Capital Appreciation Fund will emphasize investments in securities of "growth-type" companies. Such companies are believed to have relatively favorable long-term prospects for increasing demand for their goods or services, or to be developing new products, services or markets, and normally retain a relatively larger portion of their earnings for research, development and investment in capital assets. "Growth-type" companies may also include companies developing applications for recent scientific advances. Capital Appreciation Fund may also invest in cyclical industries and in "special situations" that the Manager believes present opportunities for capital growth. "Special situations" are anticipated acquisitions, mergers or other unusual developments which, in the opinion of the Manager, will increase the value of an issuer's securities, regardless of general business conditions or market movements. An additional risk is present in this type of investment since the price of the security may be expected to decline if the anticipated development fails to occur. Growth Fund. In seeking its objective of capital appreciation, Growth Fund will emphasize investments in securities of well-known and established companies. Such securities generally have a history of earnings and dividends and are issued by seasoned companies (having an operating history of at least five years, including predecessors). Current income is a secondary consideration in the selection of Growth Fund's portfolio securities. Multiple Strategies Fund. The objective of Multiple Strategies Fund is to seek a high total investment return, which includes current income as well as capital appreciation in the value of its shares. In seeking that objective, Multiple Strategies Fund may invest in equity securities (including common stocks, preferred stocks, convertible securities and warrants), debt securities (including bonds, participation interest, asset-backed securities, private-label mortgage-backed securities and CMO's, zero coupon securities and U.S. government obligations) and cash and cash equivalents (identified above as the types of instruments in which the Money Fund may invest). Multiple Strategies Fund currently intends to invest no more than 5% of its net assets in participation interests of the same issuing bank, which shall be participation interests in senior, fully-secured floating rate loans that are made primarily to U.S. companies. Multiple Strategies Fund may purchase only those participation interests that mature in one year or less, or, if maturing in more than one year, that have a floating rate that is automatically adjusted at least once each year according to a specified rate for such investments, such as a percentage of a bank's prime rate. The composition of Multiple Strategies Fund's portfolio among the different types of permitted investments will vary from time to time based upon the Manager's evaluation of economic and market trends and perceived relative total anticipated return from such types of securities. Accordingly, there is neither a minimum nor a maximum percentage of Multiple Strategies Fund's assets that may, at any given time, be invested in any of the types of investments identified above. In the event future economic or financial conditions adversely affect equity securities, it is expected that Multiple Strategies Fund would assume a defensive position by investing in debt securities (with an emphasis on securities maturing in one year or less from the date of purchase), or cash and cash equivalents. Global Securities Fund. The objective of the Global Securities Fund is to seek long-term capital appreciation. Current income is not an objective. In seeking its objective, the Fund will invest a substantial portion of its invested assets in securities of foreign issuers, "growth- type" companies (those which, in the opinion of the Manager, have relatively favorable long-term prospects for increasing demand or which develop new products and retain a significant part of earnings for research and development), cyclical industries (e.g. base metals, paper and chemicals) and special investment situations which are considered to have appreciation possibilities (e.g., private placements of start-up companies). The Fund may invest without limit in "foreign securities" (as defined below in "Special Investment Methods - Foreign Securities") and thus the relative amount of such investments will change from time to time. It is currently anticipated that Global Securities Fund may invest as much as 80% or more of its total assets in foreign securities. Under normal market conditions, the Fund will invest its total assets in securities of issuers traded in markets of at least three countries (which may include the United States). See "Special Investment Methods -Foreign Securities," below, for further discussion as to the possible rewards and risks of investing in foreign securities and as to additional diversification requirements for the Fund's foreign investments. Special Investment Methods Borrowing. From time to time, Capital Appreciation Fund, Strategic Bond Fund, Growth Fund, Multiple Strategies Fund and Global Securities Fund may each increase their ownership of securities by borrowing from banks and investing the borrowed funds (on which that Fund will pay interest). Capital Appreciation Fund, Strategic Bond Fund, and Multiple Strategies Fund may each borrow, subject to the 300% asset coverage requirement of the Investment Company Act. Growth Fund may borrow only up to 5% of the value of its total assets and Global Securities Fund may borrow up to 10% of the value of its total assets. Global Securities Fund will not borrow, if as a result of such borrowing more than 25% of its total assets would consist of investments in when-issued or delayed delivery securities or borrowed funds. Purchasing securities with borrowed funds is a speculative investment method known as "leverage," which may subject a Fund to relatively greater risks and costs than funds that do not use leverage, including possible reduction of income and increased fluctuation of net asset value per share. For further discussion of such risks and other details, see "Investment Objectives and Policies - Borrowing" in the Statement of Additional Information. Pursuant to an undertaking by Capital Appreciation Fund, Strategic Bond Fund, Multiple Strategies Fund and Global Securities Fund, borrowing by each such Fund is limited to 25% of the value of its net assets, which is further limited to 10% if the borrowing is for a purpose other than to facilitate redemptions. Neither percentage limitation is a fundamental policy. Small, Unseasoned Companies. Money Fund, Capital Appreciation Fund, Multiple Strategies Fund, Growth Fund, Global Securities Fund and Strategic Bond Fund may each invest in securities of small, unseasoned companies as well as those of large, well-known companies. It is not currently intended that investments in securities of companies (including predecessors) that have operated less than three years will exceed 5% of the net assets of either Growth Fund or Multiple Strategies Fund. Money Fund, Capital Appreciation Fund, Global Securities Fund and Strategic Bond Fund are not subject to this restriction. Securities of small, unseasoned companies may have a limited trading market and volatile price movements, which may adversely affect their disposition and can result in their being priced lower than might otherwise be the case. Participation Interests. Strategic Bond Fund, Global Securities Fund, High Income Fund and Multiple Strategies Fund may acquire participation interests in U.S. dollar-denominated loans that are made to U.S. or foreign companies (the "borrower"). They may be interests in, or assignments of, the loan, and are acquired from banks or brokers that have made the loan or are members of the lending syndicate. The Manager has set certain creditworthiness standards for issuers of loan participations, and monitors their creditworthiness. Some borrowers may have senior securities rated as low as "C" by Moody's or "D" by Standard & Poor's, but may be deemed acceptable credit risks. Participation interests are considered investments in illiquid securities (see "Restricted and Illiquid Securities,"below). Their value primarily depends upon the creditworthiness of the borrower, and its ability to pay interest and principal. Borrowers may have difficulty making payments. If a borrower fails to make scheduled interest or principal payments, the Funds could experience a reduction in their respective income and a decline in the net asset value of their respective shares. Further details are set forth in the Statement of Additional Information under "Investment Objective and Policies." Foreign Securities. Each Fund may purchase "foreign securities" that is, securities of companies organized under the laws of countries other than the United States that are traded on foreign securities exchanges or in the foreign over-the-counter markets. Securities of foreign issuers that are represented by American Depository Receipts ("ADRs"), or that are listed on a U.S. securities exchange or are traded in the United States over-the-counter markets are not considered "foreign securities" for this purpose because they are not subject to many of the special considerations and risks (discussed below and in the Statement of Additional Information) that apply to foreign securities traded and held abroad. If a Fund's securities are held abroad, the countries in which such securities may be held and the sub-custodians holding them must be approved by the Fund's Board of Trustees under applicable SEC rules. Each Fund may also invest in debt obligations issued or guaranteed by foreign corporations, certain supranational entities (such as the World Bank) and foreign governments (including political subdivisions having taxing authority) or their agencies or instrumentalities, subject to the investment policies described above. Foreign securities which the Funds may purchase may be denominated in U.S. dollars or in non-U.S. currencies. The Funds may convert U.S. dollars into foreign currency, but only to effect securities transactions and not to hold such currency as an investment. It is currently intended that each Fund (other than Global Securities Fund, Multiple Strategies Fund or Strategic Bond Fund) will invest no more than 25% of its total assets in foreign securities or in government securities of any foreign country or in obligations of foreign banks. Multiple Strategies Fund will invest no more than 35% of its total assets in foreign securities or in government securities of any foreign country or in obligations of foreign banks. Neither Global Securities Fund nor Strategic Bond Fund has any restrictions on the amount of its assets that may be invested in foreign securities. Investments in securities of issuers in non-industrialized countries generally involve more risk and may be considered highly speculative. The Funds have undertaken to comply with the foreign country diversification guidelines of Section 10506 of the California Insurance Code, as follows: Whenever a Fund's investment in foreign securities exceeds 25% of its net assets, it will invest its assets in securities of issuers located in a minimum of two different foreign countries; this minimum is increased to three foreign countries if foreign investments comprise 40% or more of a Fund's net assets, to four if 60% or more and to five if 80% or more. In addition, no such Fund will have more than 20% of its net assets invested in securities of issuers located in any one foreign country; that limit is increased to 35% for Australia, Canada, France, Japan, the United Kingdom or Germany. The percentage of each Fund's assets that will be allocated to foreign securities will vary depending on the relative yields of foreign and U.S. securities, the economies of foreign countries, the condition of their financial markets, the interest rate climate of such countries, and the relationship of such countries' currency to the U.S. dollar. These factors are judged on the basis of fundamental economic criteria (e.g., relative inflation levels and trends, growth rate forecasts, balance of payments status, and economic policies) as well as technical and political data. Subsequent foreign currency losses may result in a Fund having previously distributed more income in a particular period than was available from investment income, which could result in a return of capital to shareholders. Each such Fund's portfolio of foreign securities may include those of a number of foreign countries or, depending upon market conditions and subject to the above diversification requirements those of a single country. In summary, foreign securities markets may be less liquid and more volatile than the markets in the U.S. Risks of foreign securities investing may include foreign withholding taxation, changes in currency rates or currency blockage, currency exchange costs, difficulty in obtaining and enforcing judgments against foreign issuers, relatively greater brokerage and custodial costs, risk of expropriation or nationalization of assets, less publicly available information, and differences between domestic and foreign legal, auditing, brokerage and economic standards. See "Investment Objectives and Policies - Foreign Securities" in the Statement of Additional Information for further details. Warrants and Rights. Each of the Funds (except Money Fund) may invest up to 5% of its total assets in warrants and rights other than those that have been acquired in units or attached to other securities. No more than 2% of each such Fund's total assets may be invested in warrants that are not listed on either the New York or American Stock Exchanges. For further details, see "Warrants and Rights" in the Statement of Additional Information. Repurchase Agreements. Each Fund may acquire securities that are subject to repurchase agreements to generate income while providing liquidity. There is no limit on the amount of any Fund's net assets that may be subject to repurchase agreements having a maturity of seven days or less. No Fund will enter into repurchase agreements which will cause more than 15% of its net assets (10% of net assets for Money Fund) to be invested in repurchase agreements having a maturity beyond seven days. Repurchase agreements must be fully collateralized. However, if the vendor fails to pay the resale price on the delivery date, the Fund may experience costs in disposing of the collateral, and losses if there is any delay in doing so. Restricted and Illiquid Securities. Under the supervision of the Board of Trustees, the Manager determines the liquidity of a Fund's investments. Investments may be illiquid because of the absence of a 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 resale or cannot be sold publicly until it is registered under the Securities Act of 1933. No Fund will purchase or otherwise acquire any security if, as a result, more than 15% (10% for Money Fund) of its net assets (taken at current value) would be invested in securities that are illiquid by virtue of the absence of a readily available market or because of legal or contractual restrictions on resale ("restricted securities"). This policy applies to participation interests, bank time deposits, master demand notes and repurchase transactions maturing in more than seven days, over-the-counter ("OTC") options held by any Fund and that portion of assets used to cover such OTC options (High Income, Global Securities and Strategic Bond Funds). This policy is not a fundamental policy and does not limit purchases of restricted securities eligible for resale to qualified institutional purchasers pursuant to Rule 144A under the Securities Act of 1933 that are determined to be liquid by the Board of Trustees or by the Manager under Board-approved guidelines. Such guidelines take into account trading activity for such securities and the availability of reliable pricing information, among other factors. If there is a lack of trading interest in particular Rule 144A securities, a Fund's holdings of those securities may be illiquid. There may be undesirable delays in selling such securities at a price representing their fair value. None of the Funds presently intend to invest more than 10% of its net assets in illiquid or restricted securities; restricted securities eligible for resale pursuant to Rule 144A are not included within this limitation. Loans of Portfolio Securities. To attempt to increase income, each Fund may lend its portfolio securities if the loan is collateralized in accordance with applicable regulatory requirements and if after any loan, the value of the securities loaned does not exceed 25% of the value of that Fund's total assets. In connection with securities lending, a Fund might experience risks of delay in receiving additional collateral, or risks of delay in recovery of the securities, or loss of rights in the collateral should the borrower fail financially. The Funds presently do not intend that the value of securities loaned will exceed 5% of each Fund's total assets. See "Loans of Portfolio Securities" in the Statement of Additional Information for further information on securities loans. When-Issued Securities. Each Fund may from time to time purchase securities on a "when-issued" basis, and may purchase or sell securities on a "delayed delivery" basis. Debt securities are often issued on this basis. In those transactions, a Fund obligates itself to purchase or sell securities with delivery and payment to occur at a later date to secure what is considered to be an advantageous price and yield at the time the obligation is entered into. The price, which is generally expressed in yield terms, is fixed at the time the commitment to purchase is made, but delivery and payment for when-issued securities take place at a later date (normally within 45 days of purchase). During the period between purchase and settlement, no payment is made by the Fund to the issuer and no interest accrues to the Fund from the investment. Although the Fund is subject to the risk of adverse market fluctuation during that period, the Manager does not believe that the net asset value or income of a Fund will be significantly adversely affected by its purchase of securities on a "when-issued" basis. See "When-Issued and Delayed Delivery Transactions" in the Statement of Additional Information Statement for further details. Writing Covered Calls. High Income Fund, Capital Appreciation Fund, Growth Fund, Multiple Strategies Fund, Global Securities Fund and Strategic Bond Fund may each write, (i.e., sell) call options ("calls") that are traded on a domestic securities exchange or quoted on NASDAQ. High Income Fund, Global Securities Fund and Strategic Bond Fund may also write calls that are traded on foreign securities exchanges and domestic over-the-counter markets. Global Securities Fund and Strategic Bond Fund may also write calls that are traded on foreign over-the-counter markets. All such calls written by these Funds must be "covered" while the call is outstanding (i.e., the Fund must own the securities subject to the call or other securities acceptable for applicable escrow requirements). Calls on Futures (see "Hedging - High Income Fund, Global Securities Fund and Strategic Bond Fund," below) must be covered by deliverable securities or by liquid assets segregated to satisfy the Futures contract. Capital Appreciation Fund, Growth Fund and Multiple Strategies Fund may each purchase a call only in a "closing purchase transaction" to terminate its obligation on a call which it has written. Covered call writing is an attempt to enhance income through the receipt of premiums from expired calls and any net profits from closing purchase transactions. After any such sale, up to 100% of High Income, Strategic Bond or Global Securities Funds' total assets may be subject to calls, up to 25% of Capital Appreciation or Multiple Strategies Funds' total assets may be subject to calls, and up to 5% of Growth Fund's total assets may be subject to calls. If a call written by a Fund is exercised, the Fund forgoes any possible profit from an increase in the market price of the underlying security over the exercise price less the commissions paid on the sale. In addition, the Fund could experience capital losses which might cause previously distributed short-term capital gains to be recharacterized as non-taxable return of capital to shareholders. Hedging - Global Securities Fund, Strategic Bond Fund and High Income Fund. For hedging purposes as a temporary defensive maneuver, Global Securities Fund and Strategic Bond Fund may use Stock Index Futures; Global Securities Fund, Strategic Bond Fund and High Income Fund may use Interest Rate Futures and Bond Index Futures (together with Stock Index Futures, referred to as "Futures"), Forward Contracts (defined below), and call and put options on securities, Futures (as applicable), broadly-based indices and foreign currencies; Strategic Bond Fund may also enter into Interest Rate Swap transactions (all of the foregoing are referred to as "Hedging Instruments"). Hedging Instruments may be used to attempt to: (i) protect against declines in the market value of a Fund's portfolio securities or Futures, and thus protect that Fund's net asset value per share against downward market trends, (ii) protect a Fund's unrealized gains in the value of its securities which have appreciated, (iii) facilitate selling portfolio securities for investment reasons, (iv) establish a position in the securities markets as a temporary substitute for purchasing particular securities, or (v) reduce the risk of adverse currency fluctuations. A call or put may be purchased only if, after such purchase, the value of all call and put options held by that Fund would not exceed 5% of its total assets. Global Securities Fund, Strategic Bond Fund and High Income Fund will not use Futures and options on Futures for speculation. The Hedging Instruments which Global Securities Fund, Strategic Bond Fund and High Income Fund may use are described below. Interest Rate Futures. Global Securities Fund, Strategic Bond Fund and High Income Fund may buy and sell futures contracts that relate to debt securities ("Interest Rate Futures"). An Interest Rate Future obligates the seller to deliver and the purchaser to take a specific type of debt security at a specific future date for a fixed price. That obligation may be satisfied by actual delivery of the debt security or by entering into an offsetting contract. Bond Index Futures. Global Securities Fund, Strategic Bond Fund and High Income Fund may buy and sell futures contracts that relate to bond indices ("Bond Index Futures"). A bond index assigns relative values to the bonds included in that index and is used as a basis for trading long-term Bond Index Futures contracts. Bond Index Futures reflect the price movements of bonds included in the index. They differ from Interest Rate Futures in that settlement is made in cash rather than by delivery. Stock Index Futures. Global Securities Fund and Strategic Bond Fund may buy and sell futures contracts that relate to broadly-based stock indices ("Stock Index Futures"). A stock index is "broadly-based" if it includes stocks that are not limited to issuers in any particular industry or group of industries. Stock Index Futures obligate one party to accept, and the other party to make, delivery of cash equal to the difference between the stock index value at the close of trading of the contract and the exercise price of the futures contract times a specified multiple (the "multiplier") which determines the total dollar value for each point of difference. No physical delivery of the underlying stocks in the index is made. Generally, contracts are closed out prior to the expiration date of the contract. Purchasing Calls on Securities and Futures. Global Securities Fund, Strategic Bond Fund and High Income Fund may purchase calls on securities or on Futures (as permitted by its investment policy), that are traded on U.S. and foreign securities or commodities exchanges or the U.S. over-the- counter markets in order to protect against the possibility that its portfolio will not fully participate in an anticipated rise in value of the long-term securities market. Global Securities Fund and Strategic Bond Fund may also purchase calls on securities or on Futures that are traded on foreign over-the-counter markets. The value of debt securities underlying calls purchased by any of these three Funds will not exceed the value of the portion of the Fund's portfolio invested in cash or cash equivalents (i.e. securities with maturities of less than one year). Puts on Securities and Futures. Global Securities Fund, Strategic Bond Fund and High Income Fund may purchase put options ("puts") which relate to securities (whether or not it holds such securities in its portfolio) or Futures (as permitted by its investment policy). They may also write puts on securities or Futures (as permitted by its investment policy) only if such puts are covered by segregated liquid assets. None of these three Funds will write puts if, as a result, more than 50% of its net assets would be required to be segregated liquid assets. In writing puts, there is the risk that a Fund may be required to buy the underlying security at a disadvantageous price. Foreign Currency Options. Global Securities Fund, Strategic Bond Fund and High Income Fund may purchase and write puts and calls on foreign currencies that are traded on a securities or commodities exchange or quoted by major recognized dealers in such options, for the purpose of protecting against declines in the dollar value of foreign securities owned by such Fund or in the dollar value of payments on such securities and against increases in the dollar cost of foreign securities to be acquired. If a rise is anticipated in the dollar value of a foreign currency in which securities to be acquired are denominated, the increased cost of such securities may be partially offset by purchasing calls or writing puts on that foreign currency. If a decline in the dollar value of a foreign currency is anticipated, the decline in value of portfolio securities denominated in that currency may be partially offset by writing calls or purchasing puts on that foreign currency. However, in the event of currency rate fluctuations adverse to a Fund's position, it would lose the premium it paid and transactions costs. Forward Contracts. Global Securities Fund, Strategic Bond Fund and High Income Fund may enter into foreign currency exchange contracts ("Forward Contracts"), which obligate the seller to deliver and the purchaser to take a specific amount of foreign currency at a specific future date for a fixed price. Any of these Funds may enter into a Forward Contract in order to "lock in" the U.S. dollar price of a security denominated in a foreign currency, which it has purchased or sold but which has not yet settled, or to protect against a possible loss resulting from an adverse change in the relationship between the U.S. dollar and a foreign currency. There is a risk that use of Forward Contracts may reduce the gain that would otherwise result from a change in the relationship between the U.S. dollar and a foreign currency. Forward Contracts include standardized foreign currency futures contracts which are traded on exchanges and are subject to procedures and regulations applicable to other Futures. These three Funds may also enter into Forward Contracts to sell a foreign currency denominated in a currency other than that in which the underlying security is denominated. This is done in the expectation that there is a greater correlation between the foreign currency of the Forward Contract and the foreign currency of the underlying investment than between the U.S. dollar and the foreign currency of the underlying investment. This technique is referred to as "cross hedging." These Funds may also cross hedge by entering into a Forward Contract to sell a foreign currency and receive a second foreign currency, both of which differ from the foreign currency in which the underlying security is denominated. This is done in the expectation that there is a greater correlation between the foreign currencies of the Forward Contract and the foreign currency of the underlying investment than between the U.S. dollar and the foreign currency of the underlying investment. The success of cross hedging is dependent on many factors, including the ability of the Manager to correctly identify and monitor the correlation between foreign currencies and the U.S. dollar. To the extent that the correlation is not identical, that Fund may experience losses or gains on both the underlying security and the cross currency hedge. None of these Funds will speculate in foreign currency exchange contracts. There is no limit as to the percentage of these Funds' assets that may be committed to foreign currency exchange contracts. These Funds do not enter into such forward contracts or maintain a net exposure in such contracts where that Fund would be obligated to deliver an amount of foreign currency in excess of the value of that Fund's portfolio securities denominated in that currency or, enter into a cross hedge unless it is denominated in a currency or currencies that the Manager believes will have price movements that tend to correlate closely with the currency in which the investment being hedged is denominated. Interest Rate Swap Transactions. Strategic Bond Fund may enter into interest rate swaps. Interest rate swaps are subject to interest rate risks, in that the Fund could be obligated to pay more under its swap agreements than it receives, as a result of interest rate changes. In an interest rate swap, the Fund and another party exchange their respective commitments to pay or receive interest on a security (e.g., an exchange of floating rate payments for fixed rate payments). Strategic Bond Fund will not use interest rate swaps for leverage. Swap transactions will be entered into only as to security positions held by the Fund. Strategic Bond Fund may not enter into swap transactions with respect to more than 50% of its total assets. The Fund will segregate liquid assets (e.g., cash, U.S. Government securities or other appropriate high grade debt obligations) equal to the net excess, if any, of its obligations over its entitlements under the swap and will mark to market that amount daily. There is a risk of loss on a swap equal to the net amount of interest payments that the Fund is contractually obligated to make. The credit risk of an interest rate swap depends on the counterparty's ability to perform. The value of the swap may decline if the counterparty's creditworthiness deteriorates. If the counterparty defaults, the Fund risks the loss of the net amount of interest payments that it is contractually entitled to receive. The Fund may be able to reduce or eliminate its exposure to losses under swap agreements either by assigning them to another party, or by entering into an offsetting swap agreement with the same counterparty or another creditworthy counterparty. See "Hedging - High Income Fund, Global Securities Fund and Strategic Bond Fund - Interest Rate Swap Transactions" in the Statement of Additional Information for further details. Risks of Options and Futures Trading. The Statement of Additional Information contains more information about options and Futures, Forward Contracts, segregation arrangements for Forward Contracts and Futures, the payment of premiums for option trades, the tax effects, risks and possible benefits to the Funds from options trading and information as to the Fund's other limitations on investments in Futures and options thereon. These limitations and the restrictions described in the preceding paragraph on cross hedging are not fundamental policies of High Income Fund, Strategic Bond Fund or Global Securities Fund. There are certain risks in writing calls. If a call written by a Fund is exercised, the Fund foregoes any profit from any increase in the market price above the call price of the underlying investment on which the call was written. In addition, the Fund could experience capital losses that might cause previously distributed short-term capital gains to be re-characterized as non-taxable return of capital to shareholders. In writing puts, there is the risk that the Fund may be required to buy the underlying security at a disadvantageous price. The principal risks of Futures trading are: (a) possible imperfect correlation between the prices of the Futures and the market value of the debt securities in the Fund's portfolio; (b) possible lack of a liquid secondary market for closing out a Futures position; (c) the need for additional skills and techniques beyond those required for normal portfolio management; and (d) losses on Futures resulting from interest rate movements not anticipated by the Manager. Derivatives. The most common derivatives, also known as structured financial products, in which the Funds (except Money Fund) may invest include: (i) index-linked notes whose final payouts are dependent upon the performance of one or more market indices, and (ii) relative performance options whose cash settlement is a function of the differential returns between two market indices. A risk of these derivatives is a decline in value of the underlying instrument due to adverse movements in the index. Investments in derivatives will be consistent with the Funds' respective investment policies. Portfolio Turnover. The Funds may engage frequently in short-term trading. High turnover and short-term trading involve correspondingly greater commission expenses and transaction costs for Capital Appreciation Fund, Growth Fund, Multiple Strategies Fund and Global Securities Fund and to a lesser extent, higher transaction costs for Money Fund, Bond Fund, Strategic Bond Fund and High Income Fund. Portfolio turnover rates are set forth under "Financial Highlights" for each Fund. If any Fund derives 30% or more of its gross income from the sale of securities held less than three months, it may fail to qualify under the tax laws as a regulated investment company (see "Dividends, Distributions and Taxes," below). Short Sales Against-the-Box. Global Securities Fund and Strategic Bond Fund may sell securities short in "short sales against-the-box." No more than 15% of Global Securities Fund's net assets will be held as collateral for such short sales at any one time. See "Investment Objectives and Policies - Short Sales Against-the-Box" in the Statement of Additional Information for further information. Investment Restrictions Each of the Funds has certain investment restrictions which, together with its investment objective, are fundamental policies, that is, subject to change only by approval of a majority of the outstanding voting securities of the appropriate Fund. Under some of those restrictions, each Fund cannot: (1) with respect to 75% of its total assets, invest in securities (except those of the U.S. Government or its agencies or instrumentalities) of any issuer if immediately thereafter, either (a) more than 5% of that Fund's total assets would be invested in securities of that issuer, or (b) that Fund would then own more than 10% of that issuer's voting securities or 10% in principal amount of the outstanding debt securities of that issuer (the latter limitation on debt securities does not apply to Strategic Bond Fund); (2) lend money except in connection with the acquisition of debt securities which a Fund's investment policies and restrictions permit it to purchase; the Funds may also make loans of portfolio securities (see "Loans of Portfolio Securities"); (3) pledge, mortgage or hypothecate any assets to secure a debt; the escrow arrangements which are involved in options trading are not considered to involve such a mortgage, hypothecation or pledge; (4) concentrate investments in any particular industry, other than securities of the U.S. Government or its agencies or instrumentalities (Money Fund, Bond Fund and High Income Fund, only); therefore these Funds will not purchase the securities of issuers primarily engaged in the same industry if more than 25% of the total value of that Fund's assets would (in the absence of special circumstances) consist of securities of companies in a single industry; however, there is no limitation as to concentration of investments by Money Fund in obligations issued by domestic banks, foreign branches of domestic banks (if guaranteed by the domestic parent), savings and loan associations or in obligations issued by the federal government and its agencies and instrumentalities; (5) deviate from the percentage requirements and other restrictions listed under "Writing Covered Calls," "Hedging," "Warrants and Rights," and the first paragraph under "Borrowing"; and (6) deviate from the percentage requirements listed under "Short Sales Against-the-Box" (Global Securities Fund only). None of the percentage limitations and restrictions described above and in the Statement of Additional Information for Strategic Bond Fund with respect to writing covered calls and Hedging is a fundamental policy. The percentage restrictions described above and in the Statement of Additional Information, other than those described under "Special Investment Methods -- Borrowing," apply only at the time of investment and require no action by a Fund as a result of subsequent changes in value of the investment or the size of that Fund. Money Fund has separately undertaken to exclude savings and loan associations from the exception to the concentration limitation set forth under investment restriction (4), above. A supplementary list of investment restrictions is contained in the Statement of Additional Information, which also contains further information regarding the Funds' investment policies. The Trustees of the Trust are required to monitor events to identify any irreconcilable conflicts which may arise between the variable life insurance policies and variable annuity contracts that invest in the Funds. Should any conflict arise which ultimately requires that any substantial amount of assets be withdrawn from any Fund, its operating expenses could increase. Management Of The Funds The Board of Trustees has overall responsibility for the management of each Fund under the laws of Massachusetts governing the responsibilities of trustees of business trusts. Subject to the authority of the Board of Trustees, the Manager is responsible for the day-to-day management of the Funds' business, supervises the investment operations of each Fund and the composition of its portfolio and furnishes advice and recommendations with respect to investments, investment policies and the purchase and sale of securities, pursuant to an investment advisory agreement with each Fund (the "Agreements"). The monthly management fee payable to the Manager is computed on the aggregate net assets of all the Funds as of the close of business each day. Each Fund's share of the management fee is determined by the ratio of its net assets to the aggregate net assets of all the Funds. Except as stated below, the annual management fee rate is 0.50% of the first $250 million of aggregate Trust net assets, 0.45% of the next $50 million, 0.40% of the next $100 million, 0.35% of the next $400 million and 0.30% of net assets in excess of $800 million. Money Fund's management fee rate is reduced by 0.05% of the first $250 million of its net assets and by 0.05% of its net assets in excess of $4 billion. High Income Fund pays an additional management fee at the annual rate of 0.15% of its net assets. Global Securities Fund's annual management fee is 0.75% on the first $200 million of aggregate Trust net assets, 0.72% on the next $200 million, 0.69% on the next $200 million, 0.66% on the next $200 million and 0.60% on net assets in excess of $800 million. Strategic Bond Fund's annual management fee is 0.65% of aggregate Trust net assets. During the fiscal year ended December 31, 1993, the management fee (computed on an annualized basis as a percentage of the net assets of all the Funds as of the close of business each day) and the total operating expenses as a percentage of average net assets of each Fund were as follows: Management Total Operating Fund Fees Expenses - ----------- -------------- -------------- Money Fund .37% .43% High Income Fund .57 .68 Bond Fund .41 .46 Capital Appreciation Fund .41 .47 Growth Fund .42 .50 Multiple Strategies Fund .42 .48 Global Securities Fund .72 .92 Strategic Bond Fund(1) .65 .96 _______________ (1)Annualized. The Manager is authorized by the Agreements to employ such brokers or dealers as may in its best judgment, based on all relevant factors, implement the policy of the Funds to obtain, at reasonable expense, the "best execution" (prompt and reliable execution at the most favorable price obtainable) of the Funds' portfolio transactions. Subject to the Agreements, the Manager may also consider sales of shares of the Funds and other funds advised by the Manager or its affiliates as a factor in the selection of broker-dealers for portfolio transactions. As most purchases by Money Fund, High Income Fund, Bond Fund and Strategic Bond Fund are principal transactions at net prices, these Funds incur little or no brokerage costs, and the mark-up (the difference or spread between the dealer's purchase and sale price) that they pay on principal transactions is smaller than that paid by most individual investors. "Investment Management Services" in the Statement of Additional Information contains additional information about the Agreements, including a description of expense arrangements, exculpation provisions, and brokerage practices of the Funds. Mr. David Negri is a Vice President of the Manager who serves as a Portfolio Manager of High Income Fund, Bond Fund, Multiple Strategies Fund and Strategic Bond Fund. Since July, 1989, January 1990, July, 1989 and May 1993 respectively, he has been the person principally responsible for the day-to-day management portfolios of those Funds. During the past five years, he has also served as an officer of other OppenheimerFunds. Mr. George Evans is a Vice President of the Manager who serves as a Portfolio Manager of Global Securities Fund. Since February, 1991, he has been the person principally responsible for the day-to-day management of that Fund's portfolio. During the past five years, he has also served as an international equities portfolio manager/analyst with Brown Brothers Harriman & Co. Mr. Arthur Zimmer is a Vice President of the Manager who serves as a Portfolio Manager of Money Fund. Since October, 1990, he has been the person principally responsible for the day-to-day management of that Fund's portfolio. During the past five years, he has also served as an officer of other OppenheimerFunds and formerly served as Vice President of Hanifen Imhoff Management Company (mutual fund investment adviser). Mr. Robert Doll is a Senior Vice President of the Manager who serves as a Portfolio Manager of Growth Fund. Since April, 1991, he has been the person principally responsible for the day-to-day management of that Fund's portfolio. During the past five years, he has also served as an officer of other OppenheimerFunds. Mr. Paul LaRocco is an Assistant Vice President and a Portfolio Manager of the Manager who serves as Portfolio Manager of Capital Appreciation Fund. Since January, 1994, he has been the person principally responsible for the day-to-day management of the Fund's portfolio. During the past five years, he has also served as Associate Portfolio Manager for other OppenheimerFunds and formerly served as a securities analyst with Columbus Circle Investors, prior to which he was an investment analyst for Chicago Title & Trust Co. Messrs. Richard Rubinstein and David Negri are Vice Presidents of the Manager and serve as Portfolio Managers of Multiple Strategies Fund, since April, 1991 and July, 1989, respectively. During the past five years, Mr. Rubinstein has served as an officer of other OppenheimerFunds and was formerly Vice President and Portfolio Manager/Security Analyst for Oppenheimer Capital Corp., an investment adviser. Each of the Portfolio Managers named above are also Vice Presidents of the Trust. For more information about the Trust's other Trustees and Officers, see "Trustees and Officers" in the Statement of Additional Information. The Manager has operated as an investment adviser since April 30, 1959. It and its affiliates currently advise U.S. investment companies with assets aggregating over $27 billion as of December 31, 1993, and having more than 1.8 million shareholder accounts. The Manager is owned by Oppenheimer Acquisition Corp., a holding company owned in part by senior management of the Manager, and ultimately controlled by Massachusetts Mutual Life Insurance Company, a mutual life insurance company which also advises pension plans and investment companies. Management's Discussion of Performance. During the Funds' fiscal year ended December 31, 1993, the Managers emphasized the following investment strategies and techniques. For High Income Fund, bonds of cyclical companies in the automotive, paper and metals industries were emphasized, in expectation that they would benefit from stronger U.S. economic growth, and once a recovery takes hold in Europe and Japan. The strengthening of the U.S. economy and continued low inflation and interest rate levels resulted in favorable performance of high yield, lower rated bonds, which more than offset modest declines in yields as interest rates move lower. For Bond Fund, bonds were emphasized in areas which are expected to experience high growth rates, such as telecommunications, or in areas which are regarded as undervalued, such as oil and gas companies. Intermediate U.S. treasury securities were purchased for that Fund to position it for a possible increase in interest rates. For Capital Appreciation Fund, stocks of companies were emphasized in health care, technology and telecommunications, and specialty retailing, in expectation that an improving economy will support the prospects for stocks of small companies. For Growth Fund, stocks were emphasized in financial service companies positioned to benefit from low interest rates, health care companies, and other global companies regarded as having above-average long-term prospects. Multiple Strategies Fund's fixed income portfolio emphasized high-yield corporate issues and foreign bonds, notably from Canadian, Australian and Latin American issuers, which are expected to benefit from the improving global economy and be less sensitive to changes in U.S. interest rates. That Fund's equity portfolio focused on health care and technology stocks that are expected to provide new products or services, and international stocks expected to capitalize on the prospects of strong economic growth offshore. For Global Securities Fund, banks and financial services in emerging markets and developed countries, consumer industries servicing emerging markets, telecommunications and energy logistics were emphasized in anticipation of increased capital requirements to support development, growth and demand of emerging consumer markets, and an anticipated pick up in global economies and markets. For Strategic Bond Fund, corporate bonds were emphasized in the paper, metals and automotive industries, to take advantage of price appreciation in the event of economic recovery, and foreign fixed income securities were emphasized to take advantage of growth rates in foreign countries (including Europe, Australia, Canada New Zealand, Latin America, Indonesia and Eastern Europe) that are higher than in the U.S. Comparison of Change in Value of $10,000 Hypothetical Investment in High Income Fund Versus Salomon Brothers High Yield Market Index (Chart comparing total return of High Income Fund shares to performance of Salomon Brothers High Yield Market Index) Average Annual Total Return at 12/31/93 1 year 5 years Life of Fund (1) 26.34% 16.96% 14.70% Comparison of Change in Value of $10,000 Hypothetical Investment in Bond Fund Versus Lehman Brothers Corporate Bond Index (Chart comparing total return of Bond Fund shares to performance of Lehman Brothers Corporate Bond Index) Average Annual Total Return at 12/31/93 1 year 5 years Life of Fund (1) 13.04% 11.61% 11.21% Comparison of Change in Value of $10,000 Hypothetical Investment in Capital Appreciation Fund Versus S&P 500 Index (Chart comparing total return of Capital Appreciation Fund shares to performance of S&P 500 Index) Average Annual Total Return at 12/31/93 1 year 5 years Life of Fund (1) 27.32% 19.26% 16.46% Comparison of Change in Value of $10,000 Hypothetical Investment in Growth Fund Versus S&P 500 Index (Chart comparing total return of Growth Fund shares to performance of S&P 500 Index) Average Annual Total Return at 12/31/93 1 year 5 years Life of Fund (1) 7.25% 11.83% 12.70% Comparison of Change in Value of $10,000 Hypothetical Investment in Multiple Strategies Fund Versus S&P 500 Index and Lehman Brothers Aggregate Bond Index (Chart comparing total return of Multiple Strategies Fund shares to performance of S&P 500 Index and Lehman Brothers Aggregate Bond Index) Average Annual Total Return at 12/31/93 1 year 5 years Life of Fund (1) 15.95% $11.01% 11.67% Comparison of Change in Value of $10,000 Hypothetical Investment in Global Securities Fund Versus Morgan Stanley World Index (Chart comparing total return of Global Securities Fund shares to performance of Morgan Stanley World Index) Average Annual Total Return at 12/31/93 1 year Life of Fund (1) 70.32% 17.14% Comparison of Change in Value of $10,000 Hypothetical Investment in Strategic Bond Fund Versus Lehman Brothers Aggregate Bond Index and Salomon Brothers World Government Bond Index (Chart comparing total return of Strategic Bond Fund to performance of Lehman Brothers Aggregate Bond Index and Salomon Brothers World Government Bond Index) Cumulative Total Return at 12/31/93 Life of Fund (1) 4.25% ______________ (1)Inception dates are as follows: April 30, 1986 for High Income Fund; April 3, 1985 for Bond Fund and Growth Fund; August 15, 1986 for Capital Appreciation Fund; February 9, 1987 for Multiple Strategies Fund; November 12, 1990 for Global Securities Fund.; and May 3, 1993 for Strategic Bond Fund. Indices. The Salomon Brothers High Yield Market Index is an unmanaged index of below-investment grade (but rated at least BB+/Ba1 by Standard & Poor's or Moody's) U.S. corporate debt obligations, widely-recognized as a measure of the performance of the high-yield corporate bond market, the market in which High Income Fund principally invests. The Lehman Brothers Corporate Bond Index is an unmanaged index of publicly-issued non-convertible investment grade corporate debt of U.S. issuers, widely recognized as a measure of the U.S. fixed-rate corporate bond market. The S&P 500 Index is an unmanaged index of 500 widely held common stocks traded on the New York and American Stock Exchanges and the over-the- counter market, and is widely recognized as a general measure of stock market performance. The Lehman Brothers Aggregate Bond Index is a broad- based, unmanaged index of U.S. corporate bond issues, U.S. government securities and mortgage-backed securities, widely recognized as a measure of the performance of the domestic debt securities market. The Morgan Stanley World Index is an unmanaged index of issuers listed on the stock exchanges of 20 foreign countries and the U.S., and is widely recognized as a measure of global stock market performance. The Salomon Brothers World Government Bond Index is an unmanaged index of fixed-rate bonds having a maturity of one year or more, and is widely recognized as a benchmark of fixed income performance on a world-wide basis. The performance of each index reflects reinvestment of income but not capital gains or transaction costs, and none of the data shown above shows the effect of taxes. While index comparisons may be useful to provide a benchmark for the Funds' performance, it must be noted that the Funds' investments are not limited to the securities in any one index and the index data does not reflect any assessment of the risk of the investments included in the index. Purchase Of Shares Shares of each Fund are offered only for purchase by Accounts as an investment medium for variable life insurance policies and variable annuity contracts, as described in the accompanying Account Prospectus. The sale of shares will be suspended during any period when the determination of net asset value is suspended and may be suspended by the Board of Trustees whenever the Board judges it in that Fund's best interest to do so. Shares of each Fund are offered at their respective offering price, which (as used in this Prospectus and the Statement of Additional Information) is net asset value (without sales charge). Under Rule 2a-7, the amortized cost method is used to value Money Fund's net asset value per share, which is expected to remain fixed at $1.00 per share except under extraordinary circumstances; see "Purchase, Redemption and Pricing of Shares - Money Fund Net Asset Valuation" in the Statement of Additional Information for further information. There can be no assurance that Money Fund's net asset value will not vary. All purchase orders are processed at the offering price next determined after receipt by the Trust of a purchase order in proper form. The offering price (and net asset value) is determined as of 4:00 P.M., New York time, each day the New York Stock Exchange is open. Net asset value per share of each Fund is determined by dividing the value of that Fund's net assets by the number of its shares outstanding. The Board of Trustees has established procedures for valuing each Fund's securities. In general, those valuations are based on market value, with special provisions for: (i) securities not having readily available market quotations; (ii) short-term debt securities; and (iii) calls and Hedging Instruments. Further details are in "Purchase, Redemption and Pricing of Shares" in the Statement of Additional Information. Redemption Of Shares Payment for shares tendered by an Account for redemption is made ordinarily in cash and forwarded within seven days after receipt by the Trust's transfer agent, Oppenheimer Shareholder Services (the "Transfer Agent"), of redemption instructions in proper form, except under unusual circumstances as determined by the SEC. The Trust understands that payment to the Account owner will be made in accordance with the terms of the accompanying Account Prospectus. The redemption price will be the net asset value next determined after the receipt by the Transfer Agent of a request in proper form. The market value of the securities in the portfolio of the Funds is subject to daily fluctuations and the net asset value of the Funds' shares (other than shares of the Money Fund) will fluctuate accordingly. Therefore, the redemption value may be more or less than the investor's cost. Dividends, Distributions And Taxes Dividends of the Money Fund. The Trust intends to declare all of Money Fund's net income, defined below, as dividends on each day the New York Stock Exchange is open for business. Such dividends will be payable on shares held of record at the time of the previous determination of net asset value. Daily dividends accrued since the prior dividend payment will be paid to shareholders monthly as of a date selected by the Board of Trustees. Money Fund's net income for dividend purposes consists of all interest income accrued on portfolio assets, less all expenses of that Fund for such period. Accrued market discount is included in interest income; amortized market premium is treated as an expense. Although distributions from net realized gains on securities, if any, will be paid at least once each year, and may be made more frequently, Money Fund does not expect to realize long-term capital gains, and therefore does not contemplate payment of any capital gains distribution. Distributions from net realized gains will not be distributed unless Money Fund's capital loss carry forwards, if any, have been used or have expired. Money Fund seeks to maintain a net asset value of $1.00 per share for purchases and redemptions. To effect this policy, under certain circumstances the Money Fund may withhold dividends or make distributions from capital or capital gains (see "Purchase, Redemption and Pricing of Shares" in the Statement of Additional Information). Dividends and Distributions of High Income Fund, Bond Fund, Strategic Bond Fund and Multiple Strategies Fund. The Trust intends to declare High Income Fund, Bond Fund, Strategic Bond Fund and Multiple Strategies Fund dividends quarterly, payable in March, June, September and December. Dividends and Distributions of Capital Appreciation Fund, Growth Fund and Global Securities Fund. The Trust intends to declare Capital Appreciation Fund, Growth Fund and Global Securities Fund dividends on an annual basis. Dividends and Distributions: General. Any Fund (other than Money Fund) may make a supplemental distribution annually in December out of any net short-term or long-term capital gains derived from the sale of securities, premiums from expired calls written by the Fund, and net profits from hedging transactions, realized from November 1 of the prior year through October 31 of the current year. Each such Fund may also make a supplemental distribution of capital gains and ordinary income following the end of its fiscal year. All dividends and capital gains distributions paid on shares of any of the Funds are automatically reinvested in additional shares of that Fund at net asset value determined on the distribution date. There are no fixed dividend rates and there can be no assurance as to the payment of any dividends or the realization of any capital gains. Tax Treatment to the Account As Shareholder. Dividends paid by each Fund from its ordinary income and distributions of each Fund's net realized short-term or long-term capital gains are includable in gross income of the Accounts holding such shares. The tax treatment of such dividends and distributions depends on the tax status of that Account. Tax Status of the Funds. If the Funds qualify as "regulated investment companies" under the Internal Revenue Code, the Trust will not be liable for Federal income taxes on amounts paid as dividends and distributions from any of the Funds. The Funds did qualify during their last fiscal year and the Trust intends that they will qualify in current and future years. However, the Code contains a number of complex tests relating to qualification which any Fund might not meet in any particular year (see, e.g., "The Funds and Their Investment Policies - Portfolio Turnover"). If any Fund does not so qualify, it would be treated for tax purposes as an ordinary corporation and would receive no tax deduction for payments made to shareholders of that Fund. The above discussion relates solely to Federal tax laws. This discussion is not exhaustive and a qualified tax adviser should be consulted. Additional Information Description of the Trust and its Shares. The Declaration of Trust permits the Board of Trustees to issue an unlimited number of full and fractional shares of beneficial interest of separate series, without par value, and from time to time to create additional series and to fix and determine the relative rights and preferences among the different series. Shares of eight series have been authorized, which constitute interests in the Funds described herein; the Trustees have authority to create additional series (without shareholder approval) which would constitute new funds. Shares of each Fund represent an interest in that Fund proportionately equal to the interest of each other share of that Fund and entitle their holders to one vote per share (with proportionate voting for fractional shares) on matters submitted to their vote, as explained in the Statement of Additional Information. Shares do not have cumulative voting rights, or conversion, preemptive or subscription rights, and are fully transferable. Shares of each Fund have liquidation rights as to the assets of that Fund. It is not contemplated that regular annual meetings of shareholders will be held. Under certain circumstances, shareholders have the right to remove a Trustee. See "Additional Information - Description of the Trust" in the Statement of Additional Information for details. As of December 31, 1993, Monarch Life Insurance Company's Variable Account B may be deemed to control Money Fund and Growth Fund; Bankers Security Variable Annuity Funds P and Q may be deemed to control High Income Fund and Capital Appreciation Fund; Nationwide's Separate Accounts I and II may be deemed to control Bond Fund, Multiple Strategies Fund and Global Securities Fund; Confederation Life Insurance and Annuity Company's Separate Account A may be deemed to control High Income Fund, Capital Appreciation Fund, Global Securities Fund, Growth Fund and Strategic Bond Fund; in each case by virtue of owning more than 25% of the shares of such Fund. See "Trustees and Officers - Fund Shareholders" in the Statement of Additional Information. Except as provided under the Investment Company Act, the Accounts will vote their shares in accordance with instructions received from Account Policyowners; this is explained further in the accompanying Account Prospectus. Shareholder Inquiries. Inquiries by policyowners for Account information are to be directed to the insurance company issuing the Account at the address or telephone number shown on the first page of the accompanying Account Prospectus. The Custodian and the Transfer Agent. The Custodian of the assets of the Trust is The Bank of New York. The Manager and its affiliates have banking relationships with the Custodian. See "Additional Information" in the Statement of Additional Information for further details. Cash balances with the Custodian in excess of $100,000 are not protected by Federal deposit insurance. Such uninsured balances may at times be substantial. Oppenheimer Shareholder Services, a division of the Manager, acts as transfer agent on an at-cost basis for the Trust. It also acts as transfer agent and shareholder servicing agent for certain other open- end funds advised by the Manager. APPENDIX A - DESCRIPTION OF TERMS Some of the terms used in the Prospectus and the Statement of Additional Information are described below: Bank obligations include certificates of deposit which are negotiable certificates evidencing the indebtedness of a commercial bank to repay funds deposited with it for a definite period of time (usually 14 days to one year) at a stated interest rate. Bankers' acceptances are credit instruments evidencing the obligation of a bank to pay a draft which has been drawn on it by a customer; these instruments reflect the obligation both of the bank and of the drawer to pay the face amount of the instrument upon maturity. Time deposits are non-negotiable deposits maintained in a banking institution for a specified period of time at a stated interest rate. Bank notes are short-term direct credit obligations of the issuing bank or bank holding company. Commercial paper consists of short-term (usually 1 to 270 days) unsecured promissory notes issued by corporations in order to finance their current operations. Variable rate master demand notes are obligations that permit the investment of fluctuating amounts at varying rates of interest pursuant to direct arrangement between the holder and the borrower. The holder has the right to increase the amount under the note at any time up to the face amount, or to decrease the amount borrowed, and the borrower may repay up to the face amount of the note without penalty. Corporate obligations are bonds and notes issued by corporations and other business organizations, including business trusts, in order to finance their long-term credit needs. Letters of credit are obligations by the issuer (a bank or other person) to honor drafts or other demands for payment upon compliance with specified conditions. Securities issued or guaranteed by the United States Government or its agencies or instrumentalities include issues of the United States Treasury, such as bills, certificates of indebtedness, notes and bonds, and issues of agencies and instrumentalities established under the authority of an act of Congress. Such agencies and instrumentalities include, but are not limited to, Bank for Cooperatives, Federal Financing Bank, Federal Home Loan Bank, Federal Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage Association and Tennessee Valley Authority. Issues of the United States Treasury are direct obligations of the United States Government. Issues of agencies or instrumentalities are (i) guaranteed by the United States Treasury, or (ii) supported by the issuing agency's or instrumentality's right to borrow from the United States Treasury, or (iii) supported by the issuing agency's or instrumentality's own credit. APPENDIX B - DESCRIPTION OF SECURITIES RATINGS This is a description of (i) the two highest rating categories for Short Term Debt and Long Term Debt by the Rating Organizations referred to under "Investment Policies -- Money Fund", and (ii) additional rating categories that apply principally to investments by High Income Fund, Strategic Bond Fund and Bond Fund. The rating descriptions are based on information supplied by the Rating Organizations to subscribers. Short Term Debt Ratings. Moody's Investors Service, Inc. ("Moody's"): The following rating designations for commercial paper (defined by Moody's as promissory obligations not having original maturity in excess of nine months), are judged by Moody's to be investment grade, and indicate the relative repayment capacity of rated issuers: Prime-1: Superior capacity for repayment. Capacity will normally be evidenced by the following characteristics: (a) leveling market positions in well-established industries; (b) high rates of return on funds employed; (c) conservative capitalization structures with moderate reliance on debt and ample asset protection; (d) broad margins in earning coverage of fixed financial charges and high internal cash generation; and (e) well established access to a range of financial markets and assured sources of alternate liquidity. Prime-2: Strong capacity for repayment. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Standard & Poor's Corporation ("S&P"): The following ratings by S&P for commercial paper (defined by S&P as debt having an original maturity of no more than 365 days) assess the likelihood of payment: A-1: Strong capacity for timely payment. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2: Satisfactory capacity for timely payment. However, the relative degree of safety is not as high as for issues designated "A-1". Fitch Investors Service, Inc. ("Fitch"): Fitch assigns the following short-term ratings to debt obligations that are payable on demand or have original maturities of generally up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes: F-1+: Exceptionally strong credit quality; the strongest degree of assurance for timely payment. F-1: Very strong credit quality; assurance of timely payment is only slightly less in degree than issues rated "F-1+". F-2: Good credit quality; satisfactory degree of assurance for timely payment, but the margin of safety is not as great as for issues assigned "F-1+" or "F-1" ratings. Duff & Phelps, Inc. ("Duff & Phelps"): The following ratings are for commercial paper (defined by Duff & Phelps as obligations with maturities, when issued, of under one year), asset-backed commercial paper, and certificates of deposit (the ratings cover all obligations of the institution with maturities, when issued, of under one year, including bankers' acceptance and letters of credit): Duff 1+: Highest certainty of timely payment. Short-term liquidity, including internal operating factors and/or access to alternative sources of funds, is outstanding, and safety is just below risk-free U.S. Treasury short-term obligations. Duff 1: Very high certainty of timely payment. Liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. Duff 1-: High certainty of timely payment. Liquidity factors are strong and supported by good fundamental protection factors. Risk factors are very small. Duff 2: Good certainty of timely payment. Liquidity factors and company fundamentals are sound. Although ongoing funding needs may enlarge total financing requirements, access to capital markets is good. Risk factors are small. IBCA Limited or its affiliate IBCA Inc. ("IBCA"): Short-term ratings, including commercial paper (with maturities up to 12 months), are as follows: A1+: Obligations supported by the highest capacity for timely repayment. A1: Obligations supported by a very strong capacity for timely repayment. A2: Obligations supported by a strong capacity for timely repayment, although such capacity may be susceptible to adverse changes in business, economic, or financial conditions. Thomson BankWatch, Inc. ("TBW"): The following short-term ratings apply to commercial paper, certificates of deposit, unsecured notes, and other securities having a maturity of one year or less. TBW-1: The highest category; indicates the degree of safety regarding timely repayment of principal and interest is very strong. TBW-2: The second highest rating category; while the degree of safety regarding timely repayment of principal and interest is strong, the relative degree of safety is not as high as for issues rated "TBW-1". Long Term Debt Ratings. These rating categories apply principally to investments by High Income Fund, Strategic Bond Fund and Bond Fund. For Money Fund only, the two highest rating categories of each Rating Organization are relevant for securities purchased with a remaining maturity of 397 days or less, or for rating issuers of short-term obligations. Moody's: Bonds (including municipal bonds) are rated as follows: Aaa: Judged to be the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." 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, such changes as can be visualized are most unlikely to impair the fundamentally strong positions of such issues. Aa: 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 in "Aaa" securities or fluctuations 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 in "Aaa" securities. 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: Considered medium grade obligations, i.e., 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: Judged to have speculative elements; their future cannot be considered well-assured. Often the protection of interest and principal payments may be very moderate and not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B: Bonds rated "B" generally lack characteristics of desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa: Of poor standing and may be in default or there may be present elements of danger with respect to principal or interest. Ca: Represent obligations which are speculative in a high degree and are often in default or have other marked shortcomings. C: Bonds rated "C" 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 "B" in its corporate bond rating system. The modifier "1" indicates that the security ranks in the higher end of its generic rating category; the modifier "2" indicates a mid-range ranking; and the modifier "3" indicates that the issue ranks in the lower end of its generic rating category. Standard & Poor's: Bonds are rated as follows: AAA: The highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong. AA: A strong capacity to pay interest and repay principal and differ from "AAA" rated issues only in small degree. A: Have a strong capacity to pay principal and interest, although they are somewhat more susceptible to adverse effects of change in circumstances and economic conditions. BBB: Regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this capacity than for bonds in the "A" category. BB, B, CCC, CC: Regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligation. "BB" indicates the lowest degree of speculation and"CC" the highest degree. While such bonds will likely have some equality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. C, D: Bonds on which no interest is being paid are rated "C." Bonds rated "D" are in default and payment of interest and/or repayment of principal is in arrears. Fitch: AAA: Considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events. AA: Considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated "AAA". Plus (+) and minus (-) signs are used in the "AA" category to indicate the relative position of a credit within that category. Because bonds rated in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated "F-1+". Duff & Phelps: AAA: The highest credit quality. The risk factors are negligible, being only slightly more than the risk-free U.S. Treasury debt. AA: High credit quality. Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. Plus (+) and minus (-) signs are used in the "AA" category to indicate the relative position of a credit within that category. IBCA: Long-term obligations (with maturities of more than 12 months) are rated as follows: AAA: The lowest expectation for investment risk. Capacity for timely repayment of principal and interest is substantial such that adverse changes in business, economic, or financial conditions are unlikely to increase investment risks significantly. AA: A very low expectation for investment risk. Capacity for timely repayment of principal and interest is substantial. Adverse changes in business, economic, or financial conditions may increase investment risk albeit not very significantly. A plus (+) or minus (-) sign may be appended to a long term rating to denote relative status within a rating category. TBW: TBW issues the following ratings for companies. These ratings assess the likelihood of receiving payment of principal and interest on a timely basis and incorporate TBW's opinion as to the vulnerability of the company to adverse developments, which may impact the market's perception of the company, thereby affecting the marketability of its securities. A: Possesses an exceptionally strong balance sheet and earnings record, translating into an excellent reputation and unquestioned access to its natural money markets. If weakness or vulnerability exists in any aspect of the company's business, it is entirely mitigated by the strengths of the organization. A/B: The company is financially very solid with a favorable track record and no readily apparent weakness. Its overall risk profile, while low, it not quite as favorable as for companies in the highest rating category. APPENDIX TO PROSPECTUS Graphic material included in Prospectus of Oppenheimer Variable Account Funds: "Comparison of Total Return of Oppenheimer Variable Account Funds with Broad-Based Indices - Changes in Value of a $10,000 Hypothetical Investment" Linear graphs will be included in the Prospectus of Oppenheimer Variable Account Funds (the "Funds") depicting the initial account value and subsequent account value of a hypothetical $10,000 investment in shares of the Funds for the life of each Fund (except Oppenheimer Money Fund) and comparing such values with the same investments over the same time periods in the Broad-Based Indices. Set forth below are the relevant data points that will appear on the linear graphs. Additional information with respect to the foregoing, including a description of the S&P 500 Index, is set forth in the Prospectus under "Fund Performance Information - - Management's Discussion of Performance."
Salomon Brothers Fiscal High Yield Year Ended High Income Fund Market Index 04/30/86(1) $10,000 $10,000 12/31/86 $10,473 $10,510 12/31/87 $11,318 $10,990 12/31/88 $13,081 $12,664 12/31/89 $13,715 $13,012 12/31/90 $14,352 $12,096 12/31/91 $19,220 $16,851 12/31/92 $22,664 $19,859 12/31/93 $28,632 $24,878
Lehman Brothers Fiscal Corporate Year Ended Bond Fund Bond Index 04/03/85(1) $10,000 $10,000 12/31/85 $11,882 $11,819 12/31/86 $13,084 $13,770 12/31/87 $13,415 $14,112 12/31/88 $14,618 $15,352 12/31/89 $16,565 $17,526 12/31/90 $17,877 $18,811 12/31/91 $21,028 $22,325 12/31/92 $22,395 $24,294 12/31/93 $25,315 $27,209
Fiscal Capital Year Ended Appreciation Fund S&P 500 Index 08/15/86(1) $10,000 $10,000 12/31/86 $ 9,835 $ 9,684 12/31/87 $11,245 $10,192 12/31/88 $12,754 $11,880 12/31/89 $16,269 $15,638 12/31/90 $13,530 $15,152 12/31/91 $20,938 $19,758 12/31/92 $24,167 $21,261 12/31/93 $30,770 $23,400
Fiscal Year Ended Growth Fund S&P 500 Index 04/03/85(1) $10,000 $10,000 12/31/85 $10,950 $12,076 12/31/86 $12,894 $14,331 12/31/87 $13,322 $15,083 12/31/88 $16,265 $17,581 12/31/89 $20,101 $23,141 12/31/90 $18,450 $22,422 12/31/91 $23,163 $29,238 12/31/92 $26,528 $31,463 12/31/93 $28,451 $34,628
Lehman Brothers Fiscal Multiple Aggregate Year Ended Strategies Fund S&P 500 Index Bond Index 02/09/87(1) $10,000 $10,000 $10,000 12/31/87 $10,397 $ 8,923 $10,063 12/31/88 $12,700 $10,401 $10,857 12/31/89 $14,701 $13,690 $12,434 12/31/90 $14,421 $13,265 $13,549 12/31/91 $16,941 $17,297 $15,716 12/31/92 $18,463 $18,613 $16,879 12/31/93 $21,408 $20,486 $18,525
Morgan Fiscal Global Stanley Year Ended Securities Fund World Index 11/12/90(1) $10,000 $10,000 12/31/90 $10,040 $10,211 12/31/91 $10,380 $12,148 12/31/92 $ 9,642 $11,582 12/31/93 $16,423 $14,261
Lehman Salomon Brothers Brothers World Fiscal Strategic Aggregate Government Year Ended Bond Fund Bond Index Bond Index 05/03/93(1) $10,000 $10,000 $10,000 12/31/93 $10,425 $10,453 $10,426
________________________ (1) Commencement of operations. Investment Adviser Oppenheimer Management Corporation Two World Trade Center New York, New York 10048-0203 Transfer Agent Oppenheimer Shareholder Services P.O. Box 5270 Denver, Colorado 80217 Custodian of Portfolio Securities The Bank of New York One Wall Street New York, New York 10015 Independent Auditors Deloitte & Touche 1560 Broadway Denver, Colorado 80202 Legal Counsel Myer, Swanson & Adams, P.C. 1600 Broadway Denver, Colorado 80202 No dealer, salesperson or any other person has been authorized to give any information or to make any representations other than those contained in this Prospectus or the Statement of Additional Information, and if given or made, such information and representations must not be relied upon as having been authorized by the Fund, Oppenheimer Management Corporation or any affiliate thereof. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby in any state to any person to whom it is unlawful to make such an offer in such state. STATEMENT OF ADDITIONAL INFORMATION OPPENHEIMER VARIABLE ACCOUNT FUNDS 3410 South Galena Street, Denver, Colorado 80231 1-800-525-7048 OPPENHEIMER VARIABLE ACCOUNT FUNDS (the "Trust") is an investment company consisting of eight separate Funds (the "Funds"): Oppenheimer Money Fund ("Money Fund") Oppenheimer High Income Fund ("High Income Fund") Oppenheimer Bond Fund ("Bond Fund") Oppenheimer Capital Appreciation Fund ("Capital Appreciation Fund") Oppenheimer Growth Fund ("Growth Fund") Oppenheimer Multiple Strategies Fund ("Multiple Strategies Fund") Oppenheimer Global Securities Fund ("Global Securities Fund") Oppenheimer Strategic Bond Fund ("Strategic Bond Fund") Shares of the Funds are sold only to provide benefits under variable life insurance policies and variable annuity contracts (collectively the "Accounts"), as described in the Account Prospectus. This Statement of Additional Information (the "Additional Statement") is not a Prospectus. This Additional Statement should be read in conjunction with the Trust's Prospectus (the "Prospectus") dated May 1, 1994, and the Account Prospectus. TABLE OF CONTENTS Page Investment Objectives and Policies 2 Investment Restrictions 19 Trustees and Officers 20 Investment Management Services 23 Brokerage 25 Purchase, Redemption and Pricing of Shares 26 Performance and Tax Information 29 Additional Information 32 Report of Independent Auditors 34 Financial Statements 35 The date of this Additional Statement is May 1, 1994. INVESTMENT OBJECTIVES AND POLICIES The investment objectives and policies of each of the Funds are described in the Prospectus. Set forth below is supplemental information about those policies. Certain capitalized terms used in this Additional Statement are defined in the Prospectus. Investment Policies - Money Fund The Prospectus describes "Eligible Securities" in which Money Fund may invest and indicates that 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's best interests to dispose of it; but if Money Fund disposes of the security within 5 days of Oppenheimer Management Corporation (the "Manager") learning of the downgrade, the Manager will provide the Board with subsequent notice of such downgrade. If a security is in default, or ceases to be an Eligible Security, or is determined no longer to present minimal credit risks, the Board must determine whether it would be in Money Fund's best interests to dispose of the security. The Rating Organizations currently designated as such by the Securities and Exchange Commission ("SEC") are Standard & Poor's Corporation, Moody's Investors Services, Inc., Fitch Investors Services, Inc., Duff & Phelps, Inc., IBCA Limited and its affiliate, IBCA, Inc., and Thomson BankWatch, Inc. See Appendix B to the Prospectus for a description of the rating categories of the Rating Organizations. Time Deposits. The Fund may invest in fixed time deposits, which are non-negotiable deposits in a bank for a specified period of time at a stated interest rate, whether or not subject to withdrawal penalties; however, such deposits which are subject to such penalties, other than deposits maturing in less than 7 days, are subject to the 10% investment limitation for illiquid securities set forth in "Special Investment Methods - Restricted and Illiquid Securities" in the Prospectus. Floating Rate/Variable Rate Notes. Money Fund 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 may invest have a demand feature entitling the holder to demand payment at an amount approximately equal to amortized cost or 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. Variable rate demand notes may include master demand notes which are obligations that permit Money Fund to invest fluctuating amounts, which may change daily without penalty, pursuant to direct arrangements between Money Fund, as lender, and the borrower. The interest rates on these notes fluctuate from time to time. The issuer of such obligations normally has a corresponding right, after a given period, to prepay in its discretion the outstanding principal amount of the obligations plus accrued interest upon a specified number of days' notice to the holders of such obligations. 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. Because these obligations are direct lending arrangements between the lender and the borrower, it is not contemplated that such instruments generally will be traded, and there generally is no established secondary market for these obligations, although they are redeemable at face value. Accordingly, where these obligations are not secured by letters of credit or other credit support arrangements, Money Fund's right to redeem is dependent on the ability of the borrower to pay principal and interest on demand. Such obligations frequently are not rated by credit rating agencies and Money Fund may invest in obligations which are not so rated only if the Manager determines that at the time of investment the obligations are of comparable quality to the other obligations in which Money Fund may invest. The Manager, on behalf of Money Fund, will consider on an ongoing basis the creditworthiness of the issuers of the floating and variable rate obligations in Money Fund's portfolio. There is no limit on the amount of the Money Fund'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 limitations applicable to illiquid securities described in "Special Investment Methods - Restricted and Illiquid Securities" in the Prospectus. Master Demand Notes. Master demand notes are corporate obligations that permit the investment of fluctuating amounts by Money Fund at varying rates of interest pursuant to direct arrangements between Money Fund, as lender, and the corporate borrower that issues the note. These notes permit daily changes in the amounts borrowed. Money Fund 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, Money Fund'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, Money Fund 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's liquidity might be impaired if the borrower were unable to pay principal and interest on demand. Investment Policies - Money Fund, High Income Fund, Bond Fund and Strategic Bond Fund. The market value of fixed income securities in which Money Fund, High Income Fund, Bond Fund and Strategic Bond Fund may invest generally will be affected by changes in the level of interest rates. An increase in interest rates will tend to reduce the market value of fixed income investments, and a decline in interest rates will tend to increase their value. In order to take advantage of differences in securities prices and yields or of fluctuations in interest rates, consistent with their respective investment objectives, these Funds may trade for short- term profits. High Yield Securities. As stated in the Prospectus, the corporate debt in which High Income Fund and Strategic Bond Fund will principally invest may be in the lower rating categories. Risks of high yield securities include: (i) limited liquidity and secondary market support, (ii) substantial market price volatility resulting from changes in prevailing interest rates, (iii) subordination to the prior claims of banks and other senior lenders, (iv) the operation of mandatory sinking fund or call/redemption provisions during periods of declining interest rates which may cause the Fund to invest premature redemption proceeds in lower yielding portfolio securities, (v) the possibility that earnings of the issuer may be insufficient to meet its debt service, and (vi) the issuer's low creditworthiness and potential for insolvency during periods of rising interest rates and economic downturn. As a result of the limited liquidity of high yield securities, their prices have at times experienced significant and rapid decline when a substantial number of holders decided to sell. A decline is also likely in the high yield bond market during an economic downturn. An economic downturn or an increase in interest rates could severely disrupt the market for high yield bonds and adversely affect the value of outstanding bonds and the ability of the issuers to repay principal and interest. In addition, there have been several Congressional attempts to limit the use of tax and other advantages of high yield bonds which, if enacted, could adversely affect the value of these securities and the net asset value of these two Funds. For example, federally-insured savings and loan associations have been required to divest their investments in high yield bonds. Investment Policies - Capital Appreciation Fund, Growth Fund, Multiple Strategies Fund, Strategic Bond Fund and Global Securities Fund. The investment risks and rewards of certain of the investment policies of these five Funds are discussed below. Securities of Growth-Type Companies. Capital Appreciation Fund, Growth Fund and Global Securities Fund may emphasize securities of "growth-type" companies. Such issuers typically are those whose goods or services have relatively favorable long-term prospects for increasing demand, or ones which develop new products, services or markets and normally retain a relatively large part of their earnings for research, development and investment in capital assets. They may include companies in the natural resources fields or those developing industrial applications for new scientific knowledge having potential for technological innovation, such as nuclear energy, oceanography, business services and new customer products. Small Unseasoned Issuers. Each of these five Funds may invest in small unseasoned issuers. Securities of small, unseasoned companies may have a limited trading market and volatile price movements, which may adversely affect their disposition and can result in their being priced lower than might otherwise be the case. If other investment companies and investors who invest in such issuers trade the same securities when one of these Funds attempts to dispose of its holdings, that Fund may receive lower prices than might otherwise be obtained. Domestic Securities. Strategic Bond and Multiple Strategies Funds' investments in fixed-income securities issued by domestic corporations may include participation interests, asset-backed securities and other debt obligations (bonds, debentures, notes, mortgage-backed securities and CMOs) together with preferred stocks. Investment Policies-Collaterized Securities. Each of the Funds may invest in the collaterized securities described below. High Income Fund, Bond Fund and Strategic Bond Fund are most likely to make such investments. Asset-Backed Securities. 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 dependent upon payment of consumer loans by the individual borrowers. As a purchaser of an asset-backed security, the Fund would generally have no recourse to the entity that originated the loans in the event of default by a borrower. The underlying loans are subject to prepayments, which shorten the weighted average life of asset-backed securities and may lower their return, in the same manner as described above for prepayments of a pool of mortgage loans underlying mortgage- backed securities. Mortgage-Backed Securities. These securities represent participation interests in pools of residential mortgage loans which may or may not be guaranteed by agencies or instrumentalities of the U.S. Government. Such securities differ from conventional debt securities which generally provide for periodic payment of interest in fixed or determinable amounts (usually semi-annually) with principal payments at maturity or specified call dates. Mortgage-backed securities may be backed by the full faith and credit of the U.S. Treasury (e.g., direct pass-through certificates of Government National Mortgage Association); some are supported by the right of the issuer to borrow from the U.S. Government (e.g., obligations of Federal Home Loan Mortgage Corporation); and some are backed by only the credit of the issuer itself. Those guarantees do not extend to the value or yield of the mortgage-backed securities themselves or to the net asset value of the Fund's shares. Any of those government agencies may also issue collateralized mortgage-backed obligations, discussed below. The yield on mortgage-backed securities is based on the average expected life of the underlying pool of mortgage loans. The actual life of any particular pool will be shortened by any unscheduled or early payments of principal and interest. Principal prepayments generally result from the sale of the underlying property or the refinancing or foreclosure of underlying mortgages. The occurrence of prepayments is affected by a wide range of economic, demographic and social factors and, accordingly, it is not possible to predict accurately the average life of a particular pool. Yield on such pools is usually computed by using the historical record of prepayments for that pool, or, in the case of newly- issued mortgages, the prepayment history of similar pools. The actual prepayment experience of a pool of mortgage loans may cause the yield realized by the Fund to differ from the yield calculated on the basis of the expected average life of the pool. Prepayments tend to increase during periods of falling interest rates, while during periods of rising interest rates prepayments will most likely decline. When prevailing interest rates rise, the value of a pass- through security may decrease as do the values of other debt securities, but, when prevailing interest rates decline, the value of a pass-through security is not likely to rise to the extent that the values of other debt securities rise, because of the prepayment feature of pass-through securities. The Fund's reinvestment of scheduled principal payments and unscheduled prepayments it receives may occur at times when available investments offer higher or lower rates than the original investment, thus affecting the yield of the Fund. Monthly interest payments received by the Fund have a compounding effect which may increase the yield to the Fund more than debt obligations that pay interest semi-annually. Because of those factors, mortgage-backed securities may be less effective than Treasury bonds of similar maturity at maintaining yields during periods of declining interest rates. The Fund may purchase mortgage-backed securities at a premium or at a discount. Accelerated prepayments adversely affect yields for pass-through securities purchased at a premium (i.e., at a price in excess of their principal amount) and may involve additional risk of loss of principal because the premium may not have been fully amortized at the time the obligation is repaid. The opposite is true for pass-through securities purchased at a discount. The Fund may purchase mortgage-backed securities at a premium or at a discount. The Fund may invest in "stripped" mortgage backed securities, in which the principal and interest portions of the security are separated and sold. Stripped mortgage-backed securities usually have at least two classes each of which receives different proportions of interest and principal distributions on the underlying pool of mortgage assets. One common variety of stripped mortgage-backed security has one class that receives some of the interest and most of the principal, while the other class receives most of the interest and remainder of the principal. In some cases, one class will receive all of the interest (the "interest- only" or "IO" class), while the other class will receive all of the principal (the "principal-only" or "PO" class). Interest only securities are extremely sensitive to interest rate changes, and prepayments of principal on the underlying mortgage assets. An increase in principal payments or prepayments will reduce the income available to the IO security. In other types of CMOs, the underlying principal payments may apply to various classes in a particular order, and therefore the value of certain classes or "tranches" of such securities may be more volatile that the value of the pool as a whole, and losses may be more severe than on other classes. - Collateralized Mortgage-Backed Obligations ("CMOs"). CMOs are fully-collateralized bonds that are the general obligations of the issuer thereof, either the U.S. Government, a U.S. Government instrumentality, or a private issuer. Such bonds generally are secured by an assignment to a trustee (under the indenture pursuant to which the bonds are issued) of collateral consisting of a pool of mortgages. Payments with respect to the underlying mortgages generally are made to the trustee under the indenture. Payments of principal and interest on the underlying mortgages are not passed through to the holders of the CMOs as such (i.e., the character of payments of principal and interest is not passed through, and therefore payments to holders of CMOs attributable to interest paid and principal repaid on the underlying mortgages do not necessarily constitute income and return of capital, respectively, to such holders), but such payments are dedicated to payment of interest on and repayment of principal of the CMOs. CMOs often are issued in two or more classes with different characteristics such as varying maturities and stated rates of interest. Because interest and principal payments on the underlying mortgages are not passed through to holders of CMOs, CMOs of varying maturities may be secured by the same pool of mortgages, the payments on which are used to pay interest on each class and to retire successive maturities (known as "tranches") in sequence. Unlike other mortgage- backed securities (discussed above), CMOs are designed to be retired as the underlying mortgages are repaid. In the event of prepayment on such mortgages, the class of CMO first to mature generally will be paid down. Therefore, although in most cases the issuer of CMOs will not supply additional collateral in the event of such prepayment, there will be sufficient collateral to secure CMOs that remain outstanding. - Participation Interests. Strategic Bond Fund, Global Securities Fund, High Income Fund and Multiple Strategies Fund may invest in participation interests, subject to the limitation, described in "Restricted and Illiquid Securities" in the Prospectus, on investments by the Fund in illiquid investments. Participation interests provide the Fund an undivided interest in a loan made by the issuing financial institution in the proportion that the Fund's participation interest bears to the total principal amount of the loan. It is currently intended that no more than 5% of either Multiple Strategies Fund's or Strategic Bond Fund's net assets can be invested in participation interests of the same issuing bank. 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, and there is a risk that such borrowers may have difficulty making payments. In the event the borrower fails to pay scheduled interest or principal payments, the Fund could experience a reduction in its income and might experience a decline in the net asset value of its shares. In the event of a failure by the financial institution to perform its obligation in connection with the participation agreement, the Fund might incur certain costs and delays in realizing payment or may suffer a loss of principal and/or interest. Borrowing. From time to time, each of Capital Appreciation Fund, Strategic Bond Fund, Growth Fund, Multiple Strategies Fund and Global Fund may increase its ownership of securities by borrowing from banks on an unsecured basis and investing the borrowed funds, subject to the restrictions stated in the Prospectus. Any such borrowing will be made only from banks and pursuant to the requirements of the Investment Company Act. Growth Fund may borrow up to 5% of the value of its assets and Global Securities Fund may borrow up to 10% of the value of its assets. Capital Appreciation Fund, Strategic Bond Fund and Multiple Strategies Fund may borrow to the extent that the value of that Fund's assets, less its liabilities other than borrowings, is equal to at least 300% of all borrowings including the proposed borrowing. If the value of such Fund's assets so computed should fail to meet the 300% asset coverage requirement, that Fund is required within three days to reduce its bank debt to the extent necessary to meet such requirement and may have to sell a portion of its investments at a time when independent investment judgment would not dictate such sale. Borrowing for investment increases both investment opportunity and risk. Interest on money borrowed is an expense these five Funds would not otherwise incur, so that they may have little or no net investment income during periods of substantial borrowings. Since substantially all of these Funds' assets fluctuate in value whereas borrowing obligations are fixed, when a Fund has outstanding borrowings, its net asset value will tend to increase and decrease more when its portfolio assets increase or decrease than would otherwise be the case. Foreign Securities. The obligations of foreign governmental entities may or may not be supported by the full faith and credit of a foreign government. Obligations of supranational entities include those of international organizations designated or supported by governmental entities to promote economic reconstruction or development and of international banking institutions and related government agencies. Examples include the International Bank for Reconstruction and Development (the World Bank), the European Coal and Steel Community, the Asian Development Bank and the Inter-American Development Bank. The governmental members, or "stockholders," usually make initial capital contributions to the supranational entity and in many cases are committed to make additional capital contributions if the supranational entity is unable to repay its borrowings. Each supranational entity's lending activities are limited to a percentage of its total capital (including "callable capital" contributed by members at the entity's call), reserves and net income. There is no assurance that foreign governments will be able or willing to honor their commitments. Investing in foreign securities involves considerations and possible risks not typically associated with investing in securities in the U.S. The values of foreign securities will be affected by changes in currency rates or exchange control regulations or currency blockage, application of foreign tax laws, including withholding taxes, changes in governmental administration or economic or monetary policy (in the U.S. or abroad) or changed circumstances in dealings between nations. Costs will be incurred in connection with conversions between various currencies. Foreign brokerage commissions are generally higher than commissions in the U.S., and foreign securities markets may be less liquid, more volatile and less subject to governmental regulation than in the U.S. Investments in foreign countries could be affected by other factors not generally thought to be present in the U.S., including expropriation or nationalization, confiscatory taxation and potential difficulties in enforcing contractual obligations, and could be subject to extended settlement periods. Because each Fund, other than Money Fund, may purchase securities denominated in foreign currencies, a change in the value of any such currency against the U.S. dollar will result in a change in the U.S. dollar value of each Fund's assets and each Fund's income available for distribution. In addition, although a portion of each Fund's investment income may be received or realized in foreign currencies, the Fund will be required to compute and distribute its income in U.S. dollars, and absorb the cost of currency fluctuations. High Income Fund, Strategic Bond Fund and Global Securities Fund may engage in foreign currency exchange transactions for hedging purposes to attempt to protect against changes in future exchange rates. See "Hedging - Forward Contracts," below. The values of foreign investments and the investment income derived from them may also be affected unfavorably by changes in currency exchange control regulations. Although each Fund, other than Money Fund, will invest only in securities denominated in foreign currencies that at the time of investment do not have significant government-imposed restrictions on conversion into U.S. dollars, there can be no assurance against subsequent imposition of currency controls. In addition, the values of foreign securities will fluctuate in response to changes in U.S. and foreign interest rates. Investments in foreign securities offer potential benefits not available from investments solely in securities of domestic issuers by offering 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. From time to time, 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 reimposed. Warrants and Rights. As described in the Prospectus, each Fund other than Money Fund may invest in warrants and rights. Warrants are options to purchase equity securities at specified prices valid for a specific period of time. Their prices do not necessarily move parallel to the prices of the underlying securities. Any price paid for a warrant will be lost unless the warrant is exercised prior to its expiration. Rights are similar to warrants, but normally have a short duration and are distributed directly by the issuer to its shareholders. Warrants and rights have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer. Repurchase Transactions. These Funds may acquire securities that are subject to repurchase agreements in order to generate income while providing liquidity as set forth in the prospectus. Money Fund's repurchase agreements must comply with the collateral requirements of Rule 2a-7 under the Investment Company Act. In a repurchase transaction, a Fund acquires a security from, and simultaneously resells it to, an approved vendor (a U.S. commercial bank or the U.S. branch of a foreign bank with assets of $1 billion or broker-dealer with net capital of at least $50 million which has been designated a primary dealer in government securities). The sale 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. The majority of these transactions run from day to day, and delivery pursuant to resale typically will occur within one to five days of the purchase. Repurchase agreements are considered "loans" under the Investment Company Act, collateralized by the underlying security. The Funds' repurchase agreements require that at all times while the repurchase agreement is in effect, the value of the collateral must equal or exceed the repurchase price to fully collateralize the repayment obligation. Additionally, the Funds' Manager will continuously monitor the collateral's value and will impose creditworthiness requirements to confirm that the vendor is financially sound. Loans of Portfolio Securities. Each Fund may lend its respective portfolio securities subject to the restrictions stated in "Loans of Portfolio Securities" in the Prospectus. Under applicable regulatory requirements (which are subject to change), the loan collateral must, on each business day, at least equal the value of the loaned securities and must consist of cash, bank letters of credit, U.S. Government securities, or certain other cash equivalents. To be acceptable as collateral, letters of credit must obligate a bank to pay amounts demanded by the Trust if the demand meets the terms of the letter. Such terms and the issuing bank must be satisfactory to the Trust. Any Fund lending its securities receives amounts equal to the dividends declared or interest paid on the loaned securities during the term of the loan as well as the interest on the collateral securities, less any finders' or administrative fees the Fund pays in arranging the loan. A Fund may share the interest it receives on the collateral securities with the borrower as long as it realizes at least a minimum amount of interest required by the lending guidelines established by the Board of Trustees. The lending Fund will not lend its portfolio securities to any officer, trustee, employee or affiliate of the Fund or its Manager. The terms of a Fund's loans must meet certain tests under the Internal Revenue Code and permit it to reacquire loaned securities on five days' notice or in time to vote on any important matter. When-Issued and Delayed Delivery Transactions. Each Fund may purchase securities on a "when-issued" basis, and may purchase or sell such securities on a "delayed delivery" basis. Although a Fund will enter into such transactions for the purpose of acquiring securities for its portfolio or for delivery pursuant to options contracts it has entered into, the Fund may dispose of a commitment prior to settlement. "When- issued" or "delayed delivery" refers 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, but delivery and payment for the securities take place at a later date. During the period between commitment by a Fund and settlement (generally within two months but not to exceed 120 days), no payment is made for the securities purchased by the purchaser, and no interest accrues to the purchaser from the transaction. Such securities are subject to market fluctuation; the value at delivery may be less than the purchase price. The Fund will maintain a segregated account with its Custodian, consisting of cash, U.S. Government securities, or other high grade debt securities rated "A" or better by Moody's or Standard & Poor's at least equal to the value of purchase commitments until payment is made. The Funds will engage in when-issued transactions in order to secure what is considered to be an advantageous price and yield at the time of entering into the obligation. When a Fund engages in when-issued or delayed delivery transactions, it relies on the buyer or seller, as the case may be, to consummate the transaction. Failure to do so may result in the Fund losing the opportunity to obtain a price and yield considered to be advantageous. If any of the Funds chooses to (i) dispose of the right to acquire a when-issued security prior to its acquisition or (ii) dispose of its right to deliver or receive against a forward commitment, it may incur a gain or loss. At the time the Fund makes a commitment to purchase or sell a security on a when-issued or forward commitment basis, it records the transaction and reflects the value of the security purchased, or if a sale, the proceeds to be received in determining its net asset value. To the extent any Fund engages in when-issued and delayed delivery transactions, it will do so for the purpose of acquiring or selling securities consistent with its investment objective and policies and not for the purposes of investment leverage. Each Fund enters into such transactions only with the intention of actually receiving or delivering the securities, although (as noted above), when-issued securities and forward commitments may be sold prior to settlement date. In addition, 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 loss to that Fund. When-issued transactions and forward commitments allow a Fund a technique to use against anticipated changes in interest rates and prices. For instance, in periods of rising interest rates and falling prices, the 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 forward commitment basis, thereby obtaining the benefit of currently higher cash yields. Covered Calls and Hedging As described in the Prospectus, High Income Fund, Capital Appreciation Fund, Growth Fund, Multiple Strategies Fund, Global Securities Fund and Strategic Bond Fund may each write covered calls. High Income Fund, Global Securities Fund and Strategic Bond Fund may also employ one or more types of Hedging Instruments, including the futures identified in the Prospectus ("Futures"). High Income, Global Securities and Strategic Bond Funds' strategy of hedging with Futures and options on Futures will be incidental to each such Fund's activities in the underlying cash market. When hedging to attempt to protect against declines in the market value of the Fund's portfolio, to permit the Fund to retain unrealized gains in the value of portfolio securities which have appreciated, or to facilitate selling securities for investment reasons, a given Fund would: (i) sell Futures, (ii) purchase puts on such Futures or securities, or (iii) write covered calls on securities or on Futures. When hedging to permit Global Securities Fund to establish a position in the equities market as a temporary substitute for purchasing individual equity securities (which that Fund will normally purchase, and then terminate that hedging position), or to attempt to protect against the possibility that High Income, Global Securities or Strategic Bond Funds' portfolio debt securities are not fully included in a rise in the debt securities market, these funds may: (i) purchase Futures, or (ii) purchase calls on such Futures or on securities. When hedging to attempt to protect against declines in the dollar value of a foreign currency-denominated security or in a payment on such security, High Income Fund, Global Securities Fund and Strategic Bond Fund would: (a) purchase puts on that foreign currency or on foreign currency Futures, (b) write calls on that currency or on such Futures, or (c) enter into Forward Contracts at a lower or higher rate than the spot ("cash") rate. Additional information about the Hedging Instruments these Funds may use is provided below. At present, High Income Fund, Global Securities Fund and Strategic Bond Fund do not intend to purchase or sell Futures or related options if, after any such purchase, the sum of initial margin deposits on Futures and premiums paid for related options exceeds 5% of the value of that Fund's total assets. Certain options on foreign currencies are considered related options for this purpose. In the future, a Fund may employ Hedging Instruments and strategies that are not presently contemplated but which may be developed, to the extent such investment methods are consistent with that Fund's investment objective, legally permissible and adequately disclosed. Writing Covered Call Options. When either High Income Fund, Capital Appreciation Fund, Growth Fund, Multiple Strategies Fund, Global Securities Fund or Strategic Bond Fund writes a call on a security, it receives a premium and agrees to sell the underlying security to a purchaser of a corresponding call on the same security during the call period (usually not more than 9 months) at a fixed exercise price (which may differ from the market price of the underlying security), regardless of market price changes during the call period. Such Fund has retained the risk of loss should the price of the underlying security decline during the call period, which may be offset to some extent by the premium. To terminate its obligation on a call it has written, each such Fund may purchase a corresponding call in a "closing purchase transaction." A profit or loss will be realized, depending upon whether the net of the amount of the option transaction costs and the premium received on the call written was more or less than the price of the call subsequently purchased. A profit may also be realized if the call expires unexercised, because a Fund retains the underlying security and the premium received. Any such profits are considered short-term capital gains for Federal income tax purposes, and when distributed by each such Fund are taxable as ordinary income. If the Fund could not effect a closing purchase transaction due to lack of a market, it would have to hold the callable securities until the call expired or was exercised. Call writing may affect a Fund's turnover rate and brokerage commissions. The exercise of calls written by a Fund may cause that Fund to sell related portfolio securities, thus increasing its turnover rate in a manner beyond its control. High Income, Global Securities and Strategic Bond Funds may also write (and purchase) calls on foreign currencies. A call written on a foreign currency by one of these Funds 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 for additional cash consideration held in a segregated account by its custodian) upon conversion or exchange of other foreign currency held in its portfolio. A call written by one of these Funds on a foreign currency is for cross-hedging purposes if it is not covered, but is designed to provide a hedge against a decline (due to an adverse change in the exchange rate) 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. In such circumstances, the Fund collateralizes the option by maintaining in a segregated account with the Fund's custodian, cash or U.S. Government securities in an amount not less than the value of the underlying foreign currency in U.S. dollars marked- to-market daily. High Income Fund, Global Securities Fund and Strategic Bond Fund may also write calls on Futures without owning a futures contract (or, with respect to the High Income Fund, a deliverable bond) provided that at the time the call is written, the Fund covers the call by segregating in escrow an equivalent dollar amount of liquid assets. The Fund will segregate additional liquid assets if the value of the escrowed assets drops below 100% of the current value of the Future. In no circumstances would an exercise notice require a Fund to deliver a futures contract; it would simply put the Fund in a short futures position, which is permitted by each Fund's hedging policies. Hedging - High Income Fund, Global Securities Fund and Strategic Bond Fund. Set forth below are the Hedging Instruments which High Income Fund, Global Securities Fund and Strategic Bond Fund may use. Writing 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. Writing a put covered by segregated liquid assets equal to the exercise price of the put has the same economic effect to a Fund as writing a covered call. The premium the Fund receives from writing a put option represents a profit, as long as the price of the underlying investment remains above the exercise price. However, a Fund has also assumed the obligation during the option period to buy the underlying investment from the buyer of the put at the exercise price, even though the value of the investment may fall below the exercise price. If the put expires unexercised, the Fund (as the writer of the put) realizes a gain in the amount of the premium less transaction costs. If the put is exercised, the Fund must fulfill its obligation to purchase the underlying investment at the exercise price, which will usually exceed the market value of the investment at that time. In that case, the Fund may incur a loss, 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 incurred. When writing put options on securities or on foreign currencies, to secure its obligation to pay for the underlying security, the Fund will deposit in escrow liquid assets with a value equal to or greater than the exercise price of the underlying securities. The Fund therefore forgoes the opportunity of investing the segregated assets or writing calls against those assets. As long as the obligation of the Fund as the put writer continues, it may be assigned an exercise notice by the exchange or broker-dealer through whom such option was sold, requiring the Fund to take delivery of the underlying security against payment of the exercise price. The Fund may be assigned an exercise notice at any time prior to the termination of its obligation as the writer of the put. This obligation terminates upon expiration of the put, or such earlier time at which the Fund effects a closing purchase transaction by purchasing a put of the same series as that previously sold. Once the Fund has been assigned an exercise notice, it is thereafter not allowed to effect a closing purchase transaction. The Fund may effect a closing purchase transaction to realize a profit on an outstanding put option it has written or to prevent an underlying security from being put. Furthermore, effecting such a closing purchase transaction will permit the Fund to write another put option to the extent that the exercise price thereof is secured by the deposited assets, or to utilize the proceeds from the sale of such assets for other investments by that Fund. The Fund will realize a profit or loss from a closing purchase transaction if the cost of the transaction is less or more than the premium received from writing the option. As above for writing covered calls, any and all such profits described herein from writing puts are considered short-term gains for Federal tax purposes, and when distributed by the Fund, are taxable as ordinary income. Purchasing Calls and Puts. When High Income Fund, Global Securities Fund or Strategic Bond Fund purchases a call (other than in a closing purchase transaction), it pays a premium and 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. The Fund benefits only if the call is sold 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 call is exercised. If the call is not exercised or sold (whether or not at a profit), it will become worthless at its expiration date and the Fund will lose its premium payment and the right to purchase the underlying investment. When such Fund purchases a put, it pays a premium and 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 the 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 and the Fund will lose its premium payment and the right to sell the underlying investment; the put may, however, be sold prior to expiration (whether or not at a profit). Purchasing a put on either Futures or on securities it does not own permits a Fund either to resell the put or, if applicable, to buy the underlying investment and sell it at the exercise price. The resale price of the put will vary inversely with 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. In the event of a decline in price of the underlying investment, the Fund could exercise or sell the put at a profit to attempt to offset some or all of its loss on its portfolio securities. When the Fund purchases a put on a Future or security not held by it, the put protects the Fund to the extent that the prices of the underlying Future or securities move in a similar pattern to the prices of the securities in a Fund's portfolio. Futures. No price is paid or received upon the purchase or sale of a Future. Upon entering into a Futures transaction, a Fund will be required to deposit an initial margin payment with the futures commission merchant (the "futures broker"). The initial margin will be deposited with the Fund's Custodian 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 to reflect changes in its market value, subsequent margin payments, called variation margin, will be paid to or by the futures broker on a daily basis. Prior to expiration of the Future, if the Fund elects to close out its position by taking an opposite position, a final determination of variation margin is made, additional cash is required to be paid by or released to the Fund, and any loss or gain is realized for tax purposes. All futures transactions are effected through a clearinghouse associated with the exchange on which the contracts are traded. Forward Contracts. A Forward Contract involves bilateral obligations of one party to purchase, and another party to sell, a specific currency at a future date (which may be any fixed number of days from the date of the contract agreed upon by the parties), at a price set at the time the contract is entered into. These contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. High Income, Global Securities and Strategic Bond Funds may use Forward Contracts to protect against uncertainty in the level of future exchange rates. The use of Forward Contracts does not eliminate fluctuations in the prices of the underlying securities the Fund owns or intends to acquire, but it does fix a rate of exchange in advance. In addition, although Forward Contracts limit the risk of loss due to a decline in the value of the hedged currencies, at the same time they limit any potential gain that might result should the value of the currencies increase. None of these Funds speculates with Forward Contracts or foreign currency exchange rates. These Funds may enter into Forward Contracts with respect to specific transactions. For example, when a Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency, or when a Fund anticipates receipt of dividend payments in a foreign currency, a Fund may desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar equivalent of such payment by entering into a Forward Contract, for a fixed amount of U.S. Dollars per unit of foreign currency, for the purchase or sale of the amount of foreign currency involved in the underlying transaction. A Fund will thereby be able to protect itself against a possible loss resulting from an adverse change in the relationship between 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 such payments are made or received. These Funds may also use Forward Contracts to lock in the U.S. dollar value of portfolio positions ("position hedge"). In a position hedge, for example, when a Fund believes that foreign currency may suffer a substantial decline against the U.S. dollar, it may enter into a forward sale contract to sell an amount of that foreign currency approximating the value of some or all of that Fund's portfolio securities denominated in such foreign currency, or when a Fund believes that the U.S. dollar may suffer a substantial decline against a foreign currency, it may enter into a forward purchase contract to buy that foreign currency for a fixed dollar amount. In this situation the Fund may, in the alternative, enter into a Forward Contract to sell a different foreign currency for a fixed U.S. dollar amount where that Fund believes that the U.S. dollar value of the currency to be sold pursuant to the Forward Contract will fall whenever there is a decline in the U.S. dollar value of the currency in which portfolio securities of that Fund are denominated ("cross-hedge"). These Funds will not enter into such Forward Contracts or maintain a net exposure to such contracts where the consummation of the contracts would obligate that Fund to deliver an amount of foreign currency in excess of the value of the Fund's portfolio securities or other assets denominated in that currency. The Fund, however, in order to avoid excess transactions and transaction costs, may maintain a net exposure to Forward Contracts in excess of the value of the Fund's portfolio securities or other assets denominated in that currency provided the excess amount is "covered" by liquid, high-grade debt securities, denominated in that foreign currency or U.S. dollars, at least equal at all times to the amount of such excess. As an alternative, the Fund may purchase a call option permitting the Fund to purchase the amount of foreign currency being hedged by a forward sale contract at a price no higher than the forward contract price or the Fund may purchase a put option permitting the Fund to sell the amount of foreign currency subject to a forward purchase contract at a price as high or higher than the forward contract price. Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not entered into such contracts. The precise matching of the Forward Contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of these securities between the date the Forward Contract is entered into and the date it is sold. Accordingly, it may be necessary for a Fund to purchase additional foreign currency on the spot (i.e., cash) market (and bear the expense of such purchase), if the market value of the security is less than the amount of foreign currency the Fund is obligated to deliver and if a decision is made to sell the security and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security if its market value exceeds the amount of foreign currency a Fund is obligated to deliver. 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 transactions costs. At or before the maturity of a Forward Contract requiring any Fund to sell a currency, the Fund may either sell a portfolio security and use the sale proceeds to make delivery of the currency or retain the security and offset its contractual obligation to deliver the currency by purchasing a second contract pursuant to which the Fund will obtain, on the same maturity date, the same amount of the currency that it is obligated to deliver. Similarly, the Fund may 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 to the extent the exchange rate or rates between the currencies involved moved between the execution dates of the first contract and offsetting contract. The cost to the 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 fees or commissions are involved. Because such contracts are not traded on an exchange, a Fund must evaluate the credit and performance risk of each particular counterparty under a Forward Contract. Although each 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. The Fund may convert foreign currency from time to time, and investors should be aware of the costs of currency conversion. 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 may offer to sell a foreign currency to the Fund at one rate, while offering a lesser rate of exchange should that Fund desire to resell that currency to the dealer. Interest Rate Swap Transactions. The risk incurred by Strategic Bond Fund in entering into a swap agreement is twofold: 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 have been greater than those received by it. Credit risk arises from the possibility that the counterparty will default. If the counterparty to an interest rate swap 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 will enter into swap transactions with appropriate counterparties pursuant to master netting agreements. A master netting agreement provides that all swaps done between the Fund and that counterparty under the master agreement shall be regarded as parts of an integral agreement. If on any date amounts are payable in the same currency in respect of one or more swap transactions, the net amount payable on that date in that currency shall be paid. In addition, the master netting agreement may provide that if one party defaults generally or on one swap, the counterparty may terminate the swaps with that party. Under such agreements, if there is a default resulting 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 with respect to each swap (i.e., 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." Additional Information About Hedging Instruments and Their Use. Each Fund's Custodian, or a securities depository acting for the Custodian, will act as that Fund's escrow agent, through the facilities of the Options Clearing Corporation ("OCC"), as to the securities on which the Fund has written options or as to other acceptable escrow securities, so that no margin will be required for such transactions. OCC will release the securities on the expiration of the option or upon the Fund's entering into a closing transaction. An option position may be closed out only on a market which 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. When High Income Fund, Strategic Bond Fund or Global Securities Fund writes an over-the-counter ("OTC") option, it will enter into an arrangement with a securities dealer, which would establish a formula price at which that Fund would have the absolute right to repurchase that OTC option. This formula price would generally be based on a multiple of the premium received for the option, plus the amount by which the option is exercisable below for a put, above for a call, the market price of the underlying security ("in-the-money"). For any OTC option which any of these three Funds writes, it will treat as illiquid (for purposes of the 15% of net assets restriction on illiquid securities, stated in the Prospectus) the mark-to-market value of any OTC option held by it. The SEC is evaluating the general issue of whether or not OTC options should be considered as liquid securities, and the procedure described above could be affected by the outcome of that evaluation. Each Fund's option activities may affect its turnover rate and brokerage commissions. As noted above, the exercise of calls written by a Fund may cause that Fund to sell related portfolio securities, thus increasing its turnover rate in a manner beyond a Fund's control. The exercise by a Fund of puts on securities or Futures may cause the sale of related investments, also increasing portfolio turnover. Although such exercise is within the Fund's control, holding a put might cause the Fund to sell the underlying investment for reasons which would not exist in the absence of the put. Each Fund will pay a brokerage commission each time it buys or sells a call, buys a put or sells an underlying investment in connection with the exercise of a put or call. Such commissions may be higher than those which would apply to direct purchases or sales of the underlying investments. Premiums paid for options are small in relation to the market value of such investments and 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 value being more sensitive to changes in the value of the underlying investment. Regulatory Aspects of Hedging Instruments. High Income Fund, Global Securities Fund and Strategic Bond Fund must each operate within certain restrictions as to its long and short positions in Futures and options thereon under a rule (the "CFTC Rule") adopted by the Commodity Futures Trading Commission (the "CFTC") under the Commodity Exchange Act (the "CEA"), which excludes the Fund from registration with the CFTC as a "commodity pool operator" (as defined in the CEA) if it complies with the CFTC Rule. Under these restrictions the Fund will not, as to any positions, whether short, long or a combination thereof, enter into Futures and related options for which the aggregate initial margins and premiums exceed 5% of the fair market value of its total assets, with certain exclusions as defined in the CFTC Rule. Under the restrictions, the Fund also must, as to its short positions, use Futures and options thereon solely for bona-fide hedging purposes within the meaning and intent of the applicable provisions under the CEA. Certain options on foreign currencies are considered related options for this purpose. Transactions in options by these Funds are subject to limitations established by each of the exchanges governing the maximum number of options which may be written or held by a single investor or group of investors acting in concert, 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 exchanges or brokers. Thus, the number of options which the Fund may write or hold may be affected by options written or held by other entities, including other investment companies having the same or an affiliated investment adviser. Position limits also apply to Futures. An exchange may order the liquidation of positions found to be in violation of those limits and may impose certain other sanctions. Due to requirements under the Investment Company Act, when a Fund purchases a Future, the Fund will maintain, in a segregated account or accounts with its custodian bank, cash or readily-marketable, short-term (maturing in one year or less) debt instruments in an amount equal to the market value of the securities underlying such Future, less the margin deposit applicable to it. Tax Aspects of Hedging Instruments and Covered Calls. Each Fund intends to qualify as a "regulated investment company" under the Internal Revenue Code of 1986. That qualification enables each Fund to "pass- through" its income and realized capital gains to shareholders without the Fund having to pay tax on them. This avoids a "double tax" on that income and capital gains, since shareholders will be taxed on the dividends and capital gains they receive from the Funds. One of the tests for each Fund's qualification is that less than 30% of its gross income must be derived from gains realized on the sale of securities held for less than three months. To comply with that 30% cap, the Funds will limit the extent to which they engage in the following activities, but will not be precluded from them: (i) selling investments, including Futures, held for less than three months, whether or not they were purchased on the exercise of a call held by that Fund; (ii) purchasing calls or puts which expire in less than three months; (iii) effecting closing transactions with respect to calls or puts purchased less than three months previously; (iv) exercising puts held by that Fund for less than three months; and (v) writing calls on investments held for less than three months. Possible Risk Factors in Hedging. In addition to the risks with respect to options discussed in the Prospectus and above, there is a risk in using short hedging by: (i) selling Futures or (ii) purchasing puts on broadly-based indices or Futures to attempt to protect against declines in the value of the Fund's securities that the prices of the Futures or applicable index (thus the prices of the Hedging Instruments) will correlate imperfectly with the behavior of the cash (i.e., market value prices) of the Fund's securities. The ordinary spreads between prices in the cash and futures markets are subject to distortions due to differences in the natures of those markets. First, all participants in the futures markets 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 markets depend 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 markets could be reduced, thus producing distortion. Third, from the point of view of speculators, the deposit requirements in the futures markets are less onerous than margin requirements in the securities markets. Therefore, increased participation by speculators in the futures markets may cause temporary price distortions. 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 securities being hedged and movements in the price of the Hedging Instruments, each Fund may use Hedging Instruments in a greater dollar amount than the dollar amount of securities being hedged if the historical volatility of the prices of such securities being hedged is more than the historical volatility of the applicable index. It is also possible that where a Fund has used Hedging Instruments in a short hedge, the market may advance and the value of securities held in the Fund's portfolio may decline. If this occurred, the Fund would lose money on the Hedging Instruments and also experience a decline in value in its 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 equity securities will tend to move in the same direction as the indices upon which the Hedging Instruments are based. If a Fund uses 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, on securities, or on stock indices, it is possible that the market may decline. If either Fund then concludes not to invest in such securities at that time because of concerns as to possible further market decline or for other reasons, that Fund will realize a loss on the Hedging Instruments that is not offset by a reduction in the price of the equity securities purchased. Short Sales Against-the-Box. Global Securities Fund and Strategic Bond Fund may sell securities short in "short sales against-the-box." In such short sales, while the short position is open, the Fund must own an equal amount of such securities, or by virtue of ownership of securities have the right, without payment of further consideration, to obtain an equal amount of the securities sold short. Short sales against-the-box may be made to defer, for Federal income tax purposes, recognition of gain or loss on the sale of securities "in the box" until the short position is closed out. INVESTMENT RESTRICTIONS The significant investment restrictions of all the Funds are set forth in the Prospectus. The following investment restrictions are also fundamental policies and, together with the fundamental policies described in the Prospectus, cannot be changed without the vote of a "majority" (as defined in the Investment Company Act) of the outstanding shares of the Trust (or of the Fund, as to matters affecting only that Fund). Under the Investment Company Act, such a "majority" vote is defined as the vote of the holders of the lesser of: (i) 67% or more of the shares present or represented by proxy at such meeting, if the holders of more than 50% of the outstanding shares are present or represented by proxy, or (ii) more than 50% of the outstanding shares. Under these additional restrictions, each of the Funds cannot: (1) invest in commodities or in commodities contracts, other than the Hedging Instruments permitted by any of its other fundamental policies, whether or not any such Hedging Instrument is considered to be a commodity or a commodity contract (High Income, Global Securities and Strategic Bond Funds, only; none of the percentage limitations and restrictions for Strategic Bond Fund regarding Hedging Instruments is a fundamental policy of Strategic Bond Fund); (2) invest in oil or gas exploration or development programs; (3) invest in real estate or in interests in real estate, but may purchase securities of issuers holding real estate or interests therein; (4) purchase securities on margin, except that a Fund may make margin deposits in connection with any of the Hedging Instruments which it may use (High Income, Global Securities and Strategic Bond Funds, only); (5) make short sales of securities, except that Global Securities Fund and Strategic Bond Fund may make short sales "against-the-box"; (6) invest in companies for the purpose of acquiring control of management thereof; (7) underwrite securities of other companies, except insofar as it might be deemed to be an underwriter for purposes of the Securities Act of 1933 in the resale of any securities held in its own portfolio; (8) invest or hold securities of any issuer if those officers and trustees or directors of the Trust or its adviser owning individually more than 1/2 of 1% of the securities of such issuer together own more than 5% of the securities of such issuer; or (9) invest in other open-end investment companies, or invest more than 5% of its net assets at the time of purchase in closed-end investment companies, including small business investment companies, nor make any such investments at commission rates in excess of normal brokerage commissions. New York's insurance laws require that investments of each Fund be made with a degree of care of an "ordinarily prudent person." The Manager believes that compliance with this standard will not have a negative impact on the performance of any of the Funds. In addition, each Fund's investments must comply with the diversification requirements contained in Section 817(h) of the Internal Revenue Code, and Global Securities Fund has undertaken to comply with the diversification requirements of Section 10506 of the California Insurance Code (see "Investment Policies -- Global Securities Fund" in the Prospectus), and in each case with the regulations adopted under those statutes. TRUSTEES AND OFFICERS The Trust's Trustees and officers and their principal occupations and business affiliations during the past five years are listed below. All of the Trustees are also trustees, directors or managing general partners of Oppenheimer Equity Income Fund, Oppenheimer High Yield Fund, Oppenheimer Strategic Funds Trust, Oppenheimer Strategic Investment Grade Bond Fund, Oppenheimer Strategic Short-Term Income Fund, Oppenheimer Strategic Income & Growth Fund, Centennial America Fund, L.P., Oppenheimer Total Return Fund, Inc., Oppenheimer Cash Reserves, Oppenheimer Tax-Exempt Cash Reserves, Oppenheimer Integrity Funds, Oppenheimer Tax-Exempt Bond Fund, Oppenheimer Limited-Term Government Fund, Main Street Funds, Inc., Oppenheimer Champion High Yield Fund, Centennial Government Trust, Centennial Money Market Trust, Centennial Tax Exempt Trust, Centennial California Tax Exempt Trust, Centennial New York Tax Exempt Trust, Daily Cash Accumulation Fund, Inc. and The New York Tax-Exempt Income Fund, Inc. (all of the foregoing funds are collectively referred to as the "Denver OppenheimerFunds"). Mr. Fossel is President and Mr. Swain is Chairman of the Denver OppenheimerFunds. As of April 8, 1994, none of the Trustees or officers were Account owners and thus none owned any Fund shares. ROBERT G. AVIS, Trustee* One North Jefferson Ave., St. Louis, Missouri 63103 Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G. Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset Management and A.G. Edwards Trust Company (its affiliated investment adviser and trust company, respectively). WILLIAM A. BAKER, Trustee 197 Desert Lakes Drive, Palm Springs, California 92264 Management Consultant. CHARLES CONRAD, JR., Trustee 6824 Vista de Oro, des Cruces, New Mexico 88005 Vice President, McDonnell Douglas Ltd.; formerly associated with the National Aeronautics and Space Administration. JON S. FOSSEL, President and Trustee* Two World Trade Center, New York, New York 10048 Chairman, Chief Executive Officer and a director of the Manager; President and a director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's parent holding company, and of HarbourView Asset Management Corp. ("HarbourView"), a subsidiary of the Manager; a director of Shareholder Services, Inc. ("SSI") and Shareholder Financial Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager; formerly President of the Manager. RAYMOND J. KALINOWSKI, Trustee 44 Portland Drive, St. Louis, Missouri 63131 Formerly Vice Chairman and a director of A.G. Edwards, Inc., parent holding company of A.G. Edwards & Sons, Inc. (a broker-dealer), of which he was a Senior Vice President. C. HOWARD KAST, Trustee 2552 East Alameda, Denver, Colorado 80209 Formerly the Managing Partner of Deloitte Haskins & Sells (an accounting firm). ROBERT M. KIRCHNER, Trustee 7500 E. Arapahoe Road, Denver, Colorado 80209 President of The Kirchner Company (management consultants). NED M. STEEL, Trustee 3416 South Race Street, Englewood, Colorado 80110 Chartered property and casualty underwriter; formerly Senior Vice President and a director of Van Gilder Insurance Corp. (insurance brokers). JAMES C. SWAIN, Chairman and Trustee* 3410 South Galena Street, Denver, Colorado 80231 Vice Chairman of the Manager; President and a director of Centennial Asset Management Corporation, an investment advisory subsidiary of the Manager ("Centennial"); formerly President and a director of Oppenheimer Asset Management Corporation ("OAMC"), an in- vestment adviser which was a subsidiary of the Manager and Chairman of the Board of SSI. PAUL LAROCCO, Portfolio Manager, Capital Appreciation Fund Two World Trade Center, New York, New York 10048 Assistant Vice President of the Manager; Associate Portfolio Manager for other OppenheimerFunds; formerly a securities analyst with Columbus Circle Investors, prior to which he was investment analyst for Chicago Title & Trust Co. ROBERT C. DOLL, JR., Vice President; Growth Fund Portfolio Manager Two World Trade Center, New York, New York 10048 Senior Vice President of the Manager; an officer of other OppenheimerFunds. DAVID P. NEGRI, Vice President; High Income Fund, Bond Fund, Multiple Strategies Fund and Strategic Bond Fund Portfolio Manager Two World Trade Center, New York, New York 10048 Vice President of the Manager; an officer of other OppenheimerFunds. RICHARD H. RUBINSTEIN, Vice President; Multiple Strategies Fund Portfolio Manager Two World Trade Center, New York, New York 10048 Vice President of the Manager; an officer of other OppenheimerFunds; formerly Vice President and Portfolio Manager/Security Analyst for Oppenheimer Capital Corporation (an investment adviser). ARTHUR J. ZIMMER, Vice President; Money Fund Portfolio Manager 3410 South Galena Street, Denver, Colorado 80231 Vice President of the Manager and Centennial; an officer of other OppenheimerFunds; formerly Vice President of Hanifen Imhoff Management Company (mutual fund investment adviser). GEORGE EVANS, Vice President; Global Securities Fund Portfolio Manager Two World Trade Center, New York, New York 10048 Assistant Vice President of the Manager; formerly an International Equities Portfolio Manager/Analyst with Brown Brothers, Harriman & Co. ANDREW J. DONOHUE, Vice President Two World Trade Center, New York, New York 10048-0203 Executive Vice President and General Counsel of the Manager and Oppenheimer Funds Distributor, Inc. ("OFDI"); an officer of other OppenheimerFunds; formerly Senior Vice President and Associate General Counsel of the Manager and the Distributor, Partner in Kraft & McManimon (a law firm), an officer of First Investors Corporation (a broker-dealer) and First Investors Management Company, Inc. (broker-dealer and investment adviser), director and an officer of First Investors Family of Funds and First Investors Life Insurance Company. GEORGE C. BOWEN, Vice President, Secretary and Treasurer 3410 South Galena Street, Denver, Colorado 80231 Senior Vice President and Treasurer of the Manager: Vice President and Treasurer of OFDI and HarbourView; Senior Vice President, Treasurer, Assistant Secretary and a Director of Centennial; Vice President, Treasurer and Secretary of SSI and SFSI; an officer of other OppenheimerFunds; formerly Senior Vice President/Comptroller and Secretary of OAMC. ROBERT G. ZACK, Assistant Secretary Two World Trade Center, New York, New York 10048 Senior Vice President and Associate General Counsel of the Manager; Assistant Secretary of SSI and SFSI; an officer of other OppenheimerFunds. ROBERT BISHOP, Assistant Treasurer 3410 South Galena Street, Denver, Colorado 80231 Assistant Vice President of the Manager/Mutual Fund Accounting; an officer of other OppenheimerFunds; previously a Fund Controller for the Manager, prior to which he was an Accountant for Resolution Trust Corporation and previously an Accountant and Commissions Supervisor for Stuart James Company Inc., a broker-dealer. SCOTT FARRAR, Assistant Treasurer 3410 South Galena Street, Denver, Colorado 80231 Assistant Vice President of the Manager/Mutual Fund Accounting; an officer of other OppenheimerFunds; previously a Fund Controller for the Manager, prior to which he was an International Mutual Fund Supervisor for Brown Brothers Harriman Co., a bank, and previously a Senior Fund Accountant for State Street Bank & Trust Company, before which he was a sales representative for Central Colorado Planning. ________________________ * A Trustee who is an "interested person" of the Trust as defined in the Investment Company Act. Remuneration of Officers and Trustees. The officers of the Trust, (including Messrs. Swain and Fossel) are affiliated with the Manager and receive no remuneration from the Trust. During the fiscal year ended December 31, 1993, the remuneration (including expense reimbursements) paid to all Trustees of the Trust (excluding Messrs. Swain and Fossel) for services as Trustees and as members of one or more committees totaled $19,358. The Trust has an Audit and Review Committee, comprised of William A. Baker (Chairman), Charles Conrad, Jr. and Robert M. Kirchner. This Committee meets regularly to review audits, audit procedures, financial statements and other financial and operational matters of the Funds. Fund Shareholders. As of March 18, 1994, the holders of 5% or more of the outstanding shares of any Fund were (i) Variable Account B of Monarch Life Insurance Company ("Monarch"), Springfield, MA; (ii) Separate Accounts P and Q of Bankers Security Life Insurance Society ("Bankers Security"), Arlington, VA; (iii) Separate Accounts II and III of The Life Insurance Company of Virginia ("Life of Virginia"), Richmond, VA; (iv) Separate Accounts I and II of Nationwide Life Insurance Company ("Nationwide"), Columbus, OH; or (v) Separate Account A of Confederation Life Insurance and Annuity Company ("Confederation"), Atlanta, GA, such shares were held as follows:
Bankers Life of Monarch Security Virginia Nationwide Confederation Money 32,673,768.90 15,909,358.23 * * 27,766,574.77 Fund High Income 1,380,438.24 2,357,693.20 1,569,708.59 * 3,462,631.30 Fund Bond Fund 913,187.55 * 1,169,360.68 6,343,848.67 1,570,052.24 Capital 770,670.95 1,529,581.41 1,147,130.77 * 1,351,070.73 Appreciation Fund Growth Fund 1,146,383.36 * 615,605.91 * 1,583,960.82 Multiple 4,135,966.72 3,602,445.21 1,879,275.62 6,332,100.70 3,554,132.24 Strategies Fund Global * 1,448,775.38 * 5,326,738.42 3,018,925.06 Securities Fund Strategic Bond * * * * 2,733,811.45 Fund
INVESTMENT MANAGEMENT SERVICES The Manager is a wholly-owned subsidiary of Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts Mutual Life Insurance Company. OAC is also owned in part by certain of the Manager's directors and officers, some of whom may also serve as officers of the Funds, and two of whom (Messrs. Jon S. Fossel and James C. Swain) serve as Trustees of the Trust. The investment advisory agreements between the Manager and the Trust for each of the eight Funds (the "Agreements") require the Manager, at its expense, to provide each Fund with adequate office space, facilities and equipment, and to provide and supervise the activities of all administrative and clerical personnel required to provide effective administration of each Fund, including the compilation and maintenance of records with respect to its operations, the preparation and filing of specified reports, and composition of proxy materials and registration statements for continuous public sale of shares of each Fund. Under the terms of the Agreements, expenses not expressly assumed by the Manager are paid by the Trust. The Agreements list examples of expenses paid by the Trust, the major categories of which 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. Expenses with respect to any two or more Funds are allocated in proportion to the net assets of the respective Funds except where allocations of direct expenses can be made. The management fees paid by the Funds to the Manager for the Funds' most recent three fiscal years was as follows: Fiscal year ended December 31, 1993 1992 1991 --------- -------- -------- Money Fund $212,358 $259,778 $335,025 High Income Fund(1) $382,629 $230,117 $151,864 Bond Fund $361,258 $215,989 $109,119 Capital Appreciation $407,611 $267,347 $171,571 Fund Growth Fund $193,110 $121,993 $ 92,584 Multiple Strategies $831,139 $658,068 $573,026 Fund Global Securities $227,226 $ 82,505 $ 24,885 Fund Strategic Bond $ 18,509 -- -- Fund (2) ____________________ (1)Does not reflect expense reimbursements of $12,828 in the fiscal year ended December 31, 1991. (2)From May 3, 1993 (commencement of operations) to December 31, 1993. The Agreements provide that the Manager is not liable for any loss sustained by the Trust and/or any Fund in connection with matters to which the Agreements relate, except a loss resulting by reason of the Manager's willful misfeasance, bad faith or gross negligence in the performance of its duties or reckless disregard for its obligations thereunder. The Manager may act as investment adviser for any other person, firm or corporation, and the Agreements permit the Manager to use the name "Oppenheimer" in connection with other investment companies for which it may act as investment adviser or general distributor. If the Manager shall no longer act as investment adviser to the Trust, the right of the Trust or any of the Funds to use the name "Oppenheimer" as part of their names may be withdrawn. Independently of the Agreements, the Manager has voluntarily undertaken that the total expenses of Money Fund, High Income Fund, Bond Fund, Capital Appreciation Fund, Growth Fund and Multiple Strategies Fund in any fiscal year exclusive of taxes, interest, brokerage commissions and any extraordinary non-recurring expenses, including litigation affecting any Fund, shall not exceed 2.0% of the first $10 million of average net assets of that Fund plus 1.5% of the next $20 million, plus 1% of average net assets above $30 million for such year. The payment of the management fee will be reduced or eliminated during any fiscal year in which such payment would cause the expenses of these Funds to exceed the pro rata expense limitation applicable to such Fund. The Manager and Monarch Life Insurance Company, Bankers Security Life Insurance Society ("Bankers") and Confederation Life Insurance and Annuity Company have also voluntarily undertaken to limit the expenses of Money Fund, High Income Fund, Bond Fund, Capital Appreciation Fund and Multiple Strategies Fund to 0.75% of average annual net assets, after any other reimbursement by the Manager. The reimbursement is based on the proportionate number of shares in the accounts of the respective insurance companies. The undertaking by Bankers extends to Multiple Strategies Fund only. BROKERAGE Provisions of the Agreements Affecting Capital Appreciation Fund, Growth Fund, Multiple Strategies Fund, Global Securities Fund and Strategic Bond Fund. One of the duties of the Manager under the Agreements is to arrange the portfolio transactions for the Funds. The Agreements contain provisions relating to employment of broker-dealers ("brokers") to effect the Funds' portfolio transactions. In doing so, the Manager is authorized by the Agreements to employ brokers, including "affiliated broker- dealers," as that term is defined in the Investment Company Act, as may, in its best judgment based on all relevant factors, implement the policy of the Funds to obtain, at reasonable expense, the "best execution" (prompt and reliable execution at the most favorable price obtainable) of such transactions. The Manager need not seek competitive commission bidding but is expected to be aware of the current rates of eligible brokers and to minimize the commissions paid to the extent consistent with the provisions of the Agreements and the interests and policies of the Funds as established by the Board of Trustees. Under the Agreements, the Manager is authorized to select brokers which 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 have charged, if a good faith determination is made by the Manager that the commission is reasonable and fair in relation to the services provided. Description of Brokerage Practices. Subject to the provisions of the Agreements, allocations of brokerage are made by portfolio managers under the supervision of executive officers of the Manager. Transactions in securities other than those for which an exchange is the primary market are generally done with principals or market makers. Brokerage commissions are paid primarily for effecting transactions in listed securities and otherwise only if it appears likely that a better price or execution can be obtained. When the Funds engage in an option transaction, ordinarily the same broker will be used for the purchase or sale of the option and any transactions in the securities to which the option relates. Where possible, concurrent orders to purchase or sell the same security by more than one of the accounts managed by the Manager or its affiliates are combined. The transactions effected pursuant to such combined orders are averaged as to price and allocated in accordance with the purchase or sale orders actually placed for each account. Option commissions may be relatively higher than those which would apply to direct purchases and sales portfolio securities. Most purchases of money market instruments and debt obligations are principal transactions at net prices. Instead of using a broker for those transactions, the Funds normally deal directly with the selling or purchasing principal or market maker unless it determines that a better price or execution can be obtained using a broker. Purchases of these securities from underwriters include a commission or concession paid by the issuer to the underwriter, and purchases from dealers include a spread between the bid and asked prices. The Funds seek to obtain prompt execution of such orders at the most favorable net price. 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, and investment research for the commissions of those other accounts may be useful both to the Funds and one or more of such other accounts. Such research, which may be supplied by a third party at the instance of a broker, includes information on particular companies and industries as well as market or economic trends and portfolio strategy, receipt of market quotations for portfolio valuations, 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 for in commission dollars. The research services provided by brokers broaden the scope and supplement the research activities of the Manager by making available additional views for consideration and comparisons, and to enable the Manager to obtain market information for the valuation of securities held in the Funds' portfolios or being considered for purchase. The Board, including the "Independent Trustees" (those Trustees of the Trust who are not "interested persons," as defined in the Investment Company Act) annually reviews information furnished by the Manager as to the commissions paid to brokers furnishing such services so that the Board may ascertain whether the amount of such commissions was reasonably related to the value of benefit of such services. The Board of Trustees has permitted the Manager to use concessions on fixed-price offerings to obtain research, in the same manner as is permitted for agency transactions. Money Fund, High Income Fund, Bond Fund and Strategic Bond Fund. As most purchases made by Money Fund, High Income Fund, Bond Fund and Strategic Bond Fund are principal transactions at net prices, these Funds incur little or no brokerage costs. Purchases of securities from underwriters include a commission or concession paid by the issuer to the underwriter, and purchases from dealers include a spread between the bid and asked price. No principal transactions and, except under unusual circumstances, no agency transaction for these Funds will be handled by any affiliated securities dealer. In the unusual circumstance when these Funds pay brokerage commissions, the above-described brokerage practices and policies are followed. Money Fund's policy of investing in short-term debt securities with maturities of less than 397 days results in high portfolio turnover. However, since brokerage commissions, if any, are small, high portfolio turnover does not have an appreciable adverse effect upon the net asset value of that Fund. The Board of Trustees has permitted the Manager to use concessions on fixed price offerings to obtain research, in the same manner as permitted for agency transactions. During the Funds' fiscal years ended December 31, 1991, 1992 and 1993, total brokerage commissions paid by the Funds (not including spreads or concessions on principal transactions on a net trade basis) were $84,370, $79,362 and $139,429, respectively, for Capital Appreciation Fund; $3,871, $2,470 and $6,723, respectively, for High Income Fund; $84,552, $32,228 and $33,497, respectively, for Growth Fund; $226,558, $187,495 and $176,858, respectively, for Multiple Strategies Fund; $18,464, $53,828 and $352,908, respectively for Global Securities Fund; and none for Strategic Bond Fund. During the fiscal year ended December 31, 1993, $34,623, $23,090, $77,844, $10,565 and $2,948 was paid by Capital Appreciation Fund, Growth Fund, Multiple Strategies Fund, Global Securities Fund and High Income Fund, respectively, to dealers as brokerage commissions in return for research services (including special research, statistical information and execution); the aggregate amount of those transactions was $12,683,148, $10,582,340, $31,720,843, 2,739,309 and $652,501 for Capital Appreciation Fund, Growth Fund, Multiple Strategies Fund, Global Securities Fund and High Income Fund, respectively. PURCHASE, REDEMPTION AND PRICING OF SHARES Determination of Net Asset Value Per Share. The sale of shares of the Funds is currently limited to Accounts as explained on the cover page of this Additional Statement and in the Prospectus. Such shares are sold at their respective offering prices (net asset values without sales charges) and redeemed at their respective net asset values as described in the Prospectus. The net asset value per share of each Fund is determined as of 4:00 P.M., New York time, each day the New York Stock Exchange (the "NYSE") is open (a "regular business day") by dividing the value of the Fund's net assets by the number of shares outstanding. The NYSE's most recent annual holiday schedule (which is subject to change) states that it will close New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The NYSE may also close on other days. Dealers other than Exchange members may conduct trading at times when the NYSE is closed (e.g., Good Friday). Trading may occur in debt securities and in foreign securities at times when the NYSE is closed (including weekends and holidays or after 4:00 P.M., New York time, on a regular business day). Because the net asset value of the Funds will not be calculated at such times, if securities held in a Fund's portfolio are traded at such times, the net asset value per share of that Fund may be significantly affected at times when shareholders do not have the ability to purchase or redeem shares. The Funds' Board of Trustees has established procedures for the valuation of each Fund's (other than Money Fund's) securities as follows: (i) equity securities traded on a securities exchange or on NASDAQ are valued at the last sale prices on their primary exchange or NASDAQ that day (or, in the absence of sales that day, at values based on the last sales prices of the preceding trading day, or closing bid and asked prices); (ii) NASDAQ and other unlisted equity securities for which last sales prices are not regularly reported but for which over-the-counter market quotations are readily available are valued at the highest closing bid price at the time of valuation, or, if no closing bid price is reported, on the basis of a closing bid price obtained from a dealer who maintains an active market in that security; (iii) securities (including restricted securities) not having readily-available market quotations are valued at fair value under the Board's procedures; (iv) unlisted debt securities having a maturity in excess of 60 days are valued at the mean between the bid and asked prices determined by a portfolio pricing service approved by the Fund's Board of Trustees or obtained from active market makers in the security on the basis of reasonable inquiry; (v) short-term debt securities having a remaining maturity of 60 days or less are valued at cost, adjusted for amortization of premiums and accretion of discounts; and (vi) securities traded on foreign exchanges or in foreign over-the- counter markets are valued as determined by a portfolio pricing service approved by the Board, based upon last sales prices reported on a principal exchange or, if none, at the mean between closing bid and asked prices and reflect prevailing rates of exchange to convert their values to U.S. dollars. Foreign currency will be valued as close to the time fixed for the valuation date as is reasonably practicable. The value of securities denominated in foreign currency will be converted to U.S. dollars at the prevailing rates of exchange at the time of valuation. Trading in securities on European and Asian exchanges and over-the- counter markets is normally completed before the close of the NYSE. Events affecting the values of foreign securities traded in such markets that occur between the time their prices are determined and the close of the NYSE will not be reflected in that Fund's calculation of its net asset value unless the Board of Trustees, or the Manager under procedures established by the Board, determines that the particular event would materially affect that Fund's net asset value, in which case an adjustment would be made. In the case of U.S. Government Securities, mortgage-backed securities, foreign fixed-income securities and corporate bonds, when last sale information is not generally available, such pricing procedures may include "matrix" comparisons to the prices for comparable instruments on the basis of quality, yield, maturity, and other special factors involved. The Trust's Board of Trustees has authorized the Manager to employ a pricing service to price U.S. Government Securities, mortgage-backed securities, foreign government securities and corporate bonds. The Trustees will monitor the accuracy of such pricing services by comparing prices used for portfolio evaluation to actual sales prices of selected securities. Calls, puts and Futures are valued at the last sale prices on the principal exchanges or on the NASDAQ National Market on which they are traded, or, if there are no sales that day, in accordance with (i) above. When a Fund writes an option, an amount equal to the premium received by that Fund is included in its Statement of Assets and Liabilities as an asset, and an equivalent deferred credit is included in the liability section. The deferred credit is adjusted ("marked-to-market") to reflect the current market value of the option. Money Fund Net Asset Valuation. Money Fund will seek to maintain a net asset value of $1.00 per share for purchases and redemptions. There can be no assurance that it will do so. The Fund operates under SEC Rule 2a- 7, under which the Fund may use the amortized cost method of valuing its shares. 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. The method does not take into account unrealized capital gains or losses. The Fund's Board of Trustees has established procedures intended to stabilize Money Fund's net asset value at $1.00 per share. If the Fund'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 Fund shares without monetary consideration, or calculating net asset value per share by using available market quotations. As long as it uses Rule 2a-7, the Money Fund must abide by certain conditions described above and in the prospectus. For purposes of the Rule, 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 and floating rate instruments. Repurchase agreements and securities loan agreements are, in general, treated as having a maturity equal to the period scheduled until repurchase or return, or if subject to demand, equal to the notice period. While the 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 the Fund would receive if it sold the instrument. During periods of declining interest rates, the daily yield on shares of the Fund may tend to be lower than a like computation made by a fund with identical investments utilizing a method of valuation based upon market prices or estimates of market prices for its portfolio. Conversely, during periods of rising interest rates, the daily yield on Fund shares will tend to be higher than that of a portfolio priced at market value. PERFORMANCE AND TAX INFORMATION Money Fund Yield Information. Money Fund's current yield for a seven day period of time is determined in accordance with regulations adopted under the Investment Company Act 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 a 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 (a) adding 1 to the base period return (obtained as described above), (b) raising the sum to a power equal to 365 divided by 7 and (c) subtracting 1 from the result. For the seven days ended December 31, 1993, Money Fund's "current yield" was 3.08% and its compounded "effective yield" for that period was 3.12%. 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. Since 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, the dividends declared during a period may not be the same on an annualized basis as the yield for that period. High Income Fund, Bond Fund and Strategic Bond Fund Yield Information. The "yield" or "standardized yield" of High Income Fund, Bond Fund and Strategic Bond Fund for a 30-day period is calculated using the following formula set forth in the SEC rules: a-b 6 Standardized Yield = 2 ((------ + 1) - 1) cd The symbols above represent the following factors: a = dividends and interest earned during the 30-day period. b = expenses accrued for the period (net of any expense reimbursements). c = the average daily number of Fund shares outstanding during the 30-day period that were entitled to receive dividends. d = the Fund's maximum offering price (including sales charge) per share on the last day of the period. Each Fund's yield for a 30-day period may differ from its yield for any other period. The SEC formula assumes that the 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. For the 30 days ended December 31, 1993, the yield of High Income Fund, Bond Fund and Strategic Bond Fund, calculated as described above, was 8.66%, 6.10% and 7.30%, respectively. The "standardized" yield is not based on distributions paid by a Fund to shareholders in the 30-day period, but is a hypothetical yield based upon the return on a Fund's portfolio investments, and may differ from a Fund's "distribution return" described below. From time to time High Income, Bond and Strategic Bond Funds may quote a "dividend yield" or a "distribution return." Dividend yield is based on that Fund's dividends derived from net investment income during a stated period, and distribution return includes dividends derived from net investment income and from realized capital gains declared during a stated period. Under those calculations, the Fund's dividends and/or distributions declared during a stated period of one year or less (for example, 30 days) are added together, and the sum is divided by the Fund's maximum offering price (equal to its net asset value) per share on the last day of the period. The result may be annualized if the period of measurement is less than one year. The dividend yield of High Income Fund, Bond Fund and Strategic Bond Fund for the quarter ended December 31, 1993, was 9.44%, 7.28% and 5.63%, respectively. Total Return. Any Fund, other than Money Fund, may quote its "total return" or "average annual total return." "Average annual total return" ("T" in the formula below) is an average annual compounded rate of return. It is the rate of return based on factors which include a hypothetical initial investment of $1,000 ("P" in the formula below) over a number of years ("n") with an Ending Redeemable Value ("ERV") of that investment, according to the following formula: ( ERV ) 1/n (-----) -1 = Average Annual Total Return ( P ) The cumulative "total return" calculation measures the change in value of a hypothetical investment of $1,000 over a stated period. 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. Total return is determined as follows: ERV - P - ------- = Total Return P Both formulas assume that all dividends and capital gains distributions during the period are reinvested at net asset value per share, and that the investment is redeemed at the end of the period. Set forth below is the "average annual total return" and "total return" for each Fund (using the method described above) during the periods indicated: Average Annual Total Return for: --------------------------------------- Cumulative Total Return From Fiscal Five Year Incep Year Period Incep- tion(1) Ended Ended tion(1) to to Fund 12/31/93 12/31/93 12/31/93 12/31/93 - ------------------ -------- --------- -------- ------- High Income Fund 26.34% 16.96% 14.70% 186.32% Bond Fund 13.04% 11.61% 11.21% 153.16% Capital Appreciation 27.32% 19.26% 16.46% 207.70% Fund Growth Fund 7.25% 11.83% 12.70% 184.51% Multiple Strategies Fund 15.95% 11.01% 11.67% 114.08% Global Securities Fund 70.32% -- 17.14% 64.23% Strategic Bond Fund 6.50% -- 6.50% 4.25% ______________ (1)Inception dates are as follows: April 30, 1986 for High Income Fund; April 3, 1985 for Bond Fund and Growth Fund; August 15, 1986 for Capital Appreciation Fund; February 9, 1987 for Multiple Strategies Fund; November 12, 1990 for Global Securities Fund; and May 3, 1993 for Strategic Bond Fund. The total return on an investment made in shares of any one of these Funds may be compared with performance for the same period of either the Standard & Poor's 500 Index ("S&P 500") or the Dow Jones Industrial Average ("Dow"). Both the S&P 500 and the Dow are widely recognized indices of stock market performance consisting of unmanaged groups of common stocks (the Dow consists of 30 such issues). The performance of both indices includes a factor for the reinvestment of income dividends but not capital gains and does not take sales charges or taxes into consideration. Performance Information - General. Yield and total return information may be useful to investors in reviewing performance of the Funds. However, a number of factors should be taken into account before using such performance information as a basis for comparison with alternative investments. An investment in any of these Funds is not insured. Their performance is not guaranteed and will fluctuate over time. Yield and total return for any Fund for any given past period is not an indication or representation by that Fund of future yields or rates of return on its shares. In comparing the performance of one Fund to another, consideration should be given to each Fund's investment policy, portfolio quality, portfolio maturity, type of instrument held and operating expenses. When comparing yield, total return and investment risk of an investment in any of the Funds with those of other investment instruments, investors should understand that certain other investment alternative such as money market instruments, certificates of deposits ("CDs"), U.S. Government securities or bank accounts provide yields that are fixed or that may vary above a stated minimum, and may be insured or guaranteed. Finally, the performance quotations do not reflect the charges deducted from an Account, as explained in the attached Prospectus for the Policies. If these charges were deducted, that performance would be lower than as described above. From time to time the Trust may publish the ranking of any of the Funds by Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized independent service. Lipper monitors the performance of regulated investment companies, including the Funds, and ranks their performance for various periods against all variable annuity funds and variable annuity funds of the corresponding Lipper categories. These categories are money market, fixed-income, equity and flexible managed funds. The Lipper performance analysis includes the reinvestment of capital gains distributions and income dividends but does not take sales charges or taxes into consideration. From time to time the Trust may include in its advertisements and sales literature performance information about the Funds cited in other newspapers and periodicals, such as The New York Times, which may include performance quotations from other sources, including Lipper. From time to time the Trust may publish the ranking of the performance of any of the Funds by Morningstar, Inc., an independent mutual fund monitoring service that ranks mutual funds, including the Funds, in broad investment categories (equity, taxable bond, tax-exempt and other) monthly, based upon each fund's three, five and ten-year average annual total returns (when available) and a risk adjustment factor that reflects Fund performance relative to three-month U.S. Treasury bill monthly returns. Such returns are adjusted for fees. There are five ranking categories with a corresponding number of stars: highest (5), above average (4), neutral (3), below average (2) and lowest (1). Ten percent of the funds, series or classes in an investment category receive 5 stars, 22.% receive 4 stars, 35% receive 3 stars, 22.5% receive 2 stars, and the bottom 10% receive one star. Distributions and Taxes. The Trust intends for each Fund to qualify as a "regulated investment company" under Subchapter M of the Internal Revenue Code. By so qualifying, the Funds will not be subject to Federal income taxes on amounts paid by them as dividends and distributions, as described in the Prospectus. Each Fund is treated as a single entity for purposes of determining Federal tax treatment. The Trust will endeavor to ensure that each Fund's assets are so invested so that all such requirements are satisfied, but there can be no assurance that it will be successful in doing so. The Internal Revenue Code requires that a holder (such as a Fund) of a zero coupon security accrue a portion of the discount at which the security was purchased as income each year even though that Fund receives no interest payment in cash on the security during the year. As an investment company, each Fund must pay out substantially all of its net investment income each year. Accordingly, when a Fund holds zero coupon securities, it may be required to pay out as an income distribution each year an amount which is greater than the total amount of cash interest the Fund actually received. Such distributions will be made from the cash assets of that Fund or by liquidation of portfolio securities, if necessary. The Fund may realize a gain or loss from such sales. In the event the Fund realizes net capital gains from such transactions, its shareholders may receive a larger capital gain distribution than they would have had in the absence of such transactions. ADDITIONAL INFORMATION Description of the Trust. The Trust's Declaration of Trust contains an express disclaimer of shareholder or Trustee liability for the Trust's obligations, and provides for indemnification and reimbursement of expenses out of its property for any shareholder held personally liable for its obligations. The Declaration of Trust also provides that the Trust shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of the Trust and satisfy any judgment thereon. Thus, while Massachusetts law permits a shareholder of a trust (such as the Trust) to be held personally liable as a partner under certain circumstances, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to the relatively remote circumstances in which the Trust would be unable to meet the obligations described above. Any person doing business with the Trust, and any shareholder of the Trust, agrees under the Trust's Declaration of Trust to look solely to the assets of the Trust for satisfaction of any claim or demand which may arise out of any dealings with the Trust, and the Trustees shall have no personal liability to any such person, to the extent permitted by law. It is not contemplated that regular annual meetings of shareholders will be held. Shareholders have the right, upon the declaration in writing or vote of two-thirds of the outstanding shares of the Trust, 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 holders of 10% of the Trust's outstanding shares. In addition, if the Trustees receive a request from at least 10 shareholders (who have been shareholders at least six months) holding shares of the Trust valued at $25,000 or more or holding 1% or more of the Trust's outstanding shares, whichever is less, that they wish to communicate with other shareholders to request a meeting to remove a Trustee, the Trustees will then either make the Trust's shareholder list available to the applicants or mail their communication to all other shareholders at the applicants' expense, or the Trustees may take such other action as is permitted by Section 16(c) of the Investment Company Act. At all shareholder meetings, shareholders only vote on matters affecting their Fund, and each Fund votes as an individual class on such matters. However, matters that require a vote by all shareholders of the Trust are submitted to all the shareholders, without individual class voting. The Custodian and the Transfer Agent. The custodian's responsibilities include safeguarding and controlling the Trust's portfolio securities, collecting income on the portfolio securities, and handling the delivery of portfolio securities to and from the Trust. The Manager has represented to the Trust that its banking relationships with the Custodian have been and will continue to be unrelated to and unaffected by the relationship between the Trust and the Custodian. It will be the practice of the Trust to deal with the Custodian in a manner uninfluenced by any banking relationship the Custodian may have with the Manager and its affiliates. Oppenheimer Shareholder Services, as transfer agent, is responsible for maintaining the Trus's shareholder registry and shareholder accounting records, and for administrative functions. Independent Auditors. The independent auditors of the Trust examine its financial statements and perform other related audit services. They also act as auditors for the Manager and certain other funds advised by the Manager and its affiliates. Independent Auditors' Report Oppenheimer Variable Account Funds The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds: We have audited the accompanying statements of assets and liabilities, including the statements of investments, of Oppenheimer Money Fund, Oppenheimer High Income Fund, Oppenheimer Bond Fund, Oppenheimer Capital Appreciation Fund, Oppenheimer Growth Fund, Oppenheimer Multiple Strategies Fund, Oppenheimer Global Securities Fund and Oppenheimer Strategic Bond Fund (all of which are series of Oppenheimer Variable Account Funds) as of December 31, 1993, the related statements of operations for the year then ended, the statements of changes in net assets for the periods ended December 31, 1993 and 1992, and the financial highlights for the applicable periods ended December 31, 1993, 1992, 1991, 1990, 1989, 1988, 1987, and 1986, June 30, 1986 and December 31, 1985. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned at December 31, 1993 by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Oppenheimer Money Fund, Oppenheimer High Income Fund, Oppenheimer Bond Fund, Oppenheimer Capital Appreciation Fund, Oppenheimer Growth Fund, Oppenheimer Multiple Strategies Fund, Oppenheimer Global Securities Fund and Oppenheimer Strategic Bond Fund at December 31, 1993, the results of their operations, the changes in their net assets, and the financial highlights for the respective stated periods, in conformity with generally accepted accounting principles. DELOITTE & TOUCHE Denver, Colorado January 21, 1994 Statement of Investments December 31, 1993 Oppenheimer Variable Account Funds- Money Fund
Face Market Amount Value-Note 1 Repurchase Agreements -11.6% $ 7,100,000 Repurchase agreement with J.P Morgan Securities, Inc., 3.23%, dated 12/31/93 and maturing 1/3/94, collateralized by Federal National Mortgage Assn. Participation Certificates, 5.50%, 12/1/08, with a value of $7,277,496 (Cost $7,100,000)....... $ 7,100,000 Direct Bank Obligations and Letters of Credit -7.3% Abbey National PLC, guaranteeing commercial paper of: 2,500,000 Abbey National North America Corp., 3.28%, 3/18/94............. 2,482,952 ABN Amro Bank NV, guaranteeing commercial paper of: 2,000,000 ABN AMRO Bank Canada, 3.31%, 3/7/94............................ 1,988,228 Total Direct Bank Obligations (Cost $4,471,180)...................... 4,471,180 Short-Term Notes -71.4% Asset-Backed -10.6% 2,000,000 Beta Finance, Inc., 3.27%, 2/16/94(3)................................ 1,991,643 2,000,000 Corporate Asset Funding Co., Inc., 3.15%, 1/18/94.................... 1,997,025 2,500,000 CXC, Inc., 3.40%, 1/21/94............................................ 2,495,278 6,483,946 Broker/Dealers -19.2% 2,500,000 Bear Stearns Cos., Inc., 3.375%, 1/3/94(1)........................... 2,500,000 2,500,000 Goldman Sachs Group L.P., 3.35%, 2/1/94.............................. 2,492,896 700,000 Lehman Brothers Holdings, Inc., 3.375%, 1/3/94(1).................... 700,000 1,400,000 Merrill Lynch & Co., Inc., 3.045%, 1/3/94(1)......................... 1,399,936 2,635,000 Morgan Stanley Group, Inc., 2.82%, 1/3/94(1)......................... 2,635,000 2,000,000 Shearson Lehman Brothers Holdings, Inc., 3.58%, 1/7/94(1)............ 2,000,000 11,727,832 Commercial Finance -5.9% 1,000,000 CIT Group Holdings, Inc., 3.59%, 5/9/94(2)........................... 1,000,000 2,600,000 Heller Financial, Inc., 3.32%, 1/4/94(1)............................. 2,600,000 3,600,000 Consumer Non-Cyclicals -3.3% 2,000,000 American Brands, Inc., 3.34%, 1/21/94................................ 1,996,289 Diversified Finance -7.4% 2,000,000 Ford Motor Credit Corp., 9.40%-9.45%, 5/20/94-5/26/94................ 2,043,963 2,500,000 General Electric Capital Corp., 3.35%, 1/24/94....................... 2,494,649 4,538,612 Financial Services: Miscellaneous -8.9% 3,000,000 Countrywide Funding Corp., 3.32%-3.40%, 1/13/94-3/28/94.............. 2,983,005 2,500,000 Fleet Mortgage Group, Inc., 3.45%, 1/13/94........................... 2,497,125 5,480,130 Statement of Investments (Continued) Oppenheimer Variable Account Funds- Money Fund Face Market Amount Value-Note 1 Industrial -4.1% $ 2,500,000 BICC Cables Corp., guaranteed by BICC PLC, 3.55%, 1/4/94............. $ 2,499,260 Municipal -4.1% 2,500,000 North Slope Borough Alaska, 4.35%, 6/30/94........................... 2,500,000 Oil: Integrated International -3.2% 2,000,000 Petrofina (DE), Inc., 3.37%, 4/18/94................................. 1,979,968 Telecommunications -4.7% 2,900,000 NYNEX Corp., 3.40%, 3/28/94 ......................................... 2,876,445 Total Short-Term Notes (Cost $43,682,482)............................ 43,682,482 Short - Term U.S. Government Obligations -9.5% 5,453,090 Small Business Administration, 6.875%-7.875%, 1/1/94(1) (Cost $5,815,623) ................................................. 5,815,623 Total Investments, at Value (Cost $61,069,285)............................... 99.8 61,069,285 Other Assets Net of Liabilities.............................................. .2 152,334 Net Assets...................................................................100.0 $ 61,221,619 Short-term notes and direct bank obligations are generally traded on a discount basis; the interest rate is the discount rate received by the Fund at the time of purchase. Other securities normally bear interest at the rates shown. 1. Variable rate security. The interest rate, which is based on specific, or an index of, market interest rates, is subject to change periodically and is the effective rate on December 31, 1993. 2. Put obligation redeemable at full face value on the date reported. 3. Security purchased in private placement transaction, without registration under the Securities Act of 1933 (the Act). The security was acquired on August 19, 1993, is carried at amortized cost, and amounts to $1,991,643, or 3.25% of the Fund's net assets. See accompanying Notes to Financial Statements.
Statement of Investments December 31, 1993 Oppenheimer Variable Account Funds-High Income Fund
Face Market Amount Repurchase Agreements--6.8% Value-Note 1 $ 6,300,000 Repurchase agreement with J.P. Morgan Securities, Inc., 3.15%, dated 12/31/93 and maturing 1/3/94, collateralized by U.S. Treasury Bills, 2.93%, 2/3/94, with a value of $6,437,138 (Cost $6,300,000).................................................................... $ 6,300,000 Short-Term Corporate Bonds and Notes--1.0% 1,000,000 (1) Citibank CD, 17.30%, 7/29/94 (4) (Cost $1,004,761)................................................... 947,137 Long-Term Government Obligations--5.5% Argentina (Republic of): 470,000 Bonds, Bonos del Tesoro, Series II, 3.50%, 9/1/97 (3).............................................. 387,762 1,239,875 (1) Bonds, Bonos de Consolidacion de Deudas, Series I, 4.25%, 4/1/01 (3) (5)................................................................................... 983,769 1,000,000 Past Due Interest Bonds, 4.1875%, 3/31/05 (3)...................................................... 878,750 2,000,000 (1) Bank Negara Indonesia Bonds, 0%, 5/12/95 ............................................................ 778,117 1,000,000 Bariven SA Bonds, 10.75%, 7/8/97 (6)................................................................. 608,984 150,000,000 (1) Spain (Kingdom of) Bonds, 10.25%, 11/30/98 (6)....................................................... 1,156,550 500,000 Venezuela (Republic of) Front-Loaded Interest Reduction Bonds, Series B, 6%, 3/31/07 (3)................................................................... 382,500 Total Long-Term Government Obligations (Cost $4,860,148) ................................................................................. 5,176,432 Long-Term Corporate Bonds and Notes--76.2% Aerospace/Defense --2.0% 1,750,000 GPA Delaware, Inc., 8.75% Gtd. Nts., 12/15/98........................................................ 1,345,313 500,000 Sequa Corp., 9.375% Sr. Sub. Nts., 12/15/03.......................................................... 505,000 1,850,313 Airlines --1.6% 825,000 AMR Corp., 10% Debs., 4/15/21........................................................................ 952,092 500,000 Trism, Inc., 10.75% Gtd. Sr. Sub. Nts., 12/15/00.................................................... 515,000 1,467,092 Broadcast Media/Cable TV--18.8% 750,000 Ackerley Communications, Inc., 10.75% Sr. Sec. Nts., Series A, 10/1/03 (7)....................................................................................... 783,750 1,000,000 Act III Broadcasting, Inc., 9.625% Sr. Sub. Nts., 12/15/03 ............................. 1,020,000 Cablevision Systems Corp.: 500,000 9.875% Sr. Sub. Debs., 2/15/13..................................................................... 583,750 500,000 9.875% Sr. Sub. Debs., 4/1/23...................................................................... 585,000 500,000 Centennial Cellular Corp., 8.875% Sr. Nts., 11/1/01.................................................. 497,500 500,000 Continental Broadcasting Ltd./Continental Broadcasting Capital Corp., 10.625% Sr. Sub. Nts., 7/1/03....................................................... 513,750 Continental Cablevision, Inc.: 1,000,000 11% Sr. Sub. Debs., 6/1/07 ........................................................................ 1,177,500 700,000 9% Sr. Debs., 9/1/08 .............................................................................. 780,500 500,000 9.50% Sr. Debs., 8/1/13 ........................................................................... 560,000 500,000 General Media, Inc., 10.625% Sr. Sec. Nts., 12/31/00 (7)............................................. 512,500 1,000,000 Helicon Group LP/Helicon Capital Corp., 0%/9.50% Sr. Sec. Nts., 11/1/03 (2) (7)......................................................................... 977,500 2,000,000 International CableTel, Inc., 0%/10.875% Sr. Def. Cpn. Nts., 10/15/03 (2)................................................................................. 1,280,000 Statement of Investments (Continued) Oppenheimer Variable Account Funds-High Income Fund Face Market Amount Long-Term Corporate Bonds and Notes (Continued) Value-Note 1 Broadcast Media/Cable TV (Continued) $ 500,000 Lamar Advertising Co., 11% Sr. Sec. Nts., 5/15/03....................................................$ 531,250 1,000,000 New City Communications, Inc., 11.375% Sr. Sub. Nts., 11/1/03 .... 1,035,000 500,000 Outlet Broadcasting, Inc., 10.875% Sr. Sub. Nts., 7/15/03............................................ 516,250 Panamsat LP/Panamsat Capital Corp.: 500,000 9.75% Sr. Sec. Nts., 8/1/00........................................................................ 531,250 2,500,000 0%/11.375% Sr. Sub. Disc. Nts., 8/1/03 (2)......................................................... 1,675,000 SCI Television, Inc.: 486,000 7.50% Sr. Sec. Nts., Series 1, 6/30/98............................................................. 473,546 750,000 11% Sr. Sec. Nts., 6/30/05......................................................................... 780,000 500,000 SFX Broadcasting, Inc., 11.375% Sr. Sub. Nts., 10/1/00............................................... 526,250 500,000 Sinclair Broadcasting Group, 10% Sr. Sub. Nts., 12/15/03............................................. 513,750 700,000 TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07........................................................ 854,000 700,000 Univision Television Group, Inc., 11.75% Sr. Sub. Nts., 1/15/01 ..................................... 780,500 17,488,546 Building Materials --2.4% 1,000,000 Pacific Lumber Co., 10.50% Sr. Nts., 3/1/03.......................................................... 1,037,500 1,000,000 Pt Inti Indorayon Utama, 9.125% Sr. Nts., 10/15/00 .................................................. 1,003,750 500,000 Triangle Wire & Cable, Inc., 13.50% Sr. Nts., 1/15/02* (7)........................................... 190,000 2,231,250 Chemicals/Plastics --2.8% Harris Chemical North America, Inc.: 1,000,000 0%/10.25% Gtd. Sr. Sec. Disc. Nts., 7/15/01 (2).................................................... 858,750 750,000 10.75% Sr. Gtd. Sub. Nts., 10/15/03................................................................ 793,125 1,600,000 Talley Industries, Inc., 0%/12.25% Sr. Disc. Debs., 10/15/05 (2)..................................... 936,000 2,587,875 Consumer Goods: Manufacturing--3.7% 850,000 Amstar Corp., 11.375% Sr. Sub. Nts., 2/15/97......................................................... 871,250 2,000,000 Coleman Holdings, Inc., 0% Sr. Sec. Disc. Nts., Series B, 5/27/98 ................................... 1,295,000 1,000,000 Harman International Industries, Inc., 12% Sr. Sub. Nts., 8/1/02 .................................... 1,120,000 350,000 Revlon Worldwide Corp., 0% Sr. Sec. Disc. Nts., Series B, 3/15/98.................................... 180,250 3,466,500 Containers: Paper -- 0.3% 300,000 Equitable Bag, Inc., 12.375% Sr. Nts., 8/15/02....................................................... 261,000 Financial/Insurance -- 8.0% 750,000 Banco do Nordeste do Brasil, 10.375% Sr. Debs, 11/6/95 (7)........................................... 761,250 1,000,000 Banco Nacional de Mexico SA, 7% Exch. Sub. Debs., 12/15/99 (7)....................................................................................... 1,245,000 500,000 Blue Bell Funding, Inc., 11.85% Extd. Sec. Nts., 5/1/99 (3).......................................... 552,500 1,600,000 Card Establishment Services, Inc., 10% Sr. Sub. Nts., 10/1/03 (7) ................................... 1,672,000 497,387 ECM Fund L.P.I., 14% Sub. Nts., 6/10/02 (7).......................................................... 557,819 493,943 GSPI Corp., 10.15% Fst. Mtg. Bonds, 6/24/10 (7)...................................................... 602,610 1,206,215 Residential Funding Corp., 7.97% Real Estate Trust Pass-Through Ctfs., Series 1993-J2, Cl. B 1, 6/15/23 (7)............... 1,032,068 1,000,000 Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11 (7)..................................... 1,031,250 7,454,497 Food and Restaurants --2.6% 700,000 Di Giorgio Corp., 12% Sr. Nts., 2/15/03.............................................................. 761,250 Statement of Investments (Continued) Oppenheimer Variable Account Funds-High Income Fund Face Market Amount Long-Term Corporate Bonds and Notes (Continued) Value-Note 1 Food and Restaurants (Continued) Restaurant Enterprises Group, Inc.: $ 650,000 12.25% Sr. Sub. Nts., 12/15/96*....................................................................$ 640,250 1,500,000 12.75% Sub. Nts., 12/15/98*........................................................................ 990,000 2,391,500 Gaming/Hotels --2.0% 500,000 Casino America, Inc., Units.......................................................................... 517,500 500,000 Santa Fe Hotel, Inc., Units.......................................................................... 482,500 875,000 Treasure Bay Gaming & Resorts, Inc., Units (7)....................................................... 888,125 1,888,125 Healthcare/Medical Products--2.4% 500,000 Abbey Healthcare Group, Inc., 9.50% Sr. Sub. Nts., 11/1/02........................................... 513,125 1,000,000 Alco Health Distribution Corp., 11.25% Sr. Debs., 7/15/05 (5)........................................ 1,002,813 700,000 Eye Care Centers of America, Inc., Units (7)......................................................... 717,500 2,233,438 Home Building/Development-- 3.0% 750,000 Dal-Tile International, Inc., 0% Sr. Sec. Nts., 7/15/98.............................................. 453,750 1,000,000 NVR, Inc., 11% Gtd. Sr. Nts., 4/15/03................................................................ 1,057,500 640,000 Southdown, Inc., 14% Sr. Sub. Nts., Series B, 10/15/01............................................... 736,000 Trizec Corp. Ltd.: 500,000 (1) 11.125% Sr. Debs., 6/18/96* (6).................................................................... 272,847 500,000 (1) 10.25% Sr. Debs., 6/22/99* (6)..................................................................... 276,624 2,796,721 Information Technology-- 0.6% 500,000 Dell Computer Corp., 11% Sr. Nts., 8/15/00 (7)....................................................... 526,250 Leisure/Entertainment -- 0.6% 521,305 Gillett Holdings, Inc., 12.25% Sr. Sub. Nts., Series A, 6/30/02 ..................................... 570,829 Manufacturing: Diversified--2.1% 500,000 Collins & Aikman Group, Inc., 11.875% Sr. Sub. Debs., 6/1/01 ........................................ 515,000 400,000 Foamex LP/Foamex Capital Corp., 11.25% Sr. Nts., 10/1/02 ............................................ 438,000 1,000,000 Itel Corp., 13% Sr. Sub. Nts., 1/15/99............................................................... 1,043,750 1,996,750 Metals/Mining -- 3.5% 1,000,000 Carbide/Graphite Group, Inc. (The), 11.50% Sr. Nts., 9/1/03.......................................... 1,072,500 500,000 Jorgensen (Earle M.) Co., 10.75% Sr. Nts., 3/1/00.................................................... 536,875 500,000 Pace Industries, Inc., 10.625% Sr. Nts., 12/1/02 (7)................................................. 515,000 Stelco, Inc.: 500,000 (1) 10.875% Debs., 9/15/94 (6)......................................................................... 378,588 500,000 (1) 9.75% Debs., 4/1/95 (6)............................................................................ 374,811 500,000 (1) 10.40% Debs., 11/30/09 (6) ........................................................................ 369,147 3,246,921 Oil and Gas: Equipment and Services -- 0.6% 500,000 OPI International, Inc., 12.875% Gtd. Sr. Nts., 7/15/02................................... 582,500 Oil and Gas: Exploration and Production -- 4.7% 350,000 (1) BP America, Inc., 10.875% Nts., 8/1/01 (6)........................................................... 315,578 Maxus Energy Corp.: 1,000,000 8.50% Debs., 4/1/08................................................................................ 950,000 800,000 11.50% Debs., 11/15/15............................................................................. 844,000 Statement of Investments (Continued) Oppenheimer Variable Account Funds-High Income Fund Face Market Amount Long-Term Corporate Bonds and Notes (Continued) Value-Note 1 Oil and Gas: Exploration and Production (Continued) Mesa Capital Corp.: $ 1,000 0%/12.75% Disc. Nts., 6/30/96 (2)..................................................................$ 798 75,000 0%/12.75% Cv. Disc. Nts., 6/30/98 (2).............................................................. 107,063 957,000 0%/12.75% Sec. Disc. Nts., 6/30/98 (2)............................................................. 813,450 Presidio Oil Co.: 700,000 13.25% Sr. Sub. Gas Indexed Nts., 2/15/99 (3) (7).................................................. 742,000 525,000 11.50% Sr. Sec. Nts., Series A, 9/15/00............................................................ 552,563 4,325,452 Publishing --2.3% 1,700,000 Bell & Howell Holdings Co., 0%/11.50% Sr. Disc. Debs., Series B, 3/1/05 (2)............................................................................... 943,500 1,750,000 Marvel (Parent) Holdings, Inc., 0% Sr. Sec. Disc. Nts., 4/15/98...................................... 1,150,625 2,094,125 Railroads/Equipment -- 0.6% 500,000 Southern Pacific Transportation Co., 10.50% Sr. Sec. Nts., Series B, 7/1/99 .................................................................................. 555,625 Retail: Food and Drug--1.6% 500,000 Duane Reade, 12% Sr. Nts., Series B, 9/15/02......................................................... 542,500 1,000,000 Purity Supreme, Inc., 11.75% Sr. Sec. Nts., Series B, 8/1/99 ........................................ 985,000 1,527,500 Retail: Specialty --3.1% 500,000 AnnTaylor, Inc., 0%/14.375% Sr. Sub. Disc. Nts., 7/15/99 (2)......................................... 535,000 250,000 Comtroladora Commercial Mexicano SA, 8.75% Gtd. Nts., 4/21/98 (7)............................................................................. 262,188 1,000,000 Mary Kay Corp., 12.75% Gtd. Sr. Nts., Series B, 12/6/00 (7) ......................................... 1,065,000 500,000 Musicland Group, Inc. (The), 9% Sr. Sub. Nts., 6/15/03............................................... 509,375 500,000 Zale Delaware Corp., 11% Sr. Sec. Nts., 6/1/00....................................................... 517,500 2,889,063 Services --1.0% 1,000,000 Protection One Alarm Monitoring, Inc., 12% Sr. Sub. Nts., 11/1/03 (7)......................................................................................... 920,000 Telecommunications --2.0% 2,000,000 Cellular, Inc., 0%/11.75% Sr. Sub. Disc. Nts., 9/1/03 (2)............................................ 1,360,000 650,000 Horizon Cellular Telephone LP/Horizon Finance Corp., 0%/11.375% Sr. Sub. Disc. Nts., 10/1/00 (2) (7).................................................... 471,250 1,831,250 Textiles/Apparel --0.0% 115,000 Farley, Inc., 0% Sub. Debs., 12/30/12................................................................ 12,650 Transportation--3.4% Sea Containers Ltd.: 250,000 9.50% Sr. Nts., 7/1/03 ............................................................................ 251,563 500,000 12.50% Sr. Sub. Debs., Series A, 12/1/04........................................................... 565,625 350,000 12.50% Sr. Sub. Debs., Series B, 12/1/04........................................................... 386,750 1,500,000 Tiphook Financial Corp., 8% Gtd. Nts., 3/15/00....................................................... 1,230,000 1,500,000 Transtar Holdings LP, 0%/13.375% Sr. Disc. Nts., Series A, 12/15/08 (2)............................................................................. 746,250 3,180,188 Statement of Investments (Continued) Oppenheimer Variable Account Funds-High Income Fund Face Market Amount Long-Term Corporate Bonds and Notes (Continued) Value-Note 1 Utilities --0.5% $ 500,000 Subic Power Corp., 9.50% Debs., 12/28/08 (7).........................................................$ 510,000 Total Long-Term Corporate Bonds and Notes (Cost $67,518,869)................................................................................. 70,885,960 Derivative Securities --0.6% Lehman Brothers Holdings, Inc., 3.20% S & P 500 Index-Linked 500,000 Nts., 2/9/94 (7) (Cost $625,000)................................................................... 542,900 Municipal Bonds and Notes--2.5% 975,000 Pinole, California Redevelopment Agency Tax Allocation Taxable Bonds, Pinole Vista Redevelopment, Series B, 7.65%, 8/1/07...................................................................................... 1,040,368 500,000 Port of Portland, Oregon Taxable Special Obligation Revenue Bonds, PAMCO Project, 9.20%, 5/15/22....................................................... 549,472 12,500,000 San Joaquin Hills, California Transportation Corridor Agency Toll Road Capital Appreciation Revenue Bonds, Jr. Lien, 0%, 1/1/28......................................................................................... 754,312 Total Municipal Bonds and Notes (Cost $2,086,187).................................................... 2,344,152 Shares Common Stocks --3.5% 46,220 Berg Electronics Holdings Corp.* (7)................................................................. 73,952 150 ECM Fund L.P.I. (7) ................................................................................ 150,000 2,000 Finlay Enterprises, Inc., CI. A*..................................................................... 30,000 10,355 Gillett Holdings, Inc., Cl. 1* (7)................................................................... 225,221 300 Host Marriott Corp. ................................................................................. 2,738 19,212 Insilco Corp.*....................................................................................... 259,362 67,142 Leaseway Transportation Corp.*....................................................................... 1,141,409 8,400 LFC Holding Corp.*................................................................................... 140,700 300 Marriott International, Inc. ........................................................................ 8,700 45,360 Petrolane, Inc., Cl. B .............................................................................. 459,270 4,964 SCI Television, Inc.*................................................................................ 53,053 5,567 USG Corp.*........................................................................................... 162,835 56,802 Zale Corp. .......................................................................................... 525,419 Total Common Stocks (Cost $2,750,626)................................................................ 3,232,659 Preferred Stocks --3.8% 10,000 AMR Corp., $3.00 Cum. Cv. Depositary Shares, Series A (7)............................................ 525,000 10,429 Berg Electronics Holdings Corp., $3.4687 Exch., Series D*............................................ 273,761 3,500 Dell Computer Corp., 7% Cv.(7)....................................................................... 379,750 20,000 Glendale Federal Bank, $2.1875 Cv., Series E......................................................... 510,000 5,973 K-III Communications Corp., $11.625 Exch., Series B (5).............................................. 610,728 10,000 Navistar International Corp, $6.00 Cv., Series G..................................................... 535,000 10,000 Offshore Pipelines, Inc., $2.25 Cum. Cv. Exch. ...................................................... 402,500 50,000 Trizec Ltd., Sr. Cl. B, Series 3*.................................................................... 64,199 5,000 Unisys Corp., $3.75 Cv., Series A.................................................................... 241,875 Total Preferred Stocks (Cost $3,404,880)............................................................. 3,542,813 Statement of Investments (Continued) Oppenheimer Variable Account Funds-High Income Fund Market Units Rights, Warrants and Certificates -- 0.9% Value-Note 1 12,400 Ames Department Stores, Inc., Excess Cash Flow Payments Ctfs. .......................................$ 124 39,658 Ames Department Stores, Inc., Litigation Trust Units ................................................ 397 4,699 Digicon, Inc. Wts., Exp. 7/96........................................................................ 1,762 71,950 Gaylord Container Corp. Wts., Exp. 7/96.............................................................. 260,819 500 General Media, Inc. Wts., Exp. 12/00 (7)............................................................. 8,000 1,905 Hollywood Casino Corp. Wts., Exp. 4/98............................................................... 403,809 28,000 Protection One, Inc. Wts., Exp. 11/03 (7)............................................................ 89,880 2,599 Purity Supreme, Inc. Wts., Exp. 8/97 (7)............................................................. 52 50 Santa Fe Hotel, Inc. Wts., Exp. 12/96................................................................ 35,375 400 Southland Corp. Wts., Exp. 3/96...................................................................... 2,000 5,000 Triangle Wire & Cable, Inc. Wts., Exp. 1/98 (7)...................................................... 50 6,000 UGI Corp. Wts., Exp 3/98 ............................................................................ 10,200 Total Rights, Warrants and Certificates (Cost $313,508).............................................. 812,468 Total Investments, at Value (Cost $88,863,979)......................................................... 100.8% 93,784,521 Liabilities in Excess of Other Assets.................................................................. (.8) (773,188) Net Assets............................................................................................. 100.0% $ 93,011,333 * Non-income producing security. 1. Face amount is reported in foreign currency. 2. Represents a zero coupon bond that converts to a fixed rate of interest at a designated future date. 3. Represents the current interest rate for a variable rate security. 4. Indexed instrument for which the principal amount due at maturity is affected by the relative value of a foreign security. 5. Interest or dividend is paid in kind. 6. Securities with an aggregate market value of $3,753,129 are segregated to collateralize outstanding forward currency exchange contracts. See Note 5 of Notes to Financial Statements. 7. The Fund owns securities purchased in private placement transactions, without registration under the Securities Act of 1933 (the Act). The securities are valued under methods approved by the Board of Trustees as reflecting fair value. The Fund intends to invest no more than 10% of its net assets (determined at the time of purchase) in restricted and illiquid securities, excluding securities eligible for resale pursuant to Rule 144A of the Act that are determined to be liquid by the Board of Trustees or by the Manager under Board-approved guidelines. Restricted and illiquid securities amount to $2,731,042, or 2.94% of the Fund's net assets, at December 31, 1993.
Valuation Per Acquisition Cost Unit as of Security Date Per Unit December 31, 1993 Ackerley Communications, Inc., 10.75% Sr. Sec. Nts., Series A, 10/1/03(8)....................................................... 10/1/93 $ 100.00 $ 104.50 AMR Corp., $3.00 Cum. Cv. Depositary Shares, Series A Preferred Stock(8)......................................................... 12/2/93 $ 52.88 $ 52.50 Banco do Nordeste do Brasil, 10.375% Sr. Debs., 11/6/95(8)................... 4/26/93 $ 99.80 $ 101.50 Banco Nacional de Mexico SA, 7% Exch. Sub. Debs., 12/15/99(8)... 12/1/92-5/24/93 $ 102.40 $ 124.50 Berg Electronics Holdings Corp. Common Stock(8).............................. 4/28/93-8/11/93 $ 11.90 $ 1.60 Card Establishment Services, Inc., 10% Sr. Sub. Nts., 10/1/03(8)............. 10/5/93-12/1/93 $ 101.34 $ 104.50 Comtroladora Commercial Mexicano SA, 8.75% Gtd. Nts., 4/21/98(8)................................................................. 4/2/93 $ 99.34 $ 104.88 Dell Computer Corp., 7% Cv. Preferred Stock (8).............................. 8/19/93 $ 100.00 $ 108.50 Dell Computer Corp., 11% Sr. Nts., 8/15/00(8)................................ 10/27/93 $ 101.00 $ 105.25 ECM Fund L.P.I. Common Stock................................................. 4/14/92 $1,000.00 $1,000.00 ECM Fund L.P.I., 14% Sub. Nts., 6/10/02...................................... 4/14/92 $ 100.00 $ 112.15
Statement of Investments (Continued) Oppenheimer Variable Account Funds-High Income Fund
Valuation Per Acquisition Cost Unit as of Security Date Per Unit December 31, 1993 Eye Care Centers of America, Inc., Units(8).................................. 9/28/93 $ 100.00 $ 102.50 General Media, Inc., 10.625% Sr. Sec Nts., 12/31/00(8)....................... 12/14/93 $ 97.39 $ 102.50 General Media, Inc. Wts., Exp. 12/00(8)...................................... 12/14/93 $ .01 $ 16.00 Gillett Holdings, Inc., Cl. 1 Common Stock................................... 12/1/92 $ 10.50 $ 21.75 GSPI Corp., 10.15% Fst. Mtg. Bonds, 6/24/10(8)............................... 1/29/93 $ 102.40 $ 122.00 Helicon Group LP/ Helicon Capital Corp., 0%/9.50% Sr. Sec. Nts., 11/1/03(8)...................................................... 10/20/93 $ 95.01 $ 97.75 Horizon Cellular Telephone LP/Horizon Finance Corp., 0%/11.375% Sr. Sub. Disc. Nts., 10/1/00(8)................................ 9/24/93 $ 64.24 $ 72.50 Lehman Brothers Holdings, Inc., 3.20% S&P 500 Index-Linked Nts., 2/9/94............................................................... 11/9/93 $ 125.00 $ 108.58 Mary Kay Corp., 12.75% Gtd. Sr. Nts., Series B, 12/6/00...................... 12/11/92-3/22/93 $ 106.50 $ 106.50 Pace Industries, Inc., 10.625% Sr. Nts., 12/1/02(8).......................... 12/3/93 $ 100.00 $ 103.00 Presidio Oil Co., 13.25% Sr. Sub. Gas Indexed Nts., 2/15/99(8)................................................................. 2/23/93 $ 80.00 $ 106.00 Protection One Alarm Monitoring, Inc., 12% Sr. Sub. Nts., 11/1/03(8)................................................................. 11/04/93 $ 91.10 $ 92.00 Protection One Alarm Monitoring, Inc., Wts., Exp. 11/03(8)................... 11/04/93 $ 3.18 $ 3.21 Purity Supreme, Inc. Wts., Exp. 8/97......................................... 7/29/92 $ -- $ .02 Residential Funding Corp., 7.97% Real Estate Trust Pass-Through Ctfs., Series 1993-J2, Cl. B1, 6/15/23(8).................................. 6/29/93 $ 83.97 $ 85.56 Subic Power Corp., 9.50% Debs., 12/28/08(8).................................. 12/20/93 $ 99.93 $ 102.00 Treasure Bay Gaming & Resorts, Inc., Units(8)................................ 11/10/93 $ 100.00 $ 101.50 Triangle Wire & Cable, Inc., 13.50% Sr. Nts., 1/15/02........................ 1/13/92 $ 100.00 $ 38.00 Triangle Wire & Cable, Inc. Wts., Exp. 1/98.................................. 1/13/92 $ -- $ .01 Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11 (8)............. 11/8/93 $ 100.00 $ 103.13
8 Transferable under Rule 144A of the Act. See accompanying Notes to Financial Statements. Statement of Investments December 31, 1993 Oppenheimer Variable Account Funds -- Bond Fund
Face Market Amount Repurchase Agreements--17.9% Value-Note 1 $20,000,000 Repurchase agreement with First Chicago Capital Markets, Inc., 3.125%, dated 12/31/93 and maturing 1/3/94, collateralized by U.S. Treasury Nts., 3.875%, 3/31/95, with a value of $20,406,039 (Cost $20,000,000).................................... $ 20,000,000 Short-Term Corporate Bonds and Notes--0.8% Citibank CD: 500,000 (1) 17.35%, 7/28/94 (3) .............................................. 476,603 500,000 (1) 17.30%, 7/29/94 (3) .............................................. 473,569 Total Short-Term Corporate Bonds and Notes (Cost $1,007,367) ................................................ 950,172 Long-Term Government Obligations--28.3% 3,000,000 (1) Bank Negara Indonesia Bonds, 0%, 5/12/95 ........................... 1,167,176 Corporacion Andina de Fomento: 1,000,000 Bonds, 6.625%, 10/14/98 (4) ..................................... 992,500 1,000,000 Nts., 7.25%, 4/30/98 (4) ........................................ 1,020,625 1,000,000 Czechoslovakia National Bank Nts., 7%, 4/16/96 (4) ................. 1,017,500 1,250,000 Empresa Columbiana de Petroleos Nts., 7.25%, 7/8/98 (4) ............ 1,270,313 Federal National Mortgage Assn. Gtd. Real Estate Mortgage Investment Conduit Pass-Through Ctfs.: 3,000,000 8.75%, 11/25/05 .................................................. 3,214,830 2,000,000 10.40%, 4/25/19 .................................................. 2,239,800 1,450,000 Financiera Energetica Nacional Nts., 6.625%, 12/13/96 .............. 1,446,375 1,000,000 Petroliam Nasional Berhad Nts., 6.875%, 7/1/03(4) .................. 1,012,500 1,000,000 (1) Treasury Corp. of Victoria Gtd. Sr. Nts., 8.25%, 10/15/03 .......... 733,060 U.S. Treasury Bonds: 5,000,000 8%, 11/15/21 ..................................................... 5,923,399 1,000,000 7.25%, 8/15/22 ................................................... 1,091,560 U.S. Treasury Nts.: 1,000,000 6.875%, 8/15/94 .................................................. 1,020,930 3,000,000 5.875%, 5/15/95 .................................................. 3,075,930 1,000,000 7.875%, 6/30/96 .................................................. 1,087,180 1,000,000 6.375%, 6/30/97 .................................................. 1,052,490 3,000,000 6%, 12/31/97 ..................................................... 3,116,220 1,000,000 8.25%, 7/15/98 ................................................... 1,125,620 Total Long-Term Government Obligations (Cost $29,898,884) ............................................... 31,608,008 Long-Term Corporate Bonds and Notes--44.7% Airlines --1.0% 975,000 AMR Corp., 10% Debs., 4/15/21 ...................................... 1,125,200 Statement of Investments (Continued) Oppenheimer Variable Account Funds - Bond Fund Face Market Amount Long-Term Corporate Bonds and Notes(Continued) Value-Note 1 Automobiles, Trucks and Parts --0.9% $ 800,000 Chrysler Corp., 10.95% Debs., 8/1/17 ............................... $ 964,874 Banks/Savings and Loans --1.8% 200,000 Chemical New York Corp., 9.75% Sub. Cap. Nts., 6/15/99 ............. 235,515 750,000 First Chicago Corp., 11.25% Sub. Nts., 2/20/01 ..................... 964,171 100,000 First Fidelity Bancorporation, 8.50% Sub. Cap. Nts., 4/1/98 ........ 109,444 475,000 Heller Financial, Inc., 7.75% Nts., 5/15/97 ........................ 508,995 165,000 NBD Bancorp, Inc., 7.25% Sub. Debs., 8/15/04 ....................... 175,922 1,994,047 Broadcast Media/Cable TV -- 7.4% News America Holdings, Inc.: 500,000 12% Sr. Nts., 12/15/01 ........................................... 607,500 100,000 8.625% Sr. Nts., 2/1/03 .......................................... 110,375 500,000 10.125% Gtd. Sr. Debs., 10/15/12 ................................. 606,875 1,500,000 Time Warner Entertainment Co. LP, 8.375% Sr. Debs., 3/15/23 ........ 1,582,500 Time Warner, Inc.: 800,000 7.45% Nts., 2/1/98 ............................................... 842,000 220,000 7.95% Nts., 2/1/00 ............................................... 235,400 3,500,000 TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 ...................... 4,270,000 8,254,650 Chemicals/Plastics --2.3% 2,100,000 Quantum Chemical Corp., 10.375% Fst. Mtg. Bonds, 6/1/01 ............ 2,560,341 Financial/Insurance --9.7% 1,000,000 Auburn Hills Trust, 12.375% Gtd. Exch. Ctfs., 5/1/20 (2) ........... 1,537,500 700,000 Conseco, Inc., 8.125% Sr. Nts., 2/15/03 ............................ 733,106 2,000,000 First Boston Mortgage Securities Corp., 7.04% Mtg. Pass- Through Ctfs., 10/25/02 .......................................... 1,976,250 General Motors Acceptance Corp.: 700,000 8% Nts., 10/1/96 ................................................. 746,928 700,000 7.75% Nts., 4/15/97 .............................................. 744,556 300,000 5.50% Nts., 12/15/01 ............................................. 278,091 1,185,462 GSPI Corp., 10.15% Fst. Mtg. Bonds, 6/24/10 (4) .................... 1,446,264 450,000 PaineWebber Group, Inc., 7.75% Sub. Nts., 9/1/02 ................... 474,652 1,250,000 Republic American Corp., 9.50% Sub. Debs., 8/1/02 .................. 1,298,695 1,171,405 Resolution Trust Corp., 8.25% Mtg. Pass-Through Ctfs., Series 1992-CHF, Cl. C, 12/25/20 ................................. 1,218,994 350,000 Shearson Lehman Brothers Holdings, Inc., 8.375% Nts., 2/15/99 ...... 382,999 10,838,035 Food and Restaurants --1.5% 500,000 Philip Morris Cos., Inc., 8.875% Nts., 7/1/96 ...................... 546,917 1,000,000 RJR Nabisco, Inc., 10.50% Sr. Nts., 4/15/98 ........................ 1,105,000 1,651,917 Statement of Investments (Continued) Oppenheimer Variable Account Funds - Bond Fund Face Market Amount Long-Term Corporate Bonds and Notes(Continued) Value-Note 1 Gaming/Hotels --1.9% $ 1,225,000 Circus Circus Enterprises, Inc., 6.75% Sr. Sub. Nts., 7/15/03 ...... $ 1,226,491 Host Marriott Hospitality, Inc.: 228,000 10.125% Sr. Nts., Series F, 1/15/99 .............................. 235,980 190,000 10.625% Sr. Nts., Series B, 2/1/00 ............................... 195,700 475,000 11% Sr. Nts., Series L, 5/1/07 ................................... 488,656 2,146,827 Healthcare/Medical Products -- 1.2% 1,178,824 Epic Properties, Inc., 11.50% Gtd. Fst. Priority Mtg. Nts., Cl. B-2, 7/15/01 ................................................. 1,326,176 Home Building/Development -- 2.3% 1,000,000 (1) Noranda Forest, Inc., 11% Debs., 7/15/98 ........................... 849,037 1,664,470 Scotia Pacific Holding Co., 7.95% Timber Collateralized Nts., 7/20/15 .......................................................... 1,738,329 2,587,366 Leisure/Entertainment --1.4% 500,000 Columbia Pictures Entertainment, Inc., 9.875% Sr. Sub. Nts., 2/1/98 ........................................................... 571,450 250,000 Eastman Kodak Co., 10% Nts., 6/15/01 ............................... 278,036 700,000 Mattel, Inc., 6.875% Sr. Nts., 8/1/97 .............................. 732,533 1,582,019 Oil and Gas: Equipment and Services -- 1.2% 400,000 McDermott, Inc., 9.375% Nts., 3/15/02 .............................. 454,866 250,000 Sonat, Inc., 9.50% Nts., 8/15/99 ................................... 286,861 500,000 Southwest Gas Corp., 9.75% Debs., Series F, 6/15/02 ................ 558,759 1,300,486 Oil and Gas: Exploration and Production -- 0.4% 375,000 Atlantic Richfield Co., 10.375% Nts., 7/15/95 ...................... 408,525 Oil and Gas: Integrated -- 1.1% Tenneco, Inc.: 650,000 7.875% Nts., 10/1/02 ............................................. 696,255 400,000 10% Debs., 3/15/08 ............................................... 503,748 1,200,003 Railroads/Equipment --1.1% 700,000 American Car Line Co., 8.25% Equipment Trust Ctfs., Series 1993-A, 4/15/08 ........................................... 731,500 400,000 Union Pacific Corp., 9.65% Medium-Term Nts., 4/17/00 ............... 475,256 1,206,756 Telecommunications --0.5% 500,000 GTE Corp., 9.375% Debs., 12/1/00 ................................... 594,612 Statement of Investments (Continued) Oppenheimer Variable Account Funds - Bond Fund Face Market Amount Long-Term Corporate Bonds and Notes(Continued) Value-Note 1 Textiles/Apparel --1.0% $ 1,097,000 Fruit of the Loom, Inc., 7% Debs., 3/15/11 ......................... $ 1,066,833 Transportation --1.2% Tiphook Financial Corp.: 1,000,000 8% Gtd. Nts., 3/15/00 ............................................ 820,000 600,000 10.75% Sr. Gtd. Nts., 11/1/02 .................................... 531,000 1,351,000 Utilities --6.8% 750,000 Boise Cascade Corp., 9.90% Nts., 3/15/00 ........................... 847,162 650,000 (1) BP America, Inc., 10.875% Nts., 8/1/01 ............................. 586,073 Coastal Corp.: 700,000 8.75% Sr. Nts., 5/15/99 .......................................... 763,508 2,000,000 11.75% Sr. Debs., 6/15/06 ........................................ 2,320,000 Commonwealth Edison Co.: 550,000 6.50% Nts., 7/15/97 .............................................. 564,060 275,000 6.40% Nts., 10/15/05 ............................................. 260,512 500,000 Long Island Lighting Co., 7% Debs., 3/1/04 ......................... 485,454 1,000,000 Mitchell Energy & Development Corp., 9.25% Sr. Nts., 1/15/02 ....... 1,122,500 750,000 Public Service Company of Colorado, 8.75% Fst. Mtg. Bonds, 3/1/22 ........................................................... 841,434 7,790,703 Total Long-Term Corporate Bonds and Notes (Cost $47,992,177)................................................ 49,950,370 Municipal Bonds and Notes -- 6.3% City of New York Taxable General Obligation Bonds, Series D: 500,000 9%, 2/1/13 ....................................................... 564,632 500,000 9.90%, 2/1/15 .................................................... 588,588 650,000 Connecticut State Taxable General Obligation Bonds, 6.625%, 12/15/97 ......................................................... 686,732 Dade County, Florida Educational Facilities Authority Taxable Exchange Revenue Bonds, University of Miami, MBIA Insured: 175,000 7.65%, 4/1/10 ................................................... 202,488 325,000 9.70%, 4/1/10 ................................................... 388,893 New York State Environmental Facilities Corp. State Service Contract Taxable Revenue Bonds: 375,000 Series A, 9.625%, 3/15/21 ....................................... 431,862 Series B: 200,000 7.30%, 3/15/97 ............................................... 209,186 800,000 8.15%, 3/15/02 ............................................... 871,697 1,320,000 Pinole, California Redevelopment Agency Tax Allocation Taxable Bonds, Pinole Vista Redevelopment, Series B, 8.35%, 8/1/17 ....... 1,419,890 1,500,000 Port of Portland, Oregon Taxable Special Obligation Revenue Bonds, PAMCO Project, 9.20%, 5/15/22 ............................. 1,648,415 Total Municipal Bonds and Notes (Cost $6,306,380) .................. $ 7,012,383 Statement of Investments (Continued) Oppenheimer Variable Account Funds - Bond Fund Market Shares Common Stocks --0.0% Value-Note 1 1,413 Host Marriott Corp. ................................................ 12,894 1,413 Marriott International, Inc. ....................................... 40,977 Total Common Stocks (Cost $46,982) ................................. 53,871 Total Investments, at Value (Cost $105,251,790) ...................... 98.0% 109,574,804 Other Assets Net of Liabilities ...................................... 2.0 2,271,317 Net Assets ........................................................... 100.0% $ 111,846,121 1. Face amount is reported in foreign currency. 2. Represents the current interest rate for a variable rate security. 3. Indexed instrument for which the principal amount due at maturity is affected by the relative value of a foreign security. 4. The Fund owns securities purchased in private placement transactions, without registration under the Securities Act of 1933 (the Act). The securities are valued under methods approved by the Board of Trustees as reflecting fair value. The Fund intends to invest no more than more than 10% of its net assets (determined at the time of purchase) in restricted and illiquid securit excluding securities eligible for resale pursuant to Rule 144A of the Act that are determined to be liquid by the Board of Trustees or by the Manager under Board-approved guidelines.
Valuation Per Acquistion Cost Unit as of Security Date Per Unit December Corporacion Andina de Fomento: Bonds, 6.625%, 10/14/98 (5).............................. 9/23/93 $ 99.95 $ 99.25 Nts., 7.25%, 4/30/98 (5)................................. 4/15/93 $ 99.38 $102.06 Czechoslovakia National Bank Nts., 7%, 4/16/96 (5).......... 3/11/93 $ 99.70 $101.75 Empresa Columbiana de Petroleos Nts., 7.25%, 7/8/98 (5)..... 6/24/93 $ 99.63 $101.63 GSPI Corp., 10.15% Fst. Mtg. Bonds, 6/24/10 (5)............. 1/29/93 $102.40 $122.00 Petroliam Nasional Berhad Nts., 6.875%, 7/1/03 (5).......... 7/28/93 $100.60 $101.25
5. Transferable under Rule 144A of the Act. See accompanying Notes to Financial Statements. Statement of Investments December 31, 1993 Oppenheimer Variable Account Funds - Capital Appreciation Fund
Face Market Amount Repurchase Agreements--13.9% Value-Note 1 $19,000,000 Repurchase agreement with J.P. Morgan Securities, Inc., 3.15%, dated 12/31/93 and maturing 1/3/94, collateralized by U.S. Treasury Bills, 2.93%, 2/3/94, with a value of $19,399,169 (Cost $19,000,000) ............................... $ 19,000,000 Corporate Bonds and Notes--4.1% 1,250,000 Aspect Telecommunications Corp., 5% Cv. Sub. Debs., 10/15/03 (1) ................................................. 1,518,750 1,000,000 Intelcom Group, Inc., 7% Cv. Sub. Nts., 10/30/98 (1) ............. 777,840 1,000,000 Medaphis Corp., 6.50% Cv. Sub. Debs., 1/1/00 (1) ................. 1,225,000 750,000 RHI Entertainment, Inc., 6.50% Cv. Sub. Debs., 6/1/03 ............ 986,250 2,000,000 Solectron Corp., 0% Liq. Yld. Opt. Sub. Nts., 5/5/12 ............. 1,170,000 Total Corporate Bonds and Notes (Cost $4,604,064) ................ 5,677,840 Units Rights, Warrants and Certificates--0.1% 120,000 Tapistron International, Inc. Wts., Exp. 6/97 * .................. 135,000 381 Windmere Corp. Wts., Exp. 1/98 * ................................. - Total Rights, Warrants and Certificates (Cost $52,860) ........... 135,000 Shares Common Stocks --84.9% Basic Materials --0.8% Metals: Miscellaneous --0.3% 20,000 Custom Chrome, Inc. * ............................................ 445,000 Steel --0.5% 17,000 Huntco, Inc., Cl. A .............................................. 716,125 Consumer Cyclicals --31.9% Airlines --1.0% 40,000 Atlantic Southeast Airlines, Inc. ................................ 1,370,000 Auto Parts: After Market--2.7% 40,000 AutoZone, Inc. * ................................................. 2,290,000 20,000 Bailey Corp. * ................................................... 275,000 20,000 O'Reilly Automotive, Inc. * ...................................... 580,000 27,000 Stant Corp. ...................................................... 546,750 3,691,750 Broadcast Media--1.9% 25,200 EZ Communications, Inc., Cl. A ................................... 396,900 25,000 IDB Communications Group, Inc. * ................................. 1,375,000 50,000 Valuevision International, Inc., Cl. A * ......................... 768,750 2,540,650 Statement of Investments (Continued) Oppenheimer Variable Account Funds - Capital Appreciation Fund Market Shares Common Stocks (Continued) Value-Note 1 Consumer Cyclicals (Continued) Entertainment --2.9% 21,000 Autotote Corp. * ................................................. $ 462,000 30,000 Hollywood Park, Inc. * ........................................... 900,000 47,000 Iwerks Entertainment, Inc. * ..................................... 1,257,250 40,000 Players International, Inc. * .................................... 990,000 24,000 RIO HOTEL & CASINO, INC. * ....................................... 384,000 3,993,250 Hotels / Motels--2.6% 30,000 Circus Circus Enterprises, Inc. * ................................ 1,110,000 50,000 Mirage Resorts, Inc. * ........................................... 1,193,750 26,000 Promus Cos., Inc. (The) * ........................................ 1,189,500 3,493,250 Household Furnishings and Applliances--1.4% 32,500 Heilig-Meyers Co. ................................................ 1,267,500 35,000 Rhodes, Inc. * ................................................... 586,250 1,853,750 Leisure Time--2.3% 20,000 Caesar's World, Inc. * ........................................... 1,067,500 32,000 Funco, Inc. * .................................................... 480,000 20,000 International Game Technology .................................... 590,000 20,000 Showboat, Inc. ................................................... 322,500 25,000 Sodak Gaming, Inc. * ............................................. 750,000 3,210,000 Restaurants--2.6% 45,000 Apple South, Inc. ................................................ 945,000 22,500 Brinker International, Inc. * .................................... 1,035,000 20,000 HomeTown Buffet, Inc. * .......................................... 565,000 27,000 Outback Steakhouse, Inc. * ....................................... 1,036,125 3,581,125 Retail: Specialty--9.7% 10,500 Barnes & Noble, Inc. ............................................. 261,188 30,000 Bed Bath & Beyond, Inc. * ........................................ 1,035,000 70,000 Blockbuster Entertainment Corp. .................................. 2,143,750 45,000 Bombay Co., Inc. (The) * ......................................... 2,025,000 35,000 CellStar Corp. * ................................................. 586,250 58,000 CML Group, Inc. .................................................. 1,370,250 72,000 General Nutrition Cos., Inc. * ................................... 2,052,000 12,000 Insurance Auto Auctions, Inc. * .................................. 447,000 33,500 Musicland Stores Corp. * ......................................... 695,125 20,000 Office Depot, Inc. * ............................................. 672,500 Statement of Investments (Continued) Oppenheimer Variable Account Funds - Capital Appreciation Fund Market Shares Common Stocks (Continued) Value-Note 1 Consumer Cyclicals (Continued) Retail: Specialty (Continued) 16,000 PetsMart, Inc. * ................................................. $ 436,000 45,000 Rex Stores Corp. * ............................................... 1,018,125 30,000 Spiegel, Inc., Cl. A ............................................. 675,000 13,417,188 Retail: Specialty Apparel--0.2% 12,000 Urban Outfitters, Inc. * ......................................... 321,000 Retail Stores: Department Stores--1.1% 30,000 Kohls Corp. * .................................................... 1,507,500 Retail Stores: General Merchandise Chains--0.6% 35,000 Damark International, Inc. * ..................................... 796,250 Shoes--0.3% 20,000 Baker (J.), Inc. ................................................. 350,000 Textiles: Apparel Manufacturers--2.6% 30,000 Mohawk Industries, Inc. * ........................................ 1,027,500 25,000 Phillips-Van Heusen Corp. ........................................ 937,500 60,000 Tapistron International, Inc. * .................................. 300,000 41,000 Tommy Hilfiger Corp. * ........................................... 1,281,250 3,546,250 Consumer Non-Cyclicals--14.5% Beverages: Soft Drinks--1.2% 36,000 Cott Corp. ....................................................... 877,500 30,000 Snapple Beverage Corp. * ......................................... 787,500 1,665,000 Drugs--3.9% 6,361 Copley Pharmaceutical, Inc. * .................................... 251,260 50,000 Ethical Holdings Ltd., ADR * ..................................... 437,500 62,500 Nature's Bounty, Inc. * .......................................... 1,296,875 40,000 Perrigo Co. * .................................................... 1,370,000 15,000 R.P. Scherer Corp. * ............................................. 566,250 35,000 Roberts Pharmaceutical Corp. * ................................... 1,391,250 5,313,135 Food Wholesalers--0.5% 40,000 Ridgefield * ..................................................... 650,000 Healthcare: Diversified--1.2% 30,000 IVAX Corp. ....................................................... 862,500 25,500 Value Health, Inc. * ............................................. 803,250 1,665,750 Statement of Investments (Continued) Oppenheimer Variable Account Funds - Capital Appreciation Fund Market Shares Common Stocks (Continued) Value-Note 1 Consumer Non-Cyclicals (Continued) Healthcare: Miscellaneous--3.6% 20,000 Athena Neurosciences, Inc. * ..................................... $ 165,000 20,000 Celtrix Pharmaceuticals, Inc. * .................................. 220,000 10,000 Cygnus Therapeutic Systems * ..................................... 112,500 20,000 Elan Corp. PLC * ................................................. 847,500 25,000 Genesis Health Ventures, Inc. * .................................. 587,500 30,000 Genetic Therapy, Inc. * .......................................... 487,500 20,000 Intergroup Healthcare Corp. * .................................... 960,000 20,000 Isis Pharmaceuticals, Inc. * ..................................... 135,000 50,000 Martek Biosciences Corp. * ....................................... 450,000 20,000 Matrix Pharmaceutical, Inc. * .................................... 210,000 10,000 Medimmune, Inc. * ................................................ 110,000 15,000 PerSeptive Biosystems, Inc. * .................................... 431,250 10,000 Vertex Pharmaceuticals, Inc. * ................................... 185,000 4,901,250 Hospital Management--2.8% 15,000 American Medical Response, Inc. * ................................ 375,000 80,000 Horizon Healthcare Corp. ......................................... 1,610,000 50,000 Lincare Holdings, Inc. * ......................................... 1,243,750 30,000 Mariner Health Group, Inc. * ..................................... 648,750 3,877,500 Medical Products--1.3% 9,486 Applied Immune Sciences, Inc. * .................................. 94,860 10,000 Molecular Dynamics, Inc. * ....................................... 117,500 20,000 Ventritex, Inc. * ................................................ 785,000 25,000 Zoll Medical Corp. * ............................................. 750,000 1,747,360 Energy--2.4% Natural Gas: Processing--0.7% 35,400 Louis Dreyfus Natural Gas Corp. * ................................ 566,400 20,000 Newfield Exploration Co. * ....................................... 352,500 918,900 Oil: Integrated Domestic--0.3% 40,000 Trident NGL Holding, Inc. * ...................................... 470,000 Oil and Gas Drilling--1.4% 12,500 Alexander Energy Corp. * ......................................... 60,938 30,800 Cross Timbers Oil Co. ............................................ 438,900 25,000 International Colin Energy Corp. * ............................... 318,750 7,083 International Pedco Energy Corp. * ............................... 11,181 50,000 St. Mary Land & Exploration Co. .................................. 612,500 35,000 Stone Energy Corp. * ............................................. 472,500 1,914,769 Statement of Investments (Continued) Oppenheimer Variable Account Funds - Capital Appreciation Fund Market Shares Common Stocks (Continued) Value-Note 1 Financial--8.0% Financial Services: Miscellaneous--4.5% 30,000 Advanta Corp., Cl. B ............................................. $ 870,000 25,000 BHC Financial, Inc. * ............................................ 687,500 38,000 Countrywide Credit Industries, Inc. .............................. 954,750 48,400 First USA, Inc. .................................................. 1,730,300 41,000 Foothill Group, Inc. (The), Cl. A ................................ 681,625 10,000 Insignia Financial Group, Inc., Cl. A * .......................... 230,000 20,000 Servicios Financieros Quadrum SA, Sponsored ADR .................. 647,500 30,000 Vallicorp Holdings, Inc. ......................................... 375,000 6,176,675 Insurance: Life--0.6% 40,000 Bankers Life Holding Corp. ....................................... 860,000 Insurance: Multi-Line--1.2% 60,000 CCP Insurance, Inc. .............................................. 1,672,500 Insurance: Property and Casualty--1.6% 16,500 ACE Ltd. ......................................................... 513,563 25,000 Mid Ocean Ltd. * ................................................. 706,250 20,000 PartnerRe Holdings Ltd. .......................................... 435,000 45,000 Philadelphia Consolidated Holding Co. * .......................... 540,000 2,194,813 Savings and Loans/Holding Cos.--0.1% 2,733 Pacific Crest Capital, Inc. * .................................... 19,473 Industrial--4.9% Conglomerates--1.1% 70,000 Grupo Carso SA, ADS * ............................................ 1,531,250 Electrical Equipment--0.9% 52,000 AER Energy Resources, Inc. * ..................................... 533,000 24,000 Kent Electronics Corp. * ......................................... 684,000 1,217,000 Machinery: Diversified--1.0% 23,000 Duracraft Corp. .................................................. 569,250 43,000 FSI International, Inc. * ........................................ 516,000 20,500 Quickturn Design System, Inc. * .................................. 256,250 1,341,500 Manufacturing: Diversified Industrials--1.7% 30,000 Johnstown America Industries, Inc. * ............................. 735,000 20,000 Trinity Industries, Inc. ......................................... 862,500 110,000 Zoltek Cos., Inc. * .............................................. 701,250 2,298,750 Statement of Investments (Continued) Oppenheimer Variable Account Funds - Capital Appreciation Fund Market Shares Common Stocks (Continued) Value-Note 1 Industrial (Continued) Railroads--0.2% 11,300 RailTex, Inc. * .................................................. $ 313,575 Technology--22.4% Communication: Equipment/Manufacturers--1.9% 26,800 Antec Corp. * .................................................... 670,000 15,000 BroadBand Technologies, Inc. * ................................... 476,250 15,000 Glenayre Technologies, Inc. * .................................... 652,500 15,000 Newbridge Networks Corp. * ....................................... 821,250 2,620,000 Computer Software and Services--10.5% 25,000 Acclaim Entertainment, Inc. * .................................... 531,250 30,000 Cheyenne Software, Inc. * ........................................ 828,750 22,000 Compuware Corp. * ................................................ 572,000 34,200 Cornerstone Imaging, Inc. * ...................................... 504,450 41,000 CUC International, Inc. * ........................................ 1,476,000 11,100 Danka Business System PLC, Sponsored ADR ......................... 444,000 39,000 Davidson & Associates, Inc. * .................................... 702,000 20,000 Electronic Arts, Inc. * .......................................... 600,000 90,000 EMC Corp. * ...................................................... 1,485,000 25,000 Fourth Shift Corp. * ............................................. 210,938 17,000 FTP Software, Inc. * ............................................. 450,500 12,000 GTECH Holdings Corp. * ........................................... 393,000 20,000 HBO & Co. ........................................................ 920,000 12,500 Information Resources, Inc. * .................................... 481,250 30,000 Lotus Development Corp. * ........................................ 1,650,000 24,000 Mercury Interactive Corp. * ...................................... 414,000 30,000 Pairgain Technologies, Inc. * .................................... 412,500 944 Sap AG, Preference ............................................... 877,933 16,000 SOFTIMAGE, Inc. * ................................................ 256,000 4,500 SPS Transaction Services, Inc. * ................................. 271,125 20,000 Sybase, Inc. * ................................................... 840,000 14,320,696 Computer Systems--4.7% 10,000 Cabletron Systems, Inc. * ........................................ 1,125,000 9,000 Cisco Systems, Inc. * ............................................ 581,625 25,000 First Data Corp. ................................................. 1,018,750 48,000 Golden Systems, Inc. * ........................................... 411,000 30,000 Pyxis Corp. * .................................................... 2,242,500 69,000 Union Switch & Signal, Inc. * .................................... 1,086,750 6,465,625 Electronics--0.4% 30,500 Itron, Inc. * .................................................... 549,000 Statement of Investments (Continued) Oppenheimer Variable Account Funds - Capital Appreciation Fund Market Shares Common Stocks (Continued) Value-Note 1 Technology (Continued) Electronics: Instrumentation--1.5% 60,000 American Power Conversion Corp. * ................................ $ 1,425,000 75,000 CMC Industries, Inc. * ........................................... 637,500 2,062,500 Electronics: Semiconductors--0.6% 80,000 Advanced Technology Materials, Inc. * ............................ 470,000 32,100 MRS Technology, Inc. * ........................................... 417,300 887,300 Telecommunications--2.8% 20,000 Cencall Communications Corp. * ................................... 560,000 40,000 Davel Communications Group, Inc. ................................. 615,000 20,000 LCI International, Inc. * ........................................ 740,000 33,177 LDDS Communications, Inc. * ...................................... 1,600,790 45,000 WCT Communications, Inc. * ....................................... 264,373 3,780,163 Total Common Stocks (Cost $91,474,536) ........................... 116,267,572 Total Investments, at Value (Cost $115,131,460) ..................... 103.0% 141,080,412 Liabilities in Excess of Other Assets ............................... (3.0) (4,195,309) Net Assets .......................................................... 100.0% $136,885,103 * Non-income producing security. 1 The Fund owns securities purchased in private placement transactions, without registration under the Securities Act of 1933 (the Act). The securities are valued under methods approved by the Board of Trustees as reflecting fair value. The Fund intends to invest no more than 10% of its net assets (determined at the time of purchase) in restricted and illiquid securities, excluding securities eligible for resale pursuant to Rule 144A of the Act that are determined to be liquid by the Board of Trustees or by the Manager under Board-approved guidelines. Restricted and illiquid securities amount to $777,840, or .57% of the Fund's net assets, at December 31, 1993. Valuation Per Acquisition Cost Unit as of Security Date Per Unit 12/31/93 Aspect Telecommunications Corp., 5% Cv. Sub Debs., 10/15/03(2) 9/14/93 $100.00 $121.50 Intelcom Group, Inc., 7% Cv. Sub. Nts., 10/30/98 ............ 11/2/93 $100.00 $ 77.78 Medaphis Corp., 6.50% Cv. Sub. Debs., 1/1/00 (2) ............ 12/22/92 $100.00 $122.50 2 Transferable under Rule 144A of the Act. See accompanying Notes to Financial Statements.
Statement of Investments December 31, 1993 Oppenheimer Variable Account Funds - Growth Fund
Face Market Amount Repurchase Agreements --12.9% Value-Note 1 $ 7,300,000 Repurchase agreement with J.P. Morgan Securities, Inc., 3.15%, dated 12/31/93 and maturing 1/3/94, collateralized by U.S. Treasury Bills, 2.93%, 2/3/94, with a value of $7,454,315 (Cost $7,300,000) ............................... $ 7,300,000 Shares Common Stocks --86.2% Basic Materials --1.4% Chemicals --0.9% 7,000 Great Lakes Chemical Corp. ................................... 522,375 Chemicals: Diversified --0.5% 6,000 FMC Corp. * .................................................. 282,750 Consumer Cyclicals --15.3% Auto Parts: After Market --1.3% 15,000 Goodyear Tire & Rubber Co. ................................... 686,250 2,700 SPX Corp. .................................................... 47,925 734,175 Automobiles --1.0% 13,000 Harley-Davidson, Inc. ........................................ 573,625 Broadcast Media --1.6% 12,000 Multimedia, Inc. * ........................................... 411,000 17,000 Tele-Communications, Inc., Cl. A * ........................... 514,250 925,250 Entertainment --1.1% 16,000 King World Productions, Inc. * ............................... 614,000 Leisure Time --1.1% 7,000 Caesar's World, Inc. * ....................................... 373,625 8,000 International Game Technology ................................ 236,000 609,625 Publishing --0.2% 4,000 Marvel Entertainment Group, Inc. * ........................... 109,000 Restaurants --1.6% 4,500 McDonald's Corp. ............................................. 256,500 28,000 Shoney's, Inc. * ............................................. 647,500 904,000 Retail: Specialty --5.5% 14,000 Blockbuster Entertainment Corp. .............................. 428,750 18,000 Circuit City Stores, Inc. .................................... 391,500 17,000 CML Group, Inc. .............................................. 401,620 Statement of Investments (Continued) Oppenheimer Variable Account Funds - Growth Fund Market Shares Common Stocks (Continued) Value-Note 1 Consumer Cyclicals (Continued) Retail: Specialty (Continued) 14,000 Home Depot, Inc. (The) ....................................... $ 553,000 23,000 Michaels Stores, Inc. * ...................................... 822,250 8,000 Pier 1 Imports, Inc. ......................................... 78,000 7,000 QVC Network, Inc. * .......................................... 274,750 14,600 Service Merchandise Co., Inc. * .............................. 146,000 3,095,870 Retail Stores: General Merchandise Chains --0.7% 5,000 Mac Frugal's Bargains Close-Outs, Inc. *...................... 98,125 11,000 Wal-Mart Stores, Inc. ........................................ 275,000 373,125 Shoes --0.1% 3,000 Reebok International Ltd. .................................... 90,000 Textiles: Apparel Manufacturers --0.6% 14,000 Fruit of the Loom, Inc., Cl. A * ............................. 337,750 Toys --0.5% 11,000 Mattel, Inc. ................................................. 303,875 Consumer Non-Cyclicals --19.0% Beverages: Soft Drinks --1.4% 10,000 Coca-Cola Co. (The) .......................................... 446,250 9,000 PepsiCo, Inc. ................................................ 367,875 814,125 Drugs --3.0% 6,500 Forest Laboratories, Inc. * .................................. 309,563 4,000 Marion Merrell Dow, Inc. ..................................... 72,000 7,500 Merck & Co., Inc. ............................................ 257,813 3,000 Mylan Laboratories, Inc. ..................................... 76,125 5,000 Pfizer, Inc. ................................................. 345,000 6,000 Schering-Plough Corp. ........................................ 411,000 4,000 Syntex Corp. ................................................. 63,500 6,000 Upjohn Co. ................................................... 174,750 1,709,751 Food Processing --0.9% 4,000 ConAgra, Inc. ................................................ 105,500 3,000 General Mills, Inc. .......................................... 182,250 6,000 Heinz (H.J.) Co. ............................................. 215,250 1,000 Tyson Foods, Inc., Cl. A ..................................... 24,000 527,000 Healthcare: Diversified --3.6% 13,000 Abbott Laboratories .......................................... 383,500 Statement of Investments (Continued) Oppenheimer Variable Account Funds - Growth Fund Market Shares Common Stocks (Continued) Value-Note 1 Consumer Non-Cyclicals (Continued) Healthcare: Diversified (Continued) 4,500 American Home Products Corp. ................................. $ 291,375 4,500 Bristol-Myers Squibb Co. ..................................... 261,563 16,500 IVAX Corp. ................................................... 474,375 6,000 Johnson & Johnson ............................................ 268,500 4,000 Smithkline Beecham PLC, ADR .................................. 109,500 4,000 Warner-Lambert Co. ........................................... 270,000 2,058,813 Healthcare: Miscellaneous --3.9% 3,500 Amgen, Inc. * ................................................ 173,250 8,000 HealthCare COMPARE Corp. * ................................... 197,000 21,000 National Health Laboratories, Inc. ........................... 299,250 11,000 United Healthcare Corp. ...................................... 834,625 12,000 U.S. Healthcare, Inc. ........................................ 691,500 Hospital Management --0.4% 4,000 Healthtrust, Inc.-The Hospital Co. * ......................... 106,500 8,000 Novacare, Inc. * ............................................. 122,000 228,500 Household Products --1.2% 6,000 Colgate-Palmolive Co. ........................................ 374,250 5,500 Procter & Gamble Co. ......................................... 313,500 Medical Products --3.3% 13,000 Cordis Corp. * ............................................... 641,875 6,000 Medtronic, Inc. .............................................. 492,750 3,500 Rhone-Poulenc Rorer, Inc. .................................... 127,750 12,000 Sci-Med Life Systems, Inc. * ................................. 471,000 5,000 St. Jude Medical, Inc. ....................................... 132,500 1,865,875 Tobacco --1.3% 6,000 American Brands, Inc. ........................................ 199,500 5,500 Philip Morris Cos., Inc. ..................................... 306,625 6,000 UST, Inc. .................................................... 166,500 672,625 Energy --3.7% Coal --.5% 10,000 Pittston Co. ................................................. 288,750 Oil: Exploration and Production --0.5% 52,000 Maxus Energy Corp. * ......................................... 286,000 Statement of Investments (Continued) Oppenheimer Variable Account Funds - Growth Fund Market Shares Common Stocks (Continued) Value-Note 1 Energy (Continued) Oil: Integrated Domestic --0.7% 3,500 Pennzoil Co. ................................................. $ 186,375 15,500 Quaker State Corp. ........................................... 207,313 393,688 Oil: Integrated International --1.1% 3,000 Chevron Corp. ................................................ 261,375 3,500 Royal Dutch Petroleum Co. .................................... 365,313 626,688 Oil Well Services and Equipment --0.9% 15,000 McDermott International, Inc. ................................ 397,500 10,000 Western Co. of North America * ............................... 128,750 526,250 Financial --23.3% Financial Services: Miscellaneous --9.7% 17,000 Advanta Corp., Cl. A ......................................... 565,250 25,994 Bear Stearns Cos., Inc. (The) ................................ 568,619 22,000 Countrywide Credit Industries, Inc. * ........................ 552,750 8,250 Credit Local de France ....................................... 684,368 5,700 Federal National Mortgage Assn. .............................. 447,450 16,000 Green Tree Financial Corp. ................................... 768,000 5,000 MBIA, Inc. ................................................... 314,375 19,500 PaineWebber Group, Inc. ...................................... 526,500 20,000 Primerica Corp. .............................................. 777,500 7,000 Student Loan Marketing Assn. ................................. 314,125 5,518,937 Insurance: Life --2.4% 11,250 AFLAC, Inc. .................................................. 320,625 14,000 Conseco, Inc. ................................................ 777,000 6,000 Torchmark Corp. .............................................. 270,000 Insurance: Multi-Line --0.6% 12,000 CCP Insurance, Inc. .......................................... 334,500 Insurance: Property and Casualty --1.8% 15,200 Progressive Corp. ............................................ 615,600 29,000 USF&G Corp. .................................................. 427,750 1,043,350 Insurance Brokers --0.2% 5,000 Alexander & Alexander Services, Inc. ......................... 97,500 Major Banks: Other --1.7% 21,000 Bank of Boston Corp. ......................................... 483,000 Statement of Investments (Continued) Oppenheimer Variable Account Funds - Growth Fund Market Shares Common Stocks (Continued) Value-Note 1 Financial (Continued) Major Banks: Other (Continued) 9,000 Mellon Bank Corp. ............................................ $ 477,000 960,000 Major Banks: Regional --6.5% 11,625 BANC ONE CORP. ............................................... 454,828 5,000 First Fidelity Bancorporation ................................ 227,500 9,000 First Interstate Bancorp. .................................... 577,125 15,000 KeyCorp ...................................................... 530,625 19,000 Midlantic Corp. * ............................................ 484,500 18,000 Shawmut National Corp. ....................................... 391,500 20,000 Signet Banking Corp. ......................................... 695,000 9,000 UJB Financial Corp. .......................................... 213,750 4,000 Washington Mutual Savings Bank of Seattle .................... 96,500 3,671,328 Money Center Banks --.4% 6,000 Chase Manhattan Corp. ........................................ 203,250 Industrial --3.1% Commercial Services --0.5% 30,000 ADT Ltd., ADR * .............................................. 270,000 Electrical Equipment --1.2% 6,000 Amphenol Corp., Cl. A * ...................................... 99,000 5,500 General Electric Co. ......................................... 576,813 675,813 Machine Tools --0.1% 2,000 Cincinnati Milacron, Inc. .................................... 44,000 Machinery: Diversified --0.8% 11,000 Varity Corp. * ............................................... 492,250 Transportation: Miscellaneous --0.5% 5,000 American President Cos. Ltd. ................................. 286,250 Technology --20.0% Aerospace/Defense --0.4% 6,000 Northrop Corp. ............................................... 224,250 Computer Software and Services --5.5% 5,000 BMC Software, Inc. * ......................................... 240,000 14,600 Ceridian Corp. * ............................................. 277,400 16,000 Computer Associates International, Inc. ..................... 640,000 2,000 Computer Sciences Corp. * .................................... 199,000 26,000 EMC Corp. * .................................................. 429,000 8,000 General Motors Corp., Cl. E .................................. 234,000 6,200 Microsoft Corp. * ............................................ 499,875 20,000 Novell, Inc. * ............................................... 415,000 4,000 Oracle Systems Corp. * ....................................... 115,000 10,000 SHL Systemhouse, Inc. * ...................................... 72,500 3,121,775 Statement of Investments (Continued) Oppenheimer Variable Account Funds - Growth Fund Market Shares Common Stocks (Continued) Value-Note 1 Technology (Continued) Computer Systems --6.8% 7,400 Applied Magnetics Corp. * .................................... $ 40,700 13,000 AST Research, Inc. * ......................................... 295,750 8,000 Cabletron Systems, Inc. * .................................... 900,000 12,500 Cisco Systems, Inc. * ........................................ 807,813 3,500 Compaq Computer Corp. * ...................................... 259,000 15,000 QMS, Inc. * .................................................. 135,000 7,000 Scitex Corp. Ltd. * .......................................... 173,250 20,000 Seagate Technology * ......................................... 475,000 9,000 Synoptics Communications, Inc. * ............................. 250,875 40,500 Unisys Corp. * ............................................... 511,313 3,848,701 Electronics: Defense --0.6% 8,500 General Motors Corp., Cl. H .................................. 330,438 Electronics: Instrumentation --2.3% 32,000 American Power Conversion Corp. * ............................ 760,000 30,000 Belden, Inc. * ............................................... 558,750 1,318,750 Electronics: Semiconductors --1.6% 12,000 Intel Corp. .................................................. 744,000 10,000 National Semiconductor Co. ................................... 161,250 905,250 Telecommunications --2.8% 4,800 American Telephone & Telegraph Co. ........................... 252,000 20,300 PacTel Corp. * ............................................... 504,963 12,000 Telefonos de Mexico SA, Sponsored ADR ........................ 810,000 1,566,963 Utilities --0.4% Electric Cos. --0.1% 4,000 Niagara Mohawk Power Corp. ................................... 81,000 Telephone (New) --0.3% 2,500 BellSouth Corp. .............................................. 144,688 Total Common Stocks (Cost $39,727,358) ....................... 48,863,478 Total Investments, at Value (Cost $47,027,358) ..................... 99.1% $56,163,478 Other Assets Net of Liabilities .................................... 0.9 537,570 Net Assets ......................................................... 100.0% $56,701,048 *Non-income producing security. See accompanying Notes to Financial Statements.
Statement of Investments December 31, 1993 Oppenheimer Variable Account Funds-Multiple Strategies Fund
Face Market Amount Repurchase Agreements--10.0% Value-Note 1 $ 25,000,000 Repurchase agreement with First Chicago Markets, 3.125%, dated 12/31/93 and maturing 1/3/94, collateralized by U.S. Treasury Bills, 3.875%, 3/31/95, with a value of $25,506,287 (Cost $25,000,000) .................................. $ 25,000,000 Long-Term Government Obligations--25.9% 1,678,950 Argentina (Republic of) Bonds, Bonos de Consolidacion de Deudas, Series I, 3.1875%, 4/1/01 (2)(3) ........................ 1,458,977 + 1,400,000 Australia (Government of) Bonds, 12%, 5/15/06 .................... 1,298,435 Canada (Government of) Bonds: + 3,000,000 9.75%, 12/1/01 .................................................. 2,723,565 + 1,500,000 8.50%, 4/1/02 ................................................... 1,277,379 Government National Mortgage Assn.: 2,450,763 8%, 7/15/22 ..................................................... 2,583,569 4,500,662 8%, 4/15/23 ..................................................... 4,748,199 + 3,600,000 Queensland (Government of) Development Authority Global Transferable Registered Nts., 10.50%, 5/15/03 ............ 3,068,564 Spain (Kingdom of) Bonds: +175,000,000 13.45%, 4/15/96 ................................................. 1,363,388 + 50,000,000 11.45%, 8/30/98 ................................................. 398,915 2,000,000 United Mexican States Gtd. Cv. Bonds, Series B, 6.25%, 12/31/19 ........................................................ 1,671,250 U.S. Treasury Bonds, STRIPS: 3,900,000 0%, 8/15/02 ..................................................... 2,359,086 2,500,000 0%, 8/15/03 ..................................................... 1,409,322 U.S. Treasury Nts.: 12,500,000 7.625%, 5/31/96 ................................................. 13,425,749 10,300,000 6.75%, 5/31/97 .................................................. 10,946,942 9,000,000 9.25%, 8/15/98 .................................................. 10,513,080 5,000,000 6.375%, 8/15/02 ................................................. 5,215,600 500,000 Venezuela (Republic of) Collateralized Par Bonds, Series W-A, 6.75%, 3/31/20 ............................................. 372,188 Total Long-Term Government Obligations (Cost $60,924,336) ............................................. 64,834,208 Corporate Bonds and Notes--14.4% Adelphia Communications Corp.: 500,000 10.25% Sr. Debs., 7/15/00 (4) ................................... 530,000 500,000 12.50% Sr. Nts., 5/15/02 ........................................ 582,500 500,000 9.875% Sr. Debs., 3/1/05 ....................................... 552,500 750,000 Alco Health Distribution Corp., 11.25% Sr. Debs., 7/15/05 (3) .................................................... 752,110 500,000 American Medical International, Inc., 13.50% Sr. Sub. Nts., 8/15/01 ................................................... 585,625 500,000 American Standard, Inc., 9.875% Sr. Sub. Nts., 6/1/01 ............ 525,625 800,000 Amstar Corp., 11.375% Sr. Sub. Nts., 2/15/97 ..................... 820,000 Armco, Inc.: 351,000 13.50% Sr. Nts., 6/15/94 ........................................ 360,214 200,000 8.50% SF Debs., 9/1/01 ......................................... 195,000 400,000 Auburn Hills Trust, 12.375% Gtd. Exch. Ctfs., 5/1/20 (2) ........ 615,000 Statement of Investments (Continued) Oppenheimer Variable Account Funds-Multiple Strategies Fund Face Market Amount Corporate Bonds and Notes (Continued) Value-Note 1 $ 475,000 Aztar Corp., 11% Sr. Sub. Nts., 10/1/02 .......................... $ 484,500 500,000 Baldwin Co., 10.375% Sr. Nts., 8/1/03 (4)......................... 482,500 1,000,000 Bell & Howell Holdings Co., 0%/11.50% Sr. Disc. Debs., Series B, 3/1/05 (1) ............................................ 555,000 500,000 Cablevision Industries Corp., 9.25% Sr. Debs., Series B, 4/1/08 ............................................... 520,000 500,000 Calmar, Inc., 12% Sr. Sec. Nts., 12/15/97 ........................ 500,000 1,000,000 Card Establishment Services, Inc., 10% Sr. Sub Nts., 10/1/03 (4) ..................................................... 1,045,000 500,000 Centennial Cellular Corp., 8.875% Sr. Nts., 11/1/01 .............. 497,500 500,000 Chrysler Financial Corp., 13.25% Sr. Nts., 10/15/99 .............. 667,690 500,000 Coastal Corp., 11.75% Sr. Debs., 6/15/06 ......................... 580,000 1,000,000 Coleman Holdings, Inc., 0% Sr. Sec. Disc. Nts., 5/27/98 .......... 647,500 600,000 Continental Cablevision, Inc., 9.50% Sr. Debs., 8/1/13 ........... 672,000 250,000 Di Giorgio Corp., 12% Sr. Nts., 2/15/03 .......................... 271,875 500,000 Envirosource, Inc., 9.75% Sr. Nts., 6/15/03 ...................... 487,500 875,000 Epic Holdings, Inc., 0%/12% Sr. Def. Cpn. Nts., 3/15/02 (1) ..................................................... 638,750 491,176 Epic Properties, Inc., 11.50% Gtd. Fst. Priority Mtg. Nts., Cl. B-2, 7/15/01 .......................................... 552,574 750,000 Farm Fresh, Inc., 12.25% Sr. Nts., 10/1/00 ....................... 796,875 750,000 Finlay Fine Jewelry Corp., 10.625% Sr. Nts., 5/1/03 .............. 776,250 First Chicago Corp.: 250,000 9% Sub. Nts., 6/15/99 ........................................... 285,850 250,000 11.25% Sub. Nts., 2/20/01 ....................................... 321,391 400,000 Flagstar Corp., 10.875% Sr. Nts., 12/1/02 ........................ 415,000 Foodmaker, Inc.: 500,000 14.25% Sr. Sub. Nts., 5/15/98 ................................... 536,875 500,000 9.25% Sr. Nts., 3/1/99 .......................................... 511,250 500,000 Gaylord Container Corp., 11.50% Sr. Sub. Disc. Debs., 5/15/01 ......................................................... 535,000 500,000 GNF Corp., 10.625% Gtd. Fst. Mtg. Nts., 4/1/03 ................... 482,500 400,000 Grand Union Co., 11.25% Sr. Nts., 7/15/00 ........................ 422,000 500,000 Harmon International Industries, Inc. 12% Sr. Sub. Nts., 8/1/02 .......................................................... 560,000 Harris Chemical North America, Inc.: 1,000,000 10.25% Sr. Sec. Disc. Nts., 7/15/01 ............................. 858,750 600,000 10.75% Sr. Sub. Nts., 10/15/03 .................................. 634,500 400,000 Horsehead Industries, Inc., 14% Sub. Nts., 6/1/99 ................ 366,000 800,000 International Cabletel, Inc., 10.875% Sr. Def. Cpn. Nts., 10/15/03 ........................................................ 512,000 750,000 Lamar Advertising Co., 11% Sr. Sec. Nts., 5/15/03 ................ 796,875 500,000 Mediq, Inc., 7.50% Exch. Sub. Debs., 7/15/03 ..................... 480,625 Mesa Capital Corp.: 772,000 0%/12.75% Sec. Disc. Nts., 6/30/98 (1) .......................... 656,200 40,000 0%/12.75% Cv. Disc. Nts. 6/30/98 (1)............................. 57,100 900,000 Mosler, Inc., 11% Sr. Nts., Series A, 4/15/03 .................... 814,500 500,000 NVR, Inc., 11% Gtd. Sr. Nts., 4/15/03 ............................ 528,750 500,000 Owens-Illinois, Inc., 10% Sr. Sub. Nts., 8/1/02 .................. 533,125 925,000 Pacific Lumber Co., 10.50% Sr. Nts., 3/1/03 ...................... 959,687 Panamsat LP/Panamsat Capital Corp.: 500,000 9.75% Sr. Sec. Nts., 8/1/00 ..................................... 531,250 250,000 0%/11.375% Sr. Sub. Disc. Nts., 8/1/03 (1) ...................... 167,500 500,000 Quantum Chemical Corp., 10.375% Fst. Mtg. Nts., 6/1/03 .......................................................... 609,605 800,000 Revlon Worldwide Corp., 0% Sr. Sec. Disc. Nts., 3/15/98 .......... 412,000 Statement of Investments (Continued) Oppenheimer Variable Account Funds-Multiple Strategies Fund Face Market Amount Corporate Bonds and Notes (Continued) Value-Note 1 RJR Nabisco, Inc.: $ 400,000 10.50% Sr. Nts., 4/15/98 ........................................ $ 442,000 136,000 15% Sub. Debs., 5/15/01 ......................................... 149,260 500,000 8.625% Medium-Term Nts., 12/1/02 ................................ 492,149 500,000 SCI Television, Inc., 11% Sr. Sec. Nts., 6/30/05 ................. 520,000 500,000 Sealed Power Technologies LP, 14.50% Sr. Sub. Debs., 5/15/99 ......................................................... 545,000 750,000 Station Casinos, Inc., 9.625% Sr. Sub. Nts., 6/1/03 .............. 761,250 300,000 Synthetic Industries, Inc., 12.75% Sr. Sub. Debs., 12/1/02 ....... 330,000 1,000,000 Talley Industries, Inc., 12.25% Sr. Disc. Debs., 10/15/05 ........ 585,000 500,000 Time Warner, Inc./Time Warner Entertainment LP, 10.15% Sr. Nts., 5/1/12 ................................................ 620,000 500,000 Tiphook Finance Corp., 10.75% Sr. Gtd. Nts., 11/1/02 ............. 442,500 500,000 TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 .................... 610,000 Unisys Corp.: 500,000 15% Credit Sensitive Nts., 7/1/97 ............................... 570,000 500,000 9.75% Sr. Nts., 9/15/16 ......................................... 510,000 USG Corp.: 500,000 10.25% Sr. Sec. Nts., 12/15/02 .................................. 515,000 300,000 8.75% Debs., 3/1/17 ............................................. 277,500 Total Corporate Bonds and Notes (Cost $ 34,881,201) .............. 36,052,080 Municipal Bonds--0.2% 500,000 Port of Portland, Oregon Special Obligation Taxable Revenue Bonds, PAMCO Project, 9.20%, 5/15/22 (Cost $500,000) ................................................. 549,472 Units Rights, Warrants and Certificates--0.0% 16,412 Gaylord Container Corp. Wts., Exp. 7/96 (Cost $36,927) .................................................. 59,494 Shares Preferred Stocks --0.9.% 3,000 Alumax, Inc., $4.00 Cv., Series A ................................ 295,500 26,000 Chiquita Brands International, Inc., $1.28 Depositary Shares * ............................................ 354,250 6,000 Cyprus Amax Minerals Co., $4.00 Cv., Series A .................... 390,000 20 Dairy Farm International Holdings Ltd., $65.00 Cv. (4) ........... 30,800 10,000 Delta Airlines, Inc., $3.50 Cv. Depositary Shares, Series C* .... 535,000 20,000 K-III Communications Corp., Sr. Exch. ............................ 552,500 10,000 Liposome Co., Inc. (The), $1.9375 Cum. Cv. Exch. Depositary Shares, Series A .................................... 187,500 Total Preferred Stocks (Cost $2,137,265) ......................... 2,345,550 Common Stocks --48.1% Basic Materials --3.9% Chemicals --1.4% 10,000 Air Products and Chemicals, Inc. ................................. 442,500 16,000 ARCO Chemical Corp. .............................................. 692,000 40,000 biosys * ......................................................... 230,000 8,500 Dow Chemical Co. (The) ........................................... 482,375 31,000 Hauser Chemical Research, Inc. * ................................. 248,000 29,700 Praxair, Inc. .................................................... 493,763 32,500 Sybron Chemical Industries, Inc. * ............................... 784,062 3,372,700 Statement of Investments (Continued) Oppenheimer Variable Account Funds-Multiple Strategies Fund Market Shares Common Stocks (Continued) Value-Note 1 Basic Materials (Continued) Chemicals: Diversified--0.4% 4,850 Bayer AG, ADR .................................................... $ 1,023,350 Chemicals: Specialty --0.1% 750 Goldschmidt (T.H.) AG ............................................ 300,167 Gold--0.1% 85,000 Arimetco International, Inc. * ................................... 118,769 Metals: Miscellaneous --1.2% 60,500 Brush Wellman, Inc. .............................................. 862,125 48,100 Custom Chrome, Inc. * ............................................ 1,070,225 22,700 Inco Ltd. ........................................................ 610,063 11,000 Phelps Dodge Corp. (5) ........................................... 536,250 3,078,663 Paper and Forest Products--0.2% 30,000 Kimberly Clark de Mexico, Series A * ............................. 562,138 Steel --0.5% 20,000 Allegheny Ludlum Corp. ........................................... 477,500 20,600 Inland Steel Industries, Inc. * .................................. 682,375 1,159,875 Consumer Cyclicals --10.0% Auto Parts: After Market--0.4% 30,000 Excel Industries, Inc. ........................................... 551,250 45,000 Hi-Lo Automotive, Inc. * ......................................... 444,375 995,625 Broadcast Media --1.5% 1,000 Capital Cities/ABC, Inc. ......................................... 619,500 49,500 Comcast Corp., Cl. A Special ..................................... 1,782,000 12,800 Grupo Televisa SA, ADS (4) ....................................... 896,000 42,000 SFX Broadcasting, Inc., Cl. A * .................................. 535,500 3,833,000 Entertainment --1.1% 20,000 Disney (Walt) Co. (5) ............................................ 852,500 19,000 King World Productions, Inc. * (5) ............................... 729,125 7,000 Paramount Communications, Inc. (5) ............................... 541,625 21,000 WMS Industries, Inc. * (5) ....................................... 603,750 2,727,000 Home Building --0.1% 50,000 Miles Homes, Inc. * .............................................. 300,000 Household Furnishings and Appliances--0.4% 50,000 Chromcraft Revington, Inc. * ..................................... 1,100,000 Leisure Time --0.9% 13,600 Caesar's World, Inc. * ........................................... 725,900 10,500 Eastman Kodak Co. * .............................................. 588,000 35,000 Funco, Inc. * .................................................... 525,000 17,000 International Game Technology .................................... 501,500 2,340,400 Statement of Investments (Continued) Oppenheimer Variable Account Funds-Multiple Strategies Fund Market Shares Common Stocks (Continued) Value-Note 1 Consumer Cyclicals (Continued) Publishing --1.2% 40,000 Bowne & Co., Inc. ................................................ $ 870,000 8,500 McGraw-Hill, Inc. ................................................ 574,813 20,000 Time Warner, Inc. ................................................ 885,000 10,167 Wolters Kluwer NV ................................................ 642,282 2,972,095 Restaurants --0.4% 79,000 Quantum Restaurant Group, Inc. ................................... 967,750 Retail Stores: General Merchandise Chains --0.3% 8,000 Centros Comerciales Pryca ........................................ 105,790 30,000 Price/Costco, Inc. * ............................................. 577,500 683,290 Retail: Specialty --1.5% 15,300 Blockbuster Entertainment Corp. (5) .............................. 468,562 4,086 Castorama Dubois Investissements LP .............................. 610,357 22,000 CML Group, Inc. .................................................. 519,750 40,000 Inacom Corp. * ................................................... 540,000 30,000 Service Merchandise Co., Inc. * .................................. 300,000 38,700 Venture Stores, Inc. ............................................. 904,613 38,000 Waban, Inc., * ................................................... 517,750 3,861,032 Shoes --0.7% 64,000 Baker (J.), Inc. ................................................. 1,120,000 43,000 Justin Industries, Inc. .......................................... 634,250 1,754,250 Textiles: Apparel Manufacturers --0.8% 30,000 Authentic Fitness Corp. * ........................................ 843,750 21,000 Fruit of the Loom, Inc., Cl. A * ................................. 506,625 20,000 Warnaco Group, Inc. (The), Cl. A * ............................... 607,500 1,957,875 Toys --0.7% 47,000 Mattel, Inc. ..................................................... 1,298,375 7,000 Nintendo Co. ..................................................... 450,338 1,748,713 Consumer Non-Cyclicals--8.6% Beverages: Alcoholic --0.3% 100,000 Guiness PLC ...................................................... 706,461 Beverages: Soft Drinks--0.3% 51,700 Whitman Corp. .................................................... 840,125 Cosmetics --0.7% 24,000 Avon Products, Inc. (5) .......................................... 1,167,000 30,000 Neutrogena Corp. ................................................. 615,000 1,782,000 Statement of Investments (Continued) Oppenheimer Variable Account Funds-Multiple Strategies Fund Market Shares Common Stocks (Continued) Value-Note 1 Consumer Non-Cyclicals (Continued) Drugs --1.1% 22,000 Agouron Pharmaceuticals, Inc. * .................................. $ 258,500 15,500 Astra AB Free, Series A .......................................... 353,319 950 Ciba-Geigy AG .................................................... 575,746 13,700 Lilly (Eli) & Co. ................................................ 813,438 300 Sandoz AG ........................................................ 835,337 2,836,340 Food Processing --0.8% 1,541 Chiquita Brands International, Inc. .............................. 17,722 967,000 CP Pokphand Co. .................................................. 425,468 23,600 Nestle SA, Sponsored ADR ......................................... 1,020,700 40,000 Sanfilippo (John B.) & Son, Inc. ................................. 580,000 2,043,890 Healthcare: Diversified--1.3% 18,000 Abbott Laboratories .............................................. 531,000 16,500 Bristol-Myers Squibb Co. ......................................... 959,063 23,000 Carter-Wallace, Inc. ............................................. 491,625 1,025 Schering AG ...................................................... 669,941 7,000 Warner-Lambert Co. ............................................... 472,500 3,124,129 Healthcare: Miscellaneous--2.5% 9,000 Amgen, Inc. * (5) ................................................ 445,500 12,000 Biogen, Inc. * ................................................... 478,500 6,000 Chiron Corp. * ................................................... 504,000 50,000 FHP International Corp. * (5) .................................... 1,350,000 20,100 Genzyme Corp. * .................................................. 552,750 45,785 Manor Care, Inc. ................................................. 1,116,009 18,000 Matrix Pharmaceutical, Inc. * .................................... 189,000 14,000 Protein Design Labs, Inc. * ...................................... 339,500 23,400 U.S. Healthcare, Inc. (5) ........................................ 1,348,425 6,323,684 Hospital Management --0.2% 26,000 Medical Care America, Inc. * (5) ................................. 594,750 Medical Products --0.8% 18,500 Bard (C.R.), Inc. (5) ............................................ 467,125 9,000 Medtronic, Inc. (5) .............................................. 739,125 15,000 Molecular Dynamics, Inc. * ....................................... 176,250 20,000 Nellcor, Inc. * .................................................. 495,000 1,877,500 Retail Stores: Food Chains--0.3% 164,026 Dairy Farm International Holdings Ltd. ........................... 326,885 17,900 Giant Food, Inc., Cl. A .......................................... 460,925 787,810 Tobacco --0.3% 13,700 Philip Morris Cos., Inc. ......................................... 763,775 Energy --2.6% Coal --0.3% 22,000 Ashland Coal, Inc. ............................................... 665,500 Statement of Investments (Continued) Oppenheimer Variable Account Funds-Multiple Strategies Fund Market Shares Common Stocks (Continued) Value-Note 1 Energy (Continued) Oil: Exploration and Production--0.2% 29,600 Oryx Energy Co. .................................................. $ 510,600 Oil and Gas Drilling--0.2% 60,500 Santa Fe Energy Resources, Inc. .................................. 544,500 Oil: Integrated Domestic--0.7% 15,000 Ashland Oil, Inc. ................................................ 511,875 7,000 Atlantic Richfield Co. ........................................... 736,750 17,000 Unocal Corp. (5) ................................................. 473,875 1,722,500 Oil: Integrated International--0.9% 7,700 Amoco Corp. ...................................................... 407,137 10,000 Royal Dutch Petroleum Co. ........................................ 1,043,750 12,000 Saga Petroleum AS, Cl. A ......................................... 119,667 19,000 Saga Petroleum AS, Cl. B ......................................... 184,421 15,373 Total SA, Sponsored ADR .......................................... 416,993 2,171,968 Oil Well Services and Equipment--0.3% 12,400 McDermott International, Inc. (5) ................................ 328,600 52,700 Tuboscope Vetco International Corp. * ............................ 322,787 651,387 Financial --5.5% Financial Services: Miscellaneous--1.9% 25,200 Bear Stearns Cos., Inc. (The) .................................... 551,250 96,100 Catellus Development Corp. * ..................................... 744,775 15,000 Dean Witter, Discover & Co. (5) .................................. 519,375 17,800 Merrill Lynch & Co., Inc. ........................................ 747,600 200,000 Peregrine Investment Holdings Ltd. ............................... 491,752 35,000 Plaza Home Mortgage Corp. * ...................................... 293,125 20,000 Salomon, Inc. (5) ................................................ 952,500 30,000 Santa Anita Realty Enterprises, Inc. (4) ......................... 521,250 4,821,627 Insurance: Life --0.5% 26,000 Bankers Life Holding Corp. ....................................... 559,000 27,000 First Colony Corp. ............................................... 685,125 1,244,125 Insurance: Multi-Line--0.6% 7,000 American International Group, Inc. ............................... 614,250 29,600 American Re Corp. * .............................................. 839,900 1,454,150 Insurance: Property and Casualty--0.2% 6,000 Loews Corp. * .................................................... 558,000 Statement of Investments (Continued) Oppenheimer Variable Account Funds-Multiple Strategies Fund Market Shares Common Stocks (Continued) Value-Note 1 Financial (Continued) Major Banks: Other --0.5% 13,300 BankAmerica Corp. ................................................ $ 616,788 1,325 Deutsche Bank AG, ADR ............................................ 679,062 1,295,850 Major Banks: Regional--0.5% 24,200 NationsBank Corp. ................................................ 1,185,800 Money Center Banks --1.0% 13,000 Bank of New York Co., Inc. (The) (5) ............................. 741,000 12,000 Bankers Trust New York Corp. ..................................... 949,500 18,700 Chemical Banking Corp. ........................................... 750,337 Savings and Loans/Holding Cos.--0.3% 17,000 Golden West Financial Corp. ...................................... 663,000 Industrial --6.0% Building Materials Group--0.6% 15,000 Masco Corp. ...................................................... 555,000 21,000 Owens-Corning Fiberglas Corp. * (5) .............................. 931,875 3,200 Thomas Industries, Inc. .......................................... 42,000 1,528,875 Commercial Services --0.3% 65,000 Mail Boxes Etc. * ................................................ 771,875 Conglomerates --0.4% 17,500 Tenneco, Inc. .................................................... 920,938 Electrical Equipment --1.1% 80,000 Amphenol Corp., Cl. A * .......................................... 1,320,000 10,000 ASEA AB, Sponsored ADR ........................................... 710,000 8,000 General Electric Co. ............................................. 839,000 2,869,000 Engineering and Construction--0.7% 25,000 Foster Wheeler Corp. ............................................. 837,500 44,150 Huarte SA ........................................................ 528,224 35,000 Insituform Mid-America, Inc., Cl. A .............................. 490,000 1,855,724 Heavy Duty Trucks and Parts--0.2% 24,000 Spartan Motors, Inc. (5) ......................................... 408,000 Machine Tools --0.1% 7,000 FANUC Ltd. ....................................................... 230,814 Machinery: Diversified--0.3% 45,000 Cognex Corp. * ................................................... 663,750 Statement of Investments (Continued) Oppenheimer Variable Account Funds-Multiple Strategies Fund Market Shares Common Stocks (Continued) Value-Note 1 Industrial (Continued) Manufacturing-Diversified Industrials--0.9% 65,000 Instrument Systems Corp. * ....................................... $ 576,875 3,287 Mannesmann AG .................................................... 794,998 10,000 Siemens AG, ADR .................................................. 913,750 2,285,623 Pollution Control --0.3% 28,400 WMX Technologies, Inc. ........................................... 749,050 Railroads --0.4% 15,400 Burlington Northern, Inc. (5) .................................... 891,275 Transportation: Miscellaneous--0.7% 10 Dampskibsselskabet Svendborg, Cl. B .............................. 275,205 105,000 OMI Corp. ........................................................ 721,875 40,000 Stolt-Nielsen SA ................................................. 670,000 1,667,080 Technology --9.4% Aerospace/Defense --1.0% 9,000 Allied-Signal, Inc. .............................................. 711,000 6,400 General Dynamics Corp. (5) ....................................... 590,400 4,000 McDonnell Douglas Corp. .......................................... 428,000 50,000 Methode Electronics, Inc., Cl. A ................................. 718,750 2,448,150 Communication: Equipment/Manufacturers--0.2% 7,500 QUALCOMM, Inc. * (5) ............................................. 397,500 Computer Software and Services--2.8% 11,000 BMC Software, Inc. ............................................... 528,000 12,000 Computer Associates International, Inc. .......................... 480,000 23,000 LEGENT Corp. * ................................................... 520,375 26,500 Lotus Development Corp. * (5) .................................... 1,457,500 46,000 Marcam Corp. * ................................................... 448,500 6,300 Microsoft Corp. .................................................. 507,938 50,000 Network General Corp. * (5) ...................................... 893,750 28,500 Novell, Inc. ..................................................... 591,375 500 Sap AG, Preference ............................................... 465,007 50,000 Structural Dynamics Research Corp. ............................... 862,500 45,000 Wild River Systems * ............................................. 286,875 7,041,820 Computer Systems --1.5% 11,000 International Business Machines Corp. * .......................... 621,500 70,000 Micropolis Corp. * ............................................... 490,000 60,000 Radius, Inc. * ................................................... 457,500 25,000 Seagate Technology * (5) ......................................... 593,750 31,700 Synoptics Communications, Inc. ................................... 883,637 59,400 Tandem Computers, Inc. ........................................... 645,975 3,692,362 Electronics: Defense --0.2% 115,000 CAE, Inc. * ...................................................... 618,882 Statement of Investments (Continued) Oppenheimer Variable Account Funds-Multiple Strategies Fund Market Shares Common Stocks (Continued) Value-Note 1 Technology (Continued) Electronics: Instrumentation--0.4% 14,000 Hewlett-Packard Co. (5) .......................................... $ 1,106,000 Electronics: Semiconductors--1.4% 8,000 Cirrus Logic, Inc. * (5) ......................................... 296,000 32,800 Intel Corp. (5) .................................................. 2,033,600 11,500 Samsung Electronics Co. Ltd., Sponsored GDR * .................... 592,250 12,200 Xilinx, Inc. * (5) ............................................... 582,550 3,504,400 Office Equipment and Supplies--0.4% 10,500 Xerox Corp. (5) .................................................. 938,437 Telecommunications --1.5% 14,500 American Telephone & Telegraph Co. * ............................. 761,250 26,000 MCI Communications Corp. ......................................... 734,500 18,000 NEXTEL Communications, Inc., Cl. A ............................... 670,500 33,900 Rogers Cantel Mobile Communications, Inc., Cl. B, Sub. Vtg. * .......................................................... 915,300 9,000 Telefonos de Mexico SA, Sponsored ADR ............................ 607,500 3,689,050 Utilities --2.1% Electric Cos. --.6% 30,000 Public Service Enterprise Group, Inc. ............................ 960,000 9,400 Verbund Oest Electriz ........................................... 572,057 1,532,057 Natural Gas --0.2% 204,000 Hong Kong & China Gas ............................................ 591,344 Telephone (New) --1.3% 22,000 BCE, Inc. ........................................................ 767,250 25,000 Pacific Telesis Group ............................................ 1,350,000 26,300 US West Communications, Inc. ..................................... 1,206,513 3,323,763 Total Common Stocks (Cost $95,247,361) ........................... 120,192,769 Total Investments, at Value (Cost $218,727,090) ....................... 99.5% 249,033,573 Other Assets Net of Liabilities ....................................... .5 1,256,475 Net Assets ............................................................ 100.0% $250,290,048 Statement of Investments (Continued) Oppenheimer Variable Account Funds-Multiple Strategies Fund + Face amount is reported in foreign currency. * Non-income producing security. 1. Represents a zero coupon bond that converts to a fixed rate of interest at a designated future date. 2. Represents the current interest rate for a variable rate security. 3. Interest is paid in kind. 4. The Fund owns securities purchased in private placement transactions, without registration under the Securities Act of 1933 (the Act). The securities are valued under methods approved by the Board of Trustees as reflecting fair value. The Fund intends to invest no more than 10% of its net assets (determined at the time of purchase) in restricted and illiquid securities, excluding securities eligible for resale pursuant to Rule 144A of the Act that are determined to be liquid by the Board of Trustees or by the Manager under Board-approved guidelines. Restricted and illiquid securities amount to $521,250, or .20% of the Fund's net assets, at December 31, 1993. Valuation Per Acquisition Cost Unit as of Security Date Per Unit December 31, 1993 Adelphia Communications Corp., 10.25% Sr. Debs., 7/15/00 ** ......... 7/21/93 $ 98.80 $ 106.00 Baldwin Co., 10.375% Sr. Nts., 8/1/03 ** ............................ 7/19/93 $ 100.88 $ 96.50 Card Establishment Services, Inc., 10% Sr. Sub. Nts., 10/1/03 ** .... 12/1/93 $ 104.00 $ 104.50 Dairy Farm International Holdings Ltd., $65.00 Cv. ** ............... 4/30/93 $1,000.00 $1,540.00 Grupo Televisa 8/20/92- SA, ADS ** ......................................................... 8/26/92 $ 27.80 $ 70.00 Santa Anita Realty 5/28/93- Enterprises, Inc. .................................................. 11/29/93 $ 17.96 $ 17.38 ** Transferable under Rule 144A of the Act.
Statement of Investments (Continued) Oppenheimer Variable Account Funds - Multiple Strategies Fund 5. Securities with an aggregate market value of $23,979,725 are held to cover outstanding call options, as follows:
Shares Expira- Subject tion Exercise Premium Market Value - to Call Date Price Received Note 1 Amgen, Inc. .......................... 1,500 1/94 $ 50.00 $ 2,205 $ 2,062 Avon Products, Inc. .................. 4,800 4/94 55.00 5,280 4,200 Bank of New York Co., Inc. (The) ..... 2,000 1/94 60.00 5,190 750 Bard (C.R.), Inc. .................... 9,200 1/94 25.00 15,823 7,475 Bard (C.R.), Inc. .................... 9,300 4/94 30.00 13,089 4,650 Blockbuster Entertainment Corp. ...... 5,600 1/94 25.00 5,810 31,500 Blockbuster Entertainment Corp. ...... 5,700 3/94 30.00 6,241 12,825 Blockbuster Entertainment Corp. ...... 4,000 6/94 30.00 12,880 13,000 Burlington Northern, Inc. ............ 1,400 1/94 55.00 6,608 4,200 Burlington Northern, Inc. ............ 1,400 1/94 60.00 3,370 875 Cirrus Logic, Inc. ................... 4,000 3/94 30.00 17,379 31,500 Cirrus Logic, Inc. ................... 4,000 3/94 35.00 20,379 17,500 Dean Witter, Discover & Co. .......... 7,500 1/94 40.00 20,400 469 Dean Witter, Discover & Co. .......... 7,500 1/94 45.00 10,087 469 Disney (Walt) Co. .................... 4,000 4/94 40.00 10,380 17,500 FHP International Corp. .............. 5,000 3/94 25.00 20,449 15,625 General Dynamics Corp. ............... 1,600 2/94 95.00 6,744 3,800 Hewlett-Packard Co. .................. 2,800 2/94 85.00 5,929 3,500 Intel, Inc. .......................... 4,000 1/94 65.00 8,380 4,250 Intel, Inc. .......................... 3,000 4/94 70.00 12,285 7,500 King World Productions, Inc. ......... 3,800 2/94 45.00 7,624 3,325 Lotus Development Corp. .............. 4,000 1/94 40.00 18,379 62,000 Lotus Development Corp. .............. 4,000 4/94 50.00 26,879 34,000 Lotus Development Corp. .............. 5,200 4/94 60.00 24,543 15,600 McDermott International, Inc. ........ 6,200 2/94 30.00 11,051 1,550 McDermott International, Inc. ........ 6,200 5/94 35.00 6,045 1,550 Medtronic, Inc. ...................... 1,800 1/94 85.00 3,996 1,800 Medical Care America, Inc. ........... 13,000 4/94 25.00 35,359 22,750 Network General Corp. ................ 16,800 1/94 15.00 28,895 48,300 Network General Corp. ................ 8,400 7/94 20.00 19,697 19,950 Owens-Corning Fiberglas Corp. ........ 4,200 3/94 50.00 8,536 3,150 Paramount Communications, Inc. ....... 2,500 1/94 80.00 7,112 2,969 Paramount Communications, Inc. ....... 2,000 3/94 80.00 11,559 5,000 Paramount Communications, Inc. ....... 2,500 3/94 85.00 4,769 2,500 Phelps Dodge Corp. ................... 5,500 1/94 50.00 11,866 5,156 QUALCOMM, Inc. ....................... 4,000 1/94 50.00 26,379 20,000 QUALCOMM, Inc. ....................... 3,500 1/94 60.00 26,582 1,750 Salomon, Inc. ........................ 5,000 1/94 45.00 16,724 15,000 Salomon, Inc. ........................ 5,000 1/94 50.00 9,225 2,188 Salomon, Inc. ........................ 5,000 4/94 55.00 5,260 3,750 Seagate Technology ................... 12,500 3/94 20.00 40,249 51,562 Spartan Motors, Inc. ................. 4,000 3/94 22.50 9,130 1,500 Unocal Corp. ......................... 1,500 1/94 30.00 5,017 188 Unocal Corp. ......................... 1,500 1/94 35.00 2,017 281 U.S. Healthcare, Inc. ................ 5,700 1/94 55.00 24,616 23,512 WMS Industries, Inc. ................. 5,000 5/94 35.00 17,974 7,500 Xerox Corp. ......................... 2,000 4/94 85.00 5,690 14,000 Xilinx, Inc. ......................... 3,200 3/94 45.00 11,503 18,000 Xilinx, Inc. ......................... 3,200 3/94 50.00 11,104 10,400 Xilinx, Inc. ......................... 3,000 3/94 55.00 8,160 6,000 $ 654,848 $ 588,881 See accompanying Notes to Financial Statements.
Statement of Investments December 31, 1993 Oppenheimer Variable Account Funds-Global Securities Fund
Face Market Amount Repurchase Agreements--14.7% Value-Note 1 $ 14,200,000 Repurchase agreement with First Chicago Capital Markets, 3.125%, dated 12/31/93 and maturing 1/3/94, collateralized by U.S. Treasury Nts., 8.875%, 2/15/99, with a value of $14,501,606 (Cost $14,200,000) .......... $ 14,200,000 Corporate Bonds and Notes--0.9% 300,000 Jindal Strips Ltd., 4.25% Cv. Debs., 3/31/99 (2) .................. 389,250 375,000 Scici Ltd., 3.50% Cv. Bonds, 4/1/04 (2) ............................ 499,219 Total Corporate Bonds and Notes (Cost $675,000) .................... 888,469 Units Rights, Warrants and Certificates--1.4% 480,000 China Aerospace International Holdings Ltd. Wts., Exp. 12/95 ............................................ 93,173 100 Ciba-Geigy AG Wts., Exp. 6/95 (1) .................................. 926 30,000 Eurotunnel SA Wts., Exp. 10/95 (1) ................................. 13,515 2,500 RWE AG Wts., Exp. 3/96 (1) ......................................... 319,602 6,980 Shinawatra Computer Communications Co. Ltd. Rts., Exp 1/94 .............................................. 224,059 76,000 Societa Finanziora Telefonica SPA Wts., Exp. 9/94 (1) .............. 641,471 Total Rights, Warrants and Certificates (Cost $809,292) ............ 1,292,746 Shares Common Stocks--86.8% Basic Materials--4.4% Aluminum --0.6% 3,200 Wanderer-Werke AG (1) .............................................. 552,826 Chemicals: Diversified--0.3% 200,000 National Petrochemical Co. (2) ..................................... 258,366 Chemicals: Specialty--0.3% 180,000 Kurnia Kapuas Utama Glue ........................................... 341,030 Metals: Miscellaneous--0.4% 12,000 Hindalco Units ..................................................... 384,000 Paper and Forest Products--1.1% 40,000 Enso-Gutzeit Oy, Cl. A Free (1) .................................... 253,487 200,000 Indah Kiat ......................................................... 272,350 825,000 Rottneros Bruks AB, Free (1) ....................................... 593,863 Steel--1.7% 60,000 Dofasco, Inc. * .................................................... 1,053,656 6,300 Grupo Simec SA, ADR ................................................ 207,900 2,000 Maruichi Malaysia Steel Tube Berhad ................................ 5,085 5,000 Pohang Iron & Steel Co. Ltd. * ..................................... 398,005 Consumer Cyclicals--14.4% Airlines--0.2% 3,500 Vienna International Airport (1) ................................... 166,496 Statement of Investments (Continued) Oppenheimer Variable Account Funds-Global Securities Fund Market Shares Common Stocks (Continued) Value-Note 1 Consumer Cyclicals (Continued) Automobiles--4.6% 20,000 Compania Interamerican de Auto ..................................... $ 1,062,124 20,000 CONSORCIO G GRUPO DINA SA, Sponsored ADR ........................... 557,500 120,000 Mahindra & Mahindra Ltd., GDR ...................................... 1,167,000 7,000 STE Fonciere Financiere ET de Participations SA (1) ................ 397,155 20,000 Volvo AB, Series B Free (1) ........................................ 1,293,303 4,477,082 Broadcast Media--2.2% 375,000 Sistem Televisyen Malaysia Berhad .................................. 1,071,819 100,000 Television Broadcast ............................................... 414,107 3,500 Television Francaise I (1) ......................................... 291,049 10,000 United International Holdings, Inc., Cl. A * ....................... 342,500 2,119,475 Entertainment--0.5% 20,000 Iwerks Entertainment, Inc. * ....................................... 535,000 Hardware and Tools--0.8% 10,000 La Brosse et Dupont (1) ............................................ 740,283 Household Furnishings and Appliances--2.0% 2,500 Moulinex Espana (1) ................................................ 51,076 65,000 Philips Gloeilamp NV (1) ........................................... 1,338,634 15,000 Singer Co. NV (The) * .............................................. 560,625 1,950,335 Publishing--1.5% 500,000 Oriental Press Group ............................................... 446,459 40,000 Roto Smeets de Boer (1) ............................................ 947,341 1,393,800 Retail: Specialty--1.1% 50,000 PT Modern Photo Film Co. ........................................... 619,159 1,000 Vereinigte Baubeschlag (1) ......................................... 423,257 1,042,416 Retail Stores: General Merchandise Chains--1.5% 200,000 Berjaya Singar Berhad .............................................. 527,094 20,000 Modelo Supermercados SA ............................................ 445,953 5,000 Sears Roebuck de Mexico SA, ADR * (2) .............................. 192,500 16,000 Sears Roebuck de Mexico SA * ....................................... 308,049 1,473,596 Consumer Non-Cyclicals--11.0% Beverages: Alcoholic--0.8% 19,000 Jinro Ltd. ......................................................... 461,376 8,000 Remy Cointreau (1) ................................................. 319,756 781,132 Beverages: Soft Drinks--0.9% 8,000 Coca-Cola FEMSA SA de CV * ......................................... 262,000 90,000 Fomento Economico Mexicano SA, Sponsored Cl. B ADR * ........................................ 585,000 847,000 Statement of Investments (Continued) Oppenheimer Variable Account Funds-Global Securities Fund Market Shares Common Stocks (Continued) Value-Note 1 Consumer Non-Cyclicals (Continued) Drugs--1.5% 40,750 Astra AB, Series A Free (1) ........................................ $ 928,887 12,000 Yuhan Corp. ........................................................ 490,615 1,419,502 Food Processing--2.4% 700,000 Grupo Herdez SA .................................................... 896,973 15,000 Hutamaki OY (1) .................................................... 468,814 170,000 PT Sinar Mass Agro Resources & Technology .......................... 567,673 130,000 United Foods Co., Inc. ............................................. 330,788 2,264,248 Healthcare: Diversified--0.3% 400 Schering AG (1) .................................................... 261,441 Healthcare: Miscellaneous--0.4% 11,000 Genzyme Corp. * .................................................... 302,500 9,104 Plant Genetics Systems International NV * (2) ...................... 140,931 443,431 Hospital Management--2.0% 25,000 Community Psychiatric Centers ...................................... 350,000 120 Rhoen Klinikum AG (1) .............................................. 71,176 660 Rhoen Klinikum AG, Preference (1) .................................. 347,762 300,000 Takare PLC (1) ..................................................... 1,167,326 1,936,264 Household Products--0.5% 90,000 Battery Technologies, Inc. * ....................................... 526,828 Medical Products--0.6% 41,200 Arjo AB * (1) ...................................................... 603,029 Retail Stores: Food Chains--1.6% 105,000 PT Fast Food Indonesia ............................................. 475,320 4,500 Spar Handels AG (1) ................................................ 1,033,957 1,509,277 Energy--5.9% Natural Gas: Processing--0.8% 6,083 Voest-Alpine Eisenbahnsysteme AG (1) ............................... 790,778 Oil: Integrated International--0.7% 11,605 YuKong Ltd. ........................................................ 425,581 8,000 YPF Sociedad Anonima, Sponsored ADR * ............................. 208,000 633,581 Statement of Investments (Continued) Oppenheimer Variable Account Funds-Global Securities Fund Market Shares Common Stocks (Continued) Value-Note 1 Energy (Continued) Oil and Gas Drilling--3.5% 33,600 Ampolex Ltd. (1) ................................................... $ 126,570 100,000 Compania Naviera Perez Co., Cl. A .................................. 623,446 4,000 Elf Gabon (1) ...................................................... 670,675 15,000 Global Marine, Inc. * .............................................. 61,875 75,000 Morgan Hydrocarbons, Inc. * ........................................ 249,245 30,000 Petroleum Geo-Services AS * (1) .................................... 977,283 33,800 Ross Offshore AS (1) ............................................... 247,179 69,400 Transocean Drilling AS (1) ......................................... 415,245 3,371,518 Oil Well Services and Equipment--0.9% 25,000 Coflexip SA, Sponsored ADR * (1) ................................... 406,250 85,000 Th Loy Industries Berhad ........................................... 495,357 901,607 Financial--13.8% Financial Services: Miscellaneous--6.4% 12,000 BIS SA (1) ......................................................... 495,893 19,070 Central Investment & Finance Corp. ................................. 396,922 10,000 Coryo Securities Corp. ............................................. 218,051 5,000 Credit Local de France (1) ......................................... 414,769 10,000 Hyundai Securities Co. ............................................. 294,865 240,000 Industrial Finance Corp. of Thailand ............................... 582,500 10,000 Korea Investment and Securities .................................... 253,980 230,000 Peregrine Investment Holdings Ltd. ................................. 565,515 10,000 Sangyoug Investment & Securities ................................... 281,236 16,000 Servicios Financieros Quadrum SA, Sponsored ADR .................... 518,000 130,000 Sturge Holdings PLC (1) ............................................ 130,788 1,000,000 Sun Hung Kai and Co. ............................................... 808,802 8 Taipei Fund (2) .................................................... 668,000 14,800 Taiwan Fund, Inc. .................................................. 579,050 6,208,371 Major Banks: Other--7.4% 57,500 Banco de Galicia, Series B ......................................... 579,033 9,000 Banco de Santander SA (1) .......................................... 418,121 34,326 Banco Frances del Rio de la Plata SA ............................... 453,446 4,500 Banco LatinoAmericano de Exportaciones SA, Cl. E ................... 204,188 100,000 Commonwealth Bank of Australia ..................................... 648,189 55,000 Den Norske Bank, Cl. A Free (1) .................................... 140,775 80,000 Grupo Financiero Bancomer, Series C * .............................. 168,448 24,000 Grupo Financiero Bancomer, Series L ................................ 50,534 40,000 Korea First Bank ................................................... 594,685 370,000 PT Panin Bank (2) .................................................. 961,737 17,080 Shin Han Bank Ltd. ................................................. 287,788 100,000 Skandinaviska Enskilda Banken Group (1) ............................ 677,844 17,130 Standard Chartered Bank PLC (1) .................................... 314,770 57,500 Svenska Handelsbanken Inc., Cl. A (1) .............................. 779,521 80,000 Turkiye Garanti Bankasi AS, Sponsored ADR * (2) .................... 560,000 1,000 Verwalt & Privat-Bank AG-PC (1) .................................... 235,686 7,074,765 Statement of Investments (Continued) Oppenheimer Variable Account Funds-Global Securities Fund Market Shares Common Stocks (Continued) Value-Note 1 Industrial--22.6% Building Materials Group--.9% 10,000 Internacional de Ceramica SA, Series B ADR * (2) ................... $ 321,958 25,000 Internacional de Ceramica SA, Series B ............................. 160,979 90,000 Sungei Way Holdings ................................................ 397,547 880,484 Capital Goods--0.2% 90,000 Ceramicas Carabobo CA, Sponsored Series B ADR * ......................................... 194,940 Commercial Services--0.6% 100,000 PT Intraco Penta ................................................... 408,878 10,000 Serco Group (1) .................................................... 189,080 Conglomerates--4.0% 100,000 Brambles Industries Ltd. ........................................... 894,569 1,258 Compagnie Generale des Eaux (1) .................................... 622,768 30,000 Grupo Carso SA, ADS * .............................................. 656,250 350,000 Hopewell Holdings Ltd. ............................................. 457,458 80,000 Hutchison Whampoa Ltd. ............................................. 398,578 20,000 Kinnevik Investments AB, Series B Free (1) ......................... 436,700 6,200 Nederlandse Participatie Maatschappij NV (1) ....................... 176,205 2,500 Sophus Berendsen AS, Series B ...................................... 197,942 3,840,470 Containers: Metal and Glass--0.1% 100,000 M C Packaging Corp. Ltd. ........................................... 52,410 Containers: Paper--0.4% 164,000 PT Trias Sentosa ................................................... 421,409 Electrical Equipment--1.9% 1,004 Brown, Boveri & Co. Ltd., Part. Cert. (1) .......................... 734,224 80,000 Kabelmetal Indonesia PT * .......................................... 378,922 945 LEM Holdings SA (1) ................................................ 190,905 150,000 PT Trafindo Perkasa ................................................ 255,773 50,000 Supreme Cable Manufacturing (1) .................................... 274,719 1,834,543 Engineering and Construction--5.5% 10,000 BAU Holdings AF, Preference (1) .................................... 954,685 298 BAU Holdings AG * (1) .............................................. 28,841 15,000 Boskalis Westminster Koniniije (1) ................................. 356,798 14,000 Cubiertas Y Mzov SA Compania General (1) ........................... 1,048,102 2,850 Deutsche Babcock AG (1) ............................................ 413,583 6,732 Grontmij NV (1) .................................................... 237,423 30,000 Grupo Mexicano de Desarrollo SA, Sponsored Series B ADR * ................................................... 720,000 30,000 Grupo Mexicano de Desarrollo SA, Sponsored Series L ADR * ................................................... 738,750 18,000 IHC Caland NV (1) .................................................. 360,505 284,512 Leighton Holdings Ltd. ............................................. 438,354 5,297,041 Statement of Investments (Continued) Oppenheimer Variable Account Funds-Global Securities Fund Market Shares Common Stocks (Continued) Value-Note 1 Industrial (Continued) Machinery: Diversified--4.5% 1,106 Bobst Bearers AG (1) ............................................... $ 1,340,580 900 Klein, Schanjlin & Becker AG, Preference (1) ....................... 193,835 150 Maschinenfabrik Berthold Hermle AG (1) ............................. 17,103 254,000 Powerscreen International PLC (1) .................................. 1,183,748 125 Schweizerische Industrie GmbH (1) .................................. 237,369 25 Schweizerische Industrie GmbH, Bearer (1) .......................... 47,474 300,000 Tampella OY AG (1) ................................................. 1,295,065 4,315,174 Manufacturing: Diversified Industrials--1.1% 20,000 Aalberts Industries NV (1) ......................................... 616,802 650 Siemens AG (1) ..................................................... 296,640 6,000 Welna NV (1) ....................................................... 138,394 1,051,836 Pollution Control--0.0% 100,000 Environmental Technologies International, Inc. * ................... 26,435 Transportation: Miscellaneous--3.4% 90,000 Eurotunnel SA (1) .................................................. 800,238 9,802 Kvaerner Industrier AS, Series B Free (1) .......................... 475,708 125,000 Lisnave-Estal Naval Lisboa ......................................... 834,748 150,000 Malaysian International Shipping Corp. ............................. 556,789 150,000 Singmarine Industries Ltd. ......................................... 454,944 10,000 Unitor Ships Service AS (1) ........................................ 168,864 3,291,291 Technology--11.8% Aerospace/Defense--1.0% 2,400,000 China Aerospace International Holdings Ltd. ........................ 1,001,618 Computer Software and Services--0.9% 6,500 Sligos SA (1) ...................................................... 607,673 50,000 Virtuality Group PLC ............................................... 244,857 852,530 Electronics: Semiconductors--1.5% 19,000 Austia Mikro Systems AG * (1) ...................................... 807,218 11,500 Samsung Electronics Co. Ltd., Sponsored GDR * ...................... 592,250 1,399,468 Telecommunications--8.4% 2,600 Advanced Information Services Ltd. ................................. 114,606 16,000 Atlantic Tele-Network, Inc. ........................................ 228,000 11,000 Carlton Communications PLC, ADR (1) ................................ 154,282 32,185 Millicom, Inc. * ................................................... 756,348 600,000 Netas Telekomunik .................................................. 1,077,000 6,980 Shinawatra Computer Communications Co. Ltd. ........................ 234,989 400,000 SIP International * (1) ............................................ 840,186 115,000 Societa Finanziora Telefonica SPA (1) .............................. 295,762 140,000 Technology Resources Industries * ................................. 732,734 15,500 Telecomasia Corp. PLC, Sponsored GDR ............................... 817,625 90,000 Telecommunication de Argentina, Cl. B .............................. 566,333 4,500 Telefonica de Argentina SA, Cl. B ADR .............................. 327,375 Statement of Investments (Continued) Oppenheimer Variable Account Funds-Global Securities Fund Market Shares Common Stocks (Continued) Value-Note 1 Technology (Continued) Telecommunications (Continued) 100,000 Telefonica de Espana SA, ADR (1) ................................... $ 1,304,880 3,000 Telefonos de Mexico SA, Sponsored ADR .............................. 202,500 15,000 United Communication Industries (2) ................................ 135,934 34,769 Vodafone Group, ADR (1) ............................................ 305,558 8,094,112 Utilities--2.9% Electric Cos.--2.9% 20,000 Central Puerto SA, ADR * ........................................... 690,000 40,000 Consolidated Electric Power Asia Ltd., Sponsored ADR * ............. 720,000 25,000 Enersis SA, ADR * .................................................. 587,500 20,000 Korea Electric Power Co. * ......................................... 542,650 3,000 Verbund Oest Electriz (1) .......................................... 182,571 2,722,721 Total Common Stocks (Cost $68,312,122) ............................. 83,802,197 Total Investments, at Value (Cost $83,996,414) ........................ 103.8% 100,047,478 Liabilities in Excess of Other Assets ................................. (3.8) (3,622,967) Net Assets ............................................................ 100.0% $ 96,424,511 * Non-income producing security. 1. Securities with an aggregate market value of $37,803,067 are segregated to collateralize outstanding forward foreign currency exchange contracts. See Note 5 of Notes to Financial Statements. 2. The Fund owns securites purchased in private placement transactions, without registration under the Securities Act of 1933 (the Act). The securities are valued under methods approved by the Board of Trustees as reflecting fair value. The Fund intends to invest no more that 10% of its net assets (determined at the time of purchase) in restricted and illiquid securities, excluding securities eligible for resale pursuant to Rule 144A of the Act that are determined to be liquid by the Board of Trustees or by the Manager under Board-approved guidelines. Restricted and illiquid securities amount to $808,931, or .8% of the Fund's net assets, at December 31, 1993. Valuation Acquisition Cost Per Unit as of Security Date Per Unit December 31, 1993 Internacional de Ceramica SA, Series B ADR(3) ................ 2/10/93-2/11/93 $ 25.40 $ 32.20 Jindal Strips Ltd., 4.25% Cv. Debs., 3/31/99(3) ............. 11/9/93 $ 100.00 $ 129.75 National Petrochemical Co.(3) ................................ 11/30/93 $ 1.30 $ 1.29 Plant Genetics Systems International NV ...................... 5/27/92 $ 11.18 $ 15.48 PT Panin Bank(3) ............................................. 7/28/93 $ .86 $ 2.60 Scici Ltd., 3.50% Cv. Bonds, 4/1/04(3) ....................... 10/19/93 $ 100.00 $ 133.13 Sears Roebuck de Mexico SA, ADR(3) ........................... 3/16/92 $ 15.50 $ 38.50 Taipei Fund .................................................. 12/29/93 $80,000.00 $83,500.00 Turkiye Garanti Bankasi AS, Sponsored ADR(3) ................. 10/29/93 $ 7.19 $ 7.00 United Communication Industries(3) ........................... 12/3/93 $ 9.06 $ 9.06 3. Transferable under Rule 144A of the Act. See accompanying Notes to Financial Statements.
Statement of Investments December 31, 1993 Oppenheimer Variable Account Funds-Strategic Bond Fund
Face Market Amount Government Obligations --47.7% Value-Note 1 $ 300,000 Argentina (Republic of) Bonds, Bonos del Tesoro, Series II, 3.50%, 9/1/97 (3)...........................................$ 247,507 300,000 (1) Bariven SA Bonds, 10.75%, 7/8/97 (6)............................................... 182,695 240,000 BEMGE Bonds, 10%, 1/15/96 .......................................................... 240,900 250,000 (1) Hydro-Ontario Global Bonds, 9%, 6/24/02 (6)....................................................... 212,165 250,000,000 (1) Italy (Republic of) Treasury Bonds, 11%, 6/1/03 (6)......................................................... 166,253 100,000 (1) New South Wales Treasury Corp. Bonds, 9.25%, 2/18/03 .................................................. 76,929 30,000,000 (1) Spain (Kingdom of) Bonds, 9%, 2/28/97 (6)......................................................... 215,124 100,000 (1) Treasury Corp. of Victoria Gtd. Sr. Bonds, 9.25%, 9/18/03 ......................................................... 75,549 500,000 U.S. Treasury Bonds, 7.125%, 2/15/23 ........................................................ 541,245 U.S. Treasury Nts: 100,000 3.875%, 4/30/95 ........................................................ 99,968 2,350,000 4.25%, 5/15/96 ......................................................... 2,343,373 120,000 5.125%, 4/30/98 ........................................................ 120,337 250,000 Venezuela (Republic of) Front-Loaded Interest Reduction Bonds, Series B, 6%, 3/31/07 (5)............................................................. 191,250 Total Government Obligations (Cost $4,730,529)....................................................... 4,713,295 Corporate Bonds and Notes --46.1% Banks/Saving and Loans --1.1% 100,000 Bancomext Trust Division, 8% Nts., 8/5/03 ....................................................... 103,000 Broadcast Media/Cable TV --10.3% 150,000 Cablevision Systems Corp., 9.875% Sr. Sub. Debs., 2/15/13 ................................................................ 175,125 350,000 Continental Cablevision, Inc., 9.50% Sr. Debs., 8/1/13 ................................................................. 392,000 200,000 International CabelTel, Inc., 0%/10.875% Sr. Def. Cpn. Nts., 10/15/03 (2)...................................................... 128,000 150,000 Lamar Advertising Co., 11% Sr. Sec. Nts., 5/15/03 ................................................. 159,375 Statement of Investments (Continued) Oppenheimer Variable Account Funds-Strategic Bond Fund Face Market Amount Corporate Bonds and Notes (Continued) Value-Note 1 Broadcast Media/Cable TV (Continued) $ 150,000 Panamsat LP/Panamsat Capital Corp., 9.75% Sr. Sec. Nts., 8/1/00 .....................................................$ 159,375 1,013,875 Building Materials--2.5% 250,000 PT Inti Indorayon Utama, 9.125% Sr. Nts., 10/15/00 ............................................. 250,937 Chemicals/Plastics --3.0% 130,000 Atlantis Group, Inc., 11% Sr. Nts., 2/15/03 ...................................................... 137,150 150,000 Harris Chemical North America, Inc., 10.75% Sr. Gtd. Sub. Nts., 10/15/03 .................................................... 158,625 295,775 Consumer Goods: Manufacturing --7.0% 200,000 Amstar Corp., 11.375% Sr. Sub. Nts., 2/15/97 ..................................................... 205,000 150,000 Harman International Industries, Inc., 12% Sr. Sub. Nts., 8/1/02 ...................................................... 168,000 175,000 MacAndrews & Forbes Holdings, Inc., 13% Sub. Debs., 3/1/99 .......................................................... 176,094 150,000 Revlon Consumer Products Corp., 9.375% Sr. Nts., Series B, 4/1/01 ....................................................... 147,375 696,469 Financial/Insurance --6.8% 200,000 Card Establishment Services, Inc., 10% Sr. Sub. Nts., 10/1/03 (7) ................................................. 209,000 200,000 Reliance Group Holdings, Inc., 9.75% Sr. Sub. Debs., 11/15/03 ............................................................... 206,500 250,000 Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11 (7)................................. 257,813 673,313 Gaming/Hotels--1.5% 150,000 Station Casinos, Inc., 9.625% Sr. Sub. Nts., 6/1/03 ................................................................. 152,250 Statement of Investments (Continued) Oppenheimer Variable Account Funds-Strategic Bond Fund Face Market Amount Corporate Bonds and Notes (Continued) Value-Note 1 Healthcare/Medical Products--1.5% $ 150,000 Alco Health Distribution Corp., 11.25% Sr. Debs., 7/15/05 (4) ...........................................................$ 150,422 Home Building/Development--1.6% 150,000 NVR, Inc., 11% Gtd. Sr. Nts., 4/15/03 .......................................................... 158,625 Office Equipment --1.4% 150,000 Mosler, Inc., 11% Sr. Nts., Series A, 4/15/03 ...................................................... 135,750 Oil and Gas : Exploration and Production --1.5% 150,000 Maxus Energy Corp., 9.875% Nts., 10/15/02 ......................................................... 150,375 Publishing --1.1% 200,000 Bell & Howell Co., 0%/11.50% Sr. Disc. Debs., Series B, 3/1/05 (2) ............................................................. 111,000 Retail : Food and Drug--1.6% 150,000 Farm Fresh, Inc., 12.25% Sr. Nts., 10/1/00 ...................................................... 159,375 Retail : Specialty --1.6% 150,000 Finlay Fine Jewelry Corp., 10.625% Sr. Nts., 5/1/03 ............................................... 155,250 Transportation--1.0% 100,000 Transportacion Maritima Mexicana SA, 8.50% Nts., 10/15/00 ............................................................... 102,875 Utilities --2.6% 250,000 Subic Power Corp., 9.50% Debs., 12/28/08 (7)..................................................... 255,000 Total Corporate Bonds and Notes (Cost $4,476,279) ................................................ 4,564,291 Total Investments, at Value (Cost $9,206,808).............................. 93.8% 9,277,586 Other Assets Net of Liabilities ........................................... 6.2 608,932 Net Assets ................................................................ 100.0% $ 9,886,518 Statement of Investments (Continued) Oppenheimer Variable Account Funds-Strategic Bond Fund 1. Face amount is reported in foreign currency. 2. Represents a zero cupon bond that converts to a fixed rate of interest at a designated future date. 3. Represents the current interest rate for a variable rate security. 4. Interest or dividend is paid in kind. 5. Represents the current interest rate for a variable rate security. 6. Securities with an aggregate market value of $776,237 are segregated to collateralize outstanding forward foreign currency exchange contracts. See note 5 of Notes to Financial Statements. 7. The Fund owns securities purchased in private placement transactions, without registration under the Securities Act of 1933 (the Act). The securities are valued under methods approved by the Board of Trustees as reflecting fair value. The Fund intends to invest no more than 10% of its net assets (determined at the time of purchase) in restricted and illiquid securities, excluding securities eligible for resale pursuant to Rule 144A of the Act that are determined to be liquid by the Board of Trustees or by the Manager under Board-approved guidelines. Valuation Per Acquisition Cost Unit as of Security Date Per Unit 12/31/93 Card Establishment Services, Inc., 10% Sr. Sub. Nts., 10/1/03 (8) 10/6/93 $102.00 $104.50 Subic Power Corp., 9.50% Debs., 12/28/08 (8) 12/20/93 $99.93 $102.00 Tribasa Toll Road Trust 1, 10.50% Nts., Series 1993-A, 12/1/11 (8) 11/8/93 $100.00 $103.13 8. Transferable under Rule 144A of the Act. See accompanying Notes to Financial Statements
Statements of Assets and Liabilities December 31, 1993 Oppenheimer Variable Account Funds
Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer Capital Oppenheimer Multiple Global Strategic Money High Income Bond Appreciation Growth Strategies Securities Bond Fund Fund Fund Fund Fund Fund Fund Fund ASSETS: Investments, at value (cost*)-see accompanying statements $61,069,285 $93,784,521 $109,574,804 $141,080,412 $56,163,478 $249,033,573 $100,047,478 $9,277,586 Unrealized appreciation on forward foreign currency exchange contracts-Note 5 - 21,075 9,773 - - - 121,554 13,803 Cash 24,247 - 217,997 135,607 62,630 237,293 2,847,588 193,222 Receivables: Dividends and interest 159,311 1,526,923 1,743,940 86,279 51,306 1,937,521 89,294 179,525 Shares of beneficial interest sold 56,131 79,874 354,834 2,096,404 499,157 500,839 1,193,039 226,388 Investments sold 50,893 369,789 - 972,382 - 805,320 489,055 - Other 6,099 6,041 2,912 8,155 6,359 14,748 6,850 5,503 Total assets 61,365,966 95,788,223 111,904,260 144,379,239 56,782,930 252,529,294 104,794,858 9,896,027 LIABILITIES: Bank overdraft - 642,665 - - - - - - Options written, at value (premiums received $654,848) - see accompanying statements-Note 4 - - - - - 588,881 - - Payables and other liabilities: Dividends 77,910 - - - - - - - Investments purchased - 645,000 - 6,225,965 58,750 1,601,677 7,647,135 - Shares of beneficial interest redeemed 47,596 1,447,251 33,445 1,246,838 363 813 718,335 - Other 18,841 41,974 24,694 21,333 22,769 47,875 4,877 9,509 Total liabilities 144,347 2,776,890 58,139 7,494,136 81,882 2,239,246 8,370,347 9,509 NET ASSETS $61,221,619 $93,011,333 $111,846,121 $136,885,103 $56,701,048 $250,290,048 $ 96,424,511 $9,886,518 COMPOSITION OF NET ASSETS: Paid-in capital $61,220,647 $86,718,526 $107,660,538 $ 93,658,242 $47,524,055 $217,836,036 $ 77,586,765 $9,771,635 Undistributed (distributions in excess of) net investment income - (525,482) 61,656 234,158 524,266 598,176 339,434 6,384 Accumulated net realized gain (loss) from investment, written option and foreign currency transactions 972 1,876,672 (208,860) 17,043,751 (483,393) 1,483,386 2,325,694 23,918 Net unrealized appreciation on investments and options written- Note 3 - 5,023,676 4,415,577 25,948,952 9,136,120 30,372,450 16,172,618 75,918 Net unrealized appreciation (depreciation) on translation of assets and liabilities denominated in foreign currencies - (82,059) (82,790) - - - - 8,663 NET ASSETS $61,221,619 $93,011,333 $111,846,121 $136,885,103 $56,701,048 $250,290,048 $ 96,424,511 $9,886,518 SHARES OF BENEFICIAL INTEREST OUTSTANDING 61,220,647 8,442,958 9,601,796 4,325,853 3,202,704 18,025,972 5,917,113 1,929,958 NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $ 1.00 $ 11.02 $ 11.65 $ 31.64 $ 17.70 $ 13.88 $ 16.30 $ 5.12 *Cost $61,069,285 $88,863,979 $105,251,790 $115,131,460 $47,027,358 $218,727,090 $ 83,996,414 $9,206,808 See accompanying Notes to Financial Statements. Statements of Operations For the Year Ended December 31, 1993 Oppenheimer Variable Account Funds
Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer Capital Oppenheimer Multiple Global Strategic Money High Income Bond Appreciation Growth Strategies Securities Bond Fund Fund Fund Fund Fund Fund Fund Fund INVESTMENT INCOME: Interest $2,043,327 $ 6,932,131 $6,683,478 $ 478,491 $ 196,602 $ 8,165,314 $ 91,732 $188,838 Dividends - 554,337 99 204,562 555,809 1,655,585 429,261 - Total income 2,043,327 7,486,468 6,683,577 683,053 752,411 9,820,899 520,993 188,838 EXPENSES: Management fees-Note 6 212,358 382,629 361,258 407,611 193,110 831,139 227,226 18,509 Legal and auditing fees 16,544 13,808 11,714 10,939 11,756 18,510 5,937 3,201 Custodian fees and expenses 13,412 41,798 10,374 19,120 17,239 61,089 31,983 1,391 Trustees' fees and expenses 2,032 1,699 1,606 2,557 1,642 7,291 2,342 189 Registration and filing fees - 11,796 14,102 17,383 5,310 24,121 20,481 3,280 Other 3,309 2,317 2,605 3,600 1,441 7,469 4,562 797 Total expenses 247,655 454,047 401,659 461,210 230,498 949,619 292,531 27,367 NET INVESTMENT INCOME 1,795,672 7,032,421 6,281,918 221,843 521,913 8,871,280 228,462 161,471 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND OPTIONS WRITTEN: Net realized gain (loss) on investments and options written (including premiums on options exercised) 972 2,997,007 595,806 17,171,028 (416,658) 2,955,823 2,546,181 9,787 Net realized gain on closing and expiration of option contracts written- Note 4 - - - - - 219,623 - 7,110 Net realized gain (loss) 972 2,997,007 595,806 17,171,028 (416,658) 3,175,446 2,546,181 16,897 Net change in unrealized appreciation (depreciation) on investments and options written: Beginning of year - 93,026 1,393,576 17,936,209 5,758,542 12,654,079 (781,639) - End of year-Note 3 - 5,023,676 4,415,577 25,948,952 9,136,120 30,372,450 16,172,618 75,918 Net change - 4,930,650 3,022,001 8,012,743 3,377,578 17,718,371 16,954,257 75,918 NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND OPTIONS WRITTEN 972 7,927,657 3,617,807 25,183,771 2,960,920 20,893,817 19,500,438 92,815 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS BEFORE FOREIGN EXCHANGE GAIN (LOSS) 1,796,644 14,960,078 9,899,725 25,405,614 3,482,833 29,765,097 19,728,900 254,286 REALIZED AND UNREALIZED FOREIGN EXCHANGE GAIN (LOSS): Net realized gain (loss) on foreign currency transactions - (126,242) (164,183) - - - - 7,021 Net change in unrealized appreciation (depreciation) on translation of assets and liabilities denominated in foreign currencies: Beginning of year - (88,389) (240,141) - - - - - End of year - (82,059) (82,790) - - - - 8,663 Net change - 6,330 157,351 - - - - 8,663 NET REALIZED AND UNREALIZED FOREIGN EXCHANGE GAIN (LOSS) - (119,912) (6,832) - - - - 15,684 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,796,644 $14,840,166 $9,892,893 $25,405,614 $3,482,833 $29,765,097 $19,728,900 $269,970
See accompanying Notes to Financial Statements. Statements of Changes in Net Assets Oppenheimer Variable Account Funds
Oppenheimer Oppenheimer Oppenheimer Oppenheimer Money High Income Bond Capital Appreciation Fund Fund Fund Fund 1993 (1) 1992 (1) 1993 (1) 1992 (1) 1993 (1) 1992 (1) 1993 (1) 1992 (1) OPERATIONS: Net investment income $ 1,795,672 $ 2,307,212 $ 7,032,421 $ 4,453,990 $ 6,281,918 $ 3,568,280 $ 221,843 $ 168,695 Net realized gain (loss) on investments and options written 972 72,940 2,997,007 2,174,668 595,806 (110,978) 17,171,028 3,471,235 Net realized gain (loss) on foreign currency transactions - - (126,242) (165,639) (164,183) (437,791) - - Net change in unrealized appreciation or depreciation on investments and options written - - 4,930,650 (823,806) 3,022,001 (99,126) 8,012,743 7,083,362 Net change in unrealized appreciation or depreciation on translation of assets and liabilities denominated in foreign currencies - - 6,330 (40,785) 157,351 (82,013) - - Net increase in net assets resulting from operations 1,796,644 2,380,152 14,840,166 5,598,428 9,892,893 2,838,372 25,405,614 10,723,292 NET CHANGE IN EQUALIZATION - - 1,194,413 590,409 747,196 458,394 - - DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment income (1,795,672) (2,307,212) (7,933,113) (4,895,490) (6,021,196) (3,674,661) (173,608) (274,327) Distributions from net realized gain on investments and options written - (79,555) - - - - (3,478,465) (1,117,628) BENEFICIAL INTEREST TRANSACTIONS: Net increase (decrease) in net assets resulting from beneficial interest transactions-Note 2 2,954,149 (436,361) 44,092,559 12,216,279 43,872,915 30,970,048 31,796,464 24,632,437 NET ASSETS: Total increase (decrease) 2,955,121 (442,976) 52,194,025 13,509,626 48,491,808 30,592,153 53,550,005 33,963,774 Beginning of year 58,266,498 58,709,474 40,817,308 27,307,682 63,354,313 32,762,160 83,335,098 49,371,324 End of year $61,221,619 $58,266,498 $93,011,333 $ 40,817,308 $111,846,121 $63,354,313 $136,885,103 $83,335,098
1. For the year ended December 31. See accompanying Notes to Financial Statements. Statements of Changes in Net Assets (Continued) Oppenheimer Variable Account Funds
Oppenheimer Oppenheimer Oppenheimer Oppenheimer Growth Multiple Strategies Global Securities Strategic Bond Fund Fund Fund Fund 1993 (1) 1992 (1) 1993 (1) 1992 (1) 1993 (1) 1992 (1) 1993 (1) OPERATIONS: Net investment income $ 521,913 $ 350,171 $ 8,871,280 $ 6,430,572 $ 228,462 $ 116,252 $ 161,471 Net realized gain (loss) on investments and options written (416,658) 1,452,406 3,175,446 1,920,255 2,546,181 (213,298) 16,897 Net realized gain on foreign currency transactions - - - - - - 7,021 Net change in unrealized appreciation or depreciation on investments and options written 3,377,578 2,410,316 17,718,371 3,761,960 16,954,257 (990,204) 75,918 Net change in unrealized appreciation or depreciation on translation of assets and liabilities denominated in foreign currencies - - - - - - 8,663 Net increase (decrease) in net assets resulting from operations 3,482,833 4,212,893 29,765,097 12,112,787 19,728,900 (1,087,250) 269,970 DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment income (339,216) (532,602) (8,601,104) (6,262,811) - (35,139) (155,087) Distributions from net realized gain on investments and options written (768,083) - - - - (35,139) - BENEFICIAL INTEREST TRANSACTIONS: Net increase in net assets resulting from beneficial interest transactions 17,831,569 10,781,610 69,662,484 28,980,030 63,158,438 7,355,765 9,771,635 NET ASSETS: Total increase 20,207,103 14,461,901 90,826,477 34,830,006 82,887,338 6,198,237 9,886,518 Beginning of year 36,493,945 22,032,044 159,463,571 124,633,565 13,537,173 7,338,936 - End of year $ 56,701,048 $ 36,493,945 $250,290,048 $159,463,571 $96,424,511 $13,537,173 $9,886,518
1. For the year ended December 31. 2. For the period from May 3, 1993 (commencement of operations) to December 31, 1993. See accompanying Notes to Financial Statements. Financial Highlights Oppenheimer Variable Account Funds
Oppenheimer Money Fund 1993(2) 1992(2) 1991(2) 1990(2) 1989(2) 1988(2) 1987(2) 1986(2) 1985(1) PER SHARE OPERATING DATA: Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from investment operations-net investment income and net realized gain on investments .03 .04 .06 .08 .09 .07 .06 .06 .05 Dividends and distributions to shareholders (.03) (.04) (.06) (.08) (.09) (.07) (.06) (.06) (.05) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $61,221 $58,266 $58,709 $89,143 $68,440 $69,468 $42,538 $28,218 $2,506 Average net assets (in thousands) $57,654 $61,317 $75,747 $82,966 $67,586 $60,241 $35,138 $12,914 $2,080 Number of shares outstanding at end of period (in thousands) 61,221 58,266 58,703 89,141 68,439 69,468 42,538 28,218 2,506 Ratios to average net assets: Net investment income 3.12% 3.76% 5.97% 7.80% 8.82% 7.31% 6.33% 5.68% 7.25%(3) Expenses .43% .50% .49% .51% .53% .55% .59% .75% .75%(3)
1. For the period from April 3, 1985 (commencement of operations) to December 31, 1985. 2. For the year ended December 31. 3. Annualized. See accompanying Notes to Financial Statements. Financial Highlights (Continued) Oppenheimer Variable Account Funds
Oppenheimer High Income Fund 1993(2) 1992(2) 1991(2) 1990(2) 1989(2) 1988(2) 1987(2) 1986(1) PER SHARE OPERATING DATA: Net asset value, beginning of period $ 9.74 $ 9.40 $ 7.90 $ 8.59 $ 9.30 $ 9.14 $ 10.04 $ 10.00 Income from investment operations: Net investment income .82 1.19 1.28 1.21 1.09 1.12 1.30 .72 Net realized and unrealized gain (loss) on investments and foreign currency transactions 1.65 .43 1.30 (.82) (.65) .23 (.51) (.24) Total income from investment operations 2.47 1.62 2.58 .39 .44 1.35 .79 .48 Dividends and distributions to shareholders: Dividends from net investment income (1.19) (1.28) (1.08) (1.08) (1.08) (1.07) (1.55) (.44) Distributions from net realized gain on investments - - - - (.07) (.12) (.14) - Total dividends and distributions to shareholders (1.19) (1.28) (1.08) (1.08) (1.15) (1.19) (1.69) (.44) Net asset value, end of period $ 11.02 $ 9.74 $ 9.40 $ 7.90 $ 8.59 $ 9.30 $ 9.14 $ 10.04 TOTAL RETURN, AT NET ASSET VALUE(3) 26.34% 17.92% 33.91% 4.65% 4.84% 15.58% 8.07% 4.73% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $93,011 $40,817 $27,308 $19,172 $23,698 $25,551 $21,768 $14,833 Average net assets (in thousands) $67,000 $36,861 $23,663 $21,493 $26,040 $24,530 $20,637 $ 8,036 Number of shares outstanding at end of period (in thousands) 8,443 4,189 2,905 2,427 2,760 2,746 2,382 1,478 Ratios to average net assets: Net investment income 10.50% 12.08% 14.26% 14.32% 11.52% 11.94% 13.13% 11.18%(4) Expenses .68% .73% .75% .75% .75% .75% .75% .75%(4) Portfolio turnover rate(5) 135.7% 144.2% 108.0% 95.1% 78.7% 57.9% 42.1% 18.3%
1. For the period from April 30, 1986 (commencement of operations) to December 31, 1986. 2. For the year ended December 31. 3. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additionalshares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. 4. Annualized. 5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the periodSecurities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. See accompanying Notes to Financial Statements. Financial Highlights (Continued) Oppenheimer Variable Account Funds
Oppenheimer Bond Fund 1993(2) 1992(2) 1991(2) 1990(2) 1989(2) 1988(2) 1987(2) 1986(2) 1985(1) PER SHARE OPERATING DATA: Net asset value, beginning of period $ 10.99 $ 11.15 $ 10.33 $ 10.49 $ 10.15 $ 10.19 $ 11.15 $11.27 $10.00 Income from investment operations: Net investment income .65 .87 .95 .97 .98 .94 .97 .97 .86 Net realized and unrealized gain (loss) on investments and foreign currency transactions .76 (.17) .80 (.18) .32 (.05) (.71) .09 .99 Total income from investment operations 1.41 .70 1.75 .79 1.30 .89 .26 1.06 1.85 Dividends and distributions to shareholders: Dividends from net investment income (.75) (.86) (.93) (.95) (.96) (.93) (1.17) (1.03) (.58) Distributions from net realized gain on investments - - - - - - (.05) (.15) - Total dividends and distributions to shareholders (.75) (.86) (.93) (.95) (.96) (.93) (1.22) (1.18) (.58) Net asset value, end of period $ 11.65 $ 10.99 $ 11.15 $ 10.33 $ 10.49 $ 10.15 $ 10.19 $11.15 $11.27 TOTAL RETURN, AT NET ASSET VALUE(3) 13.04% 6.50% 17.63% 7.92% 13.32% 8.97% 2.53% 10.12% 18.82% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $111,846 $63,354 $32,762 $16,576 $13,422 $ 9,989 $10,415 $7,377 $2,725 Average net assets (in thousands) $ 87,215 $45,687 $22,169 $15,088 $11,167 $11,028 $ 8,748 $4,647 $1,614 Number of shares outstanding at end ofperiod (in thousands) 9,602 5,766 2,939 1,604 1,280 984 1,022 662 242 Ratios to average net assets: Net investment income 7.20% 7.81% 8.73% 9.30% 9.34% 9.08% 9.17% 8.71% 10.52%(4) Expenses .46% .56% .64% .61% .64% .70% .75% .75% .75%(4) Portfolio turnover rate(5) 36.3% 41.3% 7.6% 7.4% 5.4% 36.3% 5.9% 27.7% 101.3%
1. For the period from April 3, 1985 (commencement of operations) to December 31, 1985. 2. For the year ended December 31. 3. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additionalshares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. 4. Annualized. 5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. See accompanying Notes to Financial Statements. Financial Highlights (Continued) Oppenheimer Variable Account Funds
Oppenheimer Capital Appreciation Fund 1993(2) 1992(3) 1991(3) 1990(3) 1989(3) 1988(3) 1987(3) 1986(2) 1986(1) PER SHARE OPERATING DATA: Net asset value, beginning of period $ 26.04 $ 23.24 $ 15.24 $ 20.40 $ 16.31 $ 14.39 $13.12 $16.21 $13.71 Income (loss) from investment operations: Net investment income .05 .06 .08 .32 .50 .33 .21 .12 .09 Net realized and unrealized gain (loss) on investments 6.71 3.43 8.18 (3.54) 3.93 1.60 1.67 (1.24) 3.40 Total income (loss) from investment operations 6.76 3.49 8.26 (3.22) 4.43 1.93 1.88 (1.12) 3.49 Dividends and distributions to shareholders: Dividends from net investment income (.06) (.14) (.26) (.53) (.34) - (.34) (.21) (.20) Distributions from net realized gain on investments (1.10) (.55) - (1.41) - (.01) (.27) (1.76) (.79) Total dividends and distributions to shareholders (1.16) (.69) (.26) (1.94) (.34) (.01) (.61) (1.97) (.99) Net asset value, end of period $ 31.64 $ 26.04 $ 23.24 $ 15.24 $ 20.40 $ 16.31 $14.39 $13.12 $16.21 TOTAL RETURN, AT NET ASSET VALUE(4) 27.32% 15.42% 54.72% (16.82)% 27.57% 13.41% 14.34% (1.65)% N/A RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $136,885 $83,335 $49,371 $23,295 $27,523 $13,667 $9,692 $4,549 $3,852 Average net assets (in thousands) $ 98,228 $56,371 $34,887 $24,774 $21,307 $13,239 $8,598 $3,099 $2,292 Number of shares outstanding at end of period (in thousands) 4,326 3,201 2,125 1,528 1,349 838 674 347 238 Ratios to average net assets: Net investment income .23% .30% .81% 1.93% 3.27% 2.13% 1.68% 2.36%(5) 2.27% Expenses .47% .54% .63% .71% .68% .73% .75% 1.01%(5) 2.17% Portfolio turnover rate(6) 122.8% 78.9% 122.3% 222.0% 130.5% 128.7% 138.7% 100.1% 464.8%
1. For the year ended June 30, 1986Operating results were achieved by Centennial Capital Appreciation Fund, a separate investment company acquired by OCAP on August14, 1986. 2. For the six months ended December 31, 1986Operating results prior to August 15, 1986 were achieved by Centennial Capital Appreciation Fund, a separate investmentcompany acquired by OCAP on August 14, 1986. 3. For the year ended December 31. 4. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additionalshares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. 5. Annualized. 6. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. See accompanying Notes to Financial Statements. Financial Highlights (Continued) Oppenheimer Variable Account Funds
Oppenheimer Growth Fund 1993(2) 1992(2) 1991(2) 1990(2) 1989(2) 1988(2) 1987(2) 1986(2) 1985(1) PER SHARE OPERATING DATA: Net asset value, beginning of period $ 16.96 $ 15.17 $ 12.54 $ 16.38 $ 13.64 $ 11.21 $ 12.53 $10.95 $10.00 Income (loss) from investment operations: Net investment income .46 .16 .30 .56 .66 .29 .20 .13 .16 Net realized and unrealized gain (loss) on investments .74 1.99 2.82 (1.79) 2.50 2.19 .24 1.76 .79 Total income (loss) from investment operations 1.20 2.15 3.12 (1.23) 3.16 2.48 .44 1.89 .95 Dividends and distributions to shareholders: Dividends from net investment income (.14) (.36) (.49) (.62) (.35) - (.34) (.15) - Distributions from net realized gain on investments (.32) - - (1.99) (.07) (.05) (1.42) (.16) - Total dividends and distributions to shareholders (.46) (.36) (.49) (2.61) (.42) (.05) (1.76) (.31) - Net asset value, end of period $ 17.70 $ 16.96 $ 15.17 $ 12.54 $ 16.38 $ 13.64 $ 11.21 $12.53 $10.95 TOTAL RETURN, AT NET ASSET VALUE(3) 7.25% 14.53% 25.54% (8.21)% 23.59% 22.09% 3.32% 17.76% 9.50% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $56,701 $36,494 $22,032 $15,895 $19,301 $17,746 $14,692 $8,287 $ 820 Average net assets (in thousands) $46,389 $25,750 $18,810 $17,235 $18,596 $15,585 $15,121 $3,744 $ 388 Number of shares outstanding at end of period (in thousands) 3,203 2,152 1,453 1,267 1,179 1,301 1,311 661 75 Ratios to average net assets: Net investment income 1.13% 1.36% 2.82% 4.09% 3.72% 2.39% 1.56% 2.62% 4.25%(4) Expenses .50% .61% .70% .71% .70% .70% .75% .75% .75%(4) Portfolio turnover rate(5) 12.6% 48.7% 133.9% 267.9% 148.0% 132.5% 191.0% 100.9% 132.9%
1. For the period from April 3, 1985 (commencement of operations) to December 31, 1985. 2. For the year ended December 31. 3. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additionalshares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period 4. Annualized. 5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. See accompanying Notes to Financial Statements. Financial Highlights (Continued) Oppenheimer Variable Account Funds
Oppenheimer Multiple Strategies Fund 1993(2) 1992(2) 1991(2) 1990(2) 1989(2) 1988(2) 1987(1) PER SHARE OPERATING DATA: Net asset value, beginning of period $ 12.47 $ 11.96 $ 10.90 $ 12.30 $ 11.58 $ 10.04 $ 10.00 Income (loss) from investment operations: Net investment income .55 .55 .69 .73 .73 .66 .44 Net realized and unrealized gain (loss) on investments and options written 1.41 .50 1.15 (.97) 1.04 1.53 .07 Total income (loss) from investment operations 1.96 1.05 1.84 (.24) 1.77 2.19 .51 Dividends and distributions to shareholders: Dividends from net investment income (.55) (.54) (.78) (.70) (.68) (.65) (.43) Distributions from net realized gain on investments and options written - - - (.46) (.37) - (.04) Total dividends and distributions to shareholders (.55) (.54) (.78) (1.16) (1.05) (.65) (.47) Net asset value, end of period $ 13.88 $ 12.47 $ 11.96 $ 10.90 $ 12.30 $ 11.58 $ 10.04 TOTAL RETURN, AT NET ASSET VALUE(3) 15.95% 8.99% 17.48% (1.91)% 15.76% 22.15% 3.97% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $250,290 $159,464 $124,634 $118,888 $121,286 $78,386 $53,291 Average net assets (in thousands) $199,954 $139,011 $117,000 $123,231 $101,057 $64,298 $34,256 Number of shares outstanding at end of period (in thousands) 18,026 12,792 10,421 10,908 9,860 6,766 5,306 Ratios to average net assets: Net investment income 4.44% 4.63% 5.95% 6.53% 6.36% 6.18% 6.12%(4) Expenses .48% .55% .54% .55% .57% .58% .65%(4) Portfolio turnover rate(5) 32.4% 57.8% 80.3% 99.2% 66.9% 110.0% 46.9%
1. For the period from February 9, 1987 (commencement of operations) to December 31, 1987. 2. For the year ended December 31. 3. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. 4. Annualized. 5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. See accompanying Notes to Financial Statements. Financial Highlights (Continued) Oppenheimer Variable Account Funds
Oppenheimer Global Securities Fund 1993(2) 1992(2) 1991(2) 1990(1) PER SHARE OPERATING DATA: Net asset value, beginning of period $ 9.57 $ 10.38 $10.04 $10.00 Income (loss) from investment operations: Net investment income (.02) .07 .04 - Net realized and unrealized gain (loss) on investments 6.75 (.80) .30 .04 Total income (loss) from investment operations 6.73 (.73) .34 .04 Dividends and distributions to shareholders: Dividends from net investment income - (.04) - - Distributions from net realized gain on investments - (.04) - - Total dividends and distributions to shareholders - (.08) - - Net asset value, end of period $ 16.30 $ 9.57 $10.38 $10.04 TOTAL RETURN, AT NET ASSET VALUE(3) 70.32% (7.11)% 3.39% .40% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $96,425 $13,537 $7,339 $ 432 Average net assets (in thousands) $31,696 $11,181 $3,990 $ 263 Number of shares outstanding at end of period (in thousands) 5,917 1,415 707 43 Ratios to average net assets: Net investment income .72% 1.04% .75% .08%(4) Expenses .92% 1.06% 1.32% 6.84%(4) Portfolio turnover rate(5) 65.1% 34.1% 29.5% 0.0%
1. For the period from November 12, 1990 (commencement of operations) to December 31, 1990. 2. For the year ended December 31. 3. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. 4. Annualized. 5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. See accompanying Notes to Financial Statements. Financial Highlights (Continued) Oppenheimer Variable Account Funds
Oppenheimer Strategic Bond Fund 1993(1) PER SHARE OPERATING DATA: Net asset value, beginning of period $ 5.00 Income from investment operations: Net investment income .10 Net realized and unrealized gain on investments and foreign currency transactions .11 Total income from investment operations .21 Dividends and distributions to shareholders: Dividends from net investment income (.09) Distributions from net realized gain on investments - Total dividends and distributions to shareholders (.09) Net asset value, end of period $ 5.12 TOTAL RETURN, AT NET ASSET VALUE(2) 4.25% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $9,887 Average net assets (in thousands) $4,259 Number of shares outstanding at end of period (in thousands) 1,930 Ratios to average net assets: Net investment income 5.67%(3) Expenses .96%(3) Portfolio turnover rate(4) 10.9%
1. For the period from May 3, 1993 (commencement of operations) to December 31, 1993. 2. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested inadditional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. 3. Annualized. 4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during theperiodof acquisition of one year or less are excluded from the calculation. See accompanying Notes to Financial Statements. Notes to Financial Statements Oppenheimer Variable Account Funds 1. Significant Accounting Policies Oppenheimer Money Fund (OMF), Oppenheimer High Income Fund (OHIF), Oppenheimer Bond Fund (OBF), Oppenheimer Capital Appreciation Fund (OCAP), Oppenheimer Growth Fund (OGF), Oppenheimer Multiple Strategies Fund (OMSF), Oppenheimer Global Securities Fund (OGSF) and Oppenheimer Strategic Bond Fund (OSBF) (collectively, the Funds) are separate funds of Oppenheimer Variable Account Funds (the Trust), a diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended. The Trust's investment adviser is Oppenheimer Management Corporation (the Manager). The following is a summary of significant accounting policies consistently followed by the Funds. Investment Valuation-Portfolio securities of OMF are valued on the basis of amortized cost, which approximates market value. Portfolio securities of OHIF, OBF, OCAP, OGF, OMSF, OGSF and OSBF are valued at 4:00 p.m. (New Yorktime) on each trading day. Listed and unlisted securities for which such information is regularly reported are valued at the last sale price of the day or, in the absence of sales, at values based on the closing bid or asked price or the last sale price on the prior trading day. Long-term debt securities are valued by a portfolio pricing service approved by the Board of Trustees. Long-term debt securities which cannot be valued by the approved portfolio pricing service are valued by averaging the mean between the bid and asked prices obtained from two active market makers in such securities. Short-term debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Securities for which market quotes are not readily available are valued under procedures established by the Board of Trustees to determine fair value in good faith. A call option is valued based upon the last sales price on the principal exchange on which the option is traded or, in the absence of any transactions that day, the value is based upon the last sale on the prior trading date if it is within the spread between the closing bid and asked prices. If the last sale price is outside the spread, the closing bid or asked price closest to the last reported sale price is used. Forward foreign currency contracts are valued at the forward rate on a daily basis. Security Credit Risk-OHIF invests in high yield securities, which may be subject to a greater degree of credit risk, greater market fluctuations and risk of loss of income and principal, and may be more sensitive to economic conditions than lower yielding, higher rated fixed income securities. The Fund may acquire securities in default, and is not obligated to dispose of securities whose issuers subsequently default. At December 31, 1993, securities with an aggregate market value of $2,369,721, representing 2.47% of the Fund's total assets, were in default. Foreign Currency Translation-The accounting records of the Funds are maintained in U.S. dollars. Prices of securities purchased by OHIF, OBF, OCAP, OGF, OMSF, OGSF and OSBF that are denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange. Amounts related to the purchase and sale of securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. Forward foreign currency exchange contracts are generally entered into as a hedge, upon the purchase or sale of a security denominated in a foreign currency. In addition, OHIF, OBF, OGSF and OSBF may enter into such contracts as a hedge against changes in foreign currency exchange rates on portfolio positions. A forward exchange contract is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. Risks may arise from the potential inability of the counterparty to meet the terms of the contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. OCAP, OGF, OMSF and OGSF account for gains and losses on foreign currency transactions with the transactions that gave rise to the exchange gain or loss. The net gain or loss resulting from changes in foreign currency exchange rates is reported separately in the Statement of Operations by OHIF, OBF and OSBF. Repurchase Agreements-The Funds require the custodian to take possession, to have legally segregated in the Federal Reserve Book Entry System or to have segregated within the custodian's vault, all securities held as collateral for repurchase agreements. If the seller of the agreement defaults and the value of the collateral declines, or if the seller enters an insolvency proceeding, realization of the value of the collateral by the Funds may be delayed or limited. Notes to Financial Statements (Continued) Oppenheimer Variable Account Funds Call Options Written-OHIF, OCAP, OGF, OMSF, OGSF and OSBF may write covered call options. When an option is written by a Fund, the Fund receives a premium and becomes obligated to sell the underlying security at a fixed price, upon exercise of the option. In writing an option, the Fund bears the market risk of an unfavorable change in the price of the security underlying the written option. Exercise of an option written by the Fund could result in the Fund selling a security at a price different from the current market value. All securities covering call options written are held in escrow by the custodian bank. Federal Income Taxes-The Trust intends for each Fund to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by loss carryovers, to shareholders. Therefore, no federal income tax provision is required. Equalization-Prior to September 25, 1993, OHIF and OBF followed the accounting practice of equalization, by which a portion of the proceeds from sales and costs of redemptions of Fund shares equivalent on a per share basis to the amount of undistributed net investment income were credited or charged to undistributed income. The cumulative effect of the change in accounting practice resulted in a reclassification of $2,119,310 and $1,577,200 for OHIF and OBF, respectively, from undistributed net investment income to paid-in capital. Distributions to Shareholders-Dividends and distributions to shareholders of OHIF, OBF, OCAP, OGF, OMSF, OGSF and OSBF are recorded on the ex-dividend date. OMF intends to declare dividends from net investment income each regular business day and pay such dividends monthly. To effect its policy of maintaining a net asset value of $1.00 per share, OMF may withhold dividends or make distributions of net realized gains. Other-Investment transactions are accounted for on the date the investments are purchased or sold (trade date) and dividend income is recorded on the ex-dividend date. Discount on securities purchased by OHIF, OBF, OCAP, OGF, OMSF, OGSF and OSBF is amortized over the life of the respective securities, in accordance with federal income tax requirements. Realized gains and losses on investments and unrealized appreciation and depreciation are determined on an identified cost basis, which is the same basis used for federal income tax purposes. Dividends in kind are recognized as income on the ex-dividend date, at the current market value of the underlying security. Interest on payment-in-kind debt instruments is accrued as income at the coupon rate and a market adjustment is made on the ex-date. Notes to Financial Statements (Continued) Oppenheimer Variable Account Funds 2. Shares of Beneficial Interest The Funds have authorized an unlimited number of no par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:
Oppenheimer Money Fund Oppenheimer High Income Fund Year Ended Year Ended Year Ended Year Ended December 31, 1993 December 31, 1992 December 31, 1993 December 31, 1992 Shares Amount Shares Amount Shares Amount Shares Amount Sold 102,985,240 $ 102,985,240 108,040,063 $ 108,040,063 10,942,819 $113,254,844 4,550,213 $ 43,344,229 Dividends and distributions reinvested 1,805,107 1,805,107 2,400,795 2,400,795 743,446 7,814,552 503,051 4,788,432 Redeemed (101,836,198) (101,836,198) (110,877,219) (110,877,219)(7,432,492) (76,976,837) (3,769,287) (35,916,382) Net increase (decrease) 2,954,149 $ 2,954,149 (436,361) $ (436,361) 4,253,773 $ 44,092,559 1,283,977 $ 12,216,279
Oppenheimer Bond Fund Oppenheimer Capital Appreciation Fund Year Ended Year Ended Year Ended Year Ended December 31, 1993 December 31, 1992 December 31, 1993 December 31, 1992 Shares Amount Shares Amount Shares Amount Shares Amount Sold 4,694,025 $ 53,668,794 4,231,648 $ 46,316,359 4,925,361 $ 134,864,285 5,202,028 $117,665,463 Dividends and distributions reinvested 518,084 5,957,407 333,812 3,653,072 151,099 3,652,073 61,185 1,391,955 Redeemed (1,375,924) (15,753,286) (1,739,301) (18,999,383) (3,951,312) (106,719,894) (4,187,015) (94,424,981) Net increase 3,836,185 $ 43,872,915 2,826,159 $ 30,970,048 1,125,148 $ 31,796,464 1,076,198 $ 24,632,437
Notes to Financial Statements (Continued) Oppenheimer Variable Account Funds
Oppenheimer Growth Fund Oppenheimer Multiple Strategies Fund Year Ended Year Ended Year Ended Year Ended December 31, 1993 December 31, 1992 December 31, 1993 December 31, 1992 Shares Amount Shares Amount Shares Amount Shares Amount Sold 3,164,464 $ 53,547,991 3,914,464 $ 59,289,671 6,332,739 $ 84,477,261 3,370,345 $ 41,125,816 Dividends and distributions reinvested 66,987 1,107,299 36,133 532,602 644,161 8,601,104 517,276 6,262,811 Redeemed (2,180,502) (36,823,721) (3,251,618) (49,040,663) (1,742,975) (23,415,881) (1,516,315) (18,408,597) Net increase 1,050,949 $ 17,831,569 698,979 $ 10,781,610 5,233,925 $ 69,662,484 2,371,306 $ 28,980,030
Oppenheimer Strategic Oppenheimer Global Securities Fund Bond Fund Year Ended Year Ended Year Ended December 31, 1993 December 31, 1992 December 31, 1993(1) Shares Amount Shares Amount Shares Amount Sold 4,921,273 $68,947,505 904,052 $ 9,354,667 2,316,566 $11,749,598 Dividends and distributions reinvested - - 6,630 70,278 30,366 155,087 Redeemed (419,042) (5,789,067) (203,135) (2,069,180) (416,974) (2,133,050) Net increase 4,502,231 $63,158,438 707,547 $ 7,355,765 1,929,958 $ 9,771,635
1. For the period from May 3, 1993 (commencement of operations) to December 31, 1993. Notes to Financial Statements (Continued) Oppenheimer Variable Account Funds 3 Unrealized Gains and Losses on Investments and Options Written At December 31, 1993, net unrealized appreciation on investments and options written consisted of the following:
Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer Capital Oppenheimer Multiple Global Strategic High Income Bond Appreciation Growth Strategies Securities Bond Fund Fund Fund Fund Fund Fund Fund Gross appreciation $ 5,972,717 $ 4,941,642 $ 28,473,570 $11,310,180 $ 35,083,777 $17,370,800 $ 137,575 Gross depreciation (949,041) (526,065) (2,524,618) (2,174,060) (4,711,327) (1,198,182) (61,657) Net unrealized appreciation $ 5,023,676 $ 4,415,577 $ 25,948,952 $ 9,136,120 $ 30,372,450 $16,172,618 $ 75,918
Purchases and sales of investment securities (excluding short-term securities) for the year ended December 31, 1993 were as follows:
Purchases $122,623,355 $61,383,497 $135,905,785 $20,752,925 $109,074,871 $74,160,213 $14,669,367 Sales $ 83,369,171 $28,260,510 $110,913,591 $ 5,059,824 $ 60,759,536 $20,095,636 $ 5,485,104
4 Call Option Activity Call option activity for the year ended December 31, 1993 was as follows:
Oppenheimer Multiple Strategies Fund Oppenheimer Strategic Bond Fund Number of Amount of Number of Amount of Options Premiums Options Premiums Options outstanding at December 31, 1992 1,314 $ 250,967 - $ - Options written 5,764 1,484,776 500 7,110 Options cancelled in closing purchase transactions (1,564) (438,445) - - Options expired prior to exercise (1,431) (295,659) (500) (7,110) Options exercised (1,698) (346,791) - - Options outstanding at December 31, 1993 2,385 $ 654,848 - $ -
The cost of cancelling options in closing purchase transactions was $514,481, resulting in a net short-term capital loss of $76,036 for OMSF Premiums received on expired options resulted in short-term capital gains of $295,659 and $7,110 for OMSF and OSBF, respectively. Notes to Financial Statements (Continued) Oppenheimer Variable Account Funds 5 Forward Foreign Currency Exchange Contracts At December 31, 1993, outstanding forward exchange currency contracts to purchase and sell foreign currencies were as follows:
Oppenheimer High Income Fund Contract Valuation Contracts to Purchase Expiration Date Amount as of December 31, 1993 Unrealized Appreciation Canadian Dollar 1/10/94 $ 179,198 $ 181,246 $ 2,048 Contracts to Sell Spanish Peseta 1/05/94 $1,092,780 $1,090,596 2,184 Canadian Dollar 1/10/94 2,198,670 2,198,059 611 Deutsche Mark 1/13/94 585,138 568,906 16,232 $3,876,588 $3,857,561 $21,075
Oppenheimer Bond Fund Contract Valuation Contracts to Purchase Expiration Date Amount as of December 31, 1993 Unrealized Appreciation Canadian Dollar 1/10/94 $834,716 $844,254 $9,538 Contracts to Sell Canadian Dollar 1/10/94 $844,489 $844,254 235 $9,773
Oppenheimer Global Securities Fund Contract Valuation Unrealized Appreciation Contracts to Sell Expiration Date Amount as of December 31, 1993 (Depreciation) Austrian Schilling 1/20/94 $ 2,009,452 $ 1,981,062 $ 28,390 British Pound 1/20/94 1,992,023 1,997,666 (5,643) Deutsche Mark 1/20/94 2,712,762 2,672,717 40,045 Finnish Markka 1/20/94 989,034 1,003,039 (14,005) French Franc 1/20/94 3,166,097 3,181,513 (15,416) Italian Lira 1/20/94 1,010,246 989,836 20,410 Netherlands Guilder 1/20/94 1,403,058 1,387,215 15,843 Norwegian Krone 1/20/94 1,409,615 1,388,872 20,743 Spanish Peseta 1/20/94 1,020,784 986,678 34,106 Swedish Krona 1/20/94 3,164,686 3,148,612 16,074 Swiss Franc 1/20/94 1,265,522 1,284,515 (18,993) $20,143,279 $20,021,725 $121,554
Oppenheimer Strategic Bond Fund Contract Valuation Contracts to Sell Expiration Date Amount as of December 31, 1993 Unrealized Appreciation Canadian Dollar 1/10/94 $199,879 $199,778 $ 101 Deutsche Mark 1/13/94 175,541 170,671 4,870 Italian Lira 1/13/94 156,527 152,791 3,736 Spanish Peseta 1/13/94 199,636 194,540 5,096 $731,583 $717,780 $13,803
Notes to Financial Statements (Continued) Oppenheimer Variable Account Funds 6. Management Fees and Other Transactions with Affiliates Management fees paid to the Manager were in accordance with the investment advisory agreements with the Trust. Except as stated below, the annual fees are .50% on the first $250 million of aggregate Trust net assets, .45% on the next $50 million, .40% on the next $100 million, .35% on the next $400 million and .30% on net assets in excess of $800 million. OMF fees are reduced by .05% on the first $250 million of Fund net assets, as well as on Fund net assets in excess of $4 billion. OHIF pays an additional management fee of .15% of its net assets annually. OGSF fees are .75% on the first $200 million of aggregate Trust net assets with a reduction of .03% on each $200 million thereafter to $800 million, and .60% on net assets in excess of $800 million. OSBF fees are .65% of net assets annually. Fees are allocated ratably to each Fund based on the relative value of Fund net assets to total Trust net assets as of the close of business each day. The Manager has agreed to reimburse OMF, OHIF, OBF, OCAP, OGF, OMSF and OSBF if aggregate Fund expenses (with specified exceptions) exceed 2% of the first $10 million of average annual net assets, 1.50% of the next $20 million and 1% of average annual net assets in excess of $30 million. The Manager and Monarch Life Insurance Company, Bankers Security Life Insurance Society (Bankers) and Confederation Life Insurance and Annuity Company have also voluntarily undertaken to limit the expenses of OMF, OHIF, OBF, OCAP, OGF and OMSF to .75% of average annual net assets, after any other reimbursement by the Manager. The reimbursement is based on the proportionate number of shares in the accounts of the respective insurance companies. The undertaking by Bankers extends to OMSF only. Investment Adviser Oppenheimer Management Corporation Two World Trade Center New York, New York 10048-0203 Transfer Agent Oppenheimer Shareholder Services P.O. Box 5270 Denver, Colorado 80217 Custodian The Bank of New York One Wall Street New York, New York 10015 Independent Auditors Deloitte & Touche 1560 Broadway Denver, Colorado 80202 Legal Counsel Myer, Swanson & Adams, P.C. 1600 Broadway Denver, Colorado 80202 -----END PRIVACY-ENHANCED MESSAGE-----