-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SHe/3jaELZvUSJWO3bRzsy1RAE68tpd7YvT7pfoeeM9ZfmtR6W3SbhXYRPRfoZwU kwGDka5G0lvJIcBkRiuM5w== 0000752737-00-000004.txt : 20000427 0000752737-00-000004.hdr.sgml : 20000427 ACCESSION NUMBER: 0000752737-00-000004 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20000426 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPPENHEIMER VARIABLE ACCOUNT FUNDS CENTRAL INDEX KEY: 0000752737 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 840974272 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: SEC FILE NUMBER: 002-93177 FILM NUMBER: 609606 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 Oppenheimer Money Fund/VA A series of Oppenheimer Variable Account Funds Prospectus dated May 1, 2000 Oppenheimer Money Fund/VA is a money market mutual fund. Its goal is to seek the maximum current income from investments in money market securities that is consistent with low risk and maintenance of liquidity. Shares of the Fund are sold only as the underlying investment for variable life insurance policies, variable annuity contracts and other insurance company separate accounts. A prospectus for the insurance product you have selected accompanies this Prospectus and explains how to select shares of the Fund as an investment under that insurance product. This Prospectus contains important information about the Fund's objective, its investment As with all mutual funds, the policies, strategies and risks. The Securities and Exchange Please read this Prospectus (and has not your insurance product approved or disapproved the Fund's prospectus) carefully before you securities nor has it determined invest and keep them for future that this Prospecuts is reference about your account. accurate or complete. It is a criminal offense to represent otherwise. - ------------------------------------ (OppenheimerFunds logo) CONTENTS ABOUT THE FUND The Fund's Objective and Investment Strategies Main Risks of Investing in the Fund The Fund's Past Performance About the Fund's Investments How the Fund is Managed INVESTING IN THE FUND How to Buy and Sell Shares Dividends and Taxes Financial Highlights ABOUT THE FUND The Fund's Objective and Investment Strategies WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks maximum current income from investments in "money market" securities consistent with low capital risk and the maintenance of liquidity. WHAT DOES THE FUND INVEST IN? The Fund invests in a variety of high-quality money market securities to seek current income. Money market securities are short-term debt instruments issued by the U.S. Government, domestic and foreign corporations or financial institutions and other entities. They include, for example, bank obligations, repurchase agreements, commercial paper, other corporate debt obligations and government debt obligations. "High quality" instruments must be rated in one of the two highest credit-quality categories for short-term securities by nationally recognized rating services. If unrated, a security must be determined by the Fund's investment manager to be of comparable quality to rated securities. WHO IS THE FUND DESIGNED FOR? The Fund's shares are available only as an underlying investment option for certain variable annuities, variable life insurance policies and insurance company separate accounts. The Fund is an option under those insurance products for investors who want to earn income at current money market rates while preserving the value of their investment, because the Fund is managed to keep its share price stable at $1.00. Income on short-term securities tends to be lower than income on longer-term debt securities, so that the Fund's yield will likely be lower than the yield on longer-term fixed income funds. The Fund does not invest for the purpose of seeking capital appreciation or gains. However, the Fund is not a complete investment program. Main Risks of Investing in the Fund All investments have risks to some degree. Funds that invest in debt obligations for income may be subject to credit risks and interest rate risks. However, the Fund's investments must meet strict standards set by its Board of Trustees following special rules for money market funds under federal law. Those rules require the Fund to maintain -- o high credit quality in its portfolio, o a short average portfolio maturity to reduce the effects of changes in interest rates on the value of the Fund's securities and o diversification of the Fund's investments among issuers to reduce the effects of a default by any one issuer on the value of the Fund's shares. Even so, there are risks that any of the Fund's holdings could have its credit rating downgraded, or the issuer could default, or that interest rates could rise sharply, causing the value of the Fund's investments (and its share price) to fall. If insurance products holding Fund shares redeem them at a rate greater than anticipated by the Manager, the Fund might have to sell portfolio securities prior to their maturity at a loss. As a result, there is a risk that the Fund's shares could fall below $1.00 per share. Income on short-term securities tends to be lower than income on longer-term debt securities so the Fund's yield will likely be lower than the yield on longer-term fixed income funds. Also, there is the risk that the value of your investment could be eroded over time by the effects of inflation, and that poor security selection by OppenheimerFunds, Inc. (the "Manager") could cause the Fund to underperform other funds that have a similar objective. The Fund's investment manager, OppenheimerFunds, Inc., tries to reduce risks by diversifying investments and by carefully researching securities before they are purchased. The rate of the Fund's income will vary from day to day, generally reflecting changes in overall short-term interest rates. There is no assurance that the Fund will achieve its investment objective. An Investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. The Fund's Past Performance The bar chart and table below show how the Fund's returns may vary over time, by showing changes in the Fund's performance1 from year to year for the last ten calendar years and its average annual total returns for the 1, 5 and 10 year periods. Variability of returns is one measure of the risks of investing in a money market fund. The Fund's past investment performance is not necessarily an indication of how the Fund will perform in the future. Annual Total Returns (as of 12/31 each year) [See appendix to prospectus for annual total return data for bar chart.] For the period from 1/1/00 through 3/31/00, the Fund's cumulative return (not annualized) was 1.43%. Charges imposed by the separate accounts that invest in the Fund are not included in the calculations of return in this bar chart, and if those charges were included, the returns would be less than those shown. During the period shown in the bar chart, the highest return (not annualized) for a calendar quarter was 2.13% (2nd Q `90) and the lowest return for a calendar quarter was 0.77% (2ndQ `93 ). - ---------------------------------------------------------------------- Average Annual Total 1 Year 5 Years 10 Years Returns for the periods ended December 31, 1999 - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Oppenheimer Money 4.96% 5.26% 5.16% Fund/VA - ---------------------------------------------------------------------- The returns in the table measure the performance of a hypothetical account without deducting charges imposed by the separate accounts that invest in the Fund and assume that all distributions have been reinvested in additional shares. The total returns are not the Fund's current yield. The Fund's current yield more closely reflects the Fund's current earnings. To obtain the Fund's current 7-day yield information, please call the Transfer Agent toll-free at 1.800.525.7048. The Fund's total returns should not be expected to be the same as the returns of other Oppenheimer funds, even if both funds have the same portfolio managers and/or similar names - ---------------- TheFund has two classes of shares. This Prospectus offers only the class of shares that has no name designation, and the performance shown is for that class. The other class of shares, Service Shares, are not offered in this Prospectus. About the Fund's Investments THE FUND'S PRINCIPAL INVESTMENT POLICIES. The Fund invests in short-term money market instruments that must meet quality, maturity and diversification standards established by its Board of Trustees as well as rules that apply to money market funds under the Investment Company Act. The allocation of the Fund's portfolio among the different types of permitted investments will vary over time based on the Manager's evaluation of investment opportunities. The Fund's portfolio might not always include all of the different types of investments described below. The Statement of Additional Information contains more detailed information about the Fund's investment policies and risks. The Fund's Manager tries to reduce risks by diversifying investments and by carefully researching investments before the Fund buys them. The rate of the Fund's income will vary from day to day, generally reflecting changes in overall short-term interest rates WHAT TYPES OF MONEY MARKET SECURITIES DOES THE FUND INVEST IN? The following is a brief description of the types of money market securities the Fund can invest in. Money market securities are high-quality, short-term debt instruments that may be issued by the U.S. Government, corporations, banks or other entities. They may have fixed, variable or floating interest rates. All of the Fund's investments must meet the special quality requirements set under the Investment Company Act and described briefly below. U.S. Government Securities. These are obligations issued or guaranteed by the U.S. Government or any of its agencies or federally-chartered corporations referred to as instrumentalities. Some are direct obligations of the U.S. Treasury, such as Treasury bills, notes and bonds, and are supported by the full faith and credit of the United States. Some U.S. Government securities are supported by the right of the issuer to borrow from the U.S. Treasury. Others may be supported only by the credit of the instrumentality. The Fund's investing in U.S. government securities does not mean that its share price or returns are guaranteed or backed by the U.S. government. Bank Obligations. The Fund can invest in time deposits, certificates of deposit and bankers' acceptances. These investments must be: o obligations of a domestic bank having total assets of at least $1 billion, or o U.S. dollar-denominated obligations of a foreign bank with total assets of at least U.S. $1 billion. Commercial Paper. Commercial paper is a short-term, unsecured promissory note of a domestic or foreign company. Corporate Debt Obligations. The Fund can invest in other short-term corporate debt obligations, besides commercial paper. Other Money Market Obligations. The Fund can invest in money market obligations other than those listed above if they are subject to repurchase agreements or guaranteed as to their principal and interest by a domestic bank or by a corporation whose commercial paper may be purchased by the Fund. The bank must meet credit criteria set by the Fund's Board of Trustees. The Fund can buy other money market instruments that the Manager approves under Board approved policies. They must be U.S. dollar-denominated short-term investments that the Manager has determined to have minimal credit risks. They also must be of "high quality" as determined by a national rating organization. To a limited extent the Fund may buy an unrated security that the Manager determines to have met those qualifications. The Fund can also purchase floating or variable rate demand notes, asset-backed securities, and bank loan participation agreements. The Fund's investments in them may be subject to restrictions adopted by the Board from time to time. WHAT CREDIT QUALITY AND MATURITY STANDARDS APPLY TO THE FUND'S INVESTMENTS? Money market instruments are subject to credit risk. This is the risk that the issuer might not make timely payments of interest on the security or repay principal when it is due. The Fund may buy only those securities that meet standards set in the Investment Company Act for money market funds. The Fund's Board has adopted procedures to evaluate securities that are being considered for the Fund's portfolio and the Manager has the responsibility to implement those procedures when selecting investments for the Fund. In general, the Fund buys only high-quality investments that the Manager believes present minimal credit risk at the time of purchase. "High-quality" investments are: o rated in one of the two highest short-term rating categories of two national rating organizations, or o rated by one rating organization in one of its two highest rating categories (if only one rating organization has rated the investment), or o unrated investments that the Manager determines are comparable in quality to the two highest rating categories. In general, these procedures require that securities be rated in one of the two highest short-term rating categories of two national rating organizations. At least 95% of the Fund's assets must be invested in securities of issuers with the highest credit rating. In some cases, the Fund can buy securities rated by one rating organization or unrated securities that the Manager judges to be comparable in quality to the two highest rating categories. The procedures also limit the percentage of the Fund's assets that can be invested in the securities of any one issuer (other than the U.S. Government, its agencies and instrumentalities), to spread the Fund's investment risks. A security's maturity must not exceed 397 days. Finally, the Fund must maintain an average portfolio maturity of not more than 90 days, to reduce interest rate risks. SPECIAL PORTFOLIO DIVERSIFICATION REQUIREMENTS. To enable a variable annuity or variable life insurance contract based on an insurance company separate account to qualify for favorable tax treatment under the Internal Revenue Code, the underlying investments must follow special diversification requirements that limit the percentage of assets that can be invested in securities of particular issuers. The Fund's investment program is managed to meet those requirements, in addition to other diversification requirements under the Internal Revenue Code and the Investment Company Act that apply to publicly-sold mutual funds. Failure by the Fund to meet those special requirements could cause earnings on a contract owner's interest in an insurance company separate account to be taxable income. Those diversification requirements might also limit, to some degree, the Fund's investment decisions in a way that could reduce its performance. CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The Fund's Board of Trustees can change non-fundamental policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. Fundamental policies are those that cannot be changed without the approval of a majority of the Fund's outstanding voting shares. The Fund's investment objective is a fundamental policy. Investment restrictions that are fundamental policies are listed in the Statement of Additional Information. An investment policy is not fundamental unless this Prospectus or the Statement of Additional Information says that it is. OTHER INVESTMENT STRATEGIES. To seek its objective, the Fund can also use the investment techniques and strategies described below. The Manager might not always use all of them. These techniques involve certain risks, although some of them are designed to help reduce overall investment or market risks. The Statement of Additional Information contains more information about some of these practices. Floating Rate/Variable Rate Notes. The Fund can purchase notes that have floating or variable interest rates. Variable rates are adjustable at stated periodic intervals. Floating rates are adjusted automatically according to a specified market index for such investments, such as the prime rate of a bank. If the maturity of a note is more than 397 days, the Fund can buy it if it has a demand feature. That feature must permit the Fund to recover the principal amount of the note on not more than thirty days' notice at any time, or at specified times not exceeding 397 days from the date of purchase. Obligations of Foreign Banks and Foreign Branches of U.S. Banks. The Fund can invest in U.S. dollar-denominated securities of foreign banks having total assets at least equal to U.S. $1 billion. It can also buy U.S. dollar-denominated securities of foreign branches of U.S. banks. These securities have additional investment risks compared to obligations of domestic branches of U.S. banks. Risks that may affect the foreign bank's ability to pay its debt include: o political and economic developments in the country in which the bank or branch is located, o imposition of withholding taxes on interest income payable on the securities, o government seizure or nationalization of foreign deposits, o the establishment of exchange control regulations and o the adoption of other governmental restrictions that might limit the repayment of principal and/or payment of interest on those securities. Additionally, not all of the U.S. and state banking laws and regulations that apply to domestic banks and that are designed to protect depositors and investors apply to foreign branches of domestic banks. None of those U.S. and state regulations apply to foreign banks. Bank Loan Participation Agreements. The Fund may invest in bank loan participation agreements. They represent an undivided interest in a loan made by the issuing bank in the proportion the Fund's interest bears to the total principal amount of the loan. In evaluating the risk of these investments, the Fund looks to the creditworthiness of the borrower that is obligated to make principal and interest payments on the loan. Asset-Backed Securities. The Fund can invest in asset-backed securities. These are fractional interests in pools of consumer loans or other trade receivables, such as credit card or auto loan receivables, which are the obligations of a number of different parties. The income from the underlying pool is passed through to holders, such as the Fund. These securities may be supported by a credit enhancement, such as a letter of credit, a guarantee (by a bank or broker) or a preference right. However, the credit enhancement may apply only to a fraction of the security's value. If the issuer of the security has no security interest in the assets that back the pool, there is a risk that the Fund could lose money if the issuer defaults. Repurchase Agreements. The Fund can enter into repurchase agreements. In a repurchase transaction, the Fund buys a security and simultaneously sells it to the vendor for delivery at a future date. The Fund's repurchase agreements must be fully collateralized. However, if the vendor fails to pay the resale price on the delivery date, the Fund might incur costs in disposing of the collateral and might experience losses if there is any delay in its ability to do so. There is no limit on the amount of the Fund's net assets that may be subject to repurchase agreements of 7 days or less. It cannot invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Illiquid and Restricted Securities. Investments may be illiquid because there is no active trading market for them, making it difficult to value them or dispose of them promptly at an acceptable price. Restricted securities may have a contractual limit on resale or may require registration under federal securities laws before they can be sold publicly. The Fund will not invest more than 10% of its net assets in illiquid or restricted securities. That limit may not apply to certain restricted securities that are eligible for resale to qualified institutional purchasers. The Manager monitors holdings of illiquid securities on an ongoing basis to determine whether to sell any holdings to maintain adequate liquidity. Difficulty in selling a security may result in a loss to the Fund or additional costs. How the Fund Is Managed THE MANAGER. The Manager chooses the Fund's investments and handles its day-to-day business. The Manager carries out its duties, subject to the policies established by the Board of Trustees, under an Investment Advisory Agreement that states the Manager's responsibilities. The Agreement sets the fees paid by the Fund to the Manager and describes the expenses that the Fund is responsible to pay to conduct its business. The Manager has been an investment adviser since 1960. The Manager (including subsidiaries) currently manages investment companies, including other Oppenheimer funds, with assets of more than $120 billion as of January 31, 2000, and with more than 5 million shareholder accounts. The Manager is located at Two World Trade Center, 34th Floor, New York, New York 10048-0203. Portfolio Manager. The portfolio manager of the Fund is Carol E. Wolf. She is the person principally responsible for the day-to-day management of the Fund's portfolio. Ms. Wolf has had that responsibility since July 1998. She is also a Vice President of the Fund and of the Manager. Ms. Wolf also serves as an officer and portfolio manager for other Oppenheimer funds and has been an officer of the Manager since 1990. Advisory Fees. Under the Investment Advisory Agreement, the Fund pays the Manager an advisory fee at an annual rate that declines on additional assets as the Fund grows: 0.450% of the first $500 million of average annual net assets, 0.425% of the next $500 million, 0.400% of the next $500 million, and 0.375% of average annual net assets in excess of $1.5 billion. The Fund's management fee for its last fiscal year ended December 31, 1999, was 0.45% of the Fund's average annual net assets. Possible Conflicts of Interest. The Fund offers its shares to separate accounts of different insurance companies that are not affiliated with each other, as an investment for their variable annuity, variable life and other investment product contracts. While the Fund does not foresee any disadvantages to contract owners from these arrangements, it is possible that the interests of owners of different contracts participating in the Fund through different separate accounts might conflict. For example, a conflict could arise because of differences in tax treatment. The Fund's Board has procedures to monitor the portfolio for possible conflicts to determine what action should be taken. If a conflict occurs, the Board might require one or more participating insurance company separate accounts to withdraw their investments in the Fund. That could force the Fund to sell securities at disadvantageous prices, and orderly portfolio management could be disrupted. Also, the Board might refuse to sell shares of the Fund to a particular separate account, or could terminate the offering of the Fund's shares if required to do so by law or if it would be in the best interests of the shareholders of the Fund to do so. INVESTING IN THE FUND How to Buy, and Sell Shares HOW ARE SHARES PURCHASED? Shares of the Fund may be purchased only by separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. Individual investors cannot buy shares of the Fund directly. Please refer to the accompanying prospectus of the participating insurance company for information on how to select the Fund as an investment option for that variable life insurance policy, variable annuity or other investment product. The Fund reserves the right to refuse any purchase order when the Manager believes it would be in the Fund's best interests to do so. Information about your investment in the Fund through your variable annuity contract, variable life insurance policy or other plan can be obtained only from your participating insurance company or its servicing agent. The Fund's Transfer Agent does not hold or have access to those records. Instructions for buying or selling share of the Fund should be given to your insurance company or its servicing agent, not directly to the Fund or its Transfer Agent. AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their offering price, which is the net asset value per share. The net asset value will normally remain at $1.00 per share. However, there are no guarantees that the Fund will be able to maintain a net asset value of $1.00 per share. The Fund does not impose any sales charge on purchases of its shares. If there are any charges imposed under the variable annuity, variable life or other contract through which Fund shares are purchased, they are described in the accompanying prospectus of the participating insurance company. The net asset value per share is determined as of the close of The New York Stock Exchange on each day that the exchange is open for trading (referred to in this Prospectus as a "regular business day"). The Exchange normally closes at 4:00 P.M., New York time, but may close earlier on some days. All references to time in this Prospectus mean "New York time." The net asset value per share is determined by dividing the value of the Fund's net assets attributable to a class of shares by the number of shares of that class that are outstanding. Under a policy adopted by the Fund's Board of Trustees, the Fund uses the amortized cost method to value its securities to determine the Fund's net asset value. The offering price that applies to an order from a participating insurance company is based on the next calculation of the net asset value per share that is made after the insurance company (as the Fund's designated agent to receive purchase orders) receives a purchase order from its contract owners to purchase Fund shares on a regular business day, provided that the Fund receives the order from the insurance company by 9:30 A.M. on the next regular business day at the offices of its Transfer Agent in Denver, Colorado. CLASSES OF SHARES. The Fund may offer two different classes of shares. The class of shares offered by this Prospectus has no "name" designation. The other class is designated as Service shares. The different classes of shares represent investments in the same portfolio of securities but are expected to be subject to different expenses. This prospectus may not be used to offer or sell Service shares. A description of the Service Plans that affect only Service shares of the Fund is contained in the Fund's prospectus that offers Service shares. That prospectus may be obtained without charge by contacting any participating insurance company that offers Service shares of the Fund as an investment for its separate accounts. You can also obtain a copy from OppenheimerFunds Distributor, Inc., by calling toll-free at 1.888.470.0861. HOW ARE SHARES REDEEMED? As with purchases, only the participating insurance companies that hold Fund shares in their separate accounts for the benefit of variable annuity contracts, variable life insurance policies or other investment products can place orders to redeem shares. Contract holders and policy holders should not directly contact the Fund or its transfer agent to request a redemption of Fund shares. Contract owners should refer to the withdrawal or surrender instructions in the accompanying prospectus of the participating insurance company. The share price that applies to a redemption order is the next net asset value per share that is determined after the participating insurance company (as the Fund's designated agent) receives a redemption request on a regular business day from its contract or policy holder, provided that the Fund receives the order from the insurance company, generally by 9:30 a.m. the next regular business day at the office of its Transfer Agent in Denver, Colorado. The Fund normally sends payment by Federal Funds wire to the insurance company's account the day after the Fund receives the order (and no later than 7 days after the Fund's receipt of the order). Under unusual circumstances determined by the Securities and Exchange Commission, payment may be delayed or suspended. Dividends and Taxes DIVIDENDS. The Fund intends to declare dividends from net investment income each regular business day and to pay those dividends monthly on a date selected by the Board of Trustees. To maintain a net asset value of $1.00 per share, the Fund might withhold dividends or make distributions from capital or capital gains. Daily dividends will not be declared or paid on newly purchased shares until Federal Funds are available to the Fund from the purchase payment for such shares. All dividends (and any capital gains distributions) will be reinvested automatically in additional Fund shares at net asset value for the participating insurance company's separate account (unless the participating insurance company elects to have dividends or distributions paid in cash). CAPITAL GAINS. The Fund normally holds its securities to maturity and therefore will not usually pay capital gains distributions. Although the Fund does not seek capital gains, it could realize capital gains on the sale of portfolio securities. If it does, it may make distributions out of any net short-term or long-term capital gains in March of each year. The Fund may make supplemental distributions of dividends and capital gains following the end of its fiscal year. TAXES. For a discussion of the tax status of a variable annuity contract or variable life insurance policy or other insurance investment product, please refer to the accompanying prospectus of your participating insurance company. Because shares of the Fund may be purchased only through variable annuity contracts, variable life insurance policies or other insurance company separate accounts, dividends paid by the Fund from net investment income and distributions (if any) of its net realized short-term or long-term capital gains will be taxable, if at all, to the participating insurance company. This information is only a summary of certain federal income tax information about an investment in Fund shares. You should consult with your tax advisor or your participating insurance company about the effect of an investment in the Fund under your contract or policy. Financial Highlights The Financial Highlights Table is presented to help you understand the Fund's financial performance for the past 5 fiscal years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by Deloitte & Touche LLP, the Fund's independent auditors, whose report, along with the Fund's financial statements, is included in the Statement of Additional Information, which is available on request. - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995 ==================================================================================================================== Per Share Operating Data Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 - -------------------------------------------------------------------------------------------------------------------- Income from investment operations--net investment income and net realized gain .05 .05 .05 .05 .06 Dividends and/or distributions to shareholders (.05) (.05) (.05) (.05) (.06) - -------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 ===== ===== ===== ===== ===== ==================================================================================================================== Total Return(1) 4.96% 5.25% 5.31% 5.13% 5.62% ==================================================================================================================== Ratios/Supplemental Data Net assets, end of period (in thousands) $201,066 $151,799 $126,782 $129,719 $65,386 - -------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $166,727 $137,633 $133,707 $ 99,263 $75,136 - -------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:(2) Net investment income 4.87% 5.12% 5.19% 5.01% 5.52% Expenses 0.48% 0.50%(3) 0.48%(3) 0.49%(3) 0.51%(3)
1. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns reflect changes in net investment income only. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 2. Annualized for periods less than one full year. 3. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. INFORMATION AND SERVICES For More Information on Oppenheimer Money Fund/VA: The following additional information about the Fund is available without charge upon request: STATEMENT OF ADDITIONAL INFORMATION This document includes additional information about the Fund's investment policies, risks, and operations. It is incorporated by reference into this Prospectus (which means it is legally part of this Prospectus). ANNUAL AND SEMI-ANNUAL REPORTS Additional information about the Fund's investments and performance is available in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report includes a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. How to Get More Information: - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - -------------------------------------------------------------------- By Telephone: Call OppenheimerFunds Services toll-free: 1-888-470-0861 - -------------------------------------------------------------------- - -------------------------------------------------------------------- - ---------------------------- Write to: By Mail: ------------------------------ OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217-5270 - -------------------------------------------------------------------- You can also obtain copies of the Statement of Additional Information and other Fund documents and reports by visiting the SEC's Public Reference Room in Washington, D.C. (Phone 1.202.942.8090) or the EDGAR database on the SEC's Internet web site at http://www.sec.gov. Copies may be obtained upon payment of a duplicating fee by electronic request at the SEC's e-mail address: publicinfo@secgov, or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. No one has been authorized to provide any information about the Fund or to make any representations about the Fund other than what is contained in this Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a solicitation of an offer to buy shares of the Fund, to any person in any state or other jurisdiction where it is unlawful to make such an offer. SEC File No. 811-4108 PR0660.001.0500 Printed on recycled paper. (OppenheimerFunds logo) Appendix to Prospectus of Oppenheimer Money Fund/VA (a series of Oppenheimer Variable Account Funds) Graphic material included in the Prospectus of Oppenheimer Money Fund/VA (the "Fund") under the heading "Annual Total Return (as of 12/31 each year)": A bar chart will be included in the Prospectus of the Fund depicting the annual total returns of a hypothetical investment in shares of the Fund for each of the ten most recent calendar years, without deducting separate account expenses. Set forth below are the relevant data that will appear on the bar chart: Calendar Year Ended Annual Total Returns 12/31/90 7.84% 12/31/91 6.18% 12/31/92 4.03% 12/31/93 3.16% 12/31/94 4.21% 12/31/95 5.62% 12/31/96 5.13% 12/31/97 5.32% 12/31/98 5.25% 12/31/99 4.96% Oppenheimer Bond Fund/VA A series of Oppenheimer Variable Account Funds Prospectus dated May 1, 2000 Oppenheimer Bond Fund/VA is a mutual fund that seeks a high level of current income as its primary goal. As a secondary goal, the Fund seeks capital appreciation when consistent with its goal of high current income. The Fund invests mainly in investment grade debt securities. Shares of the Fund are sold only as the underlying investment for variable life insurance policies, variable annuity contracts and other insurance company separate accounts. A prospectus for the insurance product you have selected accompanies this As with all mutual funds, the Prospectus and explains how to Securities select shares of the Fund as an and Exchange Commission has not investment under that insurance approved or disapproved the Fund's product. securities nor has it determined This Prospectus contains that important information this Prospectus is accurate or about the Fund's objective, its complete. investment policies, strategies It is a criminal offense to and risks. Please read this represent otherwise. Prospectus (and your insurance product prospectus) carefully before you invest and keep them for future reference about your account. - ------------------------------------ (OppenheimerFunds logo) Contents About the Fund - ------------------------------------------------------------------------------- The Fund's Objectives and Investment Strategies Main Risks of Investing in the Fund The Fund's Past Performance About the Fund's Investments How the Fund is Managed Investing in the Fund - ------------------------------------------------------------------------------- How to Buy and Sell Shares Dividends, Capital Gains and Taxes Financial Highlights About the Fund The Fund's Objectives and Investment Strategies - ------------------------------------------------------------------------------- What Are the Fund's Investment Objectives? The Fund's main objective is to seek a high level of current income. As a secondary objective, the Fund seeks capital appreciation when consistent with its primary objective. - ------------------------------------------------------------------------------- What Does the Fund Invest In? Normally, the Fund invests at least 65% of its total assets in investment-grade debt securities, U.S. Government securities and money market instruments. The investment-grade debt securities the Fund invests in can include the following types of obligations, which in general are referred to as "bonds": o short-, medium- and long-term foreign and U.S. government bonds and notes, o domestic and foreign corporate debt obligations, o collateralized mortgage obligations (CMOs), o other mortgage-related securities and asset-backed securities, o participation interests in loans, o "structured" notes, and o other debt obligations. The Fund's investments in U.S. government securities include securities issued or guaranteed by the U.S. government or its agencies or federally-chartered corporate entities referred to as "instrumentalities." These include mortgage-related U.S. government securities and CMOs. There is no set percentage allocation of the Fund's assets among the types of securities the Fund buys to meet the 65% investment requirement, but currently the Fund focuses mainly on U.S. government securities, CMOs, and investment-grade debt securities to do so because they currently offer higher yields than money market instruments. However, if market conditions change, the Fund's portfolio managers may change the relative allocation of the Fund's assets. The Fund has no limitations on the range of maturities of the debt securities in which it can invest and therefore may hold bonds with short-, medium- or long-term maturities. The Fund's investments in debt securities can include "zero coupon" securities and securities that have been "stripped" of their interest coupons. The Fund can invest up to 35% of its total assets in high yield debt securities and other debt securities that are below investment grade (commonly referred to as "junk bonds") and other investments such as preferred stock. The Fund can also use hedging instruments and certain derivative investments, primarily CMOs and "structured" notes, to try to enhance income or to try to manage investment risks. These investments are more fully explained in "About the Fund's Investments," below. |X| How Do the Portfolio Managers Decide What Securities to Buy or Sell? In selecting securities for the Fund, the Fund's portfolio managers analyze the overall investment opportunities and risks in different sectors of the debt security markets by focusing on business cycle analysis and relative values between the corporate and government sectors. The portfolio managers' overall strategy is to build a broadly diversified portfolio of debt securities. The portfolio managers currently focus on the factors below (some of which may vary in particular cases and may change over time), looking for: |_| High current income from different types of corporate and government debt securities, |_| Investment-grade securities, primarily to help reduce credit risk, |_| Broad portfolio diversification to help reduce the volatility of the Fund's share prices, |_| Relative values among the debt securities market sectors. Who Is the Fund Designed For? The Fund's shares are available only as an investment option under certain variable annuity contracts, variable life insurance policies and investment plans offered through insurance company separate accounts of participating insurance companies, for investors seeking high current income from a fund that invests mainly in investment-grade debt securities, but which can also hold below-investment-grade securities to seek higher income. Those investors should be willing to assume the credit risks of a fund that typically invests a significant amount of its assets in debt securities and the changes in share prices that can occur when interest rates rise. Since the Fund's income level will fluctuate, it is not designed for investors needing an assured level of current income. The Fund is not a complete investment program. Main Risks of Investing in the Fund All investments carry risks to some degree. The Fund's investments are subject to changes in their value from a number of factors, described below. There is also the risk that the value of your investment could be eroded over time by the effects of inflation and that poor security selection by the Fund's investment manager, OppenheimerFunds, Inc., will cause the Fund to underperform other funds having similar objectives. These risks collectively form the risk profile of the Fund, and can affect the value of the Fund's investments, its investment performance and its price per share. These risks mean that you can lose money by investing in the Fund. When you redeem your shares, they may be worth more or less than what you paid for them. However, changes in the overall market prices of securities and the income they pay can occur at any time. The share price and yield of the Fund will change daily based on changes in market prices of securities and market conditions, and in response to other economic events. There is no assurance that the Fund will achieve its investment objective. |X| Credit Risk. Debt securities are subject to credit risk. Credit risk relates to the ability of the issuer of a security to make interest and principal payments on the security as they become due. If the issuer fails to pay interest, the Fund's income might be reduced, and if the issuer fails to repay principal, the value of that security and of the Fund's shares might be reduced. While the Fund's investments in U.S. government securities are subject to little credit risk, debt securities issued by domestic and foreign corporations and by foreign governments are subject to risks of default. Securities that are (or that have fallen) below investment grade are exposed to a greater risk that the issuers of those securities might not meet their debt obligations. Those risks can reduce the Fund's share prices and the income it earns. |_| Special Risks of Lower-Grade Securities. Because the Fund can invest up to 35% of its total assets in securities below investment grade to seek higher income, the Fund's credit risks are greater than those of funds that buy only investment grade securities. Lower-grade debt securities may be subject to greater market fluctuations and greater risks of loss of income and principal than investment-grade debt securities. Securities that are (or that have fallen) below investment grade are exposed to a greater risk than the issuers of those securities might not meet their debt obligations. Those risks can reduce the Fund's share prices and the income it earns. |X| Interest Rate Risks. The values of debt securities, including U.S. government securities prior to maturity, are subject to change when prevailing interest rates change. When interest rates fall, the values of already-issued debt securities generally rise. When interest rates rise, the values of already-issued debt securities generally fall, and they may sell at a discount from their face amount. The magnitude of these fluctuations will often be greater for longer-term debt securities than shorter-term debt securities. However, interest rate changes may have different effects on the values of mortgage-related securities because of prepayment risks, discussed below. The Fund's share prices can go up or down when interest rates change because of the effect of the changes on the value of the Fund's investments in debt securities. |X| Prepayment Risk. Prepayment risk occurs when the mortgages underlying a mortgage-related security are prepaid at a rate faster than anticipated (usually when interest rates fall) and the issuer of a security can prepay the principal prior to the security's maturity. Mortgage-related securities that are subject to prepayment risk, including the CMOs and other mortgage-related securities that the Fund buys, generally offer less potential for gains when prevailing interest rates decline, and have greater potential for loss when interest rates rise. The impact of prepayments on the price of a security may be difficult to predict and may increase the volatility of the price. Additionally, the Fund may buy mortgage-related securities at a premium. Accelerated prepayments on those securities could cause the Fund to lose the portion of its principal investment represented by the premium the Fund paid. |X| Risks of Foreign Investing. The Fund can invest its assets without limit in foreign debt securities and can buy securities of governments and companies in both developed markets and emerging markets. While foreign securities offer special investment opportunities, there are also special risks that can reduce the Fund's share prices and returns. The change in value of a foreign currency against the U.S. dollar will result in a change in the U.S. dollar value of securities denominated in that foreign currency. Currency rate changes can also affect the distributions the Fund makes from the income it receives from foreign securities as foreign currency values change against the U.S. dollar. Foreign investing can result in higher transaction and operating costs for the Fund. Foreign issuers are not subject to the same accounting and disclosure requirements that U.S. companies are subject to. The value of foreign investments may be affected by exchange control regulations, expropriation or nationalization of a company's assets, foreign taxes, delays in settlement of transactions, changes in governmental economic or monetary policy in the U.S. or abroad, or other political and economic factors. |X| There are Special Risks in Using Derivative Investments. The Fund can use derivatives to seek increased income or to try to hedge investment risks. In general terms, a derivatives investment is an investment contract whose value depends on (or is derived from) the value of an underlying asset, interest rate or index. Options, futures, interest rate swaps, structured notes and CMOs are examples of derivatives the Fund can use. If the issuer of the derivative does not pay the amount due, the Fund can lose money on the investment. Also, the underlying security or investment on which the derivative is based, and the derivative itself, might not perform the way the Manager expected it to perform. If that happens, the Fund's share price could decline or the Fund could get less income than expected. The Fund has limits on the amount of particular types of derivatives it can hold. However, using derivatives can cause the Fund to lose money on its investment and/or increase the volatility of its share prices. How Risky is the Fund Overall? Debt securities are subject to credit and interest rate risks that can affect their values and the share prices of the Fund. Prepayment risks of mortgage-backed securities can cause the Fund to reinvest the proceeds of its investments in lower-yielding securities. The Fund generally has more risks than bond funds that focus on U.S. government securities but the Fund's emphasis on investment-grade securities may make its share prices less volatile than high yield bond funds or funds that focus on foreign bonds. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund's Past Performance The bar chart and table below show one measure of the risks of investing in the Fund, by showing changes in the Fund's performance from year to year for the last ten calendar years and by showing how the average annual total returns of the Fund's shares compare to those of a broad-based market index. The Fund's past investment performance is not necessarily an indication of how the Fund will perform in the future. Annual Total Returns (as of 12/31 each year) [See appendix to prospectus for data in bar chart showing annual total returns] For the period from 1/1/00 through 3/31/00, the Fund's cumulative return (not annualized) was 1.00%. Charges imposed by the separate accounts that invest in the Fund are not included in the calculations of return in this bar chart, and if those charges were included, the returns would be less than those shown. During the period shown in the bar chart, the highest return (not annualized) for a calendar quarter was 5.60% (2nd Q '95) and the lowest return (not annualized) for a calendar quarter was -1.90% (1st Q '94). - ---------------------------------------------------------------------- Average Annual Total Returns for 1 Year 5 Years 10 Years the periods ended December 31, 1999 - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Oppenheimer Bond -1.52% 7.10% 7.76% Fund/VA (inception 4/3/85) - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Lehman Brothers -1.96% 8.18% 8.21% Corporate Bond Index - ---------------------------------------------------------------------- The Fund's returns in the table measure the performance of a hypothetical account without deducting charges imposed by the separate accounts that invest in the Fund and assume that all dividends and capital gains distributions have been reinvested in additional shares. The Fund's performance is compared to the Lehman Brothers Corporate Bond Index, an unmanaged index of non-convertible investment grade corporate debt of U.S. issuers that is a measure of the general domestic bond market. The index performance reflects the reinvestment of income but does not consider the effects of transaction costs. Also, the Fund may have investments that vary from the index. The Fund has two classes of shares. This Prospectus offers only the class of shares that has no class name designation, and the performance shown is for that class. The other class of shares, Service shares, is not offered in this Prospectus. The Fund's total returns should not be expected to be the same as the returns of other Oppenheimer funds, even if both funds have the same portfolio managers and/or similar names. About the Fund's Investments The Fund's Principal Investment Policies. The allocation of the Fund's portfolio among different types of investments will vary over time based upon the Manager's evaluation of economic and market trends. The Fund's portfolio might not always include all of the different types of investments described below. The Statement of Additional Information contains more detailed information about the Fund's investment policies and risks. The Fund's investment Manager, OppenheimerFunds, Inc., tries to reduce risks by carefully researching securities before they are purchased, and in some cases by using hedging techniques. The Fund attempts to reduce its exposure to credit risks by limiting its investments in below-investment grade securities, as explained above. The Fund attempts to reduce its exposure to market risks by diversifying its investments, that is, by not holding a substantial percentage of the securities of any one issuer and by not investing too great a percentage of the Fund's assets in any one issuer. Also, the Fund does not concentrate 25% or more of its investments in the securities of any one foreign government or in the debt and equity securities of companies in any one industry. A debt security is essentially a loan by the buyer to the issuer of the debt security. The issuer promises to pay back the principal amount of the loan and normally pays interest, at a fixed or variable rate, on the debt while it is outstanding. The debt securities the Fund buys may be rated by nationally recognized rating organizations or they may be unrated securities assigned an equivalent rating by the Manager. While the Fund's investments may be above or below investment grade in credit quality, the Fund invests primarily in investment-grade debt securities. However, the Fund can invest up to 35% of its net assets in below investment-grade debt securities, commonly called "junk bonds." They typically offer higher yields than investment-grade bonds, because investors assume the greater risks of default of those securities. The ratings definitions of the principal national rating organizations is included in Appendix A to the Statement of Additional Information. Investment-grade debt securities are those rated in one of the four highest categories by Standard & Poor's Corporation, Moody's Investors Service, Inc., Fitch IBCA, Inc. or other national rating organizations. They can also be unrated or "split-rated" (rated as investment grade by one rating organization but below investment grade by another), if determined by the Manager to be of comparable quality to rated investment-grade securities. The Fund is not obligated to dispose of securities when issuers are in default or if the rating of the security is reduced below investment grade. The Fund can invest some of its assets in other types of securities, including common stocks, preferred stocks, and other equity securities of foreign and U.S. companies. However, the Fund does not anticipate having significant investments in those types of securities as part of its normal portfolio strategy. The Fund could pursue its secondary objective of capital appreciation by investing in securities convertible into common stock. Convertible securities might allow the Fund to participate in the increase in value of the issuer's underlying common stock, by exercising the conversion right. Normally the Fund would not hold the common stock for investment, although it can hold common stock as part of the value of its net assets that is not normally expected to be invested in debt securities. Typically, convertible securities also pay income until they are converted. There may be other investment strategies that could offer the Fund opportunities for capital appreciation, such as investing in defaulted securities, but these are not expected to be a significant part of the Fund's investment program. U.S. Government Securities. The Fund can invest in securities issued or guaranteed by the U.S. Treasury or other government agencies or federally-chartered corporate entities referred to as "instrumentalities." These are referred to as "U.S. government securities" in this Prospectus. |X| U.S. Treasury Obligations. These include Treasury bills (which have maturities of one year or less when issued), Treasury notes (which have maturities of from one to ten years when issued), and Treasury bonds (which have maturities of more than ten years when issued). Treasury securities are backed by the full faith and credit of the United States as to timely payments of interest and repayments of principal. The Fund can also buy U. S. Treasury securities that have been "stripped" of their coupons by a Federal Reserve Bank, zero-coupon U.S. Treasury securities described below, and Treasury Inflation-Protection Securities ("TIPS"). |X| Obligations Issued or Guaranteed by U.S. Government Agencies or Instrumentalities. These include direct obligations and mortgage-related securities that have different levels of credit support from the U.S. government. Some are supported by the full faith and credit of the U.S. government, such as Government National Mortgage Association pass-through mortgage certificates (called "Ginnie Maes"). Some are supported by the right of the issuer to borrow from the U.S. Treasury under certain circumstances, such as Federal National Mortgage Association bonds ("Fannie Maes"). Others are supported only by the credit of the entity that issued them, such as Federal Home Loan Mortgage Corporation obligations ("Freddie Macs"). |_| Mortgage-Related U.S. Government Securities. The Fund can buy interests in pools of residential or commercial mortgages, in the form of collateralized mortgage obligations ("CMOs") and other "pass-through" mortgage securities. CMOs that are U.S. government securities have collateral to secure payment of interest and principal. They may be issued in different series each having different interest rates and maturities. The collateral is either in the form of mortgage pass-through certificates issued or guaranteed by a U.S. agency or instrumentality or mortgage loans insured by a U.S. government agency. The Fund can have substantial amounts of its assets invested in mortgage-related U.S. government securities. The prices and yields of CMOs are determined, in part, by assumptions about the cash flows from the rate of payments of the underlying mortgages. Changes in interest rates may cause the rate of expected prepayments of those mortgages to change. In general, prepayments increase when general interest rates fall and decrease when interest rates rise. If prepayments of mortgages underlying a CMO occur faster than expected when interest rates fall, the market value and yield of the CMO could be reduced. Additionally, the Fund may have to reinvest the prepayment proceeds in other securities paying interest at lower rates, which could reduce the Fund's yield. When interest rates rise rapidly, and if prepayments occur more slowly than expected, a short- or medium-term CMO can in effect become a long-term security, subject to greater fluctuations in value. These prepayment risks can make the prices of CMOs very volatile when interest rates change. The prices of longer-term debt securities tend to fluctuate more than those of shorter-term debt securities. That volatility will affect the Fund's share prices. High-Yield, Lower-Grade Debt Securities. The Fund can purchase a variety of lower-grade, high-yield debt securities of U.S. and foreign issuers, including bonds, debentures, notes, preferred stocks, loan participation interests, structured notes, asset-backed securities, among others, to seek high current income. These securities are sometimes called "junk bonds." The Fund has no requirements as to the maturity of the debt securities it can buy, or as to the market capitalization range of the issuers of those securities. Up to 35% of the Fund's assets can be invested in debt securities below investment grade under normal market conditions. Lower-grade debt securities are those rated below "Baa" by Moody's Investors Service, Inc. or lower than "BBB" by Standard & Poor's Rating Service or that have similar ratings by other nationally-recognized rating organizations. The Fund can invest in securities rated as low as "C" or "D", in unrated bonds or bonds which are in default at the time the Fund buys them. While securities rated "Baa" by Moody's or "BBB" by S&P are considered "investment grade," they have some speculative characteristics. The Manager does not rely solely on ratings issued by rating organizations when selecting investments for the Fund. The Fund can buy unrated securities that offer high current income. The Manager may assign a rating to an unrated security that is equivalent to the rating of a rated security that the Manager believes offers comparable yields and risks. While investment-grade securities are subject to risks of non-payment of interest and principal, in general higher-yielding lower-grade bonds, whether rated or unrated, have greater risks than investment-grade securities. They may be subject to greater market fluctuations and risk of loss of income and principal than investment-grade securities. There may be less of a market for them and therefore they may be harder to sell at an acceptable price. There is a relatively greater possibility that the issuer's earnings may be insufficient to make the payments of interest and principal due on the bonds. These risks mean that the Fund may not achieve the expected income from lower-grade securities, and that the Fund's net asset value per share may be affected by declines in value of these securities. |X| Private-Issuer Mortgage-Backed Securities. The Fund can invest a substantial portion of its assets in mortgage-backed securities issued by private issuers, which do not offer the credit backing of U.S. government securities. Primarily these include multi-class debt or pass-through certificates secured by mortgage loans. They may be issued by banks, savings and loans, mortgage bankers and other non-governmental issuers. Private issuer mortgage-backed securities are subject to the credit risks of the issuers (as well as the interest rate risks and prepayment risks of CMOs that are U.S. government securities, discussed above), although in some cases they may be supported by insurance or guarantees. |X| Asset-Backed Securities. The Fund can buy asset-backed securities, which are fractional interests in pools of loans collateralized by the loans or other assets or receivables. They are issued by trusts and special purpose corporations that pass the income from the underlying pool to the buyer of the interest. These securities are subject to the risk of default by the issuer as well as by the borrowers of the underlying loans in the pool. Foreign Debt Securities. The Fund can buy debt securities issued by foreign governments and companies, as well as "supra-national" entities, such as the World Bank. They can include bonds, debentures, and notes, including derivative investments called "structured" notes, described below. The Fund will not invest 25% or more of its total assets in debt securities of any one foreign government or in debt securities of companies in any one industry. The Fund has no requirements as to the maturity range of the foreign debt securities it can buy, or as to the market capitalization range of the issuers of those securities. Foreign government debt securities might not be supported by the full faith and credit of the issuing government. The Fund's foreign debt investments can be denominated in U.S. dollars or in foreign currencies. The Fund will buy foreign currency only in connection with the purchase and sale of foreign securities and not for speculation. |X| Special Risks of Emerging and Developing Markets. Securities of issuers in emerging and developing markets may offer special investment opportunities but present risks not found in more mature markets. Those securities may be more difficult to sell at an acceptable price and their prices may be more volatile than securities of issuers in more developed markets. Settlements of trades may be subject to greater delays so that the Fund may not receive the proceeds of a sale of a security on a timely basis. These investments may be very speculative. These countries might have less developed trading markets and exchanges. Emerging market countries may have less developed legal and accounting systems and investments may be subject to greater risks of government restrictions on withdrawing the sales proceeds of securities from the country. Economies of developing countries may be more dependent on relatively few industries that may be highly vulnerable to local and global changes. Governments may be more unstable and present greater risks of nationalization or restrictions on foreign ownership of stocks of local companies. The Fund can buy "Brady Bonds," which are U.S.-dollar denominated debt securities collateralized by zero-coupon U.S. Treasury securities. They are typically issued by emerging markets countries and are considered speculative securities with higher risks of default. |X| Special Portfolio Diversification Requirements. To enable a variable annuity or variable life insurance contract based on an insurance company separate account to qualify for favorable tax treatment under the Internal Revenue Code, the underlying investments must follow special diversification requirements that limit the percentage of assets that can be invested in securities of particular issuers. The Fund's investment program is managed to meet those requirements, in addition to other diversification requirements under the Internal Revenue Code and the Investment Company Act that apply to publicly-sold mutual funds. Failure by the Fund to meet those special requirements could cause earnings on a contract owner's interest in an insurance company separate account to be taxable income. Those diversification requirements might also limit, to some degree, the Fund's investment decisions in a way that could reduce its performance Can the Fund's Investment Objective and Policies Change? The Fund's Board of Trustees can change non-fundamental investment policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. Fundamental policies are those that cannot be changed without the approval of a majority of the Fund's outstanding voting shares. The Fund's investment objective is a fundamental policy. Investment restrictions that are fundamental policies are listed in the Statement of Additional Information. An investment policy is not fundamental unless this Prospectus or the Statement of Additional Information says that it is. Portfolio Turnover. The Fund may engage in short-term trading to try to achieve its objective. Portfolio turnover affects brokerage and transaction costs the Fund pays. The Financial Highlights table below shows the Fund's portfolio turnover rates during prior fiscal years. Other Investment Strategies. To seek its objective, the Fund can also use the investment techniques and strategies described below. The Fund might not always use all of them. These techniques involve risks, although some are designed to help reduce overall investment or market risks. |X| Zero-Coupon and "Stripped" Securities. Some of the government and corporate debt securities the Fund buys are zero-coupon bonds that pay no interest. They are issued at a substantial discount from their face value. "Stripped" securities are the separate income or principal components of a debt security. Some CMOs or other mortgage-related securities may be stripped, with each component having a different proportion of principal or interest payments. One class might receive all the interest and the other all the principal payments. Zero-coupon and stripped securities are subject to greater fluctuations in price from interest rate changes than conventional interest-bearing securities. The Fund may have to pay out the imputed income on zero-coupon securities without receiving the actual cash currently. Interest-only securities are particularly sensitive to changes in interest rates. The values of interest-only mortgage-related securities are also very sensitive to prepayments of underlying mortgages. Principal-only securities are also sensitive to changes in interest rates. When prepayments tend to fall, the timing of the cash flows to these securities increases, making them more sensitive to changes in interest rates. The market for some of these securities may be limited, making it difficult for the Fund to dispose of its holdings at an acceptable price. The Fund can invest up to 50% of its total assets in zero-coupon securities issued by either the U.S. Treasury or companies. |X| Participation Interests in Loans. These securities represent an undivided fractional interest in a loan obligation by a borrower. They are typically purchased from banks or dealers that have made the loan or are members of the loan syndicate. The loans may be to foreign or U.S. companies. The Fund does not invest more than 5% of its net assets in participation interests of any one borrower. They are subject to the risk of default by the borrower. If the borrower fails to pay interest or repay principal, the Fund can lose money on its investment. |X| Illiquid and Restricted Securities. Investments may be illiquid because they do not have an active trading market, making it difficult to value them or dispose of them promptly at an acceptable price. A restricted security is one that has a contractual restriction on its resale or which cannot be sold publicly until it is registered under the Securities Act of 1933. The Fund will not invest more than 15% of its net assets in illiquid or restricted securities. Certain restricted securities that are eligible for resale to qualified institutional purchasers may not be subject to that limit. The Manager monitors holdings of illiquid securities on an ongoing basis to determine whether to sell any holdings to maintain adequate liquidity. |X| Derivative Investments. The Fund can invest in a number of different kinds of "derivative" investments. In the broadest sense, exchange-traded options, futures contracts, structured notes, CMOs and other hedging instruments the Fund can use may be considered "derivative investments." In addition to using hedging instruments, the Fund can use other derivative investments because they offer the potential for increased income. Markets underlying securities and indices may move in a direction not anticipated by the Manager. Interest rate and stock market changes in the U.S. and abroad may also influence the performance of derivatives. As a result of these risks the Fund could realize less principal or income from the investment than expected. Certain derivative investments held by the Fund may be illiquid. |_| "Structured" Notes. The Fund can buy "structured" notes, which are specially-designed derivative debt investments. Their principal payments or interest payments are linked to the value of an index (such as a currency or securities index) or commodity. The terms of the instrument may be "structured" by the purchaser (the Fund) and the borrower issuing the note. The principal and/or interest payments depend on the performance of one or more other securities or indices, and the values of these notes will therefore fall or rise in response to the changes in the values of the underlying security or index. They are subject to both credit and interest rate risks and therefore the Fund could receive more or less than it originally invested when the notes mature, or it might receive less interest than the stated coupon payment if the underlying investment or index does not perform as anticipated. Their values may be very volatile and they may have a limited trading market, making it difficult for the Fund to sell its investment at an acceptable price. |X| Hedging. The Fund can buy and sell futures contracts, put and call options, forward contracts and options on futures and broadly-based securities indices. These are all referred to as "hedging instruments." The Fund does not use hedging instruments for speculative purposes, and has limits on its use of them. The Fund is not required to use hedging instruments in seeking its goal. The Fund could buy and sell options, futures and forward contracts for a number of purposes. It might do so to try to manage its exposure to the possibility that the prices of its portfolio securities may decline, or to establish a position in the securities market as a temporary substitute for purchasing individual securities. It might do so to try to manage its exposure to changing interest rates. Options trading involves the payment of premiums and has special tax effects on the Fund. There are also special risks in particular hedging strategies. For example, if a covered call written by the Fund is exercised on an investment that has increased in value, the Fund will be required to sell the investment at the call price and will not be able to realize any profit if the investment has increased in value above the call price. In writing a put, there is a risk that the Fund may be required to buy the underlying security at a disadvantageous price. If the Manager used a hedging instrument at the wrong time or judged market conditions incorrectly, the strategy could reduce the Fund's return. The Fund could also experience losses if the prices of its futures and options positions were not correlated with its other investments or if it could not close out a position because of an illiquid market. Temporary Defensive Investments. For cash management purposes, the Fund may hold cash equivalents such as commercial paper, repurchase agreements, Treasury bills and other short-term U.S. government securities. In times of adverse or unstable market or economic conditions, the Fund can invest up to 100% of its assets in temporary defensive investments. These would ordinarily be U. S. government securities, highly-rated commercial paper, bank deposits or repurchase agreements. To the extent the Fund invests defensively in these securities, it might not achieve its primary investment objective, high current income. How the Fund Is Managed The Manager. The Manager chooses the Fund's investments and handles its day-to-day business. The Manager carries out its duties, subject to the policies established by the Fund's Board of Trustees, under an investment advisory agreement that states the Manager's responsibilities. The agreement sets the fees the Fund pays to the Manager and describes the expenses that the Fund is responsible to pay to conduct its business. The Manager has been an investment adviser since January, 1960. The Manager (including subsidiaries and affiliates) managed more than $120 billion as of March 31, 2000, including other Oppenheimer funds with more than 5 million shareholder accounts. The Manager is located at Two World Trade Center, 34th Floor, New York, New York 10048-0203. |X| Portfolio Managers. The portfolio managers of the Fund are David P. Negri and John S. Kowalik. They have been the persons principally responsible for the day-to-day management of the Fund's portfolio, in Mr. Negri's case since January 1990 and in Mr. Kowalik's case since July 1998. Each is a Vice President of the Fund and Senior Vice President of the Manager. Each serves as an officer and portfolio manager for other Oppenheimer funds. Mr. Negri has been employed as a portfolio manager by the Manager since July 1988. Mr. Kowalik joined the Manager in July 1998 and was previously Managing Director and Senior Portfolio Manager at Prudential Global Advisers (from 1989 to June 1998). |X| Advisory Fees. Under the Investment Advisory Agreement, the Fund pays the Manager an advisory fee at an annual rate that declines on additional assets as the Fund grows: 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% on the next $200 million and 0.50% of average annual net assets over $1 billion. The Fund's management fee for its last fiscal year ended March 31, 1999, was 0.72% of the Fund's average annual net assets. |X| Possible Conflicts of Interest. The Fund offers its shares to separate accounts of different insurance companies that are not affiliated with each other, as an investment for their variable annuity, variable life and other investment product contracts. While the Fund does not foresee any disadvantages to contract owners from these arrangements, it is possible that the interests of owners of different contracts participating in the Fund through different separate accounts might conflict. For example, a conflict could arise because of differences in tax treatment. The Fund's Board has procedures to monitor the portfolio for possible conflicts to determine what action should be taken. If a conflict occurs, the Board might require one or more participating insurance company separate accounts to withdraw their investments in the Fund. That could force the Fund to sell securities at disadvantageous prices, and orderly portfolio management could be disrupted. Also, the Board might refuse to sell shares of the Fund to a particular separate account, or could terminate the offering of the Fund's shares if required to do so by law or if it would be in the best interests of the shareholders of the Fund to do so. Investing in the Fund How to Buy and Sell Shares How Are Shares Purchased? Shares of the Fund may be purchased only by separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. Individual investors cannot buy shares of the Fund directly. Please refer to the accompanying prospectus of the participating insurance company for information on how to select the Fund as an investment option for that variable life insurance policy, variable annuity or other investment product. The Fund reserves the right to refuse any purchase order when the Manager believes it would be in the Fund's best interests to do so. - ------------------------------------------------------------------------------- Information about your investment in the Fund through your variable annuity contract, variable life insurance policy or other plan can be obtained only from your participating insurance company or its servicing agent. The Fund's Transfer Agent does not hold or have access to those records. Instructions for buying or selling shares of the Fund should be given to your insurance company or its servicing agent, not directly to the Fund or its Transfer Agent. - ------------------------------------------------------------------------------- |X| At What Price Are Shares Sold? Shares are sold at their offering price, which is the net asset value per share. The Fund does not impose any sales charge on purchases of its shares. If there are any charges imposed under the variable annuity, variable life or other contract through which Fund shares are purchased, they are described in the accompanying prospectus of the participating insurance company. The net asset value per share is determined as of the close of The New York Stock Exchange on each day that the exchange is open for trading (referred to in this Prospectus as a "regular business day"). The Exchange normally closes at 4:00 P.M., New York time, but may close earlier on some days. All references to time in this Prospectus mean "New York time." The net asset value per share is determined by dividing the value of the Fund's net assets attributable to a class of shares by the number of shares of that class that are outstanding. The Fund's Board of Trustees has established procedures to value the Fund's securities to determine the Fund's net asset value, in general based on market values. The Board has adopted special procedures for valuing illiquid and restricted securities and securities for which market values cannot be readily obtained. Because some foreign securities trade in markets and on exchanges that operate on weekends and U.S. holidays, the values of some of the Fund's foreign investments might change significantly on days when shares of the Fund cannot be purchased or redeemed. The offering price that applies to an order from a participating insurance company is based on the next calculation of the net asset value per share that is made after the insurance company (as the Fund's designated agent to receive purchase orders) receives a purchase order from its contract owners to purchase Fund shares on a regular business day, provided that the Fund receives the order from the insurance company, generally by 9:30 A.M. on the next regular business day at the offices of its Transfer Agent in Colorado. |X| Classes of Shares. The Fund may offer two different classes of shares. The class of shares offered by this Prospectus has no class name designation. The other class is designated as Service shares. The different classes of shares represent investments in the same portfolio of securities but are expected to have different expenses and share prices. This Prospectus may not be used to offer or sell Service shares. A description of the distribution and service plans that affect only Service shares of the Fund is contained in the Fund's Prospectus that offers Service shares. That Prospectus, when available, may be obtained without charge by contacting any participating insurance company that offers Service shares of the Fund as an investment for its separate accounts. You can also obtain a copy from OppenheimerFunds Distributor, Inc. by calling toll-free 1-888-470-0861. How Are Shares Redeemed? As with purchases, only the participating insurance companies that hold Fund shares in their separate accounts for the benefit of variable annuity contracts, variable life insurance policies or other investment products can place orders to redeem shares. Contract holders and policy holders should not directly contact the Fund or its transfer agent to request a redemption of Fund shares. Contract owners should refer to the withdrawal or surrender instructions in the accompanying prospectus of the participating insurance company. The share price that applies to a redemption order is the next net asset value per share that is determined after the participating insurance company (as the Fund's designated agent) receives a redemption request on a regular business day from its contract or policy holder, provided that the Fund receives the order from the insurance company, generally by 9:30 A.M. the next regular business day at the office of its Transfer Agent in Colorado. The Fund normally sends payment by Federal Funds wire to the insurance company's account the day after the Fund receives the order (and no later than 7 days after the Fund's receipt of the order). Under unusual circumstances determined by the Securities and Exchange Commission, payment may be delayed or suspended. Dividends, Capital Gains and Taxes Dividends. The Fund intends to declare dividends separately for each class of shares from net investment income, if any, on an annual basis, and to pay those dividends in March on a date selected by the Board of Trustees. The Fund has no fixed dividend rate and cannot guarantee that it will pay any dividends. All dividends (and any capital gains distributions will be reinvested automatically in additional Fund shares at net asset value for the account of the participating insurance company (unless the insurance company elects to have dividends or distributions paid in cash). Capital Gains. The Fund may realize capital gains on the sale of portfolio securities. If it does, it may make distributions out of any net short-term or long-term capital gains in March of each year. The Fund may make supplemental distributions of dividends and capital gains following the end of its fiscal year. There can be no assurance that the Fund will pay any capital gains distributions in a particular year. Taxes. For a discussion of the tax status of a variable annuity contract, a variable life insurance policy or other investment product of a participating insurance company, please refer to the accompanying prospectus of your participating insurance company. Because shares of the Fund may be purchased only through insurance company separate accounts for variable annuity contracts, variable life insurance policies or other investment products, dividends paid by the Fund from net investment income and distributions (if any) of net realized short-term and long-term capital gains will be taxable, if at all, to the participating insurance company. This information is only a summary of certain federal income tax information about an investment in Fund shares. You should consult with your tax advisor or your participating insurance company representative about the effect of an investment in the Fund under your contract or policy. Financial Highlights The Financial Highlights Table is presented to help you understand the Fund's financial performance for the past 5 fiscal years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by Deloitte & Touche LLP, the Fund's independent auditors, whose report, along with the Fund's financial statements, is included in the Statement of Additional Information, which is available on request. - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------ Per Share Operating Data Net asset value, beginning of period $12.32 $11.91 $11.63 $11.84 $10.78 - ------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income .88 .72 .76 .69 .72 Net realized and unrealized gain (loss) (1.06) .07 .28 (.15) 1.07 - ------------------------------------------------------------------------------------------------------------------------------ Total income (loss) from investment operations (.18) .79 1.04 .54 1.79 - ------------------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.57) (.20) (.72) (.74) (.73) Distributions from net realized gain (.05) (.18) (.04) (.01) -- - ------------------------------------------------------------------------------------------------------------------------------ Total dividends and/or distributions to shareholders (.62) (.38) (.76) (.75) (.73) - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $11.52 $12.32 $11.91 $11.63 $11.84 ====== ====== ====== ====== ====== ============================================================================================================================== Total Return, at Net Asset Value(1) (1.52)% 6.80% 9.25% 4.80% 17.00% ============================================================================================================================== Ratios/Supplemental Data Net assets, end of period (in thousands) $601,064 $655,543 $520,078 $426,439 $211,232 - ------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $633,059 $586,242 $449,760 $296,253 $170,929 - ------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets:(2) Net investment income 7.22% 6.31% 6.72% 6.72% 6.91% Expenses 0.73% 0.74%(3) 0.78%(3) 0.78%(3) 0.80%(3) - ------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate(4) 256% 76% 117% 82% 79%
1. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 2. Annualized for periods less than one full year. 3. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. 4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended December 31, 1999, were $1,625,487,960 and $1,547,628,962, respectively. 11 INFORMATION AND SERVICES For More Information About Oppenheimer Bond Fund/VA: The following additional information about the Fund is available without charge upon request: Statement of Additional Information This document includes additional information about the Fund's investment policies, risks, and operations. It is incorporated by reference into this Prospectus (which means it is legally part of this Prospectus). Annual and Semi-Annual Reports Additional information about the Fund's investments and performance is available in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report includes a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. - ---------------------------------------------------------------------------- How to Get More Information: - ---------------------------------------------------------------------------- You can request the Statement of Additional Information, the Annual and Semi-Annual Reports, and other information about the Fund or instructions on how to contact the sponsor of your insurance product: - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- By Telephone: - ---------------------------------------------------------------------------- Call OppenheimerFunds Services toll-free: 1-888-470-0861 By Mail: Write to: OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217-5270 - ---------------------------------------------------------------------------- You can also obtain copies of the Statement of Additional Information and other Fund documents and reports by visiting the SEC's Public Reference Room in Washington, D.C. (Phone 1.202.942.8090) or the EDGAR database on the SEC's Internet web site at http://www.sec.gov. Copies may be obtained upon payment of a duplicating fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov, or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. - ---------------------------------------------------------------------------- No one has been authorized to provide any information about the Fund or to make any representations about the Fund other than what is contained in this Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a solicitation of an offer to buy shares of the Fund, to any person in any state or other jurisdiction where it is unlawful to make such an offer. SEC File No. 811-4108 PR0630.001.0500 Printed on recycled paper. 67890 Appendix to Prospectus of Oppenheimer Bond Fund/VA (a series of Oppenheimer Variable Account Funds) Graphic material included in the Prospectus of Oppenheimer Bond Fund/VA (the "Fund") under the heading "Annual Total Return (as of 12/31 each year)": A bar chart will be included in the Prospectus of the Fund depicting the annual total returns of a hypothetical $10,000 investment in shares of the Fund for each of the ten most recent calendar years, without deducting separate account expenses. Set forth below are the relevant data that will appear on the bar chart: Calendar Year Ended Annual Total Returns 12/31/90 7.92% 12/31/91 17.63% 12/31/92 6.50% 12/31/93 13.04% 12/31/94 -1.94% 12/31/95 17.00% 12/31/96 4.80% 12/31/97 9.26% 12/31/98 6.80% 12/31/99 -1.52% Oppenheimer Capital Appreciation Fund/VA A series of Oppenheimer Variable Account Funds Prospectus dated May 1, 2000 Oppenheimer Capital Appreciation Fund/VA is a mutual fund that seeks capital appreciation to make your investment grow. It emphasizes investments in common stocks of well-known, established companies. Shares of the Fund are sold only as the underlying investment for variable life insurance policies, variable annuity contracts and other insurance company separate accounts. A prospectus for the insurance product you have selected accompanies this Prospectus and explains how to select shares of the Fund as an investment under that insurance product. This Prospectus contains important information about the Fund's objective, its investment policies, strategies and risks. As with all mutual funds, the Please read this Prospectus (and Securities your insurance product and Exchange Commission has not prospectus) carefully before you approved or disapproved the Fund's invest and keep them for future securities nor has it determined reference about your account. that this Prospectus is accurate or complete. It is a criminal offense to represent otherwise. - ------------------------------------ (OppenheimerFunds logo) CONTENTS ABOUT THE FUND The Fund's Objective and Investment Strategies Main Risks of Investing in the Fund The Fund's Past Performance About the Fund's Investments How the Fund is Managed - ------------------------------------------------------------------------------- INVESTING IN THE FUND How to Buy and Sell Shares Dividends, Capital Gains and Taxes Financial Highlights ABOUT THE FUND The Fund's Objective and Investment Strategies WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks capital appreciation by investing in securities of well known established companies. WHAT DOES THE FUND MAINLY INVEST IN? The Fund invests mainly in common stocks of established, well-known U.S. companies that OppenheimerFunds, Inc. (the "Manager") believes may appreciate in value over the long-term. While the Fund can invest in securities of issuers of all market capitalization ranges, the Manager currently emphasizes "large capitalization" issuers (having a market capitalization of $5 billion or more). The Fund generally focuses on well-known and established companies that have a history of earnings and dividends. In addition, these companies tend to be seasoned issuers with an operating history of at least five years, including any predecessors. HOW DOES THE MANAGER DECIDE WHAT SECURITIES TO BUY OR SELL? In selecting securities for the Fund, the Fund's portfolio manager looks primarily for companies with high growth potential using fundamental analysis of a company's financial statements and management structure, and analysis of the company's operations and product development, as well as the industry of which the issuer is part. The portfolio manager looks for stocks that are reasonably priced in relation to overall stock market valuations. The portfolio manager focuses on factors that may vary in particular cases and over time in seeking broad diversification of the Fund's portfolio among industries and market sectors. Currently the portfolio manager looks for: o Companies with management that has a proven record, Companies with relatively stable or established businesses in established markets, that are entering into a growth cycle. Companies with strong earnings growth. WHO IS THE FUND DESIGNED FOR? The Fund's shares are available only as an investment option under certain variable annuity contracts, variable life insurance policies and investment plans offered through insurance company separate accounts of participating insurance companies, for investors seeking capital appreciation in their investment over the long term, from investments in common stocks of well-known companies. Those investors should be willing to assume the risks of short-term share price fluctuations that are typical for a fund focusing on stock investments. Since the Fund's income level will fluctuate and will likely be small, it is not designed for investors needing an assured level of current income. However, the Fund is not a complete investment program. Main Risks of Investing in the Fund All investments have some degree of risk. The Fund's investments, in particular, are subject to changes in their value from a number of factors described below. They include changes in general stock market movements (this is referred to as "market risk"), or the change in value of particular stocks because of an event affecting the issuer. There is also the risk that poor security selection by the Manager will cause the Fund to underperform other funds having a similar objective. At times, the Fund might increase the relative emphasis of its investments in a particular industry. If it does, it may be subject to the risks that economic, political or other events can have a negative effect on the values of securities of issuers in that industry (this is referred to as "industry risk"). The Manager tries to reduce risks by carefully researching securities before they are purchased. The Fund attempts to reduce its exposure to market risks by diversifying its investments, that is, by not holding a substantial percentage of the stock of any one company and by not investing too great a percentage of the Fund's assets in any one issuer. Also, the Fund does not concentrate 25% or more of its investments in any one industry. However, changes in the overall market prices of securities and the income they pay can occur at any time. The share price of the Fund will change daily based on changes in market prices of securities and market conditions and in response to other economic events. There is no assurance that the Fund will achieve its investment objective. RISKS OF INVESTING IN STOCKS. Stocks fluctuate in price, and their short-term volatility at times may be great. Because the Fund currently invests primarily in common stocks for capital appreciation, the value of the Fund's portfolio will be affected by changes in the stock markets. Market risk will affect the Fund's net asset value per share, which will fluctuate as the values of the Fund's portfolio securities change. A variety of factors can affect the price of a particular stocks and the prices of individual stocks do not all move in the same direction uniformly or at the same time. Different stock markets may behave differently from each other. Securities in the Fund's portfolio may not increase as much as the market as a whole. Growth stocks may at times be favored by the market and at other times may be out of favor. Some securities may be inactively traded, and therefore, may not be readily bought or sold. Although some growth stocks may appreciate quickly, investors should not expect the Fund's investments to act in this manner because the Fund is designed for long-term capital appreciation. Other factors can affect a particular stock's price, such as poor earnings reports by the issuer, loss of major customers, major litigation against the issuer, or changes in government regulations affecting the issuer. The Fund invests mainly in securities of large companies, but can also invest in small and medium-size companies, which may have more volatile stock prices than large companies. Industry and Sector Focus. At times the Fund may increase the relative emphasis of its investments in a particular industry or sector. The prices of stocks of issuers in a particular industry or sector may go up and down in response to changes in economic conditions, government regulations, availability of basic resources or supplies, or other events that affect that industry or sector more than others. To the extent that the Fund increases the relative emphasis of its investments in a particular industry or sector, its share values may fluctuate in response to events affecting that industry or sector. To some extent that risk may be limited by the Fund's policy of not concentrating 25% or more of its assets in investments in any one industry. Risks of Growth Stocks. Stocks of growth companies, particularly newer companies, may offer opportunities for greater capital appreciation but may be more volatile than stocks of larger, more established companies. If the company's earnings growth fails to increase as expected the stock price of a growth company may decline sharply. HOW RISKY IS THE FUND OVERALL? The risks described above collectively form the overall risk profile of the Fund and can affect the value of the Fund's investments, its investment performance and its price per share. Particular investments and investment strategies also have risks. These risks mean that you can lose money by investing in the Fund. When you redeem your shares, they may be worth more or less than what you paid for them. There is no assurance that the Fund will achieve its investment objective. In the short term, stock markets can be volatile, and the price of the Fund's shares can go up and down substantially. The Fund generally does not use income-oriented investments to a great extent to help cushion the Fund's share price from stock market volatility, except for defensive purposes. Because it focuses on larger companies, the Fund generally may be less volatile than funds focusing on investments in small-cap stocks, but the Fund may have greater risk of volatility than funds that invest in both stocks and fixed income securities. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund's Past Performance The bar chart and table below show one measure of the risks of investing in the Fund, by showing changes in the Fund's performance1 from year to year for the last ten calendar years and by showing how the average annual total returns for 1, 5 and 10 years of the Fund's shares compare to those of a broad-based market index. The Fund's past investment performance is not necessarily an indication of how the Fund will perform in the future. Annual Total Returns (as of 12/31 each year) [See appendix to prospectus for data in bar chart showing annual total returns] For the period from 1/1/00 through 3/31/00, the Fund's cumulative return (not annualized) was 14.60%. Charges imposed by the separate accounts that invest in the Fund are not included in the calculations of return in this bar chart, and if those charges were included, the returns would be less than those shown. During the periods shown in the bar chart, the highest return (not annualized) for a calendar quarter was 28.49% (4th Q'99) and the lowest return (not annualized) for a calendar quarter was -16.41% (3rd Q'98). - ---------------------------------------------------------------------- Average Annual Total Returns for 1 Year 5 Years 10 Years the periods ended December 31, 1999 - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Oppenheimer 41.66% 30.65% 17.61% Capital Appreciation Fund/VA - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- S&P 500 Index 21.03% 28.54% 18.19% - ---------------------------------------------------------------------- The Fund's returns in the table measure the performance (1) of a hypothetical account without deducting charges imposed by the separate accounts that invest in the Fund and assume that all dividends and capital gains distributions have been reinvested in additional shares. Because the Fund invests primarily in stocks, the Fund's performance is compared to the S&P 500 Index, an unmanaged index of equity securities that is a measure of the general domestic stock market. However, it must be remembered that the index performance reflects the reinvestment of income but does not consider the effects of transaction costs. The Fund's total returns should not be expected to be the same as the returns of other Oppenheimer funds, even if both funds have the same portfolio managers and/or similar names. About the Fund's Investments THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's portfolio among the different types of permitted investments will vary over time based upon the evaluation of economic and market trends by the Manager. The Fund's portfolio might not always include all of the different types of investments described below. The Statement of Additional Information contains more detailed information about the Fund's investment policies and risks. Stock Investments. The types of growth companies the Manager focuses on are larger, more established growth companies with an operating history of at least five years (including any predecessors) and a history of earnings and dividends. Although not a focus of the Fund, mid-cap and small-cap companies may be held to a lesser degree. Growth companies may be companies that are developing new products or services, such as companies in the technology sector, or they may be expanding into new markets for their products, such as the energy sector. Growth companies tend to retain a large part of their earnings for research, development or investment in capital assets. Therefore, they do not tend to emphasize paying dividends, and may not pay any dividends for some time. They are selected for the Fund's portfolio because the Manager believes the price of the stock will increase over time. Cyclical Opportunities. The Fund may also seek to take advantage of changes in the business cycle by investing in companies that are sensitive to those changes if the Manager believes they have growth potential. For example, when the economy is expanding, companies in the consumer durables and technology sectors might benefit and present long-term growth opportunities. The Fund might sometimes seek to take tactical advantage of short-term market movements or events affecting particular issuers or industries. SPECIAL PORTFOLIO DIVERSIFICATION REQUIREMENTS. To enable a variable annuity or variable life insurance contract based on an insurance company separate account to qualify for favorable tax treatment under the Internal Revenue Code, the underlying investments must follow special diversification requirements that limit the percentage of assets that can be invested in securities of particular issuers. The Fund's investment program is managed to meet those requirements, in addition to other diversification requirements under the Internal Revenue Code and the Investment Company Act 1940, that apply to publicly-sold mutual funds. Failure by the Fund to meet those special requirements could cause earnings on a contract owner's interest in an insurance company separate account to be taxable income. Those diversification requirements might also limit, to some degree, the Fund's investment decisions in a way that could reduce its performance. CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The Fund's Board of Trustees can change non-fundamental investment policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. Fundamental policies are those that cannot be changed without the approval of a majority of the Fund's outstanding voting shares. The Fund's investment objective is a fundamental policy. Other investment restrictions that are fundamental policies are listed in the Statement of Additional Information. An investment policy is not fundamental unless this Prospectus or the Statement of Additional Information says that it is. OTHER INVESTMENT STRATEGIES. To seek its objective, the Fund can also use the investment techniques and strategies described below. The Fund might not always use all of the different types of techniques and investments described below. These techniques involve certain risks, although some are designed to help reduce investment or market risks. Other Equity Securities. While the Fund emphasizes investments in common stocks, it can also buy preferred stocks and securities convertible into common stock. While many convertible securities are debt securities, the Manager considers some of them to be "equity equivalents" because of the conversion feature and in those cases their rating has less impact on the investment decision than in the case of other debt securities. Nevertheless, convertible debt securities are subject to both "credit risk" (the risk that the issuer will not pay interest or repay principal in a timely manner) and "interest rate risk" (the risk that prices of the securities will be affected inversely by changes in prevailing interest rates). If the Fund buys convertible securities (or other debt securities), it will focus primarily on investment-grade securities which pose less credit risk than lower-grade debt securities. Illiquid and Restricted Securities. Investments may be illiquid because there is no active trading market for them, making it difficult to value them or dispose of them promptly at an acceptable price. A restricted security is one that has a contractual restriction on its resale or which cannot be sold publicly until it is registered under the Securities Act of 1933. The Fund will not invest more than 15% of its net assets in illiquid or restricted securities. Certain restricted securities that are eligible for resale to qualified institutional purchasers may not be subject to that limit. The Manager monitors holdings of illiquid securities on an ongoing basis to determine whether to sell any holdings to maintain adequate liquidity. Derivative Investments. The Fund can invest in a number of different kinds of "derivative" investments. In general terms, a derivative investment is an investment contract whose value depends on (or is derived from) the value of an underlying asset, interest rate or index. In the broadest sense, options, futures contracts, and other hedging instruments the Fund might use may be considered "derivative" investments. In addition to using derivatives for hedging, the Fund might use certain derivative investments because they offer the potential for increased value. The Fund currently does not use derivatives to a significant degree and is not required to use them in seeking its objective. Derivatives have risks. If the issuer of the derivative investment does not pay the amount due, the Fund can lose money on the investment. The underlying security or investment on which a derivative is based, and the derivative itself, may not perform the way the Manager expected it to. As a result of these risks the Fund could realize less principal or income from the investment than expected or its hedge might be unsuccessful. As a result, the Fund's share prices could fall. Certain derivative investments held by the Fund might be illiquid. o Hedging. The Fund can buy and sell futures contracts, put and call options, and forward contracts. These are all referred to as "hedging instruments." The Fund does not currently use hedging extensively nor for speculative purposes. It has limits on its use of hedging instruments and is not required to use them in seeking its objective. Some of these strategies would hedge the Fund's portfolio against price fluctuations. Other hedging strategies, such as buying futures and call options, would tend to increase the Fund's exposure to the securities market. Options trading involves the payment of premiums and has special tax effects on the Fund. For example, if a covered call written by the Fund is exercised on an investment that has increased in value, the Fund will be required to sell the investment at the call price and will not be able to realize any profit if the investment has increased in value above the call price. There are also special risks in particular hedging strategies. If the Manager used a hedging instrument at the wrong time or judged market conditions incorrectly, the strategy could reduce the Fund's return. The Fund could also experience losses if the prices of its futures and options positions were not correlated with its other investments or if it could not close out a position because of an illiquid market. Temporary Defensive Investments. For cash management purposes, the Fund can hold cash equivalents such as commercial paper, repurchase agreements, Treasury bills and other short-term U.S. government securities. In times of adverse or unstable market or economic conditions, the Fund can invest up to 100% of its assets in temporary defensive investments. These would ordinarily be U. S. government securities, highly-rated commercial paper, bank deposits or repurchase agreements. To the extent the Fund invests defensively in these securities, it might not achieve its investment objective. How the Fund Is Managed THE MANAGER. The Fund's investment Manager, OppenheimerFunds, Inc., chooses the Fund's investments and handles its day-to-day business. The Manager carries out its duties, subject to the policies established by the Board of Trustees, under an Investment Advisory Agreement that states the Manager's responsibilities. The Agreement sets the fees paid by the Fund to the Manager and describes the expenses that the Fund is responsible to pay to conduct its business. The Manager has been an investment adviser since 1960 and currently manages investment companies, including other Oppenheimer funds. The Manager (including subsidiaries and affiliates) manages assets of more than $120 billion as of January 31, 2000 with more than 5 million shareholder accounts. The Manager is located at Two World Trade Center, 34th Floor, New York, New York 10048-0203. Portfolio Manager. The portfolio manager of the Fund is Jane Putnam. She is a Vice President of the Fund and the Manager. She has been the person principally responsible for the day-to-day management of the Fund's portfolio since May, 1994. Ms. Putnam also serves as an officer and portfolio manager for other Oppenheimer funds. Before joining the manager in 1994, she was a portfolio manager and equity research analyst for Chemical Bank. Advisory Fees. Under the Investment Advisory Agreement, the Fund pays the Manager an advisory fee at an annual rate that declines on additional assets as the Fund grows: 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, and 0.60% of average annual net assets over $800 million. The Fund's management fee for its last fiscal year ended December 31, 1999, was 0.68% of the Fund's average annual net assets. Possible Conflicts of Interest. The Fund offers its shares to separate accounts of different insurance companies that are not affiliated with each other, as an investment for their variable annuity, variable life and other investment product contracts. While the Fund does not foresee any disadvantages to contract owners from these arrangements, it is possible that the interests of owners of different contracts participating in the Fund through different separate accounts might conflict. For example, a conflict could arise because of differences in tax treatment. The Fund's Board has procedures to monitor the portfolio for possible conflicts to determine what action should be taken. If a conflict occurs, the Board might require one or more participating insurance company separate accounts to withdraw their investments in the Fund. That could force the Fund to sell securities at disadvantageous prices, and orderly portfolio management could be disrupted. Also, the Board might refuse to sell shares of the Fund to a particular separate account, or could terminate the offering of the Fund's shares if required to do so by law or if it would be in the best interests of the shareholders of the Fund to do so. INVESTING IN THE FUND How to Buy and Sell Shares HOW ARE SHARES PURCHASED? Shares of the Fund may be purchased only by separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. Individual investors cannot buy shares of the Fund directly. Please refer to the accompanying prospectus of the participating insurance company for information on how to select the Fund as an investment option for that variable life insurance policy, variable annuity or other investment product. The Fund reserves the right to refuse any purchase order when the Manager believes it would be in the Fund's best interests to do so. - ------------------------------------------------------------------------------- Information about your investment in the Fund through your variable annuity contract, variable life insurance policy or other plan can be obtained only from your participating insurance company or its servicing agent. The Fund's Transfer Agent does not hold or have access to those records. Instructions for buying or selling shares of the Fund should be given to your insurance company or its servicing agent, not directly to the Fund or its Transfer Agent. - ------------------------------------------------------------------------------- AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their offering price, which is the net asset value per share. The Fund does not impose any sales charge on purchases of its shares. If there are any charges imposed under the variable annuity, variable life or other contract through which Fund shares are purchased, they are described in the accompanying prospectus of the participating insurance company. The net asset value per share is determined as of the close of The New York Stock Exchange on each day that the exchange is open for trading (referred to in this Prospectus as a "regular business day"). The Exchange normally closes at 4:00 P.M., New York time, but may close earlier on some days. All references to time in this Prospectus mean "New York time." The net asset value per share is determined by dividing the value of the Fund's net assets attributable to a class of shares by the number of shares of that class that are outstanding. The Fund's Board of Trustees has established procedures to value the Fund's securities to determine the Fund's net asset value, in general based on market values. The Board has adopted special procedures for valuing illiquid and restricted securities and securities for which market values cannot be readily obtained. Because some foreign securities trade in markets and on exchanges that operate on weekends and U.S. holidays, the values of some of the Fund's foreign investments might change significantly on days when shares of the Fund cannot be purchased or redeemed. The offering price that applies to an order from a participating insurance company is based on the next calculation of the net asset value per share that is made after the insurance company (as the Fund's designated agent to receive purchase orders) receives a purchase order from its contract owners to purchase Fund shares on a regular business day, provided that the Fund receives the order from the insurance company, generally by 9:30 A.M. on the next regular business day at the offices of its Transfer Agent in Denver, Colorado. CLASSES OF SHARES. The Fund may offer two different classes of shares. The class of shares offered by this Prospectus has no class name designation. The other class is designated as Service shares. The different classes of shares represent investments in the same portfolio of securities but are expected to have different expenses and share prices. This Prospectus may not be used to offer Service shares. A description of the Service Plans that affect only Service shares of the Fund is contained in the Fund's Prospectus that offers Service shares. That Prospectus, when available, may be obtained without charge by contacting any participating insurance company that offers Service shares of the Fund as an investment for its separate accounts. You can also obtain a copy from OppenheimerFunds Distributor, Inc. by calling toll-free 1.888.470.0861. HOW ARE SHARES REDEEMED? As with purchases, only the participating insurance companies that hold Fund shares in their separate accounts for the benefit of variable annuity contracts, variable life insurance policies or other investment products can place orders to redeem shares. Contract holders and policy holders should not directly contact the Fund or its transfer agent to request a redemption of Fund shares. Contract owners should refer to the withdrawal or surrender instructions in the accompanying prospectus of the participating insurance company. The share price that applies to a redemption order is the next net asset value per share that is determined after the participating insurance company (as the Fund's designated agent) receives a redemption request on a regular business day from its contract or policy holder, provided that the Fund receives the order from the insurance company, generally by 9:30 A.M. the next regular business day at the office of its Transfer Agent in Denver, Colorado. The Fund normally sends payment by Federal Funds wire to the insurance company's account the day after the Fund receives the order (and no later than 7 days after the Fund's receipt of the order). Under unusual circumstances determined by the Securities and Exchange Commission, payment may be delayed or suspended. Dividends, Capital Gains and Taxes DIVIDENDS. The Fund intends to declare dividends separately for each class of shares from net investment income, if any, on an annual basis, and to pay those dividends in March on a date selected by the Board of Trustees. The Fund has no fixed dividend rate and cannot guarantee that it will pay any dividends. All dividends (and any capital gains distributions will be reinvested automatically in additional Fund shares at net asset value for the account of the participating insurance company (unless the insurance company elects to have dividends or distributions paid in cash). CAPITAL GAINS. The Fund may realize capital gains on the sale of portfolio securities. If it does, it may make distributions out of any net short-term or long-term capital gains in March of each year. The Fund may make supplemental distributions of dividends and capital gains following the end of its fiscal year. There can be no assurance that the Fund will pay any capital gains distributions in a particular year. TAXES. For a discussion of the tax status of a variable annuity contract, a variable life insurance policy or other investment product of a participating insurance company, please refer to the accompanying prospectus of your participating insurance company. Because shares of the Fund may be purchased only through insurance company separate accounts for variable annuity contracts, variable life insurance policies or other investment products, dividends paid by the Fund from net investment income and distributions (if any) of net realized short-term and long-term capital gains will be taxable, if at all, to the participating insurance company. This information is only a summary of certain federal income tax information about an investment in Fund shares. You should consult with your tax advisor or your participating insurance company representative about the effect of an investment in the Fund under your contract or policy. Financial Highlights The Financial Highlights Table is presented to help you understand the Fund's financial performance for the past 5 fiscal years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by Deloitte & Touche LLP, the Fund's independent auditors, whose report, along with the Fund's financial statements, is included in the Statement of Additional Information, which is available on request. - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995 ========================================================================================================================= Per Share Operating Data Net asset value, beginning of period $36.67 $32.44 $27.24 $23.55 $17.68 - ------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income .06 .13 .25 .15 .25 Net realized and unrealized gain 14.68 7.28 6.62 5.46 6.10 - ------------------------------------------------------------------------------------------------------------------------- Total income from investment operations 14.74 7.41 6.87 5.61 6.35 - ------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.13) (.24) (.15) (.25) (.22) Distributions from net realized gain (1.44) (2.94) (1.52) (1.67) (.26) - ------------------------------------------------------------------------------------------------------------------------- Total dividends and distributions to shareholders (1.57) (3.18) (1.67) (1.92) (.48) - ------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $49.84 $36.67 $32.44 $27.24 $23.55 ====== ====== ====== ====== ====== ========================================================================================================================= Total Return, at Net Asset Value(1) 41.66% 24.00% 26.68% 25.20% 36.65% ========================================================================================================================= Ratios/Supplemental Data Net assets, end of period (in millions) $1,425 $769 $494 $286 $118 - ------------------------------------------------------------------------------------------------------------------------- Average net assets (in millions) $1,003 $609 $390 $152 $ 89 - ------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:(2) Net investment income 0.21% 0.50% 1.02% 1.08% 1.46% Expenses 0.70% 0.75%(3) 0.75%(3) 0.81%(3)(4) 0.79%(3) - ------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(5) 56% 56% 66% 65% 58%
1. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 2. Annualized for periods less than one full year. 3. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. 4. The expense ratio was 0.79% net of the voluntary reimbursement by the Manager. 5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended December 31, 1999, were $751,087,611 and $525,369,517, respectively. 9 INFORMATION AND SERVICES For More Information on Oppenheimer Capital Appreciation Fund/VA: The following additional information about Oppenheimer Capital Appreciation Fund is available without charge upon request: STATEMENT OF ADDITIONAL INFORMATION This document includes additional information about the Fund's investment policies, risks, and operations. It is incorporated by reference into this Prospectus (which means it is legally part of this Prospectus). ANNUAL AND SEMI-ANNUAL REPORTS Additional information about the Fund's investments and performance is available in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report includes a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. The Reports refer to the Fund as "Oppenheimer Growth Fund" (its name prior to May 1, 1999). - -------------------------------------------------------------------- By Telephone: Call OppenheimerFunds Services toll-free: 1-888-470-0861 - -------------------------------------------------------------------- - -------------------------------------------------------------------- - ---------------------------- Write to: By Mail: ------------------------------ OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217-5270 - -------------------------------------------------------------------- You can also obtain copies of the Statement of Additional Information and other Fund documents and reports by visiting the SEC's Public Reference Room in Washington, D.C. (Phone 1.202.942.8090) or the EDGAR database on the SEC's Internet web site at http://www.sec.gov. Copies may be obtained upon payment of a duplicating fee by electronic request at the SEC's e-mail address: publicinfo@secgov., or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. No one has been authorized to provide any information about the Fund or to make any representations about the Fund other than what is contained in this Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a solicitation of an offer to buy shares of the Fund, to any person in any state or other jurisdiction where it is unlawful to make such an offer. SEC File No. 811-4108 PR0610.001.0500 Printed on recycled paper. 890 Appendix to Prospectus of Oppenheimer Capital Appreciation Fund/VA (a series of Oppenheimer Variable Account Funds) Graphic material included in the Prospectus of Oppenheimer Capital Appreciation Fund/VA (the "Fund") under the heading "Annual Total Return (as of 12/31 each year)": A bar chart will be included in the Prospectus of the Fund depicting the annual total returns of a hypothetical $10,000 investment in shares of the Fund for each of the ten most recent calendar years, without deducting separate account expenses. Set forth below are the relevant data that will appear on the bar chart: Calendar Year Ended Annual Total Returns 12/31/90 -8.21% 12/31/91 25.54% 12/31/92 14.53% 12/31/93 7.25% 12/31/94 0.97% 12/31/95 36.66% 12/31/96 25.20% 12/31/97 26.69% 12/31/98 24.00% 12/31/99 41.66% Oppenheimer High Income Fund/VA A series of Oppenheimer Variable Account Funds Prospectus dated May 1, 2000 Oppenheimer High Income Fund/VA is a mutual fund that seeks a high level of current income. The Fund invests primarily in lower-grade, high-yield debt securities. Shares of the Fund are sold only as the underlying investment for variable life insurance policies, variable annuity contracts and other insurance company separate accounts. A prospectus for the insurance product you have selected accompanies this Prospectus and explains how to select shares of the Fund as an investment under that insurance product. This Prospectus contains important information As with all mutual funds, the about the Fund's objective, its Securities investment policies, strategies And Exchange Commission has not and risks. Please read this approved or disapproved the Fund's Prospectus (and your insurance securities nor has it determined product prospectus) carefully that before you invest and keep them This Prospectus is accurate or for future reference about your complete. account. It is a criminal offense to represent otherwise. - ------------------------------------ (OppenheimerFunds logo) Contents About the Fund - ------------------------------------------------------------------------------- The Fund's Objective and Investment Strategies Main Risks of Investing in the Fund The Fund's Past Performance About the Fund's Investments How the Fund is Managed Investing in the Fund - ------------------------------------------------------------------------------- How to Buy and Sell Shares Dividends, Capital Gains and Taxes Financial Highlights About the Fund The Fund's Objective and Investment Strategies - ------------------------------------------------------------------------------- What Is the Fund's Investment Objective? The Fund seeks a high level of current income from investment in high-yield fixed income securities. - ------------------------------------------------------------------------------- What Does the Fund Invest In? The Fund invests mainly in a variety of high-yield fixed-income securities of domestic and foreign issuers. The Fund's investments typically include: o lower-grade, high-yield domestic and foreign corporate bonds and notes (these are the main focus of the Fund's portfolio), o mortgage-related securities and asset-backed securities, o preferred stocks, o "structured" notes, o foreign government bonds and notes, and o "zero-coupon" and "step" bonds. Under normal market conditions, the Fund invests at least 65% of its total assets, and can invest without limit, in high-yield, lower-grade fixed-income securities, commonly called "junk bonds." Lower-grade securities are below investment-grade securities, and are rated below "Baa" by Moody's Investors Service or below "BBB" by Standard & Poor's or have comparable ratings by other nationally-recognized rating organizations (or, in the case of unrated securities, have comparable ratings assigned by the Fund's investment manager, OppenheimerFunds, Inc.). The Fund's foreign investments can include securities of issuers in developed markets as well as emerging markets, which have special risks. The Fund can also invest in loan participations and can use hedging instruments and certain derivative investments, primarily mortgage-related securities and "structured" notes, to try to increase income or to try to manage investment risks. These investments are more fully explained in "About the Fund's Investments," below. |X| How Do the Portfolio Managers Decide What Securities to Buy or Sell? In selecting securities for the Fund, the Fund's portfolio managers analyze the overall investment opportunities and risks in different market sectors, industries and countries. The portfolio managers' overall strategy is to build a broadly diversified portfolio of debt securities to help moderate the special risks of investing in lower-grade, high yield debt instruments. The portfolio managers currently focus on the factors below (some of which may vary in particular cases and may change over time), looking for: |_| Securities offering high current income, |_| Issuers in industries that are currently undervalued, |_| Issuers with strong cash flows, |_| Changes in the business cycle that might affect corporate profits. The Fund's diversification strategies, both with respect to securities issued by different companies and within different industries, are intended to reduce the volatility of the Fund's share prices while providing opportunities for high current income. Who Is the Fund Designed For? The Fund's shares are available only as an investment option under certain variable annuity contracts, variable life insurance policies and investment plans offered through insurance company separate accounts of participating insurance companies, for investors seeking high current income from a portfolio emphasizing lower-grade domestic and foreign debt securities. Those investors should be willing to assume the special risks of lower-grade debt securities. Since the Fund's income level will fluctuate, it is not designed for investors needing an assured level of current income. Also, the Fund does not seek capital appreciation. The Fund is designed as a long-term investment. However, the Fund is not a complete investment program. Main Risks of Investing in the Fund All investments carry risks to some degree. The Fund's investments in debt securities are subject to changes in their value from a number of factors described below. There is also the risk that the value of your investment could be eroded over time by the effects of inflation and that poor security selection by the Fund's investment manager, OppenheimerFunds, Inc., will cause the Fund to underperform other funds having similar objectives. These risks collectively form the risk profile of the Fund, and can affect the value of the Fund's investments, its investment performance and its price per share. These risks mean that you can lose money by investing in the Fund. When you redeem your shares, they may be worth more or less than what you paid for them. However, changes in the overall market prices of securities and the income they pay can occur at any time. The share price and yield of the Fund will change daily based on changes in market prices of securities and market conditions, and in response to other economic events. There is no assurance that the Fund will achieve its investment objective. |X| Credit Risk. Debt securities are subject to credit risk. Credit risk relates to the ability of the issuer of a security to make interest and principal payments on the security as they become due. If the issuer fails to pay interest, the Fund's income might be reduced, and if the issuer fails to repay principal, the value of that security and of the Fund's shares might be reduced. The Fund's investments in debt securities, particularly high-yield, lower-grade debt securities, are subject to risks of default. |_| Special Risks of Lower-Grade Securities. Because the Fund can invest without limit in securities below investment grade to seek high income and emphasizes these securities in its investment program, the Fund's credit risks are greater than those of funds that buy only investment-grade bonds. Lower-grade debt securities may be subject to greater market fluctuations and greater risks of loss of income and principal than investment-grade debt securities. Securities that are (or that have fallen) below investment grade are exposed to a greater risk that the issuers of those securities might not meet their debt obligations. These risks can reduce the Fund's share prices and the income it earns. |X| Interest Rate Risks. The values of debt securities, including government securities, are subject to change when prevailing interest rates change. When interest rates fall, the values of already-issued debt securities generally rise. When interest rates rise, the values of already-issued debt securities generally fall, and they may sell at a discount from their face amount. The magnitude of these fluctuations will often be greater for longer-term debt securities than shorter-term debt securities. The Fund's share prices can go up or down when interest rates change because of the effect of the changes on the value of the Fund's investments in debt securities. |X| Risks of Foreign Investing. The Fund can invest its assets without limit in foreign debt securities and can buy securities of governments and companies in both developed markets and emerging markets. The Fund normally invests part of its assets in foreign securities. While foreign securities offer special investment opportunities, there are also special risks that can reduce the Fund's share prices and returns. The change in value of a foreign currency against the U.S. dollar will result in a change in the U.S. dollar value of securities denominated in that foreign currency. Currency rate changes can also affect the distributions the Fund makes from the income it receives from foreign securities as foreign currency values change against the U.S. dollar. Foreign investing can result in higher transaction and operating costs for the Fund. Foreign issuers are not subject to the same accounting and disclosure requirements that U.S. companies are subject to. The value of foreign investments may be affected by exchange control regulations, expropriation or nationalization of a company's assets, foreign taxes, delays in settlement of transactions, changes in governmental economic or monetary policy in the U.S. or abroad, or other political and economic factors. |X| Prepayment Risk. Prepayment risk occurs when the mortgages underlying a mortgage-related security are prepaid at a rate faster than anticipated (usually when interest rates fall) and the issuer of the security can prepay the principal prior to the security's maturity. Mortgage-related securities that are subject to prepayment risk, including the mortgage-related securities that the Fund buys, generally offer less potential for gains when prevailing interest rates decline, and have greater potential for loss than other debt securities when interest rates rise. The impact of prepayments on the price of a security may be difficult to predict and may increase the volatility of the price. The Fund might have to reinvest the proceeds of prepaid securities in new securities offering lower yields. Additionally, the Fund can buy mortgage-related securities at a premium. Accelerated prepayments on those securities could cause the Fund to lose the portion of its principal investment represented by the premium the Fund paid. |X| There are Special Risks in Using Derivative Investments. The Fund can use derivatives to seek increased income or to try to hedge investment risks. In general terms, a derivative investment is an investment contract whose value depends on (or is derived from) the value of an underlying asset, interest rate or index. Options, futures, interest rate swaps, structured notes and mortgage-related securities are examples of derivatives the Fund can use. If the issuer of the derivative does not pay the amount due, the Fund can lose money on the investment. Also, the underlying security or investment on which the derivative is based, and the derivative itself, might not perform the way the Manager expected it to perform. If that happens, the Fund's share price could decline or the Fund could get less income than expected. The Fund has limits on the amount of particular types of derivatives it can hold. However, using derivatives can cause the Fund to lose money on its investment and/or increase the volatility of its share prices. How Risky is the Fund Overall? In the short term, the values of debt securities can fluctuate substantially because of interest rate changes. Foreign debt securities, particularly those of issuers in emerging markets, and high yield securities can be volatile, and the price of the Fund's shares can go up and down substantially because of events affecting foreign markets or issuers or events affecting the high yield market. The Fund's security diversification strategy may help cushion the Fund's shares prices from that volatility, but debt securities are subject to other credit and interest rate risks that can affect their values and the share prices of the Fund. The Fund generally has more risks than bond funds that focus on U. S. government securities and investment-grade bonds but may be less volatile than funds that focus solely on investments in a single foreign sector, such as emerging markets. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund's Past Performance The bar chart and table below show one measure of the risks of investing in the Fund, by showing changes in the Fund's performance from year to year for the last ten calendar years and by showing how the average annual total returns of the Fund's shares compare to those of a broad-based market index. The Fund's past investment performance is not necessarily an indication of how the Fund will perform in the future. Annual Total Returns (as of 12/31 each year) [See appendix to prospectus for data in bar chart showing annual total returns] For the period from 1/1/00 through 3/31/00, the Fund's cumulative return (not annualized) was -1.35%. Charges imposed by the separate accounts that invest in the Fund are not included in the calculations of return in this bar chart, and if those charges were included, the returns would be less than those shown. During the period shown in the bar chart, the highest return (not annualized) for a calendar quarter was 13.07% (1st Q '91) and the lowest return (not annualized) for a calendar quarter was -7.12% (3rd Q '98). - ---------------------------------------------------------------------- Average Annual Total Returns for 1 Year 5 Years 10 Years the periods ended December 31, 1999 - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Oppenheimer High 4.29% 10.24% 12.65% Income Fund/VA (inception 4/30/86) - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Merrill Lynch 1.57% 9.61% 10.79% High Yield Master Index - ---------------------------------------------------------------------- The Fund's returns in the table measure the performance of a hypothetical account without deducting charges imposed by the separate accounts that invest in the Fund and assume that all dividends and capital gains distributions have been reinvested in additional shares. The Fund's performance is compared to the Merrill Lynch High Yield Master Index, an unmanaged index of U.S. corporate and government bonds that is a measure of the performance of the high-yield corporate bond market. It must be remembered that the index performance reflects the reinvestment of income but does not consider the effects of transaction costs. Also, the Fund may have investments that vary from the index. The Fund has two classes of shares. This Prospectus offers only the class of shares that has no name designation, and the performance shown is for that class. The other class of shares, Service shares, is not offered in this Prospectus. The Fund's total returns should not be expected to be the same as the returns of other Oppenheimer funds, even if both funds have the same portfolio managers and/or similar names. About the Fund's Investments The Fund's Principal Investment Policies. The allocation of the Fund's portfolio among different types of investments will vary over time based upon the Manager's evaluation of economic and market trends. The Fund's portfolio might not always include all of the different types of investments described below. The Statement of Additional Information contains more details about the Fund's investment policies and risks. The Fund's investment Manager, OppenheimerFunds, Inc., tries to reduce risks by carefully researching securities before they are purchased, and in some cases by using hedging techniques. The Fund attempts to reduce its exposure to market risks by diversifying its investments, that is, by not holding a substantial percentage of securities of any one issuer and by not investing too great a percentage of the Fund's assets in any one issuer. Also, the Fund does not concentrate 25% or more of its investments in the securities of any one foreign government or in the debt and equity securities of companies in any one industry. A debt security is essentially a loan by the buyer to the issuer of the debt security. The issuer promises to pay back the principal amount of the loan and normally pays interest, at a fixed or variable rate, on the debt while it is outstanding. The debt securities the Fund buys may be rated by nationally recognized rating organizations or they may be unrated securities assigned an equivalent rating by the Manager. While the Fund's investments may be investment grade or below investment grade in credit quality, it is expected to invest mainly in lower-grade securities, commonly called "junk bonds." They typically offer higher yields than investment-grade bonds, because investors assume greater risks of default of these securities. The ratings definitions of the principal national rating organizations are included in Appendix A to the Statement of Additional Information. The Fund has no limit on the range of maturity of the debt securities it can buy, and therefore may hold obligations with short, medium or long-term maturities. However, longer term securities typically offer higher yields than shorter-term securities and therefore the Fund will focus on longer-term debt to seek higher income. However, longer-term securities fluctuate more in price when interest rates change than shorter-term securities. The Fund can invest some of its assets in other types of securities, including common stocks and other equity securities of foreign and U.S. companies. However, the Fund does not anticipate having significant investments in those types of securities as part of its normal portfolio strategy. |X| High-Yield, Lower-Grade Fixed-Income Securities of U.S. Issuers. There are no restrictions on the amount of the Fund's assets that can be invested in debt securities below investment grade. The Fund can invest in securities rated as low as "C" or "D", in unrated bonds or bonds which are in default at the time the Fund buys them. While securities rated "Baa" by Moody's or "BBB" by S&P are considered "investment grade," they have some speculative characteristics. The Manager does not rely solely on ratings issued by rating organizations when selecting investments for the Fund. The Fund can buy unrated securities that offer high current income. The Manager assigns a rating to an unrated security that is equivalent to the rating of a rated security that the Manager believes offers comparable yields and risks. While investment-grade securities are subject to risks of non-payment of interest and principal, generally, higher yielding lower-grade bonds, whether rated or unrated, have greater risks than investment-grade securities. They may be subject to greater market fluctuations and risk of loss of income and principal than investment-grade securities. There may be less of a market for them and therefore they may be harder to sell at an acceptable price. There is a relatively greater possibility that the issuer's earnings may be insufficient to make the payments of interest and principal due on the bonds. These risks mean that the Fund may not achieve the expected income from lower-grade securities, and that the Fund's net asset value per share may be affected by declines in value of these securities. |X| CMOs and Mortgage-Backed Securities. The Fund can invest a substantial portion of its assets in mortgage-backed securities issued by private issuers, which do not offer the credit backing of U.S. government securities. Primarily these include multi-class debt or pass-through certificates secured by mortgage loans. They may be issued by banks, savings and loans, mortgage bankers and other non-governmental issuers. Private issuer mortgage-backed securities are subject to the credit risks of the issuers (as well as the interest rate risks and prepayment risks of CMOs, discussed below), although in some cases they may be supported by insurance or guarantees. |X| Mortgage-Related U.S. Government Securities. The Fund can buy interests in pools of residential or commercial mortgages, in the form of collateralized mortgage obligations ("CMOs") and other "pass-through" mortgage securities. CMOs that are U.S. government securities have collateral to secure payment of interest and principal. They may be issued in different series each having different interest rates and maturities. The collateral is either in the form of mortgage pass-through certificates issued or guaranteed by a U.S. agency or instrumentality or mortgage loans insured by a U.S. government agency. The Fund can have substantial amounts of its assets invested in mortgage-related U.S. government securities. The prices and yields of CMOs are determined, in part, by assumptions about the cash flows from the rate of payments of the underlying mortgages. Changes in interest rates may cause the rate of expected prepayments of those mortgages to change. In general, prepayments increase when general interest rates fall and decrease when interest rates rise. If prepayments of mortgages underlying a CMO occur faster than expected when interest rates fall, the market value and yield of the CMO could be reduced. Additionally, the Fund may have to reinvest the prepayment proceeds in other securities paying interest at lower rates, which could reduce the Fund's yield. If interest rates rise rapidly, prepayments may occur at slower rates than expected, which could have the effect of lengthening the expected maturity of a short or medium-term security. That could cause its value to fluctuate more widely in response to changes in interest rates. In turn, this could cause the value of the Fund's shares to fluctuate more. |X| Asset-Backed Securities. The Fund can buy asset-backed securities, which are fractional interests in pools of loans collateralized by the loans or other assets or receivables. They are issued by trusts and special purpose corporations that pass the income from the underlying pool to the buyer of the interest. These securities are subject to the risk of default by the issuer as well as by the borrowers of the underlying loans in the pool. |X| Foreign Debt Securities. The Fund can buy debt securities issued by foreign governments and companies, as well as "supra-national" entities, such as the World Bank. The Fund will not invest 25% or more of its total assets in debt securities of any one foreign government or in debt securities of companies in any one industry. The Fund has no requirements as to the maturity range of the foreign debt securities it can buy, or as to the market capitalization range of the issuers of those securities. The Fund's foreign debt investments can be denominated in U.S. dollars or in foreign currencies. The Fund will buy foreign currency only in connection with the purchase and sale of foreign securities and not for speculation. |_| Special Risks of Emerging and Developing Markets. Securities of issuers in emerging and developing markets may offer special investment opportunities but present risks not found in more mature markets. Those securities may be more difficult to sell at an acceptable price and their prices may be more volatile than securities of issuers in more developed markets. They may be very speculative. Settlements of trades may be subject to greater delays so that the Fund may not receive the proceeds of a sale of a security on a timely basis. These countries might have less developed trading markets and exchanges. Emerging market countries may have less developed legal and accounting systems, and investments may be subject to greater risks of government restrictions on withdrawing the sales proceeds of securities from the country. Economies of developing countries may be more dependent on relatively few industries that may be highly vulnerable to local and global changes. Governments may be more unstable and present greater risks of nationalization or restrictions on foreign ownership of securities of local companies. |X| "Structured" Notes. The Fund can buy "structured" notes, which are specially-designed derivative debt investments. Their principal payments or interest payments are linked to the value of an index (such as a currency or securities index) or commodity. The terms of the instrument may be "structured" by the purchaser (the Fund) and the borrower issuing the note. The principal and/or interest payments depend on the performance of one or more other securities or indices, and the values of these notes will therefore fall or rise in response to the changes in the values of the underlying security or index. They are subject to both credit and interest rate risks and therefore the Fund could receive more or less than it originally invested when the notes mature, or it might receive less interest than the stated coupon payment if the underlying investment or index does not perform as anticipated. Their values may be very volatile and they may have a limited trading market, making it difficult for the Fund to sell its investment at an acceptable price. |X| Special Portfolio Diversification Requirements. To enable a variable annuity or variable life insurance contract based on an insurance company separate account to qualify for favorable tax treatment under the Internal Revenue Code, the underlying investments must follow special diversification requirements that limit the percentage of assets that can be invested in securities of particular issuers. The Fund's investment program is managed to meet those requirements, in addition to other diversification requirements under the Internal Revenue Code and the Investment Company Act that apply to publicly-sold mutual funds. Failure by the Fund to meet those special requirements could cause earnings on a contract owner's interest in an insurance company separate account to be taxable income. Those diversification requirements might also limit, to some degree, the Fund's investment decisions in a way that could reduce its performance. |X| Can the Fund's Investment Objective and Policies Change? The Fund's Board of Trustees can change non-fundamental investment policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. Fundamental policies cannot be changed without the approval of a majority of the Fund's outstanding voting shares. The Fund's investment objective is a fundamental policy. Investment restrictions that are fundamental policies are listed in the Statement of Additional Information. An investment policy is not fundamental unless this Prospectus or the Statement of Additional Information says that it is. |X| Portfolio Turnover. The Fund may engage in short-term trading to try to achieve its objective and is expected to have a portfolio turnover rate over 100% annually. Portfolio turnover affects brokerage and transaction costs the Fund pays. The Financial Highlights table below shows the Fund's portfolio turnover rates during prior fiscal years. Other Investment Strategies. To seek its objective, the Fund can also use the investment techniques and strategies described below. The Manager might not always use all of them. These techniques involve risks, although some are designed to help reduce overall investment or market risks. |X| U.S. Government Securities. The Fund can invest in securities issued or guaranteed by the U.S. Treasury or other government agencies or federally-chartered corporate entities referred to as "instrumentalities." These are referred to as "U.S. government securities" in this Prospectus. |_| U.S. Treasury Obligations. These include Treasury bills (which have maturities of one year or less when issued), Treasury notes (which have maturities of from one to ten years), and Treasury bonds (which have maturities of more than ten years). Treasury securities are backed by the full faith and credit of the United States as to timely payments of interest and repayments of principal. The Fund can also buy U. S. Treasury securities that have been "stripped" of their coupons by a Federal Reserve Bank, zero-coupon U.S. Treasury securities described below, and Treasury Inflation-Protection Securities ("TIPS"). |_| Obligations of U.S. Government Agencies or Instrumentalities. These include direct obligations and mortgage-related securities that have different levels of credit support from the U.S. government. Some are supported by the full faith and credit of the U.S. government, such as Government National Mortgage Association pass-through mortgage certificates (called "Ginnie Maes"). Some are supported by the right of the issuer to borrow from the U.S. Treasury under certain circumstances, such as Federal National Mortgage Association bonds ("Fannie Maes"). Others are supported only by the credit of the entity that issued them, such as Federal Home Loan Mortgage Corporation obligations ("Freddie Macs"). |X| Zero-Coupon and "Stripped" Securities. Some of the government and corporate debt securities the Fund buys are zero-coupon bonds that pay no interest. They are issued at a substantial discount from their face value. "Stripped" securities are the separate income or principal components of a debt security. Some CMOs or other mortgage-related securities may be stripped, with each component having a different proportion of principal or interest payments. One class might receive all the interest and the other all the principal payments. Zero-coupon and stripped securities are subject to greater fluctuations in price from interest rate changes than conventional interest-bearing securities. The Fund may have to pay out the imputed income on zero-coupon securities without receiving the actual cash currently. Interest-only securities are particularly sensitive to changes in interest rates. The values of interest-only mortgage-related securities are also very sensitive to prepayments of underlying mortgages. Principal-only securities are also sensitive to changes in interest rates. When prepayments tend to fall, the timing of the cash flows to these securities increases, making them more sensitive to changes in interest rates. The market for some of these securities may be limited, making it difficult for the Fund to dispose of its holdings at an acceptable price. The Fund can invest up to 50% of its total assets in zero-coupon securities issued by either the U.S. Treasury or companies. |X| Participation Interests in Loans. These securities represent an undivided fractional interest in a loan obligation by a borrower. They are typically purchased from banks or dealers that have made the loan or are members of the loan syndicate. The loans may be to foreign or U.S. companies. The Fund does not invest more than 5% of its net assets in participation interests of any one borrower. They are subject to the risk of default by the borrower. If the borrower fails to pay interest or repay principal, the Fund can lose money on its investment. |X| Preferred Stock. Unlike common stock, preferred stock typically has a stated dividend rate. Preferred stock dividends may be cumulative (they remain a liability of the company until they are paid) or non-cumulative. When prevailing interest rates rise, the value of preferred stock having a fixed dividend rate tends to fall. The right to payment of dividends on preferred stock is generally subordinate to the rights of a corporation's debt securities. |X| Illiquid and Restricted Securities. Investments may be illiquid because they do not have an active trading market, making it difficult to value them or dispose of them promptly at an acceptable price. A restricted security is one that has a contractual restriction on its resale or which cannot be sold publicly until it is registered under the Securities Act of 1933. The Fund will not invest more than 15% of its net assets in illiquid or restricted securities. Certain restricted securities that are eligible for resale to qualified institutional purchasers may not be subject to that limit. The Manager monitors holdings of illiquid securities on an ongoing basis to determine whether to sell any holdings to maintain adequate liquidity. |X| Derivative Investments. The Fund can invest in a number of different kinds of "derivative" investments. In the broadest sense, exchange-traded options, futures contracts, structured notes, CMOs and other hedging instruments the Fund can use may be considered "derivative investments." In addition to using hedging instruments, the Fund can use other derivative investments because they offer the potential for increased income. Markets underlying securities and indices may move in a direction not anticipated by the Manager. Interest rate and stock market changes in the U.S. and abroad may also influence the performance of derivatives. As a result of these risks the Fund could realize less principal or income from the investment than expected. Certain derivative investments held by the Fund may be illiquid. |X| Hedging. The Fund can buy and sell futures contracts, put and call options, forward contracts and options on futures and broadly-based securities indices. These are all referred to as "hedging instruments." The Fund does not use hedging instruments for speculative purposes, and has limits on its use of them. The Fund is not required to use hedging instruments in seeking its goal. The Fund could buy and sell options, futures and forward contracts for a number of purposes. It might do so to try to manage its exposure to the possibility that the prices of its portfolio securities may decline, or to establish a position in the securities market as a temporary substitute for purchasing individual securities. It might do so to try to manage its exposure to changing interest rates. Options trading involves the payment of premiums and has special tax effects on the Fund. There are also special risks in particular hedging strategies. For example, if a covered call written by the Fund is exercised on an investment that has increased in value, the Fund will be required to sell the investment at the call price and will not be able to realize any profit if the investment has increased in value above the call price. In writing a put, there is a risk that the Fund may be required to buy the underlying security at a disadvantageous price. If the Manager used a hedging instrument at the wrong time or judged market conditions incorrectly, the strategy could reduce the Fund's return. The Fund could also experience losses if the prices of its futures and options positions were not correlated with its other investments or if it could not close out a position because of an illiquid market. Temporary Defensive Investments. For cash management purposes, the Fund may hold cash equivalents such as commercial paper, repurchase agreements, Treasury bills and other short-term U.S. government securities. In times of adverse or unstable market or economic conditions, the Fund can invest up to 100% of its assets in temporary defensive investments. These would ordinarily be U. S. government securities, highly-rated commercial paper, bank deposits or repurchase agreements. To the extent the Fund invests defensively in these securities, it might not achieve its investment objective. How the Fund Is Managed The Manager. The Manager chooses the Fund's investments and handles its day-to-day business. The Manager carries out its duties, subject to the policies established by the Fund's Board of Trustees, under an investment advisory agreement that states the Manager's responsibilities. The agreement sets the fees the Fund pays to the Manager and describes the expenses that the Fund is responsible to pay to conduct its business. The Manager has been an investment adviser since 1960. The Manager (including subsidiaries and affiliates) manages more than $120 billion as of March 31, 2000, including other Oppenheimer funds with more than 5 million shareholder accounts. The Manager is located at Two World Trade Center, 34th Floor, New York, New York 10048-0203. |X| Portfolio Managers. The portfolio managers of the Fund are Thomas P. Reedy and David P. Negri. They are the persons principally responsible for the day-to-day management of the Fund's portfolio, Mr. Reedy since January 1998 and Mr. Negri since May 1999. Both are Vice Presidents of the Fund, and Mr. Reedy is Vice President and Mr. Negri is Senior Vice President of the Manager. They also serve as officers and portfolio managers for other Oppenheimer funds. Mr. Negri has been employed by the Manager since June 1989, Mr. Reedy since 1993. |X| Advisory Fees. Under the Investment Advisory Agreement, the Fund pays the Manager an advisory fee at an annual rate that declines on additional assets as the Fund grows: 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% on the next $200 million and 0.50% of average annual net assets over $1 billion. The Fund's management fee for its last fiscal year ended December 31, 1999, was 0.74% of the Fund's average annual net assets. |X| Possible Conflicts of Interest. The Fund offers its shares to separate accounts of different insurance companies that are not affiliated with each other, as an investment for their variable annuity, variable life and other investment product contracts. While the Fund does not foresee any disadvantages to contract owners from these arrangements, it is possible that the interests of owners of different contracts participating in the Fund through different separate accounts might conflict. For example, a conflict could arise because of differences in tax treatment. The Fund's Board has procedures to monitor the portfolio for possible conflicts to determine what action should be taken. If a conflict occurs, the Board might require one or more participating insurance company separate accounts to withdraw their investments in the Fund. That could force the Fund to sell securities at disadvantageous prices, and orderly portfolio management could be disrupted. Also, the Board might refuse to sell shares of the Fund to a particular separate account, or could terminate the offering of the Fund's shares if required to do so by law or if it would be in the best interests of the shareholders of the Fund to do so. - ------------------------------------------------------------------------------- Investing in the Fund - ------------------------------------------------------------------------------- How to Buy and Sell Shares How Are Shares Purchased? Shares of the Fund may be purchased only by separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. Individual investors cannot buy shares of the Fund directly. Please refer to the accompanying prospectus of the participating insurance company for information on how to select the Fund as an investment option for that variable life insurance policy, variable annuity or other investment product. The Fund reserves the right to refuse any purchase order when the Manager believes it would be in the Fund's best interests to do so. - ------------------------------------------------------------------------------- Information about your investment in the Fund through your variable annuity contract, variable life insurance policy or other plan can be obtained only from your participating insurance company or its servicing agent. The Fund's Transfer Agent does not hold or have access to those records. Instructions for buying or selling shares of the Fund should be given to your insurance company or its servicing agent, not directly to the Fund or its Transfer Agent. - ------------------------------------------------------------------------------- |X| At What Price Are Shares Sold? Shares are sold at their offering price, which is the net asset value per share. The Fund does not impose any sales charge on purchases of its shares. If there are any charges imposed under the variable annuity, variable life or other contract through which Fund shares are purchased, they are described in the accompanying prospectus of the participating insurance company. The net asset value per share is determined as of the close of The New York Stock Exchange on each day that the exchange is open for trading (referred to in this Prospectus as a "regular business day"). The Exchange normally closes at 4:00 P.M., New York time, but may close earlier on some days. All references to time in this Prospectus mean "New York time." The net asset value per share is determined by dividing the value of the Fund's net assets attributable to a class of shares by the number of shares of that class that are outstanding. The Fund's Board of Trustees has established procedures to value the Fund's securities to determine the Fund's net asset value, in general based on market values. The Board has adopted special procedures for valuing illiquid and restricted securities and securities for which market values cannot be readily obtained. Because some foreign securities trade in markets and on exchanges that operate on weekends and U.S. holidays, the values of some of the Fund's foreign investments might change significantly on days when shares of the Fund cannot be purchased or redeemed. The offering price that applies to an order from a participating insurance company is based on the next calculation of the net asset value per share that is made after the insurance company (as the Fund's designated agent to receive purchase orders) receives a purchase order from its contract owners to purchase Fund shares on a regular business day, provided that the Fund receives the order from the insurance company, generally by 9:30 A.M. on the next regular business day at the offices of its Transfer Agent in Colorado. |X| Classes of Shares. The Fund may offer two different classes of shares. The class of shares offered by this Prospectus has no "name" designation. The other class is designated as Service shares. The different classes of shares represent investments in the same portfolio of securities but are expected to be subject to different expenses and will likely have different share prices. This Prospectus may not be used to offer or sell Service shares. A description of the distribution and service plans that affect only Service shares of the Fund is contained in the Fund's prospectus that offers Service shares. That prospectus may be obtained without charge by contacting any participating insurance sponsor that offers Service shares of the Funds as an investment for its separate accounts. You can also obtain a copy from OppenheimerFunds Distributor, Inc., by calling toll-free 1-888-470-0861. How Are Shares Redeemed? As with purchases, only the participating insurance companies that hold Fund shares in their separate accounts for the benefit of variable annuity contracts, variable life insurance policies or other investment products can place orders to redeem shares. Contract holders and policy holders should not directly contact the Fund or its transfer agent to request a redemption of Fund shares. Contract owners should refer to the withdrawal or surrender instructions in the accompanying prospectus of the participating insurance company. The share price that applies to a redemption order is the next net asset value per share that is determined after the participating insurance company (as the Fund's designated agent) receives a redemption request on a regular business day from its contract or policy holder, provided that the Fund receives the order from the insurance company by 9:30 A.M. the next regular business day at the office of its Transfer Agent in Denver, Colorado. The Fund normally sends payment by Federal Funds wire to the insurance company's account the day after the Fund receives the order (and no later than 7 days after the Fund's receipt of the order). Under unusual circumstances determined by the Securities and Exchange Commission, payment may be delayed or suspended. Dividends, Capital Gains and Taxes Dividends. The Fund intends to declare dividends separately for each class of shares from net investment income on an annual basis, and to pay those dividends in March on a date selected by the Board of Trustees. The Fund has no fixed dividend rate and cannot guarantee that it will pay any dividends. All dividends (and any capital gains distributions will be reinvested automatically in additional Fund shares at net asset value for the account of the participating insurance company (unless the insurance company elects to have dividends or distributions paid in cash). Capital Gains. The Fund may realize capital gains on the sale of portfolio securities. If it does, it may make distributions out of any net short-term or long-term capital gains in March of each year. The Fund may make supplemental distributions of dividends and capital gains following the end of its fiscal year. There can be no assurance that the Fund will pay any capital gains distributions in a particular year. Taxes. For a discussion of the tax status of a variable annuity contract, a variable life insurance policy or other investment product of a participating insurance company, please refer to the accompanying prospectus of your participating insurance company. Because shares of the Fund may be purchased only through insurance company separate accounts for variable annuity contracts, variable life insurance policies or other investment products, dividends paid by the Fund from net investment income and distributions (if any) of net realized short-term and long-term capital gains will be taxable, if at all, to the participating insurance company. This information is only a summary of certain federal income tax information about an investment in Fund shares. You should consult with your tax advisor or your participating insurance company representative about the effect of an investment in the Fund under your contract or policy. Financial Highlights The Financial Highlights Table is presented to help you understand the Fund's financial performance for the past 5 fiscal years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by Deloitte & Touche LLP, the Fund's independent auditors, whose report, along with the Fund's financial statements, is included in the Statement of Additional Information, which is available on request. - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995 =========================================================================================================================== Per Share Operating Data Net asset value, beginning of period $11.02 $11.52 $11.13 $10.63 $ 9.79 - --------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 1.01 .95 .94 .97 .98 Net realized and unrealized gain (loss) (.55) (.90) .37 .58 .94 - --------------------------------------------------------------------------------------------------------------------------- Total income from investment operations .46 .05 1.31 1.55 1.92 - --------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.76) (.25) (.91) (1.05) (1.08) Distributions from net realized gain -- (.30) (.01) -- -- - --------------------------------------------------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (.76) (.55) (.92) (1.05) (1.08) - --------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.72 $11.02 $11.52 $11.13 $10.63 ====== ====== ====== ====== ====== =========================================================================================================================== Total Return, at Net Asset Value(1) 4.29% 0.31% 12.21% 15.26% 20.37% =========================================================================================================================== Ratios/Supplemental Data Net assets, end of period (in thousands) $340,829 $328,563 $291,323 $191,293 $133,451 - --------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $340,519 $322,748 $223,617 $157,203 $115,600 - --------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:(2) Net investment income 9.61% 8.65% 8.88% 9.18% 9.81% Expenses 0.75% 0.78%(3) 0.82%(3) 0.81%(3) 0.81%(3) - --------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(4) 33% 161% 168% 125% 107%
1. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 2. Annualized for periods less than one full year. 3. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. 4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended December 31, 1999, were $147,560,583 and $101,280,643, respectively. 11 INFORMATION AND SERVICES For More Information About Oppenheimer High Income Fund/VA: The following additional information about the Fund is available without charge upon request: Statement of Additional Information This document includes additional information about the Fund's investment policies, risks, and operations. It is incorporated by reference into this Prospectus (which means it is legally part of this Prospectus). Annual and Semi-Annual Reports Additional information about the Fund's investments and performance is available in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report includes a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. - ---------------------------------------------------------------------------- How to Get More Information: - ---------------------------------------------------------------------------- You can request the Statement of Additional Information, the Annual and Semi-Annual Reports, and other information about the Fund or instructions on how to contact the sponsor of your insurance product: - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- By Telephone: - ---------------------------------------------------------------------------- Call OppenheimerFunds Services toll-free: 1-888-470-0861 By Mail: Write to: OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217-5270 - ---------------------------------------------------------------------------- You can also obtain copies of the Statement of Additional Information and other Fund documents and reports by visiting the SEC's Public Reference Room in Washington, D.C. (Phone 1.202.942.8090) or the SEC's EDGAR database on the Internet web site at http://www.sec.gov. Copies may be obtained upon payment of a duplicating fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov, or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. - ---------------------------------------------------------------------------- No one has been authorized to provide any information about the Fund or to make any representations about the Fund other than what is contained in this Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a solicitation of an offer to buy shares of the Fund, to any person in any state or other jurisdiction where it is unlawful to make such an offer. SEC File No. 811-4108 PR0640.001.0500 Printed on recycled paper. 67890 Appendix to Prospectus of Oppenheimer High Income Fund/VA (a series of Oppenheimer Variable Account Funds) Graphic material included in the Prospectus of Oppenheimer High Income Fund/VA (the "Fund") under the heading "Annual Total Return (as of 12/31 each year)": A bar chart will be included in the Prospectus of the Fund depicting the annual total returns of a hypothetical $10,000 investment in shares of the Fund for each of the ten most recent calendar years, without deducting separate account expenses. Set forth below are the relevant data that will appear on the bar chart: Calendar Year Ended Annual Total Returns 12/31/90 4.65% 12/31/91 33.91% 12/31/92 17.92% 12/31/93 26.34% 12/31/94 -3.18% 12/31/95 20.37% 12/31/96 15.25% 12/31/97 12.22% 12/31/98 0.31% 12/31/99 4.29% 2 Oppenheimer Aggressive Growth Fund/VA A series of Oppenheimer Variable Account Funds Prospectus dated May 1, 2000 Oppenheimer Aggressive Growth Fund/VA is a mutual fund that seeks capital appreciation by investing in "growth type" companies. It currently emphasizes investments in stocks of mid-cap companies. Shares of the Fund are sold only as the underlying investment for variable life insurance policies, variable annuity contracts and other insurance company separate accounts. A prospectus for the insurance product you have selected accompanies this Prospectus and explains how to select shares of the Fund as an investment under that insurance product. This Prospectus contains important information about the As with all mutual funds, the Fund's objective, its investment Securities policies, strategies and risks. and Exchange Commission has not Please read this Prospectus (and approved or disapproved the Fund's your insurance product securities nor has it determined prospectus) carefully before you that invest and keep them for future this Prospectus is accurate or reference about your account. complete. It is a criminal offense to represent otherwise. - ------------------------------------ (OppenheimerFunds logo) CONTENTS ABOUT THE FUND The Fund's Objective and Investment Strategies Main Risks of Investing in the Fund The Fund's Past Performance About the Fund's Investments How the Fund is Managed INVESTING IN THE FUND How to Buy and Sell Shares Dividends, Capital Gains and Taxes Financial Highlights ABOUT THE FUND The Fund's Investment Objective and Strategies WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks capital appreciation by investing in "growth type" companies. WHAT DOES THE FUND MAINLY INVEST IN? The Fund invests mainly in equity securities, such as common stocks and can invest in other equity securities, such as preferred stocks and securities convertible into common stocks. The Fund emphasizes investments in companies believed by the investment manager, OppenheimerFunds, Inc. (the "Manager") to have significant growth potential. Growth companies can include established companies entering a growth cycle in their business, as well as newer companies. The Fund can invest in securities of issuers of all market capitalization ranges, but currently focuses on stocks of "mid-cap" issuers (currently those issuers between $2.5 billion and $11.5 billion). The Fund can invest in domestic and foreign companies, although most of its investments are in stocks of U.S. companies. HOW DOES THE MANAGER DECIDE WHAT SECURITIES TO BUY OR SELL? In selecting securities for the Fund, the Fund's portfolio manager looks for high-growth companies using a "bottom-up" stock selection process. The "bottom-up" approach focuses on fundamental analysis of individual issuers before considering overall economic, market or industry trends. The stock selection process includes analysis of other business and economic factors that might contribute to the company's stock appreciation. The portfolio manager also looks for companies with revenues growing at above-average rates that might support and sustain above-average earnings, and companies whose revenue growth is primarily driven by strength in unit volume sales. While this process and the inter-relationship of the factors used may change over time, and its implementation may vary in particular cases, the portfolio manager currently searches primarily for stocks of companies having the following characteristics: o What the portfolio manager believes to be a high rate of sustainable earnings growth; o Undiscovered and undervalued emerging growth characteristics; o Innovative management and strong leadership positions in unique market niches; and/or o An expectation of better-than-anticipated earnings or positive earnings forecasts. If the portfolio manager discerns a slowdown in the company's internal revenue growth or earnings growth or a negative movement in the company's fundamental economic condition, he will consider selling that stock if there are other investment alternatives that offer what he believes to be better appreciation possibilities. WHO IS THE FUND DESIGNED FOR? The Fund's shares are available only as an investment option under certain variable annuity contracts, variable life insurance policies and investment plans offered through insurance company separate accounts of participating insurance companies, for investors seeking capital growth in their investment over the long term. Those investors should be willing to assume the greater risks of short-term shares price fluctuations that are typical for an aggressive growth fund focusing on common stock investments. The Fund does not seek current income and it is not designed for investors needing assured levels of current income or preservation of capital. However, the Fund is not a complete investment program. Main Risks of Investing in the Fund All investments have some degree of risk. The Fund's investments, in particular, are subject to changes in their value from a number of factors described below. They include changes in general stock market movements (this is referred to as "market risk"). There is also the risk that poor security selection by the Manager will cause the Fund to underperform other funds having a similar objective. There may be events or changes affecting particular industries that might be emphasized in the Fund's portfolio (this is referred to as "industry risk") or the change in value of particular stocks because of an event affecting the issuer. The Manager tries to reduce risks by carefully researching securities before they are purchased. The Fund attempts to reduce its exposure to market risks by diversifying its investments, that is, by not holding a substantial percentage of the stock of any one company and by not investing too great a percentage of the Fund's assets in any one issuer. Also, the Fund does not concentrate 25% or more of its investments in any one industry. However, changes in the overall market prices of securities can occur at any time. The share price of the Fund will change daily based on changes in market prices of securities and market conditions, and in response to other economic events. RISKS OF INVESTING IN STOCKS. Stocks fluctuate in price, and their short-term volatility at times may be great. Because the Fund currently focuses its investments primarily in common stocks and other equity securities for capital appreciation, the value of the Fund's portfolio will be affected by changes in the stock markets. Market risk will affect the Fund's net asset value per share, which will fluctuate as the values of the Fund's portfolio securities change. A variety of factors can affect the price of a particular stocks and the prices of individual stocks do not all move in the same direction uniformly or at the same time. Different stock markets may behave differently from each other. Stocks of growth companies may provide greater opportunities for capital appreciation but may be more volatile than other stocks. Securities in the Fund's portfolio may not increase as much as the market as a whole. Growth stocks may at times be favored by the market and at other times may be out of favor. Some securities may be inactively traded, and therefore, may not be readily bought or sold. Although in some growth stocks may appreciate quickly, investors should not expect that investments of the Fund will appreciate rapidly. Some investments should be expected to decline in value. Other factors can affect a particular stock's price, such as poor earnings reports by the issuer, loss of major customers, major litigation against the issuer, or changes in government regulations affecting the issuer. The Fund invests in securities of large companies but may also invests in small and medium-size companies, which may have more volatile stock prices than large companies. Industry and Sector Focus. At times the Fund may increase the relative emphasis of its investments in a particular industry or sector. The prices of stocks of issuers in a particular industry or sector may go up and down in response to changes in economic conditions, government regulations, availability of basic resources or supplies, or other events that affect that industry or sector more than others. To the extent that the Fund increases the relative emphasis of its investments in a particular industry or sector, its share values may fluctuate in response to events affecting that industry or sector. To some extent that risk may be limited by the Fund's policy of not concentrating 25% or more of its assets in investments in any one industry. Risks of Growth Stocks. Stocks of growth companies, particularly newer companies, may offer opportunities for greater capital appreciation but may be more volatile than stocks of larger, more established companies. If the company's earnings growth or stock price fails to increase as expected the stock price of a growth company may decline sharply. HOW RISKY IS THE FUND OVERALL? The risks described above collectively form the overall risk profile of the Fund and can affect the value of the Fund's investments, its investment performance and its price per share. Particular investments and investment strategies also have risks. These risks mean that you can lose money by investing in the Fund. When you redeem your shares, they may be worth more or less than what you paid for them. There is no assurance that the Fund will achieve its investment objective. In the short term, stock markets can be volatile, and the price of the Fund's shares can go up and down substantially. The Fund generally does not use income-oriented investments to help cushion the Fund's total return from changes in stock prices, except for defensive purposes. The Fund is an aggressive investment vehicle, designed for investors willing to assume greater risks in the hope of achieving greater gains. In the short-term the Fund may be less volatile than small-cap and emerging markets stock funds, but it may be subject to greater fluctuations in its share prices than funds that focus on both stocks and bonds. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund's Past Performance The bar chart and table below show one measure of the risks of investing in the Fund, by showing changes in the Fund's performance1 from year to year for the last ten calendar years and by showing how the average annual total returns for 1, 5 and 10 years of the Fund's shares compare to those of a broad-based market index. The Fund's past investment performance is not necessarily an indication of how the Fund will perform in the future. Annual Total Returns (as of 12/31 each year) [See appendix to prospectus for data in bar chart showing annual total returns] - ------------------- 1 The Fund has two classes of shares. This Prospectus offers only the class of shares that has no class name designation, and the performance shown is for that class. The other class of shares, Service Shares, is not offered in this Prospectus. For the period from 1/1/00 through 3/31/00, the Fund's cumulative return (not annualized) was 25.65%. Charges imposed by the separate accounts that invest in the Fund are not included in the calculations of return in this bar chart, and if those charges were included, the returns would be less than those shown. During the period shown in the bar chart, the highest return (not annualized) for a calendar quarter was 45.84% (4thQ'99) and the lowest return (not annualized) for a calendar quarter was -23.25% (3rdQ'98). - ---------------------------------------------------------------------- Average Annual Total Returns for 1 Year 5 Years 10 Years the periods ended December 31, 1999 - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Oppenheimer 83.60% 29.70% 20.43% Aggressive Growth Fund/VA - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- S&P 500 Index 21.03% 28.54% 18.19% - ---------------------------------------------------------------------- The Fund's returns in the table measure the performance of a hypothetical account without deducting charges imposed by the separate accounts that invest in the Fund and assume that all dividends and capital gains distributions have been reinvested in additional shares. Because the Fund invests primarily in stocks, the Fund's performance is compared to the S&P 500 Index, an unmanaged index of equity securities that is a measure of the general domestic stock market. However, it must be remembered that the index performance reflects the reinvestment of income but does not consider the effects of transaction costs. The Fund's total returns should not be expected to be the same as the returns of other Oppenheimer funds, even if both funds have the same portfolio managers and/or similar names. About the Fund's Investments THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's portfolio among the different types of permitted investments will vary over time based upon the evaluation of economic and market trends by the Manager. The Fund's portfolio might not always include all of the different types of investments described below. The Statement of Additional Information contains more detailed information about the Fund's investment policies and risks. Stock Investments. The Fund invests in securities issued by companies that the Manager believes have growth potential. Growth companies can be new or established companies that may be developing new products or services, that have relatively favorable prospects, or that are expanding into new and growing markets. Current examples include companies in the fields of telecommunications, biotechnology, computer software, and new consumer products. Growth companies may be providing new products or services that can enable them to capture a dominant or important market position. They may have a special area of expertise or the capability to take advantage of changes in demographic factors in a more profitable way than larger, more established companies. Newer growth companies tend to retain a large part of their earnings for research, development or investment in capital assets. Therefore, they do not tend to emphasize paying dividends, and may not pay any dividends for some time. Stocks of growth companies are selected for the Fund's portfolio because the Manager believes the price of the stock will increase in value over time. The Fund does not limit its investments to issuers in a particular market capitalization range or ranges, although it currently focuses on large-cap issuers. "Market capitalization" refers to the total market value of an issuer's common stock. The stock prices of large-cap issuers tend to be less volatile than the prices of mid-cap and small-cap companies in the short term, but these large-cap companies may not afford the same growth opportunities as mid-cap and small-cap companies. Cyclical Opportunities. The Fund might also seek to take advantage of changes in the business cycle by investing in companies that are sensitive to those changes if the Manager believes they have growth potential. For example, when the economy is expanding, companies in the consumer durables and technology sectors might benefit and present long-term growth opportunities. The Fund focuses on seeking growth over the long term, but could seek to take tactical advantage of short-term market movements or events affecting particular issuers or industries. SPECIAL PORTFOLIO DIVERSIFICATION REQUIREMENTS. To enable a variable annuity or variable life insurance contract based on an insurance company separate account to qualify for favorable tax treatment under the Internal Revenue Code, the underlying investments must follow special diversification requirements that limit the percentage of assets that can be invested in securities of particular issuers. The Fund's investment program is managed to meet those requirements, in addition to other diversification requirements under the Internal Revenue Code and the Investment Company Act OF 1940 that apply to publicly-sold mutual funds. Failure by the Fund to meet those special requirements could cause earnings on a contract owner's interest in an insurance company separate account to be taxable income. Those diversification requirements might also limit, to some degree, the Fund's investment decisions in a way that could reduce its performance. CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The Fund's Board of Trustees can change non-fundamental investment policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. Fundamental policies are those that cannot be changed without the approval of a majority of the Fund's outstanding voting shares. The Fund's investment objective is a fundamental policy. Other investment restrictions that are fundamental policies are listed in the Statement of Additional Information. An investment policy is not fundamental unless this Prospectus or the Statement of Additional Information says that it is. OTHER INVESTMENT STRATEGIES. To seek its objective, the Fund can also use the investment techniques and strategies described below. The Fund might not always use all of the different types of techniques and investments described below. These techniques involve certain risks, although some are designed to help reduce investment or market risks. Other Equity Securities. While the Fund emphasizes investments in common stocks, it can also buy preferred stocks, warrants and securities convertible into common stock. Although many convertible securities are debt securities, the Manager considers some of them to be "equity equivalents" because of the conversion feature, and in that case their rating has less impact on the investment decision than in the case of other debt securities. Nevertheless, convertible debt securities are subject to credit risk (the risk that the issuer will not make timely payments in interest and principal) and interest rate risk (the risk that the value of the security will fall if interest rates rise). If the Fund buys convertible securities (or other debt securities), it will focus primarily on investment-grade securities which pose less credit risk than lower-grade debt securities. Investing in Small, Unseasoned Companies. The Fund can invest without limit in small, unseasoned companies. These are companies that have been in operation less than three years, including the operations of any predecessors. These securities may have limited liquidity, which means that the Fund may not be able to sell them quickly at an acceptable price. Their prices may be very volatile, especially in the short-term. Foreign Investing. The Fund can buy securities in any country, including developed countries and emerging markets. The Fund limits its investments in foreign securities to not more than 25% of its net assets, and it normally does not expect to invest substantial amounts of its assets in foreign stocks. Special Risks of Foreign Investing. While foreign securities offer special investment opportunities, there are also special risks. The change in value of a foreign currency against the U.S. dollar will result in a change in the U.S. dollar value of securities denominated in that foreign currency. Foreign issuers are not subject to the same accounting and disclosure requirements that U.S. companies are subject to. The value of foreign investments may be affected by exchange control regulations, expropriation or nationalization of a company's assets, foreign taxes, delays in settlement of transactions, changes in governmental economic or monetary policy in the U.S. or abroad, or other political and economic factors. Securities in underdeveloped countries may be more difficult to sell and their prices may be more volatile than securities of issuers in developed markets. Illiquid and Restricted Securities. Investments may be illiquid because there is no active trading market for them, making it difficult to value them or dispose of them promptly at an acceptable price. A restricted security is one that has a contractual restriction on its resale or which cannot be sold publicly until it is registered under the Securities Act of 1933. The Fund will not invest more than 15% of its net assets in illiquid or restricted securities. Certain restricted securities that are eligible for resale to qualified institutional purchasers may not be subject to that limit. The Manager monitors holdings of illiquid securities on an ongoing basis to determine whether to sell any holdings to maintain adequate liquidity. Derivative Investments. The Fund can invest in a number of different kinds of "derivative" investments. In general terms, a derivative investment is an investment contract whose value depends on (or is derived from) the value of an underlying asset, interest rate or index. In the broadest sense, options, futures contracts, and other hedging instruments the Fund might use may be considered "derivative" investments. In addition to using derivatives for hedging, the Fund might use other derivative investments because they offer the potential for increased value. The Fund currently does not use derivatives to a significant degree and is not required to use them in seeking its objective. Derivatives have risks. If the issuer of the derivative investment does not pay the amount due, the Fund can lose money on the investment. The underlying security or investment on which a derivative is based, and the derivative itself, may not perform the way the Manager expected it to. As a result of these risks the Fund could realize less principal or income from the investment than expected or its hedge might be unsuccessful. As a result, the Fund's share prices could fall. Certain derivative investments held by the Fund might be illiquid. o Hedging. The Fund can buy and sell futures contracts, put and call options, and forward contracts. These are all referred to as "hedging instruments." The Fund does not currently use hedging extensively nor for speculative purposes. It has limits on its use of hedging instruments and is not required to use them in seeking its objective. Some of these strategies would hedge the Fund's portfolio against price fluctuations. Other hedging strategies, such as buying futures and call options, would tend to increase the Fund's exposure to the securities market. Options trading involves the payment of premiums and has special tax effects on the Fund. For example, if a covered call written by the Fund is exercised on an investment that has increased in value, the Fund will be required to sell the investment at the call price and will not be able to realize any profit if the investment has increased in value above the call price. There are also special risks in particular hedging strategies. If the Manager used a hedging instrument at the wrong time or judged market conditions incorrectly, the strategy could reduce the Fund's return. The Fund could also experience losses if the prices of its futures and options positions were not correlated with its other investments or if it could not close out a position because of an illiquid market. Temporary Defensive Instruments. In times of unstable or adverse market or economic conditions, the Fund can invest up to 100% of its assets in temporary defensive investments. Generally, they would be cash equivalents (such as commercial paper) money market instruments, short-term debt securities, U.S. Government securities, or repurchase agreements. They could include other investment-grade debt securities. The Fund might also hold these types of securities pending the investment of proceeds from the sale of Fund share or portfolio securities or to meet anticipated redemptions of Fund shares. To the extent the Fund invests defensively in these securities, it might not achieve its investment objective of capital appreciation. How the Fund Is Managed THE MANAGER. The Fund's investment Manager, OppenheimerFunds, Inc., chooses the Fund's investments and handles its day-to-day business. The Manager carries out its duties, subject to the policies established by the Board of Trustees, under an Investment Advisory Agreement that states the Manager's responsibilities. The Agreement sets forth the fees paid by the Fund to the Manager and describes the expenses that the Fund is responsible to pay to conduct its business. The Manager has been an investment adviser since January 1960 and currently manages investment companies including other Oppenheimer funds. The Manager (including subsidiaries and affiliates) manages assets of more than $120 billion as of January 31, 2000 with more than 5 million shareholder accounts. The Manager is located at Two World Trade Center, 34th Floor, New York, New York 10048-0203. Portfolio Manager. The portfolio manager of the Fund is Bruce L. Bartlett. He is a Vice President of the Fund and a Senior Vice President of the Manager. He has been the person principally responsible for the day-to-day management of the Fund's portfolio since April, 1998. Mr. Bartlett serves as portfolio manager and Vice President of other Oppenheimer funds. Prior to joining the Manager in 1995, Mr. Bartlett was a Vice President and Senior Portfolio Manager at First of America Investment Corp. Advisory Fees. Under the Investment Advisory Agreement, the Fund pays the Manager an advisory fee at an annual rate that declines on additional assets as the Fund grows: 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $700 million, and 0.58% of average annual net assets over $1.5 billion. The Fund's management fee for its last fiscal year ended December 31, 1999, was 0.66% of the Fund's average annual net assets. Possible Conflicts of Interest. The Fund offers its shares to separate accounts of different insurance companies that are not affiliated with each other, as an investment for their variable annuity, variable life and other investment product contracts. While the Fund does not foresee any disadvantages to contract owners from these arrangements, it is possible that the interests of owners of different contracts participating in the Fund through different separate accounts might conflict. For example, a conflict could arise because of differences in tax treatment. The Fund's Board has procedures to monitor the portfolio for possible conflicts to determine what action should be taken. If a conflict occurs, the Board might require one or more participating insurance company separate accounts to withdraw their investments in the Fund. That could force the Fund to sell securities at disadvantageous prices, and orderly portfolio management could be disrupted. Also, the Board might refuse to sell shares of the Fund to a particular separate account, or could terminate the offering of the Fund's shares if required to do so by law or if it would be in the best interests of the shareholders of the Fund to do so. INVESTING IN THE FUND How to Buy and Sell Shares HOW ARE SHARES PURCHASED? Shares of the Fund may be purchased only by separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. Individual investors cannot buy shares of the Fund directly. Please refer to the accompanying prospectus of the participating insurance company for information on how to select the Fund as an investment option for that variable life insurance policy, variable annuity or other investment product. The Fund reserves the right to refuse any purchase order when the Manager believes it would be in the Fund's best interests to do so. - ------------------------------------------------------------------------------- Information about your investment in the Fund through your variable annuity contract, variable life insurance policy or other plan can be obtained only from your participating insurance company or its servicing agent. The Fund's Transfer Agent does not hold or have access to those records. Instructions for buying or selling shares of the Fund should be given to your insurance company or its servicing agent, not directly to the Fund or its Transfer Agent. - ------------------------------------------------------------------------------- AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their offering price, which is the net asset value per share. The Fund does not impose any sales charge on purchases of its shares. If there are any charges imposed under the variable annuity, variable life or other contract through which Fund shares are purchased, they are described in the accompanying prospectus of the participating insurance company. The net asset value per share is determined as of the close of The New York Stock Exchange on each day that the exchange is open for trading (referred to in this Prospectus as a "regular business day"). The Exchange normally closes at 4:00 P.M., New York time, but may close earlier on some days. All references to time in this Prospectus mean "New York time." The net asset value per share is determined by dividing the value of the Fund's net assets attributable to a class of shares by the number of shares of that class that are outstanding. The Fund's Board of Trustees has established procedures to value the Fund's securities to determine the Fund's net asset value, in general based on market values. The Board has adopted special procedures for valuing illiquid and restricted securities and securities for which market values cannot be readily obtained. Because some foreign securities trade in markets and on exchanges that operate on weekends and U.S. holidays, the values of some of the Fund's foreign investments might change significantly on days when shares of the Fund cannot be purchased or redeemed. The offering price that applies to an order from a participating insurance company is based on the next calculation of the net asset value per share that is made after the insurance company (as the Fund's designated agent to receive purchase orders) receives a purchase order from its contract owners to purchase Fund shares on a regular business day, provided that the Fund receives the order from the insurance company, generally by 9:30 A.M. on the next regular business day at the offices of its Transfer Agent in Denver, Colorado. CLASSES OF SHARES. The Fund offers two different classes of shares. The class of shares offered by this Prospectus has no class name designation. The other class is designated as Service shares. The different classes of shares represent investments in the same portfolio of securities but are expected to have different expenses and share prices. This Prospectus may not be used to offer Service shares. A description of the Service Plans that affect only Service shares of the Fund is contained in the Fund's Prospectus that offers Service shares. That Prospectus, when available, may be obtained without charge by contacting any participating insurance company that offers Service shares of the Fund as an investment for its separate accounts. You can also obtain a copy from OppenheimerFunds Distributor, Inc. by calling toll-free 1.888.470.0861. HOW ARE SHARES REDEEMED? As with purchases, only the participating insurance companies that hold Fund shares in their separate accounts for the benefit of variable annuity contracts, variable life insurance policies or other investment products can place orders to redeem shares. Contract holders and policy holders should not directly contact the Fund or its transfer agent to request a redemption of Fund shares. Contract owners should refer to the withdrawal or surrender instructions in the accompanying prospectus of the participating insurance company. The share price that applies to a redemption order is the next net asset value per share that is determined after the participating insurance company (as the Fund's designated agent) receives a redemption request on a regular business day from its contract or policy holder, provided that the Fund receives the order from the insurance company, generally by 9:30 A.M. the next regular business day at the office of its Transfer Agent in Denver, Colorado. The Fund normally sends payment by Federal Funds wire to the insurance company's account the day after the Fund receives the order (and no later than 7 days after the Fund's receipt of the order). Under unusual circumstances determined by the Securities and Exchange Commission, payment may be delayed or suspended. Dividends, Capital Gains and Taxes DIVIDENDS. The Fund intends to declare dividends separately for each class of shares from net investment income, if any, on an annual basis, and to pay those dividends in March or a date selected by the Board of Trustees. The Fund has no fixed dividend rate and cannot guarantee that it will pay any dividends. All dividends (and any capital gains distributions will be reinvested automatically in additional Fund shares at net asset value for the account of the participating insurance company (unless the insurance company elects to have dividends or distributions paid in cash). CAPITAL GAINS. The Fund may realize capital gains on the sale of portfolio securities. If it does, it may make distributions out of any net short-term or long-term capital gains in March of each year. The Fund may make supplemental distributions of dividends and capital gains following the end of its fiscal year. There can be no assurance that the Fund will pay any capital gains distributions in a particular year. All dividends (and any capital gains distributions will be reinvested automatically in additional Fund shares at net asset value for the account of the participating insurance company (unless the insurance company elects to have dividends or distributions paid in cash). TAXES. For a discussion of the tax status of a variable annuity contract, a variable life insurance policy or other investment product of a participating insurance company, please refer to the accompanying prospectus of your participating insurance company. Because shares of the Fund may be purchased only through insurance company separate accounts for variable annuity contracts, variable life insurance policies or other investment products, dividends paid by the Fund from net investment income and distributions (if any) of net realized short-term and long-term capital gains will be taxable, if at all, to the participating insurance company. This information is only a summary of certain federal income tax information about an investment in Fund shares. You should consult with your tax advisor or your participating insurance company representative about the effect of an investment in the Fund under your contract or policy. Financial Highlights The Financial Highlights Table is presented to help you understand the Fund's financial performance for the past 5 fiscal years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by Deloitte & Touche LLP, the Fund's independent auditors, whose report, along with the Fund's financial statements, is included in the Statement of Additional Information, which is available on request. - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995 ============================================================================================================================= Per Share Operating Data Net asset value, beginning of period $44.83 $40.96 $38.71 $34.21 $25.95 - ----------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) (.09) (.05) .10 .09 .11 Net realized and unrealized gain 37.57 5.09 4.01 6.59 8.29 - ----------------------------------------------------------------------------------------------------------------------------- Total income from investment operations 37.48 5.04 4.11 6.68 8.40 - ----------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- (.10) (.09) (.11) (.09) Distributions from net realized gain -- (1.07) (1.77) (2.07) (.05) - ----------------------------------------------------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders -- (1.17) (1.86) (2.18) (.14) - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $82.31 $44.83 $40.96 $38.71 $34.21 ====== ====== ====== ====== ====== ============================================================================================================================= Total Return, at Net Asset Value(1) 83.60% 12.36% 11.67% 20.22% 32.52% ============================================================================================================================= Ratios/Supplemental Data Net assets, end of period (in millions) $2,104 $1,078 $878 $617 $325 - ----------------------------------------------------------------------------------------------------------------------------- Average net assets (in millions) $1,314 $ 955 $754 $467 $241 - ----------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:(2) Net investment income (loss) (0.17)% (0.12)% 0.31% 0.32% 0.47% Expenses 0.67% 0.71%(3) 0.73%(3) 0.75%(3) 0.78%(3) - ----------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(4) 66% 80% 88% 100% 126%
1. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 2. Annualized for periods less than one full year. 3. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. 4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended December 31, 1999, were $821,119,876 and $835,938,199, respectively. 9 INFORMATION AND SERVICES For More Information on Oppenheimer Aggressive Growth Fund/VA: The following additional information about Oppenheimer Aggressive Growth Fund/VA is available without charge upon request: STATEMENT OF ADDITIONAL INFORMATION This document includes additional information about the Fund's investment policies, risks, and operations. It is incorporated by reference into this Prospectus (which means it is legally part of this Prospectus). ANNUAL AND SEMI-ANNUAL REPORTS Additional information about the Fund's investments and performance is available in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report includes a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. - -------------------------------------------------------------------- By Telephone: Call OppenheimerFunds Services toll-free: 1-888-470-0861 - -------------------------------------------------------------------- - -------------------------------------------------------------------- - ---------------------------- Write to: By Mail: ------------------------------ OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217-5270 - -------------------------------------------------------------------- You can also obtain copies of the Statement of Additional Information and other Fund documents and reports by visiting the SEC's Public Reference Room in Washington, D.C. (Phone 1.202.942.8090) or the EDGAR database on the SEC's Internet web site at http://www.sec.gov. Copies may be obtained upon payment of a duplicating fee by electronic request at the SEC's e-mail address: publicinfo@secgov., or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. No one has been authorized to provide any information about the Fund or to make any representations about the Fund other than what is contained in this Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a solicitation of an offer to buy shares of the Fund, to any person in any state or other jurisdiction where it is unlawful to make such an offer. SEC File No. 811-4108 PR0620.001.0500 Printed on recycled paper. 890 Appendix to Prospectus of Oppenheimer Aggressive Growth Fund/VA (a series of Oppenheimer Variable Account Funds) Graphic material included in the Prospectus of Oppenheimer Aggressive Growth Fund/VA (the "Fund") under the heading "Annual Total Return (as of 12/31 each year)": A bar chart will be included in the Prospectus of the Fund depicting the annual total returns of a hypothetical $10,000 investment in shares of the Fund for each of the ten most recent calendar years, without deducting separate account expenses. Set forth below are the relevant data that will appear on the bar chart: Calendar Year Ended Annual Total Returns - ----- -------------------- 12/31/90 -16.82% 12/31/91 54.72% 12/31/92 15.42% 12/31/93 27.32% 12/31/94 -7.59% 12/31/95 32.52% 12/31/96 20.23% 12/31/97 11.67% 12/31/98 12.36% 12/31/99 83.60% Oppenheimer Multiple Strategies Fund/VA A series of Oppenheimer Variable Account Funds Oppenheimer Multiple Strategies Fund/VA is a mutual Prospectus dated May 1, 2000 fund that seeks a total investment return, which includes current income and capital appreciation in the value of its shares. The Fund allocates its investments among common stocks, debt securities, and "money market" instruments. Shares of the Fund are sold only as the underlying investment for variable life insurance policies, variable annuity contracts and other insurance company separate accounts. A prospectus for the insurance product you have selected accompanies this Prospectus and explains how to select shares of the Fund as an investment under that insurance product. As with all mutual funds, the This Prospectus contains Securities important information about the and Exchange Commission has not Fund's objective, its investment approved or disapproved the Fund's policies, strategies and risks. securities nor has it determined Please read this Prospectus (and that your insurance product this Prospectus is accurate or prospectus) carefully before you complete. invest and keep them for future It is a criminal offense to reference about your account. represent otherwise. - ------------------------------------ (OppenheimerFunds logo) Contents About the Fund - ------------------------------------------------------------------------------- The Fund's Objective and Investment Strategies Main Risks of Investing in the Fund The Fund's Past Performance About the Fund's Investments How the Fund is Managed Investing in the Fund - ------------------------------------------------------------------------------- How to Buy and Sell Shares Dividends, Capital Gains and Taxes Financial Highlights About the Fund The Fund's Objective and Investment Strategies - ------------------------------------------------------------------------------- What Is the Fund's Investment Objective? The Fund seeks a high total investment return, which includes current income and capital appreciation in the value of its shares. - ------------------------------------------------------------------------------- What Does the Fund Invest In? The Fund's investment Manager, OppenheimerFunds, Inc., uses a variety of different types of securities and investment strategies to seek the Fund's objective: o Equity securities, such as common stocks, preferred stocks and securities convertible into common stock, of issuers in the U.S. and foreign countries, o Debt securities, such as bonds and notes issued by domestic and foreign companies (which can include lower-grade, high-yield securities), securities issued or guaranteed by the U.S. government and its agencies and instrumentalities including mortgage-related securities (these are referred to as "U.S. government securities"), and debt obligations of foreign governments, o Money market instruments, which are obligations that have a maturity of 13 months or less, including short-term U.S. government securities, corporate and bank debt obligations and commercial paper, and o Hedging instruments, such as put and call options, foreign currency forward contracts, futures and certain derivative investments to try to enhance income or to manage investment risks. These investments are more fully explained in "About the Fund's Investments," below. |X| How Do the Portfolio Managers Decide What Securities to Buy or Sell? In selecting securities for the Fund, the Fund's portfolio managers use different investment styles to carry out an asset allocation strategy that seeks broad diversification across asset classes. They normally maintain a balanced mix of equity securities and debt securities (including money market instruments), although the Fund is not required to weight the portfolio holdings in a fixed proportion. Therefore, the portfolio's mix of equity securities, debt securities and money market instruments will change over time. The debt securities in the portfolio normally include a mix of U.S. government securities, high-yield corporate bonds and foreign government bonds, to seek current income. The relative amounts of those types of debt securities in the portfolio will change over time, because those sectors of the bond markets generally react differently to changing economic environments. The portfolio managers employ both "growth" and "value" styles in selecting equity securities. They use fundamental analysis of a company's financial statements and management structure, analysis of the company's operations and product development, as well as the industry of which the issuer is part. Value investing seeks issuers that are temporarily out of favor or undervalued in the market by various measures, such as the stock's price/earnings ratio. Growth investing seeks issuers that the Manager believes have possibilities for increases in their stock prices because of strong earnings growth compared to the market, the development of new products or services or other favorable economic factors. Who Is the Fund Designed For? The Fund's shares are available only as an investment option under certain variable annuity contracts, variable life insurance policies and investment plans offered through insurance company separate accounts of participating insurance companies, for investors seeking high total return from their investment over the long term, from a fund employing a variety of investments and investment styles in a diversified portfolio. Those investors should be willing to assume the risks of short-term share price fluctuations that are typical for a fund with significant investments in stocks and foreign securities. Since the Fund's income level will fluctuate, it is not designed for investors needing an assured level of current income, and the Fund is not a complete investment program. Main Risks of Investing in the Fund All investments carry risks to some degree. The Fund's investments are subject to changes in their value from a number of factors, described below. There is also the risk that the value of your investment could be eroded over time by the effects of inflation and that poor security selection by the Fund's investment manager, OppenheimerFunds, Inc., will cause the Fund to underperform other funds having similar objectives. These risks collectively form the risk profile of the Fund, and can affect the value of the Fund's investments, its investment performance and its price per share. These risks mean that you can lose money by investing in the Fund. When you redeem your shares, they may be worth more or less than what you paid for them. However, changes in the overall market prices of securities and the income they pay can occur at any time. The share price of the Fund will change daily based on changes in market prices of securities and market conditions and in response to other economic events. There is no assurance that the Fund will achieve its investment objective. |X| Risks of Investing in Stocks. Stocks fluctuate in price, and their short-term volatility at times can be great. The value of the Fund's portfolio therefore will be affected by changes in the stock markets. Market risk will affect the Fund's net asset value per share, which will fluctuate as the values of the Fund's portfolio securities change. A variety of factors can affect the price of a particular stock, and the prices of individual stocks do not all move in the same direction uniformly or at the same time. Different stock markets may behave differently from each other. Additionally, stocks of issuers in a particular industry may be affected by changes in economic conditions that affect that industry more than others, or by changes in government regulations, availability of basic resources or supplies, or other events. Other factors can affect a particular stock's price, such as poor earnings reports by the issuer, loss of major customers, major litigation against the issuer, or changes in government regulations affecting the issuer. The Fund can invest in securities of large companies and also small and medium-size companies, which may have more volatile stock prices than large companies. |X| Risks of Foreign Investing. The Fund can buy securities issued by companies or governments in any country, including developed and underdeveloped countries. Although there are no limits on the amounts it can invest in foreign securities, normally the Fund does not expect to invest more than 35% of its assets in foreign securities. While foreign securities offer special investment opportunities, there are also special risks that can reduce the Fund's share price and returns. The change in value of a foreign currency against the U.S. dollar will result in a change in the U.S. dollar value of securities denominated in that foreign currency. Foreign issuers are not subject to the same accounting and disclosure requirements that U.S. companies are subject to. The value of foreign investments may be affected by exchange control regulations, expropriation or nationalization of a company's assets, foreign taxes, delays in settlement of transactions, changes in governmental economic or monetary policy in the U.S. or abroad, or other political and economic factors. Foreign government debt securities may not be backed by the full faith and credit of the issuing government. |_| Special Risks of Emerging and Developing Markets. Securities of issuers in emerging and developing markets may offer special investment opportunities, but present risks not found in more mature markets. Those securities may be more difficult to sell at an acceptable price and their prices may be more volatile than securities of issuers in more developed markets. Settlements of trades may be subject to greater delays so that the Fund might not receive the proceeds of a sale of a security on a timely basis. These investments may be very speculative. These countries might have less developed trading markets and exchanges. Emerging market countries may have less developed legal and accounting systems and investments may be subject to greater risks of government restrictions on withdrawing the sales proceeds of securities from the country. Economies of developing countries may be more dependent on relatively few industries that may be highly vulnerable to local and global changes. Governments may be more unstable and present greater risks of nationalization or restrictions on foreign ownership of stocks of local companies. |X| Credit Risk. Debt securities are subject to credit risk. Credit risk relates to the ability of the issuer of a security to make interest and principal payments on the security as they become due. If the issuer fails to pay interest, the Fund's income might be reduced and if the issuer fails to repay principal, the value of that security and of the Fund's shares might be reduced. While the Fund's investments in U.S. government securities are subject to little credit risk, the Fund's other investments in debt securities, particularly high-yield lower-grade debt securities, are subject to risks of default. |_| Special Risks of Lower-Grade Securities. Because the Fund can invest in securities below investment-grade to seek high income, the Fund's credit risks are greater than those of funds that buy only investment-grade bonds. Lower-grade debt securities (commonly called "junk bonds") may be subject to greater market fluctuations and greater risks of loss of income and principal than investment-grade debt securities. Securities that are (or that have fallen) below investment grade are exposed to a greater risk that the issuers of those securities might not meet their debt obligations. These risks can reduce the Fund's share prices and the income it earns. |X| Interest Rate Risks. The prices of debt securities, including U.S. government securities, are subject to change when prevailing interest rates change. When interest rates fall, the values of already-issued debt securities generally rise. When interest rates rise, the values of already-issued debt securities generally fall. The magnitude of these fluctuations will often be greater for longer-term debt securities than shorter-term debt securities. The Fund's share prices can go up or down when interest rates change because of the effect of the changes on the value of the Fund's investments in debt securities. |X| Prepayment Risk. Prepayment risk occurs when the mortgages underlying a mortgage-related security are prepaid at a rate faster than anticipated (usually when interest rates fall) and the issuer of the security can prepay the principal prior to the security's maturity. Mortgage-related securities that are subject to prepayment risk, including the CMOs and other mortgage-related securities that the Fund can buy, generally offer less potential for gains when prevailing interest rates decline, and have greater potential for loss than other debt securities when interest rates rise. The impact of prepayments on the price of a security may be difficult to predict and may increase the volatility of the price. The Fund might have to reinvest the proceeds of prepaid securities in new securities offering lower yields. Additionally, the Fund can buy mortgage-related securities at a premium. Accelerated prepayments on those securities could cause the Fund to lose the portion of its principal investment represented by the premium the Fund paid. If interest rates rise rapidly, prepayments might occur at slower rates than expected, which could have the effect of lengthening the expected maturity of a short or medium-term security. That could cause its value to fluctuate more widely in response to changes in interest rates. In turn, this could cause the value of the Fund's shares to fluctuate more. |X| There Are Special Risks in Using Derivative Investments. The Fund can use derivatives to seek increased returns or to try to hedge investment risks. In general terms, a derivative investment is an investment contract whose value depends on (or is derived from) the value of an underlying asset, interest rate or index. Options, futures, CMOs, and structured notes are examples of derivatives the Fund can use. If the issuer of the derivative does not pay the amount due, the Fund can lose money on the investment. Also, the underlying security or investment on which the derivative is based, and the derivative itself, might not perform the way the Manager expected it to perform. If that happens, the Fund's share price could decline or the Fund could get less income than expected. The Fund has limits on the amount of particular types of derivatives it can hold. However, using derivatives can cause the Fund to lose money on its investment and/or increase the volatility of its share prices. How Risky is the Fund Overall? In the short term, domestic and foreign stock markets can be volatile, and the price of the Fund's shares will go up and down in response to those changes. The Fund's income-oriented investments may help cushion the Fund's total return from changes in stock prices, but debt securities are subject to credit and interest rate risks. The Fund may be less volatile than funds that focus only on stock investments, but has more risks than funds that focus solely on investment grade bonds. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund's Past Performance The bar chart and table below show one measure of the risks of investing in the Fund, by showing changes in the Fund's performance from year to year for the last ten calendar years and by showing how the average annual total returns of the Fund's shares compare to those of broad-based market indices. The Fund's past investment performance is not necessarily an indication of how the Fund will perform in the future. Annual Total Returns (as of 12/31 each year) [See appendix to prospectus for data in bar chart showing annual total returns] For the period from 1/1/00 through 3/31/00, the Fund's cumulative return (not annualized) was 6.12%. Charges imposed by the separate accounts that invest in the Fund are not included in the calculations of return in this bar chart, and if those charges were included, the returns would be less than those shown. During the period shown in the bar chart, the highest return (not annualized) for a calendar quarter was 11.22% (4th Q '98) and the lowest return (not annualized) for a calendar quarter was -10.46% (3rdh Q '98). - ---------------------------------------------------------------------- Average Annual Total Returns for the periods ended 1 Year 5 Years 10 Years December 31, 1999 - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Oppenheimer 11.80% 14.40% 10.83% Multiple Strategies Fund/VA (inception 2/9/87) - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- S&P 500 Index 21.03% 28.54% 18.19% - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Lehman Bros. -0.82% 7.73% 7.70% Aggregate Bond Index - ---------------------------------------------------------------------- The Fund's returns in the table measure the performance of a hypothetical account without deducting charges imposed by the separate account that invest in the Fund and assume that all dividends and capital gains distributions have been reinvested in additional shares. The Fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of U.S. equity securities that is a measure of the general domestic stock market. The Fund also compares its performance to the Lehman Brothers Aggregate Bond Index, an unmanaged index of U.S. corporate, government and mortgage-backed securities that is a measure of the domestic bond market. The index performance reflects the reinvestment of income but does not consider the effects of transaction costs. Also, the Fund may have investments that vary from the indices. The Fund has two classes of shares. This Prospectus offers only the class of shares that has no class name designation, and the performance shown is for that class. The other class of shares, Service shares, is not offered in this Prospectus. The Fund's total returns should not be expected to be the same as the returns of other Oppenheimer funds, even if funds have the same portfolio managers and/or similar names. About the Fund's Investments The Fund's Principal Investment Policies. The allocation of the Fund's portfolio among different types of investments will vary over time based upon the Manager's evaluation of economic and market trends. At times the Fund may focus more on investing for capital appreciation with less emphasis on income. At other times, for example when stock markets are less stable, the Fund may increase the relative emphasis of its portfolio in income-seeking investments, such as bonds and money market instruments. The Manager tries to reduce risks by carefully researching securities before they are purchased, and in some cases by using hedging techniques. The Fund attempts to reduce its exposure to market risks by diversifying its investments, that is, by not holding a substantial percentage of the stock of any one company and by not investing too great a percentage of the Fund's assets in any one issuer. Also, the Fund does not concentrate 25% or more of its investments in any one industry. In seeking broad diversification of the Fund's portfolio over asset classes, issuers and economies, the portfolio managers consider overall and relative economic conditions in U.S. and foreign markets. They seek broad diversification by investing in different countries to help moderate the special risks of investing in foreign securities and lower-grade, high-yield debt securities. The Fund's portfolio might not always include all of the different types of investments described below. The Statement of Additional Information contains more detailed information about the Fund's investment policies and risks. Stock and Other Equity Investments. The Fund can invest in equity securities of issuers that may be of small, medium or large size, to seek capital growth. Equity securities include common stocks, preferred stocks and securities convertible into common stock. Although some convertible securities are a type of debt security, the Manager considers some of those convertible securities to be "equity equivalents" because of the conversion feature. In that case, their rating has less impact on the investment decision than in the case of other debt securities. The Fund invests in securities issued by domestic or foreign companies that the Manager believes have appreciation potential or that are undervalued. The Fund's equity investments may be exchange-traded or over-the-counter securities. Over-the-counter securities may have less liquidity than exchange-traded securities, and stocks of companies with smaller capitalization have greater risk of volatility than stocks of larger companies. The Fund limits its investments in securities of small, unseasoned issuers to not more than 5% of its net assets. Debt Securities. The Fund can also invest in debt securities, such as U.S. government securities, foreign government securities, and foreign and domestic corporate bonds, notes and debentures, for their income possibilities. The debt securities the Fund buys may be rated by nationally recognized rating organizations or they may be unrated securities assigned a rating by the Manager. The Fund's investments may be investment grade or below investment grade in credit quality. The Manager does not rely solely on ratings by rating organizations in selecting debt securities but evaluates business and economic factors affecting an issuer as well. The Fund's foreign debt investments can be denominated in U.S. dollars or in foreign currencies and can include "Brady Bonds." Those are U.S. dollar-denominated debt securities collateralized by zero-coupon U.S. Treasury securities. They are typically issued by governments of emerging market countries and are considered speculative securities with higher risks of default. The Fund will buy foreign currency only in connection with the purchase and sale of foreign securities and not for speculation. |X| U.S. Government Securities. The Fund can invest in securities issued or guaranteed by the U.S. Treasury or other U.S. government agencies or federally-chartered corporate entities referred to as "instrumentalities". These are referred to as "U.S. government securities" in this Prospectus. They can include collateralized mortgage obligations (CMOs) and other mortgage-related securities. Mortgage-related securities are subject to additional risks of unanticipated prepayments of the underlying mortgages, which can affect the income stream to the Fund from those securities as well as their values. |_| U.S. Treasury Obligations. These include Treasury bills (having maturities of one year or less when issued), Treasury notes (having maturities of from one to ten years), and Treasury bonds (having maturities of more than ten years when issued). Treasury securities are backed by the full faith and credit of the United States as to timely payments of interest and repayment of principal. The Fund can buy U. S. Treasury securities that have been "stripped" of their interest coupons by a Federal Reserve Bank, zero-coupon U.S. Treasury securities described below, and Treasury Inflation-Protection Securities ("TIPS"). Although not rated, Treasury obligations have little credit risk but prior to their maturity are subject to interest rate risk. |_| Obligations Issued or Guaranteed by U.S. Government Agencies or Instrumentalities. These include direct obligations and mortgage-related securities that have different levels of credit support from the U.S. government. Some are supported by the full faith and credit of the U.S. government, such as Government National Mortgage Association pass-through mortgage certificates (called "Ginnie Maes"). Some are supported by the right of the issuer to borrow from the U.S. Treasury under certain circumstances, such as Federal National Mortgage Association bonds ("Fannie Maes"). Others are supported only by the credit of the entity that issued them, such as Federal Home Loan Mortgage Corporation obligations ("Freddie Macs"). These have relatively little credit risk. |_| Mortgage-Related U.S. Government Securities. The Fund can buy interests in pools of residential or commercial mortgages, in the form of collateralized mortgage obligations ("CMOs") and other "pass-through" mortgage securities. CMOs that are U.S. government securities have collateral to secure payment of interest and principal. They may be issued in different series each having different interest rates and maturities. The collateral is either in the form of mortgage pass-through certificates issued or guaranteed by a U.S. agency or instrumentality or mortgage loans insured by a U.S. government agency. The prices and yields of CMOs are determined, in part, by assumptions about the cash flows from the rate of payments of the underlying mortgages. Changes in interest rates may cause the rate of expected prepayments of those mortgages to change. In general, prepayments increase when general interest rates fall and decrease when interest rates rise. If prepayments of mortgages underlying a CMO occur faster than expected when interest rates fall, the market value and yield of the CMO could be reduced. Additionally, the Fund may have to reinvest the prepayment proceeds in other securities paying interest at lower rates, which could reduce the Fund's yield. When interest rates rise rapidly and if prepayments occur more slowly than expected, a short- or medium-term CMO can in effect become a long-term security, subject to greater fluctuations in value. These prepayment risks can make the prices of CMOs very volatile when interest rates change. The prices of longer-term debt securities tend to fluctuate more than those of shorter-term debt securities. That volatility will affect the Fund's share prices. |X| Private-Issuer Mortgage-Backed Securities. The Fund can invest in mortgage-backed securities issued by private issuers, which do not offer the credit backing of U.S. government securities. Primarily these would include multi-class debt or pass-through certificates secured by mortgage loans. They may be issued by banks, savings and loans, mortgage bankers and other non-governmental issuers. Private issuer mortgage-backed securities are subject to the credit risks of the issuers (as well as the interest rate risks and prepayment risks of CMOs, discussed above), although in some cases they may be supported by insurance or guarantees. |X| Asset-Backed Securities. The Fund can buy asset-backed securities, which are fractional interests in pools of loans collateralized by loans or other assets or receivables. They are issued by trusts and special purpose corporations that pass the income from the underlying pool to the buyer of the interest. These securities are subject to the risk of default by the issuer as well as by the borrowers of the underlying loans in the pool. |X| High-Yield, Lower-Grade Debt Securities. The Fund can invest without limit in lower-grade, high yield debt securities, including bonds, debentures, notes, preferred stocks, loan participation interests, structured notes, asset-backed securities, among others, to seek current income. These securities are sometimes called "junk bonds." The Fund has no requirements as to the maturity of the debt securities it can buy, or as to the market capitalization range of the issuers of those securities. Lower-grade debt securities are those rated below "Baa" by Moody's Investors Service or lower than "BBB" by Standard & Poor's or that have similar ratings by other nationally-recognized rating organizations. The Fund can invest in securities rated as low as "C" or "D" or which are in default at the time the Fund buys them. While securities rated "Baa" by Moody's or "BBB" by S&P are considered "investment grade," they have some speculative characteristics. While investment-grade securities are subject to risks of non-payment of interest and principal, in general high-yield lower-grade bonds, whether rated or unrated, have greater risks than investment-grade securities. There may be less of a market for them and therefore they may be harder to sell at an acceptable price. The special risks these securities are subject to mean that the Fund may not achieve the expected income from them and that the Fund's net asset value per share may be affected by declines in value of these securities. Money Market Instruments. The Fund can invest in money market instruments, which are debt obligations having a remaining maturity of 13 months or less. They include short-term certificates of deposit, bankers' acceptances, commercial paper (including variable amount master demand notes), U.S. Government obligations, and other debt instruments (including bonds) issued by corporations. These securities may have variable or floating interest rates. The Fund's investments in commercial paper in general will be limited to paper in the top two rating categories of Standard & Poor's, Moody's or other national rating organizations. |X| Special Portfolio Diversification Requirements. To enable a variable annuity or variable life insurance contract based on an insurance company separate account to qualify for favorable tax treatment under the Internal Revenue Code, the underlying investments must follow special diversification requirements that limit the percentage of assets that can be invested in securities of particular issuers. The Fund's investment program is managed to meet those requirements, in addition to other diversification requirements under the Internal Revenue Code and the Investment Company Act that apply to publicly-sold mutual funds. Failure by the Fund to meet those special requirements could cause earnings on a contract owner's interest in an insurance company separate account to be taxable income. Those diversification requirements might also limit, to some degree, the Fund's investment decisions in a way that could reduce its performance. Can the Fund's Investment Objective and Policies Change? The Fund's Board of Trustees can change non-fundamental investment policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. Fundamental policies cannot be changed without the approval of a majority of the Fund's outstanding voting shares. The Fund's objective is a fundamental policy. Investment restrictions that are fundamental policies are listed in the Statement of Additional Information. An investment policy is not fundamental unless this Prospectus or the Statement of Additional Information says that it is. Portfolio Turnover. The Fund can engage in short-term trading to try to achieve its objective. Portfolio turnover affects brokerage costs the Fund pays. The Financial Highlights table below shows the Fund's portfolio turnover rates during prior fiscal years. Other Investment Strategies. To seek its objective, the Fund can also use the investment techniques and strategies described below. The Fund might not always use all of them. These techniques involve risks, although some are designed to help reduce overall investment or market risks. |X| Bank Loan Participation Agreements. The Fund can invest in bank loan participation agreements. They provide the Fund an undivided interest in a loan made by the issuing bank in the proportion the Fund's interest bears to the total principal amount of the loan. In evaluating the risk of these investments, the Manager looks to the creditworthiness of the borrower that is obligated to make principal and interest payments on the loan. Not more than 5% of the Fund's net assets can be invested in participation interests of any one borrower. |X| Repurchase Agreements. The Fund can enter into repurchase agreements. In a repurchase transaction, the Fund buys a security and simultaneously sells it to the vendor for delivery at a future date. Repurchase agreements must be fully collateralized. However, if the vendor fails to pay the resale price on the delivery date, the Fund could incur costs in disposing of the collateral and might experience losses if there is any delay in its ability to do so. There is no limit on the amount of the Fund's net assets that may be subject to repurchase agreements of 7 days or less. |X| Zero-Coupon and "Stripped" Securities. Some of the U.S. government debt securities the Fund buys are zero-coupon bonds that pay no interest. They are issued at a substantial discount from their face value. "Stripped" securities are the separate income or principal components of a debt security. Some CMOs or other mortgage-related securities may be stripped, with each component having a different proportion of principal or interest payments. One class might receive all the interest and the other all the principal payments. Zero-coupon and stripped securities are subject to greater fluctuations in price from interest rate changes than conventional interest-bearing securities. The Fund may have to pay out the imputed income on zero-coupon securities without receiving the actual cash currently. Interest-only securities are particularly sensitive to changes in interest rates. The values of interest-only mortgage related securities are also very sensitive to prepayments of underlying mortgages. Principal-only securities are also sensitive to changes in interest rates. When prepayments tend to fall, the timing of the cash flows to these securities increases, making them more sensitive to changes in interest rates. The market for some of these securities may be limited, making it difficult for the Fund to dispose of its holdings at an acceptable price. |X| Illiquid and Restricted Securities. Investments may be illiquid because they do not have an active trading market, , making it difficult to value them or dispose of them promptly at an acceptable price. A restricted security is one that has a contractual restriction on its resale or which cannot be sold publicly until it is registered under the Securities Act of 1933. The Fund will not invest more than 15% of its net assets in illiquid or restricted securities. Certain restricted securities that are eligible for resale to qualified institutional purchasers may not be subject to that limit. The Manager monitors holdings of illiquid securities on an ongoing basis to determine whether to sell any holdings to maintain adequate liquidity. |X| Derivative Investments. The Fund can invest in a number of different kinds of "derivative" investments. In the broadest sense, exchange-traded options, futures contracts, mortgage-related securities and other hedging instruments the Fund can use may be considered "derivative investments." In addition to using hedging instruments, the Fund may use other derivative investments because they offer the potential for increased income and principal value. Markets underlying securities and indices may move in a direction not anticipated by the Manager. Interest rate and stock market changes in the U.S. and abroad may also influence the performance of derivatives. As a result of these risks the Fund could realize less principal or income from the investment than expected. Certain derivative investments held by the Fund may be illiquid. |X| Hedging. The Fund can buy and sell futures contracts, forward contracts and put and call options, including options on futures and broadly-based securities indices. These are all referred to as "hedging instruments." The Fund is not required to use hedging instruments to seek its objective. The Fund does not use hedging instruments for speculative purposes, and has limits on its use of them. The Fund could buy and sell options, futures and forward contracts for a number of purposes. It might do so to try to manage its exposure to the possibility that the prices of its portfolio securities may decline, or to establish a position in the securities market as a temporary substitute for purchasing individual securities. It might do so to try to manage its exposure to changing interest rates. Forward contracts can be used to try to manage foreign currency risks on the Fund's foreign investments. Options trading involves the payment of premiums and has special tax effects on the Fund. There are also special risks in particular hedging strategies. For example, if a covered call written by the Fund is exercised on an investment that has increased in value, the Fund will be required to sell the investment at the call price and will not be able to realize any profit if the investment has increased in value above the call price. In writing a put, there is a risk that the Fund may be required to buy the underlying security at a disadvantageous price. If the Manager used a hedging instrument at the wrong time or judged market conditions incorrectly, the strategy could reduce the Fund's return. The Fund could also experience losses if the prices of its futures and options positions were not correlated with its other investments or if it could not close out a position because of an illiquid market. How the Fund Is Managed The Manager. The Manager chooses the Fund's investments and handles its day-to-day business. The Manager carries out its duties, subject to the policies established by the Fund's Board of Trustees, under an investment advisory agreement that states the Manager's responsibilities. The agreement sets the fees paid the Fund pays to the Manager and describes the expenses that the Fund is responsible to pay to conduct its business. The Manager has been an investment adviser since January, 1960. The Manager (including subsidiaries and affiliates) managed more than $120 billion as of March 31, 2000, including other Oppenheimer funds with more than 5 million shareholder accounts. The Manager is located at Two World Trade Center, 34th Floor, New York, New York 10048-0203. |X| Portfolio Manager. The Fund's management team includes three portfolio managers. Each is a Vice President of the Fund. They are the persons principally responsible for the day-to-day management of the Fund's portfolio. Richard H. Rubinstein, who is a Senior Vice President of the Manager, has been a portfolio manager of the Fund since April 1991. John Doney and Michael Levine, who are both Vice Presidents of the Manager, have been portfolio managers of the Fund since May 1999 and August 1998, respectively. Each serves as an officer and manager of other Oppenheimer funds. Prior to joining the Manager in June 1994, Mr. Levine was a portfolio manager and research associate for Amas Securities, Inc. Mr. Rubinstein has been a portfolio manager of the Manager since June 1990 and Mr. Doney since June 1992. |X| Advisory Fees. Under the Investment Advisory Agreement, the Fund pays the Manager an advisory fee at an annual rate that declines on additional assets as the Fund grows: 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, and 0.60% of average annual net assets over $800 million. The Fund's management fee for its last fiscal year ended December 31, 1999, was 0.72% of the Fund's average annual net assets. |X| Possible Conflicts of Interest. The Fund offers its shares to separate accounts of different insurance companies that are not affiliated with each other, as an investment for their variable annuity, variable life and other investment product contracts. While the Fund does not foresee any disadvantages to contract owners from these arrangements, it is possible that the interests of owners of different contracts participating in the Fund through different separate accounts might conflict. For example, a conflict could arise because of differences in tax treatment. The Fund's Board has procedures to monitor the portfolio for possible conflicts to determine what action should be taken. If a conflict occurs, the Board might require one or more participating insurance company separate accounts to withdraw their investments in the Fund. That could force the Fund to sell securities at disadvantageous prices, and orderly portfolio management could be disrupted. Also, the Board might refuse to sell shares of the Fund to a particular separate account, or could terminate the offering of the Fund's shares if required to do so by law or if it would be in the best interests of the shareholders of the Fund to do so. Investing in the Fund How to Buy and Sell Shares How Are Shares Purchased? Shares of the Fund may be purchased only by separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. Individual investors cannot buy shares of the Fund directly. Please refer to the accompanying prospectus of the participating insurance company for information on how to select the Fund as an investment option for that variable life insurance policy, variable annuity or other investment product. The Fund reserves the right to refuse any purchase order when the Manager believes it would be in the Fund's best interests to do so. - ------------------------------------------------------------------------------- Information about your investment in the Fund through your variable annuity contract, variable life insurance policy or other plan can be obtained only from your participating insurance company or its servicing agent. The Fund's Transfer Agent does not hold or have access to those records. Instructions for buying or selling shares of the Fund should be given to your insurance company or its servicing agent, not directly to the Fund or its Transfer Agent. - ------------------------------------------------------------------------------- |X| At What Price Are Shares Sold? Shares are sold at their offering price, which is the net asset value per share. The Fund does not impose any sales charge on purchases of its shares. If there are any charges imposed under the variable annuity, variable life or other contract through which Fund shares are purchased, they are described in the accompanying prospectus of the participating insurance company. The net asset value per share is determined as of the close of The New York Stock Exchange on each day that the exchange is open for trading (referred to in this Prospectus as a "regular business day"). The Exchange normally closes at 4:00 P.M., New York time, but may close earlier on some days. All references to time in this Prospectus mean "New York time." The net asset value per share is determined by dividing the value of the Fund's net assets attributable to a class of shares by the number of shares of that class that are outstanding. The Fund's Board of Trustees has established procedures to value the Fund's securities to determine the Fund's net asset value, in general based on market values. The Board has adopted special procedures for valuing illiquid and restricted securities and securities for which market values cannot be readily obtained. Because some foreign securities trade in markets and on exchanges that operate on weekends and U.S. holidays, the values of some of the Fund's foreign investments might change significantly on days when shares of the Fund cannot be purchased or redeemed. The offering price that applies to an order from a participating insurance company is based on the next calculation of the net asset value per share that is made after the insurance company (as the Fund's designated agent to receive purchase orders) receives a purchase order from its contract owners to purchase Fund shares on a regular business day, provided that the Fund receives the order from the insurance company, generally by 9:30 A.M. on the next regular business day at the offices of its Transfer Agent in Colorado. |X| Classes of Shares. The Fund may offer two different classes of shares. The class of shares offered by this Prospectus has no class name designation. The other class is designated as Service shares. The different classes of shares represent investments in the same portfolio of securities but are expected to have different expenses and share prices. This prospectus may not be used to offer or sell Service shares. A description of the distribution and service plans that affect only Service shares of the Fund is contained in the Fund's prospectus that offers Service shares. That prospectus may be obtained without charge by contacting any participating insurance company that offers Service shares of the Fund as an investment for its separate accounts. You can also obtain a copy from OppenheimerFunds Distributor, Inc., by calling toll-free at 1-888-470-0861. How Are Shares Redeemed? As with purchases, only the participating insurance companies that hold Fund shares in their separate accounts for the benefit of variable annuity contracts, variable life insurance policies or other investment products can place orders to redeem shares. Contract holders and policy holders should not directly contact the Fund or its transfer agent to request a redemption of Fund shares. Contract owners should refer to the withdrawal or surrender instructions in the accompanying prospectus of the participating insurance company. The share price that applies to a redemption order is the next net asset value per share that is determined after the participating insurance company (as the Fund's designated agent) receives a redemption request on a regular business day from its contract or policy holder, provided that the Fund receives the order from the insurance company by 9:30 A.M. the next regular business day at the office of its Transfer Agent in Colorado. The Fund normally sends payment by Federal Funds wire to the insurance company's account the day after the Fund receives the order (and no later than 7 days after the Fund's receipt of the order). Under unusual circumstances determined by the Securities and Exchange Commission, payment may be delayed or suspended. Dividends, Capital Gains and Taxes Dividends. The Fund intends to declare dividends separately for each class of shares from net investment income on an annual basis, and to pay those dividends in March on a date selected by the Board of Trustees. The Fund has no fixed dividend rate and cannot guarantee that it will pay any dividends. All dividends (and any capital gains distributions will be reinvested automatically in additional Fund shares at net asset value for the account of the participating insurance company (unless the insurance company elects to have dividends or distributions paid in cash). Capital Gains. The Fund may realize capital gains on the sale of portfolio securities. If it does, it may make distributions out of any net short-term or long-term capital gains in March of each year. The Fund may make supplemental distributions of dividends and capital gains following the end of its fiscal year. There can be no assurance that the Fund will pay any capital gains distributions in a particular year. Taxes. For a discussion of the tax status of a variable annuity contract, a variable life insurance policy or other investment product of a participating insurance company, please refer to the accompanying prospectus of your participating insurance company. Because shares of the Fund may be purchased only through insurance company separate accounts for variable annuity contracts, variable life insurance policies or other investment products, dividends paid by the Fund from net investment income and distributions (if any) of net realized short-term and long-term capital gains will be taxable, if at all, to the participating insurance company. This information is only a summary of certain federal income tax information about an investment in Fund shares. You should consult with your tax advisor or your participating insurance company representative about the effect of an investment in the Fund under your contract or policy. Financial Highlights The Financial Highlights Table is presented to help you understand the Fund's financial performance for the past five years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by Deloitte & Touche LLP, the Fund's independent auditors, whose report, along with the Fund's financial statements, is included in the Statement of Additional Information, which is available on request. - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995 ================================================================================================================================ Per Share Operating Data Net asset value, beginning of period $17.05 $17.01 $15.63 $14.55 $12.91 - -------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income .82 .71 .62 .72 .66 Net realized and unrealized gain 1.04 .42 1.95 1.45 2.00 - -------------------------------------------------------------------------------------------------------------------------------- Total income from investment operations 1.86 1.13 2.57 2.17 2.66 - -------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.59) (.16) (.61) (.74) (.65) Distributions from net realized gain (.86) (.93) (.58) (.35) (.37) - -------------------------------------------------------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (1.45) (1.09) (1.19) (1.09) (1.02) - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $17.46 $17.05 $17.01 $15.63 $14.55 ====== ====== ====== ====== ====== ================================================================================================================================ Total Return, at Net Asset Value(1) 11.80% 6.66% 17.22% 15.50% 21.36% ================================================================================================================================ Ratios/Supplemental Data Net assets, end of period (in thousands) $578,783 $622,333 $637,545 $484,285 $381,263 - -------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $593,151 $640,131 $564,369 $428,277 $344,745 - -------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:(2) Net investment income 4.46% 4.05% 3.86% 4.89% 4.81% Expenses 0.73% 0.76%(3) 0.75%(3) 0.77%(3) 0.77%(3) - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(4) 17% 43% 42% 40% 39%
1. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 2. Annualized for periods less than one full year. 3. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. 4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended December 31, 1999, were $94,111,384 and $130,260,786, respectively. 11 INFORMATION AND SERVICES For More Information About Oppenheimer Multiple Strategies Fund/VA: The following additional information about the Fund is available without charge upon request: Statement of Additional Information This document includes additional information about the Fund's investment policies, risks, and operations. It is incorporated by reference into this Prospectus (which means it is legally part of this Prospectus). Annual and Semi-Annual Reports Additional information about the Fund's investments and performance is available in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report includes a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. - ---------------------------------------------------------------------------- How to Get More Information: - ---------------------------------------------------------------------------- You can request the Statement of Additional Information, the Annual and Semi-Annual Reports, and other information about the Fund, or instructions on how to contact the sponsor of your insurance product: - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- By Telephone: - ---------------------------------------------------------------------------- Call OppenheimerFunds Services toll-free: 1-888-470-0861 By Mail: Write to: OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217-5270 - ---------------------------------------------------------------------------- You can also obtain copies of the Statement of Additional Information and other Fund documents and reports by visiting the SEC's Public Reference Room in Washington, D.C. (Phone 1.202.942.8090) or the EDGAR database on the SEC's Internet web site at http://www.sec.gov. Copies may be obtained upon payment of a duplicating fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov, or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. - ---------------------------------------------------------------------------- No one has been authorized to provide any information about the Fund or to make any representations about the Fund other than what is contained in this Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a solicitation of an offer to buy shares of the Fund, to any person in any state or other jurisdiction where it is unlawful to make such an offer. SEC File No. 811-4108 PR0670.001.0500 Printed on recycled paper. 67890 Appendix to Prospectus of Oppenheimer Multiple Strategies Fund/VA (a series of Oppenheimer Variable Account Funds) Graphic material included in the Prospectus of Oppenheimer Multiple Strategies Fund/VA (the "Fund") under the heading "Annual Total Return (as of 12/31 each year)": A bar chart will be included in the Prospectus of the Fund depicting the annual total returns of a hypothetical $10,000 investment in shares of the Fund for each of the ten most recent calendar years, without deducting separate account expenses. Set forth below are the relevant data that will appear on the bar chart: Calendar Year Ended Annual Total Returns - ----- -------------------- 12/31/90 -1.90% 12/31/91 17.48% 12/31/92 8.99% 12/31/93 15.95% 12/31/94 -1.95% 12/31/95 21.36% 12/31/96 15.50% 12/31/97 17.22% 12/31/98 6.66% 12/31/99 11.80% Oppenheimer Global Securities Fund/VA A series of Oppenheimer Variable Account Funds Oppenheimer Global Securities Fund/VA is a mutual Prospectus dated May 1, 2000 fund that 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 that are considered to have appreciation possibilities. It invests mainly in common stocks of U.S. and foreign issuers. Shares of the Fund are sold only as the underlying investment for variable life insurance policies, variable annuity contracts and other insurance company separate accounts. A prospectus for the insurance product you have selected accompanies this Prospectus and explains how to As with all mutual funds, the select shares of the Fund as an Securities investment under that insurance and Exchange Commission has not product, and whether you are approved or disapproved the Fund's only eligible to purchase securities nor has it determined Service shares of the Fund. that This Prospectus contains this Prospectus is accurate or important information about the complete. Fund's objective, its investment It is a criminal offense to policies, strategies and risks. represent otherwise. Please read this Prospectus (and your insurance product prospectus) carefully before you invest and keep them for future reference about your account. - ------------------------------------ (OppenheimerFunds logo) Contents About the Fund - ------------------------------------------------------------------------------- The Fund's Objective and Investment Strategies Main Risks of Investing in the Fund The Fund's Past Performance About the Fund's Investments How the Fund is Managed Investing in the Fund - ------------------------------------------------------------------------------- How to Buy and Sell Shares Dividends, Capital Gains and Taxes Financial Highlights About the Fund The Fund's Objective and Investment Strategies - ------------------------------------------------------------------------------- What Is the Fund's Investment Objective? The Fund seeks long-term capital appreciation by investing a substantial portion of assets in securities of foreign issuers, "growth-type" companies, cyclical industries and special situations that are considered to have appreciation possibilities. - ------------------------------------------------------------------------------- What Does the Fund Invest In? The Fund invests mainly in common stocks, and can also buy other equity securities, including preferred stocks and securities convertible into common stock. The Fund buys securities of issuers in the U.S. and foreign countries. The Fund can invest without limit in foreign securities and can invest in any country, including countries with developed or emerging markets. However, the Fund's investment Manager, OppenheimerFunds, Inc., currently emphasizes investments in developed markets. The Fund has no requirements to allocate its investments in any set percentages in any particular countries, but normally will invest in at least three countries (one of which may be the United States). Typically the Fund invests in a number of different countries. The Fund can invest in securities of issuers in any market capitalization range. The Fund can also use hedging instruments and certain derivative investments to try to manage investment risks. These investments are more fully explained in "About the Fund's Investments," below. |X| How Does the Portfolio Manager Decide What Securities to Buy or Sell? In selecting securities for the Fund, the Fund's portfolio manager looks primarily for foreign and U.S. companies with high growth potential, using fundamental analysis of a company's financial statements and management structure, and analysis of the company's operations and product development, as well as the industry of which the issuer is part. In seeking broad diversification of the Fund's portfolio, the portfolio manager considers overall and relative economic conditions in U.S. and foreign markets, and seeks broad diversification in different countries to help moderate the special risks of foreign investing. The portfolio manager currently focuses on the factors below (which may vary in particular cases and may change over time), looking for: |_| Companies of small-, medium- and large-capitalization ranges worldwide, |_| Stocks to provide growth opportunities, |_| Companies with strong competitive positions and high demand for their products or services. In applying these and other selection criteria, the portfolio manager considers the effect of worldwide trends on the growth of various business sectors. The trends, or global "themes," currently employed include technological change, demographic/geopolitical change, and changing resource needs. The Fund does not invest a fixed or specific amount of its assets in any one sector, and these themes and this strategy may change over time. Who Is the Fund Designed For? The Fund's shares are available only as an investment option under certain variable annuity contracts, variable life insurance policies and investment plans offered through insurance company separate accounts of participating insurance companies, for investors seeking capital growth in their investment over the long term, from a fund that normally has substantial investments in foreign securities. Those investors should be willing to assume the risks of short-term share price fluctuations that are typical for a fund focusing on stock investments and investments in foreign securities. Since the Fund does not invest with the goal of seeking income, and its current income will likely be small, it is not designed for investors needing an assured level of current income. The Fund is not a complete investment program. Main Risks of Investing in the Fund All investments carry risks to some degree. The Fund's investments are subject to changes in their value from a number of factors described below. There is also the risk that the value of your investment could be eroded over time by the effects of inflation and that poor security selection by the Fund's investment manager, OppenheimerFunds, Inc., will cause the Fund to underperform other funds having similar objectives. These risks collectively form the risk profile of the Fund, and can affect the value of the Fund's investments, its investment performance and its price per share. These risks mean that you can lose money by investing in the Fund. When you redeem your shares, they may be worth more or less than what you paid for them. However, changes in the overall market prices of securities and the income they pay can occur at any time. The share price of the Fund will change daily based on changes in market prices of securities and market conditions and in response to other economic events. There is no assurance that the Fund will achieve its investment objective. |X| Risks of Investing in Stocks. Stocks fluctuate in price, and their short-term volatility at times may be great. Because the Fund currently focuses its investments primarily on common stocks for capital appreciation, the value of the Fund's portfolio will be affected by changes in the stock markets. Market risk will affect the Fund's net asset value per share, which will fluctuate as the values of the Fund's portfolio securities change. A variety of factors can affect the price of a particular stock, and the prices of individual stocks do not all move in the same direction uniformly or at the same time. Different stock markets may behave differently from each other. Additionally, stocks of issuers in a particular industry may be affected by changes in economic conditions that affect that industry more than others, or by changes in government regulations, availability of basic resources or supplies, or other events. To the extent that the Fund has greater emphasis on investments in a particular industry using its "global themes" strategy, its share values may fluctuate in response to events affecting that industry. Other factors can affect a particular stock's price, such as poor earnings reports by the issuer, loss of major customers, major litigation against the issuer, or changes in government regulations affecting the issuer. The Fund can invest in securities of large companies and also small and medium-size companies, which may have more volatile stock prices than large companies. |X| Risks of Foreign Investing. The Fund expects to invest substantial amounts of its assets in foreign securities. While foreign securities offer special investment opportunities, there are also special risks. The change in value of a foreign currency against the U.S. dollar will result in a change in the U.S. dollar value of securities denominated in that foreign currency. Foreign issuers are not subject to the same accounting and disclosure requirements that U.S. companies are subject to. The value of foreign investments may be affected by exchange control regulations, expropriation or nationalization of a company's assets, foreign taxes, delays in settlement of transactions, changes in governmental economic or monetary policy in the U.S. or abroad, or other political and economic factors. |X| There are Special Risks in Using Derivative Investments. The Fund can use derivatives to seek increased returns or to try to hedge investment risks. In general terms, a derivative investment is one whose value depends on (or is derived from) the value of an underlying asset, interest rate or index. Options, futures, and forward contracts are examples of derivatives. If the issuer of the derivative does not pay the amount due, the Fund can lose money on the investment. Also, the underlying security or investment on which the derivative is based, and the derivative itself, might not perform the way the Manager expected it to perform. If that happens, the Fund's share price could decline or the Fund could get less income than expected. The Fund has limits on the amount of particular types of derivatives it can hold. However, using derivatives can cause the Fund to lose money on its investment and/or increase the volatility of its share prices. How Risky is the Fund Overall? In the short term, domestic and foreign stock markets can be volatile, and the price of the Fund's shares can go up and down substantially. The Fund does not seek income from debt securities to try to reduce the volatility of its share prices. The Fund generally may be less volatile than funds focusing on investments in emerging markets or small-cap stocks, but the Fund has greater risks than funds that focus solely on large-cap domestic stocks or stocks and bonds. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund's Past Performance The bar chart and table below show one measure of the risks of investing in the Fund, by showing changes in the Fund's performance from year to year for the full calendar years since the Fund's inception and by showing how the average annual total returns of the Fund's shares compare to those of a broad-based market index. Performance is not shown for the Fund's Service shares, which were not offered prior to May 1, 2000. Because Service shares are subject to a service fee, the performance is expected to be lower for any given period. The Fund's past investment performance is not necessarily an indication of how the Fund will perform in the future. Annual Total Returns (as of 12/31 each year) [See appendix to prospectus for data in bar chart showing annual total returns] For the period from 1/1/00 through 3/31/00, the Fund's cumulative return (not annualized) was 14.44%. Charges imposed by the separate accounts that invest in the Fund are not included in the calculations of return in this bar chart, and if those charges were included, the returns would be less than those shown. During the period shown in the bar chart, the highest return (not annualized) for a calendar quarter was 36.93% (4th Q '99) and the lowest return (not annualized) for a calendar quarter was -15.62% (3rd Q '98). - ---------------------------------------------------------------------- Average Annual Total Returns for 1 Year 5 Years Life of Fund the periods ended December 31, 1999 - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Oppenheimer Global 58.48% 21.67% 16.79% Securities Fund/VA (inception 11/12/90) - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- MSCI World Index 25.34% 20.25% 15.42% 1 - ---------------------------------------------------------------------- 1. From 10/31/90. The Fund's returns in the table measure the performance of a hypothetical account without deducting charges imposed by the separate accounts that invest in the Fund and assume that all dividends and capital gains distributions have been reinvested in additional shares. The Fund's performance is compared to the Morgan Stanley Capital International World Index, an unmanaged index of equity securities listed on stock exchanges of 20 foreign countries and the U.S. The index performance does not consider the effects of transaction costs. The Fund's total returns should not be expected to be the same as the returns of other Oppenheimer funds, even if both funds have the same portfolio managers and/or similar names. About the Fund's Investments The Fund's Principal Investment Policies. The allocation of the Fund's portfolio among different types of investments will vary over time based upon the Manager's evaluation of economic and market trends. The Fund's portfolio might not always include all of the different types of investments described below. The Statement of Additional Information contains more detailed information about the Fund's investment policies and risks. The Manager tries to reduce risks by carefully researching securities before they are purchased. The Fund attempts to reduce its exposure to market risks by diversifying its investments, that is, by not holding a substantial percentage of the stock of any one company and by not investing too great a percentage of the Fund's assets in any one issuer. Also, the Fund does not concentrate 25% or more of its investments in any one industry. |X| Stock Investments. The Fund invests in securities issued by domestic or foreign companies that the Manager believes have appreciation potential. The Fund invests primarily in a diversified portfolio of common stocks (and may buy other equity securities) of issuers that may be of small, medium or large size. Equity securities include common stocks, preferred stocks and securities convertible into common stock. Although many convertible securities are debt securities, the Manager considers some convertible securities to be "equity equivalents" because of the conversion feature and in that case their rating has less impact on the investment decision than in the case of other debt securities. Nevertheless, convertible debt securities are subject to both "credit risk" (the risk that the issuer will not pay interest or repay principal in a timely manner) and "interest rate risk" (the risk that prices of the security will be affected inversely by changes in prevailing interest rates). If the Fund buys convertible securities, it will focus primarily on investment-grade securities. |_| Cyclical Opportunities. The Fund may also seek to take advantage of changes in the business cycle by investing in companies that are sensitive to those changes if the Manager believes they have growth potential. For example, when the economy is expanding, companies in the consumer durables and technology sectors might benefit and present long-term growth opportunities. The Fund might sometimes seek to take tactical advantage of short-term market movements or events affecting particular issuers or industries. |_| Industry Focus. At times, the Fund may increase the relative emphasis of its investments in a particular industry. Stocks of issuers in a particular industry are subject to changes in economic conditions, government regulations, availability of basic resources or supplies, or other events that affect that industry more than others. To the extent that the Fund has greater emphasis on investments in a particular industry, its share values may fluctuate in response to events affecting that industry. To some extent that risk may be limited by the Fund's policy of not concentrating 25% or more of its assets in investments in any one industry. |X| Special Risks of Emerging and Developing Markets. Securities of issuers in emerging and developing markets may offer special investment opportunities, but present risks not found in more mature markets. Those securities may be more difficult to sell at an acceptable price and their prices may be more volatile than securities of issuers in more developed markets. Settlements of trades may be subject to greater delays so that the Fund might not receive the proceeds of a sale of a security on a timely basis. These investments may be very speculative. These countries might have less developed trading markets and exchanges. Emerging market countries may have less developed legal and accounting systems and investments may be subject to greater risks of government restrictions on withdrawing the sale proceeds of securities from the country. Economics of developing countries may be more dependent on relatively few industries that may be highly vulnerable to local and global changes. Governments may be more unstable and present greater risks of nationalization or restrictions on foreign ownership of stocks of local companies. |X| Special Portfolio Diversification Requirements. To enable a variable annuity or variable life insurance contract based on an insurance company separate account to qualify for favorable tax treatment under the Internal Revenue Code, the underlying investments must follow special diversification requirements that limit the percentage of assets that can be invested in securities of particular issuers. The Fund's investment program is managed to meet those requirements, in addition to other diversification requirements under the Internal Revenue Code and the Investment Company Act that apply to publicly-sold mutual funds. Failure by the Fund to meet those special requirements could cause earnings on a contract owner's interest in an insurance company separate account to be taxable income. Those diversification requirements might also limit, to some degree, the Fund's investment decisions in a way that could reduce its performance. |X| Can the Fund's Investment Objective and Policies Change? The Fund's Board of Trustees can change non-fundamental investment policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. Fundamental policies cannot be changed without the approval of a majority of the Fund's outstanding voting shares. The Fund's investment objective is a fundamental policy. Investment restrictions that are fundamental policies are listed in the Statement of Additional Information. An investment policy is not fundamental unless this Prospectus or the Statement of Additional Information says that it is. |X| Portfolio Turnover. The Fund may engage in short-term trading to try to achieve its objective. Portfolio turnover affects brokerage costs the Fund pays. The Financial Highlights table at the end of this Prospectus shows the Fund's portfolio turnover rates during prior fiscal years. Other Investment Strategies. To seek its objective, the Fund can also use the investment techniques and strategies described below. The Fund might not always use all of them. These techniques involve risks, although some are designed to help reduce overall investment or market risks. |X| Illiquid and Restricted Securities. Investments may be illiquid because there is no active trading market, making it difficult to value them or dispose of them promptly at an acceptable price. A restricted security is one that has a contractual restriction on its resale or which cannot be sold publicly until it is registered under the Securities Act of 1933. The Fund will not invest more than 15% of its net assets in illiquid or restricted securities. Certain restricted securities that are eligible for resale to qualified institutional purchasers may not be subject to that limit. The Manager monitors holdings of illiquid securities on an ongoing basis to determine whether to sell any holdings to maintain adequate liquidity. |X| Derivative Investments. The Fund can invest in a number of different kinds of "derivative" investments. In the broadest sense, exchange-traded options, futures contracts, and other hedging instruments the Fund might use may be considered "derivative investments." In addition to using hedging instruments, the Fund can use other derivative investments because they offer the potential for increased income and principal value. Markets underlying securities and indices might move in a direction not anticipated by the Manager. Interest rate and stock market changes in the U.S. and abroad may also influence the performance of derivatives. As a result of these risks the Fund could realize less principal or income from the investment than expected. Certain derivative investments held by the Fund may be illiquid. |X| Hedging. The Fund can buy and sell forward contracts, futures contracts, and put and call options, including options on futures and broadly-based securities indices. These are all referred to as "hedging instruments." The Fund is not required to hedge to seek its objective. The Fund has limits on its use of hedging instruments and does not use them for speculative purposes. The Fund could buy and sell options, futures and forward contracts for a number of purposes. It might do so to try to manage its exposure to the possibility that the prices of its portfolio securities may decline, or to establish a position in the securities market as a temporary substitute for purchasing individual securities. It might do so to try to manage its exposure to changing interest rates. Forward contracts can be used to try to manage foreign currency risks on the Fund's foreign investments. Options trading involves the payment of premiums and has special tax effects on the Fund. There are also special risks in particular hedging strategies. For example, if a covered call written by the Fund is exercised on an investment that has increased in value, the Fund will be required to sell the investment at the call price and will not be able to realize any profit if the investment has increased in value above the call price. In writing a put, there is a risk that the Fund may be required to buy the underlying security at a disadvantageous price. If the Manager used a hedging instrument at the wrong time or judged market conditions incorrectly, the strategy could reduce the Fund's return. The Fund could also experience losses if the prices of its futures and options positions were not correlated with its other investments or if it could not close out a position because of an illiquid market. Temporary Defensive Investments. For cash management purposes, the Fund can hold cash equivalents such as commercial paper, repurchase agreements, Treasury bills and other short-term U.S. government securities. In times of adverse or unstable market or economic conditions, the Fund can invest up to 100% of its assets in temporary defensive investments. These would ordinarily be U. S. government securities, highly-rated commercial paper, bank deposits or repurchase agreements. To the extent the Fund invests defensively in these securities, it might not achieve its investment objective. How the Fund Is Managed The Manager. The Fund's Manager, OppenheimerFunds, Inc., chooses the Fund's investments and handles its day-to-day business. The Manager carries out its duties, subject to the policies established by the Fund's Board of Trustees, under an investment advisory agreement that states the Manager's responsibilities. The agreement sets the fees the Fund pays to the Manager and describes the expenses that the Fund is responsible to pay to conduct its business. The Manager has been an investment adviser since 1960. The Manager (including subsidiaries and affiliates) manages more than $120 billion as of March 31, 2000, including other Oppenheimer funds with more than 5 million shareholder accounts. The Manager is located at Two World Trade Center, 34th Floor, New York, New York 10048-0203. |X| Portfolio Manager. The portfolio manager of the Fund is William L. Wilby. He is a Vice President of the Fund and a Senior Vice President of the Manager. He has been the person principally responsible for the day-to-day management of the Fund's portfolio since December, 1995. Mr. Wilby also serves as an officer and portfolio manager for other Oppenheimer funds. Prior to joining the Manager in 1993, he was an international investment strategist at Brown Brothers Harriman & Co. and before that a Managing Director and Portfolio Manager at AIG Global Investors. |X| Advisory Fees. Under the investment advisory agreement, the Fund pays the Manager an advisory fee at an annual rate that declines on additional assets as the Fund grows: 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, and 0.60% of average annual net assets over $800 million. The Fund's management fee for its last fiscal year ended December 31, 1999, was 0.67% of the Fund's average annual net assets. |X| Possible Conflicts of Interest. The Fund offers its shares to separate accounts of different insurance companies that are not affiliated with each other, as an investment for their variable annuity, variable life and other investment product contracts. While the Fund does not foresee any disadvantages to contract owners from these arrangements, it is possible that the interests of owners of different contracts participating in the Fund through different separate accounts might conflict. For example, a conflict could arise because of differences in tax treatment. The Fund's Board has procedures to monitor the portfolio for possible conflicts to determine what action should be taken. If a conflict occurs, the Board might require one or more participating insurance company separate accounts to withdraw their investments in the Fund. That could force the Fund to sell securities at disadvantageous prices, and orderly portfolio management could be disrupted. Also, the Board might refuse to sell shares of the Fund to a particular separate account, or could terminate the offering of the Fund's shares if required to do so by law or if it would be in the best interests of the shareholders of the Fund to do so. Investing in the Fund How to Buy and Sell Shares How Are Shares Purchased? Shares of the Fund may be purchased only by separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. Individual investors cannot buy shares of the Fund directly. Please refer to the accompanying prospectus of the participating insurance company for information on how to select the Fund as an investment option for that variable life insurance policy, variable annuity or other investment product. That prospectus will indicate whether you are only eligible to purchase Service shares of the Fund. The Fund reserves the right to refuse any purchase order when the Manager believes it would be in the Fund's best interests to do so. - ------------------------------------------------------------------------------- Information about your investment in the Fund through your variable annuity contract, variable life insurance policy or other plan can be obtained only from your participating insurance company or its servicing agent. The Fund's Transfer Agent does not hold or have access to those records. Instructions for buying or selling shares of the Fund should be given to your insurance company or its servicing agent, not directly to the Fund or its Transfer Agent. - ------------------------------------------------------------------------------- |X| At What Price Are Shares Sold? Shares are sold at their offering price, which is the net asset value per share. The Fund does not impose any sales charge on purchases of its shares. If there are any charges imposed under the variable annuity, variable life or other contract through which Fund shares are purchased, they are described in the accompanying prospectus of the participating insurance company. The net asset value per share is determined as of the close of The New York Stock Exchange on each day that the exchange is open for trading (referred to in this Prospectus as a "regular business day"). The Exchange normally closes at 4:00 P.M., New York time, but may close earlier on some days. All references to time in this Prospectus mean "New York time." The net asset value per share is determined by dividing the value of the Fund's net assets attributable to a class of shares by the number of shares of that class that are outstanding. The Fund's Board of Trustees has established procedures to value the Fund's securities to determine the Fund's net asset value, in general based on market values. The Board has adopted special procedures for valuing illiquid and restricted securities and securities for which market values cannot be readily obtained. Because some foreign securities trade in markets and on exchanges that operate on weekends and U.S. holidays, the values of some of the Fund's foreign investments might change significantly on days when shares of the Fund cannot be purchased or redeemed. The offering price that applies to an order from a participating insurance company is based on the next calculation of the net asset value per share that is made after the insurance company (as the Fund's designated agent to receive purchase orders) receives a purchase order from its contract owners to purchase Fund shares on a regular business day, provided that the Fund receives the order from the insurance company, generally by 9:30 A.M. on the next regular business day at the offices of its Transfer Agent in Colorado. |X| Classes of Shares. The Fund offers two different classes of shares. The class of shares designated as Service shares are subject to a distribution and service plan. The impact of the expenses of that plan on Service shares is described below. The class of shares that are not subject to a plan has no class name designation. The different classes of shares represent investments in the same portfolio of securities but are expected to have different expenses and share prices. |X| Distribution and Service Plan for Service shares. The Fund has adopted a distribution and service plan for Service shares to pay OppenheimerFunds Distributor, Inc., the distributor, for distribution related services for the Fund's Service shares. Although the plan allows for payment to be made quarterly at an annual rate of up to 0.25% of the average annual net assets of Service shares of the Fund, that rate is currently reduced to 0.15%. The Board may increase that rate to no more than 0.25% per annum, without advance notification. The distributor currently expects to use those fees to compensate sponsor(s) of the insurance products that offer Service shares of the Fund and other entities, for providing personal service and maintenance of accounts of contract owners that may hold Service shares. The impact of the service plan is to increase operating expenses of the Service shares, which results in lower performance compared to the Fund's shares that are not subject to a service fee. How Are Shares Redeemed? As with purchases, only the participating insurance companies that hold Fund shares in their separate accounts for the benefit of variable annuity contracts, variable life insurance policies or other investment products can place orders to redeem shares. Contract holders and policy holders should not directly contact the Fund or its transfer agent to request a redemption of Fund shares. Contract owners should refer to the withdrawal or surrender instructions in the accompanying prospectus of the participating insurance company. The share price that applies to a redemption order is the next net asset value per share that is determined after the participating insurance company (as the Fund's designated agent) receives a redemption request on a regular business day from its contract or policy holder, provided that the Fund receives the order from the insurance company, generally by 9:30 A.M. the next regular business day at the office of its Transfer Agent in Colorado. The Fund normally sends payment by Federal Funds wire to the insurance company's account the day after the Fund receives the order (and no later than 7 days after the Fund's receipt of the order). Under unusual circumstances determined by the Securities and Exchange Commission, payment may be delayed or suspended. Dividends, Capital Gains and Taxes Dividends. The Fund intends to declare dividends separately for each class of shares from net investment income, if any, on an annual basis, and to pay those dividends in March on a date selected by the Board of Trustees. Dividends and distributions will generally be lower for Service shares, which normally have higher expenses. The Fund has no fixed dividend rate and cannot guarantee that it will pay any dividends. All dividends (and any capital gains distributions will be reinvested automatically in additional Fund shares at net asset value for the account of the participating insurance company (unless the insurance company elects to have dividends or distributions paid in cash). Capital Gains. The Fund may realize capital gains on the sale of portfolio securities. If it does, it may make distributions out of any net short-term or long-term capital gains in March of each year. The Fund may make supplemental distributions of dividends and capital gains following the end of its fiscal year. There can be no assurance that the Fund will pay any capital gains distributions in a particular year. Taxes. For a discussion of the tax status of a variable annuity contract, a variable life insurance policy or other investment product of a participating insurance company, please refer to the accompanying prospectus of your participating insurance company. Because shares of the Fund may be purchased only through insurance company separate accounts for variable annuity contracts, variable life insurance policies or other investment products, dividends paid by the Fund from net investment income and distributions (if any) of net realized short-term and long-term capital gains will be taxable, if at all, to the participating insurance company. This information is only a summary of certain federal income tax information about an investment in Fund shares. You should consult with your tax advisor or your participating insurance company representative about the effect of an investment in the Fund under your contract or policy. Financial Highlights The Financial Highlights Table is presented to help you understand the Fund's financial performance for the past 5 fiscal years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by Deloitte & Touche LLP, the Fund's independent auditors, whose report, along with the Fund's financial statements, is included in the Statement of Additional Information, which is available on request. Because Service shares of the Fund were not issued prior to May 1, 2000, no financial information is shown for Service shares in the Financial Highlights table or in the financial statements included in the Statement of Additional Information. - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995 - --------------------------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $22.07 $21.37 $17.67 $15.00 $15.09 - --------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income .14 .24 .25 .15 .12 Net realized and unrealized gain 12.21 2.64 3.68 2.52 .19 - --------------------------------------------------------------------------------------------------------------------- Total income from investment operations 12.35 2.88 3.93 2.67 .31 - --------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.14) (.46) (.23) -- -- Dividends in excess of net investment income (.13) -- -- -- -- Distributions from net realized gain (.74) (1.72) -- -- (.40) - --------------------------------------------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (1.01) (2.18) (.23) -- (.40) - --------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $33.41 $22.07 $21.37 $17.67 $15.00 ====== ====== ====== ====== ====== ===================================================================================================================== Total Return, at Net Asset Value(1) 58.48% 14.11% 22.42% 17.80% 2.24% ===================================================================================================================== Ratios/Supplemental Data Net assets, end of period (in millions) $1,762 $1,135 $959 $582 $361 - --------------------------------------------------------------------------------------------------------------------- Average net assets (in millions) $1,251 $1,055 $802 $467 $332 - --------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:(2) Net investment income 0.57% 1.22% 1.51% 1.09% 0.86% Expenses 0.69% 0.74%(3) 0.76%(3) 0.81%(3) 0.89%(3) - --------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(4) 64% 81% 67% 90% 131%
1. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 2. Annualized for periods less than one full year. 3. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. 4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended December 31, 1999, were $772,038,559 and $956,384,357, respectively. 9 INFORMATION AND SERVICES For More Information About Oppenheimer Global Securities Fund/VA: The following additional information about the Fund is available without charge upon request: Statement of Additional Information This document includes additional information about the Fund's investment policies, risks, and operations. It is incorporated by reference into this Prospectus (which means it is legally part of this Prospectus). Annual and Semi-Annual Reports Additional information about the Fund's investments and performance is available in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report includes a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. - ---------------------------------------------------------------------------- How to Get More Information: - ---------------------------------------------------------------------------- You can request the Statement of Additional Information, the Annual and Semi-Annual Reports, and other information about the Fund, or instructions on how to contact the sponsor of your insurance product: - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- By Telephone: - ---------------------------------------------------------------------------- Call OppenheimerFunds Services toll-free: 1-888-470-0861 By Mail: Write to: OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217-5270 You can also obtain copies of the Statement of Additional Information and other Fund documents and reports by visiting the SEC's Public Reference Room in Washington, D.C. (Phone 1.202.942.8090) or the EDGAR database on the SEC's Internet web site at http://www.sec.gov. Copies may be obtained upon payment of a duplicating fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov, or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. No one has been authorized to provide any information about the Fund or to make any representations about the Fund other than what is contained in this Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a solicitation of an offer to buy shares of the Fund, to any person in any state or other jurisdiction where it is unlawful to make such an offer. SEC File No. 811-4108 PR0485.001.0500 Printed on recycled paper. (OppenheimerFunds logo) Appendix to Prospectus of Oppenheimer Global Securities Fund/VA (a series of Oppenheimer Variable Account Funds) Graphic material included in the Prospectus of Oppenheimer Global Securities Fund/VA (the "Fund") under the heading "Annual Total Return (as of 12/31 each year)": A bar chart will be included in the Prospectus of the Fund depicting the annual total returns of a hypothetical $10,000 investment in shares of the Fund for each of the nine most recent calendar years, without deducting separate account expenses. Set forth below are the relevant data that will appear on the bar chart: Calendar Year Ended Annual Total Returns 12/31/91 3.39% 12/31/92 -7.11% 12/31/93 70.32% 12/31/94 -5.72% 12/31/95 2.24% 12/31/96 17.80% 12/31/97 22.42% 12/31/98 14.11% 12/31/99 58.48% Oppenheimer Strategic Bond Fund/VA A series of Oppenheimer Variable Account Funds Prospectus dated May 1, 2000 Oppenheimer Strategic Bond Fund/VA is a mutual fund that seeks a high level of current income principally derived from interest on debt securities. The Fund invest mainly in three market sectors: debt securities of foreign government and companies, U.S. Government securities, and lower-rated high yield securities of U.S. and foreign companies. Shares of the Fund are sold only as the underlying investment for variable life insurance policies, variable annuity contracts and other insurance company separate accounts. A prospectus for the insurance product you have selected accompanies this Prospectus and explains how to select shares of the Fund as an investment under that insurance product. This Prospectus contains important information about the Fund's objective, its investment As with all mutual funds, the policies, strategies and risks. Securities Please read this Prospectus (and and Exchange Commission has not your insurance product approved or disapproved the Fund's prospectus) carefully before you securities nor has it determined invest and keep them for future that reference about your account. this Prospectus is accurate or complete. It is a criminal offense to represent otherwise. - ------------------------------------ (OppenheimerFunds logo) CONTENTS ABOUT THE FUND The Fund's Objective and Investment Strategies Main Risks of Investing in the Fund The Fund's Past Performance About the Fund's Investments How the Fund is Managed INVESTING IN THE FUND How to Buy and Sell Shares Dividends, Capital Gains and Taxes Financial Highlights ABOUT THE FUND The Fund's Objective and Investment Strategies WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks a high level of current income principally derived from interest on debt securities and seeks to enhance that income by writing covered call options on debt securities. WHAT DOES THE FUND MAINLY INVEST IN? The Fund invests mainly in debt securities of issuers in three market sectors: foreign governments and companies, U.S. Government securities and lower-grade high-yield securities of U.S. and foreign companies. Those debt securities typically include: o short-, medium- and long-term foreign and U.S. Government bonds and notes, o collateralized mortgage obligations (CMOs), o other mortgage-related securities and asset-backed securities, o participation interests in loans, o "structured" notes, o lower-grade, high-yield domestic and foreign corporate debt obligations, and o "zero-coupon" or "stripped" securities. Under normal market conditions, the Fund invests in each of those three market sectors. However, the Fund is not obligated to do so, and the amount of its assets in each of the three sectors will vary over time. The Fund can invest up to 100% of its assets in any one sector at any time, if the Fund's investment Manager, OppenheimerFunds, Inc. (the "Manager") believes that in doing so the Fund can achieve its objective without undue risk. The Fund can invest in securities having short, medium, or long-term maturities and may invest with out limit in lower-grade, high-yield debt obligations, also called "junk bonds." The Fund's foreign investments can include debt securities of issuers in developed markets as well as emerging markets, which have special risks. The Fund can also use hedging instruments and certain derivative investments, primarily CMOs and "structured" notes, to try to enhance income or to try to manage investment risks. These investments are more fully explained in "About the Fund's Investments," below. HOW DOES THE MANAGER DECIDE WHAT SECURITIES TO BUY OR SELL? In selecting securities for the Fund, the Fund's portfolio managers analyze the overall investment opportunities and risks in individual national economies. The portfolio managers' overall strategy is to build a broadly-diversified portfolio of debt securities to help moderate the special risks of investing in high-yield debt instruments and foreign securities. The managers may try to take advantage of the lack of correlation of price movements that may occur among the three sectors from time to time. The portfolio managers currently focus on the factors below (some of which may vary in particular cases and may change over time), looking for: o Securities offering high current income, o Overall diversification for the portfolio by seeking securities whose markets and prices tend to move in different directions, and o Relative values among the three major market sectors in which the Fund invests. WHO IS THE FUND DESIGNED FOR? The Fund's shares are available only as an investment option under certain variable annuity contracts, variable life insurance policies and investment plans offered through insurance company separate accounts of participating insurance companies, for investors seeking high current income from a fund that ordinarily will have substantial investments in both domestic and foreign debt securities. Those investors should be willing to assume the risks of short-term share price fluctuations that are typical for a fund that invests in debt securities, particularly high-yield and foreign securities, which have special risks. Since the Fund's income level will fluctuate, it is not designed for investors needing an assured level of current income. Also, the Fund does not seek capital appreciation. The Fund is designed as a long-term investment for investors seeking an investment with an overall sector diversification strategy. However, the Fund is not a complete investment program. Main Risks of Investing in the Fund All investments have some degree of risk. The Fund's investments, in particular, are subject to changes in their value from a number of factors described below. There is also the risk that poor security selection by the Manager will cause the Fund to underperform other funds having a similar objective. The Manager tries to reduce risks by carefully researching securities before they are purchased, and in some cases by using hedging techniques. The Fund attempts to reduce its exposure to market risks by diversifying its investments, that is, by not holding a substantial percentage of the securities of any one issuer and by not investing too great a percentage of the Fund's assets in any one issuer. The Fund's diversification strategies, both with respect to securities in different sectors and securities issued by different companies and governments are intended to help reduce the volatility of the Fund's share prices while seeking current income. Also, the Fund does not concentrate 25% or more of its investments in the securities of any one foreign government or in the debt and equity securities of companies in any one industry. However, changes in the overall market prices of securities and the income they pay can occur at any time. The share price and yield of the Fund will change daily based on changes in market prices of securities and market conditions, and in response to other economic events. CREDIT RISK. Debt securities are subject to credit risk. Credit risk relates to the ability of the issuer of a security to make interest and principal payments on the security as they become due. If the issuer fails to pay interest, the Fund's income might be reduced, and if the issuer fails to repay principal, the value of that security and of the Fund's shares might be reduced. While the Fund's investments in U.S. Government securities are subject to little credit risk, the Fund's other investments in debt securities, particularly high-yield, lower-grade debt securities, are subject to risks of default. Special Risks of Lower-Grade Securities. Because the Fund can invest without limit in securities below investment grade to seek high current income, the Fund's credit risks are greater than those of funds that buy only investment-grade bonds. Lower-grade debt securities may be subject to greater market fluctuations and greater risks of loss of income and principal than investment-grade debt securities. Securities that are (or that have fallen) below investment grade are exposed to a greater risk that the issuers of those securities might not meet their debt obligations. The market for these securities may be less liquid, making it difficult for the Fund to sell them quickly at an acceptable price. These risks can reduce the Fund's share prices and the income it earns. RISKS OF FOREIGN INVESTING. The Fund can invest its assets without limit in foreign debt securities and can buy securities of governments and companies in both developed markets and emerging markets. The Fund normally invests significant amounts of its assets in foreign securities. While foreign securities offer special investment opportunities, there are also special risks that can reduce the Fund's share prices and returns. The change in value of a foreign currency against the U.S. dollar will result in a change in the U.S. dollar value of securities denominated in that foreign currency. Currency rate changes can also affect the distributions the Fund makes from the income it receives from foreign securities as foreign currency values change against the U.S. dollar. Foreign investing can result in higher transaction and operating costs for the Fund. Foreign issuers are not subject to the same accounting and disclosure requirements that U.S. companies are subject to. The value of foreign investments may be affected by exchange control regulations, expropriation or nationalization of a company's assets, foreign taxes, delays in settlement of transactions, changes in governmental economic or monetary policy in the U.S. or abroad, or other political and economic factors. Special Risks of Emerging and Developing Markets. Securities of issuers in emerging and developing markets may offer special investment opportunities but present risks not found in more mature markets. Those securities may be more difficult to sell at an acceptable price and their prices may be more volatile than securities of issuers in more developed markets. Settlements of trades may be subject to greater delays so that the Fund may not receive the proceeds of a sale of a security on a timely basis. These countries might have less developed trading markets and exchanges. Emerging market countries may have less developed legal and accounting systems and investments may be subject to greater risks of government restrictions on withdrawing the sales proceeds of securities from the country. Economies of developing countries may be more dependent on relatively few industries that may be highly vulnerable to local and global changes. Governments may be more unstable and present greater risks of nationalization or restrictions on foreign ownership of securities of local companies. These investments may be substantially more volatile than debt securities of issuers in the U.S. and other developed countries and may be very speculative. INTEREST RATE RISKS. The prices of debt securities, including U.S. Government securities, are subject to change when prevailing interest rates change. When interest rates fall, the values of already-issued debt securities generally rise. When interest rates rise, the values of already-issued debt securities generally fall, and they may sell at a discount from their face amount. The magnitude of these fluctuations will often be greater for longer-term debt securities than shorter-term debt securities. The Fund's share prices can go up or down when interest rates change because of the effect of the changes on the value of the Fund's investments in debt securities. Also, if interest rates fall, the Fund's investments in newly issued securities with lower yields will reduce the Fund's income. PREPAYMENT RISK. Prepayment risk is the risk that the issuer of a security can prepay the principal prior to the security's expected maturity. The prices and yields of mortgage-related securities are determined, in part, by assumptions about the cash flows from the rate of payments of the underlying mortgages. Changes in interest rates may cause the rate of expected prepayments of those mortgages to change. In general, prepayments increase when general interest rates fall and decrease when general interest rates rise. Securities subject to prepayment risk, including the mortgage-related securities that the Fund buys, have greater potential for losses when interest rates rise than other types of debt securities. The impact of prepayments on the price of a security may be difficult to predict and may increase the volatility of the price. Interest-only and principal-only "stripped" securities can be particularly volatile when interest rates change. If the Fund buys mortgage-related securities at a premium, accelerated prepayments on those securities could cause the Fund to lose a portion of its principal investment represented by the premium the Fund paid. If prepayments of mortgages underlying a CMO occur faster than expected when interest rates fall, the market value and yield of the CMO could be reduced. If interest rates rise rapidly, prepayments may occur at slower rates than expected, which could have the effect of lengthening the expected maturity of a short- or medium-term security. That could cause the value of the security to fluctuate more widely in response to changes in interest rates and this could cause the value of the Fund's shares to fall. SECTOR ALLOCATION RISKS. The Manager's expectations about the relative performance of the three principal sectors in which the Fund invests may be inaccurate, and the Fund's returns might be less than other funds using similar strategies. RISK OF DERIVATIVE INVESTMENTS. The Fund can use derivatives to seek increased income or to try to hedge investment risks. In general terms, a derivative investment is an investment contract whose value depends on (or is derived from) the value of an underlying asset, interest rate or index. Options, futures, forwards, interest rate swaps, structured notes and CMOs are examples of derivatives the Fund can use. If the issuer of the derivative does not pay the amount due, the Fund can lose money on the investment. Also, the underlying security or investment on which the derivative is based, and the derivative itself, might not perform the way the Manager expected it to perform. If that happens, the Fund's share price could decline or the Fund could get less income than expected. The Fund has limits on the amount of particular types of derivatives it can hold. However, using derivatives can cause the Fund to lose money on its investment and/or increase the volatility of its share prices. HOW RISKY IS THE FUND OVERALL? The risks described above collectively form the overall risk profile of the Fund and can affect the value of the Fund's investments, its investment performance and its price per share. Particular investments and investment strategies also have risks. These risks mean that you can lose money by investing in the Fund. When you redeem your shares, they may be worth more or less than what you paid for them. There is no assurance that the Fund will achieve its investment objective. In the short term, the values of debt securities can fluctuate substantially because of interest rate changes. Foreign debt securities, particularly those of issuers in emerging markets, and high yield securities can be volatile, and the price of the Fund's shares can go up and down substantially because of events affecting foreign markets or issuers or events affecting the high yield market. The Fund's sector and security diversification strategy may help cushion the Fund's shares prices from that volatility, but debt securities are subject to other credit and interest rate risks that can affect their values and the share prices of the Fund. The Fund generally has more risks than bond funds that focus on U. S. Government securities and investment-grade bonds but may be less volatile than bond funds that focus solely on investments in a single foreign sector, such as emerging markets. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund's Past Performance The bar chart and table below show one measure of the risks of investing in the Fund, by showing changes in the Fund's performance(1) from year to year since the Fund's inception and 1, 5 and 10 years by showing how the average annual total returns of the Fund's shares compare to those of broad-based market indices. The Fund's past investment performance is not necessarily an indication of how the Fund will perform in the future. Annual Total Returns (as of 12/31 each year) [See appendix to prospectus for data in bar chart showing annual total returns] For the period from 1/1/00 through 3/31/00, the Fund's cumulative return (not annualized) was 1.10%. Charges imposed by the separate accounts that invest in the Fund are not included in the calculations of return in this bar chart, and if those charges were included, the returns would be less than those shown. During the period shown in the bar chart, the highest return (not annualized) for a calendar quarter was 5.90% (2ndQ'95) and the lowest return (not annualized) for a calendar quarter was -3.70% (1stQ'94). - ---------------------------------------------------------------------- Average Annual Total Returns for 1 Year 5 Years Life of Fund* the periods ended December 31, 1999 - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Oppenheimer 2.83% 8.25% 6.18% Strategic Bond Fund/VA - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Lehman Brothers -0.82% 7.73% 6.00% Aggregate Bond Index - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Salomon Brothers -4.27% 6.42% 5.96% World Government Bond Index - ---------------------------------------------------------------------- * The Fund's inception date was 5/3/93. The "life of class" index performance is shown from 4/30/93. The Fund's returns in the table measure the performance of a hypothetical account without deducting charges imposed by the separate accounts that invest in the Fund and assume that all dividends and capital gains distributions have been reinvested in additional shares. Because the Fund invests in a variety of domestic and foreign corporate and government debt securities, the Fund's performance is compared to the Lehman Brothers Aggregate Bond Index, an unmanaged index of U.S. corporate and government bonds, and to the Salomon Brothers World Government Bond Index, an unmanaged index of debt securities of major foreign governments. However, it must be remembered that the index performance reflects the reinvestment of income but does not consider the effects of transaction costs. Also, the Fund may have investments that vary from the index. The Fund's total returns should not be expected to be the same as the returns of other Oppenheimer funds, even if both funds have the same portfolio managers and/or similar names. About the Fund's Investments THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's portfolio among the different types of permitted investments will vary over time based upon the Manager's evaluation of economic and market trends. At times the Fund might emphasize investments in one or two sectors because of the Manager's evaluation of the opportunities for high current income from debt securities in those sectors relative to other sectors. The Fund's portfolio might not always include all of the different types of investments described below. The Statement of Additional Information contains more detailed information about the Fund's investment policies and risks. The Fund can invest in different types of debt securities described below. A debt security is essentially a loan by the buyer to the issuer of the debt security. The issuer promises to pay back the principal amount of the loan and normally pays interest, at a fixed or variable rate, on the debt while it is outstanding. The debt securities the Fund buys may be rated by nationally recognized rating organizations or they may be unrated securities assigned an equivalent rating by the Manager. The Fund's investments may be investment grade or below investment grade in credit quality and the Fund can invest without limit in below investment-grade debt securities, commonly called "junk bonds." These typically offer higher yields than investment grade bonds, because investors assume greater risks of default of these securities. The ratings definitions of the principal national rating organizations are included in Appendix A to the Statement of Additional Information. The Fund can invest some of its assets in other types of securities, including common stocks and other equity securities of foreign and U.S. companies. However, the Fund does not anticipate having significant investments in those types of securities as part of its normal portfolio strategies. The Fund's portfolio might not always include all of the different types of investments described below. The statement of Addition Information contains more detailed information about the Fund's investment policies and risks. o U.S. Government Securities. The Fund can invest in securities issued or guaranteed by the U.S. Treasury or other government agencies or federally-chartered corporate entities referred to as "instrumentalities." These are referred to as "U.S. Government securities" in this Prospectus. U.S. Treasury Obligations. These include Treasury bills (which have maturities of one year or less when issued), Treasury notes (which have maturities of from one to ten years when issued), and Treasury bonds (which have maturities of more than ten years when issued). Treasury securities are backed by the full faith and credit of the United States as to timely payments of interest and repayments of principal. The Fund can also buy U. S. Treasury securities that have been "stripped" of their coupons by a Federal Reserve Bank, zero-coupon U.S. Treasury securities described below, and Treasury Inflation-Protection Securities ("TIPS"). Obligations Issued or Guaranteed by U.S. Government Agencies or Instrumentalities. These include direct obligations and mortgage-related securities that have different levels of credit support from the U.S. Government. Some are supported by the full faith and credit of the U.S. Government, such as Government National Mortgage Association pass-through mortgage certificates (called "Ginnie Maes"). Some are supported by the right of the issuer to borrow from the U.S. Treasury under certain circumstances, such as Federal National Mortgage Association bonds ("Fannie Maes"). Others are supported only by the credit of the entity that issued them, such as Federal Home Loan Mortgage Corporation obligations ("Freddie Macs"). Mortgage-Related U.S. Government Securities. The Fund can buy interests in pools of residential or commercial mortgages, in the form of collateralized mortgage obligations ("CMOs") and other "pass-through" mortgage securities. CMOs that are U.S. Government securities have collateral to secure payment of interest and principal. They may be issued in different series each having different interest rates and maturities. The collateral is either in the form of mortgage pass-through certificates issued or guaranteed by a U.S. agency or instrumentality or mortgage loans insured by a U.S. Government agency. The Fund can have substantial amounts of its assets invested in mortgage-related U.S. Government securities. The prices and yields of CMOs are determined, in part, by assumptions about the cash flows from the rate of payments of the underlying mortgages. Changes in interest rates may cause the rate of expected prepayments of those mortgages to change. In general, prepayments increase when general interest rates fall and decrease when interest rates rise. If prepayments of mortgages underlying a CMO occur faster than expected when interest rates fall, the market value and yield of the CMO could be reduced. When interest rates rise rapidly, if prepayments occur more slowly than expected, a short- or medium-term CMO can in effect become a long-term security, subject to greater fluctuations in value. These prepayment risks can make the prices of CMOs very volatile when interest rates change. The prices of longer-term debt securities tend to fluctuate more than those of shorter-term debt securities. That volatility will affect the Fund's share prices. High-Yield, Lower-Grade Debt Securities. The Fund can purchase a variety of lower-grade, high-yield debt securities of U.S. and foreign issuers, including bonds, debentures, notes, preferred stocks, loan participation interests, structured notes, asset-backed securities, among others, to seek high current income. These securities are sometimes called "junk bonds. Lower-grade debt securities are those rated below "Baa" by Moody's Investors Service, Inc. or lower than "BBB" by Standard & Poor's Rating Service or that have similar ratings by other nationally-recognized rating organizations. The Fund can invest in securities rated as low as "C" or "D", in unrated bonds or bonds which are in default at the time the Fund buys them. While securities rated "Baa" by Moody's or "BBB" by S&P are considered "investment grade," they have some speculative characteristics. The Manager does not rely solely on ratings issued by rating organizations when selecting investments for the Fund. The Fund can buy unrated securities that offer high current income. The Manager assigns a rating to an unrated security that is equivalent to the rating of a rated security that the Manager believes offers comparable yields and risks. Private-Issuer Mortgage-Backed Securities. The Fund can invest a substantial portion of its assets in mortgage-backed securities issued by private issuers, which do not offer the credit backing of U.S. Government securities. Primarily these include multi-class debt or pass-through certificates secured by mortgage loans. They may be issued by banks, savings and loans, mortgage bankers and other non-governmental issuers. Private issuer mortgage-backed securities are subject to the credit risks of the issuers (as well as the interest rate risks and prepayment risks of CMOs, discussed above), although in some cases they may be supported by insurance or guarantees. Asset-Backed Securities. The Fund can buy asset-backed securities, which are fractional interests in pools of loans collateralized by the loans or other assets or receivables. They are issued by trusts and special purpose corporations that pass the income from the underlying pool to the buyer of the interest. These securities are subject to the risk of default by the issuer as well as by the borrowers of the underlying loans in the pool, as well as interest rate and prepayment risks. Foreign Securities. The Fund can buy a variety of debt securities issued by foreign governments and companies, as well as "supra-national" entities, such as the World Bank. They can include bonds, debentures, and notes, including derivative investments called "structured" notes, described below. The Fund's foreign debt investments can be denominated in U.S. dollars or in foreign currencies. The Fund will buy foreign currency only in connection with the purchase and sale of foreign securities and not for speculation. Investments in Emerging and Developing Markets. The Fund can buy "Brady Bonds," which are U.S.-dollar denominated debt securities collateralized by zero-coupon U.S. Treasury securities. They are typically issued by emerging markets countries and are considered speculative securities with higher risks of default. SPECIAL PORTFOLIO DIVERSIFICATION REQUIREMENTS. To enable a variable annuity or variable life insurance contract based on an insurance company separate account to qualify for favorable tax treatment under the Internal Revenue Code, the underlying investments must follow special diversification requirements that limit the percentage of assets that can be invested in securities of particular issuers. The Fund's investment program is managed to meet those requirements, in addition to other diversification requirements under the Internal Revenue Code and the Investment Company Act that apply to publicly-sold mutual funds. Failure by the Fund to meet those special requirements could cause earnings on a contract owner's interest in an insurance company separate account to be taxable income. Those diversification requirements might also limit, to some degree, the Fund's investment decisions in a way that could reduce its performance. CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The Fund's Board of Trustees can change non-fundamental investment policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. Fundamental policies are those that cannot be changed without the approval of a majority of the Fund's outstanding voting shares. The Fund's investment objective is a fundamental policy. Other investment restrictions that are fundamental policies are listed in the Statement of Additional Information. An investment policy is not fundamental unless this Prospectus or the Statement of Additional Information says that it is. OTHER INVESTMENT STRATEGIES. To seek its objective, the Fund can also use the investment techniques and strategies described below. The Manager might not always use all of the different types of techniques and investments described below. These techniques involve certain risks, although some are designed to help reduce investment or market risks. Zero-Coupon and "Stripped" Securities. Some of the government and corporate debt securities the Fund buys are zero-coupon bonds that pay no interest. They are issued at a substantial discount from their face value. "Stripped" securities are the separate income or principal components of a debt security. Some CMOs or other mortgage-related securities may be stripped, with each component having a different proportion of principal or interest payments. One class might receive all the interest and the other all the principal payments. Zero-coupon and stripped securities are subject to greater fluctuations in price from interest rate changes than conventional interest-bearing securities. The Fund may have to pay out the imputed income on zero-coupon securities without receiving the actual cash currently. The Fund can invest up to 50% of its total assets in zero-coupon securities issued by either the U.S. Treasury or companies. The values of interest-only and principal only mortgage-related securities are also very sensitive to prepayments of underlying mortgages. Principal-only securities are also sensitive to prepayment of underlying mortgages and changes in interest rates. When prepayments tend to fall, the timing of the cash flows to these securities increases, making them more sensitive to changes in interest rates. The market for some of these securities may be limited, making it difficult for the Fund to dispose of its holdings at an acceptable price. Participation Interests in Loans. These securities represent an undivided fractional interest in a loan obligation by a borrower. They are typically purchased from banks or dealers that have made the loan or are members of the loan syndicate. The loans may be to foreign or U.S. companies. The Fund does not invest more than 5% of its net assets in participation interests of any one borrower. They are subject to the risk of default by the borrower. If the borrower fails to pay interest or repay principal, the Fund can lose money on its investment. Illiquid and Restricted Securities. Investments may be illiquid because there is no active trading market for them, making it difficult to value them or dispose of them promptly at an acceptable price. A restricted security is one that has a contractual restriction on its resale or which cannot be sold publicly until it is registered under the Securities Act of 1933. The Fund will not invest more than 15% of its net assets in illiquid or restricted securities. Certain restricted securities that are eligible for resale to qualified institutional purchasers may not be subject to that limit. The Manager monitors holdings of illiquid securities on an ongoing basis to determine whether to sell any holdings to maintain adequate liquidity. Derivative Investments. The Fund can invest in a number of different kinds of "derivative" investments. In general terms, a derivative investment is an investment contract whose value depends on (or is derived from) the value of an underlying asset, interest rate or index. In the broadest sense, options, futures contracts, and other hedging instruments the Fund might use may be considered "derivative" investments. In addition to using derivatives for hedging, the Fund might use other derivative investments because they offer the potential for increased value. The Fund currently does not use derivatives to a significant degree and is not required to use them in seeking its objective. Derivatives have risks. If the issuer of the derivative investment does not pay the amount due, the Fund can lose money on the investment. The underlying security or investment on which a derivative is based, and the derivative itself, may not perform the way the Manager expected it to. As a result of these risks the Fund could realize less principal or income from the investment than expected or its hedge might be unsuccessful. As a result, the Fund's share prices could fall. Certain derivative investments held by the Fund might be illiquid. "Structured" Notes. The Fund can buy "structured" notes, which are specially-designed derivative debt investments, their principal payments or interest payments are linked to the value of an index (such as a currency or securities index) or commodity. The terms of the instrument may be "structured" by the purchaser (the Fund) and the borrower issuing the note. The value of these notes will fall or rise in response to the changes in the values of the underlying security or index. They are subject to both credit and interest rate risks and therefore the Fund could receive more or less than it originally invested when the notes mature, or it might receive less interest than the stated coupon payment if the underlying investment or index does not perform as anticipated. The prices of these notes may be very volatile and they may have a limited trading market, making it difficult for the Fund to sell its investment at an acceptable price. o Hedging. The Fund can buy and sell futures contracts, put and call options, and forward contracts. These are all referred to as "hedging instruments." Writing covered call options is a principal strategy that is part of the Fund's objective, and is used when deemed appropriate by the Manager. The Fund is not required to use other hedging instruments to seek its objective. The Fund does not use hedging instruments for speculative purposes and has limits on its use of them. The Fund could buy and sell options, futures and forward contracts for a number of purposes. It might do so to try to hedge against falling prices of its portfolio securities or to establish a position in the securities market as a temporary substitute for purchasing individual securities. It might do so to try to manage its exposure to changing interest rates. Forward contracts and currency options can be used to try to manage foreign currency risks on the Fund's foreign investments. The Fund could write covered call options to seek cash for liquidity purposes or to distribute to shareholders. Options trading involves the payment of premiums and has special tax effects on the Fund. For example, if a covered call written by the Fund is exercised on an investment that has increased in value, the Fund will be required to sell the investment at the call price and will not be able to realize any profit if the investment has increased in value above the call price. There are also special risks in particular hedging strategies. If the Manager used a hedging instrument at the wrong time or judged market conditions incorrectly, the strategy could reduce the Fund's return. The Fund could also experience losses if the prices of its futures and options positions were not correlated with its other investments or if it could not close out a position because of an illiquid market. Temporary Defensive Investments. For cash management purposes, the Fund may hold cash equivalents such as commercial paper, repurchase agreements, Treasury bills and other short-term U.S. Government securities. In times of adverse or unstable market or economic conditions, the Fund can invest up to 100% of its assets in temporary defensive investments. These would ordinarily be U. S. Government securities, highly-rated commercial paper, bank deposits or repurchase agreements. To the extent the Fund invests defensively in these securities, it might not achieve its investment objective. How the Fund Is Managed THE MANAGER. The Fund's investment Manager, OppenheimerFunds, Inc., chooses the Fund's investments and handles its day-to-day business. The Manager carries out its duties, subject to the policies established by the Board of Trustees, under an Investment Advisory Agreement that states the Manager's responsibilities. The Agreement sets forth the fees paid by the Fund to the Manager and describes the expenses that the Fund is responsible to pay to conduct its business. The Manager has been an investment adviser since 1960 and currently manages investment companies including other Oppenheimer funds. The Manager (including subsidiaries and affiliates ) manages assets of $120 billions as of January 31, 2000 and with more than 5 million shareholder accounts. The Manager is located at Two World Trade Center, 34th Floor, New York, New York 10048-0203. Portfolio Managers. The portfolio managers of the Fund are David P. Negri and Arthur P. Steinmetz. They have been the persons principally responsible for the day-to-day management of the Fund's portfolio since its inception in May 1993. Both are Vice Presidents of the Fund and Senior Vice Presidents of the Manager. They also serve as officers and portfolio managers for other Oppenheimer funds. Mr. Steinmetz has been employed by the Manager since 1986, and Mr. Negri, since 1989. Advisory Fees. Under the Investment Advisory Agreement, the Fund pays the Manager an advisory fee at an annual rate that declines on additional assets as the Fund grows: 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% on the next $200 million and 0.50% of average annual net assets over $1 billion. The Fund's management fee for its last fiscal year ended December 31, 1999, was 0.74% of the Fund's average annual net assets. Possible Conflicts of Interest. The Fund offers its shares to separate accounts of different insurance companies that are not affiliated with each other, as an investment for their variable annuity, variable life and other investment product contracts. While the Fund does not foresee any disadvantages to contract owners from these arrangements, it is possible that the interests of owners of different contracts participating in the Fund through different separate accounts might conflict. For example, a conflict could arise because of differences in tax treatment. The Fund's Board has procedures to monitor the portfolio for possible conflicts to determine what action should be taken. If a conflict occurs, the Board might require one or more participating insurance company separate accounts to withdraw their investments in the Fund. That could force the Fund to sell securities at disadvantageous prices, and orderly portfolio management could be disrupted. Also, the Board might refuse to sell shares of the Fund to a particular separate account, or could terminate the offering of the Fund's shares if required to do so by law or if it would be in the best interests of the shareholders of the Fund to do so. INVESTING IN THE FUND How to Buy and Sell Shares HOW ARE SHARES PURCHASED? Shares of the Fund may be purchased only by separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. Individual investors cannot buy shares of the Fund directly. Please refer to the accompanying prospectus of the participating insurance company for information on how to select the Fund as an investment option for that variable life insurance policy, variable annuity or other investment product. The Fund reserves the right to refuse any purchase order when the Manager believes it would be in the Fund's best interests to do so. - ------------------------------------------------------------------------------- Information about your investment in the Fund through your variable annuity contract, variable life insurance policy or other plan can be obtained only from your participating insurance company or its servicing agent. The Fund's Transfer Agent does not hold or have access to those records. Instructions for buying or selling shares of the Fund should be given to your insurance company or its servicing agent, not directly to the Fund or its Transfer Agent. - ------------------------------------------------------------------------------- AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their offering price, which is the net asset value per share. The Fund does not impose any sales charge on purchases of its shares. If there are any charges imposed under the variable annuity, variable life or other contract through which Fund shares are purchased, they are described in the accompanying prospectus of the participating insurance company. The net asset value per share is determined as of the close of The New York Stock Exchange on each day that the exchange is open for trading (referred to in this Prospectus as a "regular business day"). The Exchange normally closes at 4:00 P.M., New York time, but may close earlier on some days. All references to time in this Prospectus mean "New York time." The net asset value per share is determined by dividing the value of the Fund's net assets attributable to a class of shares by the number of shares of that class that are outstanding. The Fund's Board of Trustees has established procedures to value the Fund's securities to determine the Fund's net asset value, in general based on market values. The Board has adopted special procedures for valuing illiquid and restricted securities and securities for which market values cannot be readily obtained. Because some foreign securities trade in markets and on exchanges that operate on weekends and U.S. holidays, the values of some of the Fund's foreign investments might change significantly on days when shares of the Fund cannot be purchased or redeemed. The offering price that applies to an order from a participating insurance company is based on the next calculation of the net asset value per share that is made after the insurance company (as the Fund's designated agent to receive purchase orders) receives a purchase order from its contract owners to purchase Fund shares on a regular business day, provided that the Fund receives the order from the insurance company, generally by 9:30 A.M. on the next regular business day at the offices of its Transfer Agent in Denver, Colorado. CLASSES OF SHARES. The Fund offers two different classes of shares. The class of shares offered by this Prospectus has no class name designation. The other class is designated as Service shares. The different classes of shares represent investments in the same portfolio of securities but are expected to have different expenses and share prices. This Prospectus may not be used to offer or sell Service shares. A description of the Service Plans that affect only Service shares of the Fund is contained in the Fund's Prospectus that offers Service shares. That Prospectus, when available, may be obtained without charge by contacting any participating insurance company that offers Service shares of the Fund as an investment for its separate accounts. You can also obtain a copy from OppenheimerFunds Distributor, Inc. by calling toll-free 1.888.470.0861. HOW ARE SHARES REDEEMED? As with purchases, only the participating insurance companies that hold Fund shares in their separate accounts for the benefit of variable annuity contracts, variable life insurance policies or other investment products can place orders to redeem shares. Contract holders and policy holders should not directly contact the Fund or its transfer agent to request a redemption of Fund shares. Contract owners should refer to the withdrawal or surrender instructions in the accompanying prospectus of the participating insurance company. The share price that applies to a redemption order is the next net asset value per share that is determined after the participating insurance company (as the Fund's designated agent) receives a redemption request on a regular business day from its contract or policy holder, provided that the Fund receives the order from the insurance company, generally by 9:30 A.M. the next regular business day at the office of its Transfer Agent in Denver, Colorado. The Fund normally sends payment by Federal Funds wire to the insurance company's account the day after the Fund receives the order (and no later than 7 days after the Fund's receipt of the order). Under unusual circumstances determined by the Securities and Exchange Commission, payment may be delayed or suspended. Dividends, Capital Gains and Taxes DIVIDENDS. The Fund intends to declare dividends separately for each class of shares from net investment income, if any, on an annual basis and to pay those dividends in March on a date selected by the Board of Trustees. The Fund has no fixed dividend rate and cannot guarantee that it will pay any dividends. All dividends (and any capital gains distributions will be reinvested automatically in additional Fund shares at net asset value for the account of the participating insurance company (unless the insurance company elects to have dividends or distributions paid in cash). CAPITAL GAINS. The Fund may realize capital gains on the sale of portfolio securities. If it does, it may make distributions out of any net short-term or long-term capital gains in March of each year. The Fund may make supplemental distributions of dividends and capital gains following the end of its fiscal year. There can be no assurance that the Fund will pay any capital gains distributions in a particular year. TAXES. For a discussion of the tax status of a variable annuity contract, a variable life insurance policy or other investment product of a participating insurance company, please refer to the accompanying prospectus of your participating insurance company. Because shares of the Fund may be purchased only through insurance company separate accounts for variable annuity contracts, variable life insurance policies or other investment products, dividends paid by the Fund from net investment income and distributions (if any) of net realized short-term and long-term capital gains will be taxable, if at all, to the participating insurance company. This information is only a summary of certain federal income tax information about an investment in Fund shares. You should consult with your tax advisor or your participating insurance company representative about the effect of an investment in the Fund under your contract or policy. Financial Highlights The Financial Highlights Table is presented to help you understand the Fund's financial performance for the past 5 fiscal years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by Deloitte & Touche LLP, the Fund's independent auditors, whose report, along with the Fund's financial statements, is included in the Statement of Additional Information, which is available on request. - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------ Per Share Operating Data Net asset value, beginning of period $5.12 $5.12 $5.09 $4.91 $4.60 - ------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income .45 .39 .39 .38 .38 Net realized and unrealized gain (loss) (.31) (.24) .04 .19 .30 - ------------------------------------------------------------------------------------------------------------------------------ Total income from investment operations .14 .15 .43 .57 .68 - ------------------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.29) (.09) (.39) (.39) (.37) Distributions from net realized gain -- (.06) (.01) -- -- - ------------------------------------------------------------------------------------------------------------------------------ Total dividends and/or distributions to shareholders (.29) (.15) (.40) (.39) (.37) - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $4.97 $5.12 $5.12 $5.09 $4.91 ===== ===== ===== ===== ===== - ------------------------------------------------------------------------------------------------------------------------------ Total Return, at Net Asset Value(1) 2.83% 2.90% 8.71% 12.07% 15.33% ============================================================================================================================== Ratios/Supplemental Data Net assets, end of period (in thousands) $282,086 $279,200 $207,839 $118,716 $60,098 - ------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $278,668 $250,227 $159,934 $82,604 $37,698 - ------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets:(2) Net investment income 9.08% 8.17% 8.23% 8.48% 9.32% Expenses 0.78% 0.80%(3) 0.83%(3) 0.85%(3) 0.85%(3) - ------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate(4) 81% 134% 150% 144% 87%
1. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 2. Annualized for periods less than one full year. 3. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. 4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended December 31, 1999, were $242,578,613 and $216,840,010, respectively. 11 INFORMATION AND SERVICES For More Information on Oppenheimer Strategic Bond Fund/VA: The following additional information about Oppenheimer Strategic Bond Fund/VA is available without charge upon request: STATEMENT OF ADDITIONAL INFORMATION This document includes additional information about the Fund's investment policies, risks, and operations. It is incorporated by reference into this Prospectus (which means it is legally part of this Prospectus). ANNUAL AND SEMI-ANNUAL REPORTS Additional information about the Fund's investments and performance is available in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report includes a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. - -------------------------------------------------------------------- By Telephone: Call OppenheimerFunds Services toll-free: 1-888-470-0861 - -------------------------------------------------------------------- - -------------------------------------------------------------------- - ---------------------------- Write to: By Mail: ------------------------------ OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217-5270 - -------------------------------------------------------------------- You can also obtain copies of the Statement of Additional Information and other Fund documents and reports by visiting the SEC's Public Reference Room in Washington, D.C. (Phone 1.202.942.8090) or the EDGAR database on the SEC's Internet web site at http://www.sec.gov. Copies may be obtained upon payment of a duplicating fee by electronic request at the SEC's e-mail address: publicinfo@secgov., or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. No one has been authorized to provide any information about the Fund or to make any representations about the Fund other than what is contained in this Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a solicitation of an offer to buy shares of the Fund, to any person in any state or other jurisdiction where it is unlawful to make such an offer. SEC File No. 811-4108 PR0265.001.0500 Printed on recycled paper. (OppenheimerFunds logo) Appendix to Prospectus of Oppenheimer Strategic Bond Fund/VA (a series of Oppenheimer Variable Account Funds) Graphic material included in the Prospectus of Oppenheimer Strategic Bond Fund/VA (the "Fund") under the heading "Annual Total Return (as of 12/31 each year)": A bar chart will be included in the Prospectus of the Fund depicting the annual total returns of a hypothetical $10,000 investment in shares of the Fund for each of the five most recent calendar years, without deducting separate account expenses. Set forth below are the relevant data that will appear on the bar chart: Calendar Year Ended Annual Total Returns 12/31/95 15.33% 12/31/96 12.07% 12/31/97 8.71% 12/31/98 2.90% 12/31/99 2.83% Oppenheimer Small Cap Growth Fund/VA A series of Oppenheimer Variable Account Funds Prospectus dated May 1, 2000 Oppenheimer Small Cap Growth Fund/VA is a mutual fund that seeks capital appreciation to make your investment grow. The Fund invests mainly in common stocks of "small-cap" companies. Shares of the Fund are sold only as the underlying investment for variable life insurance policies, variable annuity contracts and other insurance company separate accounts. A prospectus for the insurance product you have selected accompanies this Prospectus and explains how to select shares of the Fund as an investment under that insurance product. This Prospectus contains important information about the Fund's objective, its investment policies, strategies and risks. As with all mutual funds, the Please read this Prospectus (and Securities your insurance product and Exchange Commission has not prospectus) carefully before you approved or disapproved the Fund's invest and keep them for future securities nor has it determined reference about your account. that this Prospectus is accurate or complete. It is a criminal offense to represent otherwise. - ------------------------------------ (OppenheimerFunds logo) CONTENTS ABOUT THE FUND The Fund's Objective and Investment Strategies Main Risks of Investing in the Fund The Fund's Past Performance About the Fund's Investments How the Fund is Managed INVESTING IN THE FUND How to Buy and Sell Shares Dividends, Capital Gains and Taxes Financial Highlights ABOUT THE FUND The Fund's Objective and Investment Strategies WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks capital appreciation. WHAT DOES THE FUND MAINLY INVEST IN? The Fund invests mainly in common stocks of small cap companies that OppenheimerFunds, Inc. (the "Manager") believes have favorable growth prospects. The Fund currently defines a "small cap issuer" as one having a market capitalization of up to $2.5 billion. However, that definition can change over time as relative capitalizations of issuers change. Under normal market conditions, the Fund will invest at least 65% of its total assets in common stocks and other equity securities of growth companies having a small market capitalization. The Fund can invest in any country, including countries with developed or emerging markets, but currently emphasizes investments in the U.S. and other developed markets. HOW DOES THE MANAGER DECIDE WHAT SECURITIES TO BUY OR SELL? In selecting securities for the Fund, the Fund's portfolio manager looks primarily for companies with high growth potential using fundamental analysis of a company's financial statements and management structure, and analysis of the company's operations and product development, as well as the industry of which the issuer is part. He also evaluates research on particular industries, market trends and general economic conditions. The portfolio manager focuses on factors that may vary in particular cases and over time. Currently he looks for: o Companies with small capitalizations, o Companies with management that has a proven ability to handle growth, o Companies that self-finance expansion rather than adding to their debt, o Companies with accelerating earnings and sustainable earnings growth, and o Companies with innovative products or services. WHO IS THE FUND DESIGNED FOR? The Fund's shares are available only as an investment option under certain variable annuity contracts, variable life insurance policies and investment plans offered through insurance company separate accounts of participating insurance companies, for investors seeking capital growth in their investment over the long term, from a fund that invests in small-cap stocks. Those investors should be willing to assume the greater risks of short-term share price fluctuations that are typical for an aggressive fund focusing on small-cap stocks. Since the Fund does not invest for income and the income from its investments will likely be small, it is not designed for investors needing an assured level of current income. However, the Fund is not a complete investment program. Main Risks of Investing in the Fund All investments have some degree of risk. The Fund's investments, in particular, are subject to changes in their value from a number of factors described below. Investments in stocks can be volatile and are subject to changes in general stock market movements (this is referred to as "market risk"). There is also the risk that poor security selection by the Manager will cause the Fund to underperform other funds having a similar objective. There may be events or changes affecting particular industries that might have a relatively greater weighting in the Fund's portfolio (this is referred to as "industry risk") or the change in value of a particular stock because of an event affecting the issuer. Stocks of growth companies may provide greater opportunities for capital appreciation but may be more volatile than other stocks. That volatility is likely to be even greater for small-cap companies. The Fund can also buy foreign securities that have special risks not associated with investments in domestic securities, such as the effects of currency fluctuations on relative prices. The Manager tries to reduce risks by carefully researching securities before they are purchased. The Fund attempts to reduce its exposure to market risks by diversifying its investments, that is, by not holding a substantial percentage of the stock of any one company and by not investing too great a percentage of the Fund's assets in any one company. Also, the Fund does not concentrate 25% or more of its assets in investments in any one industry. However, changes in the overall market prices of securities can occur at any time. The share price of the Fund will change daily based on changes in market prices of securities and market conditions, and in response to other economic events. RISKS OF INVESTING IN STOCKS. Because the Fund invests primarily in common stocks of small-cap growth companies, the value of the Fund's portfolio will be affected by changes in the stock market and the special economic and other factors that might primarily affect the prices of small cap stocks. Market risk will affect the Fund's net asset value per share, which will fluctuate as the values of the Fund's portfolio securities change. The prices of individual stocks do not all move in the same direction uniformly or at the same time. Different stock markets may behave differently from each other. Securities in the Fund's portfolio may not increase as much as the market as a whole. Growth stocks may at times be favored by the market and at other times may be out of favor. Some small cap securities may be inactively traded, and therefore, may not be readily bought or sold. Although profits in some Fund holdings may be realized quickly, investors should not expect the Fund's investments to appreciate rapidly. Other factors can affect a particular stock's price, such as poor earnings reports by the issuer, loss of major customers, major litigation against the issuer, or changes in government regulations affecting the issuer or its industry. Industry and Sector Focus. At times the Fund may increase the relative emphasis of its investments in a particular industry or sector. The prices of stocks of issuers in a particular industry or sector may go up and down in response to changes in economic conditions, government regulations, availability of basic resources or supplies, or other events that affect that industry or sector more than others. To the extent that the Fund increases the relative emphasis of its investments in a particular industry or sector, its share values may fluctuate in response to events affecting that industry or sector. To some extent that risk may be limited by the Fund's policy of not concentrating 25% or more of its assets in investments in any one industry. Risks of Growth Stocks. Stocks of growth companies, particularly newer companies, may offer opportunities for greater capital appreciation but may be more volatile than stocks of larger, more established companies. If the company's earnings growth or stock price fails to increase as expected the stock price of a growth company may decline sharply. Special Risks of Small-Cap Stocks. The Fund focuses its investments on securities of companies having a small market capitalization, which can include both established and newer companies. While newer emerging growth companies might offer greater opportunities for capital appreciation than larger, more established companies, they involve substantially greater risks of loss and price fluctuations than larger, more-established issuers. Small-cap companies may have limited product lines or markets for their products, limited access to financial resources and less depth in management skill than larger, more established companies. Their stocks may be less liquid than those of larger issuers. That means the Fund could have greater difficulty selling a security of a small cap issuer at an acceptable price, especially in periods of market volatility. That factor increases the potential for losses to the Fund. Also, it may take a substantial period of time before the Fund realizes a gain on an investment in a small-cap company, if it realizes any gain at all. Because of the special risks associated with investments in small, unseasoned issuers which are companies that have been in operation less than three years, (including the operations of any predecessors) the Fund intends to limit these investments to no more than 20% of total assets. HOW RISKY IS THE FUND OVERALL? The risks described above collectively form the overall risk profile of the Fund and can affect the value of the Fund's investments, its investment performance and its price per share. Particular investments and investment strategies also have risks. These risks mean that you can lose money by investing in the Fund. When you redeem your shares, they may be worth more or less than what you paid for them. There is no assurance that the Fund will achieve its investment objective. In the short term, the markets for small-cap stocks can be volatile, and the price of the Fund's shares can go up and down substantially. The Fund generally does not use income-oriented investments to help cushion the Fund's total return from changes in stock prices, except for defensive purposes. The Fund is a very aggressive investment vehicle, designed for investors willing to assume greater risks in the hope of achieving greater gains, and its share price is likely to fluctuate more than the price of shares of Funds emphasizing large-cap stocks. However, the Fund is not a complete investment program. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund's Past Performance The bar chart and table below show one measure of the risks of investing in the Fund, by showing changes in the Fund's performance1 from year to year since the Fund's inception and by showing how the average annual total return of the Fund's shares compare to those of a small-capitalization sector index. The Fund's past investment performance is not necessarily an indication of how the Fund will perform in the future. Annual Total Returns (as of 12/31 each year) [See appendix to prospectus for data in bar chart showing annual total returns] For the period from 1/1/00 through 3/31/00, the Fund's cumulative return (not annualized) was 9.20%. Charges imposed by the separate accounts that invest in the Fund are not included in the calculations of return in this bar chart, and if those charges were included, the returns would be less than those shown. During the period shown in the bar chart, the highest return (not annualized) for a calendar quarter was 49.05% (4thQ'99) and the lowest return (not annualized) for a calendar quarter was -7.50% (1stQ'99). - -------------------------------------------------------------------- Average Annual Total Returns for the periods 1 Year Life of Fund* ended December 31, 1999 - -------------------------------------------------------------------- - -------------------------------------------------------------------- Oppenheimer Small Cap 46.56% 22.74% Growth Fund/VA - -------------------------------------------------------------------- - -------------------------------------------------------------------- Russell 2000(R)Index 21.26% 6.78% - -------------------------------------------------------------------- * The Fund's inception date was 5/1/98. The "life of class" index performance is shown from 4/30/98. The Fund's returns in the table measure the performance of a hypothetical account without deducting charges imposed by the separate accounts that invest in the Fund and assume that all dividends and capital gains distributions have been reinvested in additional shares. Because the Fund invests primarily in small-cap stocks, the Fund's performance is compared to the Russell 2000 Index, an unmanaged index of equity securities of small capitalization companies that is a measure of the small company market. However, it must be remembered that the index performance reflects the reinvestment of income but does not consider the effects of transaction costs. The Fund's total returns should not be expected to be the same as the returns of other Oppenheimer funds, even if both funds have the same portfolio managers and/or similar names. About the Fund's Investments THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's portfolio among the different types of permitted investments will vary over time based upon the evaluation of economic and market trends by the Manager. The Fund's portfolio might not always include all of the different types of investments described below. The Statement of Additional Information contains more detailed information about the Fund's investment policies and risks. Small-Cap Stock Investments. The Fund emphasizes investments in equity securities of small companies that the Manager believes have growth potential. Small-cap growth companies tend to be companies that may be developing new products or services, that have relatively favorable prospects, or that are expanding into new and growing markets. Current examples include companies in the fields of telecommunications, biotechnology, computer software and new consumer products. While they include established companies that are entering a growth cycle, they also include newer companies. Emerging growth companies may be providing new products or services that can enable them to capture a dominant or important market position. They may have a special area of expertise or the capability to take advantage of changes in demographic factors in a more profitable way than larger, more established companies. Growth companies tend to retain a large part of their earnings for research, development or investment in capital assets. Therefore, they do not tend to emphasize paying dividends, and may not pay any dividends for some time. They are selected for the Fund's portfolio because the Manager believes the price of the stock will increase over the long term. Cyclical Opportunities. The Fund focuses on seeking growth over the long term but might also seek to take advantage of changes in the business cycle by investing in companies that are sensitive to those changes, if the Manager believes they have growth potential. For example, when the economy is expanding, companies in the consumer durables and technology sectors might benefit and present long-term growth opportunities. There is the risk that those securities can lose value when the issuer or industry is out of phase in the business cycle. Portfolio Turnover. The Fund may engage in short-term trading to try to achieve its objective, and will likely have a portfolio turnover rate in excess of 100% annually. Portfolio turnover affects brokerage costs the Fund pays. The Financial Highlights table at the end of this Prospectus shows the Fund's portfolio turnover rates during prior fiscal years. SPECIAL PORTFOLIO DIVERSIFICATION REQUIREMENTS. To enable a variable annuity or variable life insurance contract based on an insurance company separate account to qualify for favorable tax treatment under the Internal Revenue Code, the underlying investments must follow special diversification requirements that limit the percentage of assets that can be invested in securities of particular issuers. The Fund's investment program is managed to meet those requirements, in addition to other diversification requirements under the Internal Revenue Code and the Investment Company Act that apply to publicly-sold mutual funds. Failure by the Fund to meet those special requirements could cause earnings on a contract owner's interest in an insurance company separate account to be taxable income. Those diversification requirements might also limit, to some degree, the Fund's investment decisions in a way that could reduce its performance. CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The Fund's Board of Trustees can change non-fundamental investment policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. Fundamental policies are those that cannot be changed without the approval of a majority of the Fund's outstanding voting shares. The Fund's investment objective is a fundamental policy. Investment restrictions that are fundamental policies are listed in the Statement of Additional Information. An investment policy is not fundamental unless this Prospectus or the Statement of Additional Information says that it is. OTHER INVESTMENT STRATEGIES. To seek its objective, the Fund can also use the investment techniques and strategies described below. The Manager might not always use all of the different types of techniques and investments described below. These techniques involve certain risks, although some are designed to help reduce investment or market risks. Other Equity Securities. While the Fund emphasizes investments in common stocks, it may also buy preferred stocks and securities convertible into common stock. While some convertible securities are debt securities, the Manager considers some of them to be "equity equivalents" because of the conversion feature and in that case their rating has less impact on the investment decision than in the case of other debt securities. Nevertheless, convertible securities are subject to both "credit risk" (the risk that the issuer will not pay interest or repay principal in a timely manner) and "interest rate risk" (the risk that the prices of the securities will be affected inversely by changes in prevailing interest rates). If the Fund buys convertible securities (or other debt securities) it will focus primarily on investment-grade securities, which pose less credit risk than lower-grade debt securities. Foreign Securities. The Fund can invest in foreign securities, although most of the small cap stocks the Fund holds are issued by domestic companies. The Fund currently emphasizes investments in U.S. companies and does not expect its investments in foreign securities to exceed 25% of its net assets. While foreign securities offer special investment opportunities, there are also special risks. The change in value of a foreign currency against the U.S. dollar will result in a change in the U.S. dollar value of securities denominated in that foreign currency. Foreign issuers are not subject to the same accounting and disclosure requirements that U.S. companies are subject to. The value of foreign investments may be affected by exchange control regulations, expropriation or nationalization of a company's assets, foreign taxes, delays in settlement of transactions, changes in governmental economic or monetary policy in the U.S. or abroad, or other political and economic factors. Illiquid and Restricted Securities. Investments may be illiquid because there is no active trading market for them, making it difficult to value them or dispose of them promptly at an acceptable price. A restricted security is one that has a contractual restriction on its resale or which cannot be sold publicly until it is registered under the Securities Act of 1933. The Fund will not invest more than 15% of its net assets in illiquid or restricted securities. Certain restricted securities that are eligible for resale to qualified institutional purchasers may not be subject to that limit. The Manager monitors holdings of illiquid securities on an ongoing basis to determine whether to sell any holdings to maintain adequate liquidity. Derivative Investments. The Fund can invest in a number of different kinds of "derivative" investments. In general terms, a derivative investment is an investment contract whose value depends on (or is derived from) the value of an underlying asset, interest rate or index. In the broadest sense, options, futures contracts, and other hedging instruments the Fund might use may be considered "derivative" investments. In addition to using derivatives for hedging, the Fund might use other derivative investments because they offer the potential for increased value. The Fund currently does not use derivatives to a significant degree and is not required to use them in seeking its objective. Derivatives have risks. If the issuer of the derivative investment does not pay the amount due, the Fund can lose money on the investment. The underlying security or investment on which a derivative is based, and the derivative itself, may not perform the way the Manager expected it to. As a result of these risks the Fund could realize less principal or income from the investment than expected or its hedge might be unsuccessful. As a result, the Fund's share prices could fall. Certain derivative investments held by the Fund might be illiquid. o Hedging. The Fund can buy and sell futures contracts, put and call options, and forward contracts. These are all referred to as "hedging instruments." The Fund does not currently use hedging extensively nor for speculative purposes. It has limits on its use of hedging instruments and is not required to use them in seeking its objective. Some of these strategies would hedge the Fund's portfolio against price fluctuations. Other hedging strategies, such as buying futures and call options, would tend to increase the Fund's exposure to the securities market. Options trading involves the payment of premiums and has special tax effects on the Fund. For example, if a covered call written by the Fund is exercised on an investment that has increased in value, the Fund will be required to sell the investment at the call price and will not be able to realize any profit if the investment has increased in value above the call price. There are also special risks in particular hedging strategies. If the Manager used a hedging instrument at the wrong time or judged market conditions incorrectly, the strategy could reduce the Fund's return. The Fund could also experience losses if the prices of its futures and options positions were not correlated with its other investments or if it could not close out a position because of an illiquid market. Temporary Defensive Investments. For cash management purposes, the Fund can hold cash equivalents such as commercial paper, repurchase agreements, Treasury bills and other short-term U.S. Government securities. In times of adverse or unstable market or economic conditions, the Fund can invest up to 100% of its assets in temporary defensive investments. These would ordinarily be U. S. Government securities, highly-rated commercial paper, bank deposits or repurchase agreements. To the extent the Fund invests defensively in these securities, it might not achieve its investment objective. How the Fund Is Managed THE MANAGER. The Fund's investment Manager, OppenheimerFunds, Inc., chooses the Fund's investments and handles its day-to-day business. The Manager carries out its duties, subject to the policies established by the Board of Trustees, under an Investment Advisory Agreement that states the Manager's responsibilities. The Agreement sets the fees paid by the Fund to the Manager and describes the expenses that the Fund is responsible to pay to conduct its business. The Manager has been an investment adviser since 1960 and currently manages investment companies, including other Oppenheimer funds. The Manager (including subsidiaries and affiliates) manages assets of more than $120 billion as of January 31, 2000 with more than 5 million shareholder accounts. The Manager is located at Two World Trade Center, 34th Floor, New York, New York 10048-0203. Portfolio Manager. The Portfolio Manager of the Fund is Jay W. Tracey, III. He has been the person principally responsible for the day-to-day management of the Fund since its inception in May 1998, and is a Vice President of the Fund and of the Manager. He also serves as an officer and portfolio manager of other Oppenheimer funds. He has been employed by the Manager since July 1991, except during the period from February through September 1994, during which he was a managing director of another firm. Advisory Fees. Under the Investment Advisory Agreement, the Fund pays the Manager an advisory fee at an annual rate that declines on additional assets as the Fund grows: 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, and 0.60% of average annual net assets over $800 million. The Fund's management fee for its last fiscal year ended December 31, 1999, was 0.75% of the Fund's average annual net assets. Possible Conflicts of Interest. The Fund offers its shares to separate accounts of different insurance companies that are not affiliated with each other, as an investment for their variable annuity, variable life and other investment product contracts. While the Fund does not foresee any disadvantages to contract owners from these arrangements, it is possible that the interests of owners of different contracts participating in the Fund through different separate accounts might conflict. For example, a conflict could arise because of differences in tax treatment. The Fund's Board has procedures to monitor the portfolio for possible conflicts to determine what action should be taken. If a conflict occurs, the Board might require one or more participating insurance company separate accounts to withdraw their investments in the Fund. That could force the Fund to sell securities at disadvantageous prices, and orderly portfolio management could be disrupted. Also, the Board might refuse to sell shares of the Fund to a particular separate account, or could terminate the offering of the Fund's shares if required to do so by law or if it would be in the best interests of the shareholders of the Fund to do so. INVESTING IN THE FUND How to Buy and Sell Shares HOW ARE SHARES PURCHASED? Shares of the Fund may be purchased only by separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. Individual investors cannot buy shares of the Fund directly. Please refer to the accompanying prospectus of the participating insurance company for information on how to select the Fund as an investment option for that variable life insurance policy, variable annuity or other investment product. The Fund reserves the right to refuse any purchase order when the Manager believes it would be in the Fund's best interests to do so. - ------------------------------------------------------------------------------- Information about your investment in the Fund through your variable annuity contract, variable life insurance policy or other plan can be obtained only from your participating insurance company or its servicing agent. The Fund's Transfer Agent does not hold or have access to those records. Instructions for buying or selling shares of the Fund should be given to your insurance company or its servicing agent, not directly to the Fund or its Transfer Agent. - ------------------------------------------------------------------------------- AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their offering price, which is the net asset value per share. The Fund does not impose any sales charge on purchases of its shares. If there are any charges imposed under the variable annuity, variable life or other contract through which Fund shares are purchased, they are described in the accompanying prospectus of the participating insurance company. The net asset value per share is determined as of the close of The New York Stock Exchange on each day that the exchange is open for trading (referred to in this Prospectus as a "regular business day"). The Exchange normally closes at 4:00 P.M., New York time, but may close earlier on some days. All references to time in this Prospectus mean "New York time." The net asset value per share is determined by dividing the value of the Fund's net assets attributable to a class of shares by the number of shares of that class that are outstanding. The Fund's Board of Trustees has established procedures to value the Fund's securities to determine the Fund's net asset value, in general based on market values. The Board has adopted special procedures for valuing illiquid and restricted securities and securities for which market values cannot be readily obtained. Because some foreign securities trade in markets and on exchanges that operate on weekends and U.S. holidays, the values of some of the Fund's foreign investments might change significantly on days when shares of the Fund cannot be purchased or redeemed. The offering price that applies to an order from a participating insurance company is based on the next calculation of the net asset value per share that is made after the insurance company (as the Fund's designated agent to receive purchase orders) receives a purchase order from its contract owners to purchase Fund shares on a regular business day, provided that the Fund receives the order from the insurance company by 9:30 A.M. on the next regular business day at the offices of its Transfer Agent in Denver, Colorado. CLASSES OF SHARES. The Fund may offers two different classes of shares. The class of shares offered by this Prospectus has no class name designation. The other class is designated as Service shares. The different classes of shares represent investments in the same portfolio of securities but are expected to have different expenses and share prices. This Prospectus may not be used to offer Service shares. A description of the Service Plans that affect only Service shares of the Fund is contained in the Fund's Prospectus that offers Service shares. That Prospectus, when available, may be obtained without charge by contacting any participating insurance company that offers Service shares of the Fund as an investment for its separate accounts. You can also obtain a copy from OppenheimerFunds Distributor, Inc. by calling toll-free 1.888.470.0861. HOW ARE SHARES REDEEMED? As with purchases, only the participating insurance companies that hold Fund shares in their separate accounts for the benefit of variable annuity contracts, variable life insurance policies or other investment products can place orders to redeem shares. Contract holders and policy holders should not directly contact the Fund or its transfer agent to request a redemption of Fund shares. Contract owners should refer to the withdrawal or surrender instructions in the accompanying prospectus of the participating insurance company. The share price that applies to a redemption order is the next net asset value per share that is determined after the participating insurance company (as the Fund's designated agent) receives a redemption request on a regular business day from its contract or policy holder, provided that the Fund receives the order from the insurance company, generally by 9:30 A.M. the next regular business day at the office of its Transfer Agent in Denver, Colorado. The Fund normally sends payment by Federal Funds wire to the insurance company's account the day after the Fund receives the order (and no later than 7 days after the Fund's receipt of the order). Under unusual circumstances determined by the Securities and Exchange Commission, payment may be delayed or suspended. Dividends, Capital Gains and Taxes DIVIDENDS. The Fund intends to declare dividends separately for each class of shares from net investment income, if any, on an annual basis, and to pay those dividends in March on a date selected by the Board of Trustees. the Fund has no fixed dividend rate and cannot guarantee that it will pay any dividends. All dividends (and any capital gains distributions) will be reinvested automatically in additional Fund shares at net asset value for the account of the participating insurance company (unless the insurance company elects to have dividends or distributions paid in cash). CAPITAL GAINS. The Fund may realize capital gains on the sale of portfolio securities. If it does, it may make distributions out of any net short-term or long-term capital gains in March of each year. The Fund may make supplemental distributions of dividends and capital gains following the end of its fiscal year. There can be no assurance that the Fund will pay any capital gains distributions in a particular year. TAXES. For a discussion of the tax status of a variable annuity contract, a variable life insurance policy or other investment product of a participating insurance company, please refer to the accompanying prospectus of your participating insurance company. Because shares of the Fund may be purchased only through insurance company separate accounts for variable annuity contracts, variable life insurance policies or other investment products, dividends paid by the Fund from net investment income and distributions (if any) of net realized short-term and long-term capital gains will be taxable, if at all, to the participating insurance company. This information is only a summary of certain federal income tax information about an investment in Fund shares. You should consult with your tax advisor or your participating insurance company representative about the effect of an investment in the Fund under your contract or policy. Financial Highlights The Financial Highlights Table is presented to help you understand the Fund's financial performance since its inception. Certain information reflects financial results for a single Fund share. The total return in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by Deloitte & Touche LLP, the Fund's independent auditors, whose report, along with the Fund's financial statements, is included in the Statement of Additional Information, which is available on request. - ------------------------------------------------------------------ Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998(1) =========================================================================================== Per Share Operating Data Net asset value, beginning of period $ 9.60 $10.00 - ------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (.02) (.02) Net realized and unrealized gain (loss) 4.49 (.38) - ------------------------------------------------------------------------------------------- Total income (loss) from investment operations 4.47 (.40) - ------------------------------------------------------------------------------------------- Net asset value, end of period $14.07 $ 9.60 ====== ====== =========================================================================================== Total Return, at Net Asset Value(2) 46.56% (4.00)% =========================================================================================== Ratios/Supplemental Data Net assets, end of period (in thousands) $6,927 $994 - ------------------------------------------------------------------------------------------- Average net assets (in thousands) $2,738 $441 - ------------------------------------------------------------------------------------------- Ratios to average net assets:(3) Net investment loss (0.37)% (0.79)% Expenses 1.83% 0.87%(4) Expenses, net of voluntary assumption of expenses 1.34% N/A - ------------------------------------------------------------------------------------------- Portfolio turnover rate(5) 176% 61%
1. For the period from May 1, 1998 (commencement of operations) to December 31, 1998. 2. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period (or commencement of operations), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods of less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 3. Annualized for periods less than one full year. 4. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. 5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended December 31, 1999, were $7,060,737 and $4,155,665, respectively. 9 INFORMATION AND SERVICES For More Information on Oppenheimer Small Cap Growth Fund/VA: The following additional information about Oppenheimer Small Cap Growth Fund/VA is available without charge upon request: STATEMENT OF ADDITIONAL INFORMATION This document includes additional information about the Fund's investment policies, risks, and operations. It is incorporated by reference into this Prospectus (which means it is legally part of this Prospectus). ANNUAL AND SEMI-ANNUAL REPORTS Additional information about the Fund's investments and performance is available in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report includes a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. - -------------------------------------------------------------------- By Telephone: Call OppenheimerFunds Services toll-free: 1-888-470-0861 - -------------------------------------------------------------------- - -------------------------------------------------------------------- - ---------------------------- Write to: By Mail: ------------------------------ OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217-5270 - -------------------------------------------------------------------- You can also obtain copies of the Statement of Additional Information and other Fund documents and reports by visiting the SEC's Public Reference Room in Washington, D.C. (Phone 1.202.942.8090) or the EDGAR database on the SEC's Internet web site at http://www.sec.gov. Copies may be obtained upon payment of a duplicating fee by electronic request at the SEC's e-mail address: publicinfo@secgov., or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. No one has been authorized to provide any information about the Fund or to make any representations about the Fund other than what is contained in this Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a solicitation of an offer to buy shares of the Fund, to any person in any state or other jurisdiction where it is unlawful to make such an offer. SEC File No. 811-4108 PR0297.001.0500 Printed on recycled paper. (OppenheimerFunds logo) Appendix to Prospectus of Oppenheimer Small Cap Growth Fund/VA (a series of Oppenheimer Variable Account Funds) Graphic material included in the Prospectus of Oppenheimer Small Cap Growth Fund/VA (the "Fund") under the heading "Annual Total Return (as of 12/31 each year)": A bar chart will be included in the Prospectus of the Fund depicting the annual total returns of a hypothetical $10,000 investment in shares of the Fund for the most recent calendar year, without deducting separate account expenses. Set forth below are the relevant data that will appear on the bar chart: Calendar Year Ended Annual Total Return 12/31/99 45.56% Oppenheimer Main Street Growth & Income Fund/VA(R) A series of Oppenheimer Variable Account Funds Prospectus dated May 1, 2000 Oppenheimer Main Street Growth & Income Fund/VA is a mutual fund that seeks high total return, which includes growth in the value of its shares as well as current income, from equity and debt securities. The Fund invests mainly in common stocks of U.S. companies. Shares of the Fund are sold only as the underlying investment for variable life insurance policies, variable annuity contracts and other insurance company separate accounts. A prospectus for the insurance product you have selected accompanies this Prospectus. It explains how to select shares of the Fund as an As with all mutual funds, the investment under the insurance Securities and Exchange Commission product, and whether you are has not approved or disapproved only eligible to purchase the Fund's securities nor has it Service shares of the Fund. determined that this Prospectus is This Prospectus contains accurate or complete. It is a important information about the criminal offense to represent Fund's objective, its investment otherwise. policies, strategies and risks. Please read this Prospectus (and your insurance product prospectus) carefully before you invest and keep it for future reference about your account. - ------------------------------------ (OppenheimerFunds logo) Contents About the Fund - ------------------------------------------------------------------------------- The Fund's Objective and Investment Strategies Main Risks of Investing in the Fund The Fund's Past Performance About the Fund's Investments How the Fund is Managed Investing in the Fund - ------------------------------------------------------------------------------- How to Buy and Sell Shares Dividends, Capital Gains and Taxes Financial Highlights About the Fund The Fund's Objective and Investment Strategies - ------------------------------------------------------------------------------- What Is the Fund's Investment Objective? The Fund's objective is to seek high total return (which includes growth in the value of its shares as well as current income) from equity and debt securities. - ------------------------------------------------------------------------------- What Does the Fund Invest In? The Fund invests mainly in common stocks of U.S. companies, and can also invest in other equity securities such as preferred stocks and securities convertible into common stocks. Although the Fund does not have any requirements as to the capitalization of issuers in which it invests, the Fund's investment Manager, OppenheimerFunds, Inc., currently emphasizes the stocks of large-capitalization companies in the Fund's portfolio. At times, the Fund may increase the relative emphasis of its investments in small-cap and mid-cap stocks. While the Fund can buy foreign securities and debt securities such as bonds and notes, currently it does not emphasize those investments. The Fund can also use hedging instruments and certain derivative investments to try to manage investment risks. These investments are more fully explained in "About the Fund's Investments," below. |X| How Do the Portfolio Managers Decide What Securities to Buy or Sell? In selecting securities for purchase or sale by the Fund, the Fund's portfolio managers use an investment process that combines quantitative models, fundamental research about particular securities and individual judgment. While this process and the inter-relationship of the factors used may change over time and its implementation may vary in particular cases, in general the selection process involves the use of: o Multi-factor quantitative models: These include a group of "top-down" models that analyze data such as relative valuations, relative price trends, interest rates and the shape of the yield curve. These help direct portfolio emphasis by market capitalization (small, mid, or large), industries, and value or growth styles. A group of "bottom up" models helps to rank stocks in a universe typically including 2000 stocks, selecting stocks for relative attractiveness by analyzing fundamental stock and company characteristics. o Fundamental research: The portfolio managers use internal research and analysis by other market analysts, with emphasis on current company news and industry-related events. o Judgment: The portfolio is then continuously rebalanced by the portfolio managers, using all of the tools described above. Who Is the Fund Designed For? The Fund's shares are available only as an investment option under certain variable annuity contracts, variable life insurance policies and investment plans offered through insurance company separate accounts of participating insurance companies, for investors seeking high total return from their investment over the long term. Those investors should be willing to assume the risks of short-term share price fluctuations that are typical for a fund with significant investments in stocks. Since the Fund's income level will fluctuate, it is not designed for investors needing an assured level of current income. However, the Fund is not a complete investment program. Main Risks of Investing in the Fund All investments carry risks to some degree. The Fund's investments are subject to changes in their value from a number of factors, described below. There is also the risk that value of your investment could be eroded over time by the effects of inflation and that poor security selection by the Fund's Investment Manager, OppenheimerFunds, Inc. will cause the Fund to underperform other funds having similar objectives. At times, the Fund may increase the relative emphasis of its investments in a particular industry compared to the weighting of that industry in the S&P 500 Index, which the Fund uses as a performance benchmark. Therefore, it may be subject to the risks that economic, political or other events can have a negative effect on the values of securities of issuers in that industry (this is referred to as "industry risk"). Changes in interest rates can also affect bond prices (this is known as "interest rate risk"). These risks collectively form the risk profile of the Fund, and can affect the value of the Fund's investments, its investment performance and its price per share. These risks mean that you can lose money by investing in the Fund. When you redeem your shares, they may be worth more or less than what you paid for them. However, changes in the overall market prices of securities and the income they pay can occur at any time. The share price of the Fund will change daily based on changes in market prices of securities and market conditions and in response to other economic events. There is no assurance that the Fund will achieve its investment objective. |X| Risks of Investing in Stocks. Stocks fluctuate in price, and their short-term volatility at times may be great. Because the Fund currently emphasizes investments in common stocks, the value of the Fund's portfolio will be affected by changes in the stock markets. Market risk will affect the Fund's net asset value per share, which will fluctuate as the values of the Fund's portfolio securities change. A variety of factors can affect the price of a particular stock and the prices of individual stocks do not all move in the same direction uniformly or at the same time. Different stock markets may behave differently from each other. In particular, because the Fund currently intends to focus its investments in stocks of U.S. issuers, it will be affected primarily by changes in U.S. stock markets. Additionally, stocks of issuers in a particular industry may be affected by changes in economic conditions that affect that industry more than others, or by changes in government regulations, availability of basic resources or supplies, or other events. Other factors can affect a particular stock's price, such as poor earnings reports by the issuer, loss of major customers, major litigation against the issuer, or changes in government regulations affecting the issuer. How Risky is the Fund Overall? In the short term, stock markets can be volatile, and the price of the Fund's shares will go up and down in response to those changes. The Fund's income-oriented investments, if any, may help cushion the Fund's total return from changes in stock prices, but debt securities are subject to credit and interest rate risks and are not the main focus of the Fund. The Fund may be less volatile than funds that focus only on small-cap, foreign or sector stock investments, but may be more volatile than funds that place more emphasis on debt securities, particularly on investment grade bonds. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund's Past Performance The bar chart and table below show one measure of the risks of investing in the Fund, by showing changes in the Fund's performance for the full calendar year since the Fund's inception and by showing how the average annual total returns of the Fund's shares compare to those of a broad-based market index. Performance is not shown for the Fund's Service shares, which were not offered prior to May 1, 2000. Because Service shares are subject to a service fee, the performance is expected to be lower for any given period. The Fund's past investment performance is not necessarily an indication of how the Fund will perform in the future. Annual Total Returns (as of 12/31 each year) [See appendix to prospectus for data in bar chart showing annual total returns] For the period from 1/1/2000 through 3/31/2000, the Fund's cumulative return (not annualized) was 3.07%. Charges imposed by the separate accounts that invest in the Fund are not included in the calculations of return in this bar chart, and if those charges were included, the returns would be less than those shown. During the period shown in the bar chart, the highest return (not annualized) for a calendar quarter was 19.28% ( 4th Q '98) and the lowest return (not annualized) for a calendar quarter was -22.38% ( 3rd Q '98). - ----------------------------------------------------- Average Annual Total Returns for 1 Year Life of Fund* the periods ended December 31, 1999 - ----------------------------------------------------- - ----------------------------------------------------- Oppenheimer Main 21.71% 25.80% Street Growth & Income Fund/VA (inception 7/5/95) - ----------------------------------------------------- - ----------------------------------------------------- S&P 500 Index 21.03% 26.89%1 - ----------------------------------------------------- 1. From 6/30/95. The Fund's returns in the table measure the performance of a hypothetical account without deducting charges imposed by the separate accounts that invest in the Fund and assume that all dividends and capital gains distributions have been reinvested in additional shares. The Fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of U.S. equity securities. The index performance reflects the reinvestment of income but does not consider the effects of capital gains or transaction costs. Also, the Fund may have investments that vary from the index. The Fund's total returns should not be expected to be the same as the returns of other Oppenheimer funds, even if both funds have the same portfolio managers and/or similar names. About the Fund's Investments The Fund's Principal Investment Policies. The allocation of the Fund's portfolio among different types of investments will vary over time based upon the Manager's evaluation of economic and market trends. The Fund's portfolio might not always include all the different types of investments described below. The Statement of Additional Information contains more detailed information about the Fund's investment policies and risks. The Manager tries to reduce risks by carefully researching securities before they are purchased. The Fund attempts to reduce its exposure to market risks by diversifying its investments, that is, by not holding a substantial percentage of stock of any one company and by not investing too great a percentage of the Fund's assets in any one issuer. Also, the Fund does not concentrate 25% or more of its investments in any one industry. |X| Stock and Other Equity Investments. The Fund invests mainly in common stocks. It can also buy other equity securities. Equity securities include common stocks, preferred stocks and securities convertible into common stock. Although some convertible securities are a type of debt security, the Manager considers some of those convertible securities to be "equity equivalents" because of the conversion feature and their rating has less impact on the investment decision than in the case of other debt securities. The Fund invests in securities issued by companies that the Manager believes have appreciation potential. The Fund's equity investments may be exchange-traded or over-the-counter securities. Over-the-counter securities may have less liquidity than exchange-traded securities, and stocks of companies with smaller capitalization have greater risk of volatility than stocks of larger companies. |X| Special Portfolio Diversification Requirements. To enable a variable annuity or variable life insurance contract based on an insurance company separate account to qualify for favorable tax treatment under the Internal Revenue Code, the underlying investments must follow special diversification requirements that limit the percentage of assets that can be invested in securities of particular issuers. The Fund's investment program is managed to meet those requirements, in addition to other diversification requirements under the Internal Revenue Code and the Investment Company Act that apply to publicly-sold mutual funds. Failure by the Fund to meet those special requirements could cause earnings on a contract owner's interest in an insurance company separate account to be taxable income. Those diversification requirements might also limit, to some degree, the Fund's investment decisions in a way that could reduce its performance. Can the Fund's Investment Objective and Policies Change? The Fund's Board of Trustees can change non-fundamental investment policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. Fundamental policies cannot be changed without the approval of a majority of the Fund's outstanding voting shares. The Fund's objective is a fundamental policy. Investment restrictions that are fundamental policies are listed in the Statement of Additional Information. An investment policy is not fundamental unless this Prospectus or the Statement of Additional Information says that it is. Portfolio Turnover. The Fund can engage in short-term trading to try to achieve its objective. Portfolio turnover affects brokerage costs the Fund pays. The Financial Highlights table at the end of this Prospectus shows the Fund's portfolio turnover rates during prior fiscal years. Other Investment Strategies. To seek its objective, the Fund can also use the investment techniques and strategies described below. The Fund might not always use all of them. These techniques involve risks, although some are designed to help reduce overall investment or market risks. |X| Debt Securities. The Fund can also invest in debt securities, such as U.S. government securities, foreign government securities, and foreign and domestic corporate bonds, notes and debentures, for their income possibilities. Currently the Fund does not invest a significant percentage of its assets in debt securities, although their relative emphasis in the portfolio may change if the Manager believes they offer opportunities to increase the Fund's total return. The debt securities the Fund buys may be rated by nationally recognized rating organizations or they may be unrated securities assigned a rating by the Manager. The Fund's investments may be above or below investment grade in credit quality. The Manager does not rely solely on ratings by rating organizations in selecting debt securities but evaluates business and economic factors affecting an issuer as well. |X| Risks of Foreign Investing. The Fund can buy securities issued by companies or governments in any country, including developed and underdeveloped countries. There are no limits on the amounts it can invest in foreign securities, but the Fund currently does not expect to have substantial investments in foreign securities. While foreign securities offer special investment opportunities, there are also special risks. The change in value of a foreign currency against the U.S. dollar will result in a change in the U.S. dollar value of securities denominated in that foreign currency. Foreign issuers are not subject to the same accounting and disclosure requirements that U.S. companies are subject to. The value of foreign investments may be affected by exchange control regulations, expropriation or nationalization of a company's assets, foreign taxes, delays in settlement of transactions, changes in governmental economic or monetary policy in the U.S. or abroad, or other political and economic factors. |_| Interest Rate Risks. The values of debt securities are subject to change when prevailing interest rates change. When interest rates fall, the values of already-issued debt securities generally rise. When interest rates rise, the values of already-issued debt securities generally fall. The magnitude of these fluctuations will typically be greater for longer-term debt securities than shorter-term debt securities. The Fund's share prices can go up or down when interest rates change because of the effect of the changes on the value of the Fund's investments in debt securities. |_| Credit Risk. Debt securities are subject to credit risk. Credit risk relates to the ability of the issuer of a security to make interest and principal payments on the security as they become due. If the issuer fails to pay interest, the Fund's income might be reduced and if the issuer fails to repay principal, the value of that security and of the Fund's shares might be reduced. While the Fund's investments in U.S. government securities are subject to little credit risk, the Fund's other investments in debt securities are subject to risks of default. |_| U.S. Government Securities. The Fund can invest in securities issued or guaranteed by the U.S. Treasury or other U.S. government agencies or federally-chartered corporate entities referred to as "instrumentalities". These are referred to as "U.S. government securities" in this Prospectus. Although not rated, Treasury obligations have little credit risk but prior to their maturity are subject to interest rate risk. |X| Illiquid and Restricted Securities. Investments may be illiquid because they do not have an active trading market, making it difficult to value them or dispose of them promptly at an acceptable price. A restricted security is one that has a contractual restriction on its resale or which cannot be sold publicly until it is registered under the Securities Act of 1933. The Fund will not invest more than 15% of its net assets in illiquid or restricted securities. Certain restricted securities that are eligible for resale to qualified institutional purchasers may not be subject to that limit. The Manager monitors holdings of illiquid securities on an ongoing basis to determine whether to sell any holdings to maintain adequate liquidity. |X| Derivative Investments. The Fund can invest in a number of different kinds of "derivative" investments. In general terms, a derivative investment is an investment contract whose value depends on (or is derived from) the value of an underlying asset, interest rate or index. In the broadest sense, exchange-traded options, futures contracts, mortgage-related securities and other hedging instruments the Fund can use may be considered "derivative investments." In addition to using hedging instruments, the Fund may use other derivative investments because they offer the potential for increased income and principal value. |X| There Are Special Risks in Using Derivative Investments. If the issuer of the derivative does not pay the amount due, the Fund can lose money on the investment. Also, the underlying security or investment on which the derivative is based, and the derivative itself, might not perform the way the Manager expected it to perform. If that happens, the Fund's share price could decline or the Fund could get less income than expected. The Fund has limits on the amount of particular types of derivatives it can hold. However, using derivatives can cause the Fund to lose money on its investment and/or increase the volatility of its share prices. Markets underlying securities and indices may move in a direction not anticipated by the Manager. Interest rate and stock market changes in the U.S. and abroad may also influence the performance of derivatives. As a result of these risks the Fund could realize less principal or income from the investment than expected. Certain derivative investments held by the Fund may be illiquid. |X| Hedging. The Fund can buy and sell futures contracts, put and call options, forward contracts and options on futures and broadly-based securities indices. These are all referred to as "hedging instruments." The Fund is not required to use hedging instruments to seek its objective. The Fund does not use hedging instruments for speculative purposes, and has limits on its use of them. The Fund could buy and sell options, futures and forward contracts for a number of purposes. It might do so to try to manage its exposure to the possibility that the prices of its portfolio securities may decline, or to establish a position in the securities market as a temporary substitute for purchasing individual securities. It might do so to try to manage its exposure to changing interest rates. Options trading involves the payment of premiums and has special tax effects on the Fund. There are also special risks in particular hedging strategies. For example, if a covered call written by the Fund is exercised on an investment that has increased in value, the Fund will be required to sell the investment at the call price and will not be able to realize any profit if the investment has increased in value above the call price. In writing a put, there is a risk that the Fund may be required to buy the underlying security at a disadvantageous price. If the Manager used a hedging instrument at the wrong time or judged market conditions incorrectly, the strategy could reduce the Fund's return. The Fund could also experience losses if the prices of its futures and options positions were not correlated with its other investments or if it could not close out a position because of an illiquid market. Temporary Defensive Investments. In times of unstable market or economic conditions, the Fund can invest up to 100% of its assets in temporary defensive investments. Generally they would be U.S. government securities, highly-rated commercial paper, bank deposits or repurchase agreements. The Fund may also hold these types of securities pending the investment of proceeds from the sale of Fund shares or portfolio securities or to meet anticipated redemptions of Fund shares. To the extent the Fund invests defensively in these securities, it may not achieve its investment objective of high total return. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. How the Fund Is Managed The Manager. The Manager chooses the Fund's investments and handles its day-to-day business. The Manager carries out its duties, subject to the policies established by the Fund's Board of Trustees, under an investment advisory agreement that states the Manager's responsibilities. The agreement sets the fees the Fund pays to the Manager and describes the expenses that the Fund is responsible to pay to conduct its business. The Manager has been an investment adviser since 1960. The Manager (including subsidiaries and affiliates) managed more than $120 billion as of March 31, 2000, including other Oppenheimer funds with more than 5 million shareholder accounts. The Manager is located at Two World Trade Center, 34th Floor, New York, New York 10048-0203. |X| Portfolio Managers. The portfolio managers of the Fund are Charles Albers and Nikolaos Monoyios, who are also Vice Presidents of the Fund. They have been responsible for the day-to-day management of the Fund's portfolio since May 1, 1999. Mr. Albers is a Senior Vice President of the Manager and Mr. Monoyios is a Vice President of the Manager. Prior to joining the Manager in April, 1998, they were portfolio managers at Guardian Investor Services (from 1972 and 1979, respectively), the investment management subsidiary of The Guardian Life Insurance Company. |X| Advisory Fees. Under the Investment Advisory Agreement, the Fund pays the Manager an advisory fee at an annual rate that declines on additional assets as the Fund grows: 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, and 0.60% of average annual net assets over $800 million. The Fund's management fee for its last fiscal year ended December 31, 1999, was 0.73% of the Fund's average annual net assets. |X| Possible Conflicts of Interest. The Fund offers its shares to separate accounts of different insurance companies that are not affiliated with each other, as an investment for their variable annuity, variable life and other investment product contracts. While the Fund does not foresee any disadvantages to contract owners from these arrangements, it is possible that the interests of owners of different contracts participating in the Fund through different separate accounts might conflict. For example, a conflict could arise because of differences in tax treatment. The Fund's Board has procedures to monitor the portfolio for possible conflicts to determine what action should be taken. If a conflict occurs, the Board might require one or more participating insurance company separate accounts to withdraw their investments in the Fund. That could force the Fund to sell securities at disadvantageous prices, and orderly portfolio management could be disrupted. Also, the Board might refuse to sell shares of the Fund to a particular separate account, or could terminate the offering of the Fund's shares if required to do so by law or if it would be in the best interests of the shareholders of the Fund to do so. Investing in the Fund How to Buy and Sell Shares How Are Shares Purchased? Shares of the Fund may be purchased only by separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. Individual investors cannot buy shares of the Fund directly. Please refer to the accompanying prospectus of the participating insurance company for information on how to select the Fund as an investment option for that variable life insurance policy, variable annuity or other investment product. That prospectus will indicate whether you are only eligible to purchase Service shares of the Fund. The Fund reserves the right to refuse any purchase order when the Manager believes it would be in the Fund's best interests to do so. - ------------------------------------------------------------------------------- Information about your investment in the Fund through your variable annuity contract, variable life insurance policy or other plan can be obtained only from your participating insurance company or its servicing agent. The Fund's Transfer Agent does not hold or have access to those records. Instructions for buying or selling shares of the Fund should be given to your insurance company or its servicing agent, not directly to the Fund or its Transfer Agent. - ------------------------------------------------------------------------------- |X| At What Price Are Shares Sold? Shares are sold at their offering price, which is the net asset value per share. The Fund does not impose any sales charge on purchases of its shares. If there are any charges imposed under the variable annuity, variable life or other contract through which Fund shares are purchased, they are described in the accompanying prospectus of the participating insurance company. The net asset value per share is determined as of the close of The New York Stock Exchange on each day that the exchange is open for trading (referred to in this Prospectus as a "regular business day"). The Exchange normally closes at 4:00 P.M., New York time, but may close earlier on some days. All references to time in this Prospectus mean "New York time." The net asset value per share is determined by dividing the value of the Fund's net assets attributable to a class of shares by the number of shares of that class that are outstanding. The Fund's Board of Trustees has established procedures to value the Fund's securities to determine the Fund's net asset value, in general based on market values. The Board has adopted special procedures for valuing illiquid and restricted securities and securities for which market values cannot be readily obtained. Because some foreign securities trade in markets and on exchanges that operate on weekends and U.S. holidays, the values of some of the Fund's foreign investments might change significantly on days when shares of the Fund cannot be purchased or redeemed. The offering price that applies to an order from a participating insurance company is based on the next calculation of the net asset value per share that is made after the insurance company (as the Fund's designated agent to receive purchase orders) receives a purchase order from its contract owners to purchase Fund shares on a regular business day, provided that the Fund receives the order from the insurance company, generally by 9:30 A.M. on the next regular business day at the offices of its Transfer Agent in Colorado. |X| Classes of Shares. The Fund offers two different classes of shares. The class of shares designated as Service shares are subject to a distribution and service plan. The impact of the expenses of that plan on Service shares is described below. The class of shares that are not subject to a plan has no class "name" designation. The different classes of shares represent investments in the same portfolio of securities but are expected to be subject to different expenses and will likely have different share prices. |X| Distribution and Service Plan for Service shares. The Fund has adopted a distribution and service plan for Service shares to pay OppenheimerFunds Distributor, Inc., the distributor, for distribution related services for the Fund's Service shares. Although the plan allows for payment to be made quarterly at an annual rate of up to 0.25% of the average annual net assets of Service shares of the Fund, that rate is currently reduced to 0.15%. The Board may increase that rate to no more than 0.25% per annum, without advance notification. The distributor currently uses all of those fees to compensate sponsor(s) of the insurance product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service shares. The impact of the service plan is to increase operating expenses of the Service shares, which results in lower performance compared to the Fund's shares that are not subject to a service fee. How Are Shares Redeemed? As with purchases, only the participating insurance companies that hold Fund shares in their separate accounts for the benefit of variable annuity contracts, variable life insurance policies or other investment products can place orders to redeem shares. Contract holders and policy holders should not directly contact the Fund or its transfer agent to request a redemption of Fund shares. Contract owners should refer to the withdrawal or surrender instructions in the accompanying prospectus of the participating insurance company. The share price that applies to a redemption order is the next net asset value per share that is determined after the participating insurance company (as the Fund's designated agent) receives a redemption request on a regular business day from its contract or policy holder, provided that the Fund receives the order from the insurance company by 9:30 A.M. the next regular business day at the office of its Transfer Agent in Colorado. The Fund normally sends payment by Federal Funds wire to the insurance company's account the day after the Fund receives the order (and no later than 7 days after the Fund's receipt of the order). Under unusual circumstances determined by the Securities and Exchange Commission, payment may be delayed or suspended. Dividends, Capital Gains and Taxes Dividends. The Fund intends to declare dividends separately for each class of shares from net investment income on an annual basis, and to pay those dividends in March on a date selected by the Board of Trustees. Dividends and distributions will generally be lower for Service shares, which normally have higher expenses. The Fund has no fixed dividend rate and cannot guarantee that it will pay any dividends. All dividends (and any capital gains distributions will be reinvested automatically in additional Fund shares at net asset value for the account of the participating insurance company (unless the insurance company elects to have dividends or distributions paid in cash). Capital Gains. The Fund may realize capital gains on the sale of portfolio securities. If it does, it may make distributions out of any net short-term or long-term capital gains in March of each year. The Fund may make supplemental distributions of dividends and capital gains following the end of its fiscal year. There can be no assurance that the Fund will pay any capital gains distributions in a particular year. Taxes. For a discussion of the tax status of a variable annuity contract, a variable life insurance policy or other investment product of a participating insurance company, please refer to the accompanying prospectus of your participating insurance company. Because shares of the Fund may be purchased only through insurance company separate accounts for variable annuity contracts, variable life insurance policies or other investment products, dividends paid by the Fund from net investment income and distributions (if any) of net realized short-term and long-term capital gains will be taxable, if at all, to the participating insurance company. This information is only a summary of certain federal income tax information about an investment in Fund shares. You should consult with your tax advisor or your participating insurance company representative about the effect of an investment in the Fund under your contract or policy. Financial Highlights The Financial Highlights Table is presented to help you understand the Fund's financial performance since inception. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by Deloitte & Touche LLP, the Fund's independent auditors, whose report, along with the Fund's financial statements, is included in the Statement of Additional Information, which is available on request. Because Service shares of the Fund were not issued prior to May 1, 2000, no financial information is shown for Service shares in the Financial Highlights table or in the financial statements included in the Statement of Additional Information. - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995(1) =========================================================================================================================== Per Share Operating Data Net asset value, beginning of period $20.48 $20.58 $16.37 $12.51 $10.00 - --------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income .11 .13 .19 .14 .01 Net realized and unrealized gain 4.29 .92 4.91 3.91 2.52 - --------------------------------------------------------------------------------------------------------------------------- Total income from investment operations 4.40 1.05 5.10 4.05 2.53 - --------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.09) (.05) (.17) (.14) (.02) Distributions from net realized gain (.16) (1.10) (.72) (.05) -- - --------------------------------------------------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (.25) (1.15) (.89) (.19) (.02) - --------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $24.63 $20.48 $20.58 $16.37 $12.51 ====== ====== ====== ====== ====== =========================================================================================================================== Total Return, at Net Asset Value(2) 21.71% 4.70% 32.48% 32.51% 25.25% =========================================================================================================================== Ratios/Supplemental Data Net assets, end of period (in thousands) $555,311 $308,353 $155,368 $47,009 $4,288 - --------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $391,063 $234,306 $ 94,906 $21,562 $1,809 - --------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:(3) Net investment income 0.63% 0.74% 1.15% 1.41% 0.50% Expenses 0.78% 0.79%(4) 0.83%(4) 1.00%(4) 2.07%(4) - --------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(5) 118% 86% 79% 113% 24%
1. For the period from July 5, 1995 (commencement of operations) to December 31, 1995. 2. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period (or commencement of operations), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 3. Annualized for periods less than one full year. 4. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. 5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended December 31, 1999, were $585,193,287 and $443,805,600, respectively. 9 INFORMATION AND SERVICES For More Information About Oppenheimer Main Street Growth & Income Fund/VA: The following additional information about the Fund is available without charge upon request: Statement of Additional Information This document includes additional information about the Fund's investment policies, risks, and operations. It is incorporated by reference into this Prospectus (which means it is legally part of this Prospectus). Annual and Semi-Annual Reports Additional information about the Fund's investments and performance is available in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report includes a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. - ---------------------------------------------------------------------------- How to Get More Information: - ---------------------------------------------------------------------------- You can request the Statement of Additional Information, the Annual and Semi-Annual Reports, other information about the Fund, or instructions on how to contact the sponsor of your insurance product: - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- By Telephone: - ---------------------------------------------------------------------------- Call OppenheimerFunds Services toll-free: 1-888-470-0861 By Mail: Write to: OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217-5270 You can also obtain copies of the Statement of Additional Information and other Fund documents and reports by visiting the SEC's Public Reference Room in Washington, D.C. (Phone 1.202.942.8090) or the EDGAR database on the SEC's Internet web site at http://www.sec.gov. Copies may be obtained upon payment of a duplicating fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov, or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. No one has been authorized to provide any information about the Fund or to make any representations about the Fund other than what is contained in this Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a solicitation of an offer to buy shares of the Fund, to any person in any state or other jurisdiction where it is unlawful to make such an offer. SEC File No. 811-4108 PR0650.001.0500 Printed on recycled paper. (OppenheimerFunds logo) Appendix to Prospectus of Oppenheimer Main Street Growth & Income Fund (a series of Oppenheimer Variable Account Funds) Graphic material included in the Prospectus of Oppenheimer Main Street Growth & Income Fund (the "Fund") under the heading "Annual Total Return (as of 12/31 each year)": A bar chart will be included in the Prospectus of the Fund depicting the annual total returns of a hypothetical investment in shares of the Fund for each of the four most recent calendar years, without deducting separate account expenses. Set forth below are the relevant data that will appear on the bar chart: Calendar Year Ended Annual Total Returns 12/31/96 32.51% 12/31/97 32.48% 12/31/98 4.70% 12/31/99 21.71% -30- - ------------------------------------------------------------------------------- Oppenheimer Variable Account Funds - ------------------------------------------------------------------------------- 6803 S. Tucson Way, Englewood, Colorado 80112 1-888-470-0861 Statement of Additional Information dated May 1, 2000 OPPENHEIMER VARIABLE ACCOUNT FUNDS (the "Trust") is an investment company consisting of ten separate Funds (the "Funds"): Oppenheimer Money Fund/VA Oppenheimer High Income Fund/VA Oppenheimer Bond Fund/VA Oppenheimer Strategic Bond Fund/VA Oppenheimer Aggressive Growth Fund/VA Oppenheimer Capital Appreciation Fund/VA Oppenheimer Small Cap Growth Fund/VA Oppenheimer Global Securities Fund/VA Oppenheimer Multiple Strategies Fund/VA Oppenheimer Main Street Growth & Income Fund(R)/VA Shares of the Funds are sold to provide benefits under variable life insurance policies and variable annuity contracts and other insurance company separate accounts, as described in the Prospectuses for the Funds and for the insurance products you have selected. This Statement of Additional Information is not a Prospectus. This document contains additional information about the Funds and the Trust, and supplements information in the Funds' Prospectuses dated May 1, 2000. It should be read together with the Prospectuses. You can obtain a Prospectus by writing to the Funds' Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado 80217, or by calling the Transfer Agent at the toll-free number shown above. Contents Page About the Funds Additional Information About the Funds' Investment Policies and Risks 3 The Funds' Investment Policies............................ 3 Other Investment Techniques and Strategies................ 11 Investment Restrictions................................... 30 How the Funds are Managed ................................... 32 Organization and History.................................. 32 Trustees and Officers..................................... 34 The Manager............................................... 41 Brokerage Policies of the Funds.............................. 43 Distribution and Service Plans (Service Shares Only)......... 45 Performance of the Funds..................................... 46 About Your Account How To Buy and Sell Shares................................... 52 Dividends, Capital Gains and Taxes........................... 56 Additional Information About the Funds....................... 56 Financial Information About the Funds Independent Auditors' Report................................. 58 Financial Statements......................................... 59 Appendix A: Ratings Definitions.............................. A-1 Appendix B: Industry Classifications......................... B-1 Appendix C: Major Shareholders............................... C-1 - ------------------------------------------------------------------------------- ABOUT THE FUNDS - ------------------------------------------------------------------------------- Additional Information About the Funds' Investment Policies and Risks The investment objective, the principal investment policies and the main risks of the Funds are described in the Prospectus. This Statement of Additional Information contains supplemental information about those policies and risks and the types of securities that the Funds' investment Manager, OppenheimerFunds, Inc., can select for the Funds. Additional information is also provided about the strategies that each Fund may use to try to achieve its objective. The full name of each Fund is shown on the cover page, after which the word "Oppenheimer" is omitted from these names to conserve space. The Funds' Investment Policies. The composition of the Funds' portfolio and the techniques and strategies that the Manager uses in selecting portfolio securities will vary over time. The Funds are not required to use all of the investment techniques and strategies described below at all times in seeking their goals. They may use some of the special investment techniques and strategies at some times or not at all. In selecting securities for the Funds' portfolios, the Manager evaluates the merits of particular securities primarily through the exercise of its own investment analysis. That process may include, among other things, evaluation of the issuer's historical operations, prospects for the industry of which the issuer is part, the issuer's financial condition, its pending product developments and business (and those of competitors), the effect of general market and economic conditions on the issuer's business, and legislative proposals that might affect the issuer. The Funds are categorized by the types of investment they make. Capital Appreciation Fund/VA, Aggressive Growth Fund/VA, Small Cap Growth Fund/VA and Global Securities Fund/VA can be categorized as "Equity Funds." High Income Fund/VA, Bond Fund/VA, and Strategic Bond Fund/VA can be categorized as "Fixed Income Funds." Multiple Strategies Fund/VA and Main Street Growth & Income Fund/VA share the investment characteristics (and certain of the Investment Policies) of both the Equity Funds and the Fixed Income Funds, depending upon the allocations determined from time to time by their portfolio managers. The allocation of Main Street Growth & Income Fund/VA's portfolio to equity securities is generally substantially larger than its allocation to fixed-income securities. Money Fund's/VA investment policies are explained separately; however, discussion below about investment restrictions, repurchase agreements, illiquid securities and loans of portfolio securities also apply to Money Fund/VA. |X| Investments in Equity Securities. The Equity Funds focus their investments in equity securities, which include common stocks, preferred stocks, rights and warrants, and securities convertible into common stock. Certain equity securities may be selected not only for their appreciation possibilities but because they may provide dividend income. Small-cap growth companies may offer greater opportunities for capital appreciation than securities of large, more established companies. However, these securities also involve greater risks than securities of larger companies. Securities of small capitalization issuers may be subject to greater price volatility in general than securities of large-cap and mid-cap companies. Therefore, to the degree that a Fund has investments in smaller capitalization companies at times of market volatility, that Fund's share price may fluctuate more. Those investments may be limited to the extent the Manager believes that such investments would be inconsistent with the goal of preservation of principal. |_| Growth Companies. The Equity Funds in particular may invest in securities of "growth" companies. Growth companies are those companies that the Manager believes are entering into a growth cycle in their business, with the expectation that their stock will increase in value. They may be established companies as well as newer companies in the development stage. Growth companies may have a variety of characteristics that in the Manager's view define them as "growth" issuers. They may be generating or applying new technologies, new or improved distribution techniques or new services. They may own or develop natural resources. They may be companies that can benefit from changing consumer demands or lifestyles, or companies that have projected earnings in excess of the average for their sector or industry. In each case, they have prospects that the Manager believes are favorable for the long term. The portfolio managers of the Funds look for growth companies with strong, capable management sound financial and accounting policies, successful product development and marketing and other factors. |_| Value Investing. In selecting equity investments, the portfolio managers for the Equity Funds in particular may from time to time use a value investing style. In using a value approach, the portfolio managers seek stock and other equity securities that appear to be temporarily undervalued, by various measures, such as price/earnings ratios, rather than seeking stocks of "growth" issuers. This approach is subject to change and might not necessarily be used in all cases. Value investing seeks stocks having prices that are low in relation to their real worth or future prospects, in the hope that a Fund will realize appreciation in the value of its holdings when other investors realize the intrinsic value of the stock. Using value investing requires research as to the issuer's underlying financial condition and prospects. Some of the measures that can be used to identify these securities include, among others: |_| Price/Earnings ratio, which is the stock's price divided by its earnings per share. A stock having a price/earnings ratio lower than its historical range, or the market as a whole or that of similar companies may offer attractive investment opportunities. |_| Price/book value ratio, which is the stock price divided by the book value of the company per share, which measures the company's stock price in relation to its asset value. |_| Dividend Yield is measured by dividing the annual dividend by the stock price per share. |_| Valuation of Assets, which compares the stock price to the value of the company's underlying assets, including their projected value in the marketplace and liquidation value. |_| Convertible Securities. While convertible securities are a form of debt security, in many cases their conversion feature (allowing conversion into equity securities) causes them to be regarded by the Manager more as "equity equivalents." As a result, the rating assigned to the security has less impact on the Manager's investment decision with respect to convertible securities than in the case of non-convertible fixed income securities. Convertible securities are subject to the credit risks and interest rate risks described below in "Debt Securities." To determine whether convertible securities should be regarded as "equity equivalents," the Manager examines the following factors: (1) whether, at the option of the investor, the convertible security can be exchanged for a fixed number of shares of common stock of the issuer, (2) whether the issuer of the convertible securities has restated its earnings per share of common stock on a fully diluted basis (considering the effect of conversion of the convertible securities), and (3) the extent to which the convertible security may be a defensive "equity substitute," providing the ability to participate in any appreciation in the price of the issuer's common stock. |_| Rights and Warrants. The Funds may invest in warrants or rights. They do not expect that their investments in warrants and rights will exceed 5% of their total assets. Warrants basically are options to purchase equity securities at specific prices valid for a specific period of time. Their prices do not necessarily move parallel to the prices of the underlying securities. Rights are similar to warrants, but normally have a short duration and are distributed directly by the issuer to its shareholders. Rights and warrants have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer. |X| Investments in Bonds and Other Debt Securities. The Fixed Income Funds in particular can invest in bonds, debentures and other debt securities to seek current income as part of its investment objective. The Funds' debt investments can include investment-grade and non-investment-grade bonds (commonly referred to as "junk bonds"). Investment-grade bonds are bonds rated in one of the four highest categories by Moody's Investors Service, Inc., Standard & Poor's Corporation, Fitch IBCA, Inc., Duff & Phelps, Inc., or that have comparable ratings by another nationally-recognized rating organization, or if unrated or split-rated, determined by the Manager to be of comparable quality. In making investments in debt securities, the Manager may rely to some extent on the ratings of ratings organizations or it may use its own research to evaluate a security's credit-worthiness. |_| U.S. Government Securities. The Funds can buy securities issued or guaranteed by the U.S. government or its agencies and instrumentalities. Securities issued by the U.S. Treasury are backed by the full faith and credit of the U.S. government and are subject to very little credit risk. Obligations of U.S. government agencies or instrumentalities (including mortgage-backed securities) may or may not be guaranteed or supported by the "full faith and credit" of the United States. Some are backed by the right of the issuer to borrow from the U.S. Treasury; others, by discretionary authority of the U.S. government to purchase the agencies' obligations; while others are supported only by the credit of the instrumentality. If a security is not backed by the full faith and credit of the United States, the owner of the security must look principally to the agency issuing the obligation for repayment and may not be able to assert a claim against the United States in the event that the agency or instrumentality does not meet its commitment. A Fund will invest in securities of U.S. government agencies and instrumentalities only when the Manager is satisfied that the credit risk with respect to the agency or instrumentality is minimal. |_| Special Risks of Lower-Grade Securities. Because lower-rated securities tend to offer higher yields than investment grade securities, a Fund may invest in lower grade securities if the Manager is trying to achieve greater income (and, in some cases, the appreciation possibilities of lower-grade securities may be a reason they are selected for a Fund's portfolio). Some of the special credit risks of lower-grade securities are discussed in the Prospectus. There is a greater risk that the issuer may default on its obligation to pay interest or to repay principal than in the case of investment-grade securities. The issuer's low creditworthiness may increase the potential for its insolvency. An overall decline in values in the high yield bond market is also more likely during a period of a general economic downturn. An economic downturn or an increase in interest rates could severely disrupt the market for high yield bonds, adversely affecting the values of outstanding bonds as well as the ability of issuers to pay interest or repay principal. In the case of foreign high yield bonds, these risks are in addition to the special risk of foreign investing discussed in the Prospectus and in this Statement of Additional Information. While securities rated "Baa" by Moody's or "BBB" by Standard & Poor's or Duff & Phelps are investment-grade and are not regarded as junk bonds, those securities may be subject to special risks, and have some speculative characteristics. Definitions of the debt security ratings categories of Moody's, Standard & Poor's, Fitch IBCA and Duff & Phelps are included in Appendix A to this Statement of Additional Information. |X| Asset-Backed Securities. Asset-backed securities are fractional interests in pools of assets, typically accounts receivable or consumer loans. They are issued by trusts or special-purpose corporations. They are similar to mortgage-backed securities, described below, and are backed by a pool of assets that consist of obligations of individual borrowers. The income from the pool is passed through to the holders of participation interest in the pools. The pools may offer a credit enhancement, such as a bank letter of credit, to try to reduce the risks that the underlying debtors will not pay their obligations when due. However, the enhancement, if any, might not be for the full par value of the security. If the enhancement is exhausted and any required payments of interest or repayments of principal are not made, that Fund could suffer losses on its investment or delays in receiving payment. The value of an asset-backed security is affected by changes in the market's perception of the asset backing the security, the creditworthiness of the servicing agent for the loan pool, the originator of the loans, or the financial institution providing any credit enhancement, and is also affected if any credit enhancement has been exhausted. The risks of investing in asset-backed securities are ultimately related to payment of consumer loans by the individual borrowers. As a purchaser of an asset-backed security, the Fund would generally have no recourse to the entity that originated the loans in the event of default by a borrower. The underlying loans are subject to prepayments, which may shorten the weighted average life of asset-backed securities and may lower their return, in the same manner as in the case of mortgage-backed securities and CMOs, described below. Unlike mortgage-backed securities, asset-backed securities typically do not have the benefit of a security interest in the underlying collateral. |X| Mortgage-Related Securities. Mortgage-related securities are a form of derivative investment collateralized by pools of commercial or residential mortgages. Pools of mortgage loans are assembled as securities for sale to investors by government agencies or entities or by private issuers. These securities include collateralized mortgage obligations ("CMOs"), mortgage pass-through securities, stripped mortgage pass-through securities, interests in real estate mortgage investment conduits ("REMICs") and other real-estate related securities. Mortgage-related securities that are issued or guaranteed by agencies or instrumentalities of the U.S. government have relatively little credit risk (depending on the nature of the issuer) but are subject to interest rate risks and prepayment risks, as described in the Prospectus. As with other debt securities, the prices of mortgage-related securities tend to move inversely to changes in interest rates. The Fixed Income Funds can buy mortgage-related securities that have interest rates that move inversely to changes in general interest rates, based on a multiple of a specific index. Although the value of a mortgage-related security may decline when interest rates rise, the converse is not always the case. In periods of declining interest rates, mortgages are more likely to be prepaid. Therefore, a mortgage-related security's maturity can be shortened by unscheduled prepayments on the underlying mortgages. Therefore, it is not possible to predict accurately the security's yield. The principal that is returned earlier than expected may have to be reinvested in other investments having a lower yield than the prepaid security. Therefore, these securities may be less effective as a means of "locking in" attractive long-term interest rates, and they may have less potential for appreciation during periods of declining interest rates, than conventional bonds with comparable stated maturities. Prepayment risks can lead to substantial fluctuations in the value of a mortgage-related security. In turn, this can affect the value of that Fund's shares. If a mortgage-related security has been purchased at a premium, all or part of the premium that Fund paid may be lost if there is a decline in the market value of the security, whether that results from interest rate changes or prepayments on the underlying mortgages. In the case of stripped mortgage-related securities, if they experience greater rates of prepayment than were anticipated, the Fund may fail to recoup its initial investment on the security. During periods of rapidly rising interest rates, prepayments of mortgage-related securities may occur at slower than expected rates. Slower prepayments effectively may lengthen a mortgage-related security's expected maturity. Generally, that would cause the value of the security to fluctuate more widely in responses to changes in interest rates. If the prepayments on a Fund's mortgage-related securities were to decrease broadly, that Fund's effective duration, and therefore its sensitivity to interest rate changes, would increase. As with other debt securities, the values of mortgage-related securities may be affected by changes in the market's perception of the creditworthiness of the entity issuing the securities or guaranteeing them. Their values may also be affected by changes in government regulations and tax policies. |_| Collateralized Mortgage Obligations. CMOs are multi-class bonds that are backed by pools of mortgage loans or mortgage pass-through certificates. They may be collateralized by: (1) pass-through certificates issued or guaranteed by Ginnie Mae, Fannie Mae, or Freddie Mac, (2) unsecuritized mortgage loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans' Affairs, (3) unsecuritized conventional mortgages, (4) other mortgage-related securities, or (5) any combination of these. Each class of CMO, referred to as a "tranche," is issued at a specific coupon rate and has a stated maturity or final distribution date. Principal prepayments on the underlying mortgages may cause the CMO to be retired much earlier than the stated maturity or final distribution date. The principal and interest on the underlying mortgages may be allocated among the several classes of a series of a CMO in different ways. One or more tranches may have coupon rates that reset periodically at a specified increase over an index. These are floating rate CMOs, and typically have a cap on the coupon rate. Inverse floating rate CMOs have a coupon rate that moves in the reverse direction to an applicable index. The coupon rate on these CMOs will increase as general interest rates decrease. These are usually much more volatile than fixed rate CMOs or floating rate CMOs. |X| Foreign Securities. The Equity Funds and the Fixed Income Funds may invest in foreign securities, and Global Securities Fund expects to have substantial investments in foreign securities. These include equity securities issued by foreign companies and debt securities issued or guaranteed by foreign companies or governments, including supra-national entities. "Foreign securities" include equity and debt securities of companies organized under the laws of countries other than the United States and debt securities issued or guaranteed by governments other than the U.S. government or by foreign supra-national entities. They also include securities of companies (including those that are located in the U.S. or organized under U.S. law) that derive a significant portion of their revenue or profits from foreign businesses, investments or sales, or that have a significant portion of their assets abroad. They may be traded on foreign securities exchanges or in the foreign over-the-counter markets. Securities of foreign issuers that are represented by American Depository Receipts or that are listed on a U.S. securities exchange or traded in the U.S. over-the-counter markets are not considered "foreign securities" for the purpose of a Fund's investment allocations, because they are not subject to many of the special considerations and risks, discussed below, that apply to foreign securities traded and held abroad. Because the Funds may purchase securities denominated in foreign currencies, a change in the value of such foreign currency against the U.S. dollar will result in a change in the amount of income the Funds have available for distribution. Because a portion of the Funds' investment income may be received in foreign currencies, the Funds will be required to compute their income in U.S. dollars for distribution to shareholders, and therefore the Funds will absorb the cost of currency fluctuations. After the Funds have distributed income, subsequent foreign currency losses may result in the Fund's having distributed more income in a particular fiscal period than was available from investment income, which could result in a return of capital to shareholders. Investing in foreign securities offers potential benefits not available from investing solely in securities of domestic issuers. They include the opportunity to invest in foreign issuers that appear to offer growth potential, or in foreign countries with economic policies or business cycles different from those of the U.S., or to reduce fluctuations in portfolio value by taking advantage of foreign stock markets that do not move in a manner parallel to U.S. markets. The Funds will hold foreign currency only in connection with the purchase or sale of foreign securities. |_| Foreign Debt Obligations. The debt obligations of foreign governments and entities may or may not be supported by the full faith and credit of the foreign government. The Fixed Income Funds may buy securities issued by certain supra-national entities, which include entities designated or supported by governments to promote economic reconstruction or development, international banking organizations and related government agencies. Examples are the International Bank for Reconstruction and Development (commonly called the "World Bank"), the Asian Development bank and the Inter-American Development Bank. The governmental members of these supra-national entities are "stockholders" that typically make capital contributions and may be committed to make additional capital contributions if the entity is unable to repay its borrowings. A supra-national entity's lending activities may be limited to a percentage of its total capital, reserves and net income. There can be no assurance that the constituent foreign governments will continue to be able or willing to honor their capitalization commitments for those entities. The Fixed Income Funds can invest in U.S. dollar-denominated "Brady Bonds." These foreign debt obligations may be fixed-rate par bonds or floating-rate discount bonds. They are generally collateralized in full as to repayment of principal at maturity by U.S. Treasury zero-coupon obligations that have the same maturity as the Brady Bonds. Brady Bonds can be viewed as having three or four valuation components: (i) the collateralized repayment of principal at final maturity; (ii) the collateralized interest payments; (iii) the uncollateralized interest payments; and (iv) any uncollateralized repayment of principal at maturity. Those uncollateralized amounts constitute what is called the "residual risk." If there is a default on collateralized Brady Bonds resulting in acceleration of the payment obligations of the issuer, the zero-coupon U.S. Treasury securities held as collateral for the payment of principal will not be distributed to investors, nor will those obligations be sold to distribute the proceeds. The collateral will be held by the collateral agent to the scheduled maturity of the defaulted Brady Bonds. The defaulted bonds will continue to remain outstanding, and the face amount of the collateral will equal the principal payments which would have then been due on the Brady Bonds in the normal course. Because of the residual risk of Brady Bonds and the history of defaults with respect to commercial bank loans by public and private entities of countries issuing Brady Bonds, Brady Bonds are considered speculative investments. |_| Risks of Foreign Investing. Investments in foreign securities may offer special opportunities for investing but also present special additional risks and considerations not typically associated with investments in domestic securities. Some of these additional risks are: o reduction of income by foreign taxes; o fluctuation in value of foreign investments due to changes in currency rates or currency control regulations (for example, currency blockage); o transaction charges for currency exchange; o lack of public information about foreign issuers; o lack of uniform accounting, auditing and financial reporting standards in foreign countries comparable to those applicable to domestic issuers; o less volume on foreign exchanges than on U.S. exchanges; o greater volatility and less liquidity on foreign markets than in the U.S.; o less governmental regulation of foreign issuers, stock exchanges and brokers than in the U.S.; o greater difficulties in commencing lawsuits; o higher brokerage commission rates than in the U.S.; o increased risks of delays in settlement of portfolio transactions or loss of certificates for portfolio securities; o possibilities in some countries of expropriation, confiscatory taxation, political, financial or social instability or adverse diplomatic developments; and o unfavorable differences between the U.S. economy and foreign economies. In the past, U.S. Government policies have discouraged certain investments abroad by U.S. investors, through taxation or other restrictions, and it is possible that such restrictions could be re-imposed. |_| Special Risks of Emerging Markets. Emerging and developing markets abroad may also offer special opportunities for growth investing but have greater risks than more developed foreign markets, such as those in Europe, Canada, Australia, New Zealand and Japan. There may be even less liquidity in their securities markets, and settlements of purchases and sales of securities may be subject to additional delays. They are subject to greater risks of limitations on the repatriation of income and profits because of currency restrictions imposed by local governments. Those countries may also be subject to the risk of greater political and economic instability, which can greatly affect the volatility of prices of securities in those countries. The Manager will consider these factors when evaluating securities in these markets, because the selection of those securities must be consistent with the Fund's goal of preservation of principal. The Funds intend to invest less than 5% of their total assets in securities of issuers of Eastern European countries. The social, political and economic reforms in most Eastern European countries are still in their early stages, and there can be no assurance that these reforms will continue. Eastern European countries in many cases do not have a sophisticated or well-established capital market structure for the sale and trading of securities. Participation in the investment markets in some of those countries may be available initially or solely through investment in joint ventures, state enterprises, private placements, unlisted securities or other similar illiquid investment vehicles. In addition, although investment opportunities may exist in Eastern European countries, any change in the leadership or policies of the governments of those countries, or changes in the leadership or policies of any other government that exercises a significant influence over those countries, may halt the expansion of or reverse the liberalization of foreign investment policies now occurring. As a result investment opportunities which may currently exist may be threatened. The prior authoritarian governments of a number of the Eastern European countries previously expropriated large amounts of real and personal property, which may include property which will be represented by or held by entities issuing the securities a Fund might wish to purchase. In many cases, the claims of the prior property owners against those governments were never finally settled. There can be no assurance that any property represented by or held by entities issuing securities purchased by a Fund will not also be expropriated, nationalized, or confiscated. If that property were confiscated, the Fund could lose a substantial portion of its investments in such countries. A Fund's investments could also be adversely affected by exchange control regulations imposed in any of those countries. |X| Portfolio Turnover. "Portfolio turnover" describes the rates at which the Funds traded their portfolio securities during its last fiscal year. For example, if a Fund sold all of its securities during the year, its portfolio turnover rate would have been 100%. The Funds' portfolio turnover rates will fluctuate from year to year, and any of the Funds may have portfolio turnover rates of more than 100% annually. Other Investment Techniques and Strategies. In seeking their respective objectives, the Funds may from time to time use the types of investment strategies and investments described below. They are not required to use all of these strategies at all times, and at times may not use them. |X| Investing in Small, Unseasoned Companies. The Funds may invest in securities of small, unseasoned companies, subject to limits (if any) stated in that Fund's Prospectus. These are companies that have been in operation for less than three years, including the operations of any predecessors. Securities of these companies may be subject to volatility in their prices. They may have a limited trading market, which may adversely affect their ability to dispose of them and can reduce the price the Funds might be able to obtain for them. Other investors that own a security issued by a small, unseasoned issuer for which there is limited liquidity might trade the security when the Funds are attempting to dispose of their holdings of that security. In that case, a Fund might receive a lower price for its holdings than might otherwise be obtained. |X| When-Issued and Delayed-Delivery Transactions (All Portfolios). The Funds may invest in securities on a "when-issued" basis and may purchase or sell securities on a "delayed-delivery" or "forward commitment" basis. When-issued and delayed-delivery are terms that refer to securities whose terms and indenture are available and for which a market exists, but which are not available for immediate delivery. When such transactions are negotiated, the price (which is generally expressed in yield terms) is fixed at the time the commitment is made. Delivery and payment for the securities take place at a later date (generally within 45 days of the date the offer is accepted). The securities are subject to change in value from market fluctuations during the period until settlement. The value at delivery may be less than the purchase price. For example, changes in interest rates in a direction other than that expected by the Manager before settlement will affect the value of such securities and may cause a loss to the Funds. During the period between purchase and settlement, no payment is made by the Funds to the issuer and no interest accrues to that portfolio from the investment. No income begins to accrue to the Funds on a when-issued security until the Funds receive the security at settlement of the trade. The Funds will engage in when-issued transactions to secure what the Manager considers to be an advantageous price and yield at the time of entering into the obligation. When a Fund enters into a when-issued or delayed-delivery transaction, it relies on the other party to complete the transaction. Its failure to do so may cause that Fund to lose the opportunity to obtain the security at a price and yield the Manager considers to be advantageous. When a Fund engages in when-issued and delayed-delivery transactions, it does so for the purpose of acquiring or selling securities consistent with its investment objective and policies for its portfolio or for delivery pursuant to options contracts it has entered into, and not for the purpose of investment leverage. Although a Fund will enter into delayed-delivery or when-issued purchase transactions to acquire securities, it may dispose of a commitment prior to settlement. If a Fund chooses to dispose of the right to acquire a when-issued security prior to its acquisition or to dispose of its right to delivery or receive against a forward commitment, it may incur a gain or loss. At the time a Fund makes the commitment to purchase or sell a security on a when-issued or delayed delivery basis, it records the transaction on their books and reflects the value of the security purchased in determining that Fund's net asset value. In a sale transaction, it records the proceeds to be received. That Fund will identify on its books liquid assets at least equal in value to the value of that Fund's purchase commitments until that Fund pays for the investment. When-issued and delayed-delivery transactions can be used by the Funds as a defensive technique to hedge against anticipated changes in interest rates and prices. For instance, in periods of rising interest rates and falling prices, a Fund might sell securities in their portfolio on a forward commitment basis to attempt to limit its exposure to anticipated falling prices. In periods of falling interest rates and rising prices, a Fund might sell portfolio securities and purchase the same or similar securities on a when-issued or delayed-delivery basis to obtain the benefit of currently higher cash yields. |X| Zero-Coupon Securities. The Fixed Income Funds may buy zero-coupon and delayed interest securities, and "stripped" securities of foreign government issuers, which may or may not be backed by the "full faith and credit" of the issuing foreign government, and of corporations. The Fixed Income Funds may also buy zero-coupon and "stripped" U.S. government securities. Zero-coupon securities issued by foreign governments and by corporations will be subject to greater credit risks than U.S. government zero-coupon securities. |X| "Stripped" Mortgage-Related Securities. The Fixed Income Funds can invest in stripped mortgage-related securities that are created by segregating the cash flows from underlying mortgage loans or mortgage securities to create two or more new securities. Each has a specified percentage of the underlying security's principal or interest payments. These are a form of derivative investment. Mortgage securities may be partially stripped so that each class receives some interest and some principal. However, they may be completely stripped. In that case all of the interest is distributed to holders of one type of security, known as an "interest-only" security, or "I/O," and all of the principal is distributed to holders of another type of security, known as a "principal-only" security or "P/O." Strips can be created for pass-through certificates or CMOs. The yields to maturity of I/Os and P/Os are very sensitive to principal repayments (including prepayments) on the underlying mortgages. If the underlying mortgages experience greater than anticipated prepayments of principal, that Fund might not fully recoup its investment in an I/O based on those assets. If underlying mortgages experience less than anticipated prepayments of principal, the yield on the P/Os based on them could decline substantially. |X| Repurchase Agreements. The Funds may acquire securities subject to repurchase agreements. They may do so for liquidity purposes to meet anticipated redemptions of Fund shares, or pending the investment of the proceeds from sales of Fund shares, or pending the settlement of portfolio securities transactions, or for temporary defensive purposes, as described below. In a repurchase transaction, the Funds buy a security from, and simultaneously resells it to, an approved vendor for delivery on an agreed-upon future date. The resale price exceeds the purchase price by an amount that reflects an agreed-upon interest rate effective for the period during which the repurchase agreement is in effect. Approved vendors include U.S. commercial banks, U.S. branches of foreign banks, or broker-dealers that have been designated as primary dealers in government securities. They must meet credit requirements set by the Manager from time to time. The majority of these transactions run from day to day, and delivery pursuant to the resale typically occurs within one to five days of the purchase. Repurchase agreements having a maturity beyond seven days are subject to each Fund's limit on holding illiquid investments. No Fund will enter into a repurchase agreement that causes more than 15% of its net assets (for Money Fund/VA, 10%) to be subject to repurchase agreements having a maturity beyond seven days. There is no limit on the amount of a Fund's net assets that may be subject to repurchase agreements having maturities of seven days or less. Repurchase agreements, considered "loans" under the Investment Company Act, are collateralized by the underlying security. The Funds' repurchase agreements require that at all times while the repurchase agreement are in effect, the value of the collateral must equal or exceed the repurchase price to fully collateralize the repayment obligation. However, if the vendor fails to pay the resale price on the delivery date, the Funds may incur costs in disposing of the collateral and may experience losses if there is any delay in its ability to do so. The Manager will monitor the vendor's creditworthiness to confirm that the vendor is financially sound and will continuously monitor the collateral's value. |X| Illiquid and Restricted Securities. Under the policies and procedures established by the Fund's Board of Trustees, the Manager determines the liquidity of certain of the Funds' investments. To enable a Fund to sell its holdings of a restricted security not registered under the Securities Act of 1933, that Fund may have to cause those securities to be registered. The expenses of registering restricted securities may be negotiated by the Fund with the issuer at the time the Fund buys the securities. When a Fund must arrange registration because the Fund wishes to sell the security, a considerable period may elapse between the time the decision is made to sell the security and the time the security is registered so that the Fund could sell it. That Fund would bear the risks of any downward price fluctuation during that period. The Funds may also acquire restricted securities through private placements. Those securities have contractual restrictions on their public resale. Those restrictions might limit a Fund's ability to dispose of the securities and might lower the amount a Fund could realize upon the sale. The Funds have limitations that apply to purchases of restricted securities, as stated in the Prospectus. Those percentage restrictions do not limit purchases of restricted securities that are eligible for sale to qualified institutional purchasers under Rule 144A of the Securities Act of 1933, if those securities have been determined to be liquid by the Manager under Board-approved guidelines. Those guidelines take into account the trading activity for such securities and the availability of reliable pricing information, among other factors. If there is a lack of trading interest in a particular Rule 144A security, the Funds' holdings of that security may be considered to be illiquid. Illiquid securities include repurchase agreements maturing in more than seven days and participation interests that do not have puts exercisable within seven days. |X| Forward Rolls. The Funds can enter into "forward roll" transactions with respect to mortgage related securities. In this type of transaction, the Funds sell a mortgage related security to a buyer and simultaneously agrees to repurchase a similar security (the same type of security, and having the same coupon and maturity) at a later date at a set price. The securities that are repurchased will have the same interest rate as the securities that are sold, but typically will be collateralized by different pools of mortgages (with different prepayment histories) than the securities that have been sold. Proceeds from the sale are invested in short-term instruments, such as repurchase agreements. The income from those investments, plus the fees from the forward roll transaction, are expected to generate income to the Funds in excess of the yield on the securities that have been sold. The Funds will only enter into "covered" rolls. To assure their future payment of the purchase price, the Funds will identify as segregated on their respective books liquid assets in an amount equal to their respective payment obligations under the roll. These transactions have risks. During the period between the sale and the repurchase, the Funds will not be entitled to receive interest and principal payments on the securities that have been sold. It is possible that the market value of the securities the Funds sell may decline below the price at which the Funds are obligated to repurchase securities. |X| Loans of Portfolio Securities. To raise cash for liquidity purposes or income, the Funds can lend their portfolio securities to brokers, dealers and other types of financial institutions approved by the Fund's Board of Trustees. These loans are limited to not more than 10% of the value of that Fund's net assets. The Funds currently do not intend to engage in loans of securities in the coming year, but if they do so, such loans will not likely exceed 5% of that Fund's total assets. There are some risks in connection with securities lending. The Funds might experience a delay in receiving additional collateral to secure a loan, or a delay in recovery of the loaned securities if the borrower defaults. The Funds must receive collateral for a loan. Under current applicable regulatory requirements (which are subject to change), on each business day the loan collateral must be at least equal to the value of the loaned securities. It must consist of cash, bank letters of credit, or securities of the U.S. Government or its agencies or instrumentalities, or other cash equivalents in which that Fund is permitted to invest. To be acceptable as collateral, letters of credit must obligate a bank to pay amounts demanded by the Funds if the demand meets the terms of the letter. The terms of the letter of credit and the issuing bank both must be satisfactory to the Funds. When they lend securities, that Fund receives amounts equal to the dividends or interest on loaned securities. It also receives one or more of (a) negotiated loan fees, (b) interest on securities used as collateral, and (c) interest on any short-term debt securities purchased with such loan collateral. Either type of interest may be shared with the borrower. That Fund may also pay reasonable finder's, custodian and administrative fees in connection with these loans. The terms of a Fund's loans must meet applicable tests under the Internal Revenue Code and must permit the Fund to reacquire loaned securities on five days' notice or in time to vote on any important matter. |X| Borrowing for Leverage. Each Fund has the ability to borrow from banks on an unsecured basis. Each Fund has undertaken to limit borrowing to 25% of the value of that Fund's net assets, which is further limited to 10% if borrowing is for a purpose other than to facilitate redemptions. Investing borrowed funds in portfolio securities is a speculative technique known as "leverage." As a matter of fundamental policy, borrowings can be made only to the extent that the value of that Fund's assets, less its liabilities other than borrowings, is equal to at least 300% of all borrowings (including the proposed borrowing). If the value of that Fund's assets fails to meet this 300% asset coverage requirement, that Fund will reduce its bank debt within three days to meet the requirement. To do so, that Fund might have to sell a portion of its investments at a disadvantageous time. A Fund will pay interest on these loans, and that interest expense will raise the overall expenses of that Fund and reduce its returns. If it does borrow, its expenses will be greater than comparable funds that do not borrow for leverage. Additionally, that Fund's net asset value per share might fluctuate more than that of funds that do not borrow. Currently, the Funds do not contemplate using this technique in the next year but if they do so, it will not likely be to a substantial degree. |X| Derivatives. The Funds can invest in a variety of derivative investments for hedging purposes. Some derivative investments the Funds can use are the hedging instruments described below in this Statement of Additional Information. The Equity Funds do not use, and do not currently contemplate using, derivatives or hedging instruments to a significant degree in the coming year and they are not obligated to use them in seeking their objectives. Other derivative investments the Fixed Income Funds can invest in include "index-linked" notes. Principal and/or interest payments on these notes depend on the performance of an underlying index. Currency-indexed securities are another derivative these Funds may use. Typically, these are short-term or intermediate-term debt securities. Their value at maturity or the rates at which they pay income are determined by the change in value of the U.S. dollar against one or more foreign currencies or an index. In some cases, these securities may pay an amount at maturity based on a multiple of the amount of the relative currency movements. This type of index security offers the potential for increased income or principal payments but at a greater risk of loss than a typical debt security of the same maturity and credit quality. Other derivative investments the Fixed Income Funds can use include debt exchangeable for common stock of an issuer or "equity-linked debt securities" of an issuer. At maturity, the debt security is exchanged for common stock of the issuer or it is payable in an amount based on the price of the issuer's common stock at the time of maturity. Both alternatives present a risk that the amount payable at maturity will be less than the principal amount of the debt because the price of the issuer's common stock might not be as high as the Manager expected. |X| Hedging. Although the Funds can use hedging instruments, they are not obligated to use them in seeking their objective. To attempt to protect against declines in the market value of the Funds' portfolio, to permit the Funds to retain unrealized gains in the value of portfolio securities which have appreciated, or to facilitate selling securities for investment reasons, the Funds could: |_| sell futures contracts, |_| buy puts on such futures or on securities, or |_| write covered calls on securities or futures. Covered calls may also be used to increase the Funds' income, but the Manager does not expect to engage extensively in that practice. The Funds can use hedging to establish a position in the securities market as a temporary substitute for purchasing particular securities. In that case the Funds would normally seek to purchase the securities and then terminate that hedging position. The Funds might also use this type of hedge to attempt to protect against the possibility that its portfolio securities would not be fully included in a rise in value of the market. To do so the Funds could: |_| buy futures, or |_| buy calls on such futures or on securities. The Funds' strategy of hedging with futures and options on futures will be incidental to the Fund's activities in the underlying cash market. The particular hedging instruments the Funds can use are described below. The Funds may employ new hedging instruments and strategies when they are developed, if those investment methods are consistent with the Funds' investment objective and are permissible under applicable regulations governing the Fund. |_| Futures. The Funds can buy and sell futures contracts that relate to (1) broadly-based stock indices (these are referred to as "stock index futures"), (2) bond indices (these are referred to as "bond index futures"), (3) debt securities (these are referred to as "interest rate futures"), and (4) foreign currencies (these are referred to as "forward contracts"). A broadly-based stock index is used as the basis for trading stock index futures. They may in some cases be based on stocks of issuers in a particular industry or group of industries. A stock index assigns relative values to the common stocks included in the index and its value fluctuates in response to the changes in value of the underlying stocks. A stock index cannot be purchased or sold directly. Bond index futures are similar contracts based on the future value of the basket of securities that comprise the index. These contracts obligate the seller to deliver, and the purchaser to take, cash to settle the futures transaction. There is no delivery made of the underlying securities to settle the futures obligation. Either party may also settle the transaction by entering into an offsetting contract. An interest rate future obligates the seller to deliver (and the purchaser to take) cash or a specified type of debt security to settle the futures transaction. Either party could also enter into an offsetting contract to close out the position. No money is paid or received by the Funds on the purchase or sale of a future. Upon entering into a futures transaction, the Funds will be required to deposit an initial margin payment with the futures commission merchant (the "futures broker"). Initial margin payments will be deposited with the Funds' custodian bank in an account registered in the futures broker's name. However, the futures broker can gain access to that account only under specified conditions. As the future is marked to market (that is, its value on that Fund's books is changed) to reflect changes in its market value, subsequent margin payments, called variation margin, will be paid to or by the futures broker daily. At any time prior to expiration of the future, the Funds may elect to close out their position by taking an opposite position, at which time a final determination of variation margin is made and any additional cash must be paid by or released to that Fund. Any loss or gain on the future is then realized by that Fund for tax purposes. All futures transactions are effected through a clearinghouse associated with the exchange on which the contracts are traded. |_| Put and Call Options. The Funds can buy and sell certain kinds of put options ("puts") and call options ("calls"). The Funds can buy and sell exchange-traded and over-the-counter put and call options, including index options, securities options, currency options, commodities options, and options on the other types of futures described above. |_| Writing Covered Call Options. The Funds can write (that is, sell) covered calls. If a Fund sells a call option, it must be covered. That means the Fund must own the security subject to the call while the call is outstanding, or, for certain types of calls, the call may be covered by segregating liquid assets to enable that Fund to satisfy its obligations if the call is exercised. Up to 100% of a Fund's total assets may be subject to calls that Fund writes. When a Fund writes a call on a security, it receives cash (a premium). That Fund agrees to sell the underlying security to a purchaser of a corresponding call on the same security during the call period at a fixed exercise price regardless of market price changes during the call period. The call period is usually not more than nine months. The exercise price may differ from the market price of the underlying security. That Fund shares the risk of loss that the price of the underlying security may decline during the call period. That risk may be offset to some extent by the premium the Fund receives. If the value of the investment does not rise above the call price, it is likely that the call will lapse without being exercised. In that case the Fund would keep the cash premium and the investment. When a Fund writes a call on an index, it receives cash (a premium). If the buyer of the call exercises it, the Fund will pay an amount of cash equal to the difference between the closing price of the call and the exercise price, multiplied by a specified multiple that determines the total value of the call for each point of difference. If the value of the underlying investment does not rise above the call price, it is likely that the call will lapse without being exercised. In that case the Fund would keep the cash premium. The Funds' custodian bank, or a securities depository acting for the custodian bank, will act as the Funds' escrow agent, through the facilities of the Options Clearing Corporation ("OCC"), as to the investments on which the Funds have written calls traded on exchanges or as to other acceptable escrow securities. In that way, no margin will be required for such transactions. OCC will release the securities on the expiration of the option or when the Funds enter into a closing transaction. When a Fund writes an over-the-counter ("OTC") option, that Fund will enter into an arrangement with a primary U.S. government securities dealer which will establish a formula price at which the Fund will have the absolute right to repurchase that OTC option. The formula price will generally be based on a multiple of the premium received for the option, plus the amount by which the option is exercisable below the market price of the underlying security (that is, the option is "in the money"). When a Fund writes an OTC option, it will treat as illiquid (for purposes of its restriction on holding illiquid securities) the mark-to-market value of any OTC option it holds, unless the option is subject to a buy-back agreement by the executing broker. To terminate its obligation on a call it has written, a Fund may purchase a corresponding call in a "closing purchase transaction." A Fund will then realize a profit or loss, depending upon whether the net of the amount of the option transaction costs and the premium received on the call the Fund wrote is more or less than the price of the call the Fund purchases to close out the transaction. That Fund may realize a profit if the call expires unexercised, because that Fund will retain the underlying security and the premium it received when it wrote the call. Any such profits are considered short-term capital gains for Federal income tax purposes, as are the premiums on lapsed calls. When distributed by a Fund they are taxable as ordinary income. If a Fund cannot effect a closing purchase transaction due to the lack of a market, it will have to hold the callable securities until the call expires or is exercised. A Fund may also write calls on a futures contract without owning the futures contract or securities deliverable under the contract. To do so, at the time the call is written, that Fund must cover the call by segregating an equivalent dollar amount of liquid assets. The Fund will segregate additional liquid assets if the value of the segregated assets drops below 100% of the current value of the future. Because of this segregation requirement, in no circumstances would that Fund's receipt of an exercise notice as to that future require that Fund to deliver a futures contract. It would simply put that Fund in a short futures position, which is permitted by the Funds' hedging policies. |_| Writing Put Options. Each Fund can sell put options. A put option on securities gives the purchaser the right to sell, and the writer the obligation to buy, the underlying investment at the exercise price during the option period. The Funds will not write puts if, as a result, more than 50% of the Fund's net assets would be required to be segregated to cover such put options. If a Fund writes a put, the put must be covered by segregated liquid assets. The premium the Funds receive from writing a put represents a profit, as long as the price of the underlying investment remains equal to or above the exercise price of the put. However, that Fund also assumes the obligation during the option period to buy the underlying investment from the buyer of the put at the exercise price, even if the value of the investment falls below the exercise price. If a put a Fund has written expires unexercised, that Fund realizes a gain in the amount of the premium less the transaction costs incurred. If the put is exercised, that Fund must fulfill its obligation to purchase the underlying investment at the exercise price. That price will usually exceed the market value of the investment at that time. In that case, that Fund may incur a loss if it sells the underlying investment. That loss will be equal to the sum of the sale price of the underlying investment and the premium received minus the sum of the exercise price and any transaction costs the Fund incurred. When writing a put option on a security, to secure its obligation to pay for the underlying security, that Fund will identify as segregated on its records liquid assets with a value equal to or greater than the exercise price of the underlying securities. That Fund therefore forgoes the opportunity of investing the segregated assets or writing calls against those assets. As long as a Fund's obligation as the put writer continues, it may be assigned an exercise notice by the broker-dealer through which the put was sold. That notice will require that Fund to take delivery of the underlying security and pay the exercise price. No Fund has control over when it may be required to purchase the underlying security, since it may be assigned an exercise notice at any time prior to the termination of its obligation as the writer of the put. That obligation terminates upon expiration of the put. It may also terminate if, before it receives an exercise notice, that Fund effects a closing purchase transaction by purchasing a put of the same series as it sold. Once a Fund has been assigned an exercise notice, it cannot effect a closing purchase transaction. A Fund may decide to effect a closing purchase transaction to realize a profit on an outstanding put option it has written or to prevent the underlying security from being put. Effecting a closing purchase transaction will also permit that Fund to write another put option on the security, or to sell the security and use the proceeds from the sale for other investments. A Fund will realize a profit or loss from a closing purchase transaction depending on whether the cost of the transaction is less or more than the premium received from writing the put option. Any profits from writing puts are considered short-term capital gains for Federal tax purposes, and when distributed by a Fund, is taxable as ordinary income. |_| Purchasing Calls and Puts. Each Fund can purchase calls to protect against the possibility that its portfolio will not participate in an anticipated rise in the securities market. When a Fund buys a call (other than in a closing purchase transaction), it pays a premium. That Fund then has the right to buy the underlying investment from a seller of a corresponding call on the same investment during the call period at a fixed exercise price. A Fund benefits only if it sells the call at a profit or if, during the call period, the market price of the underlying investment is above the sum of the call price plus the transaction costs and the premium paid for the call and the Fund exercises the call. If a Fund does not exercise the call or sell it (whether or not at a profit), the call will become worthless at its expiration date. In that case the Fund will have paid the premium but lost the right to purchase the underlying investment. A Fund can buy puts whether or not it holds the underlying investment in its portfolio. When a Fund purchases a put, it pays a premium and, except as to puts on indices, has the right to sell the underlying investment to a seller of a put on a corresponding investment during the put period at a fixed exercise price. Buying a put on securities or futures a Fund owns enables that Fund to attempt to protect itself during the put period against a decline in the value of the underlying investment below the exercise price by selling the underlying investment at the exercise price to a seller of a corresponding put. If the market price of the underlying investment is equal to or above the exercise price and, as a result, the put is not exercised or resold, the put will become worthless at its expiration date. In that case the Fund will have paid the premium but lost the right to sell the underlying investment. However, the Fund may sell the put prior to its expiration. That sale may or may not be at a profit. When a Fund purchases a call or put on an index or future, it pays a premium, but settlement is in cash rather than by delivery of the underlying investment to the Fund. A gain or loss depends on changes in the index in question (and thus on price movements in the securities market generally) rather than on price movements in individual securities or futures contracts. A Fund may buy a call or put only if, after the purchase, the value of all call and put options held by the Fund will not exceed 5% of the Fund's total assets. |_| Buying and Selling Options on Foreign Currencies. A Fund can buy and sell calls and puts on foreign currencies. They include puts and calls that trade on a securities or commodities exchange or in the over-the-counter markets or are quoted by major recognized dealers in such options. A Fund could use these calls and puts to try to protect against declines in the dollar value of foreign securities and increases in the dollar cost of foreign securities the Fund wants to acquire. If the Manager anticipates a rise in the dollar value of a foreign currency in which securities to be acquired are denominated, the increased cost of those securities may be partially offset by purchasing calls or writing puts on that foreign currency. If the Manager anticipates a decline in the dollar value of a foreign currency, the decline in the dollar value of portfolio securities denominated in that currency might be partially offset by writing calls or purchasing puts on that foreign currency. However, the currency rates could fluctuate in a direction adverse to a Fund's position. That Fund will then have incurred option premium payments and transaction costs without a corresponding benefit. A call the Fund writes on a foreign currency is "covered" if that Fund owns the underlying foreign currency covered by the call or has an absolute and immediate right to acquire that foreign currency without additional cash consideration (or it can do so for additional cash consideration held in a segregated account by its custodian bank) upon conversion or exchange of other foreign currency held in its portfolio. A Fund could write a call on a foreign currency to provide a hedge against a decline in the U.S. dollar value of a security which the Fund owns or has the right to acquire and which is denominated in the currency underlying the option. That decline might be one that occurs due to an expected adverse change in the exchange rate. This is known as a "cross-hedging" strategy. In those circumstances, the Fund covers the option by identifying as segregated on its books liquid assets in an amount equal to the exercise price of the option. |_| Risks of Hedging with Options and Futures. The use of hedging instruments requires special skills and knowledge of investment techniques that are different than what is required for normal portfolio management. If the Manager uses a hedging instrument at the wrong time or judges market conditions incorrectly, hedging strategies may reduce a Fund's return. A Fund could also experience losses if the prices of its futures and options positions were not correlated with its other investments. A Fund's option activities could affect its portfolio turnover rate and brokerage commissions. The exercise of calls written by the Fund might cause a Fund to sell related portfolio securities, thus increasing its turnover rate. The exercise by a Fund of puts on securities will cause the sale of underlying investments, increasing portfolio turnover. Although the decision whether to exercise a put it holds is within a Fund's control, holding a put might cause that Fund to sell the related investments for reasons that would not exist in the absence of the put. A Fund could pay a brokerage commission each time it buys or sells a call, a put or an underlying investment in connection with the exercise of a call or put. Those commissions could be higher on a relative basis than the commissions for direct purchases or sales of the underlying investments. Premiums paid for options are small in relation to the market value of the underlying investments. Consequently, put and call options offer large amounts of leverage. The leverage offered by trading in options could result in a Fund's net asset values being more sensitive to changes in the value of the underlying investment. If a covered call written by a Fund is exercised on an investment that has increased in value, that Fund will be required to sell the investment at the call price. It will not be able to realize any profit if the investment has increased in value above the call price. An option position may be closed out only on a market that provides secondary trading for options of the same series, and there is no assurance that a liquid secondary market will exist for any particular option. A Fund might experience losses if it could not close out a position because of an illiquid market for the future or option. There is a risk in using short hedging by selling futures or purchasing puts on broadly-based indices or futures to attempt to protect against declines in the value of a Fund's portfolio securities. The risk is that the prices of the futures or the applicable index will correlate imperfectly with the behavior of the cash prices of that Fund's securities. For example, it is possible that while a Fund has used a hedging instrument in a short hedge, the market might advance and the value of the securities held in the Fund's portfolio might decline. If that occurred, the Fund would lose money on the hedging instrument and also experience a decline in the value of its portfolio securities. However, while this could occur for a very brief period or to a very small degree, over time the value of a diversified portfolio of securities will tend to move in the same direction as the indices upon which the hedging instrument is based. The risk of imperfect correlation increases as the composition of a Fund's portfolio diverges from the securities included in the applicable index. To compensate for the imperfect correlation of movements in the price of the portfolio securities being hedged and movements in the price of the hedging instruments, a Fund may use hedging instruments in a greater dollar amount than the dollar amount of portfolio securities being hedged. It might do so if the historical volatility of the prices of the portfolio securities being hedged are more than the historical volatility of the applicable index. The ordinary spreads between prices in the cash and futures markets are subject to distortions, due to differences in the nature of those markets. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions which could distort the normal relationship between the cash and futures markets. Second, the liquidity of the futures market depends on participants entering into offsetting transactions rather than making or taking delivery. To the extent participants decide to make or take delivery, liquidity in the futures market could be reduced, thus producing distortion. Third, from the point of view of speculators, the deposit requirements in the futures market are less onerous than margin requirements in the securities markets. Therefore, increased participation by speculators in the futures market may cause temporary price distortions. A Fund can use hedging instruments to establish a position in the securities markets as a temporary substitute for the purchase of individual securities (long hedging) by buying futures and/or calls on such futures, broadly-based indices or on securities. It is possible that when a Fund does so the market might decline. If that Fund then concludes not to invest in securities because of concerns that the market might decline further or for other reasons, the Fund will realize a loss on the hedging instruments that is not offset by a reduction in the price of the securities purchased. |_| Forward Contracts. Forward contracts are foreign currency exchange contracts. They are used to buy or sell foreign currency for future delivery at a fixed price. A Fund uses them to "lock in" the U.S. dollar price of a security denominated in a foreign currency that the Fund has bought or sold, or to protect against possible losses from changes in the relative values of the U.S. dollar and a foreign currency. A Fund limits its exposure in foreign currency exchange contracts in a particular foreign currency to the amount of its assets denominated in that currency or a closely-correlated currency. A Fund may also use "cross-hedging" where it hedges against changes in currencies other than the currency in which a security it holds is denominated. Under a forward contract, one party agrees to purchase, and another party agrees to sell, a specific currency at a future date. That date may be any fixed number of days from the date of the contract agreed upon by the parties. The transaction price is set at the time the contract is entered into. These contracts are traded in the inter-bank market conducted directly among currency traders (usually large commercial banks) and their customers. The Funds may use forward contracts to protect against uncertainty in the level of future exchange rates. The use of forward contracts does not eliminate the risk of fluctuations in the prices of the underlying securities a Fund owns or intends to acquire, but it does fix a rate of exchange in advance. Although forward contracts may reduce the risk of loss from a decline in the value of the hedged currency, at the same time they limit any potential gain if the value of the hedged currency increases. When a Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency, or when it anticipates receiving dividend payments in a foreign currency, the Fund might desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar equivalent of the dividend payments. To do so, that Fund could enter into a forward contract for the purchase or sale of the amount of foreign currency involved in the underlying transaction, in a fixed amount of U.S. dollars per unit of the foreign currency. This is called a "transaction hedge." The transaction hedge will protect the Fund against a loss from an adverse change in the currency exchange rates during the period between the date on which the security is purchased or sold or on which the payment is declared, and the date on which the payments are made or received. A Fund could also use forward contracts to lock in the U.S. dollar value of a portfolio position. This is called a "position hedge." When a Fund believes that foreign currency might suffer a substantial decline against the U.S. dollar, it could enter into a forward contract to sell an amount of that foreign currency approximating the value of some or all of the Fund's portfolio securities denominated in that foreign currency. When a Fund believes that the U.S. dollar might suffer a substantial decline against a foreign currency, it could enter into a forward contract to buy that foreign currency for a fixed dollar amount. Alternatively, a Fund could enter into a forward contract to sell a different foreign currency for a fixed U.S. dollar amount if the Fund believes that the U.S. dollar value of the foreign currency to be sold pursuant to its forward contract will fall whenever there is a decline in the U.S. dollar value of the currency in which portfolio securities of the Fund are denominated. That is referred to as a "cross hedge." A Fund will cover its short position in these cases by identifying to its custodian bank assets having a value equal to the aggregate amount of the Fund's commitment under forward contracts. No Fund will enter into forward contracts or maintain a net exposure to such contracts if the consummation of the contracts would obligate a Fund to deliver an amount of foreign currency in excess of the value of that Fund's portfolio securities or other assets denominated in that currency or another currency that is the subject of the hedge. The precise matching of the amounts under forward contracts and the value of the securities involved generally will not be possible because the future value of securities denominated in foreign currencies will change as a consequence of market movements between the date the forward contract is entered into and the date it is sold. In some cases the Manager might decide to sell the security and deliver foreign currency to settle the original purchase obligation. If the market value of the security is less than the amount of foreign currency the Fund is obligated to deliver, the Fund might have to purchase additional foreign currency on the "spot" (that is, cash) market to settle the security trade. If the market value of the security instead exceeds the amount of foreign currency the Fund is obligated to deliver to settle the trade, the Fund might have to sell on the spot market some of the foreign currency received upon the sale of the security. There will be additional transaction costs on the spot market in those cases. The projection of short-term currency market movements is extremely difficult, and the successful execution of a short-term hedging strategy is highly uncertain. Forward contracts involve the risk that anticipated currency movements will not be accurately predicted, causing a Fund to sustain losses on these contracts and to pay additional transactions costs. The use of forward contracts in this manner might reduce a Fund's performance if there are unanticipated changes in currency prices to a greater degree than if a Fund had not entered into such contracts. At or before the maturity of a forward contract requiring a Fund to sell a currency, the Fund might sell a portfolio security and use the sale proceeds to make delivery of the currency. In the alternative a Fund might retain the security and offset its contractual obligation to deliver the currency by purchasing a second contract. Under that contract a Fund will obtain, on the same maturity date, the same amount of the currency that it is obligated to deliver. Similarly, a Fund might close out a forward contract requiring it to purchase a specified currency by entering into a second contract entitling it to sell the same amount of the same currency on the maturity date of the first contract. The Fund would realize a gain or loss as a result of entering into such an offsetting forward contract under either circumstance. The gain or loss will depend on the extent to which the exchange rate or rates between the currencies involved moved between the execution dates of the first contract and offsetting contract. The costs to a Fund of engaging in forward contracts varies with factors such as the currencies involved, the length of the contract period and the market conditions then prevailing. Because forward contracts are usually entered into on a principal basis, no brokerage fees or commissions are involved. Because these contracts are not traded on an exchange, a Fund must evaluate the credit and performance risk of the counterparty under each forward contract. Although a Fund values its assets daily in terms of U.S. dollars, it does not intend to convert its holdings of foreign currencies into U.S. dollars on a daily basis. Funds may convert foreign currency from time to time, and will incur costs in doing so. Foreign exchange dealers do not charge a fee for conversion, but they do seek to realize a profit based on the difference between the prices at which they buy and sell various currencies. Thus, a dealer might offer to sell a foreign currency to a Fund at one rate, while offering a lesser rate of exchange if the Fund desires to resell that currency to the dealer. |_| Regulatory Aspects of Hedging Instruments. When using futures and options on futures, the Funds are required to operate within certain guidelines and restrictions with respect to the use of futures as established by the Commodities Futures Trading Commission (the "CFTC"). In particular, a Fund is exempted from registration with the CFTC as a "commodity pool operator" if the Fund complies with the requirements of Rule 4.5 adopted by the CFTC. The Rule does not limit the percentage of a Fund's assets that may be used for futures margin and related options premiums for a bona fide hedging position. However, under the Rule, a Fund must limit its aggregate initial futures margin and related options premiums to not more than 5% of the Funds' net assets for hedging strategies that are not considered bona fide hedging strategies under the Rule. Transactions in options by a Fund are subject to limitations established by the option exchanges. The exchanges limit the maximum number of options that may be written or held by a single investor or group of investors acting in concert. Those limits apply regardless of whether the options were written or purchased on the same or different exchanges or are held in one or more accounts or through one or more different exchanges or through one or more brokers. Thus, the number of options that a Fund may write or hold may be affected by options written or held by other entities, including other investment companies having the same advisor as that Fund (or an adviser that is an affiliate of the Funds' advisor). The exchanges also impose position limits on futures transactions. An exchange may order the liquidation of positions found to be in violation of those limits and may impose certain other sanctions. Under the Investment Company Act, when a Fund purchases a future, it must identify as segregated on its records liquid assets in an amount equal to the market value of the securities underlying the future, less the margin deposit applicable to it. |_| Tax Aspects of Certain Hedging Instruments. Certain foreign currency exchange contracts are treated as "Section 1256 contracts" under the Internal Revenue Code. In general, gains or losses relating to Section 1256 contracts are characterized as 60% long-term and 40% short-term capital gains or losses under the Code. However, foreign currency gains or losses arising from Section 1256 contracts that are forward contracts generally are treated as ordinary income or loss. In addition, Section 1256 contracts held by the Funds at the end of each taxable year are "marked-to-market," and unrealized gains or losses are treated as though they were realized. These contracts also may be marked-to-market for other purposes under rules prescribed pursuant to the Internal Revenue Code. An election can be made by a Fund to exempt those transactions from this marked-to-market treatment. Certain forward contracts a Fund enters into may result in "straddles" for Federal income tax purposes. The straddle rules may affect the character and timing of gains (or losses) recognized by that Fund on straddle positions. Generally, a loss sustained on the disposition of a position making up a straddle is allowed only to the extent that the loss exceeds any unrecognized gain in the offsetting positions making up the straddle. Disallowed loss is generally allowed at the point where there is no unrecognized gain in the offsetting positions making up the straddle, or the offsetting position is disposed of. Under the Internal Revenue Code, the following gains or losses are treated as ordinary income or loss: (1) gains or losses attributable to fluctuations in exchange rates that occur between the time a Fund accrues interest or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time that Fund actually collects such receivables or pays such liabilities, and (2) gains or losses attributable to fluctuations in the value of a foreign currency between the date of acquisition of a debt security denominated in a foreign currency or foreign currency forward contracts and the date of disposition. Currency gains and losses are offset against market gains and losses on each trade before determining a net "Section 988" gain or loss under the Internal Revenue Code for that trade, which may increase or decrease the amount of a Fund's investment income available for distribution to its shareholders. |X| Temporary Defensive Investments. When market conditions are unstable, or the Manager believes it is otherwise appropriate to reduce holdings in stocks, the Funds can invest in a variety of debt securities for defensive purposes. The Funds can also purchase these securities for liquidity purposes to meet cash needs due to the redemption of Fund shares, or to hold while waiting to reinvest cash received from the sale of other portfolio securities. The Funds can buy: |_| obligations issued or guaranteed by the U. S. government or its instrumentalities or agencies, |_| commercial paper (short-term, unsecured, promissory notes of domestic or foreign companies) rated in the three top rating categories of a nationally recognized rating organization, |_| short-term debt obligations of corporate issuers, rated investment grade (rated at least Baa by Moody's Investors Service, Inc. or at least BBB by Standard & Poor's Corporation, or a comparable rating by another rating organization), or unrated securities judged by the Manager to have a comparable quality to rated securities in those categories, |_| certificates of deposit and bankers' acceptances of domestic and foreign banks having total assets in excess of $1 billion, and |_| repurchase agreements. Short-term debt securities would normally be selected for defensive or cash management purposes because they can normally be disposed of quickly, are not generally subject to significant fluctuations in principal value and their value will be less subject to interest rate risk than longer-term debt securities. Money Fund/VA Investment Policies. Under Rule 2a-7, Money Fund/VA may purchase only "Eligible Securities," as defined below, that the Manger, under procedures approved by the Trust's Board of Trustees, has determined have minimal credit risk. An "Eligible Security" is (a) a security that has received a rating in one of the two highest short-term rating categories by any two "nationally-recognized statistical rating organizations" as defined in Rule 2a-7 ("Rating Organizations"), or, if only one Rating Organization has rated that security, by that Rating Organization (the "Rating Requirements"), (b) a security that is guaranteed, and either that guarantee or the party providing that guarantee meets the Rating Requirements, or (c) an unrated security that is either issued by an issuer having another similar security that meets the Rating Requirements, or is judged by the Manager to be of comparable quality to investments that meet the Rating Requirements. Rule 2a-7 permits Money Fund/VA to purchase "First Tier Securities," which are Eligible Securities rated in the highest category for short-term debt obligations by at least two Rating Organizations, or, if only one Rating Organization has rated a particular security, by that Rating Organization, or comparable unrated securities. If a security's rating is downgraded, the Manager and/or the Board may have to reassess the security's credit risk. If a security has ceased to be a First Tier Security, the Manager will promptly reassess whether the security continues to present "minimal credit risk." If the Manager becomes aware that any Rating Organization has downgraded its rating of a Second Tier Security or rated an unrated security below its second highest rating category, the Trust's Board of Trustees shall promptly reassess whether the security presents minimal credit risk and whether it is in Money Fund/VA's best interests to dispose of it. If Money Fund/VA disposes of the security within 5 days of the Manager learning of the downgrade, the Manager will provide the Board with subsequent notice of such downgrade. If a security is in default, or ceases to be an Eligible Security, or is determined no longer to present minimal credit risks, the Board must determine whether it would be in Money Fund/VA's best interests to dispose of the security. In making that determination, the Board may take into consideration default insurance coverage that Money Fund shares with other money market funds managed by the Manager and an affiliate. If such coverage is available for a portion of the loss caused by the default and the security can only be sold at a depressed price, the Board may determine it is in Money Fund/VA's best interests not to sell that defaulted security. In that case, retention of the security would not violate Rule 2a-7. Due to coverage limits, exclusions and deductibles, there can be no assurance of the adequacy or availability of insurance coverage in the event a security is in default. The Rating Organizations currently designated as such by the Securities and Exchange Commission ("SEC") are Standard & Poor's Corporation, Moody's Investors Service, Inc., Fitch IBCA, Inc., Duff & Phelps, Inc., and Thomson BankWatch, Inc. See Appendix A to this Statement of Additional Information for a description of the rating categories of the Rating Organizations. G Certificates of Deposit and Commercial Paper. Money Fund/VA may invest in certificates of deposit of up to $100,000 of a domestic bank if such certificates of deposit are fully insured as to principal by the Federal Deposit Insurance Corporation. For purposes of this section, the term "bank" includes commercial banks, savings banks, and savings and loan associations and the term "foreign bank" includes foreign branches of U.S. banks (issuers of "Eurodollar" instruments), U.S. branches and agencies of foreign banks (issuers of "Yankee dollar" instruments) and foreign branches of foreign banks. Money Fund/VA also may purchase obligations issued by other entities if they are: (i) guaranteed as to principal and interest by a bank or corporation whose certificates of deposit or commercial paper may otherwise be purchased by Money Fund/VA, or (ii) subject to repurchase agreements (explained in the prospectus), if the collateral for the agreement complies with Rule 2a-7. Bank Loan Participation Agreements. Money Fund/VA may invest in bank loan participation agreements. They provide the Fund with an undivided interest in a loan made by the issuing bank in the proportion the Fund's interest bears to the total principal amount of the loan. In evaluating the risk of these investments, the Fund looks to the creditworthiness of the borrower that is obligated to make principal and interest payments on the loan. Time Deposits. Money Fund/VA may invest in fixed time deposits, which are non-negotiable deposits in a bank for a specified period of time at a stated interest rate, whether or not subject to withdrawal penalties; however, such deposits which are subject to such penalties, other than deposits maturing in less than 7 days, are subject to the 10% limitation applicable to illiquid securities purchased by Money Fund/VA. Floating Rate/Variable Rate Notes. Money Fund/VA may invest in instruments with floating or variable interest rates. The interest rate on a floating rate obligation is based on a stated prevailing market rate, such as a bank's prime rate, the 90-day U.S. Treasury Bill rate, the rate of return on commercial paper or bank certificates of deposit, or some other standard, and is adjusted automatically each time such market rate is adjusted. The interest rate on a variable rate obligation is also based on a stated prevailing market rate but is adjusted automatically at a specified interval of no less than one year. Some variable rate or floating rate obligations in which Money Fund/VA may invest have a demand feature entitling the holder to demand payment at an amount approximately equal to the principal amount thereof plus accrued interest at any time, or at specified intervals not exceeding one year. These notes may or may not be backed by bank letters of credit. The interest rates on these notes fluctuate from time to time. Generally, the changes in the interest rate on such securities reduce the fluctuation in their market value. As interest rates decrease or increase, the potential for capital appreciation or depreciation is less than that for fixed-rate obligations of the same maturity. Master Demand Notes. Master demand notes are corporate obligations that permit the investment of fluctuating amounts by Money Fund/VA at varying rates of interest pursuant to direct arrangements between Money Fund/VA, as lender, and the corporate borrower that issues the note. These notes permit daily changes in the amounts borrowed. Money Fund/VA has the right to increase the amount under the note at any time up to the full amount provided by the note agreement, or to decrease the amount. The borrower may repay up to the full amount of the note at any time without penalty. It is not generally contemplated that master demand notes will be traded because they are direct lending arrangements between the lender and the borrower. There is no secondary market for these notes, although they are redeemable and thus immediately repayable by the borrower at face value, plus accrued interest, at any time. Accordingly, where these obligations are not secured by letters of credit or other credit support arrangements, Money Fund/VA's right to redeem is dependent upon the ability of the borrower to pay principal and interest on demand. In evaluating the master demand arrangements, the Manager considers the earning power, cash flow, and other liquidity ratios of the issuer. If they are not rated by Rating Organizations, Money Fund/VA may invest in them only if, at the time of an investment, they are Eligible Securities. The Manager will continuously monitor the borrower's financial ability to meet all of its obligations because Money Fund/VA's liquidity might be impaired if the borrower were unable to pay principal and interest on demand. There is no limit on the amount of the Money Fund/VA's assets that may be invested in floating rate and variable rate obligations. Floating rate or variable rate obligations which do not provide for recovery of principal and interest within seven days' notice will be subject to the 10% limitation applicable to illiquid securities purchased by Money Fund/VA. Investment Restrictions |X| What Are "Fundamental Policies?" Fundamental policies are those policies that the Fund has adopted to govern its investments that can be changed only by the vote of a "majority" of the Fund's outstanding voting securities. Under the Investment Company Act, a "majority" vote is defined as the vote of the holders of the lesser of: |_| 67% or more of the shares present or represented by proxy at a shareholder meeting, if the holders of more than 50% of the outstanding shares are present or represented by proxy, or |_| more than 50% of the outstanding shares. The Funds' investment objectives are fundamental policies. Other policies described in the Prospectus or this Statement of Additional Information are "fundamental" only if they are identified as such. The Funds' Board of Trustees can change non-fundamental policies without shareholder approval. However, significant changes to investment policies will be described in supplements or updates to the Prospectus or this Statement of Additional Information, as appropriate. The Funds' most significant investment policies are described in the Prospectus. |X| Do the Funds Have Additional Fundamental Policies? The following investment restrictions are fundamental policies of the Funds. |_| No Fund can buy securities issued or guaranteed by any one issuer if (i) more than 5% of its total assets would be invested in securities of that issuer or (ii) it would then own more than 10% of that issuer's voting securities, or (iii) it would then own more than 10% in principal amount of that issuer's outstanding debt securities. The restriction on debt securities does not apply to Strategic Bond Fund/VA. All of the restrictions apply only to 75% of each Fund's total assets. The limits do not apply to securities issued by the U.S. Government or any of its agencies or instrumentalities. |_| The Funds cannot lend money. However, they can invest in all or a portion of an issue of bonds, debentures, commercial paper or other similar corporate obligations of the types that are usually purchased by institutions, whether or not they are publicly distributed. The Funds may also enter into repurchase agreements, and make loans of portfolio securities. |_| The Funds cannot concentrate investments. That means they cannot invest 25% or more of their total assets in companies in any one industry. Obligations of the U.S. government, its agencies and instrumentalities are not considered to be part of an "industry" for the purposes of this restriction. This policy does not limit investments by Money Fund/VA in obligations issued by banks. |_| The Funds cannot buy or sell real estate or interests in real estate. However, the Funds can purchase debt securities secured by real estate or interests in real estate, or issued by companies, including real estate investment trusts, which invest in real estate or interests in real estate. |_| The Funds cannot underwrite securities of other companies. A permitted exception is in case a Fund is deemed to be an underwriter under the Securities Act of 1933 when reselling any securities held in its own portfolio. |_| The Funds cannot invest in commodities or commodity contracts, other than the hedging instruments permitted by any of its other fundamental policies. It does not matter whether the hedging instrument is considered to be a commodity or commodity contract. |_| The Funds cannot invest in the securities issued by any company for the purpose of exercising control of management of that company. |_| The Funds cannot invest in or hold securities of any issuer if officers and Trustees of the Funds or the Manager individually beneficially own more than 1/2 of 1% of the securities of that issuer and together own more than 5% of the securities of that issuer. |_| The Funds cannot mortgage, pledge, hypothecate or otherwise encumber any of its assets to secure a debt or a loan. However, this does not prohibit the Funds from entering into an escrow, collateral or margin arrangement with any of its investments. |_| The Funds cannot invest in oil, gas or other mineral explorations or development programs. However, the Funds may purchase options, futures contracts, swaps and other investments which are backed by, or the investment return from which are linked to oil, gas and mineral values. |_| The Funds cannot issue "senior securities," but this does not prohibit certain investment activities for which assets of the Funds are designated as segregated, or margin, collateral or escrow arrangements are established, to cover the related obligations. Examples of those activities include borrowing money, reverse repurchase agreements, delayed-delivery and when-issued arrangements for portfolio securities transactions, and contracts to buy or sell derivatives, hedging instruments, options or futures. Unless the Prospectus or this Statement of Additional Information states that a percentage restriction applies on an ongoing basis, it applies only at the time the Fund makes an investment. The Fund need not sell securities to meet the percentage limits if the value of the investment increases in proportion to the size of the Fund. For purposes of the Funds' policy not to concentrate its investments as described above, the Funds have adopted the industry classifications set forth in Appendix B to this Statement of Additional Information. This is not a fundamental policy. The Board of Trustees is expected to propose that shareholders approve a number of changes to the fundamental policies listed above. Specifically, that proposal would eliminate all but the first and last fundamental investment policies listed above. That proposal would also amend the fundamental policy of the Funds on lending and borrowing. There can be no assurance that the proposal will be submitted to shareholders by any specific date, or that once submitted, it will be approved. If adopted, these changes are not expected to change the operation of any Fund in any material manner. For that reason, no revision or supplement to this Statement of Additional Information may be made to reflect these changes if and when they are approved and implemented. How the Funds Are Managed Organization and History. Each Fund is an investment portfolio, or "series" of Oppenheimer Variable Account Funds (the "Trust"), a multi-series open-end diversified management investment company organized as a Massachusetts business trust that presently includes ten series. Money Fund/VA, Bond Fund/VA and Capital Appreciation Fund/VA were all organized in 1983, High Income Fund/VA, Aggressive Growth Fund/VA and Multiple Strategies Fund/VA, were all organized in 1986, Global Securities Fund/VA was organized in 1990, Strategic Bond Fund/VA was organized in 1993, Main Street Growth & Income Fund/VA was organized in 1995, and Small Cap Growth Fund/VA was organized in 1998. The suffix "VA" was added to each Fund's name on May 1, 1999. Prior to that date, Oppenheimer Capital Appreciation Fund/VA was named "Oppenheimer Growth Fund," and Oppenheimer Main Street Growth & Income Fund/VA was named "Oppenheimer Growth & Income Fund." Prior to May 1, 1998, Oppenheimer Aggressive Growth Fund/VA was named "Oppenheimer Capital Appreciation Fund." All references to the Fund's Board of Trustees and Officers refer to the Trustees and Officers, respectively, of Oppenheimer Variable Account Funds. The Funds are governed by a Board of Trustees, which is responsible for protecting the interests of shareholders under Massachusetts law. The Trustees meet periodically throughout the year to oversee the Funds' activities, review their performance, and review the actions of the Manager. Although the Funds will not normally hold annual meetings of its shareholders, they may hold shareholder meetings from time to time on important matters, and shareholders have the right to call a meeting to remove a Trustee or to take other action described in the Declaration of Trust of Oppenheimer Variable Account Funds. |X| Classes of Shares. The Board of Trustees has the power, without shareholder approval, to divide unissued shares of any Fund into two or more classes. The Board has done so, and each Fund currently has two classes of shares: (1) a class with no specific name, other than the name shown two paragraphs above, and (2) "Service shares," which are subject to a distribution and service plan, described under that heading below. All classes invest in the same investment portfolio. Each class of shares: o has its own dividends and distributions, o pays certain expenses which may be different for the different classes, o may have a different net asset value, o may have separate voting rights on matters in which interests of one class are different from interests of another class, and o votes as a class on matters that affect that class alone. Shares are freely transferable, and each share of each class has one vote at shareholder meetings, with fractional shares voting proportionally on matters submitted to the vote of shareholders. Each share of each Fund represents an interest in that Fund proportionately equal to the interest of each other share of the same class. The Trustees are authorized to create new series and classes of shares. The Trustees may reclassify unissued shares of the Funds into additional series or classes of shares. The Trustees also may divide or combine the shares of a class into a greater or lesser number of shares without changing the proportionate beneficial interest of a shareholder in the Funds. Shares do not have cumulative voting rights or preemptive or subscription rights. Shares may be voted in person or by proxy at shareholder meetings. |X| Meetings of Shareholders. As a Massachusetts business trust, the Funds are not required to hold, and do not plan to hold, regular annual meetings of shareholders. The Funds will hold meetings when required to do so by the Investment Company Act or other applicable law. They will also do so when a shareholder meeting is called by the Trustees or upon proper request of the shareholders. Shareholders have the right, upon the declaration in writing or vote of two-thirds of the outstanding shares of all the Funds, to remove a Trustee. The Trustees will call a meeting of shareholders to vote on the removal of a Trustee upon the written request of the record holders of 10% of all outstanding shares. If the Trustees receive a request from at least 10 shareholders stating that they wish to communicate with other shareholders to request a meeting to remove a Trustee, the Trustees will then either make the shareholder list available to the applicants or mail their communication to all other shareholders at the applicants' expense. The shareholders making the request must have been shareholders for at least six months and must hold shares of the Funds valued at $25,000 or more or constituting at least 1% of the Funds' outstanding shares, whichever is less. The Trustees may also take other action as permitted by the Investment Company Act. |X| Shareholder and Trustee Liability. The Declaration of Trust contains an express disclaimer of shareholder or Trustee liability for the Funds' obligations. It also provides for indemnification and reimbursement of expenses out of a Fund's property for any shareholder held personally liable for its obligations. The Declaration of Trust also states that upon request, a Fund shall assume the defense of any claim made against a shareholder for any act or obligation of the Fund and shall satisfy any judgment on that claim. Massachusetts law permits a shareholder of a business trust (such as the Trust) to be held personally liable as a "partner" under certain circumstances. However, the risk that a Fund shareholder will incur financial loss from being held liable as a "partner" of the Fund is limited to the relatively remote circumstances in which a Fund would be unable to meet its obligations. The Funds' contractual arrangements state that any person doing business with the Funds (and each shareholder of the Funds) agrees under its Declaration of Trust to look solely to the assets of the Fund for satisfaction of any claim or demand that may arise out of any dealings with that Fund. Additionally, the Trustees shall have no personal liability to any such person, to the extent permitted by law. Trustees and Officers of the Funds. The Trustees and officers of the Funds, and their principal occupations and business affiliations during the past five years are listed below. Trustees denoted with an asterisk (*) below are deemed to be "interested persons" of the Funds under the Investment Company Act. All of the Trustees are also trustees, directors or managing general partners of the following Denver-based Oppenheimer funds: Oppenheimer Cash Reserves Oppenheimer Total Return Fund, Inc. Oppenheimer Champion Income Fund Oppenheimer Variable Account Funds Oppenheimer Capital Income Fund Panorama Series Fund, Inc. Oppenheimer High Yield Fund Centennial America Fund, L. P. Oppenheimer International Bond Centennial California Tax Exempt Fund Trust Oppenheimer Integrity Funds Centennial Government Trust Oppenheimer Limited-Term Centennial Money Market Trust Government Fund Oppenheimer Main Street Funds, Centennial New York Tax Exempt Inc. Trust Oppenheimer Municipal Fund Centennial Tax Exempt Trust Oppenheimer Real Asset Fund Oppenheimer Main Street Small Cap Fund Oppenheimer Strategic Income Fund Oppenheimer Senior Floating Rate Fund Ms. Macaskill and Messrs. Swain, Bishop, Donohue, Farrar and Zack, who are officers of the Fund, respectively hold the same offices with the other Denver-based Oppenheimer funds. As of April 1, 2000, the Trustees and officers of the Fund as a group did not beneficially own any shares of any Fund. William L. Armstrong, Trustee, Age: 63. 11 Carriage Lane, Littleton, Colorado 80121 Chairman of the following private mortgage banking companies: Cherry Creek Mortgage Company (since 1991), Centennial State Mortgage Company (since 1994), The El Paso Mortgage Company (since 1993), Transland Financial Services, Inc. (since 1997), and Ambassador Media Corporation (since 1984); Chairman of the following private companies: Frontier Real Estate, Inc. (residential real estate brokerage) (since 1994), Frontier Title (title insurance agency) (since 1995) and Great Frontier Insurance (insurance agency) (since 1995); Director of the following public companies: Storage Technology Corporation (computer equipment company) (since 1991), Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), UNUMProvident (insurance company) (since 1991); formerly Director of the following public companies: International Family Entertainment (television channel) (1991 - 1997) and Natec Resources, Inc. (air pollution control equipment and services company) (1991 - 1995); formerly U.S. Senator (January 1979 - January 1991). Robert G. Avis*, Trustee, Age: 68. One North Jefferson Ave., St. Louis, Missouri 63103 Chairman, President and Chief Executive Officer of A.G. Edwards Capital, Inc. (general partnership of private equity funds), Director of A.G. Edwards & Sons, Inc. (a broker-dealer) and Director of A.G. Edwards Trust Companies (trust companies), formerly, Vice Chairman of A.G. Edwards & Sons, Inc. and A.G. Edwards, Inc. (its parent holding company) and Chairman of A.G.E. Asset Management (an investment advisor). William A. Baker, Trustee, Age: 85. 197 Desert Lakes Drive, Palm Springs, California 92264 Management Consultant. George C. Bowen, Trustee, Age: 64 9224 Bauer Court, Lone Tree, Colorado 80124 Formerly (until April 1999) Mr. Bowen held the following positions: Senior Vice President (since September 1987) and Treasurer (since March 1985) of the Manager; Vice President (since June 1983) and Treasurer (since March 1985) of OppenheimerFunds Distributor, Inc. ("OFDI"); Vice President (since October 1989) and Treasurer (since April 1986) of HarbourView Asset Management Corporation; Senior Vice President (since February 1992), Treasurer (since July 1991) Assistant Secretary and a director (since December 1991) of Centennial Asset Management Corporation; President, Treasurer and a director of Centennial Capital Corporation (since June 1989); Vice President and Treasurer (since August 1978) and Secretary (since April 1981) of Shareholder Services, Inc.; Vice President, Treasurer and Secretary of Shareholder Financial Services, Inc. (since November 1989); Assistant Treasurer of Oppenheimer Acquisition Corp. (since March 1998); Treasurer of Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President and Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996); Treasurer of OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc (since October 1997). Edward L. Cameron, Trustee, Age: 66. Spring Valley Road, Morristown, New Jersey 07960 Formerly (from 1974-1999) a partner with PricewaterhouseCoopers LLC (an accounting firm) and Chairman, Price Waterhouse LLP Global Investment management Industry Services Group (from 1994-1998). Jon S. Fossel, Trustee, Age: 56. P.O. Box 44, Mead Street, Waccabuc, New York 10597 Formerly Chairman and a director of the Manager, President and a director of Oppenheimer Acquisition Corp., the Manager's parent holding company, and Shareholder Services, Inc. and Shareholder Financial Services, Inc., transfer agent subsidiaries of the Manager. Sam Freedman, Trustee, Age: 59. 4975 Lakeshore Drive, Littleton, Colorado 80123 Formerly Chairman and Chief Executive Officer of OppenheimerFunds Services, Chairman, Chief Executive Officer and a director of Shareholder Services, Inc., Chairman, Chief Executive Officer and director of Shareholder Financial Services, Inc., Vice President and director of Oppenheimer Acquisition Corp. and a director of OppenheimerFunds, Inc. Raymond J. Kalinowski, Trustee, Age: 70. 44 Portland Drive, St. Louis, Missouri 63131 Director of Wave Technologies International, Inc. (a computer products training company), self-employed consultant (securities matters). C. Howard Kast, Trustee, Age: 77. 2552 East Alameda, Denver, Colorado 80209 Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm). Robert M. Kirchner, Trustee, Age: 78. 7500 E. Arapahoe Road, Englewood, Colorado 80112 President of The Kirchner Company (management consultants). James C. Swain*, Chairman, Chief Executive Officer and Trustee, Age: 66. 6803 South Tucson Way, Englewood, Colorado 80112 Vice Chairman of the Manager (since September 1988); formerly President and a director of Centennial Asset Management Corporation, an investment adviser subsidiary of the Manager and Chairman of the Board of Shareholder Services, Inc. Bridget A. Macaskill*, President and Trustee, Age: 51. Two World Trade Center, New York, New York 10048-0203 President (since June 1991), Chief Executive Officer (since September 1995) and a Director (since December 1994) of the Manager; President and director (since June 1991) of HarbourView Asset Management Corporation, an investment adviser subsidiary of the Manager; Chairman and a director of Shareholder Services, Inc. (since August 1994) and Shareholder Financial Services, Inc. (since September 1995), transfer agent subsidiaries of the Manager; President (since September 1995) and a director (since October 1990) of Oppenheimer Acquisition Corp., the Manager's parent holding company; President (since September 1995) and a director (since November 1989) of Oppenheimer Partnership Holdings, Inc., a holding company subsidiary of the Manager; a director of Oppenheimer Real Asset Management, Inc. (since July 1996); President and a director (since October 1997) of OppenheimerFunds International Ltd., an offshore fund management subsidiary of the Manager and of Oppenheimer Millennium Funds plc; President and a director of other Oppenheimer funds; a director of Prudential Corporation plc (a U.K. financial service company). Ned M. Steel, Trustee, Age: 85. 3416 South Race Street, Englewood, Colorado 80110 Chartered Property and Casualty Underwriter; a director of Visiting Nurse Corporation of Colorado. Charles Albers, Senior Vice President and Portfolio Manager, Age: 60. Two World Trade Center, New York, New York 10048-0203 Senior Vice President of the Manager (since April 1998); a Certified Financial Analyst; formerly a Vice President and portfolio manager for Guardian Investor Services, the investment management subsidiary of The Guardian Life Insurance Company (since 1972). Bruce Bartlett, Senior Vice President and Portfolio Manager, Age: 51. Two World Trade Center, New York, New York 10048-0203 Senior Vice President of the Manager (since January 1998); an officer of other Oppenheimer funds, formerly a Vice President and Senior Portfolio Manager at First of America Investment Corp. John P. Doney, Vice President and Portfolio Manager, Age: 71. Two World Trade Center, New York, New York 10048-0203 Vice President of the Manager (since June 1992); prior to joining the Manager in June 1992, he was Senior Vice President and Chief Investment Officer Equities of National Securities & Research Corporation (mutual fund adviser) and Vice President of the National Affiliated Investment Companies. John S. Kowalik, Vice President and Portfolio Manager, Age: 44. Two World Trade Center, New York, New York 10048-0203 Senior Vice President of the Manager (since July 1998); an officer of other Oppenheimer funds; formerly Managing Director and Senior Portfolio Manager at Prudential Global Advisors (June 1989 - June 1998). Michael S. Levine, Vice President and Portfolio Manager, Age: 35. Two World Trade Center, New York, New York 10048-0203 Vice President of the Manager (since April 1996); formerly Assistant Portfolio Manager of the Manager (from June 1994 - April 1996) and portfolio manager and research associate for Amas Securities, Inc. (from February 1990 - February 1994). Nikolaos D. Monoyios, Vice President and Portfolio Manager, Age: 51. Two World Trade Center, New York, New York 10048-0203 Vice President of the Manager (since April 1998); a Certified Financial Analyst; formerly a Vice President and portfolio manager for Guardian Investor Services, the investment management subsidiary of The Guardian Life Insurance Company (since 1979). David P. Negri, Vice President and Portfolio Manager, Age: 46. Two World Trade Center, New York, New York 10048-0203 Senior Vice President of the Manager (since June 1989); an officer of other Oppenheimer funds. Jane Putnam, Vice President and Portfolio Manager, Age: 40. Two World Trade Center, New York, New York 10048-0203 Vice President of the Manager (since October 1995); before joining the Manager in May 1994, she was a portfolio manager and equity research analyst for Chemical Bank (June 1989 - May 1994). Thomas P. Reedy, Vice President and Portfolio Manager, Age: 39. Two World Trade Center, New York, New York 10048-0203 Vice President of the Manager (since June 1993); an officer of other Oppenheimer funds. Richard H. Rubinstein, Vice President and Portfolio Manager, Age: 52. Two World Trade Center, New York, New York 10048-0203 Senior Vice President of the Manager (since October 1995); an officer of other Oppenheimer funds (since joining the Manager in June 1990). Arthur P. Steinmetz, Vice President and Portfolio Manager, Age: 42. Two World Trade Center, New York, New York 10048-0203 Senior Vice President of the Manager (since March 1993); an officer of other Oppenheimer funds. Jay W. Tracey III, Vice President and Portfolio Manager, Age: 47. Two World Trade Center, New York, New York 10048-0203 Vice President of the Manager (since September 1994); Vice President and portfolio manager of other OppenheimerFunds; formerly a Managing Director of Buckingham Capital Management (February 1994 - September 1994), prior to which he was Portfolio Manager and Vice President of other Oppenheimer funds and a Vice President of the Manager (July 1991 - February 1994). William L. Wilby, Vice President and Portfolio Manager, Age: 56. Two World Trade Center, New York, New York 10048-0203 Senior Vice President of the Manager (since July 1994) and Vice President of HarbourView Asset Management Corporation (since October 1993); an officer of other Oppenheimer funds; formerly international investment strategist at Brown Brothers Harriman & Co., prior to which he was a Managing Director and Portfolio Manager at AIG Global Investors. Carol E. Wolf, Vice President and Portfolio Manager, Age: 48. 6803 South Tucson Way, Englewood, Colorado 80112 Vice President of the Manager and Centennial Asset Management Corporation (since June 1990); an officer of other Oppenheimer funds. Andrew J. Donohue, Vice President and Secretary, Age: 49. Two World Trade Center, New York, New York 10048-0203 Executive Vice President (since January 1993), General Counsel (since October 1991) and a Director (since September 1995) of the Manager; Executive Vice President and General Counsel (since September 1993) and a director (since January 1992) of OFDI; Executive Vice President, General Counsel and a director of HarbourView Asset Management Corporation, Shareholder Services, Inc., Shareholder Financial Services, Inc., Oppenheimer Partnership Holdings, Inc. (since September 1995) and Oppenheimer Trust Company (since March 2000); President and a director of Centennial Asset Management Corporation (since September 1995); President, General Counsel and a director of Oppenheimer Real Asset Management, Inc. (since July 1996); General Counsel (since May 1996) and Secretary (since April 1997) of Oppenheimer Acquisition Corp.; Vice President and a director of OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc (since October 1997); an officer of other Oppenheimer funds. Brian W. Wixted, Treasurer, Age: 39. 6803 South Tucson Way, Englewood, Colorado 80112 Senior Vice President and Treasurer (since April 1999) of the Manager; Treasurer of HarbourView Asset Management Corporation, Shareholder Services, Inc., Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc. (since April 1999); Assistant Treasurer of Oppenheimer Acquisition Corp. (since April 1999); Assistant Secretary of Centennial Asset Management Corporation (since April 1999); formerly Principal and Chief Operating Officer, Bankers Trust Company - Mutual Fund Services Division (March 1995 - March 1999); Vice President and Chief Financial Officer of CS First Boston Investment Management Corp. (September 1991 - March 1995); and Vice President and Accounting Manager, Merrill Lynch Asset Management (November 1987 - September 1991). Robert J. Bishop, Assistant Treasurer, Age: 41. 6803 South Tucson Way, Englewood, Colorado 80112 Vice President of the Manager/Mutual Fund Accounting (since May 1996); an officer of other Oppenheimer funds; formerly an Assistant Vice President of the Manager/Mutual Fund Accounting (April 1994 - May 1996), and a Fund Controller for the Manager. Scott T. Farrar, Assistant Treasurer, Age: 34. 6803 South Tucson Way, Englewood, Colorado 80112 Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer of other Oppenheimer funds; formerly an Assistant Vice President of the Manager/Mutual Fund Accounting (April 1994 - May 1996), and a Fund Controller for the Manager. Robert G. Zack, Assistant Secretary, Age: 51. Two World Trade Center, New York, New York 10048-0203 Senior Vice President (since May 1985) and Associate General Counsel (since May 1981) of the Manager, Assistant Secretary of Shareholder Services, Inc. (since May 1985), and Shareholder Financial Services, Inc. (since November 1989); Assistant Secretary of OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc (since October 1997); an officer of other Oppenheimer funds. |X| Remuneration of Trustees. The officers of the Funds and two Trustees of the Fund (Ms. Macaskill and Mr. Swain) are affiliated with the Manager and receive no salary or fee from the Funds. The remaining Trustees of the Funds received the compensation shown below. The compensation from the Funds were paid during their fiscal year ended December 31, 1999. The compensation from all of the Denver-based Oppenheimer funds includes the compensation from the Funds and represents compensation received as a director, trustee, managing general partner or member of a committee of the Board during the calendar year 1999. - -------------------------------------------------------------------- Aggregate Compensation Total Compensation Trustee's Name and from Oppenheimer From all Other Positions Variable Denver-Based Account Funds Oppenheimer Funds 1 - -------------------------------------------------------------------- - -------------------------------------------------------------------- William H. Armstrong2 $1,148 $14,542 - -------------------------------------------------------------------- - -------------------------------------------------------------------- Robert G. Avis $5,370 $67,998 - -------------------------------------------------------------------- - -------------------------------------------------------------------- William A. Baker $5,370 $67,998 - -------------------------------------------------------------------- - -------------------------------------------------------------------- George Bowen2 None $23,879 - -------------------------------------------------------------------- - -------------------------------------------------------------------- Edward L. Cameron2 $193 $2,430 - -------------------------------------------------------------------- - -------------------------------------------------------------------- Jon S. Fossel $5,256 $66,586 - -------------------------------------------------------------------- - -------------------------------------------------------------------- Sam Freedman Review Committee $5,841 $73,998 Member - -------------------------------------------------------------------- - -------------------------------------------------------------------- Raymond J. Kalinowski Audit Committee Member $5,780 $73,248 - -------------------------------------------------------------------- - -------------------------------------------------------------------- C. Howard Kast Chairman, Audit and Review Committees $6,226 $78,873 - -------------------------------------------------------------------- - -------------------------------------------------------------------- Robert M. Kirchner $5,467 $69,248 Audit Committee Member - -------------------------------------------------------------------- - -------------------------------------------------------------------- Ned M. Steel $5,366 $67,998 - -------------------------------------------------------------------- 1. For the 1999 calendar year. 2. Mr. Armstrong and Mr. Cameron were not Trustees or Directors of the Denver-based Oppenheimer funds prior to August 24, 1999 and December 14, 1999, respectively, and Mr. Bowen was not a Trustee of the Fund prior to December 14, 1999. |X| Deferred Compensation Plan. The Board of Trustees has adopted a Deferred Compensation Plan for disinterested Trustees that enables them to elect to defer receipt of all or a portion of the annual fees they are entitled to receive from the Funds. Under the plan, the compensation deferred by a Trustee is periodically adjusted as though an equivalent amount had been invested in shares of one or more Oppenheimer funds selected by the Trustee. The amount paid to the Trustee under the plan will be determined based upon the performance of the selected funds. Deferral of Trustee's fees under the plan will not materially affect the Funds' assets, liabilities and net income per share. The plan will not obligate the fund to retain the services of any Trustee or to pay any particular level of compensation to any Trustee. Pursuant to an Order issued by the Securities and Exchange Commission, the Funds may invest in the funds selected by the Trustee under the plan without shareholder approval for the limited purpose of determining the value of the Trustee's deferred fee account. Major Shareholders. As of April 1, 2000 the holders of 5% or more of the outstanding shares of any Fund were separate accounts of the following insurance companies and their respective affiliates: (i) Monarch Life Insurance Company ("Monarch"), Springfield, MA; (ii) ReliaStar Bankers Security Life Insurance Company ("ReliaStar"), Minneapolis, MN; (iii) GE Life & Annuity Assurance Company ("GE"), Richmond, VA; (iv) Nationwide Life Insurance Company ("Nationwide"), Columbus, OH; (v) Aetna Life Insurance and Annuity Company ("Aetna"), Hartford, CT; (vi) Massachusetts Mutual Life Insurance Company, Springfield, MA ("MassMutual"), (vii) Jefferson-Pilot Life Insurance Company, Greensboro, NC and Alexander Hamilton Life Insurance Company of America, Concord, NH (collectively, "Jefferson Pilot"); (viii) CUNA Mutual Group ("CUNA"), Madison, WI; (ix) American General Annuity Insurance Company, Houston, TX ("American General"); and (x) Protective Life Insurance Company, Birmingham, AL ("Protective"). Such shares were held as shown in Appendix C. No Service shares of any Fund were outstanding as of that date. The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a holding company controlled by Massachusetts Mutual Life Insurance Company. |X| Code of Ethics. The Fund, the Manager and OFDI have a Code of Ethics. It is designed to detect and prevent improper personal trading by certain employees, including portfolio managers, that would compete with or take advantage of the Fund's portfolio transactions. Covered persons include persons with knowledge of the investments and investment intentions of the Fund and other funds advised by the Manager. The Code of Ethics does permit personnel subject to the Code to invest in securities, including securities that may be purchased or held by the Fund, subject to a number of restrictions and controls. Compliance with the Code of Ethics is carefully monitored and enforced by the Manager. The Code of Ethics is an exhibit to the Fund's registration statement filed with the Securities and Exchange Commission and can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. You can obtain information about the hours of operation of the Public Reference Room by calling the SEC at 1-202-942-8090. The Code of Ethics can also be viewed as part of the Fund's registration statement on the SEC's EDGAR database at the SEC's Internet web site at http://www.sec.gov. Copies may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov., or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. |X| The Investment Advisory Agreements. The Manager provides investment advisory and management services to each Fund under an investment advisory agreement between the Manager and the Trust for each Fund. The Manager selects securities for the Funds' portfolios and handles their day-to-day business. The portfolio managers of the Funds are employed by the Manager and are the persons who are principally responsible for the day-to-day management of the Funds' portfolios. Other members of the Manager's Teams provide the portfolio managers with counsel and support in managing the Funds' portfolios. For Global Securities Fund/VA, this includes George Evans and Frank Jennings. Similarly, other members of the Manager's Fixed Income Portfolio Department, particularly portfolio analysts, traders and other portfolio managers having broad experience with domestic and international government and fixed-income securities, provide the portfolio managers of the High Income Fund/VA, Bond Fund/VA and Strategic Bond Fund/VA with support in managing the portfolios of those Funds. The agreements require the Manager, at its expense, to provide the Funds with adequate office space, facilities and equipment. It also requires the Manager to provide and supervise the activities of all administrative and clerical personnel required to provide effective administration for the Funds. Those responsibilities include the compilation and maintenance of records with respect to operations, the preparation and filing of specified reports, and composition of proxy materials and registration statements for continuous public sale of shares of the Funds. The Funds pay expenses not expressly assumed by the Manager under the advisory agreement, or by the Distributor under the General Distributor's Agreements for Service shares. The advisory agreement lists examples of expenses paid by the Funds. The major categories relate to interest, taxes, brokerage commissions, fees to certain Trustees, legal and audit expenses, custodian and transfer agent expenses, share issuance costs, certain printing and registration costs and non-recurring expenses, including litigation costs. The management fees paid by the Funds to the Manager are calculated at the rates described in the Prospectus, which are applied to the assets of each Fund as a whole. Prior to May 1, 1999, the advisory agreement for Aggressive Growth Fund/VA did not include a breakpoint above $800 million. In the event more than one class of shares is issued, the fees are allocated to each class of shares based upon the relative proportion of a Fund's net assets represented by that class. - ----------------------------------------------------------------- Management Fees for the Fiscal Year Ended December 31: - ----------------------------------------------------------------- - ----------------------------------------------------------------- Fund: 1997 1998 1999 - ----------------------------------------------------------------- - ----------------------------------------------------------------- Money Fund/VA $ 601,698 $ 619,030 $ 749,665 - ----------------------------------------------------------------- - ----------------------------------------------------------------- High Income Fund/VA $1,667,490 $2,383,008 $2,511,521 - ----------------------------------------------------------------- - ----------------------------------------------------------------- Bond Fund/VA $3,281,556 $4,218,231 $4,539,138 - ----------------------------------------------------------------- - ----------------------------------------------------------------- Aggressive Growth $5,324,309 $6,564,650 $8,700,904 Fund/VA - ----------------------------------------------------------------- - ----------------------------------------------------------------- Capital Appreciation $2,859,202 $4,369,487 $6,845,473 Fund/VA - ----------------------------------------------------------------- - ----------------------------------------------------------------- Multiple Strategies $4,068,887 $4,584,184 $4,271,996 Fund/VA - ----------------------------------------------------------------- - ----------------------------------------------------------------- Global Securities $5,615,606 $7,167,836 $8,336,850 Fund/VA - ----------------------------------------------------------------- - ----------------------------------------------------------------- Strategic Bond Fund/VA $1,197,613 $1,860,227 $2,066,323 - ----------------------------------------------------------------- - ----------------------------------------------------------------- Main Street Growth & Income Fund/VA $ 790,577 $1,742,253 $2,864,220 - ----------------------------------------------------------------- - ----------------------------------------------------------------- Small Cap Growth Fund/VA(2) N/A $2,219(1) $20,414 - ----------------------------------------------------------------- - -------------------- (1) From May 1, 1998 (commencement of operations) to December 31, 1998. (2) The Manager voluntarily reimbursed certain expenses other than management fees during the periods shown. The investment advisory agreements state that in the absence of willful misfeasance, bad faith, gross negligence in the performance of its duties or reckless disregard of its obligations and duties under the investment advisory agreement, the Manager is not liable for any loss resulting from a good faith error or omission on its part with respect to any of its duties under the agreement. The agreements permit the Manager to act as investment advisor for any other person, firm or corporation and to use the name "Oppenheimer" in connection with other investment companies for which it may act as investment adviser or general distributor. If the Manager shall no longer act as investment advisor to a Fund, the Manager may withdraw the right of that Fund to use the name "Oppenheimer" as part of its name. Brokerage Policies of the Funds Brokerage Provisions of the Investment Advisory Agreements. One of the duties of the Manager under the investment advisory agreements is to arrange the portfolio transactions for the Funds. The advisory agreements contain provisions relating to the employment of broker-dealers to effect the Funds' portfolio transactions. The Manager is authorized by the advisory agreements to employ broker-dealers, including "affiliated" brokers, as that term is defined in the Investment Company Act. The Manager may employ broker-dealers that the Manager thinks, in its best judgment based on all relevant factors, will implement the policy of the Funds to obtain, at reasonable expense, the "best execution" of the Funds' portfolio transactions. "Best execution" means prompt and reliable execution at the most favorable price obtainable. The Manager need not seek competitive commission bidding. However, it is expected to be aware of the current rates of eligible brokers and to minimize the commissions paid to the extent consistent with the interests and policies of the Funds as established by its Board of Trustees. Under the investment advisory agreements, the Manager may select brokers (other than affiliates) that provide brokerage and/or research services for the Funds and/or the other accounts over which the Manager or its affiliates have investment discretion. The commissions paid to such brokers may be higher than another qualified broker would charge, if the Manager makes a good faith determination that the commission is fair and reasonable in relation to the services provided. Subject to those considerations, as a factor in selecting brokers for the Funds' portfolio transactions, the Manager may also consider sales of shares of the Funds and other investment companies for which the Manager or an affiliate serves as investment adviser. Brokerage Practices Followed by the Manager. The Manager allocates brokerage for the Funds subject to the provisions of the investment advisory agreements and the procedures and rules described above. Generally, the Manager's portfolio traders allocate brokerage based upon recommendations from the Manager's portfolio managers. In certain instances, portfolio managers may directly place trades and allocate brokerage. In either case, the Manager's executive officers supervise the allocation of brokerage. Transactions in securities other than those for which an exchange is the primary market are generally done with principals or market makers. In transactions on foreign exchanges, the Funds may be required to pay fixed brokerage commissions and therefore would not have the benefit of negotiated commissions available in U.S. markets. Brokerage commissions are paid primarily for transactions in listed securities or for certain fixed-income agency transactions in the secondary market. Otherwise brokerage commissions are paid only if it appears likely that a better price or execution can be obtained by doing so. In an option transaction, the Funds ordinarily use the same broker for the purchase or sale of the option and any transaction in the securities to which the option relates. Other funds advised by the Manager have investment policies similar to those of the Funds. Those other funds may purchase or sell the same securities as the Funds at the same time as the Funds, which could affect the supply and price of the securities. If two or more funds advised by the Manager purchase the same security on the same day from the same dealer, the transactions under those combined orders are averaged as to price and allocated in accordance with the purchase or sale orders actually placed for each account. Most purchases of debt obligations are principal transactions at net prices. This affects a substantial portion of the portfolio transactions of Money Fund/VA, High Income Fund/VA, Bond Fund/VA and Strategic Bond Fund/VA. Instead of using a broker for those transactions, the Funds normally deal directly with the selling or purchasing principal or market maker unless the Manager determines that a better price or execution can be obtained by using the services of a broker. Purchases of portfolio securities from underwriters include a commission or concession paid by the issuer to the underwriter. Purchases from dealers include a spread between the bid and asked prices. The Funds seek to obtain prompt execution of these orders at the most favorable net price. The investment advisory agreements permit the Manager to allocate brokerage for research services. The research services provided by a particular broker may be useful only to one or more of the advisory accounts of the Manager and its affiliates. The investment research received for the commissions of those other accounts may be useful both to one of the Funds and one or more of the Manager's other accounts. Investment research may be supplied to the Manager by a third party at the instance of a broker through which trades are placed. Investment research services include information and analysis on particular companies and industries as well as market or economic trends and portfolio strategy, market quotations for portfolio evaluations, information systems, computer hardware and similar products and services. If a research service also assists the Manager in a non-research capacity (such as bookkeeping or other administrative functions), then only the percentage or component that provides assistance to the Manager in the investment decision-making process may be paid in commission dollars. The Board of Trustees permits the Manager to use stated commissions on secondary fixed-income agency trades to obtain research if the broker represents to the Manager that: (i) the trade is not from or for the broker's own inventory, (ii) the trade was executed by the broker on an agency basis at the stated commission, and (iii) the trade is not a riskless principal transaction. The Board of Trustees permits the Manager to use concessions on fixed-price offerings to obtain research, in the same manner as is permitted for agency transactions. The research services provided by brokers broadens the scope and supplements the research activities of the Manager. That research provides additional views and comparisons for consideration, and helps the Manager to obtain market information for the valuation of securities that are either held in the Fund's portfolio or are being considered for purchase. The Manager provides information to the Board about the commissions paid to brokers furnishing such services, together with the Manager's representation that the amount of such commissions was reasonably related to the value or benefit of such services. The (i) total brokerage commissions paid by the Funds (other than Money Fund/VA, which paid no brokerage commissions), not including spreads or concessions on principal transactions on a net trade basis, for the Funds' fiscal year ended December 31, 1997, 1998 and 1999; and (ii) for the Funds' fiscal year ended December 31, 1999, the amount of transactions directed to brokers for research services, and the amount of the commissions paid to broker-dealers for those services, is shown in the chart below: - ---------------------------------------------------------------------- Transaction Commissions Total Brokerage Commissions Directed Paid Paid by the Funds for For Research 1 Research 1 - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Fund 1997 1998 1999 1999 1999 - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- High Income Fund/VA $ 20,256 $ 62,251 $ 12,736 $605,887 $50 - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Bond Fund/VA $ 26,799 $ 91,170 $ 294,377 $13,530,189 $1,837 - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Strategic Bond $ 17,121 $219,537 $ 37,459 $4,409,292 $3,243 - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Aggressive Growth $810,749 $1,264,440 $1,260,968 $308,986,39 $361,679 Fund/VA - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Capital Appreciation $506,443 $805,08 $1,229,872 $499,225,91 $695,842 Fund/VA - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Small Cap Growth -- $ 829 $ 4,819 $359,409 $1,054 - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Global Securities $2,114,52 $2,900,162 $3,026,315 $773,222,45 $1,847,998 Fund/VA - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Multiple Strategies $500,783 $ 430,211 $269,657 $53,879,024 $ 104,269 Fund/VA - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Main Street Growth $209,630 $ 458,120 $1,278,160 $140,243,57 $223,423 & Income Fund/VA - ---------------------------------------------------------------------- 1. The amount of transactions directed to brokers for research services and the amount of the commissions paid to brokers for those services are shown in these columns. Distribution and Service Plans (Service Shares Only) Under its General Distributor's Agreements with the Funds, OppenheimerFunds Distributor, Inc. will only act as the principal underwriter of the Funds' Service shares. Each Fund has adopted a Distribution and Service Plan (the "Plan") for its Service shares under Rule 12b-1 of the Investment Company Act, pursuant to which each Fund will make payments to the Distributor in connection with the distribution and/or servicing of Service shares. The Distributor will pay insurance company separate account sponsors and other entities that offer and/or provide services to Service shares, as described in the Prospectus. Each Plan has been approved by a vote of (i) the Board of Trustees of the Trust, including a majority of the Independent Trustees, cast in person at a meeting called for the purpose of voting on that Plan, and (ii) the Manager as the then-sole initial holder of such shares. Prior to May 1, 2000, no Service shares have been issued and therefore no payments have been made prior to that date. Under the Plans, no payment will be made to any insurance company separate account sponsor or affiliate thereof under a Fund's Plan (each is referred to as a "Recipient") in any quarter if the aggregate net assets of a Fund's Service shares held by the Recipient for itself and its customers did not exceed a minimum amount, if any, that may be determined from time to time by a majority of the Trust's Independent Trustees. Initially, the Board of Trustees has set the fee at 0.15% of average annual net assets and set no minimum amount. Under the Plans, the Manager and the Distributor may make payments to affiliates and, in their sole discretion, from time to time may use their own resources (which, as to the Manager, may include profits derived from the advisory fee it receives from each respective Fund) to make payments to Recipients for distribution and administrative services they perform. The Distributor and the Manager may, in their sole discretion, increase or decrease the amount of distribution assistance payments they make to Recipients from their own assets. Unless terminated as described below, each Plan continues in effect from year to year but only as long as such continuance is specifically approved at least annually by the Trust's Board of Trustees and its Independent Trustees by a vote cast in person at a meeting called for the purpose of voting on such continuance. Any Plan may be terminated at any time by the vote of a majority of the Independent Trustees or by the vote of the holders of a "majority" (as defined in the Investment Company Act) of the outstanding Service shares. For purposes of voting with respect to the Plans, Account owners are considered to be shareholders of a Fund's shares. No Plan may be amended to increase materially the amount of payments to be made unless such amendment is approved by Account owners of the class affected by the amendment. All material amendments must be approved by the Board and a majority of the Independent Trustees. While the plans are in effect and Service shares are outstanding, the Treasurer of the Trust must provide separate written reports to the Trust's Board of Trustees at least quarterly describing the amount of payments and the purpose of the payment made pursuant to each Plan. These reports are subject to the review and approval of the Independent Trustees. Performance of the Funds Explanation of Performance Terminology. The Funds use a variety of terms to illustrate their investment performance. Those terms include "cumulative total return," "average annual total return," "average annual total return at net asset value" and "total return at net asset value." An explanation of how total returns are calculated is set forth below. The charts below show the Funds' performance as of the Funds' most recent fiscal year end. You can obtain current performance information by following the instructions in the prospectus for your insurance product, or by calling the Funds' Transfer Agent at 1-888-470-0861. The Funds' illustrations of their performance data in advertisements must comply with rules of the Securities and Exchange Commission. Those rules describe the types of performance data that may be used and how it is to be calculated. In general, any advertisement by a Fund of its performance data must include the average annual total returns for the advertised class of shares of that Fund. Those returns must be shown for the 1, 5 and 10-year periods (or the life of the class, if less) ending as of the most recently ended calendar quarter prior to the publication of the advertisement (or its submission for publication). No performance information is presented for any Fund's Service shares, which were not offered prior to May 1, 2000. Because Service shares are subject to an additional fee, the performance is expected to be lower for any given period. Use of standardized performance calculations enables an investor to compare the Funds' performance to the performance of other funds for the same periods. However, a number of factors should be considered before using the Funds' performance information as a basis for comparison with other investments: |_| Total returns measure the performance of a hypothetical account in a Fund over various periods and do not show the performance of each shareholder's account. Your account's performance will vary from the model performance data if you buy or sell shares during the period, or you bought your shares at a different time and price than the shares used in the model. |_| The Fund's performance does not reflect the charges deducted from an investor's separate account by the insurance company or other sponsor of that separate account, which vary from product to product. If these charges were deducted, performance will be lower than as described in the Fund's Prospectus and Statement of Additional Information. In addition, the separate accounts may have inception dates different from those of the Funds. The sponsor for your insurance product can provide performance information that reflects those charges and inception dates. |_| An investment in the Fund is not insured by the FDIC or any other government agency. |_| The Funds' performance returns do not reflect the effect of taxes on dividends and capital gains distributions. |_| The principal value of the Funds' shares and total returns are not guaranteed and normally will fluctuate on a daily basis.1 |_| When an investor's shares are redeemed, they may be worth more or less than their original cost.1 |_| Total returns for any given past period represent historical performance information and are not, and should not be considered, a prediction of future returns. The Funds' total returns should not be expected to be the same as the returns of other Oppenheimer funds, whether or not such other funds have the same portfolio managers and/or similar names. The Funds' total returns are affected by market conditions, the quality of that Funds' investments, the maturity of debt investments, the types of investments that Fund holds, and its operating expenses. |X| Total Return Information. There are different types of "total returns" to measure the Funds' performance. Total return is the change in value of a hypothetical investment in a Fund over a given period, assuming that all dividends and capital gains distributions are reinvested in additional shares and that the investment is redeemed at the end of the period. The cumulative total return measures the change in value over the entire period (for example, ten years). An average annual total return shows the average rate of return for each year in a period that would produce the cumulative total return over the entire period. However, average annual total returns do not show actual year-by-year performance. The Funds use standardized calculations for its total returns as prescribed by the SEC. The methodology is discussed below. - ----------------- 1. These statements do not apply to Money Fund/VA, which seeks to maintain a stable net asset value of $1.00 per shares. There can be no assurance that Money Fund/VA will be able to do so. |_| Average Annual Total Return. The "average annual total return" of each class is an average annual compounded rate of return for each year in a specified number of years. It is the rate of return based on the change in value of a hypothetical initial investment of $1,000 ("P" in the formula below) held for a number of years ("n" in the formula) to achieve an Ending Redeemable Value ("ERV" in the formula) of that investment, according to the following formula: 1/n ( ERV ) ( ----- ) - 1 = Average Annual Total Return ( P ) |_| Cumulative Total Return. The "cumulative total return" calculation measures the change in value of a hypothetical investment of $1,000 over an entire period of years. Its calculation uses some of the same factors as average annual total return, but it does not average the rate of return on an annual basis. Cumulative total return is determined as follows: ERV - P ------- = Total Return P The Funds' Total Returns for the Periods Ended 12/31/99 - ----------------------------------------------------------------- Average Annual Total Return For: - ----------------------------------------------------------------- - ----------------------------------------------------------------- Five Ten Cumulative Fiscal Year Year InceptiTotal Year Period Period to Return Fund Ended Ended Ended 12/31/9From 12/31/99 12/31/99 12/31/99 Inception1 to 12/31/99 - ----------------------------------------------------------------- - ----------------------------------------------------------------- High Income Fund/VA 4.29% 10.24% 12.65% 11.66% 229.17% - ----------------------------------------------------------------- - ----------------------------------------------------------------- Bond Fund/VA - 7.10% 7.76% 8.96% 111.14% 1.52% - ----------------------------------------------------------------- - ----------------------------------------------------------------- Aggressive Growth 83.60% 29.70% 20.43% 541.50% Fund/VA 19.16% - ----------------------------------------------------------------- - ----------------------------------------------------------------- Capital Appreciation 41.66% 30.65% 18.46% 17.61% 444.08% Fund/VA - ----------------------------------------------------------------- - ----------------------------------------------------------------- Multiple 11.80% 14.40% 10.83% 179.74% Strategies Fund/VA 11.59% - ----------------------------------------------------------------- - ----------------------------------------------------------------- Global Securities 58.48% 21.67% n/a 312.83% Fund/VA 16.79% - ----------------------------------------------------------------- - ----------------------------------------------------------------- Strategic Bond 2.83% 8.25% n/a 49.13% Fund/VA 6.18% - ----------------------------------------------------------------- - ----------------------------------------------------------------- Main Street Growth & 21.71% n/a n/a 25.80% 180.20% Income Fund/VA - ----------------------------------------------------------------- - ----------------------------------------------------------------- Small Cap Growth 46.56% n/a n/a Fund/VA 22.74% 40.70% - ----------------------------------------------------------------- - --------------- (1)Inception dates are as follows: 4/30/86 for High Income Fund/VA; 4/3/85 for Bond Fund/VA and Capital Appreciation Fund/VA; 8/15/86 for Aggressive Growth Fund/VA; 2/9/87 for Multiple Strategies Fund/VA; 11/12/90 for Global Securities Fund/VA; 5/3/93 for Strategic Bond Fund/VA; 7/5/95 for Main Street Growth & Income Fund/VA and 5/1/98 for Small Cap Fund./VA. For inception dates of Service shares, call 1-888-470-0861. |_| Standardized Yield. The "standardized yield" (sometimes referred to just as "yield") is shown for a stated 30-day period. It is not based on actual distributions paid by the Fixed Income Funds to shareholders in the 30-day period, but is a hypothetical yield based upon the net investment income from the Fund's portfolio investments for that period. It may therefore differ from the "dividend yield" for the same class of shares, described below. Standardized yield is calculated using the following formula set forth in rules adopted by the Securities and Exchange Commission, designed to assure uniformity in the way that all funds calculate their yields: a - b 6 Standardized Yield = 2 [ ----- + 1 ) - 1] cd The symbols above represent the following factors: a =dividends and interest earned during the 30-day period. b =expenses accrued for the period (net of any expense assumptions). c =the average daily number of shares of that class outstanding during the 30-day period that were entitled to receive dividends. d =the maximum offering price per share of that class on the last day of the period, adjusted for undistributed net investment income. The standardized yield for a particular 30-day period may differ from the yield for other periods. The SEC formula assumes that the standardized yield for a 30-day period occurs at a constant rate for a six-month period and is annualized at the end of the six-month period. Additionally, because each class of shares is subject to different expenses, it is likely that the standardized yields of the Fund's classes of shares will differ for any 30-day period. |_| Dividend Yield. The Fixed Income Funds may quote a "dividend yield" for each class of its shares. Dividend yield is based on the dividends paid on a class of shares during the actual dividend period. To calculate dividend yield, the dividends of a class declared during a stated period are added together, and the sum is multiplied by 12 (to annualize the yield) and divided by the maximum offering price on the last day of the dividend period. Because the Fixed Income Funds pay their annual dividend in March of each year, dividend yield is shown for the 30 days ended March 31, 1999. The formula is shown below: Dividend Yield = dividends paid x 12/maximum offering price (payment date) - ---------------------------------------------------------------------- Standardized Yield Dividend Yield for for the 30-Day Period the 30-Day Period Fund Ended 12/31/99 Ended 3/31/99 - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- High Income Fund/VA 11.02% 11.32% - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Bond Fund/VA 7.49% 8.64% - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Strategic Bond Fund/VA 10.05% 8.76% - ---------------------------------------------------------------------- |_| Money Fund/VA Yields. The current yield for Money Fund/VA is calculated for a seven-day period of time as follows. First, a base period return is calculated for the seven-day period by determining the net change in the value of a hypothetical pre-existing account having one share at the beginning of the seven-day period. The change includes dividends declared on the original share and dividends declared on any shares purchased with dividends on that share, but such dividends are adjusted to exclude any realized or unrealized capital gains or losses affecting the dividends declared. Next, the base period return is multiplied by 365/7 to obtain the current yield to the nearest hundredth of one percent. The compounded effective yield for a seven-day period is calculated by (1) adding 1 to the base period return (obtained as described above), (2) raising the sum to a power equal to 365 divided by 7, and (3) subtracting 1 from the result. The yield as calculated above may vary for accounts less than approximately $100 in value due to the effect of rounding off each daily dividend to the nearest full cent. The calculation of yield under either procedure described above does not take into consideration any realized or unrealized gains or losses on the Fund's portfolio securities which may affect dividends. Therefore, the return on dividends declared during a period may not be the same on an annualized basis as the yield for that period. Other Performance Comparisons. The Funds may compare their performance annually to that of an appropriate broadly-based market index in its Annual Report to shareholders. You can obtain that information by contacting the Transfer Agent at the addresses or telephone numbers shown on the cover of this Statement of Additional Information. The Funds may also compare their performance to that of other investments, including other mutual funds, or use rankings of its performance by independent ranking entities. Examples of these performance comparisons are set forth below. |X| Lipper Rankings. From time to time the Funds may publish the rankings of their performance by Lipper Analytical Services, Inc. Lipper is a widely-recognized independent mutual fund monitoring service. Lipper monitors the performance of regulated investment companies, including the Funds, and ranks their performance for various periods based on categories relating to investment styles. The Lipper performance rankings are based on total returns that include the reinvestment of capital gain distributions and income dividends but do not take sales charges or taxes into consideration. Lipper also publishes "peer-group" indices of the performance of all mutual funds in a category that it monitors and averages of the performance of the funds in particular categories. |X| Morningstar Ratings and Rankings. From time to time the star rating and ranking of the performance of separate accounts that hold Fund shares will be determined by Morningstar, an independent mutual fund monitoring service. Morningstar rates and ranks separate accounts that hold mutual funds in broad investment categories. The results may be published by or for the Funds or the separate account sponsors. Morningstar proprietary star ratings reflect historical risk-adjusted total investment return. Investment return measures one-, three-, five- and ten-year average annual total returns (depending on the inception of the separate account) in excess of 90-day U.S. Treasury bill returns after considering the fund's sales charges and expenses. Risk measures a separate account performance below 90-day U.S. Treasury bill returns. Risk and investment return are combined to produce star ratings reflecting performance relative to the average fund in a fund's category. Five stars is the highest rating (top 10% of separate accounts in a category), four stars is "above average" (next 22.5%), three stars is "average" (next 35%), two stars is "below average" (next 22.5%) and one star is "lowest" (bottom 10%). The current overall star rating is the separate account's 3-year rating or its combined 3- and 5-year rating (weighted 60%/40% respectively), or its combined 3-, 5-, and 10- year rating (weighted 40%, 30% and 30%, respectively), depending on the inception date of the separate accounts. Ratings are subject to change monthly. The total return rating of a separate account holding shares of a Fund may also be compared to that of other separate accounts in its Morningstar category, in addition to its star ratings. Those total return ratings are percentages from one percent to one hundred percent and are not risk adjusted. For example, if a separate account is in the 94th percentile, that means that 94% of the separate accounts in the same category performed better than it did. |X| Performance Rankings and Comparisons by Other Entities and Publications. From time to time the Funds may include in advertisements and sales literature performance information about the Funds cited in newspapers and other periodicals such as The New York Times, The Wall Street Journal, Barron's, or similar publications. That information may include performance quotations from other sources, including Lipper and Morningstar. The Funds' performance may be compared in publications to the performance of various market indices or other investments, and averages, performance rankings or other benchmarks prepared by recognized mutual fund statistical services. Investors may also wish to compare the returns on the Funds' shares to the return on fixed-income investments available from banks and thrift institutions. Those include certificates of deposit, ordinary interest-paying checking and savings accounts, and other forms of fixed or variable time deposits, and various other instruments such as Treasury bills. However, the Funds' returns and share price are not guaranteed or insured by the FDIC or any other agency and will fluctuate daily,1 while bank depository obligations may be insured by the FDIC and may provide fixed rates of return. Repayment of principal and payment of interest on Treasury securities is backed by the full faith and credit of the U.S. government. - ----------------- 1. These statements do not apply to Money Fund/VA, which seeks to maintain a stable net asset value of $1.00 per shares. There can be no assurance that Money Fund/VA will be able to do so. From time to time, the Funds may publish rankings or ratings of the Manager or Transfer Agent, and of the investor services provided by them to shareholders of the Oppenheimer funds, other than performance rankings of the Oppenheimer funds themselves. Those ratings or rankings of shareholder and investor services by third parties may include comparisons of their services to those provided by other mutual fund families selected by the rating or ranking services. They may be based upon the opinions of the rating or ranking service itself, using its research or judgment, or based upon surveys of investors, brokers, insurance sponsors, shareholders or others. - ------------------------------------------------------------------------------- ABOUT YOUR ACCOUNT - ------------------------------------------------------------------------------- How to Buy and Sell Shares Shares of the Funds are sold to provide benefits under variable life insurance policies and variable annuity and other insurance company separate accounts, as explained in the Funds' Prospectuses for the Funds and for the insurance product you have selected. Therefore, instructions from an investor to buy or sell shares of the Funds should be directed to the insurance sponsor for the investor's separate account, or that insurance sponsor's agent. |X| Allocation of Expenses. The Funds pay expenses related to its daily operations, such as custodian bank fees, Trustees' fees, transfer agency fees, legal fees and auditing costs. Those expenses are paid out of the Fund's assets and are not paid directly by shareholders. However, those expenses reduce the net asset value of shares, and therefore are indirectly borne by shareholders through their investment. For any Fund that has two classes of shares outstanding, the methodology for calculating the net asset value, dividends and distributions of the Fund's share classes recognizes two types of expenses. General expenses that do not pertain specifically to any one class are allocated pro rata to the shares of all classes. The allocation is based on the percentage of the Fund's total assets that is represented by the assets of each class, and then equally to each outstanding share within a given class. Such general expenses include management fees, legal, bookkeeping and audit fees, printing and mailing costs of shareholder reports, Prospectuses, Statements of Additional Information and other materials for current shareholders, fees to unaffiliated Trustees, custodian bank expenses, share issuance costs, organization and start-up costs, interest, taxes and brokerage commissions, and non-recurring expenses, such as litigation costs. Other expenses that are directly attributable to a particular class are allocated equally to each outstanding share within that class. Examples of such expenses include 12b-1 distribution and service fees of Service shares, transfer and shareholder servicing agent fees and expenses, and shareholder meeting expenses (to the extent that such expenses pertain only to a specific class). Determination of Net Asset Values Per Share. The net asset values per share of each class of shares of the Funds are determined as of the close of business of The New York Stock Exchange on each day that the Exchange is open. The calculation is done by dividing the value of the Fund's net assets attributable to a class by the number of shares of that class that are outstanding. The Exchange normally closes at 4:00 P.M., New York time, but may close earlier on some other days (for example, in case of weather emergencies or on days falling before a holiday). The Exchange's most recent annual announcement (which is subject to change) states that it will close on New Year's Day, Presidents' Day, Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It may also close on other days. Dealers other than Exchange members may conduct trading in certain securities on days on which the Exchange is closed (including weekends and U.S. holidays) or after 4:00 P.M. on a regular business day. The Funds' net asset values will not be calculated on those days, and the values of some of the Fund's portfolio securities may change significantly on those days, when shareholders may not purchase or redeem shares. Additionally, trading on European and Asian stock exchanges and over-the-counter markets normally is completed before the close of The New York Stock Exchange. Changes in the values of securities traded on foreign exchanges or markets as a result of events that occur after the prices of those securities are determined, but before the close of The New York Stock Exchange, will not be reflected in the Funds' calculation of their net asset values that day unless the Board of Trustees determines that the event is likely to effect a material change in the value of the security. The Manager may make that determination, under procedures established by the Board. |X| Securities Valuation.1 The Funds' Board of Trustees has established procedures for the valuation of the Funds' securities. In general those procedures are as follows: |_| Equity securities traded on a U.S. securities exchange or on NASDAQ are valued as follows: (1) if last sale information is regularly reported, they are valued at the last reported sale price on the principal exchange on which they are traded or on NASDAQ, as applicable, on that day, or (2) if last sale information is not available on a valuation date, they are valued at the last reported sale price preceding the valuation date if it is within the spread of the closing "bid" and "asked" prices on the valuation date or, if not, at the closing "bid" price on the valuation date. |_| Equity securities traded on a foreign securities exchange generally are valued in one of the following ways: (1) at the last sale price available to the pricing service approved by the Board of Trustees, or (2) at the mean between the "bid" and "asked" prices obtained from the principal exchange on which the security is traded or, on the basis of reasonable inquiry, from two market makers in the security. - ----------------- 1. These statements do not apply to Money Fund/VA, which seeks to maintain a stable net asset value of $1.00 per shares. There can be no assurance that Money Fund/VA will be able to do so. |_| Long-term debt securities having a remaining maturity in excess of 60 days are valued based on the mean between the "bid" and "asked" prices determined by a portfolio pricing service approved by the Funds' Board of Trustees or obtained by the Manager from two active market makers in the security on the basis of reasonable inquiry. |_| The following securities are valued at the mean between the "bid" and "asked" prices determined by a pricing service approved by the Funds' Board of Trustees or obtained by the Manager from two active market makers in the security on the basis of reasonable inquiry: (1) debt instruments that have a maturity of more than 397 days when issued, (2) debt instruments that had a maturity of 397 days or less when issued and have a remaining maturity of more than 60 days, and (3) non-money market debt instruments that had a maturity of 397 days or less when issued and which have a remaining maturity of 60 days or less. |_| The following securities are valued at cost, adjusted for amortization of premiums and accretion of discounts: (1) money market debt securities held by a non-money market fund that had a maturity of less than 397 days when issued that have a remaining maturity of 60 days or less, and (2) debt instruments held by a money market fund that have a remaining maturity of 397 days or less. |_| Securities (including restricted securities) not having readily-available market quotations are valued at fair value determined under the Board's procedures. If the Manager is unable to locate two market makers willing to give quotes, a security may be priced at the mean between the "bid" and "asked" prices provided by a single active market maker (which in certain cases may be the "bid" price if no "asked" price is available). In the case of U.S. government securities, mortgage-backed securities, corporate bonds and foreign government securities, when last sale information is not generally available, the Manager may use pricing services approved by the Board of Trustees. The pricing service may use "matrix" comparisons to the prices for comparable instruments on the basis of quality, yield, and maturity. Other special factors may be involved (such as the tax-exempt status of the interest paid by municipal securities). The Manager will monitor the accuracy of the pricing services. That monitoring may include comparing prices used for portfolio valuation to actual sales prices of selected securities. The closing prices in the London foreign exchange market on a particular business day that are provided to the Manager by a bank, dealer or pricing service that the Manager has determined to be reliable are used to value foreign currency, including forward contracts, and to convert to U.S. dollars securities that are denominated in foreign currency. Puts, calls, and futures are valued at the last sale price on the principal exchange on which they are traded or on NASDAQ, as applicable, as determined by a pricing service approved by the Board of Trustees or by the Manager. If there were no sales that day, they shall be valued at the last sale price on the preceding trading day if it is within the spread of the closing "bid" and "asked" prices on the principal exchange or on NASDAQ on the valuation date. If not, the value shall be the closing bid price on the principal exchange or on NASDAQ on the valuation date. If the put, call or future is not traded on an exchange or on NASDAQ, it shall be valued by the mean between "bid" and "asked" prices obtained by the Manager from two active market makers. In certain cases that may be at the "bid" price if no "asked" price is available. When a Fund writes an option, an amount equal to the premium received is included in that Fund's Statement of Assets and Liabilities as an asset. An equivalent credit is included in the liability section. The credit is adjusted ("marked-to-market") to reflect the current market value of the option. In determining the Fund's gain on investments, if a call or put written by a Fund is exercised, the proceeds are increased by the premium received. If a call or put written by a Fund expires, that Fund has a gain in the amount of the premium. If that Fund enters into a closing purchase transaction, it will have a gain or loss, depending on whether the premium received was more or less than the cost of the closing transaction. If a Fund exercises a put it holds, the amount that Fund receives on its sale of the underlying investment is reduced by the amount of premium paid by the Fund. Money Fund/VA Net Asset Valuation Per Share. Money Fund/VA will seek to maintain a net asset value of $1.00 per share for purchases and redemptions. There can be no assurance it will do so. Money Fund/VA operates under Rule 2a-7 under which it may use the amortized cost method of valuing their shares. The Funds' Board of Trustees has adopted procedures for that purpose. The amortized cost method values a security initially at its cost and thereafter assumes a constant amortization of any premium or accretion of any discount, regardless of the impact of fluctuating interest rates on the market value of the security. This method does not take into account unrealized capital gains or losses. The Funds' Board of Trustees has established procedures intended to stabilize Money Fund/VA's net asset value at $1.00 per share. If Money Fund/VA's net asset value per share were to deviate from $1.00 by more than 0.5%, Rule 2a-7 requires the Board promptly to consider what action, if any, should be taken. If the Trustees find that the extent of any such deviation may result in material dilution or other unfair effects on shareholders, the Board will take whatever steps it considers appropriate to eliminate or reduce such dilution or unfair effects, including, without limitation, selling portfolio securities prior to maturity, shortening the average portfolio maturity, withholding or reducing dividends, reducing the outstanding number of shares of that Fund without monetary consideration, or calculating net asset value per share by using available market quotations. As long as Money Fund/VA uses Rule 2a-7, it must abide by certain conditions described in the Prospectus which limit the maturity of securities that Fund buys. Under Rule 2a-7, the maturity of an instrument is generally considered to be its stated maturity (or in the case of an instrument called for redemption, the date on which the redemption payment must be made), with special exceptions for certain variable rate demand and floating rate instruments. Repurchase agreements and securities loan agreements are, in general, treated as having maturity equal to the period scheduled until repurchase or return, or if subject to demand, equal to the notice period. While amortized cost method provides certainty in valuation, there may be periods during which the value of an instrument, as determined by amortized cost, is higher or lower than the price Money Fund/VA would receive if it sold the instrument. During periods of declining interest rates, the daily yield on shares of that Fund may tend to be lower (and net investment income and daily dividends higher) than market prices or estimates of market prices for its portfolio. Thus, if the use of amortized cost by the funds resulted in a lower aggregate portfolio value on a particular day, a prospective investor in Money Fund/VA would be able to obtain a somewhat higher yield than would result from investment in a fund utilizing solely market values, and existing investors in that Fund would receive less investment income than if Money Fund/VA were priced at market value. Conversely, during periods of rising interest rates, the daily yield on shares of that Fund will tend to be higher and its aggregate value lower than that of a portfolio priced at market value. A prospective investor would receive a lower yield than from an investment in a portfolio priced at market value, while existing investors in Money Fund/VA would receive more investment income than if that Fund were priced at market value. Dividends, Capital Gains and Taxes Dividends and Distributions. The dividends and distributions paid by a class of shares will vary from time to time depending on market conditions, the composition of the Funds' portfolios, and expenses borne by the Funds or borne separately by a class (if more than one class of shares are outstanding). Dividends are calculated in the same manner, at the same time, and on the same day for each class of shares. Dividends on Service shares are expected to be lower. That is because of the effect of the additional fee on Service shares. Those dividends will also differ in amount as a consequence of any difference in the net asset values of the different classes of shares. Tax Status of the Fund's Dividends and Distributions. The federal tax treatment of the Funds' dividends and capital gains distributions is briefly highlighted in the Prospectus, and may also be explained in the prospectus for the insurance product you have selected. The Funds intend to qualify as a "regulated investment company" under the Internal Revenue Code (although it reserves the right not to qualify). If the Funds qualify as "regulated investment companies" under the Internal Revenue Code, they will not be liable for federal income taxes on amounts paid by it as dividends and distributions. The Funds qualified as regulated investment companies in its last fiscal year. The Internal Revenue Code contains a number of complex tests relating to qualification which the Funds might not meet in any particular year. If it did not so qualify, the Funds would be treated for tax purposes as an ordinary corporation and receive no tax deduction for payments made to shareholders. Additional Information About the Funds The Transfer Agent. OppenheimerFunds Services, Inc., the Fund's Transfer Agent, is a division of the Manager. It is responsible for maintaining the Fund's shareholder registry and shareholder accounting records, and for paying dividends and distributions to shareholders of record (the participating insurance companies that hold shares in their separate accounts). It also handles administrative functions. It acts on an "at-cost" basis. It also acts as shareholder servicing agent for the other Oppenheimer funds. Contract owners should refer inquiries about their accounts as directed by the instructions in the prospectus of their insurance product. The Custodian Bank. The Bank of New York is the custodian bank for the Funds' assets. The custodian bank's responsibilities include safeguarding and controlling the Fund's portfolio securities and handling the delivery of such securities to and from the Funds. It will be the practice of the Funds to deal with the custodian bank in a manner uninfluenced by any banking relationship the custodian bank may have with the Manager and its affiliates. The Funds' cash balances with the custodian bank in excess of $100,000 are not protected by Federal deposit insurance. Those uninsured balances at times may be substantial. Independent Auditors. Deloitte & Touche LLP are the independent auditors of the Funds. They audit the Funds' financial statements and perform other related audit services. They also act as auditors for certain other funds advised by the Manager and its affiliates. - -------------------------------------------------------------------------------- Independent Auditors' Report - -------------------------------------------------------------------------------- ================================================================================ To the Board of Trustees and Shareholders of Oppenheimer Money Fund/VA: We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Oppeneheimer Money Fund/VA (which is a series of Oppenheimer Variable Account Funds) as of December 31, 1999, the related statement of operations for the year then ended, the statements of changes in net assets for the years ended December 31, 1999 and 1998 and the financial highlights for the period January 1, 1995, to December 31, 1999. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Oppenheimer Money Fund/VA as of December 31, 1999, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP - -------------------------- Deloitte & Touche LLP Denver, Colorado January 24, 2000 - -------------------------------------------------------------------------------- Statement of Investments December 31, 1999 - --------------------------------------------------------------------------------
Principal Value Amount Note 1 ================================================================================================================================ Direct Bank Obligations--5.4% - -------------------------------------------------------------------------------------------------------------------------------- Bank of America NA: 6.12%, 1/6/00 $2,000,000 $ 2,000,000 - -------------------------------------------------------------------------------------------------------------------------------- Dresdner Bank AG: 6.09%, 1/5/00 4,000,000 4,000,004 - -------------------------------------------------------------------------------------------------------------------------------- U.S. Bank NA Minneapolis: 5.96%, 3/22/00(1) 5,000,000 5,000,000 ----------- Total Direct Bank Obligations 11,000,004 ================================================================================================================================ Letters of Credit--2.5% - -------------------------------------------------------------------------------------------------------------------------------- Dresdner Bank AG, guaranteeing commercial paper of Louis Dreyfus Corp., Series DR2: 6.85%, 1/18/00 5,000,000 4,983,826 ================================================================================================================================ Short-Term Notes--91.3% - -------------------------------------------------------------------------------------------------------------------------------- Aerospace/Defense--2.5% British Aerospace North America, Inc.: 6.14%, 3/10/00(1) 5,000,000 4,941,158 - -------------------------------------------------------------------------------------------------------------------------------- Asset-Backed--22.3% Asset Backed Capital Finance, Inc.: 6.05%, 1/18/00(1) 5,000,000 4,985,715 - -------------------------------------------------------------------------------------------------------------------------------- Asset-Securitization Cooperative: 5.82%, 2/24/00(1) 4,000,000 3,965,080 - -------------------------------------------------------------------------------------------------------------------------------- Beta Finance, Inc.: 5.73%, 2/10/00(1) 5,000,000 4,968,167 - -------------------------------------------------------------------------------------------------------------------------------- Breeds Hill Capital Co. LLC, Series A: 5.91%, 3/16/00(1) 4,418,000 4,363,603 - -------------------------------------------------------------------------------------------------------------------------------- Cooperative Assn. of Tractor Dealers, Inc., Series A: 5.85%, 3/17/00 2,500,000 2,469,125 - -------------------------------------------------------------------------------------------------------------------------------- Cooperative Assn. of Tractor Dealers, Inc., Series B: 6.17%, 3/15/00 2,100,000 2,073,366 - -------------------------------------------------------------------------------------------------------------------------------- Eureka Securitization, Inc.: 5.98%, 1/28/00(1) 3,700,000 3,683,295 - -------------------------------------------------------------------------------------------------------------------------------- Lexington Parker Capital Co. LLC: 5.92%, 3/17/00(1) 5,000,000 4,936,139 - -------------------------------------------------------------------------------------------------------------------------------- Moat Funding LLC: 6.35%, 1/14/00(1) 3,500,000 3,491,974 - -------------------------------------------------------------------------------------------------------------------------------- Preferred Receivables Funding Corp.: 5.88%, 2/29/00(1) 5,000,000 4,951,817 - -------------------------------------------------------------------------------------------------------------------------------- Sigma Finance, Inc.: 6.07%, 1/21/00(1) 5,000,000 4,983,139 ----------- 44,871,420 - -------------------------------------------------------------------------------------------------------------------------------- Automotive--3.7% BMW US Capital Corp.: 6.01%, 3/21/00 7,500,000 7,399,833 Oppenheimer Money Fund/VA 3 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- Principal Value Amount Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Banks--2.5% First Chicago Financial Corp.: 5.79%, 1/20/00(1) $5,000,000 $ 4,984,721 - -------------------------------------------------------------------------------------------------------------------------------- Beverages--1.2% Coca-Cola Enterprises, Inc.: 5.47%, 1/28/00(1) 2,500,000 2,489,744 - -------------------------------------------------------------------------------------------------------------------------------- Broker/Dealers--15.4% Banc of America Securities LLC: 5.95%, 1/3/00(2) 5,000,000 5,000,000 - -------------------------------------------------------------------------------------------------------------------------------- Bear Stearns Cos., Inc.: 5.83%, 1/11/00 3,500,000 3,494,332 - -------------------------------------------------------------------------------------------------------------------------------- Goldman Sachs Group LP: 5.60%, 1/27/00 3,000,000 2,987,867 - -------------------------------------------------------------------------------------------------------------------------------- Merrill Lynch & Co., Inc.: 5.85%, 2/7/00 3,000,000 2,981,963 6%, 1/31/00 2,600,000 2,586,827 - -------------------------------------------------------------------------------------------------------------------------------- Morgan Stanley, Dean Witter & Co.: 4.50%, 6/8/00(2) 3,500,000 3,500,000 5.79%, 2/28/00 4,400,000 4,358,955 - -------------------------------------------------------------------------------------------------------------------------------- Salomon Smith Barney Holdings, Inc.: 5.44%, 1/26/00 6,000,000 5,975,875 ----------- 30,885,819 - -------------------------------------------------------------------------------------------------------------------------------- Building Materials--2.4% Compagnie de Saint-Gobain: 5.80%, 3/27/00(1) 5,000,000 4,930,722 - -------------------------------------------------------------------------------------------------------------------------------- Commercial Finance--5.9% Caterpillar Financial Services Corp.: 6.10%, 4/3/00 6,000,000 5,905,450 - -------------------------------------------------------------------------------------------------------------------------------- Heller Financial, Inc., Series H: 6.33%, 6/1/00(2) 1,000,000 1,000,341 - -------------------------------------------------------------------------------------------------------------------------------- Homeside Lending, Inc.: 5.86%, 2/3/00 5,000,000 4,973,142 ----------- 11,878,933 - -------------------------------------------------------------------------------------------------------------------------------- Consumer Services--3.7% Prudential Funding Corp.: 5.79%, 1/26/00 4,500,000 4,481,906 6.07%, 1/10/00 3,000,000 2,995,448 ----------- 7,477,354 - -------------------------------------------------------------------------------------------------------------------------------- Diversified Financial--6.9% Associates Corp. of North America: 4%, 1/3/00 6,000,000 5,998,667 - -------------------------------------------------------------------------------------------------------------------------------- General Motors Acceptance Corp.: 5.99%, 1/26/00 8,000,000 7,966,722 ----------- 13,965,389 4 Oppenheimer Money Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- Principal Value Amount Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Insurance--12.2% AIG Life Insurance Co.: 6.476%, 5/31/00(2)(3) $3,000,000 $ 3,000,000 - -------------------------------------------------------------------------------------------------------------------------------- Marsh U.S.A., Inc.: 5.60%, 1/26/00(1) 6,000,000 5,976,667 - -------------------------------------------------------------------------------------------------------------------------------- Metropolitan Life Insurance Co.: 5.839%, 1/3/00(2) 3,500,000 3,500,000 - -------------------------------------------------------------------------------------------------------------------------------- Pacific Mutual Life Insurance Co.: 5.53%, 2/14/00(2)(3) 5,000,000 5,000,000 - -------------------------------------------------------------------------------------------------------------------------------- Protective Life Insurance Co.: 5.658%, 6/1/00(2) 5,000,000 5,000,000 - -------------------------------------------------------------------------------------------------------------------------------- Travelers Insurance Co.: 5.608%, 9/16/00(2)(3) 2,000,000 2,000,000 ------------ 24,476,667 - -------------------------------------------------------------------------------------------------------------------------------- Manufacturing--2.2% Eaton Corp.: 5.95%, 1/31/00(1) 4,400,000 4,378,183 - -------------------------------------------------------------------------------------------------------------------------------- Nondurable Household Goods--4.5% Newell Co.: 5%, 1/7/00(1) 9,000,000 8,992,500 - -------------------------------------------------------------------------------------------------------------------------------- Special Purpose Financial--3.9% KZH-KMS Corp.: 5.83%, 3/29/00(1) 5,000,000 4,928,744 5.86%, 4/6/00(1) 3,000,000 2,953,120 ------------ 7,881,864 - -------------------------------------------------------------------------------------------------------------------------------- Telecommunications: Technology--2.0% GTE Corp.: 6.155%, 6/12/00(2) 4,000,000 3,998,853 ------------ Total Short-Term Notes 183,553,160 - -------------------------------------------------------------------------------------------------------------------------------- Total Investments, at Value 99.2% 199,536,990 - -------------------------------------------------------------------------------------------------------------------------------- Other Assets Net of Liabilities 0.8 1,528,667 ---------- ------------ Net Assets 100.0% $201,065,657 ========== ============
Short-term notes, direct bank obligations and letters of credit are generally traded on a discount basis; the interest rate is the discount rate received by the Fund at the time of purchase. 1. Security issued in an exempt transaction without registration under the Securities Act of 1933. Such securities amount to $89,904,488, or 44.71% of the Fund's net assets, and have been determined to be liquid pursuant to guidelines adopted by the Board of Trustees. 2. Represents the current interest rate for a variable rate security. 3. Represents a restricted security which is considered illiquid, by virtue of the absence of a readily available market or because of legal or contractual restrictions on resale. Such securities amount to $10,000,000, or 4.97% of the Fund's net assets. The Fund may not invest more than 10% of its net assets (determined at the time of purchase) in illiquid securities. See accompanying Notes to Financial Statements. Oppenheimer Money Fund/VA 5 - -------------------------------------------------------------------------------- Statement of Assets and Liabilities December 31, 1999 - -------------------------------------------------------------------------------- ================================================================================================ Assets Investments, at value--see accompanying statement $199,536,990 - ------------------------------------------------------------------------------------------------ Cash 1,523,358 - ------------------------------------------------------------------------------------------------ Receivables and other assets: Shares of beneficial interest sold 1,013,551 Interest 278,529 Other 3,889 ------------ Total assets 202,356,317 ================================================================================================ Liabilities Payables and other liabilities: Dividends 430,915 Shares of beneficial interest redeemed 826,738 Trustees' compensation 235 Transfer and shareholder servicing agent fees 187 Other 32,585 ------------ Total liabilities 1,290,660 ================================================================================================ Net Assets $201,065,657 ============ ================================================================================================ Composition of Net Assets Paid-in capital $201,082,465 - ------------------------------------------------------------------------------------------------ Accumulated net realized loss on investment transactions (16,808) ------------ Net assets--applicable to 201,082,486 shares of beneficial interest outstanding $201,065,657 ============ ================================================================================================ Net Asset Value, Redemption Price and Offering Price Per Share $1.00
See accompanying Notes to Financial Statements. Oppenheimer Money Fund/VA - -------------------------------------------------------------------------------- Statement of Operations For the Year Ended December 31, 1999 - -------------------------------------------------------------------------------- ===================================================================== Investment Income Interest $8,907,818 ===================================================================== Expenses Management fees 749,665 - --------------------------------------------------------------------- Custodian fees and expenses 9,011 - --------------------------------------------------------------------- Trustees' compensation 2,226 - --------------------------------------------------------------------- Transfer and shareholder servicing agent fees 2,110 - --------------------------------------------------------------------- Other 32,014 ---------- Total expenses 795,026 Less expenses paid indirectly (4,083) ---------- Net expenses 790,943 ===================================================================== Net Investment Income 8,116,875 ===================================================================== Net Realized Gain on Investments 1,540 ===================================================================== Net Increase in Net Assets Resulting from Operations $8,118,415 ==========
See accompanying Notes to Financial Statements. Oppenheimer Money Fund/VA 7 - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 ============================================================================================================== Operations Net investment income $ 8,116,875 $ 7,050,032 - -------------------------------------------------------------------------------------------------------------- Net realized gain 1,540 9,101 ------------ ------------ Net increase in net assets resulting from operations 8,118,415 7,059,133 ============================================================================================================== Dividends and/or Distributions to Shareholders (8,128,189) (7,050,032) ============================================================================================================== Beneficial Interest Transactions Net increase in net assets resulting from beneficial interest transactions 49,276,631 25,007,317 ============================================================================================================== Net Assets Total increase 49,266,857 25,016,418 - -------------------------------------------------------------------------------------------------------------- Beginning of period 151,798,800 126,782,382 ------------ ------------ End of period (including undistributed net investment income of $11,314 for the year ended December 31, 1998) $201,065,657 $151,798,800 ============ ============
See accompanying Notes to Financial Statements. 8 Oppenheimer Money Fund/VA - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995 ==================================================================================================================== Per Share Operating Data Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 - -------------------------------------------------------------------------------------------------------------------- Income from investment operations--net investment income and net realized gain .05 .05 .05 .05 .06 Dividends and/or distributions to shareholders (.05) (.05) (.05) (.05) (.06) - -------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 ===== ===== ===== ===== ===== ==================================================================================================================== Total Return(1) 4.96% 5.25% 5.31% 5.13% 5.62% ==================================================================================================================== Ratios/Supplemental Data Net assets, end of period (in thousands) $201,066 $151,799 $126,782 $129,719 $65,386 - -------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $166,727 $137,633 $133,707 $ 99,263 $75,136 - -------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:(2) Net investment income 4.87% 5.12% 5.19% 5.01% 5.52% Expenses 0.48% 0.50%(3) 0.48%(3) 0.49%(3) 0.51%(3)
1. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns reflect changes in net investment income only. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 2. Annualized for periods less than one full year. 3. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. See accompanying Notes to Financial Statements. Oppenheimer Money Fund/VA 9 - -------------------------------------------------------------------------------- Notes to Financial Statements - -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies Oppenheimer Money Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds (the Trust), a diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek the maximum current income from investment in money market securities consistent with low capital risk and the maintenance of liquidity. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The following is a summary of significant accounting policies consistently followed by the Fund. - -------------------------------------------------------------------------------- Securities Valuation. Portfolio securities are valued on the basis of amortized cost, which approximates market value. - -------------------------------------------------------------------------------- Repurchase Agreements. The Fund requires the custodian to take possession, to have legally segregated in the Federal Reserve Book Entry System or to have segregated within the custodian's vault, all securities held as collateral for repurchase agreements. The market value of the underlying securities is required to be at least 102% of the resale price at the time of purchase. If the seller of the agreement defaults and the value of the collateral declines, or if the seller enters an insolvency proceeding, realization of the value of the collateral by the Fund may be delayed or limited. - -------------------------------------------------------------------------------- Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to shareholders. - -------------------------------------------------------------------------------- Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. - -------------------------------------------------------------------------------- Expense Offset Arrangements. Expenses paid indirectly represent a reduction of custodian fees for earnings on cash balances maintained by the Fund. - -------------------------------------------------------------------------------- Other. Investment transactions are accounted for as of trade date. Realized gains and losses on investments are determined on an identified cost basis, which is the same basis used for federal income tax purposes. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 10 Oppenheimer Money Fund/VA - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of no par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:
Year Ended December 31, 1999 Year Ended December 31, 1998 ------------------------------- ------------------------------ Shares Amount Shares Amount - -------------------------------------------------------------------------------------------------------------------- Sold 381,258,296 $ 381,258,296 318,160,993 $ 318,160,993 Dividends and/or distributions reinvested 7,983,593 7,983,593 7,008,382 7,008,382 Redeemed (339,965,258) (339,965,258) (300,162,058) (300,162,058) ------------ ------------- ------------ ------------- Net increase 49,276,631 $ 49,276,631 25,007,317 $ 25,007,317 ============ ============= ============ =============
================================================================================ 3. Management Fees and Other Transactions with Affiliates Management Fees. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund which provides for a fee of 0.45% of the first $500 million of average annual net assets, 0.425% of the next $500 million, 0.40% of the next $500 million and 0.375% of average annual net assets in excess of $1.5 billion. The Fund's management fee for the year ended December 31, 1999, was 0.45% of average annual net assets. - -------------------------------------------------------------------------------- Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, is the transfer agent for the Fund and is responsible for maintaining the shareholder registry and shareholder accounting records for the Fund. OFS provides these services for cost. Oppenheimer Bond Fund/VA - -------------------------------------------------------------------------------- Independent Auditors' Report - -------------------------------------------------------------------------------- ================================================================================ To the Board of Trustees and Shareholders of Oppenheimer Bond Fund/VA: We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Oppenheimer Bond Fund/VA (which is a series of Oppenheimer Variable Account Funds) as of December 31, 1999, the related statement of operations for the year then ended, the statements of changes in net assets for the years ended December 31, 1999 and 1998, and the financial highlights for the period January 1, 1995 to December 31, 1999. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Oppenheimer Bond Fund/VA as of December 31, 1999, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Deloitte & Touche LLP Denver, Colorado January 24, 2000 - -------------------------------------------------------------------------------- Statement of Investments December 31, 1999 - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 =================================================================================================================== Mortgage-Backed Obligations--33.2% Government Agency--11.7% - ------------------------------------------------------------------------------------------------------------------- FHLMC/FNMA/Sponsored--10.6% Federal Home Loan Mortgage Corp., Collateralized Mtg. Obligations, Gtd. Multiclass Mtg. Participation Certificates: Series 151, Cl. F, 9%, 5/15/21 $ 528,711 $ 546,223 Series 1092, Cl. K, 8.50%, 6/15/21 1,988,407 2,031,278 Series 1541, Cl. H, 7%, 10/15/22 4,750,000 4,626,785 Series 1714, Cl. M, 7%, 8/15/23 2,000,000 1,945,000 - ------------------------------------------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., Gtd. Multiclass Mtg. Participation Certificates, 7%, 4/1/26 3,071,879 2,980,676 - ------------------------------------------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security: Series 197, Cl. IO, 11.419%, 4/1/28(2) 13,692,632 4,483,267 Series 194, Cl. IO, 10.159%, 4/1/28(2) 15,300,874 5,115,035 Series 202, Cl. IO, 10.086%-10.125%, 4/1/29(2) 48,541,614 16,678,595 Series 2178, Cl. PI, 10.359%, 8/15/29(2) 25,675,000 6,137,930 - ------------------------------------------------------------------------------------------------------------------- Federal National Mortgage Assn.: 6.50%, 3/1/11 502,929 488,888 7%, 4/1/04-11/1/25 691,754 672,422 7.50%, 1/1/08-1/1/26 2,153,288 2,137,694 8%, 5/1/17 116,584 118,357 - ------------------------------------------------------------------------------------------------------------------- Federal National Mortgage Assn., Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, 8.75%, 11/25/05 1,262,358 1,291,153 - ------------------------------------------------------------------------------------------------------------------- Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Trust 1989-17, Cl. E, 10.40%, 4/25/19 610,095 648,416 - ------------------------------------------------------------------------------------------------------------------- Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security, Trust 294, Cl. 2, 10.581%-16.633%, 2/1/28(2) 41,634,511 13,693,852 ----------- 63,595,571 - ------------------------------------------------------------------------------------------------------------------- GNMA/Guaranteed--1.1% Government National Mortgage Assn.: 7%, 1/15/09-5/15/09 388,328 384,321 8%, 1/15/28-9/15/28 6,372,802 6,436,535 ----------- 6,820,856 - ------------------------------------------------------------------------------------------------------------------- Private--21.5% - ------------------------------------------------------------------------------------------------------------------- Commercial--18.3% Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates: Series 1997-D5, Cl. A6, 7.186%, 2/14/41(3) 3,000,000 2,427,187 Series 1997-D5, Cl. B2, 6.93%, 2/14/41 5,400,000 3,459,375 Series 1998-MD6, Cl. A3, 7.227%, 3/17/28(3) 4,875,000 4,387,500 - ------------------------------------------------------------------------------------------------------------------- Asset Securitization Corp., Interest-Only Stripped Mtg.-Backed Security, Series 1997-D5, Cl. PS1, 9.108%, 2/14/41(2) 18,257,799 1,560,471 - ------------------------------------------------------------------------------------------------------------------- Capital Lease Funding Securitization LP, Interest-Only Stripped Mtg.-Backed Security, Series 1997-CTL1, 10.29%, 6/22/24(2)(4) 30,606,042 1,209,895 - ------------------------------------------------------------------------------------------------------------------- Commercial Mortgage Acceptance Corp., Collateralized Mtg. Obligations, Series 1996-C1, Cl. D, 7.367%, 12/25/20(3)(4) 2,500,000 2,414,844 - ------------------------------------------------------------------------------------------------------------------- Commercial Mortgage Asset Trust, Series 1999-C1, Cl. C, 7.35%, 8/17/13 9,750,000 8,921,250 - ------------------------------------------------------------------------------------------------------------------- CRIIMI MAE Trust I, Collateralized Mtg. Obligations, Series 1996-C1, Cl. A2, 7.56%, 8/30/05(5) 2,000,000 1,860,625
- -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - --------------------------------------------------------------------------------------------------------------- Commercial (continued) CRIIMI MAE Trust I, Commercial Mtg. Trust, Series 1998-C1, Cl. A1, 7%, 11/2/06(4) $ 3,300,000 $ 2,919,469 - --------------------------------------------------------------------------------------------------------------- CS First Boston Mortgage Securities Corp., Interest-Only Stripped Mtg.-Backed Security, Series 1998-C1, Cl. AX, 8.19%, 4/11/30(2) 24,745,453 1,531,125 - --------------------------------------------------------------------------------------------------------------- CS First Boston Mortgage Securities Corp., Mtg. Pass-Through Certificates, Series 1997-C2, Cl. F, 6.85%, 12/17/07 3,250,000 3,055,000 - --------------------------------------------------------------------------------------------------------------- FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates: Series 1994-C1, Cl. 2-D, 8.70%, 9/25/25 1,500,000 1,447,500 Series 1994-C1, Cl. 2-E, 8.70%, 9/25/25 1,500,000 1,461,562 - --------------------------------------------------------------------------------------------------------------- First Union-Lehman Brothers Commercial Mortgage Trust, Commercial Mtg. Pass-Through Certificates, Series 1998-C2, Cl. E, 6.778%, 5/18/13 2,000,000 1,568,750 - --------------------------------------------------------------------------------------------------------------- First Union-Lehman Brothers Commercial Mortgage Trust, Interest-Only Stripped Mtg.-Backed Security, Series 1998-C2, 9.274%, 5/18/28(2) 29,447,557 1,074,951 - --------------------------------------------------------------------------------------------------------------- General Motors Acceptance Corp., Collateralized Mtg. Obligations: Series 1997-C2, Cl. D, 7.192%, 1/15/08 3,500,000 3,062,500 Series 1998-C1, Cl. E, 7.088%, 3/15/11(3) 3,500,000 3,109,531 - --------------------------------------------------------------------------------------------------------------- General Motors Acceptance Corp., Interest-Only Stripped Mtg.-Backed Security: Series 1997-C1, Cl. X, 9.033%, 7/15/27(2) 18,165,432 1,368,084 Series 1997-C1, Cl. X, 8.553%, 7/15/27(2) 9,036,122 680,533 - --------------------------------------------------------------------------------------------------------------- GS Mortgage Securities Corp. II, Commercial Mtg. Pass-Through Certificates: Series 1997-CL1, Cl. F, 7.155%, 7/13/30(3) 1,000,000 936,875 Series 1997-CL1, Cl. F, 7.625%, 7/13/30(3) 4,000,000 3,478,750 - --------------------------------------------------------------------------------------------------------------- Lehman Brothers Commercial Conduit Mortgage Trust, Interest-Only Stripped Mtg.-Backed Security, Series 1998-C1, Cl. IO, 9.063%, 2/18/28(2)(4) 43,952,818 2,321,258 - --------------------------------------------------------------------------------------------------------------- Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-Through Certificates: Series 1996-C1, Cl. D, 7.42%, 4/25/28 2,000,000 1,900,937 Series 1997-C2, Cl. D, 7.004%, 12/10/29(3) 4,000,000 3,617,500 - --------------------------------------------------------------------------------------------------------------- Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates: Series 1996-C1, Cl. D1, 7.421%, 2/15/28(3)(4) 1,000,000 953,906 Series 1997-RR, Cl. D, 7.671%, 4/30/39(4) 4,300,231 3,020,241 Series 1997-XL1, Cl. F, 7.411%, 10/3/30(3) 2,500,000 2,246,875 - --------------------------------------------------------------------------------------------------------------- NationsCommercial Corp., NB Commercial Mtg. Pass-Through Certificates: Series DMC, Cl. B, 8.562%, 8/12/11(4) 1,600,000 1,448,500 Series DMC, Cl. C, 8.921%, 8/12/11(4) 4,400,000 3,980,625 - --------------------------------------------------------------------------------------------------------------- NC Finance Trust, Collateralized Mtg. Obligations, Series 1999-I, Cl. ECFD, 8.75%, 12/25/28 15,829,568 15,379,415 - --------------------------------------------------------------------------------------------------------------- Option One Mortgage Trust, Collateralized Mtg. Obligations: Series 1999-1A, 10.06%, 3/1/29(4) 6,155,847 6,067,357 Series 1999-3, Cl. BB, 10.80%, 12/15/29 6,261,813 6,218,764 - --------------------------------------------------------------------------------------------------------------- Potomac Gurnee Financial Corp., Commercial Mtg. Pass-Through Certificates, Series 1, Cl. C, 7.217%, 12/21/26(4) 250,000 235,000 - --------------------------------------------------------------------------------------------------------------- Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates: Series 1994-C1, Cl. C, 8%, 6/25/26 1,160,794 1,154,084 Series 1995-C1, Cl. D, 6.90%, 2/25/27 3,000,000 2,915,391 - --------------------------------------------------------------------------------------------------------------- Structured Asset Securities Corp., Multiclass Pass-Through Certificates: Series 1996-CFL, Cl. D, 7.034%, 2/25/28 1,800,000 1,769,062 Series 1999-1, 10%, 8/25/28 4,955,997 4,900,242 ------------ 110,064,934
Oppenheimer Bond Fund/VA 5 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - ------------------------------------------------------------------------------------------------------------------------ Multi-Family--0.2% Countrywide Funding Corp., Mtg. Pass-Through Certificates, Series 1993-12, Cl. B1, 6.625%, 2/25/24 $ 946,747 $ 856,215 - ------------------------------------------------------------------------------------------------------------------------ Merrill Lynch Trust, Collateralized Mtg. Obligations, Gtd. Multiclass Mtg. Participation Certificates, Series 43, Cl. E, 6.50%, 8/27/15 263,338 260,210 ------------ 1,116,425 - ------------------------------------------------------------------------------------------------------------------------ Other--0.0% Salomon Brothers Mortgage Securities VI, Interest-Only Stripped Mtg.-Backed Security, Series 1987-3, Cl. B, 20.132%, 10/23/17(2) 57,595 15,676 - ------------------------------------------------------------------------------------------------------------------------ Salomon Brothers Mortgage Securities VI, Principal-Only Stripped Mtg.-Backed Security, Series 1987-3, Cl. A, 2.377%-16.21%, 10/23/17(6) 85,230 68,877 ------------ 84,553 - ------------------------------------------------------------------------------------------------------------------------ Residential--3.0% CS First Boston Mortgage Securities Corp., Mtg. Pass-Through Certificates: Series 1997-C1, Cl. E, 7.50%, 3/1/11(4) 5,006,000 4,076,761 Series 1999-C1, Cl. C, 7.682%, 9/15/09(3) 6,500,000 6,382,187 - ------------------------------------------------------------------------------------------------------------------------ First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates, Series 1997-CHL1, Cl. C, 8.127%, 7/25/06(3)(4) 4,024,000 3,621,600 - ------------------------------------------------------------------------------------------------------------------------ Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates, Series 1997-HF1, Cl. E, 7.55%, 7/15/29(4) 1,500,000 1,365,938 - ------------------------------------------------------------------------------------------------------------------------ NationsBank Trust, Lease Pass-Through Certificates, Series 1997A-1, 7.442%, 1/10/11(3) 2,500,000 2,389,063 - ------------------------------------------------------------------------------------------------------------------------ Ryland Mortgage Securities Corp. III, Sub. Bonds, Series 1992-A, Cl. 1A, 8.259%, 3/29/30(3) 204,852 201,908 ------------ 18,037,457 ------------ Total Mortgage-Backed Obligations (Cost $207,143,112) 199,719,796 ======================================================================================================================== U.S. Government Obligations--6.1% - ------------------------------------------------------------------------------------------------------------------------ U.S. Treasury Bonds, 5.25%, 2/15/29 3,705,000 3,065,887 - ------------------------------------------------------------------------------------------------------------------------ U.S. Treasury Nts., 5.875%, 8/15/09(7)(8) 34,550,000 33,481,127 ------------ Total U.S. Government Obligations (Cost $37,315,504) 36,547,014 ======================================================================================================================== Foreign Government Obligations--1.5% - ------------------------------------------------------------------------------------------------------------------------ Israel (State of) Bonds, 7.25%, 12/15/28 9,750,000 8,387,204 - ------------------------------------------------------------------------------------------------------------------------ Ontario, Canada (Province of) Bonds, 8%, 10/17/01 750,000 765,382 - ------------------------------------------------------------------------------------------------------------------------ PT Hutama Karya Medium-Term Nts., Zero Coupon, 3/17/99(4)(9)(10)IDR 1,000,000,000 39,356 ------------ Total Foreign Government Obligations (Cost $10,234,242) 9,191,942 ======================================================================================================================== Loan Participations--0.6% - ------------------------------------------------------------------------------------------------------------------------ Ferrell Companies, Inc., 10.18% Sr. Sec. Nts., 7/17/06(3)(4) (Cost $3,270,429) 3,300,000 3,283,500 ======================================================================================================================== Corporate Bonds and Notes--51.8% - ------------------------------------------------------------------------------------------------------------------------ Aerospace/Defense--0.6% Amtran, Inc., 9.625% Nts., 12/15/05 800,000 772,000 - ------------------------------------------------------------------------------------------------------------------------ Atlas Air, Inc.: 8.01% Nts., 1/2/10 2,812,199 2,642,582 9.375% Sr. Unsec. Nts., 11/15/06 500,000 485,000 ------------ 3,899,582
6 Oppenheimer Bond Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - --------------------------------------------------------------------------------------------------------- Chemicals--1.0% ClimaChem, Inc., 10.75% Sr. Unsec. Nts., Series B, 12/1/07 $ 300,000 $ 76,500 - --------------------------------------------------------------------------------------------------------- Equistar Chemicals LP, 7.55% Unsec. Debs., 2/15/06 3,250,000 2,641,236 - --------------------------------------------------------------------------------------------------------- Huntsman Corp./ICI Chemical Co. plc, 10.125% Sr. Unsec. Sub. Nts., 7/1/09(5) 800,000 832,000 - --------------------------------------------------------------------------------------------------------- Lyondell Chemical Co., 9.875% Sec. Nts., Series B, 5/1/07 1,000,000 1,025,000 - --------------------------------------------------------------------------------------------------------- Sterling Chemicals, Inc., 12.375% Sr. Sec. Nts., Series B, 7/15/06 400,000 416,000 - --------------------------------------------------------------------------------------------------------- ZSC Specialty Chemical plc, 11% Sr. Nts., 7/1/09(5) 800,000 834,000 ----------- 5,824,736 - --------------------------------------------------------------------------------------------------------- Consumer Non-Durables--0.2% AKI Holdings, Inc., 10.50% Sr. Unsec. Nts., 7/1/08 300,000 268,500 - --------------------------------------------------------------------------------------------------------- Bell Sports, Inc., 11% Sr. Unsec. Sub. Nts., Series B, 8/15/08 210,000 211,050 - --------------------------------------------------------------------------------------------------------- Fruit of the Loom, Inc., 8.875% Sr. Unsec. Nts., 4/15/06(10) 100,000 5,500 - --------------------------------------------------------------------------------------------------------- Revlon Consumer Products Corp., 9% Sr. Nts., 11/1/06 500,000 377,500 - --------------------------------------------------------------------------------------------------------- Styling Technology Corp., 10.875% Sr. Unsec. Sub. Nts., 7/1/08(4) 360,000 127,800 ----------- 990,350 - --------------------------------------------------------------------------------------------------------- Energy--1.8% Colorado Interstate Gas Corp., 10% Sr. Debs., 6/15/05 500,000 552,649 - --------------------------------------------------------------------------------------------------------- Eastern Energy Ltd., 6.75% Sr. Nts., 12/1/06(5) 2,000,000 1,858,902 - --------------------------------------------------------------------------------------------------------- Enron Corp., 9.875% Debs., 6/15/03 375,000 402,221 - --------------------------------------------------------------------------------------------------------- Gothic Production Corp., 11.125% Sr. Sec. Nts., Series B, 5/1/05(5) 300,000 256,500 - --------------------------------------------------------------------------------------------------------- Gulf Canada Resources Ltd., 8.375% Sr. Nts., 11/15/05 500,000 487,500 - --------------------------------------------------------------------------------------------------------- HNG Internorth/Enron Corp., 9.625% Debs., 3/15/06 500,000 539,416 - --------------------------------------------------------------------------------------------------------- McDermott, Inc., 9.375% Nts., 3/15/02 400,000 409,221 - --------------------------------------------------------------------------------------------------------- Mitchell Energy & Development Corp., 9.25% Sr. Nts., 1/15/02 55,000 56,227 - --------------------------------------------------------------------------------------------------------- Murphy Oil Corp., 7.05% Sr. Unsec. Nts., 5/1/29 5,190,000 4,667,912 - --------------------------------------------------------------------------------------------------------- Ocean Rig Norway AS, 10.25% Sr. Sec. Nts., 6/1/08 400,000 334,000 - --------------------------------------------------------------------------------------------------------- RBF Finance Co., 11% Sr. Sec. Nts., 3/15/06 455,000 486,850 - --------------------------------------------------------------------------------------------------------- Texaco Capital, Inc., 8.875% Gtd. Debs., 9/1/21(11) 500,000 556,443 ----------- 10,607,841 - --------------------------------------------------------------------------------------------------------- Financial--26.1% Aeltus CBO II Ltd./Aeltus CBO II Corp., 7.982% Sr. Sec. Sub. Bonds, 8/6/09(5) 5,000,000 4,632,350 - --------------------------------------------------------------------------------------------------------- Astoria Capital Trust I, 9.75% Gtd. Nts., 11/1/29(5) 3,250,000 3,220,480 - --------------------------------------------------------------------------------------------------------- BHP Finance USA Ltd., 7.25% Nts., 3/1/16 6,500,000 5,848,804 - --------------------------------------------------------------------------------------------------------- Chase Manhattan Corp., 10.125% Sub. Nts., 11/1/00 750,000 770,051 - --------------------------------------------------------------------------------------------------------- Conseco, Inc., 9% Unsec. Nts., 10/15/06 19,500,000 20,221,617 - --------------------------------------------------------------------------------------------------------- Dresdner Funding Trust II, 8.151% Nts., 6/30/31(5) 13,080,000 12,348,135 - --------------------------------------------------------------------------------------------------------- EOP Operating LP, 7.50% Sr. Nts., 4/19/29 7,800,000 6,846,598 - --------------------------------------------------------------------------------------------------------- HVB Fund Trust III, 9% Bonds, 10/22/31(5) 6,500,000 6,524,323 - --------------------------------------------------------------------------------------------------------- KBC Bank Fund Trust III, 9.86% Bonds, 11/29/49(3)(5) 13,000,000 13,477,711 - --------------------------------------------------------------------------------------------------------- Keycorp Capital III, 7.75% Nts., 7/15/29 6,500,000 6,073,041 - --------------------------------------------------------------------------------------------------------- Lehman Brothers Holdings, Inc.: 7.875% Sr. Nts., 11/1/09 8,450,000 8,447,533 8.80% Sr. Nts., 3/1/15 3,250,000 3,413,946 - --------------------------------------------------------------------------------------------------------- Liberty Financial Co., 7.625% Unsec. Debs., 11/15/28 6,500,000 5,950,002 - --------------------------------------------------------------------------------------------------------- Liberty Mutual Insurance Co., 7.697% Unsec. Nts., 10/15/2097(5) 19,000,000 15,927,016
Oppenheimer Bond Fund/VA 7 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------- Financial (continued) Nordbanken AB, 8.95% Bonds, 11/29/49(3)(5) $ 16,250,000 $ 16,019,282 - -------------------------------------------------------------------------------------------------------- Rothmans Nederland Holdings BV, 6.875% Sr. Unsec. Unsub. Nts., 5/6/08 13,750,000 12,399,750 - -------------------------------------------------------------------------------------------------------- Safeco Capital Trust I, 8.072% Nts., 7/15/37(11) 7,429,000 6,554,503 - -------------------------------------------------------------------------------------------------------- Standard Chartered Nakornthon Bank, 6.734% Unsec. Sub. Nts., 6/11/06(3)(4) 7,500,000 7,200,000 - -------------------------------------------------------------------------------------------------------- U.S. Leasing International, Inc., 6.625% Sr. Nts., 5/15/03 750,000 732,715 ------------ 156,607,857 - -------------------------------------------------------------------------------------------------------- Food & Drug--0.0% Pathmark Stores, Inc.: 10.75% Jr. Sub. Deferred Coupon Nts., 11/1/03 1,095,000 136,875 12.625% Sub. Nts., 6/15/02 400,000 134,000 ------------ 270,875 - -------------------------------------------------------------------------------------------------------- Food/Tobacco--0.2% Aurora Foods, Inc., 8.75% Sr. Sub. Nts., Series B, 7/1/08 300,000 287,250 - -------------------------------------------------------------------------------------------------------- Canadaiqua Brands, Inc., 8.625% Sr. Unsec. Nts., 8/1/06 1,000,000 1,001,250 ------------ 1,288,500 - -------------------------------------------------------------------------------------------------------- Forest Products/Containers--0.3% Boise Cascade Corp., 9.90% Nts., 3/15/00 750,000 753,437 - -------------------------------------------------------------------------------------------------------- Potlatch Corp., 9.46% Medium-Term Nts., 4/2/02 500,000 521,701 - -------------------------------------------------------------------------------------------------------- Riverwood International Corp., 10.625% Sr. Unsec. Nts., 8/1/07 450,000 465,750 ------------ 1,740,888 - -------------------------------------------------------------------------------------------------------- Gaming/Leisure--0.6% HMH Properties, Inc., 8.45% Sr. Nts., Series C, 12/1/08 300,000 279,000 - -------------------------------------------------------------------------------------------------------- Intrawest Corp., 9.75% Sr. Nts., 8/15/08 950,000 935,750 - -------------------------------------------------------------------------------------------------------- Meristar Hospitality Corp., 8.75% Sr. Unsec. Sub. Nts., 8/15/07 700,000 647,500 - -------------------------------------------------------------------------------------------------------- Mohegan Tribal Gaming Authority: 8.125% Sr. Nts., 1/1/06 400,000 390,000 8.75% Sr. Unsec. Sub. Nts., 1/1/09 300,000 297,000 - -------------------------------------------------------------------------------------------------------- Premier Parks, Inc.: 0%/10% Sr. Disc. Nts., 4/1/08(12) 300,000 208,500 9.75% Sr. Nts., 6/15/07 600,000 600,000 - -------------------------------------------------------------------------------------------------------- Station Casinos, Inc., 9.75% Sr. Sub. Nts., 4/15/07 550,000 555,500 ------------ 3,913,250 - -------------------------------------------------------------------------------------------------------- Healthcare--0.3% Fresenius Medical Care Capital Trust II, 7.875% Nts., 2/1/08 600,000 555,000 - -------------------------------------------------------------------------------------------------------- ICN Pharmaceutical, Inc., 8.75% Sr. Nts., 11/15/08(5) 400,000 384,000 - -------------------------------------------------------------------------------------------------------- Tenet Healthcare Corp., 8.625% Sr. Sub. Nts., 1/15/07 800,000 776,000 ------------ 1,715,000 - -------------------------------------------------------------------------------------------------------- Housing--1.7% Building Materials Corp. of America, 8% Sr. Unsec. Nts., 12/1/08 800,000 728,000 - -------------------------------------------------------------------------------------------------------- D.R. Horton, Inc., 8% Sr. Nts., 2/1/09 400,000 368,000 - -------------------------------------------------------------------------------------------------------- Kimco Realty Corp., 6.875% Sr. Unsec. Nts., 2/10/09 9,100,000 8,325,390 - -------------------------------------------------------------------------------------------------------- Nortek, Inc.: 9.125% Sr. Nts., Series B, 9/1/07 200,000 194,500 9.25% Sr. Nts., Series B, 3/15/07 800,000 784,000 ------------ 10,399,890
8 Oppenheimer Bond Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - ------------------------------------------------------------------------------------------------------------ Manufacturing--0.1% Moll Industries, Inc., 10.50% Sr. Unsec. Sub. Nts., 7/1/08 $ 250,000 $ 101,250 - ------------------------------------------------------------------------------------------------------------ Roller Bearing Co. of America, Inc., 9.625% Sr. Sub. Nts., Series B, 6/15/07 500,000 455,000 ----------- 556,250 - ------------------------------------------------------------------------------------------------------------ Media/Entertainment: Broadcasting--0.9% Chancellor Media Corp.: 8.75% Sr. Unsec. Sub. Nts., Series B, 6/15/07 2,500,000 2,531,250 9% Sr. Unsec. Sub. Nts., 10/1/08 2,200,000 2,299,000 - ------------------------------------------------------------------------------------------------------------ Emmis Communications Corp., 8.125% Sr. Unsec. Sub. Nts., Series B, 3/15/09 600,000 573,000 ----------- 5,403,250 - ------------------------------------------------------------------------------------------------------------ Media/Entertainment: Cable/Wireless Video--3.1% Adelphia Communications Corp., 8.375% Sr. Nts., Series B, 2/1/08 1,300,000 1,212,250 - ------------------------------------------------------------------------------------------------------------ Charter Communication Holdings LLC/Charter Communication Holdings Capital Corp.: 8.25% Sr. Unsec. Nts., 4/1/07 3,000,000 2,782,500 8.625% Sr. Unsec. Nts., 4/1/09 750,000 696,562 - ------------------------------------------------------------------------------------------------------------ CSC Holdings, Inc., 7.625% Sr. Unsec. Debs., 7/15/18 13,000,000 12,155,000 - ------------------------------------------------------------------------------------------------------------ EchoStar DBS Corp., 9.375% Sr. Unsec. Nts., 2/1/09 1,200,000 1,212,000 - ------------------------------------------------------------------------------------------------------------ Insight Midwest LP/Insight Capital, Inc., 9.75% Sr. Nts., 10/1/09(5) 500,000 518,750 ----------- 18,577,062 - ------------------------------------------------------------------------------------------------------------ Media/Entertainment: Diversified Media--0.6% AMC Entertainment, Inc., 9.50% Sr. Unsec. Sub. Nts., 2/1/11 300,000 267,000 - ------------------------------------------------------------------------------------------------------------ GSP I Corp., 10.15% First Mtg. Bonds, 6/24/10(5) 1,071,442 996,806 - ------------------------------------------------------------------------------------------------------------ Imax Corp., 7.875% Sr. Nts., 12/1/05 900,000 855,000 - ------------------------------------------------------------------------------------------------------------ Mail-Well Corp., 8.75% Sr. Unsec. Sub. Nts., Series B, 12/15/08 535,000 510,925 - ------------------------------------------------------------------------------------------------------------ Reed Elsevier, Inc., 6.625% Nts., 10/15/23(5) 600,000 494,574 - ------------------------------------------------------------------------------------------------------------ SFX Entertainment, Inc., 9.125% Sr. Unsec. Sub. Nts., 12/1/08 600,000 573,000 ----------- 3,697,305 - ------------------------------------------------------------------------------------------------------------ Media/Entertainment: Telecommunications--1.6% Intermedia Communications, Inc., 8.60% Sr. Unsec. Nts., Series B, 6/1/08 800,000 736,000 - ------------------------------------------------------------------------------------------------------------ Metromedia Fiber Network, Inc., 10% Sr. Unsec. Nts., Series B, 11/15/08 650,000 667,875 - ------------------------------------------------------------------------------------------------------------ NEXTLINK Communications, Inc.: 9.625% Sr. Nts., 10/1/07 2,200,000 2,156,000 10.75% Sr. Unsec. Nts., 11/15/08 200,000 207,000 - ------------------------------------------------------------------------------------------------------------ NTL Communications Corp., 11.50% Sr. Unsec. Nts., Series B, 10/1/08 1,000,000 1,090,000 - ------------------------------------------------------------------------------------------------------------ PSINet, Inc.: 10% Sr. Unsec. Nts., Series B, 2/15/05 600,000 596,250 11.50% Sr. Unsec. Nts., 11/1/08 1,000,000 1,050,000 - ------------------------------------------------------------------------------------------------------------ Qwest Communications International, Inc., 0%/8.29% Sr. Unsec. Disc. Nts., Series B, 2/1/08(12) 1,350,000 1,049,625 - ------------------------------------------------------------------------------------------------------------ Shaw Communications, Inc., 8.54% Debs., 9/30/27CAD 3,000,000 1,868,797 ----------- 9,421,547
Oppenheimer Bond Fund/VA 9 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - --------------------------------------------------------------------------------------------------------- Media/Entertainment: Wireless Communications--0.6% Arch Communications, Inc., 12.75% Sr. Nts., 7/1/07 $ 200,000 $ 159,250 - --------------------------------------------------------------------------------------------------------- Loral Space & Communications Ltd., 9.50% Sr. Nts., 1/15/06 200,000 181,000 - --------------------------------------------------------------------------------------------------------- Omnipoint Corp.: 11.50% Sr. Nts., 9/15/09(5) 650,000 702,000 11.625% Sr. Nts., Series A, 8/15/06 500,000 532,500 - --------------------------------------------------------------------------------------------------------- Price Communications Wireless, Inc., 9.125% Sr. Sec. Nts., Series B, 12/15/06 1,000,000 1,017,500 - --------------------------------------------------------------------------------------------------------- SBA Communications Corp., 0%/12% Sr. Unsec. Disc. Nts., 3/1/08(12) 700,000 416,500 - --------------------------------------------------------------------------------------------------------- Spectrasite Holdings, Inc., 0%/12% Sr. Disc. Nts., 7/15/08(12) 600,000 361,500 - --------------------------------------------------------------------------------------------------------- Voicestream Wireless Corp., 10.375% Sr. Nts., 11/15/09(5) 500,000 517,500 ----------- 3,887,750 - --------------------------------------------------------------------------------------------------------- Metals/Minerals--1.1% AK Steel Corp.: 7.875% Sr. Unsec. Nts., 2/15/09 1,000,000 950,000 9.125% Sr. Nts., 12/15/06 3,250,000 3,323,125 - --------------------------------------------------------------------------------------------------------- Great Lakes Carbon Corp., 10.25% Sr. Sub. Nts., Series B, 5/15/08 750,000 716,250 - --------------------------------------------------------------------------------------------------------- National Steel Corp., 9.875% First Mtg. Bonds, Series D, 3/1/09 500,000 517,500 - --------------------------------------------------------------------------------------------------------- P&L Coal Holdings Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 900,000 891,000 ----------- 6,397,875 - --------------------------------------------------------------------------------------------------------- Retail--3.6% Cooper Tire & Rubber Co., 8% Sr. Nts., 12/15/19 13,000,000 12,494,716 - --------------------------------------------------------------------------------------------------------- Eye Care Centers of America, Inc., 9.125% Sr. Unsec. Sub. Nts., 5/1/08 250,000 176,250 - --------------------------------------------------------------------------------------------------------- Sherwin-Williams Co., 7.45% Debs., 2/1/2097(11) 9,750,000 8,939,122 ----------- 21,610,088 - --------------------------------------------------------------------------------------------------------- Service--4.9% Allied Waste North America, Inc.: 7.875% Sr. Unsec. Nts., Series B, 1/1/09 965,000 857,644 10% Sr. Sub. Nts., 8/1/09(5) 450,000 405,000 - --------------------------------------------------------------------------------------------------------- Arvin Industries, Inc., 6.75% Nts., 3/15/08 1,400,000 1,270,623 - --------------------------------------------------------------------------------------------------------- Harcourt General, Inc., 7.30% Sr. Debs., 8/1/2097 10,025,000 8,289,091 - --------------------------------------------------------------------------------------------------------- Philip Morris, Co., Inc., 7.75% Unsec. Debs., 1/15/27 6,500,000 5,884,522 - --------------------------------------------------------------------------------------------------------- Protection One Alarm Monitoring, Inc., 7.375% Gtd. Sr. Unsec. Nts., 8/15/05 1,000,000 800,000 - --------------------------------------------------------------------------------------------------------- Safety-Kleen Corp., 9.25% Sr. Unsec. Nts., 5/15/09 800,000 778,000 - --------------------------------------------------------------------------------------------------------- Tyco International Group SA, 6.875% Unsec. Unsub. Nts., 1/15/29 13,000,000 11,104,340 ----------- 29,389,220 - --------------------------------------------------------------------------------------------------------- Transportation--0.4% Great Lakes Dredge & Dock Corp., 11.25% Sr. Unsec. Sub. Nts., 8/15/08 300,000 315,000 - --------------------------------------------------------------------------------------------------------- Johnson Controls, Inc., 7.70% Debs., 3/1/15 500,000 507,090 - --------------------------------------------------------------------------------------------------------- Kansas City Southern Industries, Inc., 6.625% Nts., 3/1/05 750,000 742,621 - --------------------------------------------------------------------------------------------------------- Tenneco, Inc., 11.625% Sr. Sub. Nts., 10/15/09(5) 600,000 615,000 - --------------------------------------------------------------------------------------------------------- Terex Corp., 8.875% Sr. Unsec. Sub. Nts., Series C, 4/1/08 100,000 95,000 - --------------------------------------------------------------------------------------------------------- Union Pacific Corp., 9.65% Medium-Term Nts., 4/17/00 400,000 403,825 ----------- 2,678,536
10 Oppenheimer Bond Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - ----------------------------------------------------------------------------------------------------- Utility--2.1% Calpine Corp., 7.75% Sr. Nts., 4/15/09 $ 650,000 $ 617,500 - ----------------------------------------------------------------------------------------------------- Israel Electric Corp. Ltd., 7.70% Bonds, 7/15/18(5) 12,050,000 10,686,976 - ----------------------------------------------------------------------------------------------------- Public Service Co. of Colorado, 8.75% First Mtg. Bonds, 3/1/22 750,000 760,288 - ----------------------------------------------------------------------------------------------------- South Carolina Electric & Gas Co., 9% Mtg. Bonds, 7/15/06 500,000 531,081 ------------ 12,595,845 ------------ Total Corporate Bonds and Notes (Cost $329,284,286) 311,473,497 Shares ===================================================================================================== Other Securities--4.2% - ----------------------------------------------------------------------------------------------------- Allstate Financing I, 7.95% Cum. Quarterly Income Preferred Securities, Series A, Non-Vtg. 120,000 2,677,500 - ----------------------------------------------------------------------------------------------------- EIX Trust I, 7.875% Quarterly Income Preferred Securities 520,000 11,212,500 - ----------------------------------------------------------------------------------------------------- ING Capital Fund Trust, 7.70% Non-Cum., Non-Vtg. 130,000 2,746,250 - ----------------------------------------------------------------------------------------------------- Westpac Capital Trust I, 8% Trust Originated Preferred Securities 390,000 8,433,750 ------------ Total Other Securities (Cost $29,000,000) 25,070,000 Date Strike Contracts ===================================================================================================== Options Purchased--0.1% - ----------------------------------------------------------------------------------------------------- U.S. Long Bond Futures, 3/22/00 Put (Cost $258,944) 2/18/00 94% 195 670,313 Principal Amount(1) ===================================================================================================== Repurchase Agreements--1.2% - ----------------------------------------------------------------------------------------------------- Repurchase agreement with Deutsche Bank Securities Inc., 3.20%, dated 12/31/99, to be repurchased at $7,101,893 on 1/3/00, collateralized by U.S. Treasury Bonds, 6.375%, 8/15/27, with a value of $1,955,059 and U.S. Treasury Nts., 6.125%, 12/31/01, with a value of $5,311,688 (Cost $7,100,000) $ 7,100,000 7,100,000 - ----------------------------------------------------------------------------------------------------- Total Investments, at Value (Cost $623,606,517) 98.7% 593,056,062 - ----------------------------------------------------------------------------------------------------- Other Assets Net of Liabilities 1.3 8,007,537 ----------- ------------ Net Assets 100.0% $601,063,599 =========== ============
1. Principal amount is reported in U.S. Dollars, except for those denoted in the following currencies: CAD--Canadian Dollar IDR--Indonesian Rupiah 2. Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of mortgage loans. These securities typically decline in price as interest rates decline. Most other fixed income securities increase in price when interest rates decline. The principal amount of the underlying pool represents the notional amount on which current interest is calculated. The price of these securities is typically more sensitive to changes in prepayment rates than traditional mortgage-backed securities (for example, GNMA pass-throughs). Interest rates disclosed represent current yields based upon the current cost basis and estimated timing and amount of future cash flows. 3. Represents the current interest rate for a variable or increasing rate security. 4. Identifies issues considered to be illiquid or restricted--See Note 8 of Notes to Financial Statements. 5. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees.These securities amount to $93,111,930 or 15.49% of the Fund's net assets as of December 31, 1999. 6. Principal-Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. The value of these securities generally increases as interest rates decline and prepayment rates rise. The price of these securities is typically more volatile than that of coupon-bearing bonds of the same maturity. Interest rates disclosed represent current yields based upon the current cost basis and estimated timing of future cash flows. Oppenheimer Bond Fund/VA 11 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 7. A sufficient amount of liquid assets has been designated to cover outstanding written options, as follows:
Contracts Expiration Exercise Premium Market Value Subject to Put Date Price Received Note 1 - ------------------------------------------------------------------------------------------------------------- U.S.Treasury Nts. Futures, 10 yr. Put 325 2/18/00 98% $328,453 $782,031
8. A sufficient amount of securities has been designated to cover outstanding foreign currency contracts. See Note 5 of Notes to Financial Statements. 9. Non-income producing security. 10. Issuer is in default. 11. Securities with an aggregate market value of $1,541,589 are held in collateralized accounts to cover initial margin requirements on open futures sales contracts. See Note 6 of Notes to Financial Statements. 12. Denotes a step bond: a zero coupon bond that converts to a fixed or variable interest rate at a designated future date. See accompanying Notes to Financial Statements. 12 Oppenheimer Bond Fund/VA - -------------------------------------------------------------------------------- Statement of Assets and Liabilities December 31, 1999 - -------------------------------------------------------------------------------- ================================================================================================== Assets Investments, at value (cost $623,606,517)--see accompanying statement $593,056,062 - -------------------------------------------------------------------------------------------------- Cash 505,935 - -------------------------------------------------------------------------------------------------- Receivables and other assets: Interest, dividends and principal paydowns 9,159,859 Shares of beneficial interest sold 45,586 Other 6,358 ------------ Total assets 602,773,800 ================================================================================================== Liabilities Unrealized depreciation on foreign currency contracts 36,676 - -------------------------------------------------------------------------------------------------- Options written, at value (premiums received $328,453)--see accompanying statement 782,031 - -------------------------------------------------------------------------------------------------- Payables and other liabilities: Shares of beneficial interest redeemed 634,114 Daily variation on futures contracts 212,352 Trustees' compensation 1,274 Transfer and shareholder servicing agent fees 184 Other 43,570 ------------ Total liabilities 1,710,201 ================================================================================================== Net Assets $601,063,599 ============ ================================================================================================== Composition of Net Assets Paid-in capital $604,669,053 - -------------------------------------------------------------------------------------------------- Undistributed net investment income 45,409,363 - -------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (17,446,218) - -------------------------------------------------------------------------------------------------- Net unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies (31,568,599) ------------ Net assets--applicable to 52,166,643 shares of beneficial interest outstanding $601,063,599 ============ ================================================================================================== Net Asset Value, Redemption Price Per Share and Offering Price Per Share $11.52
See accompanying Notes to Financial Statements. Oppenheimer Bond Fund/VA 13 - -------------------------------------------------------------------------------- Statement of Operations For the Year Ended December 31, 1999 - -------------------------------------------------------------------------------- ====================================================================================== Investment Income Interest (net of foreign withholding taxes of $8,672) $ 48,592,479 - -------------------------------------------------------------------------------------- Dividends 1,690,940 ------------ Total income 50,283,419 ====================================================================================== Expenses Management fees 4,539,138 - -------------------------------------------------------------------------------------- Custodian fees and expenses 53,239 - -------------------------------------------------------------------------------------- Trustees' compensation 6,651 - -------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees 2,102 - -------------------------------------------------------------------------------------- Other 23,256 ------------ Total expenses 4,624,386 Less expenses paid indirectly (27,033) ------------ Net expenses 4,597,353 ====================================================================================== Net Investment Income 45,686,066 ====================================================================================== Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments (18,429,849) Closing of futures contracts 1,187,215 Closing and expiration of option contracts written (86,721) Foreign currency transactions (238,230) ------------ Net realized loss (17,567,585) - -------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation on: Investments (38,172,276) Translation of assets and liabilities denominated in foreign currencies 265,182 ------------ Net change (37,907,094) ------------ Net realized and unrealized loss (55,474,679) ====================================================================================== Net Decrease in Net Assets Resulting from Operations $ (9,788,613) ============
See accompanying Notes to Financial Statements. 14 Oppenheimer Bond Fund/VA - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 ================================================================================================ Operations Net investment income $ 45,686,066 $ 37,001,034 - ------------------------------------------------------------------------------------------------ Net realized gain (loss) (17,567,585) 5,539,991 - ------------------------------------------------------------------------------------------------ Net change in unrealized appreciation or depreciation (37,907,094) (5,203,148) ------------ ------------ Net increase (decrease) in net assets resulting from operations (9,788,613) 37,337,877 ================================================================================================ Dividends and/or Distributions to Shareholders Dividends from net investment income (30,081,522) (9,009,958) - ------------------------------------------------------------------------------------------------ Distributions from net realized gain (2,888,886) (8,154,014) ================================================================================================ Beneficial Interest Transactions Net increase (decrease) in net assets resulting from beneficial interest transactions (11,720,079) 115,290,766 ================================================================================================ Net Assets Total increase (decrease) (54,479,100) 135,464,671 - ------------------------------------------------------------------------------------------------ Beginning of period 655,542,699 520,078,028 ------------ ------------ End of period (including undistributed net investment income of $45,409,363 and $30,079,292, respectively) $601,063,599 $655,542,699 ============ ============
See accompanying Notes to Financial Statements. Oppenheimer Bond Fund/VA 15 - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------ Per Share Operating Data Net asset value, beginning of period $12.32 $11.91 $11.63 $11.84 $10.78 - ------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income .88 .72 .76 .69 .72 Net realized and unrealized gain (loss) (1.06) .07 .28 (.15) 1.07 - ------------------------------------------------------------------------------------------------------------------------------ Total income (loss) from investment operations (.18) .79 1.04 .54 1.79 - ------------------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.57) (.20) (.72) (.74) (.73) Distributions from net realized gain (.05) (.18) (.04) (.01) -- - ------------------------------------------------------------------------------------------------------------------------------ Total dividends and/or distributions to shareholders (.62) (.38) (.76) (.75) (.73) - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $11.52 $12.32 $11.91 $11.63 $11.84 ====== ====== ====== ====== ====== ============================================================================================================================== Total Return, at Net Asset Value(1) (1.52)% 6.80% 9.25% 4.80% 17.00% ============================================================================================================================== Ratios/Supplemental Data Net assets, end of period (in thousands) $601,064 $655,543 $520,078 $426,439 $211,232 - ------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $633,059 $586,242 $449,760 $296,253 $170,929 - ------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets:(2) Net investment income 7.22% 6.31% 6.72% 6.72% 6.91% Expenses 0.73% 0.74%(3) 0.78%(3) 0.78%(3) 0.80%(3) - ------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate(4) 256% 76% 117% 82% 79%
1. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 2. Annualized for periods less than one full year. 3. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. 4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended December 31, 1999, were $1,625,487,960 and $1,547,628,962, respectively. See accompanying Notes to Financial Statements. 16 Oppenheimer Bond Fund/VA - -------------------------------------------------------------------------------- Notes to Financial Statements - -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies Oppenheimer Bond Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds (the Trust), a diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek a high level of current income. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The following is a summary of significant accounting policies consistently followed by the Fund. - -------------------------------------------------------------------------------- Securities Valuation. Portfolio securities are valued at the close of the New York Stock Exchange on each trading day. Listed and unlisted securities for which such information is regularly reported are valued at the last sale price of the day or, in the absence of sales, at values based on the closing bid or the last sale price on the prior trading day. Long-term and short-term "non-money market" debt securities are valued by a portfolio pricing service approved by the Board of Trustees. Such securities which cannot be valued by an approved portfolio pricing service are valued using dealer-supplied valuations provided the Manager is satisfied that the firm rendering the quotes is reliable and that the quotes reflect current market value, or are valued under consistently applied procedures established by the Board of Trustees to determine fair value in good faith. Short-term "money market type" debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Foreign currency exchange contracts are valued based on the closing prices of the foreign currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. Options are valued based upon the last sale price on the principal exchange on which the option is traded or, in the absence of any transactions that day, the value is based upon the last sale price on the prior trading date if it is within the spread between the closing bid and asked prices. If the last sale price is outside the spread, the closing bid is used. - -------------------------------------------------------------------------------- Security Credit Risk. The Fund invests in high yield securities, which may be subject to a greater degree of credit risk, greater market fluctuations and risk of loss of income and principal, and may be more sensitive to economic conditions than lower yielding, higher rated fixed income securities. The Fund may acquire securities in default, and is not obligated to dispose of securities whose issuers subsequently default. As of December 31, 1999, securities with an aggregate market value of $44,856, representing 0.01% of the Fund's net assets, were in default. - -------------------------------------------------------------------------------- Foreign Currency Translation. The accounting records of the Fund are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange. Amounts related to the purchase and sale of foreign securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund's Statement of Operations. - -------------------------------------------------------------------------------- Repurchase Agreements. The Fund requires the custodian to take possession, to have legally segregated in the Federal Reserve Book Entry System or to have segregated within the custodian's vault, all securities held as collateral for repurchase agreements. The market value of the underlying securities is required to be at least 102% of the resale price at the time of purchase. If the seller of the agreement defaults and the value of the collateral declines, or if the seller enters an insolvency proceeding, realization of the value of the collateral by the Fund may be delayed or limited. - -------------------------------------------------------------------------------- Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by loss carryovers to shareholders. As of December 31, 1999, the Fund had available for federal income tax purposes an unused capital loss carryover of approximately $14,340,000, which expires in 2007. Oppenheimer Bond Fund/VA 17 ================================================================================ 1. Significant Accounting Policies (continued) Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. - -------------------------------------------------------------------------------- Classification of Distributions to Shareholders. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes primarily because of paydown gains and losses and the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes. The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund. The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, during the year ended December 31, 1999, amounts have been reclassified to reflect a decrease in paid-in capital of $17,573, a decrease in undistributed net investment income of $274,473, and a decrease in accumulated net realized loss on investments of $292,046. - -------------------------------------------------------------------------------- Expense Offset Arrangements. Expenses paid indirectly represent a reduction of custodian fees for earnings on cash balances maintained by the Fund. - -------------------------------------------------------------------------------- Other. Investment transactions are accounted for as of trade date and dividend income is recorded on the ex-dividend date. Discount on securities purchased is amortized over the life of the respective securities, in accordance with federal income tax requirements. Realized gains and losses on investments and options written and unrealized appreciation and depreciation are determined on an identified cost basis, which is the same basis used for federal income tax purposes. Dividends-in-kind are recognized as income on the ex-dividend date, at the current market value of the underlying security. Interest on payment-in-kind debt instruments is accrued as income at the coupon rate and a market adjustment is made periodically. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. ================================================================================ 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of no par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:
Year Ended December 31, 1999 Year Ended December 31, 1998 ----------------------------- ----------------------------- Shares Amount Shares Amount - ------------------------------------------------------------------------------------------------------------- Sold 10,494,053 $ 123,504,590 24,245,723 $ 293,126,941 Dividends and/or distributions reinvested 2,820,394 32,970,408 1,463,254 17,163,972 Redeemed (14,357,807) (168,195,077) (16,150,244) (195,000,147) ----------- ------------- ----------- ------------- Net increase (decrease) (1,043,360) $ (11,720,079) 9,558,733 $ 115,290,766 =========== ============= =========== =============
18 Oppenheimer Bond Fund/VA ================================================================================ 3. Unrealized Gains and Losses on Securities As of December 31, 1999, net unrealized depreciation on securities and options written of $31,004,033 was composed of gross appreciation of $6,069,024, and gross depreciation of $37,073,057. ================================================================================ 4. Management Fees and Other Transactions with Affiliates Management Fees. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Trust. The annual fees are 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200 million and 0.50% of average annual net assets over $1 billion. The Fund's management fee for the year ended December 31, 1999, was 0.72% of average annual net assets. - -------------------------------------------------------------------------------- Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, is the transfer agent for the Fund and is responsible for maintaining the shareholder registry and shareholder accounting records for the Fund. OFS provides these services for cost. ================================================================================ 5. Foreign Currency Contracts A foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. The Fund may enter into foreign currency contracts for operational purposes and to seek to protect against adverse exchange rate fluctuations. Risks to the Fund include the potential inability of the counterparty to meet the terms of the contract. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates as provided by a reliable bank, dealer or pricing service. Unrealized appreciation and depreciation on foreign currency contracts are reported in the Statement of Assets and Liabilities. The Fund may realize a gain or loss upon the closing or settlement of the foreign currency transactions. Realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. Securities denominated in foreign currency to cover net exposure on outstanding foreign currency contracts are noted in the Statement of Investments where applicable. As of December 31, 1999, the Fund had outstanding foreign currency contracts as follows:
Expiration Contract Valuation as of Unrealized Contract Description Date Amounts(000s) December 31, 1999 Depreciation - ------------------------------------------------------------------------------------------------------ Contracts to Sell - ----------------- Canadian Dollar (CAD) 6/1/00 3,000 CAD $2,080,272 $36,676 =======
Oppenheimer Bond Fund/VA 19 ================================================================================ 6. Futures Contracts The Fund may buy and sell futures contracts in order to gain exposure to or to seek to protect against changes in interest rates. The Fund may also buy or write put or call options on these futures contracts. The Fund generally sells futures contracts to hedge against increases in interest rates and the resulting negative effect on the value of fixed rate portfolio securities. The Fund may also purchase futures contracts to gain exposure to changes in interest rates as it may be more efficient or cost effective than actually buying fixed income securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund may recognize a realized gain or loss when the contract is closed or expires. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable and/or payable for the daily mark to market for variation margin. Risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. As of December 31, 1999, the Fund had outstanding futures contracts as follows:
Unrealized Expiration Number of Valuation as of Appreciation Contract Description Date Contracts December 31, 1999 (Depreciation) - -------------------------------------------------------------------------------------------------------- Contracts to Purchase - --------------------- U.S. Treasury Bonds, 30 yr. 3/22/00 67 $ 6,092,813 $ (17,781) U.S. Treasury Nts., 5 yr. 3/22/00 639 62,631,984 (167,970) U.S. Treasury Nts., 10 yr. 3/22/00 238 22,814,531 (351,422) --------- (537,173) --------- Contracts to Sell - ----------------- Federal Funds Interest Rate 1/31/00 322 126,871,441 (73,798) U.S. Treasury Bonds, 30 yr. 3/22/00 130 11,821,875 60,938 U.S. Treasury Nts., 5 yr. 3/22/00 123 12,055,922 21,453 --------- 8,593 --------- $(528,580) =========
20 Oppenheimer Bond Fund/VA ================================================================================ 7. Option Activity The Fund may buy and sell put and call options, or write put and covered call options on portfolio securities in order to produce incremental earnings or protect against changes in the value of portfolio securities. The Fund generally purchases put options or writes covered call options to hedge against adverse movements in the value of portfolio holdings. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option. Options are valued daily based upon the last sale price on the principal exchange on which the option is traded and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss upon the expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option is adjusted by the amount of premium received or paid. Securities designated to cover outstanding call options are noted in the Statement of Investments where applicable. Shares subject to call, expiration date, exercise price, premium received and market value are detailed in a note to the Statement of Investments. Options written are reported as a liability in the Statement of Assets and Liabilities. Gains and losses are reported in the Statement of Operations. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Written option activity for the year ended December 31, 1999, was as follows:
Put Options ------------------------------ Number of Amount of Options Premiums - ---------------------------------------------------------------------------------- Options outstanding as of December 31, 1998 -- $ -- Options written 1,170 969,017 Options closed or expired (845) (640,564) ----- --------- - ---------------------------------------------------------------------------------- Options outstanding as of December 31, 1999 325 $ 328,453 ===== =========
================================================================================ 8. Illiquid or Restricted Securities As of December 31, 1999, investments in securities included issues that are illiquid or restricted. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may also be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund intends to invest no more than 15% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid or restricted securities. Certain restricted securities, eligible for resale to qualified institutional investors, are not subject to that limitation. The aggregate value of illiquid or restricted securities subject to this limitation as of December 31, 1999, was $44,286,050, which represents 7.37% of the Fund's net assets. - -------------------------------------------------------------------------------- Independent Auditors' Report - -------------------------------------------------------------------------------- ================================================================================ To the Board of Trustees and Shareholders of Oppenheimer Capital Appreciation Fund/VA: We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Oppenheimer Capital Appreciation Fund/VA (which is a series of Oppenheimer Variable Account Funds) as of December 31, 1999, the related statement of operations for the year then ended, the statements of changes in net assets for the years ended December 31, 1999 and 1998 and the financial highlights for the period January 1, 1995 to December 31, 1999. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Oppenheimer Capital Appreciation Fund/VA as of December 31, 1999, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP _____________________ Deloitte & Touche LLP Denver, Colorado January 24, 2000 - -------------------------------------------------------------------------------- Statement of Investments December 31, 1999 - --------------------------------------------------------------------------------
Market Value Shares Note 1 ========================================================================================================= Common Stocks--92.1% - --------------------------------------------------------------------------------------------------------- Basic Materials--1.2% - --------------------------------------------------------------------------------------------------------- Chemicals--1.0% Lafarge Corp. 115,000 $ 3,176,875 - --------------------------------------------------------------------------------------------------------- PPG Industries, Inc. 110,000 6,881,875 - --------------------------------------------------------------------------------------------------------- Union Carbide Corp. 55,000 3,671,250 ----------- 13,730,000 - --------------------------------------------------------------------------------------------------------- Paper--0.2% Boise Cascade Corp. 40,000 1,620,000 - --------------------------------------------------------------------------------------------------------- Rayonier, Inc. 27,000 1,304,437 ----------- 2,924,437 - --------------------------------------------------------------------------------------------------------- Capital Goods--4.8% - --------------------------------------------------------------------------------------------------------- Electrical Equipment--1.9% Etec Systems, Inc.(1) 10,300 462,212 - --------------------------------------------------------------------------------------------------------- Sanmina Corp.(1) 181,000 18,077,375 - --------------------------------------------------------------------------------------------------------- Vishay Intertechnology, Inc.(1) 260,000 8,222,500 ----------- 26,762,087 - --------------------------------------------------------------------------------------------------------- Industrial Services--0.7% Coflexip SA, Sponsored ADR 49,200 1,869,600 - --------------------------------------------------------------------------------------------------------- Republic Services, Inc.(1) 150,000 2,156,250 - --------------------------------------------------------------------------------------------------------- Waste Management, Inc. 330,000 5,671,875 ----------- 9,697,725 - --------------------------------------------------------------------------------------------------------- Manufacturing--2.2% Corning, Inc. 70,000 9,025,625 - --------------------------------------------------------------------------------------------------------- Honeywell International, Inc. 160,000 9,230,000 - --------------------------------------------------------------------------------------------------------- Pentair, Inc. 100,000 3,850,000 - --------------------------------------------------------------------------------------------------------- Tyco International Ltd. 224,044 8,709,710 ----------- 30,815,335 - --------------------------------------------------------------------------------------------------------- Communication Services--3.5% - --------------------------------------------------------------------------------------------------------- Telecommunications: Long Distance--2.8% Intermedia Communications, Inc.(1) 90,000 3,493,125 - --------------------------------------------------------------------------------------------------------- MCI WorldCom, Inc.(1) 262,200 13,912,987 - --------------------------------------------------------------------------------------------------------- Nortel Networks Corp. 220,000 22,220,000 ----------- 39,626,112 - --------------------------------------------------------------------------------------------------------- Telephone Utilities--0.7% CenturyTel, Inc. 110,000 5,211,250 - --------------------------------------------------------------------------------------------------------- SBC Communications, Inc. 92,120 4,490,850 ----------- 9,702,100
Oppenheimer Capital Appreciation Fund/VA 5 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - --------------------------------------------------------------------------------------------------------- Consumer Cyclicals--13.5% - --------------------------------------------------------------------------------------------------------- Autos & Housing--3.3% Centex Corp. 170,000 $ 4,196,875 - --------------------------------------------------------------------------------------------------------- Ethan Allen Interiors, Inc. 121,050 3,881,166 - --------------------------------------------------------------------------------------------------------- Ford Motor Co. 270,000 14,428,125 - --------------------------------------------------------------------------------------------------------- Gentex Corp.(1) 230,000 6,382,500 - --------------------------------------------------------------------------------------------------------- Southdown, Inc. 145,000 7,485,625 - --------------------------------------------------------------------------------------------------------- Toll Brothers, Inc.(1) 130,000 2,421,250 - --------------------------------------------------------------------------------------------------------- USG Corp. 170,000 8,011,250 ----------- 46,806,791 - --------------------------------------------------------------------------------------------------------- Consumer Services--2.3% Budget Group, Inc., Cl. A(1) 260,000 2,356,250 - --------------------------------------------------------------------------------------------------------- Hertz Corp., Cl. A 53,000 2,656,625 - --------------------------------------------------------------------------------------------------------- Omnicom Group, Inc. 180,000 18,000,000 - --------------------------------------------------------------------------------------------------------- Young & Rubicam, Inc. 144,500 10,223,375 ----------- 33,236,250 - --------------------------------------------------------------------------------------------------------- Leisure & Entertainment--2.3% Callaway Golf Co. 210,000 3,714,375 - --------------------------------------------------------------------------------------------------------- Carnival Corp. 395,000 18,885,937 - --------------------------------------------------------------------------------------------------------- Harley-Davidson, Inc. 75,000 4,804,687 - --------------------------------------------------------------------------------------------------------- Mandalay Resort Group(1) 285,000 5,735,625 ----------- 33,140,624 - --------------------------------------------------------------------------------------------------------- Media--1.8% News Corp. Ltd. (The), Sponsored ADR 250,000 9,562,500 - --------------------------------------------------------------------------------------------------------- Time Warner, Inc. 220,000 15,936,250 ----------- 25,498,750 - --------------------------------------------------------------------------------------------------------- Retail: General--0.3% Dayton Hudson Corp. 70,000 5,140,625 - --------------------------------------------------------------------------------------------------------- Retail: Specialty--2.7% Abercrombie & Fitch Co., Cl. A(1) 300,000 8,006,250 - --------------------------------------------------------------------------------------------------------- CSK Auto Corp.(1) 49,000 857,500 - --------------------------------------------------------------------------------------------------------- Gap, Inc. 300,000 13,800,000 - --------------------------------------------------------------------------------------------------------- TJX Cos., Inc. 250,000 5,109,375 - --------------------------------------------------------------------------------------------------------- Too, Inc.(1) 181,000 3,122,250 - --------------------------------------------------------------------------------------------------------- Zale Corp.(1) 170,000 8,223,750 ----------- 39,119,125 - --------------------------------------------------------------------------------------------------------- Textile/Apparel & Home Furnishings--0.8% Jones Apparel Group, Inc.(1) 185,000 5,018,125 - --------------------------------------------------------------------------------------------------------- Tommy Hilfiger Corp.(1) 260,000 6,061,250 ----------- 11,079,375
6 Oppenheimer Capital Appreciation Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - --------------------------------------------------------------------------------------------------------- Consumer Staples--10.6% - --------------------------------------------------------------------------------------------------------- Beverages--1.4% Adolph Coors Co., Cl. B 110,000 $ 5,775,000 - --------------------------------------------------------------------------------------------------------- Seagram Co. Ltd. (The) 320,000 14,380,000 ----------- 20,155,000 - --------------------------------------------------------------------------------------------------------- Broadcasting--4.5% AMFM, Inc.(1) 150,000 11,737,500 - --------------------------------------------------------------------------------------------------------- CBS Corp.(1) 220,000 14,066,250 - --------------------------------------------------------------------------------------------------------- Comcast Corp., Cl. A Special 365,000 18,455,312 - --------------------------------------------------------------------------------------------------------- Infinity Broadcasting Corp., Cl. A(1) 350,000 12,665,625 - --------------------------------------------------------------------------------------------------------- Rogers Communications, Inc., Cl. B(1) 276,300 6,739,024 ----------- 63,663,711 - --------------------------------------------------------------------------------------------------------- Entertainment--1.6% Outback Steakhouse, Inc.(1) 140,000 3,631,250 - --------------------------------------------------------------------------------------------------------- Royal Caribbean Cruises Ltd. 380,000 18,738,750 - --------------------------------------------------------------------------------------------------------- Wendy's International, Inc. 15,000 309,375 ----------- 22,679,375 - --------------------------------------------------------------------------------------------------------- Food--0.7% IBP, Inc. 190,000 3,420,000 - --------------------------------------------------------------------------------------------------------- Keebler Foods Co.(1) 140,000 3,937,500 - --------------------------------------------------------------------------------------------------------- Nabisco Holdings Corp., Cl. A 80,000 2,530,000 ----------- 9,887,500 - --------------------------------------------------------------------------------------------------------- Food & Drug Retailers--1.7% CVS Corp. 310,000 12,380,625 - --------------------------------------------------------------------------------------------------------- Safeway, Inc.(1) 350,000 12,446,875 ----------- 24,827,500 - --------------------------------------------------------------------------------------------------------- Household Goods--0.7% Avon Products, Inc. 310,000 10,230,000 - --------------------------------------------------------------------------------------------------------- Energy--5.0% - --------------------------------------------------------------------------------------------------------- Energy Services--1.9% Coastal Corp. 220,000 7,796,250 - --------------------------------------------------------------------------------------------------------- ENSCO International, Inc. 50,000 1,143,750 - --------------------------------------------------------------------------------------------------------- Halliburton Co. 200,000 8,050,000 - --------------------------------------------------------------------------------------------------------- Nabors Industries, Inc.(1) 150,000 4,640,625 - --------------------------------------------------------------------------------------------------------- Transocean Sedco Forex, Inc. 95,000 3,200,313 - --------------------------------------------------------------------------------------------------------- Varco International, Inc.(1) 240,000 2,445,000 ----------- 27,275,938 - --------------------------------------------------------------------------------------------------------- Oil: Domestic--2.5% Amerada Hess Corp. 155,000 8,796,250 - --------------------------------------------------------------------------------------------------------- Exxon Mobil Corp. 230,000 18,529,375 - --------------------------------------------------------------------------------------------------------- Forest Oil Corp.(1) 170,000 2,241,875 - --------------------------------------------------------------------------------------------------------- Texaco, Inc. 50,000 2,715,625 - --------------------------------------------------------------------------------------------------------- Tosco Corp. 140,000 3,806,250 ----------- 36,089,375
Oppenheimer Capital Appreciation Fund/VA 7 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - --------------------------------------------------------------------------------------------------------- Oil: International--0.6% Total Fina SA, Sponsored ADR 120,000 $ 8,310,000 - --------------------------------------------------------------------------------------------------------- Financial--8.8% - --------------------------------------------------------------------------------------------------------- Banks--2.2% Bank of America Corp. 150,000 7,528,125 - --------------------------------------------------------------------------------------------------------- Chase Manhattan Corp. 180,000 13,983,750 - --------------------------------------------------------------------------------------------------------- FleetBoston Financial Corp. 272,908 9,500,610 ----------- 31,012,485 - --------------------------------------------------------------------------------------------------------- Diversified Financial--4.9% C.I.T. Group, Inc., Cl. A 150,000 3,168,750 - --------------------------------------------------------------------------------------------------------- Citigroup, Inc. 377,748 20,988,623 - --------------------------------------------------------------------------------------------------------- Goldman Sachs Group, Inc. (The) 95,000 8,947,813 - --------------------------------------------------------------------------------------------------------- Merrill Lynch & Co., Inc. 105,000 8,767,500 - --------------------------------------------------------------------------------------------------------- Morgan Stanley Dean Witter & Co. 135,000 19,271,250 - --------------------------------------------------------------------------------------------------------- Price (T. Rowe) Associates, Inc. 70,000 2,585,625 - --------------------------------------------------------------------------------------------------------- Schwab (Charles) Corp. 155,000 5,948,125 ----------- 69,677,686 - --------------------------------------------------------------------------------------------------------- Insurance--1.2% American International Group, Inc. 27,500 2,973,438 - --------------------------------------------------------------------------------------------------------- AXA Financial, Inc. 250,000 8,468,750 - --------------------------------------------------------------------------------------------------------- Progressive Corp. 80,000 5,850,000 ----------- 17,292,188 - --------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts--0.5% Boston Properties, Inc. 245,000 7,625,625 - --------------------------------------------------------------------------------------------------------- Healthcare--4.9% - --------------------------------------------------------------------------------------------------------- Healthcare/Drugs--4.4% Amgen, Inc.(1) 400,000 24,025,000 - --------------------------------------------------------------------------------------------------------- Elan Corp. plc, ADR(1) 400,000 11,800,000 - --------------------------------------------------------------------------------------------------------- IDEC Pharmaceuticals Corp. 108,400 10,650,300 - --------------------------------------------------------------------------------------------------------- Pfizer, Inc. 90,000 2,919,375 - --------------------------------------------------------------------------------------------------------- Schering-Plough Corp. 120,000 5,062,500 - --------------------------------------------------------------------------------------------------------- Warner Lambert Co. 100,000 8,193,750 ----------- 62,650,925 - --------------------------------------------------------------------------------------------------------- Healthcare/Supplies & Services--0.5% Baxter International, Inc. 90,000 5,653,125 - --------------------------------------------------------------------------------------------------------- Medtronic, Inc. 60,000 2,186,250 ----------- 7,839,375
8 Oppenheimer Capital Appreciation Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - --------------------------------------------------------------------------------------------------------- Technology--38.0% - --------------------------------------------------------------------------------------------------------- Computer Hardware--2.0% Compaq Computer Corp. 65,000 $ 1,759,063 - --------------------------------------------------------------------------------------------------------- EMC Corp.(1) 15,000 1,638,750 - --------------------------------------------------------------------------------------------------------- Hewlett-Packard Co. 65,000 7,405,938 - --------------------------------------------------------------------------------------------------------- MMC Networks, Inc.(1) 60,000 2,062,500 - --------------------------------------------------------------------------------------------------------- Seagate Technology, Inc.(1) 350,000 16,296,875 ------------ 29,163,126 - --------------------------------------------------------------------------------------------------------- Computer Services--0.9% Applied Micro Circuits Corp.(1) 75,500 9,607,375 - --------------------------------------------------------------------------------------------------------- CGI Group, Inc.(1) 70,700 3,016,462 ------------ 12,623,837 - --------------------------------------------------------------------------------------------------------- Computer Software--13.8% BEA Systems, Inc.(1) 112,400 7,860,975 - --------------------------------------------------------------------------------------------------------- BMC Software, Inc.(1) 300,000 23,981,250 - --------------------------------------------------------------------------------------------------------- I2 Technologies, Inc.(1) 120,000 23,400,000 - --------------------------------------------------------------------------------------------------------- Microsoft Corp.(1) 530,000 61,877,500 - --------------------------------------------------------------------------------------------------------- Novell, Inc.(1) 650,000 25,959,375 - --------------------------------------------------------------------------------------------------------- Oracle Corp.(1) 230,000 25,774,375 - --------------------------------------------------------------------------------------------------------- Sybase, Inc.(1) 180,000 3,060,000 - --------------------------------------------------------------------------------------------------------- Veritas Software Corp.(1) 170,000 24,331,250 ------------ 196,244,725 - --------------------------------------------------------------------------------------------------------- Communications Equipment--11.4% Antec Corp.(1) 50,000 1,825,000 - --------------------------------------------------------------------------------------------------------- CIENA Corp.(1) 150,000 8,625,000 - --------------------------------------------------------------------------------------------------------- Cisco Systems, Inc.(1) 450,000 48,206,250 - --------------------------------------------------------------------------------------------------------- Lucent Technologies, Inc. 130,000 9,725,625 - --------------------------------------------------------------------------------------------------------- Nokia Corp., A Shares, Sponsored ADR(1) 335,000 63,650,000 - --------------------------------------------------------------------------------------------------------- QUALCOMM, Inc.(1) 84,000 14,794,500 - --------------------------------------------------------------------------------------------------------- Tellabs, Inc.(1) 150,000 9,628,125 - --------------------------------------------------------------------------------------------------------- Williams Communications Group, Inc.(1) 190,000 5,498,125 ------------ 161,952,625
Oppenheimer Capital Appreciation Fund/VA 9 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - --------------------------------------------------------------------------------------------------------- Electronics--9.9% Analog Devices, Inc.(1) 80,000 $ 7,440,000 - --------------------------------------------------------------------------------------------------------- Atmel Corp.(1) 320,000 9,460,000 - --------------------------------------------------------------------------------------------------------- Cypress Semiconductor Corp.(1) 230,000 7,446,250 - --------------------------------------------------------------------------------------------------------- Flextronics International Ltd.(1) 260,000 11,960,000 - --------------------------------------------------------------------------------------------------------- LSI Logic Corp.(1) 115,000 7,762,500 - --------------------------------------------------------------------------------------------------------- Micron Technology, Inc.(1) 180,000 13,995,000 - --------------------------------------------------------------------------------------------------------- National Semiconductor Corp.(1) 310,000 13,271,875 - --------------------------------------------------------------------------------------------------------- Novellus Systems, Inc.(1) 60,000 7,351,875 - --------------------------------------------------------------------------------------------------------- PMC-Sierra, Inc.(1) 7,000 1,122,188 - --------------------------------------------------------------------------------------------------------- RF Micro Devices, Inc.(1) 170,000 11,634,375 - --------------------------------------------------------------------------------------------------------- Texas Instruments, Inc. 150,000 14,531,250 - --------------------------------------------------------------------------------------------------------- Vitesse Semiconductor Corp.(1) 510,000 26,743,125 - --------------------------------------------------------------------------------------------------------- Waters Corp.(1) 160,000 8,480,000 -------------- 141,198,438 - --------------------------------------------------------------------------------------------------------- Transportation--1.1% - --------------------------------------------------------------------------------------------------------- Railroads & Truckers--1.1% Canadian Pacific Ltd. 180,000 3,881,250 - --------------------------------------------------------------------------------------------------------- Kansas City Southern Industries, Inc. 160,000 11,940,000 -------------- 15,821,250 - --------------------------------------------------------------------------------------------------------- Utilities--0.7% - --------------------------------------------------------------------------------------------------------- Electric Utilities--0.3% Potomac Electric Power Co. 180,000 4,128,750 - --------------------------------------------------------------------------------------------------------- Gas Utilities--0.4% Williams Cos., Inc. (The) 180,000 5,501,250 -------------- Total Common Stocks (Cost $846,317,127) 1,313,130,020 Principal Amount ========================================================================================================= Repurchase Agreements--8.0% - --------------------------------------------------------------------------------------------------------- Repurchase agreement with Deutsche Bank Securities Inc., 3.20%, dated 12/31/99, to be repurchased at $114,130,427 on 1/3/00, collateralized by U.S. Treasury Bonds, 6.375%, 8/15/27, with a value of $31,418,622 and U.S. Treasury Nts., 6.125%, 12/31/01, with a value of $85,361,063 (Cost $114,100,000) $114,100,000 114,100,000 - --------------------------------------------------------------------------------------------------------- Total Investments, at Value (Cost $960,417,127) 100.1% 1,427,230,020 - --------------------------------------------------------------------------------------------------------- Liabilities in Excess of Other Assets (0.1) (2,032,604) ------------ -------------- Net Assets 100.0% $1,425,197,416 ============ ==============
1. Non-income producing security. See accompanying Notes to Financial Statements 10 Oppenheimer Capital Appreciation Fund/VA - -------------------------------------------------------------------------------- Statement of Assets and Liabilities December 31, 1999 - -------------------------------------------------------------------------------- ======================================================================================================= Assets Investments, at value (cost $960,417,127)--see accompanying statement $1,427,230,020 - ------------------------------------------------------------------------------------------------------- Cash 735,078 - ------------------------------------------------------------------------------------------------------- Receivables and other assets: Investments sold 2,665,747 Shares of beneficial interest sold 1,431,324 Interest and dividends 540,095 Other 10,113 -------------- Total assets 1,432,612,377 ======================================================================================================= Liabilities Payables and other liabilities: Investments purchased 6,076,984 Shares of beneficial interest redeemed 1,213,744 Trustees' compensation 484 Transfer and shareholder servicing agent fees 186 Other 123,563 -------------- Total liabilities 7,414,961 ======================================================================================================= Net Assets $1,425,197,416 ============== ======================================================================================================= Composition of Net Assets Paid-in capital $ 847,994,816 - ------------------------------------------------------------------------------------------------------- Undistributed net investment income 2,056,707 - ------------------------------------------------------------------------------------------------------- Accumulated net realized gain on investments and foreign currency transactions 108,335,322 - ------------------------------------------------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 466,810,571 -------------- Net assets--applicable to 28,592,995 shares of beneficial interest outstanding $1,425,197,416 ============== ======================================================================================================= Net Asset Value, Redemption Price Per Share and Offering Price Per Share $49.84
See accompanying Notes to Financial Statements. Oppenheimer Capital Appreciation Fund/VA 11 - -------------------------------------------------------------------------------- Statement of Operations For the Year Ended December 31, 1999 - -------------------------------------------------------------------------------- ======================================================================================================= Investment Income Dividends $ 5,736,352 - ------------------------------------------------------------------------------------------------------- Interest 3,289,528 ------------ Total income 9,025,880 ======================================================================================================= Expenses Management fees 6,845,473 - ------------------------------------------------------------------------------------------------------- Custodian fees and expenses 17,921 - ------------------------------------------------------------------------------------------------------- Trustees' compensation 4,059 - ------------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees 2,107 - ------------------------------------------------------------------------------------------------------- Other 105,419 ------------ Total expenses 6,974,979 Less expenses paid indirectly (10,397) ------------ Net expenses 6,964,582 ======================================================================================================= Net Investment Income 2,061,298 ======================================================================================================= Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments 109,110,788 Foreign currency transactions (385,246) ------------ Net realized gain 108,725,542 - ------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation on: Investments 275,400,704 Translation of assets and liabilities denominated in foreign currencies 226,469 ------------ Net change 275,627,173 ------------ Net realized and unrealized gain 384,352,715 ======================================================================================================= Net Increase in Net Assets Resulting from Operations $386,414,013 ============
See accompanying Notes to Financial Statements. 12 Oppenheimer Capital Appreciation Fund/VA - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 - ---------------------------------------------------------------------------------------------------------------- Operations Net investment income $ 2,061,298 $ 3,036,249 - ---------------------------------------------------------------------------------------------------------------- Net realized gain 108,725,542 32,507,950 - ---------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation 275,627,173 99,933,565 -------------- ------------ Net increase in net assets resulting from operations 386,414,013 135,477,764 ================================================================================================================ Dividends and/or Distributions to Shareholders Dividends from net investment income (2,974,252) (3,939,379) - ---------------------------------------------------------------------------------------------------------------- Distributions from net realized gain (32,671,363) (47,530,889) ================================================================================================================ Beneficial Interest Transactions Net increase in net assets resulting from beneficial interest transactions 305,879,322 190,636,226 ================================================================================================================ Net Assets Total increase 656,647,720 274,643,722 - ---------------------------------------------------------------------------------------------------------------- Beginning of period 768,549,696 493,905,974 -------------- ------------ End of period (including undistributed net investment income of $2,056,707 and $2,959,139, respectively) $1,425,197,416 $768,549,696 ============== ============
See accompanying Notes to Financial Statements. Oppenheimer Capital Appreciation Fund/VA 13 - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995 ========================================================================================================================= Per Share Operating Data Net asset value, beginning of period $36.67 $32.44 $27.24 $23.55 $17.68 - ------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income .06 .13 .25 .15 .25 Net realized and unrealized gain 14.68 7.28 6.62 5.46 6.10 - ------------------------------------------------------------------------------------------------------------------------- Total income from investment operations 14.74 7.41 6.87 5.61 6.35 - ------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.13) (.24) (.15) (.25) (.22) Distributions from net realized gain (1.44) (2.94) (1.52) (1.67) (.26) - ------------------------------------------------------------------------------------------------------------------------- Total dividends and distributions to shareholders (1.57) (3.18) (1.67) (1.92) (.48) - ------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $49.84 $36.67 $32.44 $27.24 $23.55 ====== ====== ====== ====== ====== ========================================================================================================================= Total Return, at Net Asset Value(1) 41.66% 24.00% 26.68% 25.20% 36.65% ========================================================================================================================= Ratios/Supplemental Data Net assets, end of period (in millions) $1,425 $769 $494 $286 $118 - ------------------------------------------------------------------------------------------------------------------------- Average net assets (in millions) $1,003 $609 $390 $152 $ 89 - ------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:(2) Net investment income 0.21% 0.50% 1.02% 1.08% 1.46% Expenses 0.70% 0.75%(3) 0.75%(3) 0.81%(3)(4) 0.79%(3) - ------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(5) 56% 56% 66% 65% 58%
1. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 2. Annualized for periods less than one full year. 3. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. 4. The expense ratio was 0.79% net of the voluntary reimbursement by the Manager. 5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended December 31, 1999, were $751,087,611 and $525,369,517, respectively. See accompanying Notes to Financial Statements. 14 Oppenheimer Capital Appreciation Fund/VA - -------------------------------------------------------------------------------- Notes to Financial Statements - -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies Oppenheimer Capital Appreciation Fund/VA (the Fund), formerly known as Oppenheimer Growth Fund, is a separate series of Oppenheimer Variable Account Funds (the Trust), a diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek capital appreciation by investing in securities of well-known established companies. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The following is a summary of significant accounting policies consistently followed by the Fund. - -------------------------------------------------------------------------------- Securities Valuation. Portfolio securities are valued at the close of the New York Stock Exchange on each trading day. Listed and unlisted securities for which such information is regularly reported are valued at the last sale price of the day or, in the absence of sales, at values based on the closing bid or the last sale price on the prior trading day. Long-term and short-term "non-money market" debt securities are valued by a portfolio pricing service approved by the Board of Trustees. Such securities which cannot be valued by an approved portfolio pricing service are valued using dealer-supplied valuations provided the Manager is satisfied that the firm rendering the quotes is reliable and that the quotes reflect current market value, or are valued under consistently applied procedures established by the Board of Trustees to determine fair value in good faith. Short-term "money market type" debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Foreign currency exchange contracts are valued based on the closing prices of the foreign currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. Options are valued based upon the last sale price on the principal exchange on which the option is traded or, in the absence of any transactions that day, the value is based upon the last sale price on the prior trading date if it is within the spread between the closing bid and asked prices. If the last sale price is outside the spread, the closing bid is used. - -------------------------------------------------------------------------------- Foreign Currency Translation. The accounting records of the Fund are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange. Amounts related to the purchase and sale of foreign securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund's Statement of Operations. - -------------------------------------------------------------------------------- Repurchase Agreements. The Fund requires the custodian to take possession, to have legally segregated in the Federal Reserve Book Entry System or to have segregated within the custodian's vault, all securities held as collateral for repurchase agreements. The market value of the underlying securities is required to be at least 102% of the resale price at the time of purchase. If the seller of the agreement defaults and the value of the collateral declines, or if the seller enters an insolvency proceeding, realization of the value of the collateral by the Fund may be delayed or limited. - -------------------------------------------------------------------------------- Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by loss carryovers to shareholders. - -------------------------------------------------------------------------------- Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. Oppenheimer Capital Appreciation Fund/VA 15 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies (continued) Classification of Distributions to Shareholders. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes primarily because of the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes. The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund. The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, during the year ended December 31, 1999, amounts have been reclassified to reflect an increase in undistributed net investment income of $10,522. Accumulated net realized gain on investments was decreased by the same amount. - -------------------------------------------------------------------------------- Expense Offset Arrangements. Expenses paid indirectly represent a reduction of custodian fees for earnings on cash balances maintained by the Fund. - -------------------------------------------------------------------------------- Other. Investment transactions are accounted for as of trade date and dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Realized gains and losses on investments and unrealized appreciation and depreciation are determined on an identified cost basis, which is the same basis used for federal income tax purposes. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. ================================================================================ 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of no par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:
Year Ended December 31, 1999 Year Ended December 31, 1998 --------------------------------- -------------------------------- Shares Amount Shares Amount - -------------------------------------------------------------------------------------------------------------------------------- Sold 13,631,886 $ 546,735,927 8,866,513 $293,095,063 Dividends and/or distributions reinvested 958,989 35,645,615 1,565,397 51,470,268 Redeemed (6,954,081) (276,502,220) (4,699,071) (153,929,105) ---------- ------------- ---------- ------------ Net increase 7,636,794 $ 305,879,322 5,732,839 $190,636,226 ========== ============= ========== ============
================================================================================ 3. Unrealized Gains and Losses on Securities As of December 31, 1999, net unrealized appreciation on securities of $466,812,893 was composed of gross appreciation of $520,306,180, and gross depreciation of $53,493,287. ================================================================================ 4. Management Fees and Other Transactions with Affiliates Management Fees. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund, which provides for a fee of 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million and 0.60% of average annual net assets over $800 million. The Fund's management fee for the year ended December 31, 1999 was 0.68% of average annual net assets. - -------------------------------------------------------------------------------- Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, is the transfer agent for the Fund and is responsible for maintaining the shareholder registry and shareholder accounting records for the Fund. OFS provides these services for cost. 16 Oppenheimer Capital Appreciation Fund/VA - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 5. Foreign Currency Contracts A foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. The Fund may enter into foreign currency contracts for operational purposes and to seek to protect against adverse exchange rate fluctuations. Risks to the Fund include the potential inability of the counterparty to meet the terms of the contract. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates as provided by a reliable bank, dealer or pricing service. Unrealized appreciation and depreciation on foreign currency contracts are reported in the Statement of Assets and Liabilities. The Fund may realize a gain or loss upon the closing or settlement of the foreign currency transactions. Realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. Securities denominated in foreign currency to cover net exposure on outstanding foreign currency contracts are noted in the Statement of Investments where applicable. - -------------------------------------------------------------------------------- Independent Auditors' Report - -------------------------------------------------------------------------------- ================================================================================ To the Board of Trustees and Shareholders of Oppenheimer High Income Fund/VA: We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Oppenheimer High Income Fund/VA (which is a series of Oppenheimer Variable Account Funds) as of December 31, 1999, the related statement of operations for the year then ended, the statements of changes in net assets for the years ended December 31, 1999 and 1998 and the financial highlights for the period January 1, 1995, to December 31, 1999. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Oppenheimer High Income Fund/VA as of December 31, 1999, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP - --------------------------- Deloitte & Touche LLP Denver, Colorado January 24, 2000 - -------------------------------------------------------------------------------- Statement of Investments December 31, 1999 - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 ================================================================================================================================ Mortgage-Backed Obligations--1.9% AMRESCO Commercial Mortgage Funding I Corp., Multiclass Mtg. Pass-Through Certificates, Series 1997-C1, Cl. H, 7%, 6/17/29(2) $ 200,000 $ 131,750 - -------------------------------------------------------------------------------------------------------------------------------- Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates: Series 1997-D4, Cl. B1, 7.525%, 4/14/29(3) 167,000 119,092 Series 1997-D4, Cl. B2, 7.525%, 4/14/29(3) 167,000 115,856 Series 1997-D4, Cl. B3, 7.525%, 4/14/29(3) 166,000 104,580 - -------------------------------------------------------------------------------------------------------------------------------- CBA Mortgage Corp., Mtg. Pass-Through Certificates: Series 1993-C1, Cl. E, 6.72%, 12/25/03(2)(3) 250,000 214,922 Series 1993-C1, Cl. F, 6.72%, 12/25/03(2)(3) 700,000 584,500 - -------------------------------------------------------------------------------------------------------------------------------- First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates: Series 1997, Cl. D, 8.126%, 5/25/08(2)(3) 300,000 234,000 Series 1997, Cl. E, 8.126%, 2/25/11(2)(3) 1,500,000 1,005,000 - -------------------------------------------------------------------------------------------------------------------------------- Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates, Series 1996-C1, Cl. E, 7.421%, 3/15/06(2)(3) 835,342 684,850 - -------------------------------------------------------------------------------------------------------------------------------- Mortgage Capital Funding, Inc., Commercial Mtg. Pass-Through Certificates, Series 1997-MC1, Cl. F, 7.452%, 5/20/07(2) 254,890 192,840 - -------------------------------------------------------------------------------------------------------------------------------- Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates: Series 1994-C1, Cl. E, 8%, 6/25/26 619,807 595,742 Series 1994-C2, Cl. G, 8%, 4/25/25 672,810 639,591 Series 1995-C1, Cl. F, 6.90%, 2/25/27 458,833 412,735 - -------------------------------------------------------------------------------------------------------------------------------- Salomon Brothers Mortgage Securities VII, Series 1996-B, Cl. 1, 6.581%, 4/25/26(2) 1,420,875 937,334 - -------------------------------------------------------------------------------------------------------------------------------- Structured Asset Securities Corp., Multiclass Pass-Through Certificates, Series 1996-C3, Cl. E, 8.256%, 6/25/30(4) 650,000 645,937 ---------- Total Mortgage-Backed Obligations (Cost $7,051,518) 6,618,729 ================================================================================================================================ Foreign Government Obligations--0.8% - -------------------------------------------------------------------------------------------------------------------------------- Argentina (Republic of) Bonds, Bonos de Consolidacion de Deudas, Series I, 2.868%, 4/1/07(3)ARP 1,417,740 992,552 - -------------------------------------------------------------------------------------------------------------------------------- Bulgaria (Republic of) Interest Arrears Bonds, 6.50%, 7/28/11(3) 1,450,000 1,147,312 - -------------------------------------------------------------------------------------------------------------------------------- Panama (Republic of) Interest Reduction Bonds, 4.25%, 7/17/14(3) 275,000 215,875 - -------------------------------------------------------------------------------------------------------------------------------- Peru (Republic of) Past Due Interest Bonds, Series 20 yr., 4.25%, 3/7/17(3) 400,000 277,000 - -------------------------------------------------------------------------------------------------------------------------------- PT Hutama Karya Promissory Nts., Zero Coupon, 2/10/98(2)(5)(8)IDR 1,000,000,000 39,356 ---------- Total Foreign Government Obligations (Cost $2,588,032) 2,672,095 ================================================================================================================================ Loan Participations--1.8% - -------------------------------------------------------------------------------------------------------------------------------- Central Bank of Indonesia Gtd. Nts., Series 2 yr., 8.906%, 8/25/00(2)(3) 1,000,000 970,000 - -------------------------------------------------------------------------------------------------------------------------------- Shoshone Partners Loan Trust Sr. Nts., 7.955%, 4/28/02 (representing a basket of reference loans and a total return swap between Chase Manhattan Bank and the Trust)(2)(3) 5,360,000 5,266,377 ---------- Total Loan Participations (Cost $6,313,570) 6,236,377
Oppenheimer High Income Fund/VA 5 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 ================================================================================================================================ Corporate Bonds and Notes--83.1% - -------------------------------------------------------------------------------------------------------------------------------- Aerospace/Defense--2.6% Amtran, Inc.: 9.625% Nts., 12/15/05 $ 800,000 $ 772,000 10.50% Sr. Nts., 8/1/04 700,000 703,500 10.75% Sr. Nts., 8/1/05 700,000 717,500 - -------------------------------------------------------------------------------------------------------------------------------- Atlas Air, Inc.: 9.25% Sr. Nts., 4/15/08 1,325,000 1,272,000 9.375% Sr. Unsec. Nts., 11/15/06 1,000,000 970,000 - -------------------------------------------------------------------------------------------------------------------------------- BE Aerospace, Inc., 9.50% Sr. Unsec. Sub. Nts., 11/1/08 900,000 850,500 - -------------------------------------------------------------------------------------------------------------------------------- Constellation Finance LLC, 9.80% Airline Receivable Asset-Backed Nts., Series 1997-1, 1/1/01(2) 800,000 744,000 - -------------------------------------------------------------------------------------------------------------------------------- Decrane Aircraft Holdings, Inc., 12% Sr. Unsec. Sub. Nts., Series B, 9/30/08 1,750,000 1,618,750 - -------------------------------------------------------------------------------------------------------------------------------- Fairchild Corp., 10.75% Sr. Unsec. Sub. Nts., 4/15/09 1,000,000 853,750 - -------------------------------------------------------------------------------------------------------------------------------- Pegasus Aircraft Lease Securitization Trust, 11.76% Sr. Nts., Series 1997-A, Cl. B, 6/15/04(2) 288,566 294,886 ---------- 8,796,886 - -------------------------------------------------------------------------------------------------------------------------------- Chemicals--2.7% ClimaChem, Inc., 10.75% Sr. Unsec. Nts., Series B, 12/1/07 500,000 127,500 - -------------------------------------------------------------------------------------------------------------------------------- Georgia Gulf Corp., 10.375% Sr. Sub. Nts., 11/1/07(4) 300,000 314,625 - -------------------------------------------------------------------------------------------------------------------------------- Huntsman Corp./ICI Chemical Co. plc: 10.125% Sr. Unsec. Sub. Nts., 7/1/09(4) 800,000 832,000 10.125% Sr. Unsec. Sub. Nts., 7/1/09EUR 500,000 534,650 Zero Coupon Sr. Disc. Nts., 13.09%, 12/31/09(4)(6) 1,500,000 459,375 - -------------------------------------------------------------------------------------------------------------------------------- Lyondell Chemical Co.: 9.875% Sec. Nts., Series B, 5/1/07 500,000 512,500 10.875% Sr. Sub. Nts., 5/1/09 100,000 103,500 - -------------------------------------------------------------------------------------------------------------------------------- PCI Chemicals Canada, Inc., 9.25% Sec. Nts., 10/15/07 500,000 387,500 - -------------------------------------------------------------------------------------------------------------------------------- Pioneer Americas Acquisition Corp., 9.25% Sr. Nts., 6/15/07 400,000 318,000 - -------------------------------------------------------------------------------------------------------------------------------- Polymer Group, Inc.: 8.75% Sr. Sub. Nts., 3/1/08 1,500,000 1,447,500 9% Sr. Sub. Nts., 7/1/07 250,000 243,750 - -------------------------------------------------------------------------------------------------------------------------------- Royster-Clark, Inc., 10.25% First Mtg. Nts., 4/1/09(4) 650,000 591,500 - -------------------------------------------------------------------------------------------------------------------------------- Sovereign Specialty Chemicals, Inc., 9.50% Sr. Unsec. Sub. Nts., Series B, 8/1/07 795,000 802,950 - -------------------------------------------------------------------------------------------------------------------------------- Sterling Chemicals Holdings, Inc., 0%/13.50% Sr. Disc. Nts., 8/15/08(7) 650,000 167,375 - -------------------------------------------------------------------------------------------------------------------------------- Sterling Chemicals, Inc.: 11.25% Sr. Sub. Nts., 4/1/07 250,000 185,000 11.75% Sr. Unsec. Sub. Nts., 8/15/06 750,000 566,250 12.375% Sr. Sec. Nts., Series B, 7/15/06 600,000 624,000 - -------------------------------------------------------------------------------------------------------------------------------- ZSC Specialty Chemical plc, 11% Sr. Nts., 7/1/09(4) 800,000 834,000 ---------- 9,051,975 - -------------------------------------------------------------------------------------------------------------------------------- Consumer Durables--0.2% Holmes Products Corp., 9.875% Sr. Unsec. Sub. Nts., Series B, 11/15/07 425,000 312,375 - -------------------------------------------------------------------------------------------------------------------------------- TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(2) 350,000 383,803 ---------- 696,178
6 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Consumer Non-Durables--1.8% AKI Holdings, Inc.: 0%/13.50% Sr. Disc. Debs., 7/1/09(7) $1,080,000 $ 515,700 10.50% Sr. Unsec. Nts., 7/1/08 1,000,000 895,000 - -------------------------------------------------------------------------------------------------------------------------------- Bell Sports, Inc., 11% Sr. Unsec. Sub. Nts., Series B, 8/15/08 1,100,000 1,105,500 - -------------------------------------------------------------------------------------------------------------------------------- Fruit of the Loom, Inc., 8.875% Sr. Unsec. Nts., 4/15/06(8) 600,000 33,000 - -------------------------------------------------------------------------------------------------------------------------------- Globe Manufacturing Corp., 10% Sr. Unsec. Sub. Nts., Series B, 8/1/08 900,000 436,500 - -------------------------------------------------------------------------------------------------------------------------------- Phillips-Van Heusen Corp., 9.50% Sr. Unsec. Sub. Nts., 5/1/08 620,000 579,700 - -------------------------------------------------------------------------------------------------------------------------------- Revlon Consumer Products Corp.: 8.625% Sr. Unsec. Sub. Nts., 2/1/08 250,000 126,250 9% Sr. Nts., 11/1/06 1,185,000 894,675 - -------------------------------------------------------------------------------------------------------------------------------- Salton, Inc., 10.75% Sr. Unsec. Sub. Nts., 12/15/05 1,200,000 1,233,000 - -------------------------------------------------------------------------------------------------------------------------------- Styling Technology Corp., 10.875% Sr. Unsec. Sub. Nts., 7/1/08(2) 600,000 213,000 - -------------------------------------------------------------------------------------------------------------------------------- William Carter Co., 10.375% Sr. Sub. Nts., Series A, 12/1/06 235,000 212,675 ----------- 6,245,000 - -------------------------------------------------------------------------------------------------------------------------------- Energy--4.5% Chesapeake Energy Corp.: 9.125% Sr. Unsec. Nts., 4/15/06 1,000,000 917,500 9.625% Sr. Unsec. Nts., Series B, 5/1/05 1,000,000 947,500 - -------------------------------------------------------------------------------------------------------------------------------- Clark Refinancing & Marketing, Inc., 8.875% Sr. Sub. Nts., 11/15/07 1,040,000 546,000 - -------------------------------------------------------------------------------------------------------------------------------- Clark USA, Inc., 10.875% Sr. Nts., Series B, 12/1/05 275,000 111,375 - -------------------------------------------------------------------------------------------------------------------------------- Denbury Management, Inc., 9% Sr. Sub. Nts., 3/1/08 800,000 732,000 - -------------------------------------------------------------------------------------------------------------------------------- Empresa Electric Del Norte, 10.50% Sr. Debs., 6/15/05(2) 1,000,000 470,933 - -------------------------------------------------------------------------------------------------------------------------------- Forcenergy, Inc., 8.50% Sr. Sub. Nts., Series B, 2/15/07(5)(8) 700,000 573,125 - -------------------------------------------------------------------------------------------------------------------------------- Frontier Oil Corp., 11.75% Sr. Nts., 11/15/09 400,000 396,000 - -------------------------------------------------------------------------------------------------------------------------------- Gothic Production Corp., 11.125% Sr. Sec. Nts., Series B, 5/1/05(4) 2,000,000 1,710,000 - -------------------------------------------------------------------------------------------------------------------------------- Grant Geophysical, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/15/08 1,025,000 650,875 - -------------------------------------------------------------------------------------------------------------------------------- Leviathan Gas Pipeline Partners, LP/Leviathan Finance Corp., 10.375% Sr. Unsec. Sub. Nts., Series B, 6/1/09 500,000 517,500 - -------------------------------------------------------------------------------------------------------------------------------- National Energy Group, Inc., 10.75% Sr. Nts., Series D, 11/1/06(5)(8) 810,000 425,250 - -------------------------------------------------------------------------------------------------------------------------------- Ocean Rig Norway AS, 10.25% Sr. Sec. Nts., 6/1/08 1,420,000 1,185,700 - -------------------------------------------------------------------------------------------------------------------------------- Pogo Producing Co., 8.75% Sr. Sub. Nts., Series B, 5/15/07 800,000 764,000 - -------------------------------------------------------------------------------------------------------------------------------- R&B Falcon Corp., 12.25% Sr. Unsec. Nts., 3/15/06 1,000,000 1,095,000 - -------------------------------------------------------------------------------------------------------------------------------- RAM Energy, Inc., 11.50% Sr. Unsec. Nts., 2/15/08 1,060,000 492,900 - -------------------------------------------------------------------------------------------------------------------------------- RBF Finance Co.: 11% Sr. Sec. Nts., 3/15/06 1,000,000 1,070,000 11.375% Sr. Sec. Nts., 3/15/09 500,000 537,500 - -------------------------------------------------------------------------------------------------------------------------------- Statia Terminals International/Statia Terminals (Canada), Inc., 11.75% First Mtg. Nts., Series B, 11/15/03 225,000 230,344 - -------------------------------------------------------------------------------------------------------------------------------- Stone Energy Corp., 8.75% Sr. Sub. Nts., 9/15/07 735,000 720,300 - -------------------------------------------------------------------------------------------------------------------------------- Universal Compression Holdings, Inc.: 0%/9.875% Sr. Disc. Nts., 2/15/08(7) 1,325,000 828,125 0%/11.375% Sr. Disc. Nts., 2/15/09(7) 720,000 385,200 ----------- 15,307,127
Oppenheimer High Income Fund/VA 7 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Financial--1.7% AMRESCO, Inc., 9.875% Sr. Sub. Nts., Series 98-A, 3/15/05 $ 700,000 $ 444,500 - -------------------------------------------------------------------------------------------------------------------------------- ASAT Finance LLC, Units (each unit consists of $1,000 principal amount of 12.50% sr. nts., 11/1/06 and one warrant to purchase shares of common stock)(4)(9) 500,000 540,000 - -------------------------------------------------------------------------------------------------------------------------------- Bakrie Investindo, Zero Coupon Promissory Nts., 3/26/98(2)(5)(8)IDR 1,000,000,000 21,467 - -------------------------------------------------------------------------------------------------------------------------------- Bank Plus Corp., 12% Sr. Nts., 7/18/07 517,000 411,015 - -------------------------------------------------------------------------------------------------------------------------------- Local Financial Corp., 11% Sr. Nts., 9/8/04(4) 800,000 836,000 - -------------------------------------------------------------------------------------------------------------------------------- Ocwen Capital Trust I, 10.875% Capital Nts., 8/1/27(2) 450,000 290,250 - -------------------------------------------------------------------------------------------------------------------------------- PT Polysindo Eka Perkasa, 24% Nts., 6/19/03(5)(8)IDR 657,200,000 12,227 - -------------------------------------------------------------------------------------------------------------------------------- Saul (B.F.) Real Estate Investment Trust, 9.75% Sr. Sec. Nts., Series B, 4/1/08 2,165,000 1,989,094 - -------------------------------------------------------------------------------------------------------------------------------- Southern Pacific Funding Corp., 11.50% Sr. Nts., 11/1/04(5)(8) 240,000 114,000 - -------------------------------------------------------------------------------------------------------------------------------- Sovereign Bankcorp, 10.50% Sr. Unsec. Nts., 11/15/06 600,000 615,000 - -------------------------------------------------------------------------------------------------------------------------------- Veritas Capital Trust, 10% Nts., 1/1/28 550,000 413,875 ---------- 5,687,428 - -------------------------------------------------------------------------------------------------------------------------------- Food & Drug--0.7% Family Restaurants, Inc.: 9.75% Sr. Nts., 2/1/02 1,300,000 617,500 10.875% Sr. Sub. Disc. Nts., 2/1/04 100,000 45,500 - -------------------------------------------------------------------------------------------------------------------------------- Fleming Cos., Inc., 10.625% Sr. Sub. Nts., Series B, 7/31/07 1,135,000 1,030,012 - -------------------------------------------------------------------------------------------------------------------------------- Pathmark Stores, Inc.: 10.75% Jr. Sub. Deferred Coupon Nts., 11/1/03 2,710,000 338,750 12.625% Sub. Nts., 6/15/02 900,000 301,500 ---------- 2,333,262 - -------------------------------------------------------------------------------------------------------------------------------- Food/Tobacco--1.8% Aurora Foods, Inc., 8.75% Sr. Sub. Nts., Series B, 7/1/08 520,000 497,900 - -------------------------------------------------------------------------------------------------------------------------------- Del Monte Foods Co., 0%/12.50% Sr. Disc. Nts., Series B, 12/15/07(7) 501,000 388,275 - -------------------------------------------------------------------------------------------------------------------------------- New World Pasta Co., 9.25% Sr. Nts., 2/15/09 1,200,000 1,086,000 - -------------------------------------------------------------------------------------------------------------------------------- Packaged Ice, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/1/05 1,600,000 1,472,000 - -------------------------------------------------------------------------------------------------------------------------------- Purina Mills, Inc., 9% Sr. Unsec. Sub. Nts., 3/15/10(8) 400,000 102,000 - -------------------------------------------------------------------------------------------------------------------------------- SmithField Foods, Inc., 7.625% Sr. Unsec. Sub. Nts., 2/15/08 925,000 837,125 - -------------------------------------------------------------------------------------------------------------------------------- Sparkling Spring Water Group Ltd., 11.50% Sr. Sec. Sub. Nts., 11/15/07 1,175,000 957,625 - -------------------------------------------------------------------------------------------------------------------------------- Triarc Consumer Products Group LLC, 10.25% Sr. Sub. Nts., 2/15/09(4) 750,000 731,250 ---------- 6,072,175
8 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Forest Products/Containers--2.3% American Pad & Paper Co., 13% Sr. Sub. Nts., Series B, 11/15/05(8) $ 400,000 $ 46,000 - -------------------------------------------------------------------------------------------------------------------------------- Ball Corp.: 7.75% Sr. Unsec. Nts., 8/1/06 700,000 686,000 8.25% Sr. Unsec. Sub. Nts., 8/1/08 800,000 772,000 - -------------------------------------------------------------------------------------------------------------------------------- Gaylord Container Corp., 9.75% Sr. Nts., 6/15/07 500,000 473,750 - -------------------------------------------------------------------------------------------------------------------------------- Packaging Corp. of America, 9.625% Sr. Unsec. Sub. Nts., 4/1/09 750,000 769,687 - -------------------------------------------------------------------------------------------------------------------------------- Repap New Brunswick, Inc.: 9% First Priority Sr. Sec. Nts., 6/1/04 250,000 246,250 10.625% Second Priority Sr. Sec. Nts., 4/15/05 700,000 654,500 - -------------------------------------------------------------------------------------------------------------------------------- Riverwood International Corp.: 10.625% Sr. Unsec. Nts., 8/1/07 1,130,000 1,169,550 10.875% Sr. Sub. Nts., 4/1/08 750,000 742,500 - -------------------------------------------------------------------------------------------------------------------------------- SD Warren Co., 14% Unsec. Nts., 12/15/06(10) 1,158,749 1,303,593 - -------------------------------------------------------------------------------------------------------------------------------- Tembec Industries, Inc., 8.625% Sr. Nts., 6/30/09 800,000 802,000 ----------- 7,665,830 - -------------------------------------------------------------------------------------------------------------------------------- Gaming/Leisure--5.0% AP Holdings, Inc., 0%/11.25% Sr. Disc. Nts., 3/15/08(7) 450,000 182,250 - -------------------------------------------------------------------------------------------------------------------------------- Apcoa, Inc., 9.25% Sr. Unsec. Sub. Nts., 3/15/08 940,000 662,700 - -------------------------------------------------------------------------------------------------------------------------------- Aztar Corp., 8.875% Sr. Unsec. Sub. Nts., 5/15/07 550,000 530,750 - -------------------------------------------------------------------------------------------------------------------------------- Capital Gaming International, Inc., 11.50% Promissory Nts., 8/1/95(5) 9,500 --- - -------------------------------------------------------------------------------------------------------------------------------- Capstar Hotel Co., 8.75% Sr. Sub. Nts., 8/15/07 840,000 778,050 - -------------------------------------------------------------------------------------------------------------------------------- Coast Hotel & Casinos, Inc., 9.50% Sr. Unsec. Sub. Nts., 4/1/09 500,000 480,000 - -------------------------------------------------------------------------------------------------------------------------------- Empress Entertainment, Inc., 8.125% Sr. Sub. Nts., 7/1/06 500,000 507,500 - -------------------------------------------------------------------------------------------------------------------------------- Florida Panthers Holdings, Inc., 9.875% Sr. Sub. Nts., 4/15/09 800,000 780,000 - -------------------------------------------------------------------------------------------------------------------------------- Hard Rock Hotel, Inc., 9.25% Sr. Sub. Nts., 4/1/05 700,000 500,500 - -------------------------------------------------------------------------------------------------------------------------------- Harveys Casino Resorts, 10.625% Sr. Unsec. Sub. Nts., 6/1/06 120,000 124,500 - -------------------------------------------------------------------------------------------------------------------------------- Hollywood Casino Corp., 11.25% Sr. Sec. Nts., 5/1/07 500,000 525,000 - -------------------------------------------------------------------------------------------------------------------------------- Hollywood Park, Inc., 9.25% Sr. Unsec. Sub. Nts., Series B, 2/15/07 1,000,000 996,250 - -------------------------------------------------------------------------------------------------------------------------------- Horseshoe Gaming LLC, 9.375% Sr. Sub. Nts., 6/15/07 1,300,000 1,300,000 - -------------------------------------------------------------------------------------------------------------------------------- Intrawest Corp., 9.75% Sr. Nts., 8/15/08 1,500,000 1,477,500 - -------------------------------------------------------------------------------------------------------------------------------- Isle of Capri Casinos, Inc., 8.75% Sr. Unsec. Nts., 4/15/09 1,200,000 1,110,000 - -------------------------------------------------------------------------------------------------------------------------------- Jupiters Ltd., 8.50% Sr. Unsec. Nts., 3/1/06 1,000,000 960,000 - -------------------------------------------------------------------------------------------------------------------------------- Mohegan Tribal Gaming Authority, 8.75% Sr. Unsec. Sub. Nts., 1/1/09 1,500,000 1,485,000 - -------------------------------------------------------------------------------------------------------------------------------- Premier Parks, Inc.: 0%/10% Sr. Disc. Nts., 4/1/08(7) 1,200,000 834,000 9.25% Sr. Nts., 4/1/06 600,000 592,500 9.75% Sr. Nts., 6/15/07 750,000 750,000 - -------------------------------------------------------------------------------------------------------------------------------- Six Flags Entertainment Corp., 8.875% Sr. Nts., 4/1/06 1,000,000 981,250 - -------------------------------------------------------------------------------------------------------------------------------- Station Casinos, Inc.: 9.75% Sr. Sub. Nts., 4/15/07 800,000 808,000 10.125% Sr. Sub. Nts., 3/15/06 800,000 820,000 ----------- 17,185,750
Oppenheimer High Income Fund/VA 9 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Healthcare--2.5% Charles River Labs ONC, Units (each unit consists of $1,000 principal amount of 13.50% sr. sub. nts., 10/1/09 and one warrant to purchase 3.942 shares of common stock)(4)(9) $1,100,000 $1,149,500 - -------------------------------------------------------------------------------------------------------------------------------- Fresenius Medical Care Capital Trust II, 7.875% Nts., 2/1/08 2,525,000 2,335,625 - -------------------------------------------------------------------------------------------------------------------------------- ICN Pharmaceutical, Inc., 8.75% Sr. Nts., 11/15/08(4) 1,365,000 1,310,400 - -------------------------------------------------------------------------------------------------------------------------------- King Pharmaceuticals, Inc., 10.75% Sr. Unsec. Sub. Nts., 2/15/09 1,250,000 1,331,250 - -------------------------------------------------------------------------------------------------------------------------------- Magellan Health Services, Inc., 9% Sr. Sub. Nts., 2/15/08 1,000,000 815,000 - -------------------------------------------------------------------------------------------------------------------------------- Oxford Health Plans, Inc., 11% Sr. Unsec. Nts., 5/15/05 450,000 434,250 - -------------------------------------------------------------------------------------------------------------------------------- Tenet Healthcare Corp.: 8.125% Sr. Unsec. Sub. Nts., Series B, 12/1/08 250,000 233,750 8.625% Sr. Sub. Nts., 1/15/07 300,000 291,000 - -------------------------------------------------------------------------------------------------------------------------------- Unilab Finance Corp., 12.75% Sr. Sub. Nts., 10/1/09(4) 450,000 468,000 ---------- 8,368,775 - -------------------------------------------------------------------------------------------------------------------------------- Housing--2.1% CB Richard Ellis Services, Inc., 8.875% Sr. Unsec. Sub. Nts., 6/1/06 900,000 805,500 - -------------------------------------------------------------------------------------------------------------------------------- D.R. Horton, Inc., 8% Sr. Nts., 2/1/09 500,000 460,000 - -------------------------------------------------------------------------------------------------------------------------------- Del Webb Corp., 10.25% Sr. Unsec. Sub. Nts., 2/15/10 600,000 586,500 - -------------------------------------------------------------------------------------------------------------------------------- Engle Homes, Inc., 9.25% Sr. Unsec. Nts., Series C, 2/1/08 1,300,000 1,176,500 - -------------------------------------------------------------------------------------------------------------------------------- Formica Corp., 10.875% Sr. Unsec. Sub. Nts., Series B, 3/1/09 1,000,000 925,000 - -------------------------------------------------------------------------------------------------------------------------------- Nortek, Inc.: 8.875% Sr. Unsec. Nts., Series B, 8/1/08 250,000 238,750 9.125% Sr. Nts., Series B, 9/1/07 1,400,000 1,361,500 9.25% Sr. Nts., Series B, 3/15/07 625,000 612,500 - -------------------------------------------------------------------------------------------------------------------------------- Panolam Industries International, Inc., 11.50% Sr. Sub. Nts., 2/15/09(4) 1,000,000 1,022,500 ---------- 7,188,750 - -------------------------------------------------------------------------------------------------------------------------------- Information Technology--1.8% Amkor Technologies, Inc.: 9.25% Sr. Nts., 5/1/06(4) 800,000 784,000 10.50% Sr. Sub. Nts., 5/1/09(4) 500,000 500,000 - -------------------------------------------------------------------------------------------------------------------------------- Cherokee International LLC, 10.50% Sr. Sub. Nts., 5/1/09 1,000,000 885,000 - -------------------------------------------------------------------------------------------------------------------------------- Chippac International Ltd., 12.75% Sr. Sub. Nts., 8/1/09(4) 250,000 262,500 - -------------------------------------------------------------------------------------------------------------------------------- Details, Inc., 10% Sr. Sub. Nts., Series B, 11/15/05 500,000 462,500 - -------------------------------------------------------------------------------------------------------------------------------- Dyncorp, Inc., 9.50% Sr. Sub. Nts., 3/1/07 625,000 552,344 - -------------------------------------------------------------------------------------------------------------------------------- Fairchild Semiconductor International, Inc., 10.375% Sr. Unsec. Nts., 10/1/07 850,000 877,625 - -------------------------------------------------------------------------------------------------------------------------------- Fisher Scientific International, Inc., 9% Sr. Unsec. Sub. Nts., 2/1/08 1,115,000 1,074,581 - -------------------------------------------------------------------------------------------------------------------------------- Unisys Corp., 11.75% Sr. Nts., 10/15/04 275,000 301,812 - -------------------------------------------------------------------------------------------------------------------------------- Wavetek Corp., 10.125% Sr. Sub. Nts., 6/15/07 500,000 413,125 ---------- 6,113,487
10 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Manufacturing--2.2% American Standard Cos., Inc., 7.625% Sr. Nts., 2/15/10 $1,500,000 $1,376,250 - -------------------------------------------------------------------------------------------------------------------------------- Applied Power, Inc., 8.75% Sr. Sub. Nts., 4/1/09 350,000 344,312 - -------------------------------------------------------------------------------------------------------------------------------- Axia, Inc., 10.75% Sr. Sub. Nts., 7/15/08 420,000 386,925 - -------------------------------------------------------------------------------------------------------------------------------- Blount, Inc., 13% Sr. Sub. Nts., 8/1/09(4) 800,000 848,000 - -------------------------------------------------------------------------------------------------------------------------------- Burke Industries, Inc., 10% Sr. Sub. Nts., 8/15/07 400,000 166,000 - -------------------------------------------------------------------------------------------------------------------------------- Eagle-Picher Industries, Inc., 9.375% Sr. Unsec. Sub. Nts., 3/1/08 850,000 743,750 - -------------------------------------------------------------------------------------------------------------------------------- Grove Worldwide LLC, 9.25% Sr. Sub. Nts., 5/1/08 800,000 228,000 - -------------------------------------------------------------------------------------------------------------------------------- Hydrochem Industrial Services, Inc., 10.375% Sr. Sub. Nts., 8/1/07 250,000 215,625 - -------------------------------------------------------------------------------------------------------------------------------- Insilco Corp., 12% Sr. Sub. Nts., 8/15/07 765,000 757,350 - -------------------------------------------------------------------------------------------------------------------------------- International Wire Group, Inc., 11.75% Sr. Sub. Nts., Series B, 6/1/05 500,000 518,750 - -------------------------------------------------------------------------------------------------------------------------------- Jordan Industries, Inc., 10.375% Sr. Unsec. Nts., Series D, 8/1/07 700,000 703,500 - -------------------------------------------------------------------------------------------------------------------------------- Moll Industries, Inc., 10.50% Sr. Unsec. Sub. Nts., 7/1/08 560,000 226,800 - -------------------------------------------------------------------------------------------------------------------------------- Roller Bearing Co. of America, Inc., 9.625% Sr. Sub. Nts., Series B, 6/15/07 560,000 509,600 - -------------------------------------------------------------------------------------------------------------------------------- Terex Corp., 8.875% Sr. Unsec. Sub. Nts., 4/1/08 630,000 598,500 ---------- 7,623,362 - -------------------------------------------------------------------------------------------------------------------------------- Media/Entertainment: Broadcasting--2.1% AMFM Operating, Inc., 12.625% Debs., 10/31/06(10) 148,500 169,290 - -------------------------------------------------------------------------------------------------------------------------------- Chancellor Media Corp.: 8.75% Sr. Unsec. Sub. Nts., Series B, 6/15/07 975,000 987,187 9% Sr. Unsec. Sub. Nts., 10/1/08 1,700,000 1,776,500 10.50% Sr. Sub. Nts., Series B, 1/15/07 450,000 490,500 - -------------------------------------------------------------------------------------------------------------------------------- Emmis Communications Corp., 8.125% Sr. Unsec. Sub. Nts., Series B, 3/15/09 1,500,000 1,432,500 - -------------------------------------------------------------------------------------------------------------------------------- Radio One, Inc., 7% Sr. Sub. Nts., Series B, 5/15/04(3) 400,000 428,000 - -------------------------------------------------------------------------------------------------------------------------------- RCN Corp., 10.125% Sr. Unsec. Nts., 1/15/10 1,250,000 1,250,000 - -------------------------------------------------------------------------------------------------------------------------------- Spanish Broadcasting System, Inc., 9.625% Sr. Sub. Nts., 11/1/09 600,000 606,000 ---------- 7,139,977
Oppenheimer High Income Fund/VA 11 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Media/Entertainment: Cable/Wireless Video--4.9% Adelphia Communications Corp.: 7.875% Sr. Unsec. Nts., 5/1/09 $ 360,000 $ 324,900 8.125% Sr. Nts., Series B, 7/15/03 1,000,000 965,000 8.375% Sr. Nts., Series B, 2/1/08 1,000,000 932,500 9.25% Sr. Nts., 10/1/02 390,000 390,000 9.875% Sr. Nts., Series B, 3/1/07 140,000 142,800 10.50% Sr. Unsec. Nts., Series B, 7/15/04 340,000 354,450 - -------------------------------------------------------------------------------------------------------------------------------- Bresnan Communications, Inc.: 0%/9.25% Sr. Disc. Nts., 2/1/09(7) 810,000 562,950 8% Sr. Nts., 2/1/09 250,000 252,812 - -------------------------------------------------------------------------------------------------------------------------------- Charter Communication Holdings LLC/Charter Communication Holdings Capital Corp.: 0%/9.92% Sr. Unsec. Disc. Nts., 4/1/11(7) 2,200,000 1,300,750 8.25% Sr. Unsec. Nts., 4/1/07 350,000 324,625 8.625% Sr. Unsec. Nts., 4/1/09 250,000 232,187 - -------------------------------------------------------------------------------------------------------------------------------- CSC Holdings, Inc.: 7.875% Sr. Unsec. Debs., 2/15/18 1,000,000 957,500 9.875% Sr. Sub. Nts., 5/15/06 350,000 371,000 10.50% Sr. Sub. Debs., 5/15/16 250,000 278,750 - -------------------------------------------------------------------------------------------------------------------------------- Diva Systems Corp., 0%/12.625% Sr. Disc. Nts., Series B, 3/1/08(7) 500,000 197,500 - -------------------------------------------------------------------------------------------------------------------------------- EchoStar DBS Corp., 9.375% Sr. Unsec. Nts., 2/1/09 3,500,000 3,535,000 - -------------------------------------------------------------------------------------------------------------------------------- Falcon Holding Group LP: 0%/9.285% Sr. Disc. Debs., Series B, 4/15/10(7) 1,300,000 979,875 8.375% Sr. Unsec. Debs., Series B, 4/15/10 2,200,000 2,230,250 - -------------------------------------------------------------------------------------------------------------------------------- Insight Midwest LP/Insight Capital, Inc., 9.75% Sr. Nts., 10/1/09(4) 700,000 726,250 - -------------------------------------------------------------------------------------------------------------------------------- NTL Communications Corp., 9.875% Sr. Nts., 11/15/09(4)EUR 600,000 608,369 - -------------------------------------------------------------------------------------------------------------------------------- Rogers Communications, Inc., 8.75% Sr. Nts., 7/15/07CAD 500,000 348,062 - -------------------------------------------------------------------------------------------------------------------------------- United International Holdings, Inc., 0%/10.75% Sr. Disc. Nts., Series B, 2/15/08(7) 1,040,000 670,800 ----------- 16,686,330 - -------------------------------------------------------------------------------------------------------------------------------- Media/Entertainment: Diversified Media--3.1% Ackerley Group, Inc., 9% Sr. Unsec. Sub. Nts., Series B, 1/15/09 1,250,000 1,225,000 - -------------------------------------------------------------------------------------------------------------------------------- AMC Entertainment, Inc., 9.50% Sr. Unsec. Sub. Nts., 2/1/11 1,100,000 979,000 - -------------------------------------------------------------------------------------------------------------------------------- GSP I Corp., 10.15% First Mtg. Bonds, 6/24/10(4) 446,433 415,335 - -------------------------------------------------------------------------------------------------------------------------------- IPC Magazines Group plc, 0%/10.75% Bonds, 3/15/08(7)GBP 1,200,000 751,208 - -------------------------------------------------------------------------------------------------------------------------------- Lamar Media Corp., 9.625% Sr. Unsec. Sub. Nts., 12/1/06 815,000 835,375 - -------------------------------------------------------------------------------------------------------------------------------- Metromedia International Group, Inc., 0%/10.50% Sr. Unsec. Disc. Nts., 9/30/07(2)(7) 214,074 101,685 - -------------------------------------------------------------------------------------------------------------------------------- Premier Graphics, Inc., 11.50% Sr. Unsec. Nts., 12/1/05 700,000 493,500 - -------------------------------------------------------------------------------------------------------------------------------- Regal Cinemas, Inc.: 8.875% Sr. Unsec. Sub. Nts., 12/15/10 750,000 532,500 9.50% Sr. Unsec. Sub. Nts., 6/1/08 800,000 608,000
12 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Media/Entertainment: Diversified Media (continued) SFX Entertainment, Inc.: 9.125% Sr. Unsec. Sub. Nts., 12/1/08 $ 900,000 $ 859,500 9.125% Sr. Unsec. Sub. Nts., Series B, 2/1/08 1,800,000 1,705,500 - -------------------------------------------------------------------------------------------------------------------------------- TV Guide, Inc., 8.125% Sr. Unsec. Sub. Nts., 3/1/09 250,000 250,625 - -------------------------------------------------------------------------------------------------------------------------------- World Color Press, Inc., 7.75% Sr. Unsec. Sub. Nts., 2/15/09 1,000,000 955,000 - -------------------------------------------------------------------------------------------------------------------------------- WRC Media Corp., Units (each unit consists of $1,000 principal amount of 12.75% sr. sub. nts., 11/15/09 and one warrant to purchase 1.353 shares of common stock)(4)(9) 1,000,000 997,500 ----------- 10,709,728 - -------------------------------------------------------------------------------------------------------------------------------- Media/Entertainment: Telecommunications--20.1% Adelphia Business Solutions, Inc., 12% Sr. Sub. Nts., 11/1/07 1,200,000 1,284,000 - -------------------------------------------------------------------------------------------------------------------------------- Amazon.com, Inc., 0%/10% Sr. Unsec. Disc. Nts., 5/1/08(7) 3,200,000 2,048,000 - -------------------------------------------------------------------------------------------------------------------------------- COLT Telecom Group plc: 0%/12% Sr. Unsec. Disc. Nts., 12/15/06(7) 225,000 194,625 7.625% Bonds, 7/31/08DEM 1,925,000 991,774 8.875% Sr. Nts., 11/30/07DEM 250,000 134,430 10.125% Sr. Nts., 11/30/07GBP 400,000 678,510 Units (each unit consists of $1,000 principal amount of 0%/12% sr. disc. nts., 12/15/06 and one warrant to purchase 7.8 ordinary shares)(7)(9) 1,775,000 1,801,625 - -------------------------------------------------------------------------------------------------------------------------------- Concentric Network Corp., 12.75% Sr. Unsec. Nts., 12/15/07 800,000 846,000 - -------------------------------------------------------------------------------------------------------------------------------- Convergent Communications, Inc., 13% Sr. Nts., 4/1/08 200,000 141,500 - -------------------------------------------------------------------------------------------------------------------------------- Covad Communications Group, Inc., 0%/13.50% Sr. Disc. Nts., 3/15/08(7) 1,500,000 952,500 - -------------------------------------------------------------------------------------------------------------------------------- Diamond Cable Communications plc, 0%/11.75% Sr. Disc. Nts., 12/15/05(7) 2,350,000 2,232,500 - -------------------------------------------------------------------------------------------------------------------------------- Diamond Holdings plc, 9.125% Sr. Nts., 2/1/08 400,000 398,000 - -------------------------------------------------------------------------------------------------------------------------------- Equinix, Inc., Units (each unit consists of $1,000 principal amount of 13% sr. nts., 12/1/07 and one warrant to purchase 11.255 shares of common stock)(4)(9) 1,000,000 1,025,000 - -------------------------------------------------------------------------------------------------------------------------------- ESAT Telecom Group plc, 11.875% Sr. Unsec. Unsub. Nts., 11/1/09EUR 500,000 568,264 - -------------------------------------------------------------------------------------------------------------------------------- Exodus Communications, Inc.: 10.75% Sr. Nts., 12/15/09(4) 250,000 255,625 10.75% Sr. Nts., 12/15/09(4)EUR 1,000,000 1,025,270 11.25% Sr. Nts., 7/1/08 1,900,000 1,971,250 - -------------------------------------------------------------------------------------------------------------------------------- FirstWorld Communications, Inc., 0%/13% Sr. Disc. Nts., 4/15/08(7) 500,000 277,500 - -------------------------------------------------------------------------------------------------------------------------------- Focal Communications Corp., 0%/12.125% Sr. Unsec. Disc. Nts., 2/15/08(7) 500,000 327,500 - -------------------------------------------------------------------------------------------------------------------------------- Global Crossing Ltd., 9.625% Sr. Nts., 5/15/08 950,000 954,750 - -------------------------------------------------------------------------------------------------------------------------------- Global Telesystems Group, Inc., 10.50% Sr. Unsec. Bonds, 12/1/06(4)EUR 350,000 356,643 - -------------------------------------------------------------------------------------------------------------------------------- GST Telecommunications, Inc.: 0%/12.75% Sr. Sub. Nts., 11/15/07(7) 1,250,000 1,192,187 0%/13.875% Cv. Sr. Sub. Disc. Nts., 12/15/05(4)(7) 178,000 199,360 - -------------------------------------------------------------------------------------------------------------------------------- ICG Holdings, Inc., 0%/12.50% Sr. Sec. Disc. Nts., 5/1/06(7) 115,000 86,537 - -------------------------------------------------------------------------------------------------------------------------------- ICG Services, Inc., 0%/10% Sr. Exchangeable Unsec. Disc. Nts., 2/15/08(7) 1,220,000 649,650 - -------------------------------------------------------------------------------------------------------------------------------- Intermedia Communications, Inc.: 0%/12.25% Sr. Disc. Nts., Series B, 3/1/09(7) 800,000 481,000 8.50% Sr. Nts., Series B, 1/15/08 660,000 607,200 8.60% Sr. Unsec. Nts., Series B, 6/1/08 300,000 276,000 8.875% Sr. Nts., 11/1/07 460,000 430,100
Oppenheimer High Income Fund/VA 13 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Media/Entertainment: Telecommunications (continued) ITC Deltacom, Inc.: 8.875% Sr. Nts., 3/1/08 $1,000,000 $ 962,500 11% Sr. Nts., 6/1/07 750,000 795,000 - -------------------------------------------------------------------------------------------------------------------------------- Jazztel plc, 13.25% Sr. Nts., 12/15/09(4)EUR 2,000,000 2,026,637 - -------------------------------------------------------------------------------------------------------------------------------- KMC Telecom Holdings, Inc.: 0%/12.50% Sr. Unsec. Disc. Nts., 2/15/08(7) 1,250,000 718,750 13.50% Sr. Nts., 5/15/09(4) 200,000 201,000 - -------------------------------------------------------------------------------------------------------------------------------- Level 3 Communications, Inc.: 0%/10.50% Sr. Disc. Nts., 12/1/08(7) 900,000 549,000 9.125% Sr. Unsec. Nts., 5/1/08 700,000 663,250 - -------------------------------------------------------------------------------------------------------------------------------- McLeodUSA, Inc., 8.125% Sr. Unsec. Nts., 2/15/09 300,000 281,250 - -------------------------------------------------------------------------------------------------------------------------------- Metromedia Fiber Network, Inc.: 10% Sr. Nts., 12/15/09 750,000 772,500 10% Sr. Nts., 12/15/09EUR 500,000 525,215 10% Sr. Unsec. Nts., Series B, 11/15/08 1,600,000 1,644,000 - -------------------------------------------------------------------------------------------------------------------------------- Netia Holdings BV, 0%/11% Sr. Disc. Nts., 11/1/07(7)DEM 700,000 235,928 - -------------------------------------------------------------------------------------------------------------------------------- Netia Holdings II BV, 13.125% Sr. Nts., 6/15/09 1,350,000 1,360,125 - -------------------------------------------------------------------------------------------------------------------------------- NEXTLINK Communications, Inc.: 9% Sr. Nts., 3/15/08 800,000 756,000 9.625% Sr. Nts., 10/1/07 1,210,000 1,185,800 10.75% Sr. Unsec. Nts., 6/1/09 200,000 206,500 10.75% Sr. Unsec. Nts., 11/15/08 1,200,000 1,242,000 - -------------------------------------------------------------------------------------------------------------------------------- NTL Communications Corp.: 0%/9.78% Sr. Nts., 11/15/09(4)(7)EUR 500,000 296,259 0%/12.375% Sr. Unsec. Nts., Series B, 10/1/08(7) 1,000,000 712,500 11.50% Sr. Unsec. Nts., Series B, 10/1/08 1,600,000 1,744,000 - -------------------------------------------------------------------------------------------------------------------------------- NTL, Inc.: 0%/9.75% Sr. Deferred Coupon Nts., Series B, 4/1/08(7) 350,000 243,250 0%/9.75% Sr. Nts., Series B, 4/15/09(7)GBP 3,225,000 3,012,026 7% Cv. Unsec. Sub. Nts., 12/15/08 550,000 1,454,750 10% Sr. Nts., Series B, 2/15/07 1,055,000 1,089,287 - -------------------------------------------------------------------------------------------------------------------------------- Optel, Inc., 13% Sr. Nts., Series B, 2/15/05(8) 1,000,000 745,000 - -------------------------------------------------------------------------------------------------------------------------------- PSINet, Inc.: 10% Sr. Unsec. Nts., Series B, 2/15/05 750,000 745,312 10.50% Sr. Nts., 12/1/06(4)EUR 1,250,000 1,273,725 - -------------------------------------------------------------------------------------------------------------------------------- Qwest Communications International, Inc., 0%/9.47% Sr. Disc. Nts., 10/15/07(7) 1,000,000 815,000 - -------------------------------------------------------------------------------------------------------------------------------- RSL Communications plc: 9.125% Sr. Unsec. Nts., 3/1/08 500,000 440,000 10.50% Gtd. Sr. Nts., 11/15/08 1,450,000 1,370,250 - -------------------------------------------------------------------------------------------------------------------------------- Tele1 Europe BV, 11.875% Sr. Nts., 12/1/09(4)EUR 1,200,000 1,218,247 - -------------------------------------------------------------------------------------------------------------------------------- Telewest Communications plc: 0%/9.25% Sr. Nts., 4/15/09(4)(7) 1,500,000 952,500 0%/9.875% Sr. Nts., 4/15/09(4)(7)GBP 1,300,000 1,333,596 0%/11% Sr. Disc. Debs., 10/1/07(7) 990,000 928,125 11.25% Sr. Nts., 11/1/08 1,990,000 2,169,100 - -------------------------------------------------------------------------------------------------------------------------------- Teligent, Inc., 11.50% Sr. Nts., 12/1/07 400,000 388,000 - -------------------------------------------------------------------------------------------------------------------------------- Time Warner Telecom LLC, 9.75% Sr. Nts., 7/15/08 700,000 724,500
14 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Media/Entertainment: Telecommunications (continued) United Pan-Europe Communications NV: 0%/13.375% Sr. Disc. Nts., 11/1/09(4)(7) $1,000,000 $ 565,000 0%/13.375% Sr. Disc. Nts., 11/1/09(4)(7)EUR 500,000 288,711 10.875% Sr. Nts., 8/1/09EUR 250,000 255,059 10.875% Sr. Nts., 8/1/09 2,500,000 2,543,750 11.25% Sr. Nts., 11/1/09(4)EUR 500,000 514,522 - -------------------------------------------------------------------------------------------------------------------------------- Verio, Inc.: 10.375% Sr. Unsec. Nts., 4/1/05 1,480,000 1,517,000 10.625% Sr. Nts., 11/15/09(4) 500,000 515,000 11.25% Sr. Unsec. Nts., 12/1/08 700,000 738,500 13.50% Sr. Unsec. Nts., 6/15/04 385,000 424,463 - -------------------------------------------------------------------------------------------------------------------------------- Versatel Telecom International BV: 11.875% Sr. Nts., 7/15/09 800,000 816,000 11.875% Sr. Nts., 7/15/09EUR 150,000 160,772 - -------------------------------------------------------------------------------------------------------------------------------- Viatel, Inc., 11.25% Sr. Sec. Nts., 4/15/08 830,000 827,925 - -------------------------------------------------------------------------------------------------------------------------------- WAM!NET, Inc., 0%/13.25% Sr. Unsec. Disc. Nts., Series B, 3/1/05(7) 1,750,000 1,023,750 - -------------------------------------------------------------------------------------------------------------------------------- Worldwide Fiber, Inc., 12% Sr. Nts., 8/1/09(4) 200,000 207,000 ----------- 68,565,634 - -------------------------------------------------------------------------------------------------------------------------------- Media/Entertainment: Wireless Communications--8.7% Arch Communications, Inc., 12.75% Sr. Nts., 7/1/07 200,000 159,250 - -------------------------------------------------------------------------------------------------------------------------------- CellNet Data Systems, Inc., 0%/14% Sr. Disc. Nts., 10/1/07(7) 1,834,000 199,448 - -------------------------------------------------------------------------------------------------------------------------------- Centennial Cellular Corp., 10.75% Sr. Sub. Nts., 12/15/08 800,000 860,000 - -------------------------------------------------------------------------------------------------------------------------------- Crown Castle International Corp.: 0%/10.375% Sr. Disc. Nts., 5/15/11(7) 700,000 441,000 0%/10.625% Sr. Unsec. Disc. Nts., 11/15/07(7) 940,000 710,875 9% Sr. Nts., 5/15/11 750,000 735,938 - -------------------------------------------------------------------------------------------------------------------------------- CTI Holdings SA, 0%/11.50% Sr. Deferred Coupon Nts., 4/15/08(7) 1,000,000 577,500 - -------------------------------------------------------------------------------------------------------------------------------- Dobson Communications Corp., 11.75% Sr. Nts., 4/15/07 240,000 272,400 - -------------------------------------------------------------------------------------------------------------------------------- Geotek Communications, Inc., 0%/15% Sr. Sec. Disc. Nts., Series B, 7/15/05(5)(7)(8) 226,000 91,530 - -------------------------------------------------------------------------------------------------------------------------------- ICO Global Communications (Holdings) Ltd., Units (each unit consists of $1,000 principal amount of 15% sr. nts., 8/1/05 and one warrant to purchase 19.85 shares of common stock)(8)(9) 700,000 325,500 - -------------------------------------------------------------------------------------------------------------------------------- Loral Space & Communications Ltd., 9.50% Sr. Nts., 1/15/06 700,000 633,500 - -------------------------------------------------------------------------------------------------------------------------------- Microcell Telecommunications, Inc.: 0%/12% Sr. Unsec. Disc. Nts., 6/1/09(7) 1,000,000 648,750 0%/14% Sr. Disc. Nts., Series B, 6/1/06(7) 700,000 621,250 - -------------------------------------------------------------------------------------------------------------------------------- Millicom International Cellular SA, 0%/13.50% Sr. Disc. Nts., 6/1/06(7) 300,000 241,500 - -------------------------------------------------------------------------------------------------------------------------------- Nextel Communications, Inc.: 0%/9.75% Sr. Disc. Nts., 10/31/07(7) 250,000 180,000 0%/10.65% Sr. Disc. Nts., 9/15/07(7) 1,000,000 750,000 9.375% Sr. Nts., 11/15/09(4) 1,000,000 985,000 - -------------------------------------------------------------------------------------------------------------------------------- Omnipoint Corp.: 11.50% Sr. Nts., 9/15/09(4) 2,200,000 2,376,000 11.625% Sr. Nts., 8/15/06 1,000,000 1,065,000 11.625% Sr. Nts., Series A, 8/15/06 1,900,000 2,023,500 - -------------------------------------------------------------------------------------------------------------------------------- Orange plc, 8% Sr. Nts., 8/1/08 2,600,000 2,635,750
Oppenheimer High Income Fund/VA 15 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Media/Entertainment: Wireless Communications (continued) ORBCOMM Global LP/ORBCOMM Capital Corp., 14% Sr. Nts., 8/15/04 $ 600,000 $ 435,000 - -------------------------------------------------------------------------------------------------------------------------------- Orion Network Systems, Inc., 0%/12.50% Sr. Disc. Nts., 1/15/07(7) 1,150,000 534,750 - -------------------------------------------------------------------------------------------------------------------------------- Pinnacle Holdings, Inc., 0%/10% Sr. Unsec. Disc. Nts., 3/15/08(7) 2,400,000 1,584,000 - -------------------------------------------------------------------------------------------------------------------------------- Polska Telefoniz Cyfrowa International Financial II SA, 11.25% Sr. Sub. Nts., 12/1/09(4)EUR 400,000 407,592 - -------------------------------------------------------------------------------------------------------------------------------- Price Communications Wireless, Inc.: 9.125% Sr. Sec. Nts., Series B, 12/15/06 800,000 814,000 11.75% Sr. Sub. Nts., 7/15/07 425,000 465,375 - -------------------------------------------------------------------------------------------------------------------------------- Real Time Data Co., 11% Disc. Nts., 5/31/09(4)(10) 394,554 379,419 - -------------------------------------------------------------------------------------------------------------------------------- Rural Cellular Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 1,900,000 1,952,250 - -------------------------------------------------------------------------------------------------------------------------------- SBA Communications Corp., 0%/12% Sr. Unsec. Disc. Nts., 3/1/08(7) 2,720,000 1,618,400 - -------------------------------------------------------------------------------------------------------------------------------- Spectrasite Holdings, Inc.: 0%/11.25% Sr. Unsec. Disc. Nts., 4/15/09(7) 675,000 362,813 0%/12% Sr. Disc. Nts., 7/15/08(7) 1,640,000 988,100 - -------------------------------------------------------------------------------------------------------------------------------- Voicestream Wireless Corp., 10.375% Sr. Nts., 11/15/09(4) 3,500,000 3,622,500 ----------- 29,697,890 - -------------------------------------------------------------------------------------------------------------------------------- Metals/Minerals--2.3% AEI Resources, Inc., 11.50% Sr. Sub. Nts., 12/15/06(4) 750,000 489,375 - -------------------------------------------------------------------------------------------------------------------------------- AK Steel Corp.: 7.875% Sr. Unsec. Nts., 2/15/09 500,000 475,000 9.125% Sr. Nts., 12/15/06 1,200,000 1,227,000 - -------------------------------------------------------------------------------------------------------------------------------- California Steel Industries Corp., 8.50% Sr. Unsec. Nts., Series B, 4/1/09 500,000 482,500 - -------------------------------------------------------------------------------------------------------------------------------- Great Lakes Carbon Corp., 10.25% Sr. Sub. Nts., Series B, 5/15/08 1,500,000 1,432,500 - -------------------------------------------------------------------------------------------------------------------------------- International Utility Structures, Inc., 10.75% Sr. Sub. Nts., 2/1/08 400,000 338,000 - -------------------------------------------------------------------------------------------------------------------------------- Kaiser Aluminum & Chemical Corp., 12.75% Sr. Sub. Nts., 2/1/03 410,000 412,050 - -------------------------------------------------------------------------------------------------------------------------------- Metallurg Holdings, Inc., 0%/12.75% Sr. Disc. Nts., 7/15/08(7) 2,000,000 650,000 - -------------------------------------------------------------------------------------------------------------------------------- Metallurg, Inc., 11% Sr. Nts., 12/1/07 540,000 488,700 - -------------------------------------------------------------------------------------------------------------------------------- National Steel Corp., 9.875% First Mtg. Bonds, Series D, 3/1/09 600,000 621,000 - -------------------------------------------------------------------------------------------------------------------------------- P&L Coal Holdings Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 800,000 792,000 - -------------------------------------------------------------------------------------------------------------------------------- Republic Technologies International Holdings LLC/RTI Capital Corp., Units (each unit consists of $1,000 principal amount of 13.75% sr. nts., 7/15/09 and one warrant to purchase Cl. D common stock at $0.01 per share)(9) 800,000 532,000 ----------- 7,940,125 - -------------------------------------------------------------------------------------------------------------------------------- Retail--1.5% Boyds Collection Ltd. (The), 9% Sr. Unsec. Sub. Nts., Series B, 5/15/08 752,000 718,160 - -------------------------------------------------------------------------------------------------------------------------------- Dura Operating Corp., 9% Sr. Sub. Nts., Series B, 5/1/09 1,300,000 1,231,750 - -------------------------------------------------------------------------------------------------------------------------------- Eye Care Centers of America, Inc., 9.125% Sr. Unsec. Sub. Nts., 5/1/08 1,100,000 775,500 - -------------------------------------------------------------------------------------------------------------------------------- Finlay Enterprises, Inc., 9% Debs., 5/1/08 900,000 823,500 - -------------------------------------------------------------------------------------------------------------------------------- Finlay Fine Jewelry Corp., 8.375% Sr. Nts., 5/1/08 600,000 558,000 - -------------------------------------------------------------------------------------------------------------------------------- Home Interiors & Gifts, Inc., 10.125% Sr. Sub. Nts., 6/1/08 700,000 602,000 - -------------------------------------------------------------------------------------------------------------------------------- Pantry, Inc. (The), 10.25% Sr. Sub. Nts., 10/15/07 325,000 316,875 ----------- 5,025,785
16 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Service--3.3% Allied Waste North America, Inc.: 7.875% Sr. Unsec. Nts., Series B, 1/1/09 $1,000,000 $ 888,750 10% Sr. Sub. Nts., 8/1/09(4) 1,300,000 1,170,000 - -------------------------------------------------------------------------------------------------------------------------------- American Plumbing & Mechanical, Inc., 11.625% Gtd. Sr. Sub. Nts., 10/15/08(4) 500,000 478,750 - -------------------------------------------------------------------------------------------------------------------------------- Comforce Operating, Inc., 12% Sr. Nts., Series B, 12/1/07 750,000 463,125 - -------------------------------------------------------------------------------------------------------------------------------- Dura Operating Corp., 9% Sr. Sub. Nts., Series B, 5/1/09EUR 300,000 284,560 - -------------------------------------------------------------------------------------------------------------------------------- Integrated Electric Services, Inc., 9.375% Sr. Sub. Nts., Series B, 2/1/09 600,000 591,750 - -------------------------------------------------------------------------------------------------------------------------------- IT Group, Inc., 11.25% Sr. Unsec. Sub. Nts., Series B, 4/1/09 650,000 633,750 - -------------------------------------------------------------------------------------------------------------------------------- Norse CBO Ltd., 9.342% Sub. Bonds, Series 1A, Cl. C2, 8/13/10(2) 1,500,000 1,177,500 - -------------------------------------------------------------------------------------------------------------------------------- Protection One Alarm Monitoring, Inc.: 6.75% Cv. Sr. Sub. Nts., 9/15/03 950,000 456,000 7.375% Gtd. Sr. Unsec. Nts., 8/15/05 1,800,000 1,440,000 - -------------------------------------------------------------------------------------------------------------------------------- Stericycle, Inc., 12.375% Sr. Sub. Nts., 11/15/09(4) 700,000 720,125 - -------------------------------------------------------------------------------------------------------------------------------- United Rentals, Inc.: 9% Sr. Unsec. Sub. Nts., Series B, 4/1/09 350,000 332,500 9.25% Sr. Unsec. Sub. Nts., Series B, 1/15/09 1,700,000 1,640,500 - -------------------------------------------------------------------------------------------------------------------------------- US Unwired, Inc., 0%/13.375% Sr. Disc. Nts., 11/1/09(4)(7) 1,750,000 1,032,500 ----------- 11,309,810 - -------------------------------------------------------------------------------------------------------------------------------- Transportation--4.6% America West Airlines, Inc., 10.75% Sr. Nts., 9/1/05 1,000,000 976,250 - -------------------------------------------------------------------------------------------------------------------------------- Amtran, Inc., 10.50% Sr. Nts., 8/1/04(4) 500,000 502,500 - -------------------------------------------------------------------------------------------------------------------------------- Budget Group, Inc., 9.125% Sr. Unsec. Nts., 4/1/06 600,000 561,000 - -------------------------------------------------------------------------------------------------------------------------------- Great Lakes Dredge & Dock Corp., 11.25% Sr. Unsec. Sub. Nts., 8/15/08 915,000 960,750 - -------------------------------------------------------------------------------------------------------------------------------- Hayes Wheels International, Inc., 11% Sr. Sub. Nts., 7/15/06 600,000 630,000 - -------------------------------------------------------------------------------------------------------------------------------- HDA Parts System, Inc., 12% Sr. Sub. Nts., 8/1/05 950,000 869,250 - -------------------------------------------------------------------------------------------------------------------------------- Key Plastics, Inc., 10.25% Sr. Sub. Nts., Series B, 3/15/07 25,000 9,625 - -------------------------------------------------------------------------------------------------------------------------------- Millenium Seacarriers, Inc., Units (each unit consists of $1,000 principal amount of 11.63% first priority ship mtg. sr. sec. nts., 7/15/05 and one warrant to purchase five shares of common stock)(2)(3)(9) 700,000 402,500 - -------------------------------------------------------------------------------------------------------------------------------- Navigator Gas Transport plc: 10.50% First Priority Ship Mtg. Nts., 6/30/07(4) 1,175,000 546,375 Units (each unit consists of $1,000 principal amount of 12% second priority ship mtg. nts., 6/30/07 and 7.66 warrants)(4)(9) 500,000 37,500 - -------------------------------------------------------------------------------------------------------------------------------- Newcor, Inc., 9.875% Sr. Unsec. Sub. Nts., Series B, 3/1/08 1,500,000 787,500 - -------------------------------------------------------------------------------------------------------------------------------- Oxford Automotive, Inc., 10.125% Sr. Unsec. Sub. Nts., Series D, 6/15/07(2) 2,125,000 2,008,125 - -------------------------------------------------------------------------------------------------------------------------------- Pacific & Atlantic Holdings, Inc., 11.50% First Preferred Ship Mtg. Nts., 5/30/08(8) 700,000 269,500 - -------------------------------------------------------------------------------------------------------------------------------- Sea Containers Ltd., 7.875% Sr. Nts., 2/15/08 1,500,000 1,301,250 - -------------------------------------------------------------------------------------------------------------------------------- Tenneco, Inc., 11.625% Sr. Sub. Nts., 10/15/09(4) 1,000,000 1,025,000 - -------------------------------------------------------------------------------------------------------------------------------- Terex Corp., 8.875% Sr. Unsec. Sub. Nts., Series C, 4/1/08 400,000 380,000 - -------------------------------------------------------------------------------------------------------------------------------- Trans World Airlines Lease, 14% Equipment Trust, 7/2/08(2) 818,437 736,594 - -------------------------------------------------------------------------------------------------------------------------------- Trans World Airlines, Inc., 11.50% Sr. Sec. Nts., 12/15/04 1,700,000 1,102,875 - -------------------------------------------------------------------------------------------------------------------------------- Transtar Holdings LP/Transtar Capital Corp., 13.375% Sr. Disc. Nts., Series B, 12/15/03 2,600,000 2,665,000 ----------- 15,771,594
Oppenheimer High Income Fund/VA 17 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Utility--0.6% Calpine Corp.: 8.75% Sr. Nts., 7/15/07 $ 545,000 $ 549,088 10.50% Sr. Nts., 5/15/06 25,000 26,500 - -------------------------------------------------------------------------------------------------------------------------------- El Paso Electric Co., 9.40% First Mtg. Sec. Nts., Series E, 5/1/11(11) 555,000 594,266 - -------------------------------------------------------------------------------------------------------------------------------- ESI Tractebel Acquisition Corp., 7.99% Sec. Bonds, Series B, 12/30/11 1,000,000 894,694 ------------ 2,064,548 ------------ Total Corporate Bonds and Notes (Cost $308,366,702) 283,247,406 Shares ================================================================================================================================ Preferred Stocks--5.1% - -------------------------------------------------------------------------------------------------------------------------------- AmeriKing, Inc., 13% Cum. Sr. Exchangeable, Non-Vtg.(10) 16,509 301,289 - -------------------------------------------------------------------------------------------------------------------------------- CGA Group Ltd., Series A(2)(10) 76,590 1,914,750 - -------------------------------------------------------------------------------------------------------------------------------- Clark USA, Inc., 11.50% Cum. Sr. Exchangeable, Non-Vtg.(10) 480 130,800 - -------------------------------------------------------------------------------------------------------------------------------- Concentric Network Corp., 13.50% Sr. Redeemable Exchangeable, Series B, Non-Vtg.(10) 607 602,447 - -------------------------------------------------------------------------------------------------------------------------------- Dobson Communications Corp.: 12.25% Sr. Exchangeable, Non-Vtg.(10) 1,272 1,281,540 13% Sr. Exchangeable, Non-Vtg.(10) 1,065 1,163,512 - -------------------------------------------------------------------------------------------------------------------------------- e.spire Communications, Inc., 12.75% Jr. Redeemable, Non-Vtg.(10) 425 86,062 - -------------------------------------------------------------------------------------------------------------------------------- Eagle-Picher Holdings, Inc., 11.75% Cum. Exchangeable, Series B, Non-Vtg.(2)(5) 8,000 370,000 - -------------------------------------------------------------------------------------------------------------------------------- Fidelity Federal Bank FSB Glendale California, l2% Non-Cum. Exchangeable Perpetual, Series A(2) 20 300 - -------------------------------------------------------------------------------------------------------------------------------- Global Crossing Ltd., 10.50% Sr. Exchangeable(10) 7,500 755,625 - -------------------------------------------------------------------------------------------------------------------------------- ICG Holdings, Inc., 14.25% Exchangeable, Non-Vtg.(10) 307 280,138 - -------------------------------------------------------------------------------------------------------------------------------- Intermedia Communications, Inc., 13.50% Exchangeable, Series B(10) 905 889,163 - -------------------------------------------------------------------------------------------------------------------------------- Nebco Evans Holdings, Inc., 11.25% Sr. Redeemable Exchangeable Preferred Stock, Non-Vtg.(10) 7,274 81,833 - -------------------------------------------------------------------------------------------------------------------------------- Nextel Communications, Inc., 11.125% Exchangeable, Series E, Non-Vtg.(10) 1,285 1,288,213 - -------------------------------------------------------------------------------------------------------------------------------- NEXTLINK Communications, Inc., 14% Cum., Non-Vtg.(10) 32,136 1,727,310 - -------------------------------------------------------------------------------------------------------------------------------- Packaging Corp. of America, 12.375%(5)(10) 2,116 232,231 - -------------------------------------------------------------------------------------------------------------------------------- Paxson Communications Corp., 13.25% Cum. Jr. Exchangeable, Non-Vtg.(10) 48 492,000 - -------------------------------------------------------------------------------------------------------------------------------- PRIMEDIA, Inc.: 8.625% Exchangeable, Series H, Non-Vtg. 10,000 872,500 9.20% Exchangeable, Series F, Non-Vtg. 2,500 229,375 - -------------------------------------------------------------------------------------------------------------------------------- R&B Falcon Corp., 13.875% Cum., Non-Vtg.(10) 1,288 1,362,060 - -------------------------------------------------------------------------------------------------------------------------------- Rural Cellular Corp., 11.375% Cum. Sr., Series B, Non-Vtg.(10) 1,182 1,214,505 - -------------------------------------------------------------------------------------------------------------------------------- SF Holdings Group, Inc.: 13.75% Cum. Nts., Series B, 3/15/09, Non-Vtg.(10) 196 984,900 13.75% Exchangeable(4) 46 231,150 - -------------------------------------------------------------------------------------------------------------------------------- Star Gas Partners, LP 517 6,850 - -------------------------------------------------------------------------------------------------------------------------------- Walden Residential Properties, Inc.: 9.16% Cv., Series B, Non-Vtg. 30,000 723,750 9.20% Sr. 8,950 139,284 ------------ Total Preferred Stocks (Cost $20,061,434) 17,361,587
18 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 ================================================================================================================================ Common Stocks--0.3% - -------------------------------------------------------------------------------------------------------------------------------- Celcaribe SA(4)(5) 121,950 $198,169 - -------------------------------------------------------------------------------------------------------------------------------- ECM Fund, LPI(2) 150 131,438 - -------------------------------------------------------------------------------------------------------------------------------- Equitable Bag, Inc.(2)(5) 3,723 3,723 - -------------------------------------------------------------------------------------------------------------------------------- Gulfstream Holding, Inc.(5) 56 -- - -------------------------------------------------------------------------------------------------------------------------------- Horizon Group Properties, Inc.(5) 851 2,872 - -------------------------------------------------------------------------------------------------------------------------------- Optel, Inc.(5) 945 9 - -------------------------------------------------------------------------------------------------------------------------------- Price Communications Corp. 15,000 417,199 - -------------------------------------------------------------------------------------------------------------------------------- SF Holdings Group, Inc., Cl. C(5) 7,252 73 - -------------------------------------------------------------------------------------------------------------------------------- Weatherford International, Inc. 5,000 199,687 -------- Total Common Stocks (Cost $501,343) 953,170 Units ================================================================================================================================ Rights, Warrants and Certificates--0.7% - -------------------------------------------------------------------------------------------------------------------------------- Ames Department Stores, Inc., Litigation Trust Wts., Exp. 1/31/00(2) 39,658 397 - -------------------------------------------------------------------------------------------------------------------------------- Australis Holdings PTY Ltd./Australia Media Ltd. Wts., Exp. 5/15/00(2) 125 1 - -------------------------------------------------------------------------------------------------------------------------------- CellNet Data Systems, Inc. Wts., Exp. 10/1/07(4) 1,434 5,557 - -------------------------------------------------------------------------------------------------------------------------------- CGA Group Ltd. Wts., Exp. 6/16/07(2) 62,000 18,600 - -------------------------------------------------------------------------------------------------------------------------------- Clearnet Communications, Inc. Wts., Exp. 9/15/05 660 14,824 - -------------------------------------------------------------------------------------------------------------------------------- Concentric Network Corp. Wts., Exp. 12/15/07(2) 750 198,844 - -------------------------------------------------------------------------------------------------------------------------------- Covergent Communications, Inc. Wts., Exp. 4/1/08 2,000 24,500 - -------------------------------------------------------------------------------------------------------------------------------- Decrane Aircraft Holdings, Inc. Wts., Exp. 9/30/08 1,750 -- - -------------------------------------------------------------------------------------------------------------------------------- Diva Systems Corp. Wts., Exp. 3/1/08(2) 1,500 12,000 - -------------------------------------------------------------------------------------------------------------------------------- e.spire Communications, Inc. Wts., Exp. 11/1/05 475 2,583 - -------------------------------------------------------------------------------------------------------------------------------- FirstWorld Communications, Inc. Wts., Exp. 4/15/08(2) 500 75,062 - -------------------------------------------------------------------------------------------------------------------------------- Geotek Communications, Inc. Wts., Exp. 7/15/05(2) 52,500 525 - -------------------------------------------------------------------------------------------------------------------------------- Globix Corp. Wts., Exp. 5/1/05 1,800 432,000 - -------------------------------------------------------------------------------------------------------------------------------- Golden State Bancorp, Inc. Wts., Exp. 1/1/01 15,626 13,673 - -------------------------------------------------------------------------------------------------------------------------------- Gothic Energy Corp. Wts.: Exp. 1/23/03 8,351 -- Exp. 1/23/03(2) 4,766 48 Exp. 9/1/04(2) 14,000 14,882 - -------------------------------------------------------------------------------------------------------------------------------- ICG Communications, Inc. Wts., Exp. 9/15/05 5,940 73,300 - -------------------------------------------------------------------------------------------------------------------------------- In-Flight Phone Corp. Wts., Exp. 8/31/02 950 -- - -------------------------------------------------------------------------------------------------------------------------------- Insilco Corp. Wts., Exp. 8/15/07(2) 765 -- - -------------------------------------------------------------------------------------------------------------------------------- KMC Telecom Holdings, Inc. Wts., Exp. 4/15/08(2) 2,455 7,520 - -------------------------------------------------------------------------------------------------------------------------------- Long Distance International, Inc. Wts., Exp. 4/13/08(2) 800 400 - -------------------------------------------------------------------------------------------------------------------------------- Loral Space & Communications Ltd. Wts., Exp. 1/15/07(2) 800 9,700 - -------------------------------------------------------------------------------------------------------------------------------- Microcell Telecommunications, Inc. Wts., Exp. 6/1/06(2) 3,200 213,424 - -------------------------------------------------------------------------------------------------------------------------------- Millenium Seacarriers, Inc. Wts., Exp. 7/15/05(2) 1,500 1,687 - -------------------------------------------------------------------------------------------------------------------------------- Omnipoint Corp. Wts., Exp. 11/29/00(2) 7,500 904,687
Oppenheimer High Income Fund/VA 19 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Units Note 1 ================================================================================================================================ Rights, Warrants and Certificates (continued) PLD Telekom, Inc., 9% Cv. Sub. Nts. Wts., Exp. 3/31/03(2) 170 $ 8 - -------------------------------------------------------------------------------------------------------------------------------- Protection One Alarm Monitoring, Inc. Wts.: Exp. 11/1/03(2) 28,000 49,000 Exp. 6/30/05(2) 1,600 160 - -------------------------------------------------------------------------------------------------------------------------------- R&B Falcon Corp. Wts., Exp. 5/1/09(2) 1,200 300,000 - -------------------------------------------------------------------------------------------------------------------------------- Real Time Data Co. Wts., Exp. 5/31/04(2) 121,440 1,214 - -------------------------------------------------------------------------------------------------------------------------------- WAM!NET, Inc. Wts., Exp. 3/1/05(4) 5,250 117,469 ------------ Total Rights, Warrants and Certificates (Cost $198,136) 2,492,065 Principal Amount(1) ================================================================================================================================ Structured Instruments--0.5% - -------------------------------------------------------------------------------------------------------------------------------- Deutsche Morgan Grenfell, Lehman High Yield Index Linked Nts., 8.75%, 5/5/00 (Cost $1,500,000) $ 1,500,000 1,514,867 ================================================================================================================================ Repurchase Agreements--3.7% - -------------------------------------------------------------------------------------------------------------------------------- Repurchase agreement with Banc One Capital Markets, Inc., 2.75%, dated 12/31/99, to be repurchased at $12,702,910 on 1/3/00, collateralized by U.S. Treasury Bonds, 5.25%-12%, 2/15/01-11/15/28, with a value of $4,984,619 and U.S. Treasury Nts., 5%-7.50%, 12/31/00-2/15/07, with a value of $7,976,752 (Cost $12,700,000) 12,700,000 12,700,000 - -------------------------------------------------------------------------------------------------------------------------------- Total Investments, at Value (Cost $359,280,735) 97.9% 333,796,296 - -------------------------------------------------------------------------------------------------------------------------------- Other Assets Net of Liabilities 2.1 7,032,302 ----------- ------------ Net Assets 100.0% $340,828,598 =========== ============
1. Principal amount is reported in U.S. Dollars, except for those denoted in the following currencies: ARP -- Argentine Peso EUR -- Euro CAD -- Canadian Dollar GBP -- British Pound Sterling DEM -- German Mark IDR -- Indonesian Rupiah 2. Identifies issues considered to be illiquid or restricted--See Note 7 of Notes to Financial Statements. 3. Represents the current interest rate for a variable or increasing rate security. 4. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $43,166,117 or 12.67% of the Fund's net assets as of December 31, 1999. 5. Non-income producing security. 6. For zero coupon bonds, the interest rate shown is the effective yield on the date of purchase. 7. Denotes a step bond: a zero coupon bond that converts to a fixed or variable interest rate at a designated future date. 8. Issuer is in default. 9. Units may be comprised of several components, such as debt and equity and/or warrants to purchase equity at some point in the future. For units which represent debt securities, principal amount disclosed represents total underlying principal. 10. Interest or dividend is paid in kind. 11. A sufficient amount of securities has been designated to cover outstanding foreign currency contracts. See Note 5 of Notes to Financial Statements. See accompanying Notes to Financial Statements. 20 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Statement of Assets and Liabilities December 31, 1999 - -------------------------------------------------------------------------------- ================================================================================================== Assets Investments, at value (cost $359,280,735)--see accompanying statement $333,796,296 - -------------------------------------------------------------------------------------------------- Cash 1,071,946 - -------------------------------------------------------------------------------------------------- Receivables and other assets: Interest, dividends and principal paydowns 6,544,568 Shares of beneficial interest sold 178,609 Other 5,047 ------------ Total assets 341,596,466 ================================================================================================== Liabilities Unrealized depreciation on foreign currency contracts 85,050 - -------------------------------------------------------------------------------------------------- Payables and other liabilities: Shares of beneficial interest redeemed 604,732 Investments purchased 38,914 Trustees' compensation 210 Transfer and shareholder servicing agent fees 184 Other 38,778 ------------ Total liabilities 767,868 ================================================================================================== Net Assets $340,828,598 ============ ================================================================================================== Composition of Net Assets Paid-in capital $344,149,980 - -------------------------------------------------------------------------------------------------- Undistributed net investment income 32,932,864 - -------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (10,681,554) - -------------------------------------------------------------------------------------------------- Net unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies (25,572,692) ------------ Net assets--applicable to 31,781,566 shares of beneficial interest outstanding $340,828,598 ============ ================================================================================================== Net Asset Value, Redemption Price Per Share and Offering Price Per Share $10.72
See accompanying Notes to Financial Statements. Oppenheimer High Income Fund/VA 21 - -------------------------------------------------------------------------------- Statement of Operations For the Year ended December 31, 1999 - -------------------------------------------------------------------------------- ================================================================================================== Investment Income Interest $ 33,187,927 - -------------------------------------------------------------------------------------------------- Dividends (net of foreign withholding taxes of $61) 2,090,889 ------------ Total income 35,278,816 ================================================================================================== Expenses Management fees 2,511,521 - -------------------------------------------------------------------------------------------------- Custodian fees and expenses 8,866 - -------------------------------------------------------------------------------------------------- Trustees' compensation 3,792 - -------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees 2,104 - -------------------------------------------------------------------------------------------------- Other 26,642 ------------ Total expenses 2,552,925 Less expenses paid indirectly (12,847) ------------ Net expenses 2,540,078 ================================================================================================== Net Investment Income 32,738,738 ================================================================================================== Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments (6,397,480) Closing of futures contracts 138,192 Foreign currency transactions 262,847 ------------ Net realized loss (5,996,441) - -------------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation on: Investments (11,265,255) Translation of assets and liabilities denominated in foreign currencies (840,842) ------------ Net change (12,106,097) ------------ Net realized and unrealized loss (18,102,538) ================================================================================================== Net Increase in Net Assets Resulting from Operations $ 14,636,200 ============
See accompanying Notes to Financial Statements. 22 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 ================================================================================================================== Operations Net investment income $ 32,738,738 $ 27,929,383 - ------------------------------------------------------------------------------------------------------------------ Net realized loss (5,996,441) (2,889,367) - ------------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation or depreciation (12,106,097) (24,125,468) ------------ ------------ Net increase in net assets resulting from operations 14,636,200 914,548 ================================================================================================================== Dividends and/or Distributions to Shareholders Dividends from net investment income (23,246,834) (6,694,100) - ------------------------------------------------------------------------------------------------------------------ Distributions from net realized gain (8,113,249) ================================================================================================================== Beneficial Interest Transactions Net increase in net assets resulting from beneficial interest transactions 20,876,575 51,132,667 ================================================================================================================== Net Assets Total increase 12,265,941 37,239,866 - ------------------------------------------------------------------------------------------------------------------ Beginning of period 328,562,657 291,322,791 ------------ ------------ End of period (including undistributed net investment income of $32,932,864 and $23,046,774, respectively) $340,828,598 $328,562,657 ============ ============
See accompanying Notes to Financial Statements. Oppenheimer High Income Fund/VA 23 - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995 =========================================================================================================================== Per Share Operating Data Net asset value, beginning of period $11.02 $11.52 $11.13 $10.63 $ 9.79 - --------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 1.01 .95 .94 .97 .98 Net realized and unrealized gain (loss) (.55) (.90) .37 .58 .94 - --------------------------------------------------------------------------------------------------------------------------- Total income from investment operations .46 .05 1.31 1.55 1.92 - --------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.76) (.25) (.91) (1.05) (1.08) Distributions from net realized gain -- (.30) (.01) -- -- - --------------------------------------------------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (.76) (.55) (.92) (1.05) (1.08) - --------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.72 $11.02 $11.52 $11.13 $10.63 ====== ====== ====== ====== ====== =========================================================================================================================== Total Return, at Net Asset Value(1) 4.29% 0.31% 12.21% 15.26% 20.37% =========================================================================================================================== Ratios/Supplemental Data Net assets, end of period (in thousands) $340,829 $328,563 $291,323 $191,293 $133,451 - --------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $340,519 $322,748 $223,617 $157,203 $115,600 - --------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:(2) Net investment income 9.61% 8.65% 8.88% 9.18% 9.81% Expenses 0.75% 0.78%(3) 0.82%(3) 0.81%(3) 0.81%(3) - --------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(4) 33% 161% 168% 125% 107%
1. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 2. Annualized for periods less than one full year. 3. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. 4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended December 31, 1999, were $147,560,583 and $101,280,643, respectively. See accompanying Notes to Financial Statements. 24 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Notes to Financial Statements - -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies Oppenheimer High Income Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds (the Trust), a diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek a high level of current income from investment in high yield fixed income securities. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The following is a summary of significant accounting policies consistently followed by the Fund. - -------------------------------------------------------------------------------- Securities Valuation. Portfolio securities are valued at the close of the New York Stock Exchange on each trading day. Listed and unlisted securities for which such information is regularly reported are valued at the last sale price of the day or, in the absence of sales, at values based on the closing bid or the last sale price on the prior trading day. Long-term and short-term "non-money market" debt securities are valued by a portfolio pricing service approved by the Board of Trustees. Such securities which cannot be valued by an approved portfolio pricing service are valued using dealer-supplied valuations provided the Manager is satisfied that the firm rendering the quotes is reliable and that the quotes reflect current market value, or are valued under consistently applied procedures established by the Board of Trustees to determine fair value in good faith. Short-term "money market type" debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Foreign currency exchange contracts are valued based on the closing prices of the foreign currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. Options are valued based upon the last sale price on the principal exchange on which the option is traded or, in the absence of any transactions that day, the value is based upon the last sale price on the prior trading date if it is within the spread between the closing bid and asked prices. If the last sale price is outside the spread, the closing bid is used. - -------------------------------------------------------------------------------- Structured Notes. The Fund invests in foreign currency-linked structured notes whose market value and redemption price are linked to foreign currency exchange rates. The structured notes may be leveraged, which increases the notes' volatility relative to the face of the security. Fluctuations in value of these securities are recorded as unrealized gains and losses in the accompanying financial statements. As of December 31, 1999, the market value of these securities comprised 1.99% of the Fund's net assets and resulted in realized and unrealized losses of $1,583,690. The Fund also hedges a portion of the foreign currency exposure generated by these securities, as discussed in Note 5. - -------------------------------------------------------------------------------- Security Credit Risk. The Fund invests in high yield securities, which may be subject to a greater degree of credit risk, greater market fluctuations and risk of loss of income and principal, and may be more sensitive to economic conditions than lower yielding, higher rated fixed income securities. The Fund may acquire securities in default, and is not obligated to dispose of securities whose issuers subsequently default. As of December 31, 1999, securities with an aggregate market value of $2,797,955, representing 0.82% of the Fund's net assets, were in default. - -------------------------------------------------------------------------------- Foreign Currency Translation. The accounting records of the Fund are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange. Amounts related to the purchase and sale of foreign securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund's Statement of Operations. - -------------------------------------------------------------------------------- Repurchase Agreements. The Fund requires the custodian to take possession, to have legally segregated in the Federal Reserve Book Entry System or to have segregated within the custodian's vault, all securities held as collateral for repurchase agreements. The market value of the underlying securities is required to be at least 102% of the resale price at the time of purchase. If the seller of the agreement defaults and the value of the collateral declines, or if the seller enters an insolvency proceeding, realization of the value of the collateral by the Fund may be delayed or limited. Oppenheimer High Income Fund/VA 25 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies (continued) Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by loss carryovers to shareholders. As of December 31, 1999, the Fund had available for federal income tax purposes an unused capital loss carryover of approximately $8,335,000, which expires between 2006 and 2007. - -------------------------------------------------------------------------------- Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. - -------------------------------------------------------------------------------- Classification of Distributions to Shareholders. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes primarily because of paydown gains and losses and the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes. The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund. The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, during the year ended December 31, 1999, amounts have been reclassified to reflect an increase in undistributed net investment income of $394,186. Accumulated net realized loss on investments was increased by the same amount. - -------------------------------------------------------------------------------- Expense Offset Arrangements. Expenses paid indirectly represent a reduction of custodian fees for earnings on cash balances maintained by the Fund. - -------------------------------------------------------------------------------- Other. Investment transactions are accounted for as of trade date and dividend income is recorded on the ex-dividend date. Discount on securities purchased is amortized over the life of the respective securities, in accordance with federal income tax requirements. Realized gains and losses on investments and options written and unrealized appreciation and depreciation are determined on an identified cost basis, which is the same basis used for federal income tax purposes. Dividends-in-kind are recognized as income on the ex-dividend date, at the current market value of the underlying security. Interest on payment-in-kind debt instruments is accrued as income at the coupon rate and a market adjustment is made periodically. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. ================================================================================ 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of no par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:
Year Ended December 31, 1999 Year Ended December 31, 1998 ----------------------------- ---------------------------- Shares Amount Shares Amount - ------------------------------------------------------------------------------------------------------------------- Sold 13,810,332 $ 149,141,858 15,303,847 $ 171,699,925 Dividends and/or distributions reinvested 2,201,405 23,246,834 1,300,031 14,807,349 Redeemed (14,037,090) (151,512,117) (12,094,532) (135,374,607) ----------- ------------- ----------- ------------- Net increase 1,974,647 $ 20,876,575 4,509,346 $ 51,132,667 =========== ============= =========== =============
================================================================================ 3. Unrealized Gains and Losses on Securities As of December 31, 1999, net unrealized depreciation on securities of $25,484,439 was composed of gross appreciation of $8,906,207, and gross depreciation of $34,390,646. 26 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 4. Management Fees and Other Transactions with Affiliates Management Fees. Management Fees paid to the Manager were in accordance with the investment advisory agreement with the Trust. The annual fees are 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200 million and 0.50% of average annual net assets over $1 billion. The Fund's management fee for the year ended December 31, 1999, was 0.74% of average annual net assets. - -------------------------------------------------------------------------------- Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, is the transfer agent for the Fund and is responsible for maintaining the shareholder registry and shareholder accounting records for the Fund. OFS provides these services for cost. ================================================================================ 5. Foreign Currency Contracts A foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. The Fund may enter into foreign currency contracts for operational purposes and to seek to protect against adverse exchange rate fluctuations. Risks to the Fund include the potential inability of the counterparty to meet the terms of the contract. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates as provided by a reliable bank, dealer or pricing service. Unrealized appreciation and depreciation on foreign currency contracts are reported in the Statement of Assets and Liabilities. The Fund may realize a gain or loss upon the closing or settlement of the foreign currency transactions. Realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. Securities denominated in foreign currency to cover net exposure on outstanding foreign currency contracts are noted in the Statement of Investments where applicable. As of December 31, 1999, the Fund had outstanding foreign currency contracts as follows:
Expiration Contract Valuation as of Unrealized Contract Description Date Amount (000s) December 31, 1999 Depreciation - ------------------------------------------------------------------------------------------------------------ Contracts to Sell - ----------------- British Pound Sterling (GBP) 6/2/00-6/5/00 3,545 GBP $5,725,037 $78,449 Canadian Dollar (CAD) 6/1/00 540 CAD 374,449 6,601 ------- Total Unrealized Depreciation $85,050 =======
================================================================================ 6. Futures Contracts The Fund may buy and sell futures contracts in order to gain exposure to or to seek to protect against changes in interest rates. The Fund may also buy or write put or call options on these futures contracts. The Fund generally sells futures contracts to hedge against increases in interest rates and the resulting negative effect on the value of fixed rate portfolio securities. The Fund may also purchase futures contracts to gain exposure to changes in interest rates as it may be more efficient or cost effective than actually buying fixed income securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund may recognize a realized gain or loss when the contract is closed or expires. Oppenheimer High Income Fund/VA 27 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 6. Futures Contracts (continued) Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable and/or payable for the daily mark to market for variation margin. Risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. ================================================================================ 7. Illiquid or Restricted Securities As of December 31, 1999, investments in securities included issues that are illiquid or restricted. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may also be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund intends to invest no more than 15% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid or restricted securities. Certain restricted securities, eligible for resale to qualified institutional investors, are not subject to that limitation. The aggregate value of illiquid or restricted securities subject to this limitation as of December 31, 1999, was $21,334,042, which represents 6.26% of the Fund's net assets, of which $4,091,086 is considered restricted. Information concerning restricted securities is as follows:
Valuation Per Acquisition Cost Per Unit as of Security Date Unit December 31, 1999 - --------------------------------------------------------------------------------------------------------------------------- Bonds - ----- TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05 12/8/95-8/13/96 100.00%-105.75% 109.66% - --------------------------------------------------------------------------------------------------------------------------- Trans World Airlines Lease, 14% Equipment Trust, 7/2/08 3/19/98 101.00 90.00 Stocks and Warrants - ------------------- CGA Group Ltd. Wts., Exp. 6/16/07 6/17/97 $ -- $ 0.30 - --------------------------------------------------------------------------------------------------------------------------- CGA Group Ltd., Preferred Stock, Series A 6/17/98-12/29/98 24.97-25.03 25.00 - --------------------------------------------------------------------------------------------------------------------------- ECM Fund, LPI 4/14/92 1,000.00 876.25 - --------------------------------------------------------------------------------------------------------------------------- Omnipoint Corp. Wts., Exp. 11/29/00 11/29/95 -- 120.63 - --------------------------------------------------------------------------------------------------------------------------- Real Time Data Wts., Exp. 5/31/04 6/30/99 0.01 0.01
- -------------------------------------------------------------------------------- Independent Auditors' Report - -------------------------------------------------------------------------------- ================================================================================ To the Board of Trustees and Shareholders of Oppenheimer Aggressive Growth Fund/VA: We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Oppenheimer Aggressive Growth Fund/VA (which is a series of Oppenheimer Variable Account Funds) as of December 31, 1999, the related statement of operations for the year then ended, the statements of changes in net assets for the years ended December 31, 1999 and 1998 and the financial highlights for the period January 1, 1995, to December 31, 1999. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Oppenheimer Aggressive Growth Fund/VA as of December 31, 1999, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP __________________________ Deloitte & Touche LLP Denver, Colorado January 24, 2000 - -------------------------------------------------------------------------------- Statement of Investments December 31, 1999 - --------------------------------------------------------------------------------
Market Value Shares Note 1 =============================================================================================================== Common Stocks--88.9% - --------------------------------------------------------------------------------------------------------------- Capital Goods--5.4% - --------------------------------------------------------------------------------------------------------------- Electrical Equipment--3.4% E-Tek Dynamics, Inc.(1) 537,400 $ 72,347,475 - --------------------------------------------------------------------------------------------------------------- Manufacturing--2.0% Tyco International Ltd. 1,095,000 42,568,125 - --------------------------------------------------------------------------------------------------------------- Communication Services--2.5% - --------------------------------------------------------------------------------------------------------------- Telecommunications: Long Distance--2.5% Copper Mountain Networks, Inc.(1) 17,400 848,250 - --------------------------------------------------------------------------------------------------------------- Exodus Communications, Inc.(1) 250,000 22,203,125 - --------------------------------------------------------------------------------------------------------------- Global Crossing Ltd.(1) 593,899 29,694,950 ------------ 52,746,325 - --------------------------------------------------------------------------------------------------------------- Consumer Cyclicals--9.9% - --------------------------------------------------------------------------------------------------------------- Consumer Services--1.2% Young & Rubicam, Inc. 351,300 24,854,475 - --------------------------------------------------------------------------------------------------------------- Retail: General--1.2% Kohl's Corp.(1) 360,000 25,987,500 - --------------------------------------------------------------------------------------------------------------- Retail: Specialty--7.5% Abercrombie & Fitch Co., Cl. A(1) 480,000 12,810,000 - --------------------------------------------------------------------------------------------------------------- Best Buy Co., Inc.(1) 630,000 31,618,125 - --------------------------------------------------------------------------------------------------------------- Linens 'N Things, Inc.(1) 669,000 19,819,125 - --------------------------------------------------------------------------------------------------------------- Tandy Corp. 915,000 45,006,562 - --------------------------------------------------------------------------------------------------------------- Tiffany & Co. 519,300 46,347,525 - --------------------------------------------------------------------------------------------------------------- Williams-Sonoma, Inc.(1) 25,000 1,150,000 ------------ 156,751,337 - --------------------------------------------------------------------------------------------------------------- Consumer Staples--4.0% - --------------------------------------------------------------------------------------------------------------- Broadcasting--2.0% Charter Communications, Inc., Cl. A(1) 983,500 21,514,062 - --------------------------------------------------------------------------------------------------------------- Spanish Broadcasting System, Inc., Cl. A(1) 280,600 11,294,150 - --------------------------------------------------------------------------------------------------------------- Univision Communications, Inc., Cl. A(1) 96,900 9,901,969 ------------ 42,710,181 - --------------------------------------------------------------------------------------------------------------- Entertainment--1.6% Royal Caribbean Cruises Ltd. 674,000 33,236,625 - --------------------------------------------------------------------------------------------------------------- Household Goods--0.4% Dial Corp. (The) 325,000 7,901,563 - --------------------------------------------------------------------------------------------------------------- Financial--1.4% - --------------------------------------------------------------------------------------------------------------- Diversified Financial--1.4% Schwab (Charles) Corp. 770,000 29,548,750
4 Oppenheimer Aggressive Growth Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - --------------------------------------------------------------------------------------------------------------- Healthcare--4.6% - --------------------------------------------------------------------------------------------------------------- Healthcare/Drugs--4.6% Biogen, Inc.(1) 636,600 $ 53,792,700 - --------------------------------------------------------------------------------------------------------------- Genentech, Inc.(1) 72,200 9,710,900 - --------------------------------------------------------------------------------------------------------------- Immunex Corp.(1) 300,000 32,850,000 ------------ 96,353,600 - --------------------------------------------------------------------------------------------------------------- Technology--60.7% - --------------------------------------------------------------------------------------------------------------- Computer Hardware--7.1% Dell Computer Corp.(1) 250,000 12,750,000 - --------------------------------------------------------------------------------------------------------------- EMC Corp.(1) 603,000 65,877,750 - --------------------------------------------------------------------------------------------------------------- Gateway, Inc.(1) 350,000 25,221,875 - --------------------------------------------------------------------------------------------------------------- Juniper Networks, Inc. 28,000 9,520,000 - --------------------------------------------------------------------------------------------------------------- Lexmark International Group, Inc., Cl. A(1) 400,000 36,200,000 ------------ 149,569,625 - --------------------------------------------------------------------------------------------------------------- Computer Services--0.5% Finisar Corp(1) 39,800 3,577,025 - --------------------------------------------------------------------------------------------------------------- Foundry Networks, Inc.(1) 18,200 5,490,713 - --------------------------------------------------------------------------------------------------------------- High Speed Access Corp.(1) 114,800 2,023,350 ------------ 11,091,088 - --------------------------------------------------------------------------------------------------------------- Computer Software--11.6% Citrix Systems, Inc.(1) 693,000 85,239,000 - --------------------------------------------------------------------------------------------------------------- Microsoft Corp.(1) 550,000 64,212,500 - --------------------------------------------------------------------------------------------------------------- VeriSign, Inc.(1) 50,000 9,546,875 - --------------------------------------------------------------------------------------------------------------- Veritas Software Corp.(1) 600,000 85,875,000 ------------ 244,873,375 - --------------------------------------------------------------------------------------------------------------- Communications Equipment--14.2% Antec Corp.(1) 392,800 14,337,200 - --------------------------------------------------------------------------------------------------------------- Audiocodes Ltd.(1) 237,100 21,813,200 - --------------------------------------------------------------------------------------------------------------- Cisco Systems, Inc.(1) 450,000 48,206,250 - --------------------------------------------------------------------------------------------------------------- Harmonic, Inc(1) 1,000,000 94,937,500 - --------------------------------------------------------------------------------------------------------------- Optical Coating Laboratory, Inc. 335,000 99,160,000 - --------------------------------------------------------------------------------------------------------------- Scientific-Atlanta, Inc. 375,000 20,859,375 ------------ 299,313,525 - --------------------------------------------------------------------------------------------------------------- Electronics--27.3% Gemstar International Group Ltd.(1) 200,000 14,250,000 - --------------------------------------------------------------------------------------------------------------- GlobeSpan, Inc.(1) 6,300 410,288 - --------------------------------------------------------------------------------------------------------------- Intel Corp. 372,000 30,620,250 - --------------------------------------------------------------------------------------------------------------- JDS Uniphase Corp.(1) 1,561,332 251,862,367 - --------------------------------------------------------------------------------------------------------------- LSI Logic Corp.(1) 545,700 36,834,750 - --------------------------------------------------------------------------------------------------------------- QLogic Corp.(1) 450,000 71,943,750 - --------------------------------------------------------------------------------------------------------------- SDL, Inc.(1) 350,000 76,300,000 - --------------------------------------------------------------------------------------------------------------- Vitesse Semiconductor Corp.(1) 1,040,000 54,535,000 - --------------------------------------------------------------------------------------------------------------- Waters Corp.(1) 690,000 36,570,000 ------------ 573,326,405
Oppenheimer Aggressive Growth Fund/VA 5 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - --------------------------------------------------------------------------------------------------------------- Utilities--0.4% - --------------------------------------------------------------------------------------------------------------- Electric Utilities--0.4% Calpine Corp.(1) 126,800 $ 8,115,200 -------------- Total Common Stocks (Cost $771,289,353) 1,871,295,174 Principal Amount =============================================================================================================== Repurchase Agreements--10.7% - --------------------------------------------------------------------------------------------------------------- Repurchase agreement with Banc One Capital Markets, Inc., 2.75%, dated 12/31/99, to be repurchased at $225,151,585 on 1/3/00, collateralized by U.S. Treasury Bonds, 5.25%-12%, 2/15/01-11/15/28, with a value of $88,349,431 and U.S. Treasury Nts., 5%-7.50%, 12/31/00-2/15/07, with a value of $141,383,210 (Cost $225,100,000) $225,100,000 225,100,000 - --------------------------------------------------------------------------------------------------------------- Total Investments, at Value (Cost $996,389,353) 99.6% 2,096,395,174 - --------------------------------------------------------------------------------------------------------------- Other Assets Net of Liabilities 0.4 7,732,586 ------------ -------------- Net Assets 100.0% $2,104,127,760 ============ ==============
1. Non-income producing security. See accompanying Notes to Financial Statements. 6 Oppenheimer Aggressive Growth Fund/VA - -------------------------------------------------------------------------------- Statement of Assets and Liabilities December 31, 1999 - -------------------------------------------------------------------------------- =============================================================================================================== Assets Investments, at value (including repurchase agreement of $225,100,000) (cost $996,389,353)--see accompanying statement $2,096,395,174 - --------------------------------------------------------------------------------------------------------------- Cash 1,032,385 - --------------------------------------------------------------------------------------------------------------- Receivables and other assets: Investments sold 7,087,097 Shares of beneficial interest sold 3,244,267 Interest and dividends 138,944 Other 11,681 -------------- Total assets 2,107,909,548 =============================================================================================================== Liabilities Payables and other liabilities: Shares of beneficial interest redeemed 3,716,257 Trustees' compensation 1,697 Transfer and shareholder servicing agent fees 201 Other 63,633 -------------- Total liabilities 3,781,788 =============================================================================================================== Net Assets $2,104,127,760 ============== =============================================================================================================== Composition of Net Assets Paid-in capital $ 904,071,695 - --------------------------------------------------------------------------------------------------------------- Accumulated net realized gain on investments and foreign currency transactions 100,050,244 - --------------------------------------------------------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 1,100,005,821 -------------- Net assets--applicable to 25,564,825 shares of beneficial interest outstanding $2,104,127,760 ============== =============================================================================================================== Net Asset Value, Redemption Price Per Share and Offering Price Per Share $82.31
See accompanying Notes to Financial Statements. Oppenheimer Aggressive Growth Fund/VA 7 - -------------------------------------------------------------------------------- Statement of Operations For the Year Ended December 31, 1999 - -------------------------------------------------------------------------------- =============================================================================================================== Investment Income Interest $ 4,468,423 - --------------------------------------------------------------------------------------------------------------- Dividends 2,049,968 ------------ Total income 6,518,391 =============================================================================================================== Expenses Management fees 8,700,904 - --------------------------------------------------------------------------------------------------------------- Custodian fees and expenses 24,681 - --------------------------------------------------------------------------------------------------------------- Trustees' compensation 10,056 - --------------------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees 2,127 - --------------------------------------------------------------------------------------------------------------- Other 24,249 ------------ Total expenses 8,762,017 Less expenses paid indirectly (11,539) ------------ Net expenses 8,750,478 =============================================================================================================== Net Investment Loss (2,232,087) =============================================================================================================== Realized and Unrealized Gain (Loss) Net realized gain on: Investments (including premiums on options exercised) 169,730,345 Closing and expiration of option contracts written 428,019 Foreign currency transactions 130,388 ------------ Net realized gain 170,288,752 - --------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation on: Investments 750,572,210 Translation of assets and liabilities denominated in foreign currencies (791,294) ------------ Net change 749,780,916 ------------ Net realized and unrealized gain 920,069,668 =============================================================================================================== Net Increase in Net Assets Resulting from Operations $917,837,581 ============
See accompanying Notes to Financial Statements. 8 Oppenheimer Aggressive Growth Fund/VA - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 ================================================================================================================================ Operations Net investment loss $ (2,232,087) $ (1,162,585) - -------------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) 170,288,752 (67,125,014) - -------------------------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation 749,780,916 183,484,620 -------------- -------------- Net increase in net assets resulting from operations 917,837,581 115,197,021 ================================================================================================================================ Dividends and/or Distributions to Shareholders Dividends from net investment income -- (2,267,793) - -------------------------------------------------------------------------------------------------------------------------------- Distributions from net realized gain -- (23,288,487) ================================================================================================================================ Beneficial Interest Transactions Net increase in net assets resulting from beneficial interest transactions 108,330,019 110,511,946 ================================================================================================================================ Net Assets Total increase 1,026,167,600 200,152,687 - -------------------------------------------------------------------------------------------------------------------------------- Beginning of period 1,077,960,160 877,807,473 -------------- -------------- End of period $2,104,127,760 $1,077,960,160 ============== ==============
See accompanying Notes to Financial Statements. Oppenheimer Aggressive Growth Fund/VA 9 - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995 ============================================================================================================================= Per Share Operating Data Net asset value, beginning of period $44.83 $40.96 $38.71 $34.21 $25.95 - ----------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) (.09) (.05) .10 .09 .11 Net realized and unrealized gain 37.57 5.09 4.01 6.59 8.29 - ----------------------------------------------------------------------------------------------------------------------------- Total income from investment operations 37.48 5.04 4.11 6.68 8.40 - ----------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- (.10) (.09) (.11) (.09) Distributions from net realized gain -- (1.07) (1.77) (2.07) (.05) - ----------------------------------------------------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders -- (1.17) (1.86) (2.18) (.14) - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $82.31 $44.83 $40.96 $38.71 $34.21 ====== ====== ====== ====== ====== ============================================================================================================================= Total Return, at Net Asset Value(1) 83.60% 12.36% 11.67% 20.22% 32.52% ============================================================================================================================= Ratios/Supplemental Data Net assets, end of period (in millions) $2,104 $1,078 $878 $617 $325 - ----------------------------------------------------------------------------------------------------------------------------- Average net assets (in millions) $1,314 $ 955 $754 $467 $241 - ----------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:(2) Net investment income (loss) (0.17)% (0.12)% 0.31% 0.32% 0.47% Expenses 0.67% 0.71%(3) 0.73%(3) 0.75%(3) 0.78%(3) - ----------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(4) 66% 80% 88% 100% 126%
1. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 2. Annualized for periods less than one full year. 3. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. 4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended December 31, 1999, were $821,119,876 and $835,938,199, respectively. See accompanying Notes to Financial Statements. 10 Oppenheimer Aggressive Growth Fund/VA - -------------------------------------------------------------------------------- Notes to Financial Statements - -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies Oppenheimer Aggressive Growth Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds (the Trust), a diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to achieve capital appreciation by investing in "growth-type" companies. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The following is a summary of significant accounting policies consistently followed by the Fund. - -------------------------------------------------------------------------------- Securities Valuation. Portfolio securities are valued at the close of the New York Stock Exchange on each trading day. Listed and unlisted securities for which such information is regularly reported are valued at the last sale price of the day or, in the absence of sales, at values based on the closing bid or the last sale price on the prior trading day. Long-term and short-term "non-money market" debt securities are valued by a portfolio pricing service approved by the Board of Trustees. Such securities which cannot be valued by an approved portfolio pricing service are valued using dealer-supplied valuations provided the Manager is satisfied that the firm rendering the quotes is reliable and that the quotes reflect current market value, or are valued under consistently applied procedures established by the Board of Trustees to determine fair value in good faith. Short-term "money market type" debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Foreign currency exchange contracts are valued based on the closing prices of the foreign currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. Options are valued based upon the last sale price on the principal exchange on which the option is traded or, in the absence of any transactions that day, the value is based upon the last sale price on the prior trading date if it is within the spread between the closing bid and asked prices. If the last sale price is outside the spread, the closing bid is used. - -------------------------------------------------------------------------------- Foreign Currency Translation. The accounting records of the Fund are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange. Amounts related to the purchase and sale of foreign securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund's Statement of Operations. - -------------------------------------------------------------------------------- Repurchase Agreements. The Fund requires the custodian to take possession, to have legally segregated in the Federal Reserve Book Entry System or to have segregated within the custodian's vault, all securities held as collateral for repurchase agreements. The market value of the underlying securities is required to be at least 102% of the resale price at the time of purchase. If the seller of the agreement defaults and the value of the collateral declines, or if the seller enters an insolvency proceeding, realization of the value of the collateral by the Fund may be delayed or limited. - -------------------------------------------------------------------------------- Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by loss carryovers to shareholders. - -------------------------------------------------------------------------------- Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. Oppenheimer Aggressive Growth Fund/VA 11 - -------------------------------------------------------------------------------- Notes to Financial Stateaments (Continued) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. Significant Accounting Policies (continued) Classification of Distributions to Shareholders. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes primarily because of the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes. The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund. The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, during the year ended December 31, 1999, amounts have been reclassified to reflect a decrease in paid-in capital of $2,255,042, a decrease in accumulated net investment loss of $2,232,087, and an increase in accumulated net realized gain on investments of $22,955. - -------------------------------------------------------------------------------- Expense Offset Arrangements. Expenses paid indirectly represent a reduction of custodian fees for earnings on cash balances maintained by the Fund. - -------------------------------------------------------------------------------- Other. Investment transactions are accounted for as of trade date and dividend income is recorded on the ex-dividend date. Realized gains and losses on investments and options written and unrealized appreciation and depreciation are determined on an identified cost basis, which is the same basis used for federal income tax purposes. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. ================================================================================ 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of no par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:
Year Ended December 31, 1999 Year Ended December 31, 1998 -------------------------------- ------------------------------ Shares Amount Shares Amount - ---------------------------------------------------------------------------------------------------------------------------- Sold 9,866,210 $ 549,485,112 13,376,589 $556,408,810 Dividends and/or distributions reinvested -- -- 580,166 25,556,280 Redeemed (8,345,187) (441,155,093) (11,344,620) (471,453,144) ---------- ------------- ----------- ------------ Net increase 1,521,023 $ 108,330,019 2,612,135 $110,511,946 ========== ============= =========== ============
================================================================================ 3. Unrealized Gains and Losses on Securities As of December 31, 1999, net unrealized appreciation on securities of $1,100,005,821 was composed of gross appreciation of $1,116,099,786, and gross depreciation of $16,093,965. 12 Oppenheimer Aggressive Growth Fund/VA - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 4. Management Fees and Other Transactions with Affiliates Management Fees. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Trust. The annual fees are 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $700 million and 0.58% of average annual net assets over $1.5 billion. The Fund's management fee for the year ended December 31, 1999, was 0.66% of average annual net assets. - -------------------------------------------------------------------------------- Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, is the transfer agent for the Fund and is responsible for maintaining the shareholder registry and shareholder accounting records for the Fund. OFS provides these services for cost. ================================================================================ 5. Option Activity The Fund may buy and sell put and call options, or write put and covered call options on portfolio securities in order to produce incremental earnings or protect against changes in the value of portfolio securities. The Fund generally purchases put options or writes covered call options to hedge against adverse movements in the value of portfolio holdings. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option. Options are valued daily based upon the last sale price on the principal exchange on which the option is traded and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss upon the expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option is adjusted by the amount of premium received or paid. Securities designated to cover outstanding call options are noted in the Statement of Investments where applicable. Shares subject to call, expiration date, exercise price, premium received and market value are detailed in a note to the Statement of Investments. Options written are reported as a liability in the Statement of Assets and Liabilities. Gains and losses are reported in the Statement of Operations. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Written option activity for the year ended December 31, 1999, was as follows:
Call Options --------------------------- Number of Amount of Options Premiums - ----------------------------------------------------------------------------------------------------------------------- Options outstanding as of December 31, 1998 138 $ 34,764 Options written 2,500 640,611 Options closed or expired (1,700) (428,019) Options exercised (938) (247,356) ------ --------- Options outstanding as of December 31, 1999 -- $ -- ====== =========
Oppenheimer Multiple Strategies Fund/VA 23 - -------------------------------------------------------------------------------- Independent Auditors' Report - -------------------------------------------------------------------------------- ================================================================================ To the Board of Trustees and Shareholders of Oppenheimer Multiple Strategies Fund/VA: We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Oppenheimer Multiple Strategies Fund/VA (which is a series of Oppenheimer Variable Account Funds) as of December 31, 1999, the related statement of operations for the year then ended, the statements of changes in net assets for the years ended December 31, 1999 and 1998, and the financial highlights for the period January 1, 1995, to December 31, 1999. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Oppenheimer Multiple Strategies Fund/VA as of December 31, 1999, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP - --------------------------- Deloitte & Touche LLP Denver, Colorado January 24, 2000 - -------------------------------------------------------------------------------- Statement of Investments December 31, 1999 - --------------------------------------------------------------------------------
Market Value Shares Note 1 ========================================================================================================= Common Stocks--50.3% - --------------------------------------------------------------------------------------------------------- Basic Materials--1.8% - --------------------------------------------------------------------------------------------------------- Chemicals--0.8% Bayer AG, Sponsored ADR 34,000 $1,601,682 - --------------------------------------------------------------------------------------------------------- Du Pont (E.I.) De Nemours & Co.(1) 7,672 505,393 - --------------------------------------------------------------------------------------------------------- Potash Corp. of Saskatchewan, Inc. 29,500 1,421,531 - --------------------------------------------------------------------------------------------------------- Praxair, Inc.(1) 23,000 1,157,187 ---------- 4,685,793 - --------------------------------------------------------------------------------------------------------- Metals--0.3% De Beers Consolidated Mines Ltd., ADR 68,000 1,967,750 - --------------------------------------------------------------------------------------------------------- Paper--0.7% Pactiv Corp.(2) 50,000 531,250 - --------------------------------------------------------------------------------------------------------- Sonoco Products Co. 9,500 216,125 - --------------------------------------------------------------------------------------------------------- Wausau-Mosinee Paper Corp. 76,400 892,925 - --------------------------------------------------------------------------------------------------------- Weyerhaeuser Co. 36,647 2,631,713 ---------- 4,272,013 - --------------------------------------------------------------------------------------------------------- Capital Goods--1.5% - --------------------------------------------------------------------------------------------------------- Aerospace/Defense--0.4% Goodrich (B.F.) Co. 80,000 2,200,000 - --------------------------------------------------------------------------------------------------------- Industrial Services--0.1% Service Corp. International 125,000 867,187 - --------------------------------------------------------------------------------------------------------- Manufacturing--1.0% Hexcel Corp.(2) 140,000 778,750 - --------------------------------------------------------------------------------------------------------- Honeywell International, Inc. 19,687 1,135,694 - --------------------------------------------------------------------------------------------------------- Pall Corp. 115,000 2,479,687 - --------------------------------------------------------------------------------------------------------- Tyco International Ltd. 37,500 1,457,812 ---------- 5,851,943 - --------------------------------------------------------------------------------------------------------- Communication Services--1.8% - --------------------------------------------------------------------------------------------------------- Telecommunications: Long Distance--1.0% Intermedia Communications, Inc.(2) 3,812 147,953 - --------------------------------------------------------------------------------------------------------- Intermedia Communications, Inc.(2)(3) 201 6,241 - --------------------------------------------------------------------------------------------------------- MCI WorldCom, Inc.(2) 108,750 5,770,547 ---------- 5,924,741 - --------------------------------------------------------------------------------------------------------- Telephone Utilities--0.7% GTE Corp. 17,500 1,234,844 - --------------------------------------------------------------------------------------------------------- SBC Communications, Inc. 44,000 2,145,000 - --------------------------------------------------------------------------------------------------------- Tele Norte Leste Participacoes SA (Telemar) 26,250,000 472,253 - --------------------------------------------------------------------------------------------------------- Telesp Tele de Sao Paulo 19,200,000 265,813 ---------- 4,117,910 - --------------------------------------------------------------------------------------------------------- Telecommunications: Wireless--0.1% Telesp Celular Participacoes SA 49,150,000 465,245
4 Oppenheimer Multiple Strategies Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - --------------------------------------------------------------------------------------------------------- Consumer Cyclicals--7.0% - --------------------------------------------------------------------------------------------------------- Autos & Housing--1.7% Dana Corp. 75,000 $ 2,245,312 - --------------------------------------------------------------------------------------------------------- IRSA Inversiones y Representaciones SA 292,230 946,920 - --------------------------------------------------------------------------------------------------------- Lear Corp.(2) 55,000 1,760,000 - --------------------------------------------------------------------------------------------------------- Owens Corning 140,000 2,703,750 - --------------------------------------------------------------------------------------------------------- Southdown, Inc. 17,500 903,437 - --------------------------------------------------------------------------------------------------------- Toll Brothers, Inc.(2) 61,000 1,136,125 ----------- 9,695,544 - --------------------------------------------------------------------------------------------------------- Consumer Services--0.2% Alterra Healthcare Corp.(2) 115,000 955,937 - --------------------------------------------------------------------------------------------------------- Leisure & Entertainment--2.3% Berjaya Sports Toto Berhad 200,000 431,579 - --------------------------------------------------------------------------------------------------------- Brunswick Corp. 56,000 1,246,000 - --------------------------------------------------------------------------------------------------------- Callaway Golf Co. 140,000 2,476,250 - --------------------------------------------------------------------------------------------------------- Host Marriott Corp. 130,000 1,072,500 - --------------------------------------------------------------------------------------------------------- International Game Technology 192,500 3,910,156 - --------------------------------------------------------------------------------------------------------- Mattel, Inc. 115,000 1,509,378 - --------------------------------------------------------------------------------------------------------- Mirage Resorts, Inc.(2) 62,000 949,375 - --------------------------------------------------------------------------------------------------------- Shimano, Inc. 100,000 1,760,736 ----------- 13,355,974 - --------------------------------------------------------------------------------------------------------- Media--0.7% South China Morning Post Holdings Ltd. 1,694,000 1,460,063 - --------------------------------------------------------------------------------------------------------- Time Warner, Inc.(1) 32,000 2,318,000 ----------- 3,778,063 - --------------------------------------------------------------------------------------------------------- Retail: General--0.8% Federated Department Stores, Inc.(2) 42,500 2,148,906 - --------------------------------------------------------------------------------------------------------- Neiman Marcus Group, Inc. (The), Cl. A(2) 40,000 1,117,500 - --------------------------------------------------------------------------------------------------------- Saks, Inc.(2) 93,000 1,447,312 ----------- 4,713,718 - --------------------------------------------------------------------------------------------------------- Retail: Specialty--0.7% - --------------------------------------------------------------------------------------------------------- Abercrombie & Fitch Co., Cl. A(2) 35,000 934,063 - --------------------------------------------------------------------------------------------------------- AutoZone, Inc.(2) 43,000 1,389,438 - --------------------------------------------------------------------------------------------------------- Borders Group, Inc.(2) 70,000 1,124,375 - --------------------------------------------------------------------------------------------------------- Gap, Inc.(1) 14,500 667,000 ----------- 4,114,876 - --------------------------------------------------------------------------------------------------------- Textile/Apparel & Home Furnishings--0.6% Jones Apparel Group, Inc.(2) 77,000 2,088,625 - --------------------------------------------------------------------------------------------------------- Tommy Hilfiger Corp.(2) 48,500 1,130,656 ----------- 3,219,281 - --------------------------------------------------------------------------------------------------------- Consumer Staples--4.8% - --------------------------------------------------------------------------------------------------------- Beverages--0.3% Coca-Cola Enterprises, Inc. 41,800 841,225 - --------------------------------------------------------------------------------------------------------- Diageo plc 125,800 1,012,086 ----------- 1,853,311
Oppenheimer Multiple Strategies Fund/VA 5 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - --------------------------------------------------------------------------------------------------------- Broadcasting--1.8% CBS Corp.(1)(2) 110,000 $ 7,033,125 - --------------------------------------------------------------------------------------------------------- MediaOne Group, Inc.(1)(2) 35,000 2,688,438 - --------------------------------------------------------------------------------------------------------- RCN Corp.(2) 12,500 606,250 ----------- 10,327,813 - --------------------------------------------------------------------------------------------------------- Entertainment--0.9% Brinker International, Inc.(2) 35,000 840,000 - --------------------------------------------------------------------------------------------------------- Disney (Walt) Co. 32,500 950,625 - --------------------------------------------------------------------------------------------------------- Luby's, Inc. 90,000 1,023,750 - --------------------------------------------------------------------------------------------------------- Nintendo Co. Ltd. 14,400 2,391,783 ----------- 5,206,158 - --------------------------------------------------------------------------------------------------------- Food--0.4% Groupe Danone 7,500 1,766,231 - --------------------------------------------------------------------------------------------------------- Nestle SA, Sponsored ADR 6,000 546,688 ----------- 2,312,919 - --------------------------------------------------------------------------------------------------------- Food & Drug Retailers--0.1% Cia Brasileira de Distribuicao Grupo Pao de Acucar, Sponsored ADR 14,000 452,375 - --------------------------------------------------------------------------------------------------------- Household Goods--0.9% - --------------------------------------------------------------------------------------------------------- Avon Products, Inc.(1) 45,000 1,485,000 - --------------------------------------------------------------------------------------------------------- Fort James Corp. 45,000 1,231,875 - --------------------------------------------------------------------------------------------------------- Rexall Sundown, Inc.(2) 125,000 1,289,063 - --------------------------------------------------------------------------------------------------------- Wella AG 55,900 1,147,658 - --------------------------------------------------------------------------------------------------------- Wella AG, Preference 5,200 114,085 ----------- 5,267,681 - --------------------------------------------------------------------------------------------------------- Tobacco--0.4% Philip Morris Cos., Inc. 100,000 2,318,750 - --------------------------------------------------------------------------------------------------------- Energy--3.1% - --------------------------------------------------------------------------------------------------------- Energy Services--1.0% Input/Output, Inc.(2) 193,000 977,063 - --------------------------------------------------------------------------------------------------------- Santa Fe International Corp. 87,000 2,251,125 - --------------------------------------------------------------------------------------------------------- Schlumberger Ltd. 22,500 1,265,625 - --------------------------------------------------------------------------------------------------------- Transocean Sedco Forex, Inc. 43,356 1,460,555 ----------- 5,954,368 - --------------------------------------------------------------------------------------------------------- Oil: Domestic--1.3% Comstock Resources, Inc.(2) 175,000 492,188 - --------------------------------------------------------------------------------------------------------- Conoco, Inc., Cl. B 24,567 611,104 - --------------------------------------------------------------------------------------------------------- Exxon Mobil Corp. 28,501 2,296,112 - --------------------------------------------------------------------------------------------------------- Kerr-McGee Corp. 35,000 2,170,000 - --------------------------------------------------------------------------------------------------------- Unocal Corp. 65,000 2,181,563 ----------- 7,750,967 - --------------------------------------------------------------------------------------------------------- Oil: International--0.8% Petroleo Brasileiro SA, Preference 3,330,000 847,938 - --------------------------------------------------------------------------------------------------------- Talisman Energy, Inc.(2) 105,510 2,690,057 - --------------------------------------------------------------------------------------------------------- Total Fina SA, Sponsored ADR 16,000 1,108,000 ----------- 4,645,995
6 Oppenheimer Multiple Strategies Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - --------------------------------------------------------------------------------------------------------- Financial--9.7% - --------------------------------------------------------------------------------------------------------- Banks--5.7% ABN Amro Holding NV 62,700 $ 1,564,911 - --------------------------------------------------------------------------------------------------------- Banco Frances del Rio de la Plata SA 95,000 750,575 - --------------------------------------------------------------------------------------------------------- Bank of America Corp.(1) 160,000 8,030,000 - --------------------------------------------------------------------------------------------------------- Bank One Corp. 50,000 1,603,125 - --------------------------------------------------------------------------------------------------------- Chase Manhattan Corp. 133,000 10,332,438 - --------------------------------------------------------------------------------------------------------- Societe Generale 20,000 4,649,567 - --------------------------------------------------------------------------------------------------------- UBS AG 4,175 1,128,875 - --------------------------------------------------------------------------------------------------------- UniCredito Italiano SpA 414,000 2,033,249 - --------------------------------------------------------------------------------------------------------- Wells Fargo Co. 70,000 2,830,625 ----------- 32,923,365 - --------------------------------------------------------------------------------------------------------- Diversified Financial--0.9% Finova Group, Inc. 26,000 923,000 - --------------------------------------------------------------------------------------------------------- ICICI Ltd., Sponsored ADR(2) 35,500 523,625 - --------------------------------------------------------------------------------------------------------- Merrill Lynch & Co., Inc. 16,000 1,336,000 - --------------------------------------------------------------------------------------------------------- Morgan Stanley Dean Witter & Co. 12,500 1,784,375 - --------------------------------------------------------------------------------------------------------- Simon Property Group, Inc. 37,500 860,156 ----------- 5,427,156 - --------------------------------------------------------------------------------------------------------- Insurance--1.0% ACE Ltd. 140,000 2,336,250 - --------------------------------------------------------------------------------------------------------- Skandia Forsakrings AB 115,000 3,472,769 ----------- 5,809,019 - --------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts--2.1% Archstone Communities Trust 52,000 1,066,000 - --------------------------------------------------------------------------------------------------------- Avalonbay Communities, Inc. 30,732 1,054,492 - --------------------------------------------------------------------------------------------------------- Brandywine Realty Trust 56,000 917,000 - --------------------------------------------------------------------------------------------------------- Camden Property Trust 40,000 1,095,000 - --------------------------------------------------------------------------------------------------------- CarrAmerica Realty Corp. 48,000 1,014,000 - --------------------------------------------------------------------------------------------------------- Chastain Capital Corp.(2) 134,000 58,625 - --------------------------------------------------------------------------------------------------------- Chelsea GCA Realty, Inc. 32,000 952,000 - --------------------------------------------------------------------------------------------------------- Cornerstone Properties, Inc. 68,000 994,500 - --------------------------------------------------------------------------------------------------------- Developers Diversified Realty Corp. 62,000 798,250 - --------------------------------------------------------------------------------------------------------- JDN Realty Corp. 60,000 967,500 - --------------------------------------------------------------------------------------------------------- Manufactured Home Communities, Inc. 44,000 1,069,750 - --------------------------------------------------------------------------------------------------------- Post Properties, Inc. 28,000 1,071,000 - --------------------------------------------------------------------------------------------------------- Shurgard Storage Centers, Inc. 44,000 1,020,250 ----------- 12,078,367
Oppenheimer Multiple Strategies Fund/VA 7 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - --------------------------------------------------------------------------------------------------------- Healthcare--4.7% - --------------------------------------------------------------------------------------------------------- Healthcare/Drugs--3.4% Abbott Laboratories 38,000 $ 1,379,875 - --------------------------------------------------------------------------------------------------------- American Home Products Corp. 48,500 1,912,719 - --------------------------------------------------------------------------------------------------------- AstraZeneca Group plc 60,540 2,560,884 - --------------------------------------------------------------------------------------------------------- Elan Corp. plc, ADR(2) 32,000 944,000 - --------------------------------------------------------------------------------------------------------- Johnson & Johnson(1) 33,867 3,153,864 - --------------------------------------------------------------------------------------------------------- Merck & Co., Inc. 30,000 2,011,875 - --------------------------------------------------------------------------------------------------------- Mylan Laboratories, Inc. 110,000 2,770,625 - --------------------------------------------------------------------------------------------------------- Novartis AG 1,700 2,499,277 - --------------------------------------------------------------------------------------------------------- Pliva d.d., Sponsored GDR(4) 20,000 261,000 - --------------------------------------------------------------------------------------------------------- SmithKline Beecham plc, Cl. A, Sponsored ADR 30,000 1,933,125 ----------- 19,427,244 - --------------------------------------------------------------------------------------------------------- Healthcare/Supplies & Services--1.3% Acuson Corp.(2) 180,000 2,261,250 - --------------------------------------------------------------------------------------------------------- Innovasive Devices, Inc.(2) 110,000 880,000 - --------------------------------------------------------------------------------------------------------- Manor Care, Inc.(2) 75,000 1,200,000 - --------------------------------------------------------------------------------------------------------- McKesson HBOC, Inc. 20,000 451,250 - --------------------------------------------------------------------------------------------------------- St. Jude Medical, Inc.(2) 30,000 920,625 - --------------------------------------------------------------------------------------------------------- United Healthcare Corp. 32,800 1,742,500 ----------- 7,455,625 - --------------------------------------------------------------------------------------------------------- Technology--14.5% - --------------------------------------------------------------------------------------------------------- Computer Hardware--2.8% Canon, Inc. 50,000 1,985,718 - --------------------------------------------------------------------------------------------------------- Hewlett-Packard Co.(1) 10,000 1,139,375 - --------------------------------------------------------------------------------------------------------- International Business Machines Corp.(1) 120,000 12,960,000 ----------- 16,085,093 - --------------------------------------------------------------------------------------------------------- Computer Services--0.1% barnesandnoble.com, inc.(2) 36,100 512,169 - --------------------------------------------------------------------------------------------------------- Computer Software--2.4% Computer Associates International, Inc.(1) 48,599 3,398,928 - --------------------------------------------------------------------------------------------------------- Compuware Corp.(1)(2) 49,100 1,828,975 - --------------------------------------------------------------------------------------------------------- Novell, Inc.(2) 126,000 5,032,125 - --------------------------------------------------------------------------------------------------------- Oracle Corp.(1)(2) 12,500 1,400,781 - --------------------------------------------------------------------------------------------------------- Rational Software Corp.(1)(2) 7,700 378,263 - --------------------------------------------------------------------------------------------------------- Sabre Holdings Corp.(2) 34,500 1,768,125 - --------------------------------------------------------------------------------------------------------- Structural Dynamics Research Corp.(2) 167 2,129 ----------- 13,809,326 - --------------------------------------------------------------------------------------------------------- Communications Equipment--1.7% Cisco Systems, Inc.(1)(2) 41,000 4,392,125 - --------------------------------------------------------------------------------------------------------- Optical Coating Laboratory, Inc.(1) 18,000 5,328,000 ----------- 9,720,125
8 Oppenheimer Multiple Strategies Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - --------------------------------------------------------------------------------------------------------- Electronics--6.9% Analog Devices, Inc.(1)(2) 67,200 $ 6,249,600 - --------------------------------------------------------------------------------------------------------- ASM Lithography Holding NV 13,400 1,524,250 - --------------------------------------------------------------------------------------------------------- Cognex Corp.(2) 50,000 1,950,000 - --------------------------------------------------------------------------------------------------------- Coherent, Inc.(1)(2) 70,000 1,872,500 - --------------------------------------------------------------------------------------------------------- General Motors Corp., Cl. H(1)(2) 30,200 2,899,200 - --------------------------------------------------------------------------------------------------------- Grainger (W.W.), Inc. 21,000 1,004,063 - --------------------------------------------------------------------------------------------------------- Intel Corp. 156,000 12,840,750 - --------------------------------------------------------------------------------------------------------- Keyence Corp. 8,000 3,247,579 - --------------------------------------------------------------------------------------------------------- Methode Electronics, Inc., Cl. A(1) 104,000 3,341,000 - --------------------------------------------------------------------------------------------------------- STMicroelectronics NV, NY Registered Shares(1) 22,400 3,392,200 - --------------------------------------------------------------------------------------------------------- Teradyne, Inc.(1)(2) 28,000 1,848,000 ------------ 40,169,142 - --------------------------------------------------------------------------------------------------------- Photography--0.6% Eastman Kodak Co. 26,500 1,755,625 - --------------------------------------------------------------------------------------------------------- Xerox Corp.(1) 67,500 1,531,406 ------------ 3,287,031 - --------------------------------------------------------------------------------------------------------- Transportation--0.5% - --------------------------------------------------------------------------------------------------------- Air Transportation--0.2% Alaska Air Group, Inc.(2) 29,500 1,036,188 - --------------------------------------------------------------------------------------------------------- Railroads & Truckers--0.3% Burlington Northern Santa Fe Corp. 67,000 1,624,750 - --------------------------------------------------------------------------------------------------------- Shipping--0.0% Stolt-Nielsen SA 20,000 285,000 - --------------------------------------------------------------------------------------------------------- Utilities--0.9% - --------------------------------------------------------------------------------------------------------- Electric Utilities--0.9% Allegheny Energy, Inc. 50,500 1,360,344 - --------------------------------------------------------------------------------------------------------- Reliant Energy, Inc. 80,000 1,830,000 - --------------------------------------------------------------------------------------------------------- Southern Co. 90,000 2,115,000 ------------ 5,305,344 ------------ Total Common Stocks (Cost $201,240,567) 291,231,256 ========================================================================================================= Preferred Stocks--0.6% - --------------------------------------------------------------------------------------------------------- ICG Communications, Inc., 6.75% Cum. Cv., Non-Vtg. 45,000 2,041,875 - --------------------------------------------------------------------------------------------------------- Intermedia Communications, Inc., 7% Cv.(4) 5,000 134,375 - --------------------------------------------------------------------------------------------------------- Intermedia Communications, Inc., Depositary Shares Representing one one-hundredth 7% Cum. Cv. Jr., Series D, Non-Vtg. 30,000 1,522,500 ------------ Total Preferred Stocks (Cost $4,472,031) 3,698,750 ========================================================================================================= Other Securities--1.0% - --------------------------------------------------------------------------------------------------------- Budget Group, Inc., 6.25% Cum. Cv. Term Income Deferred Equity Securities, Non-Vtg.(4) 20,000 615,000 - --------------------------------------------------------------------------------------------------------- Monsanto Co., 6.50% Cv. Adjustable Conversion-rate Equity Security 35,000 1,159,375 - --------------------------------------------------------------------------------------------------------- Qwest Trends Trust, 5.75% Cv.(4) 55,000 3,884,375 ------------ Total Other Securities (Cost $5,245,203) 5,658,750
Oppenheimer Multiple Strategies Fund/VA 9 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 ========================================================================================================= Rights, Warrants and Certificates--0.0% - --------------------------------------------------------------------------------------------------------- Covergent Communications, Inc. Wts., Exp. 4/1/08 1,000 $ 12,250 - --------------------------------------------------------------------------------------------------------- Gaylord Container Corp. Wts., Exp. 11/1/02 9,232 60,008 - --------------------------------------------------------------------------------------------------------- HF Holdings, Inc. Wts., Exp. 9/27/00(3) 2,592 38,888 - --------------------------------------------------------------------------------------------------------- PE Corp. Cl. G Wts., Exp. 9/11/03 249 12,699 - --------------------------------------------------------------------------------------------------------- Terex Corp. Rts., Exp. 5/15/02(3) 4,000 56,500 ----------- Total Rights, Warrants and Certificates (Cost $59,660) 180,345 Principal Amount(5) ========================================================================================================= Mortgage-Backed Obligations--2.0% - --------------------------------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., Gtd. Multiclass Mtg. Participation Certificates, 7%, 5/1/29 $ 4,769,214 4,615,694 - --------------------------------------------------------------------------------------------------------- Federal National Mortgage Assn., 6.50%, 11/1/27-12/1/27 4,205,093 3,971,206 - --------------------------------------------------------------------------------------------------------- Government National Mortgage Assn., 8%, 7/15/22-4/15/23 2,084,740 2,112,922 - --------------------------------------------------------------------------------------------------------- Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates, Series 1994-C2, Cl. E, 8%, 4/25/25 635,799 620,104 ----------- Total Mortgage-Backed Obligations (Cost $11,602,003) 11,319,926 ========================================================================================================= U.S. Government Obligations--11.7% - --------------------------------------------------------------------------------------------------------- U.S. Treasury Bonds: 8.875%, 8/15/17 2,900,000 3,505,375 STRIPS, 6.30%, 8/15/25(6) 12,900,000 2,438,332 STRIPS, 6.53%, 8/15/15(6) 7,100,000 2,450,210 STRIPS, 7.10%, 11/15/18(6) 16,000,000 4,449,696 STRIPS, 7.26%, 11/15/18(6) 10,000,000 2,786,070 STRIPS, 7.31%, 8/15/19(6) 18,000,000 4,766,058 - --------------------------------------------------------------------------------------------------------- U.S. Treasury Nts.: 5.875%, 9/30/02 15,000,000 14,845,320 6.125%, 9/30/00 15,000,000 15,018,750 6.25%, 2/15/07 8,800,000 8,662,500 6.375%, 8/15/02 5,000,000 5,010,940 6.50%, 10/15/06 3,710,000 3,700,725 ----------- Total U.S. Government Obligations (Cost $68,185,746) 67,633,976 ========================================================================================================= Foreign Government Obligations--23.7% - --------------------------------------------------------------------------------------------------------- Argentina--6.4% Argentina (Republic of) Bonds: Series BT06, 11.25%, 5/24/04 1,178,000 1,169,165 Series L, 6.812%, 3/31/05(7) 8,096,000 7,387,600 - --------------------------------------------------------------------------------------------------------- Argentina (Republic of) Nts., 14.25%, 11/30/02(7) 13,125,000 12,993,750 - --------------------------------------------------------------------------------------------------------- Argentina (Republic of) Par Bonds, 6%, 3/31/23(7) 23,750,000 15,645,312 ----------- 37,195,827 - --------------------------------------------------------------------------------------------------------- Australia--0.6% New South Wales Treasury Corp. Gtd. Bonds, 7%, 4/1/04AUD 3,160,000 2,076,929 - --------------------------------------------------------------------------------------------------------- Queensland Treasury Corp. Exchangeable Gtd. Nts., 10.50%, 5/15/03AUD 1,800,000 1,313,947 ----------- 3,390,876
10 Oppenheimer Multiple Strategies Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(5) Note 1 - --------------------------------------------------------------------------------------------------------- Brazil--5.2% Brazil (Federal Republic of) Capitalization Bonds, 6.916%, 4/15/14 $21,716,459 $ 16,368,781 - --------------------------------------------------------------------------------------------------------- Brazil (Federal Republic of) Eligible Interest Bonds, 6.937%, 4/15/06(7) 15,463,000 13,646,097 ------------ 30,014,878 - --------------------------------------------------------------------------------------------------------- Canada--2.9% Canada (Government of) Bonds: 8.50%, 4/1/02CAD 1,500,000 1,090,721 8.75%, 12/1/05CAD 12,200,000 9,469,183 9.75%, 12/1/01-6/1/01CAD 5,000,000 3,672,397 Series WL43, 5.75%, 6/1/29CAD 3,670,000 2,389,240 ------------ 16,621,541 - --------------------------------------------------------------------------------------------------------- Denmark--0.9% Denmark (Kingdom of) Bonds, 8%, 3/15/06DKK 32,100,000 4,905,143 - --------------------------------------------------------------------------------------------------------- Great Britain--1.2% United Kingdom Treasury Bonds, 6.75%, 11/26/04GBP 2,680,000 4,446,440 - --------------------------------------------------------------------------------------------------------- United Kingdom Treasury Nts., 13%, 7/14/00GBP 1,590,000 2,662,916 ------------ 7,109,356 - --------------------------------------------------------------------------------------------------------- Ireland--0.3% Ireland (Government of) Bonds, 9.25%, 7/11/03(3)EUR 1,409,409 1,628,357 - --------------------------------------------------------------------------------------------------------- Mexico--0.6% United Mexican States Collateralized Fixed Rate Par Bonds, Series W-A, 6.25%, 12/31/19 4,450,000 3,515,500 - --------------------------------------------------------------------------------------------------------- New Zealand--5.1% New Zealand (Government of) Bonds: 8%, 2/15/01NZD 19,440,000 10,391,131 10%, 3/15/02NZD 16,800,000 9,395,771 - --------------------------------------------------------------------------------------------------------- New Zealand (Government of) Nts., 6.50%, 2/15/00NZD 18,600,000 9,753,559 ------------ 29,540,461 - --------------------------------------------------------------------------------------------------------- Philippines--0.2% Philippines (Republic of) Bonds, 8.60%, 6/15/27 1,500,000 1,267,994 - --------------------------------------------------------------------------------------------------------- South Africa--0.3% Eskom Depositary Receipts, Series E168, 11%, 6/1/08ZAR 12,570,000 1,734,295 ------------ Total Foreign Government Obligations (Cost $137,782,080) 136,924,228 ========================================================================================================= Non-Convertible Corporate Bonds and Notes--6.7% - --------------------------------------------------------------------------------------------------------- Basic Materials--1.3% - --------------------------------------------------------------------------------------------------------- Chemicals--0.5% Huntsman Corp./ICI Chemical Co. plc, Zero Coupon Sr. Disc. Nts., 13.08%, 12/31/09(4)(6) 1,000,000 306,250 - --------------------------------------------------------------------------------------------------------- Lyondell Chemical Co., 10.875% Sr. Sub. Nts., 5/1/09 500,000 517,500 - --------------------------------------------------------------------------------------------------------- NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03 85,000 88,400 - --------------------------------------------------------------------------------------------------------- Polymer Group, Inc., 9% Sr. Sub. Nts., 7/1/07 500,000 487,500 - --------------------------------------------------------------------------------------------------------- Sterling Chemicals, Inc.: 11.75% Sr. Unsec. Sub. Nts., 8/15/06 535,000 403,925 12.375% Sr. Sec. Nts., Series B, 7/15/06 250,000 260,000 - --------------------------------------------------------------------------------------------------------- ZSC Specialty Chemical plc, 11% Sr. Nts., 7/1/09(4) 500,000 521,250 ------------ 2,584,825
Oppenheimer Multiple Strategies Fund/VA 11 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(5) Note 1 - --------------------------------------------------------------------------------------------------------- Metals--0.4% AK Steel Corp., 9.125% Sr. Nts., 12/15/06 $1,015,000 $1,037,837 - --------------------------------------------------------------------------------------------------------- Kaiser Aluminum & Chemical Corp., 12.75% Sr. Sub. Nts., 2/1/03 1,000,000 1,005,000 - --------------------------------------------------------------------------------------------------------- Metallurg, Inc., 11% Sr. Nts., 12/1/07 450,000 407,250 ---------- 2,450,087 - --------------------------------------------------------------------------------------------------------- Paper--0.4% Aracruz Celulose SA, 10.375% Debs., 1/31/02(4) 430,000 431,075 - --------------------------------------------------------------------------------------------------------- Repap New Brunswick, Inc., 10.625% Second Priority Sr. Sec. Nts., 300,000 280,500 - --------------------------------------------------------------------------------------------------------- Riverwood International Corp.: 10.625% Sr. Unsec. Nts., 8/1/07 500,000 517,500 10.875% Sr. Sub. Nts., 4/1/08 250,000 247,500 - --------------------------------------------------------------------------------------------------------- SD Warren Co., 12% Sr. Sub. Nts., Series B, 12/15/04 750,000 785,625 ---------- 2,262,200 - --------------------------------------------------------------------------------------------------------- Capital Goods--0.4% - --------------------------------------------------------------------------------------------------------- Aerospace/Defense--0.1% Amtran, Inc., 10.50% Sr. Nts., 8/1/04 500,000 502,500 - --------------------------------------------------------------------------------------------------------- Industrial Services--0.1% Allied Waste North America, Inc., 10% Sr. Sub. Nts., 8/1/09(4) 750,000 675,000 - --------------------------------------------------------------------------------------------------------- Manufacturing--0.2% Blount, Inc., 13% Sr. Sub. Nts., 8/1/09(4) 700,000 742,000 - --------------------------------------------------------------------------------------------------------- International Wire Group, Inc., 11.75% Sr. Sub. Nts., Series B, 6/1/05 500,000 518,750 ---------- 1,260,750 - --------------------------------------------------------------------------------------------------------- Communication Services--2.1% - --------------------------------------------------------------------------------------------------------- Telecommunications: Long Distance--1.3% Exodus Communications, Inc., 11.25% Sr. Nts., 7/1/08 500,000 518,750 - --------------------------------------------------------------------------------------------------------- Global Crossing Ltd., 9.625% Sr. Nts., 5/15/08 750,000 753,750 - --------------------------------------------------------------------------------------------------------- Intermedia Communications, Inc., 8.50% Sr. Nts., Series B, 1/15/08 500,000 460,000 - --------------------------------------------------------------------------------------------------------- Metromedia Fiber Network, Inc.: 10% Sr. Nts., 12/15/09 250,000 257,500 10% Sr. Unsec. Nts., Series B, 11/15/08 750,000 770,625 - --------------------------------------------------------------------------------------------------------- NTL Communications Corp., 0%/12.375% Sr. Unsec. Nts., Series B, 10/1/08(8) 500,000 356,250 - --------------------------------------------------------------------------------------------------------- NTL, Inc., 0%/9.75% Sr. Deferred Coupon Nts., Series B, 4/1/08(8) 500,000 347,500 - --------------------------------------------------------------------------------------------------------- PSINet, Inc., 10% Sr. Unsec. Nts., Series B, 2/15/05 1,000,000 993,750 - --------------------------------------------------------------------------------------------------------- Telewest Communications plc: 0%/11% Sr. Disc. Debs., 10/1/07(8) 1,000,000 937,500 9.625% Sr. Debs., 10/1/06 500,000 507,500 - --------------------------------------------------------------------------------------------------------- United Pan-Europe Communications NV, 10.875% Sr. Nts., 8/1/09 400,000 407,000 - --------------------------------------------------------------------------------------------------------- Verio, Inc., 11.25% Sr. Unsec. Nts., 12/1/08 600,000 633,000 - --------------------------------------------------------------------------------------------------------- Worldwide Fiber, Inc., 12% Sr. Nts., 8/1/09(4) 400,000 414,000 ---------- 7,357,125 - --------------------------------------------------------------------------------------------------------- Telecommunications: Wireless--0.8% Loral Space & Communications Ltd., 9.50% Sr. Nts., 1/15/06 200,000 181,000 - --------------------------------------------------------------------------------------------------------- Millicom International Cellular SA, 0%/13.50% Sr. Disc. Nts., 6/1/06(8) 750,000 603,750 - --------------------------------------------------------------------------------------------------------- Omnipoint Corp.: 11.50% Sr. Nts., 9/15/09(4) 250,000 270,000 11.625% Sr. Nts., 8/15/06 535,000 569,775 11.625% Sr. Nts., Series A, 8/15/06 590,000 628,350
12 Oppenheimer Multiple Strategies Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(5) Note 1 - --------------------------------------------------------------------------------------------------------- Telecommunications: Wireless (continued) ORBCOMM Global LP/ORBCOMM Capital Corp., 14% Sr. Nts., 8/15/04 $ 200,000 $ 145,000 - --------------------------------------------------------------------------------------------------------- Rural Cellular Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 750,000 770,625 - --------------------------------------------------------------------------------------------------------- USA Mobile Communications, Inc. II, 9.50% Sr. Nts., 2/1/04 1,000,000 821,250 - --------------------------------------------------------------------------------------------------------- Voicestream Wireless Corp., 10.375% Sr. Nts., 11/15/09(4) 400,000 414,000 ---------- 4,403,750 - --------------------------------------------------------------------------------------------------------- Consumer Cyclicals--0.8% - --------------------------------------------------------------------------------------------------------- Autos & Housing--0.4% Building Materials Corp. of America, 8.625% Sr. Nts., Series B, 12/15/06 100,000 95,500 - --------------------------------------------------------------------------------------------------------- Cambridge Industries, Inc., 10.25% Sr. Sub. Nts., Series B, 7/15/07 300,000 117,750 - --------------------------------------------------------------------------------------------------------- Hayes Wheels International, Inc., 11% Sr. Sub. Nts., 7/15/06 500,000 525,000 - --------------------------------------------------------------------------------------------------------- Icon Health & Fitness, Inc., 12% Unsec. Nts., 7/15/05(3) 270,840 148,962 - --------------------------------------------------------------------------------------------------------- Kaufman & Broad Home Corp., 7.75% Sr. Nts., 10/15/04 400,000 378,000 - --------------------------------------------------------------------------------------------------------- Nortek, Inc., 8.875% Sr. Unsec. Nts., Series B, 8/1/08 750,000 716,250 - --------------------------------------------------------------------------------------------------------- Tenneco, Inc., 11.625% Sr. Sub. Nts., 10/15/09(4) 400,000 410,000 ---------- 2,391,462 - --------------------------------------------------------------------------------------------------------- Leisure & Entertainment--0.2% Hard Rock Hotel, Inc., 9.25% Sr. Sub. Nts., 4/1/05 250,000 178,750 - --------------------------------------------------------------------------------------------------------- Meristar Hospitality Corp., 8.75% Sr. Unsec. Sub. Nts., 8/15/07 500,000 462,500 - --------------------------------------------------------------------------------------------------------- Premier Parks, Inc., 9.75% Sr. Nts., 6/15/07 500,000 500,000 ---------- 1,141,250 - --------------------------------------------------------------------------------------------------------- Media--0.2% Lamar Media Corp., 9.625% Sr. Unsec. Sub. Nts., 12/1/06 150,000 153,750 - --------------------------------------------------------------------------------------------------------- Time Warner Entertainment Co. LP, 10.15% Sr. Nts., 5/1/12 500,000 589,339 - --------------------------------------------------------------------------------------------------------- Time Warner, Inc., 9.125% Debs., 1/15/13 500,000 549,601 ---------- 1,292,690 Consumer Staples--1.4% - --------------------------------------------------------------------------------------------------------- Beverages--0.1% Canadaiqua Brands, Inc., 8.625% Sr. Unsec. Nts., 8/1/06 700,000 700,875 - --------------------------------------------------------------------------------------------------------- Broadcasting--1.1% Aldelphia Communications Corp., 9.375% Sr. Nts., 11/15/09 750,000 738,750 - --------------------------------------------------------------------------------------------------------- Chancellor Media Corp., 8.75% Sr. Unsec. Sub. Nts., Series B, 6/15/07 1,000,000 1,012,500 - --------------------------------------------------------------------------------------------------------- Charter Communication Holdings LLC/Charter Communication Holdings Capital Corp., 8.625% Sr. Unsec. Nts., 4/1/09 750,000 696,563 - --------------------------------------------------------------------------------------------------------- CSC Holdings, Inc., 9.875% Sr. Sub. Nts., 5/15/06 250,000 265,000 - --------------------------------------------------------------------------------------------------------- EchoStar DBS Corp., 9.375% Sr. Unsec. Nts., 2/1/09 700,000 707,000 - --------------------------------------------------------------------------------------------------------- Falcon Holding Group LP, 0%/9.285% Sr. Disc. Debs., Series B, 4/15/10(8) 600,000 452,250 - --------------------------------------------------------------------------------------------------------- Rogers Cablesystems Ltd., 10% Second Priority Sr. Sec. Debs., 12/1/07 1,000,000 1,071,250 - --------------------------------------------------------------------------------------------------------- Sinclair Broadcast Group, Inc.: 8.75% Sr. Sub. Nts., 12/15/07 500,000 463,750 9% Sr. Unsec. Sub. Nts., 7/15/07 375,000 353,438 - --------------------------------------------------------------------------------------------------------- Young Broadcasting, Inc., 8.75% Sr. Sub. Debs., 6/15/07 900,000 857,250 ---------- 6,617,751
- -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(5) Note 1 - --------------------------------------------------------------------------------------------------------- Food & Drug Retailers--0.1% Fleming Cos., Inc.: 10.50% Sr. Sub. Nts., Series B, 12/1/04 $ 300,000 $ 276,750 10.625% Sr. Sub. Nts., Series B, 7/31/07 560,000 508,200 ------------ 784,950 - --------------------------------------------------------------------------------------------------------- Household Goods--0.1% Revlon Consumer Products Corp.: 8.625% Sr. Unsec. Sub. Nts., 2/1/08 400,000 202,000 9% Sr. Nts., 11/1/06 70,000 52,850 ------------ 254,850 - --------------------------------------------------------------------------------------------------------- Energy--0.1% - --------------------------------------------------------------------------------------------------------- Energy Services--0.1% Gothic Production Corp., 11.125% Sr. Sec. Nts., Series B, 5/1/05(4) 950,000 812,250 - --------------------------------------------------------------------------------------------------------- Financial--0.1% - --------------------------------------------------------------------------------------------------------- Banks--0.1% First Chicago Corp., 11.25% Sub. Nts., 2/20/01 250,000 261,387 - --------------------------------------------------------------------------------------------------------- Healthcare--0.0% - --------------------------------------------------------------------------------------------------------- Healthcare/Supplies & Services--0.0% Sun Healthcare Group, Inc., 9.375% Sr. Sub. Nts., 5/1/08(2)(4)(9) 1,000,000 65,000 - --------------------------------------------------------------------------------------------------------- Transportation--0.1% - --------------------------------------------------------------------------------------------------------- Air Transportation--0.1% Trans World Airlines, Inc., 11.50% Sr. Sec. Nts., 12/15/04 1,000,000 648,750 - --------------------------------------------------------------------------------------------------------- Shipping--0.0% Navigator Gas Transport plc, 10.50% First Priority Ship Mtg. Nts., 6/30/07(4) 500,000 232,500 - --------------------------------------------------------------------------------------------------------- Utilities--0.4% - --------------------------------------------------------------------------------------------------------- Electric Utilities--0.2% Calpine Corp.: 8.75% Sr. Nts., 7/15/07 400,000 403,000 10.50% Sr. Nts., 5/15/06 800,000 848,000 ------------ 1,251,000 - --------------------------------------------------------------------------------------------------------- Gas Utilities--0.2% Beaver Valley II Funding Corp., 9% Second Lease Obligation Bonds, 6/1/17 989,000 987,764 ------------ Total Non-Convertible Corporate Bonds and Notes (Cost $41,563,563) 38,938,716 ========================================================================================================= Repurchase Agreements--3.5% - --------------------------------------------------------------------------------------------------------- Repurchase agreement with Banc One Capital Markets, Inc., 2.75%, dated 12/31/99, to be repurchased at $20,504,698 on 1/3/00, collateralized by U.S. Treasury Bonds, 5.25%-12%, 2/15/01-11/15/28, with a value of $8,046,039 and U.S. Treasury Nts., 5%-7.50%, 12/31/00-2/15/07, with a value of $12,875,859 (Cost $20,500,000) 20,500,000 20,500,000 - --------------------------------------------------------------------------------------------------------- Total Investments, at Value (Cost $490,650,853) 99.5% 576,085,947 - --------------------------------------------------------------------------------------------------------- Other Assets Net of Liabilities 0.5 2,696,887 ----------- ------------ Net Assets 100.0% $578,782,834 =========== ============
- -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ 1. A sufficient amount of liquid assets has been designated to cover outstanding written call options, as follows:
Shares Expiration Exercise Premium Market Value Subject to Call Date Price Received Note 1 - ------------------------------------------------------------------------------------------------------------------------------------ Analog Devices, Inc. 6,700 6/19/00 $ 95.00 $ 41,670 $ 102,175 Avon Products, Inc. 10,000 7/24/00 40.00 43,450 26,875 Bank of America Corp. 22,000 1/24/00 90.00 59,838 -- CBS Corp. 33,000 1/24/00 55.00 93,885 305,250 Cisco Systems, Inc. 6,000 1/24/00 67.50 38,819 237,750 Cisco Systems, Inc. 5,000 4/24/00 70.00 40,474 195,000 Coherent, Inc. 4,000 5/22/00 35.00 8,380 4,500 Computer Associates International, Inc. 10,000 1/24/00 65.00 37,199 62,500 Computer Associates International, Inc. 6,000 5/22/00 75.00 44,820 42,750 Compuware Corp. 8,000 1/24/00 35.00 40,759 34,000 Du Pont (E.I.) De Nemours & Co. 7,000 1/24/00 75.00 41,789 1,750 Gap, Inc. 14,500 6/19/00 60.00 28,564 33,531 General Motors Corp., Cl. H 4,500 3/20/00 95.00 29,115 41,625 Hewlett-Packard Co. 10,000 2/22/00 125.00 55,948 52,500 International Business Machines Corp. 5,000 1/24/00 150.00 46,098 313 International Business Machines Corp. 4,000 4/24/00 110.00 43,879 40,000 Johnson & Johnson 15,000 1/18/00 60.00 61,423 23,437 MediaOne Group, Inc. 7,000 4/24/00 90.00 14,228 5,250 Methode Electronics, Inc., Cl. A 15,000 4/24/00 35.00 40,799 45,000 Optical Coating Laboratory, Inc. 6,000 5/22/00 250.00 249,562 445,500 Oracle Corp. 1,800 3/20/00 100.00 9,171 40,050 Praxair, Inc. 4,000 1/24/00 55.00 13,597 250 Rational Software Corp. 7,700 1/24/00 40.00 39,458 74,113 STMicroelectronics NV 3,000 4/24/00 140.00 49,033 76,125 Teradyne, Inc. 4,000 1/24/00 37.50 26,689 113,500 Time Warner, Inc. 6,400 6/19/00 80.00 19,007 32,000 Xerox Corp. 9,600 1/24/00 70.00 34,511 600 ---------- ---------- $1,252,165 $2,036,344 ========== ==========
2. Non-income producing security. 3. Identifies issues considered to be illiquid or restricted--See Note 6 of Notes to Financial Statements. 4. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $10,188,075 or 1.76% of the Fund's net assets as of December 31, 1999. 5. Principal amount is reported in U.S. Dollars, except for those denoted in the following currencies: AUD -- Australian Dollar GBP -- British Pound Sterling CAD -- Canadian Dollar NZD -- New Zealand Dollar DKK -- Danish Krone ZAR -- South African Rand EUR -- Euro 6. For zero coupon bonds, the interest rate shown is the effective yield on the date of purchase. 7. Represents the current interest rate for a variable or increasing rate security. 8. Denotes a step bond: a zero coupon bond that converts to a fixed or variable interest rate at a designated future date. 9. Issuer is in default. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- Statement of Assets and Liabilities December 31, 1999 - -------------------------------------------------------------------------------- ========================================================================================================= Assets Investments, at value (cost $490,650,853)--see accompanying statement $576,085,947 - --------------------------------------------------------------------------------------------------------- Cash 1,043,942 - --------------------------------------------------------------------------------------------------------- Receivables and other assets: Interest 5,069,984 Shares of beneficial interest sold 34,787 Other 6,374 ------------ Total assets 582,241,034 ========================================================================================================= Liabilities Options written, at value (premiums received $1,252,165)--see accompanying statement 2,036,344 - --------------------------------------------------------------------------------------------------------- Payables and other liabilities: Shares of beneficial interest redeemed 734,934 Investments purchased 664,056 Transfer and shareholder servicing agent fees 184 Trustees' compensation 49 Other 22,633 ------------ Total liabilities 3,458,200 ========================================================================================================= Net Assets $578,782,834 ============ ========================================================================================================= Composition of Net Assets Paid-in capital $432,093,512 - --------------------------------------------------------------------------------------------------------- Undistributed net investment income 25,784,656 - --------------------------------------------------------------------------------------------------------- Accumulated net realized gain on investments and foreign currency transactions 36,252,948 - --------------------------------------------------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 84,651,718 ------------ Net assets--applicable to 33,148,390 shares of beneficial interest outstanding $578,782,834 ============ ========================================================================================================= Net Asset Value, Redemption Price Per Share and Offering Price Per Share $17.46
See accompanying Notes to Financial Statements. 16 Oppenheimer Multiple Strategies Fund/VA - -------------------------------------------------------------------------------- Statement of Operations For the Year Ended December 31, 1999 - -------------------------------------------------------------------------------- ========================================================================================================= Investment Income Interest $25,857,230 - --------------------------------------------------------------------------------------------------------- Dividends (net of foreign withholding taxes of $24,091) 4,941,295 ----------- Total income 30,798,525 ========================================================================================================= Expenses Management fees 4,271,996 - --------------------------------------------------------------------------------------------------------- Custodian fees and expenses 60,945 - --------------------------------------------------------------------------------------------------------- Trustees' compensation 6,600 - --------------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees 2,105 - --------------------------------------------------------------------------------------------------------- Other 7,362 ----------- Total expenses 4,349,008 Less expenses paid indirectly (5,741) ----------- Net expenses 4,343,267 ========================================================================================================= Net Investment Income 26,455,258 ========================================================================================================= Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments (including premiums on options exercised) 36,754,035 Closing and expiration of option contracts written 853,989 Foreign currency transactions (1,215,313) ----------- Net realized gain 36,392,711 - --------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation on: Investments 3,765,208 Translation of assets and liabilities denominated in foreign currencies (624,794) ----------- Net change 3,140,414 ----------- Net realized and unrealized gain 39,533,125 ========================================================================================================= Net Increase in Net Assets Resulting from Operations $65,988,383 ===========
See accompanying Notes to Financial Statements. Oppenheimer Multiple Strategies Fund/VA 17 - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 ============================================================================================================================== Operations Net investment income $ 26,455,258 $ 25,911,095 - ------------------------------------------------------------------------------------------------------------------------------ Net realized gain 36,392,711 29,540,227 - ------------------------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation or depreciation 3,140,414 (15,895,873) ------------ ------------ Net increase in net assets resulting from operations 65,988,383 39,555,449 ============================================================================================================================== Dividends and/or Distributions to Shareholders Dividends from net investment income (20,765,472) (5,964,037) - ------------------------------------------------------------------------------------------------------------------------------ Distributions from net realized gain (30,037,334) (34,591,414) ============================================================================================================================== Beneficial Interest Transactions Net decrease in net assets resulting from beneficial interest transactions (58,736,044) (14,211,527) ============================================================================================================================== Net Assets Total decrease (43,550,467) (15,211,529) - ------------------------------------------------------------------------------------------------------------------------------ Beginning of period 622,333,301 637,544,830 ------------ ------------ End of period (including undistributed net investment income of $25,784,656 and $20,748,181, respectively) $578,782,834 $622,333,301 ============ ============
See accompanying Notes to Financial Statements. 18 Oppenheimer Multiple Strategies Fund/VA - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995 ================================================================================================================================ Per Share Operating Data Net asset value, beginning of period $17.05 $17.01 $15.63 $14.55 $12.91 - -------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income .82 .71 .62 .72 .66 Net realized and unrealized gain 1.04 .42 1.95 1.45 2.00 - -------------------------------------------------------------------------------------------------------------------------------- Total income from investment operations 1.86 1.13 2.57 2.17 2.66 - -------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.59) (.16) (.61) (.74) (.65) Distributions from net realized gain (.86) (.93) (.58) (.35) (.37) - -------------------------------------------------------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (1.45) (1.09) (1.19) (1.09) (1.02) - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $17.46 $17.05 $17.01 $15.63 $14.55 ====== ====== ====== ====== ====== ================================================================================================================================ Total Return, at Net Asset Value(1) 11.80% 6.66% 17.22% 15.50% 21.36% ================================================================================================================================ Ratios/Supplemental Data Net assets, end of period (in thousands) $578,783 $622,333 $637,545 $484,285 $381,263 - -------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $593,151 $640,131 $564,369 $428,277 $344,745 - -------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:(2) Net investment income 4.46% 4.05% 3.86% 4.89% 4.81% Expenses 0.73% 0.76%(3) 0.75%(3) 0.77%(3) 0.77%(3) - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(4) 17% 43% 42% 40% 39%
1. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 2. Annualized for periods less than one full year. 3. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. 4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended December 31, 1999, were $94,111,384 and $130,260,786, respectively. See accompanying Notes to Financial Statements. Oppenheimer Multiple Strategies Fund/VA 19 - -------------------------------------------------------------------------------- Notes to Financial Statements - -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies Oppenheimer Multiple Strategies Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds (the Trust), a diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek a total investment return, which includes current income and capital appreciation in the value of its shares. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The following is a summary of significant accounting policies consistently followed by the Fund. - -------------------------------------------------------------------------------- Securities Valuation. Portfolio securities are valued at the close of the New York Stock Exchange on each trading day. Listed and unlisted securities for which such information is regularly reported are valued at the last sale price of the day or, in the absence of sales, at values based on the closing bid or the last sale price on the prior trading day. Long-term and short-term "non-money market" debt securities are valued by a portfolio pricing service approved by the Board of Trustees. Such securities which cannot be valued by an approved portfolio pricing service are valued using dealer-supplied valuations provided the Manager is satisfied that the firm rendering the quotes is reliable and that the quotes reflect current market value, or are valued under consistently applied procedures established by the Board of Trustees to determine fair value in good faith. Short-term "money market type" debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Foreign currency exchange contracts are valued based on the closing prices of the foreign currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. Options are valued based upon the last sale price on the principal exchange on which the option is traded or, in the absence of any transactions that day, the value is based upon the last sale price on the prior trading date if it is within the spread between the closing bid and asked prices. If the last sale price is outside the spread, the closing bid is used. - -------------------------------------------------------------------------------- Security Credit Risk. The Fund invests in high yield securities, which may be subject to a greater degree of credit risk, greater market fluctuations and risk of loss of income and principal, and may be more sensitive to economic conditions than lower yielding, higher rated fixed income securities. The Fund may acquire securities in default, and is not obligated to dispose of securities whose issuers subsequently default. As of December 31, 1999, securities with an aggregate market value of $65,000, representing 0.01% of the Fund's net assets, were in default. - -------------------------------------------------------------------------------- Foreign Currency Translation. The accounting records of the Fund are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange. Amounts related to the purchase and sale of foreign securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund's Statement of Operations. - -------------------------------------------------------------------------------- Repurchase Agreements. The Fund requires the custodian to take possession, to have legally segregated in the Federal Reserve Book Entry System or to have segregated within the custodian's vault, all securities held as collateral for repurchase agreements. The market value of the underlying securities is required to be at least 102% of the resale price at the time of purchase. If the seller of the agreement defaults and the value of the collateral declines, or if the seller enters an insolvency proceeding, realization of the value of the collateral by the Fund may be delayed or limited. - -------------------------------------------------------------------------------- Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by loss carryovers to shareholders. - -------------------------------------------------------------------------------- Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. 20 Oppenheimer Multiple Strategies Fund/VA - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ Classification of Distributions to Shareholders. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes primarily because of the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes. The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund. The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, during the year ended December 31, 1999, amounts have been reclassified to reflect a decrease in undistributed net investment income of $653,311. Accumulated net realized gain on investments was increased by the same amount. - -------------------------------------------------------------------------------- Expense Offset Arrangements. Expenses paid indirectly represent a reduction of custodian fees for earnings on cash balances maintained by the Fund. - -------------------------------------------------------------------------------- Other. Investment transactions are accounted for as of trade date and dividend income is recorded on the ex-dividend date. Realized gains and losses on investments and options written and unrealized appreciation and depreciation are determined on an identified cost basis, which is the same basis used for federal income tax purposes. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. ================================================================================ 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of no par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:
Year Ended December 31, 1999 Year Ended December 31, 1998 ------------------------------ ------------------------------ Shares Amount Shares Amount - ------------------------------------------------------------------------------------------------------------------------------ Sold 1,494,012 $ 25,019,610 3,352,415 $ 56,547,384 Dividends and/or distributions reinvested 3,209,274 50,802,806 2,387,019 40,555,451 Redeemed (8,052,445) (134,558,460) (6,714,957) (111,314,362) ---------- ------------- ---------- ------------- Net decrease (3,349,159) $ (58,736,044) (975,523) $ (14,211,527) ========== ============= ========== =============
================================================================================ 3. Unrealized Gains and Losses on Securities As of December 31, 1999, net unrealized appreciation on securities and options written of $84,650,915 was composed of gross appreciation of $121,520,407, and gross depreciation of $36,869,492. ================================================================================ 4. Management Fees and Other Transactions with Affiliates Management Fees. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Trust. The annual fees are 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million and 0.60% of average annual net assets over $800 million. The Fund's management fee for the year ended December 31, 1999, was 0.72% of average annual net assets. - -------------------------------------------------------------------------------- Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, is the transfer agent for the Fund and is responsible for maintaining the shareholder registry and shareholder accounting records for the Fund. OFS provides these services for cost. Oppenheimer Multiple Strategies Fund/VA 21 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 5. Foreign Currency Contracts A foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. The Fund may enter into foreign currency contracts for operational purposes and to seek to protect against adverse exchange rate fluctuations. Risks to the Fund include the potential inability of the counterparty to meet the terms of the contract. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates as provided by a reliable bank, dealer or pricing service. Unrealized appreciation and depreciation on foreign currency contracts are reported in the Statement of Assets and Liabilities. The Fund may realize a gain or loss upon the closing or settlement of the foreign currency transaction. Realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. Securities denominated in foreign currency to cover net exposure on outstanding foreign currency contracts are noted in the Statement of Investments where applicable. ================================================================================ 6. Option Activity The Fund may buy and sell put and call options, or write put and covered call options on portfolio securities in order to produce incremental earnings or protect against changes in the value of portfolio securities. The Fund generally purchases put options or writes covered call options to hedge against adverse movements in the value of portfolio holdings. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option. Options are valued daily based upon the last sale price on the principal exchange on which the option is traded and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss upon the expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option is adjusted by the amount of premium received or paid. Securities designated to cover outstanding call options are noted in the Statement of Investments where applicable. Shares subject to call, expiration date, exercise price, premium received and market value are detailed in a note to the Statement of Investments. Options written are reported as a liability in the Statement of Assets and Liabilities. Gains and losses are reported in the Statement of Operations. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Written option activity for the year ended December 31, 1999, was as follows:
Call Options ------------------------------ Number of Amount of Options Premiums - -------------------------------------------------------------------------------------------------------------- Options outstanding as of December 31, 1998 5,871 $ 1,686,387 Options written 7,204 3,421,612 Options closed or expired (7,188) (2,544,448) Options exercised (3,535) (1,311,386) ------ ----------- Options outstanding as of December 31, 1999 2,352 $ 1,252,165 ====== ===========
22 Oppenheimer Multiple Strategies Fund/VA - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 7. Illiquid or Restricted Securities As of December 31, 1999, investments in securities included issues that are illiquid or restricted. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may also be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund intends to invest no more than 15% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid or restricted securities. Certain restricted securities, eligible for resale to qualified institutional investors, are not subject to that limitation. The aggregate value of illiquid or restricted securities subject to this limitation as of December 31, 1999, was $1,878,948, which represents 0.32% of the Fund's net assets, of which $6,241 is considered restricted. Information concerning restricted securities is as follows:
Valuation Per Unit as of Acquisition Cost Per December 31, Security Date Unit 1999 - --------------------------------------------------------------------------------------------------------------------------- Intermedia Communications, Inc. 9/29/98 $21.69 $31.05
16 Oppenheimer Global Securities Fund/VA - -------------------------------------------------------------------------------- Independent Auditors' Report - -------------------------------------------------------------------------------- ================================================================================ To the Board of Trustees and Shareholders of Oppenheimer Global Securities Fund/VA: We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Oppenheimer Global Securities Fund/VA (which is a series of Oppenheimer Variable Account Funds) as of December 31, 1999, the related statement of operations for the year then ended, the statements of changes in net assets for the years ended December 31, 1999 and 1998 and the financial highlights for the period January 1, 1995 to December 31, 1999. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Oppenheimer Global Securities Fund/VA as of December 31, 1999, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP - -------------------------- Deloitte & Touche LLP Denver, Colorado January 24, 2000 - -------------------------------------------------------------------------------- Statement of Investments December 31, 1999 - --------------------------------------------------------------------------------
Market Value Shares Note 1 ======================================================================================= Common Stocks--89.1% Basic Materials--1.1% - --------------------------------------------------------------------------------------- Chemicals--1.1% - --------------------------------------------------------------------------------------- International Flavors & Fragrances, Inc. 501,200 $ 18,920,300 - --------------------------------------------------------------------------------------- Capital Goods--7.8% - --------------------------------------------------------------------------------------- Electrical Equipment--1.5% Toshiba Corp. 3,388,000 25,849,946 - --------------------------------------------------------------------------------------- Industrial Services--3.8% Manpower, Inc. 437,800 16,472,225 - --------------------------------------------------------------------------------------- Rentokil Initial plc 3,216,300 11,729,826 - --------------------------------------------------------------------------------------- WPP Group plc 2,459,500 38,978,317 ------------ 67,180,368 - --------------------------------------------------------------------------------------- Manufacturing--2.5% Bombardier, Inc., Cl. B 787,500 16,133,058 - --------------------------------------------------------------------------------------- Sidel SA 123,700 12,760,393 - --------------------------------------------------------------------------------------- Societe BIC SA 319,437 14,524,525 ------------ 43,417,976 - --------------------------------------------------------------------------------------- Communication Services--6.8% - --------------------------------------------------------------------------------------- Telecommunications: Long Distance--0.6% MCI WorldCom, Inc.(1) 200,700 10,649,644 - --------------------------------------------------------------------------------------- Telephone Utilities--2.7% DDI Corp.(1) 600 8,216,766 - --------------------------------------------------------------------------------------- Hellenic Telecommunication Organization SA 182,118 4,327,815 - --------------------------------------------------------------------------------------- Portugal Telecom SA 719,000 7,880,019 - --------------------------------------------------------------------------------------- Tele Norte Leste Participacoes SA (Telemar), Preference 791,770,000 21,257,041 - --------------------------------------------------------------------------------------- Telstra Corp. Ltd. 1,245,400 6,774,926 ------------ 48,456,567 - --------------------------------------------------------------------------------------- Telecommunications: Wireless--3.5% NTT Mobile Communications Network, Inc. 636 24,449,574 - --------------------------------------------------------------------------------------- Telecel-Comunicacoes Pessoais, S.A. 501,400 8,734,778 - --------------------------------------------------------------------------------------- Telecom Italia Mobile SpA 2,294,400 25,607,736 - --------------------------------------------------------------------------------------- Telesp Celular Participacoes SA, ADR 79,100 3,351,862 ------------ 62,143,950 - --------------------------------------------------------------------------------------- Consumer Cyclicals--9.9% - --------------------------------------------------------------------------------------- Autos & Housing--5.9% Autoliv, Inc., SDR 301,600 8,824,205 - --------------------------------------------------------------------------------------- General Motors Corp. 205,300 14,922,744 - --------------------------------------------------------------------------------------- Hanson plc 1,608,400 13,485,550 - --------------------------------------------------------------------------------------- IRSA Inversiones y Representaciones SA 1,816,959 5,887,536 - --------------------------------------------------------------------------------------- Porsche AG, Preference 16,600 43,770,336 - --------------------------------------------------------------------------------------- Volkswagen AG 295,500 16,585,502 ------------ 103,475,873
Oppenheimer Global Securities Fund/VA 5 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - --------------------------------------------------------------------------------------- Leisure & Entertainment--1.2% Hasbro, Inc. 478,200 $ 9,115,687 - --------------------------------------------------------------------------------------- International Game Technology 558,400 11,342,500 ------------ 20,458,187 - --------------------------------------------------------------------------------------- Media--1.1% Reed International plc 1,599,200 11,974,566 - --------------------------------------------------------------------------------------- Singapore Press Holdings Ltd. 364,000 7,889,763 ------------ 19,864,329 - --------------------------------------------------------------------------------------- Retail: Specialty--1.7% Circuit City Stores-Circuit City Group 274,000 12,347,125 - --------------------------------------------------------------------------------------- Dixons Group plc 739,194 17,781,172 ------------ 30,128,297 - --------------------------------------------------------------------------------------- Consumer Staples--10.5% - --------------------------------------------------------------------------------------- Beverages--0.7% Cadbury Schweppes plc 2,036,400 12,303,876 - --------------------------------------------------------------------------------------- Broadcasting--7.4% Canal Plus 282,404 41,068,533 - --------------------------------------------------------------------------------------- Grupo Televisa SA, Sponsored GDR(1) 424,300 28,958,475 - --------------------------------------------------------------------------------------- ProSieben Media AG, Preference 235,948 13,416,377 - --------------------------------------------------------------------------------------- Television Broadcasts Ltd. 1,569,000 10,697,498 - --------------------------------------------------------------------------------------- Television Francaise 1 56,075 29,345,609 - --------------------------------------------------------------------------------------- Telewest Communications plc(1) 1,291,058 6,888,043 ------------ 130,374,535 - --------------------------------------------------------------------------------------- Entertainment--0.9% Disney (Walt) Co. 219,700 6,426,225 - --------------------------------------------------------------------------------------- Nintendo Co. Ltd. 54,000 8,969,187 ------------ 15,395,412 - --------------------------------------------------------------------------------------- Food & Drug Retailers--0.4% Dairy Farm International Holdings Ltd. 8,172,194 7,354,975 - --------------------------------------------------------------------------------------- Household Goods--1.1% Wella AG, Preference 910,700 19,980,315 - --------------------------------------------------------------------------------------- Energy--0.4% - --------------------------------------------------------------------------------------- Oil: International--0.4% BP Amoco plc, ADR 107,288 6,363,519 - --------------------------------------------------------------------------------------- Financial--9.1% - --------------------------------------------------------------------------------------- Banks--1.5% Australia & New Zealand Banking Group Ltd. 1,958,600 14,259,033 - --------------------------------------------------------------------------------------- Royal Bank of Scotland Group (The) plc 340,000 6,009,018 - --------------------------------------------------------------------------------------- UniCredito Italiano SpA 1,303,100 6,399,824 ------------ 26,667,875
6 Oppenheimer Global Securities Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - --------------------------------------------------------------------------------------- Diversified Financial--5.1% American Express Co. 99,000 $ 16,458,750 - --------------------------------------------------------------------------------------- Associates First Capital Corp., Cl. A 139,700 3,833,019 - --------------------------------------------------------------------------------------- Citigroup, Inc. 295,700 16,429,831 - --------------------------------------------------------------------------------------- Credit Saison Co. Ltd. 390,000 6,790,570 - --------------------------------------------------------------------------------------- Fannie Mae 190,000 11,863,125 - --------------------------------------------------------------------------------------- Housing Development Finance Corp. Ltd. 222,900 1,463,821 - --------------------------------------------------------------------------------------- ICICI Ltd., Sponsored ADR(1) 1,008,700 14,615,825 - --------------------------------------------------------------------------------------- Lehman Brothers Holdings, Inc. 226,000 19,139,375 ------------ 90,594,316 - --------------------------------------------------------------------------------------- Insurance--2.5% - --------------------------------------------------------------------------------------- AEGON NV 143,400 13,840,069 - --------------------------------------------------------------------------------------- Allied Zurich plc 1,048,600 12,357,835 - --------------------------------------------------------------------------------------- American International Group, Inc. 56,937 6,156,313 - --------------------------------------------------------------------------------------- AXA SA 87,300 12,159,643 ------------ 44,513,860 - --------------------------------------------------------------------------------------- Healthcare--12.3% - --------------------------------------------------------------------------------------- Healthcare/Drugs--10.0% ALZA Corp., Cl. A(1) 419,900 14,539,037 - --------------------------------------------------------------------------------------- Amgen, Inc.(1) 294,200 17,670,387 - --------------------------------------------------------------------------------------- Eisai Co. Ltd. 704,000 13,531,840 - --------------------------------------------------------------------------------------- Elan Corp. plc, ADR(1) 614,800 18,136,600 - --------------------------------------------------------------------------------------- Fresenius AG, Preference 142,419 26,086,140 - --------------------------------------------------------------------------------------- Genset, Sponsored ADR(1) 938,600 17,892,062 - --------------------------------------------------------------------------------------- Genzyme Corp. (General Division)(1) 177,400 7,983,000 - --------------------------------------------------------------------------------------- Gilead Sciences, Inc.(1) 172,700 9,347,387 - --------------------------------------------------------------------------------------- Glaxo Wellcome plc, Sponsored ADR 154,800 8,649,450 - --------------------------------------------------------------------------------------- Millennium Pharmaceuticals, Inc.(1) 207,800 25,351,600 - --------------------------------------------------------------------------------------- Pliva d.d., Sponsored GDR(2) 810,300 10,574,415 - --------------------------------------------------------------------------------------- Taisho Pharmaceutical Co. 210,000 6,162,575 ------------ 175,924,493 - --------------------------------------------------------------------------------------- Healthcare/Supplies & Services--2.3% Affymetrix, Inc.(1) 135,300 22,958,719 - --------------------------------------------------------------------------------------- Bard (C.R.), Inc. 178,400 9,455,200 - --------------------------------------------------------------------------------------- Quintiles Transnational Corp.(1) 458,900 8,575,694 ------------ 40,989,613 - --------------------------------------------------------------------------------------- Technology--30.7% - --------------------------------------------------------------------------------------- Computer Hardware--2.9% International Business Machines Corp. 145,800 15,746,400 - --------------------------------------------------------------------------------------- Sun Microsystems, Inc.(1) 447,200 34,630,050 ------------ 50,376,450
Oppenheimer Global Securities Fund/VA 7 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - ------------------------------------------------------------------------------------------------------------------------ Computer Services--4.0% Cap Gemini SA 115,600 $ 29,317,631 - ------------------------------------------------------------------------------------------------------------------------ Getronics NV 514,000 40,969,324 -------------- 70,286,955 - ------------------------------------------------------------------------------------------------------------------------ Computer Software--5.8% Cadence Design Systems, Inc.(1) 1,572,600 37,742,400 - ------------------------------------------------------------------------------------------------------------------------ Lernout & Hauspie Speech Products NV(1) 289,800 13,403,250 - ------------------------------------------------------------------------------------------------------------------------ Oracle Corp.(1) 339,000 37,989,187 - ------------------------------------------------------------------------------------------------------------------------ Sybase, Inc.(1) 345,900 5,880,300 - ------------------------------------------------------------------------------------------------------------------------ Synopsys, Inc.(1) 110,700 7,389,225 -------------- 102,404,362 - ------------------------------------------------------------------------------------------------------------------------ Communications Equipment--11.1% Alcatel 133,100 30,541,010 - ------------------------------------------------------------------------------------------------------------------------ Cisco Systems, Inc.(1) 161,350 17,284,619 - ------------------------------------------------------------------------------------------------------------------------ L.M. Ericsson Telephone Co., Cl. B, ADR 596,400 39,176,025 - ------------------------------------------------------------------------------------------------------------------------ Nokia Corp., A Shares, Sponsored ADR(1) 95,900 18,221,000 - ------------------------------------------------------------------------------------------------------------------------ QUALCOMM, Inc.(1) 385,100 67,825,737 - ------------------------------------------------------------------------------------------------------------------------ Scientific-Atlanta, Inc. 402,100 22,366,813 -------------- 195,415,204 - ------------------------------------------------------------------------------------------------------------------------ Electronics--6.9% Hoya Corp. 83,000 6,535,753 - ------------------------------------------------------------------------------------------------------------------------ Koninklijke (Royal) Philips Electronics NV 216,600 29,428,134 - ------------------------------------------------------------------------------------------------------------------------ National Semiconductor Corp.(1) 1,167,400 49,979,313 - ------------------------------------------------------------------------------------------------------------------------ STMicroelectronics NV, NY Registered Shares 229,800 34,800,338 -------------- 120,743,538 - ------------------------------------------------------------------------------------------------------------------------ Transportation--0.5% - ------------------------------------------------------------------------------------------------------------------------ Shipping--0.5% Peninsular & Oriental Steam Navigation Co. 575,100 9,597,341 - ------------------------------------------------------------------------------------------------------------------------ Total Common Stocks (Cost $1,026,351,138) 1,569,832,076 Principal Amount - ------------------------------------------------------------------------------------------------------------------------ Repurchase Agreements--8.3% - ------------------------------------------------------------------------------------------------------------------------ Repurchase agreement with Banc One Capital Markets, Inc., 2.75%, dated 12/31/99, to be repurchased at $145,933,435 on 1/3/00, collateralized by U.S. Treasury Bonds, 5.25%-12%, 2/15/01-11/15/28, with a value of $57,264,247 and U.S. Treasury Nts., 5%-7.50%, 12/31/00-2/15/07, with a value of $91,638,429 (Cost $145,900,000) $ 145,900,000 145,900,000 - ------------------------------------------------------------------------------------------------------------------------ Total Investments, at Value (Cost $1,172,251,138) 97.4% 1,715,732,076 - ------------------------------------------------------------------------------------------------------------------------ Other Assets Net of Liabilities 2.6 46,634,376 -------------- -------------- Net Assets 100.0% $1,762,366,452 ============== ==============
8 Oppenheimer Global Securities Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Distribution of investments representing geographic diversification, as a percentage of total investments at value, is as follows:
Geographic Diversification Market Value Percent - --------------------------------------------------------------------------------------- United States $ 736,854,433 42.8% - --------------------------------------------------------------------------------------- France 222,409,744 13.0 - --------------------------------------------------------------------------------------- Great Britain 156,118,512 9.1 - --------------------------------------------------------------------------------------- Germany 119,838,669 7.0 - --------------------------------------------------------------------------------------- Japan 100,506,211 5.9 - --------------------------------------------------------------------------------------- The Netherlands 84,237,526 4.9 - --------------------------------------------------------------------------------------- Sweden 48,000,230 2.8 - --------------------------------------------------------------------------------------- Italy 32,007,560 1.9 - --------------------------------------------------------------------------------------- Mexico 28,958,475 1.7 - --------------------------------------------------------------------------------------- Brazil 24,608,904 1.4 - --------------------------------------------------------------------------------------- Australia 21,033,959 1.2 - --------------------------------------------------------------------------------------- Finland 18,221,000 1.1 - --------------------------------------------------------------------------------------- Ireland 18,136,600 1.1 - --------------------------------------------------------------------------------------- Portugal 16,614,798 1.0 - --------------------------------------------------------------------------------------- Canada 16,133,058 0.9 - --------------------------------------------------------------------------------------- Singapore 15,244,737 0.9 - --------------------------------------------------------------------------------------- Belgium 13,403,250 0.8 - --------------------------------------------------------------------------------------- India 11,917,146 0.7 - --------------------------------------------------------------------------------------- Hong Kong 10,697,498 0.6 - --------------------------------------------------------------------------------------- Croatia 10,574,415 0.6 - --------------------------------------------------------------------------------------- Argentina 5,887,536 0.3 - --------------------------------------------------------------------------------------- Greece 4,327,815 0.3 -------------- ----- Total $1,715,732,076 100.0% ============== =====
1. Non-income producing security. 2. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $10,574,415 or 0.60% of the Fund's net assets as of December 31, 1999. See accompanying Notes to Financial Statements. Oppenheimer Global Securities Fund/VA 9 - -------------------------------------------------------------------------------- Statement of Assets and Liabilities December 31, 1999 - -------------------------------------------------------------------------------- ================================================================================================ Assets Investments, at value (cost $1,172,251,138)--see accompanying statement $1,715,732,076 - ------------------------------------------------------------------------------------------------ Cash 1,077,591 - ------------------------------------------------------------------------------------------------ Unrealized appreciation on foreign currency exchange contracts 7,046 - ------------------------------------------------------------------------------------------------ Receivables and other assets: Investments sold 53,869,505 Shares of beneficial interest sold 1,265,029 Interest, dividends 1,158,012 Other 11,481 -------------- Total assets 1,773,120,740 ================================================================================================ Liabilities Unrealized depreciation on foreign currency exchange contracts 7,821 - ------------------------------------------------------------------------------------------------ Payables and other liabilities: Investments purchased 9,066,120 Shares of beneficial interest redeemed 1,537,479 Trustees' compensation 1,967 Transfer and shareholder servicing agent fees 184 Other 140,717 -------------- Total liabilities 10,754,288 ================================================================================================ Net Assets $1,762,366,452 ============== ================================================================================================ Composition of Net Assets Paid-in capital $ 924,735,645 - ------------------------------------------------------------------------------------------------ Overdistributed net investment income (567,744) - ------------------------------------------------------------------------------------------------ Accumulated net realized gain on investments and foreign currency transactions 294,753,467 - ------------------------------------------------------------------------------------------------ Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 543,445,084 -------------- Net assets--applicable to 52,745,360 shares of beneficial interest outstanding $1,762,366,452 ============== ================================================================================================ Net Asset Value, Redemption Price Per Share and Offering Price Per Share $33.41
See accompanying Notes to Financial Statements. 10 Oppenheimer Global Securities Fund/VA - -------------------------------------------------------------------------------- Statement of Operations For the Year Ended December 31, 1999 - -------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- Investment Income Dividends (net of foreign withholding taxes of $712,662) $ 13,352,150 - ---------------------------------------------------------------------------------------------- Interest 2,466,093 ------------ Total income 15,818,243 ============================================================================================== Expenses Management fees 8,336,850 - ---------------------------------------------------------------------------------------------- Custodian fees and expenses 270,778 - ---------------------------------------------------------------------------------------------- Trustees' compensation 11,193 - ---------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees 2,104 - ---------------------------------------------------------------------------------------------- Other 43,962 ------------ Total expenses 8,664,887 Less expenses paid indirectly (6,321) ------------ Net expenses 8,658,566 ============================================================================================== Net Investment Income 7,159,677 ============================================================================================== Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments 320,164,650 Foreign currency transactions (29,286,569) ------------ Net realized gain 290,878,081 - ---------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation on: Investments 363,894,982 Translation of assets and liabilities denominated in foreign currencies (23,520,911) ------------ Net change 340,374,071 ------------ Net realized and unrealized gain 631,252,152 ============================================================================================== Net Increase in Net Assets Resulting from Operations $638,411,829 ============
See accompanying Notes to Financial Statements. Oppenheimer Global Securities Fund/VA 11 - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 =============================================================================================================== Operations Net investment income $ 7,159,677 $ 12,887,134 - --------------------------------------------------------------------------------------------------------------- Net realized gain 290,878,081 36,962,992 - --------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation 340,374,071 86,460,026 -------------- -------------- Net increase in net assets resulting from operations 638,411,829 136,310,152 =============================================================================================================== Dividends and/or Distributions to Shareholders Dividends from net investment income (7,159,677) (21,307,082) - --------------------------------------------------------------------------------------------------------------- Dividends in excess of net investment income (6,137,505) -- - --------------------------------------------------------------------------------------------------------------- Distributions from net realized gain (37,262,160) (80,203,951) =============================================================================================================== Beneficial Interest Transactions Net increase in net assets resulting from beneficial interest transactions 39,484,831 141,119,795 =============================================================================================================== Net Assets Total increase 627,337,318 175,918,914 - --------------------------------------------------------------------------------------------------------------- Beginning of period 1,135,029,134 959,110,220 -------------- -------------- End of period [including undistributed (overdistributed) net investment income of $(567,744) and $11,592,206, respectively] $1,762,366,452 $1,135,029,134 ============== ==============
See accompanying Notes to Financial Statements. 12 Oppenheimer Global Securities Fund/VA - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995 - --------------------------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $22.07 $21.37 $17.67 $15.00 $15.09 - --------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income .14 .24 .25 .15 .12 Net realized and unrealized gain 12.21 2.64 3.68 2.52 .19 - --------------------------------------------------------------------------------------------------------------------- Total income from investment operations 12.35 2.88 3.93 2.67 .31 - --------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.14) (.46) (.23) -- -- Dividends in excess of net investment income (.13) -- -- -- -- Distributions from net realized gain (.74) (1.72) -- -- (.40) - --------------------------------------------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (1.01) (2.18) (.23) -- (.40) - --------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $33.41 $22.07 $21.37 $17.67 $15.00 ====== ====== ====== ====== ====== ===================================================================================================================== Total Return, at Net Asset Value(1) 58.48% 14.11% 22.42% 17.80% 2.24% ===================================================================================================================== Ratios/Supplemental Data Net assets, end of period (in millions) $1,762 $1,135 $959 $582 $361 - --------------------------------------------------------------------------------------------------------------------- Average net assets (in millions) $1,251 $1,055 $802 $467 $332 - --------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:(2) Net investment income 0.57% 1.22% 1.51% 1.09% 0.86% Expenses 0.69% 0.74%(3) 0.76%(3) 0.81%(3) 0.89%(3) - --------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(4) 64% 81% 67% 90% 131%
1. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 2. Annualized for periods less than one full year. 3. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. 4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended December 31, 1999, were $772,038,559 and $956,384,357, respectively. See accompanying Notes to Financial Statements. Oppenheimer Global Securities Fund/VA 13 - -------------------------------------------------------------------------------- Notes to Financial Statements - -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies Oppenheimer Global Securities Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds (the Trust), a diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek long-term capital appreciation by investing a substantial portion of assets in securities of foreign issuers, "growth-type" companies, cyclical industries and special situations that are considered to have appreciation possibilities. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The following is a summary of significant accounting policies consistently followed by the Fund. - -------------------------------------------------------------------------------- Securities Valuation. Portfolio securities are valued at the close of the New York Stock Exchange on each trading day. Listed and unlisted securities for which such information is regularly reported are valued at the last sale price of the day or, in the absence of sales, at values based on the closing bid or the last sale price on the prior trading day. Long-term and short-term "non-money market" debt securities are valued by a portfolio pricing service approved by the Board of Trustees. Such securities which cannot be valued by an approved portfolio pricing service are valued using dealer-supplied valuations provided the Manager is satisfied that the firm rendering the quotes is reliable and that the quotes reflect current market value, or are valued under consistently applied procedures established by the Board of Trustees to determine fair value in good faith. Short-term "money market type" debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Foreign currency exchange contracts are valued based on the closing prices of the foreign currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. Options are valued based upon the last sale price on the principal exchange on which the option is traded or, in the absence of any transactions that day, the value is based upon the last sale price on the prior trading date if it is within the spread between the closing bid and asked prices. If the last sale price is outside the spread, the closing bid is used. - -------------------------------------------------------------------------------- Foreign Currency Translation. The accounting records of the Fund are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange. Amounts related to the purchase and sale of foreign securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund's Statement of Operations. - -------------------------------------------------------------------------------- Repurchase Agreements. The Fund requires the custodian to take possession, to have legally segregated in the Federal Reserve Book Entry System or to have segregated within the custodian's vault, all securities held as collateral for repurchase agreements. The market value of the underlying securities is required to be at least 102% of the resale price at the time of purchase. If the seller of the agreement defaults and the value of the collateral declines, or if the seller enters an insolvency proceeding, realization of the value of the collateral by the Fund may be delayed or limited. - -------------------------------------------------------------------------------- Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by loss carryovers to shareholders. - -------------------------------------------------------------------------------- Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. 14 Oppenheimer Global Securities Fund/VA - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Classification of Distributions to Shareholders. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes primarily because of the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes. The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund. The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, during the year ended December 31, 1999, amounts have been reclassified to reflect a decrease in paid-in capital of $6,653, a decrease in undistributed net investment income of $6,022,445, and an increase in accumulated net realized gain on investments of $6,029,098. - -------------------------------------------------------------------------------- Expense Offset Arrangements. Expenses paid indirectly represent a reduction of custodian fees for earnings on cash balances maintained by the Fund. - -------------------------------------------------------------------------------- Other. Investment transactions are accounted for as of trade date and dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Realized gains and losses on investments and unrealized appreciation and depreciation are determined on an identified cost basis, which is the same basis used for federal income tax purposes. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. ================================================================================ 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of no par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:
Year Ended December 31, 1999 Year Ended December 31, 1998 ----------------------------- ----------------------------- Shares Amount Shares Amount - ------------------------------------------------------------------------------------------------------------- Sold 14,212,563 $ 365,308,523 11,735,029 $ 248,354,528 Dividends and distributions reinvested 2,349,412 50,559,342 4,877,993 101,511,033 Redeemed (15,245,808) (376,383,034) (10,067,775) (208,745,766) ----------- ------------- ----------- ------------- Net increase 1,316,167 $ 39,484,831 6,545,247 $ 141,119,795 =========== ============= =========== =============
================================================================================ 3. Unrealized Gains and Losses on Securities As of December 31, 1999, net unrealized appreciation on securities of $543,480,938 was composed of gross appreciation of $590,197,031, and gross depreciation of $46,716,093. Oppenheimer Global Securities Fund/VA 15 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 4. Management Fees and Other Transactions with Affiliates Management Fees. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund which provides for a fee of 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million and 0.60% of average annual net assets over $800 million. The Fund's management fee for the year ended December 31, 1999 was 0.67% of average annual net assets. ================================================================================ Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, is the transfer agent for the Fund and is responsible for maintaining the shareholder registry and shareholder accounting records for the Fund. OFS provides these services for cost. ================================================================================ 5. Foreign Currency Contracts A foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. The Fund may enter into foreign currency contracts for operational purposes and to seek to protect against adverse exchange rate fluctuations. Risks to the Fund include the potential inability of the counterparty to meet the terms of the contract. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates as provided by a reliable bank, dealer or pricing service. Unrealized appreciation and depreciation on foreign currency contracts are reported in the Statement of Assets and Liabilities. The Fund may realize a gain or loss upon the closing or settlement of the foreign currency transactions. Realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. Securities denominated in foreign currency to cover net exposure on outstanding foreign currency contracts are noted in the Statement of Investments where applicable. As of December 31, 1999, the Fund had outstanding foreign currency contracts as follows:
Expiration Contract Valuation as of Unrealized Unrealized Contract Description Dates Amounts (000s) December 31, 1999 Appreciation Depreciation - ------------------------------------------------------------------------------------------------------------------- Contracts to Purchase - --------------------- British Pound Sterling (GBP) 1/3/00 164 GBP $ 264,200 $ 554 $ -- British Pound Sterling (GBP) 1/3/00 285 GBP 461,002 -- 860 Euro (EUR) 1/3/00 209 EUR 210,398 538 -- Japanese Yen (JPY) 1/3/00 163,044 JPY 1,596,537 3,186 -- Japanese Yen (JPY) 1/3/00 9,642 JPY 94,379 -- 202 ------ ------ 4,278 1,062 ------ ------ Contracts to Sell - ----------------- British Pound Sterling (GBP) 1/3/00 2,135 GBP 3,449,810 2,768 -- Euro (EUR) 1/3/00 2,933 EUR 2,959,230 -- 6,759 ------ ------ 2,768 6,759 ------ ------ Total Unrealized Appreciation and Depreciation $7,046 $7,821 ====== ======
Oppenheimer Strategic Bond Fund/VA 35 - -------------------------------------------------------------------------------- Independent Auditors' Report - -------------------------------------------------------------------------------- ================================================================================ To the Board of Trustees and Shareholders of Oppenheimer Strategic Bond Fund/VA: We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Oppenheimer Strategic Bond Fund/VA (which is a series of Oppenheimer Variable Account Funds) as of December 31, 1999, the related statement of operations for the year then ended, the statements of changes in net assets for the years ended December 31, 1999 and 1998 and the financial highlights for the period five years prior, to December 31, 1999. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Oppenheimer Strategic Bond Fund/VA as of December 31, 1999, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP - -------------------------- Deloitte & Touche LLP Denver, Colorado January 24, 2000 - -------------------------------------------------------------------------------- Statement of Investments December 31, 1999 - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 ============================================================================================================ Mortgage-Backed Obligations--22.3% - ------------------------------------------------------------------------------------------------------------ Government Agency--18.5% - ------------------------------------------------------------------------------------------------------------ FHLMC/FNMA/Sponsored--8.8% Federal Home Loan Mortgage Corp., Collateralized Mtg. Obligations, Gtd. Multiclass Mtg. Participation Certificates, Series 151, Cl. F, 9%, 5/15/21 $ 793,067 $ 819,334 - ------------------------------------------------------------------------------------------------------------ Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security, Series 194, Cl. IO, 9.40%-9.462%, 4/1/28(2) 20,681,402 6,913,728 - ------------------------------------------------------------------------------------------------------------ Federal National Mortgage Assn.: 6.50%, 5/1/29 1,555,497 1,465,559 7%, 1/25/29(3) 6,200,000 5,994,656 7.50%, 1/25/28(3) 3,200,000 3,164,000 7.50%, 8/1/25 405,275 401,730 - ------------------------------------------------------------------------------------------------------------ Federal National Mortgage Assn., Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Trust 1993-202, Cl. PH, 6.50%, 2/25/22 4,500,000 4,373,415 - ------------------------------------------------------------------------------------------------------------ Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: Trust 276, Cl. 2, 9.065%, 10/1/24(2) 2,834,208 875,948 Trust 294, Cl. 2, 11.826%, 2/1/28(2) 2,273,267 747,692 ----------- 24,756,062 - ------------------------------------------------------------------------------------------------------------ GNMA/Guaranteed--9.7% Government National Mortgage Assn.: 6.125%, 11/20/25 174,462 177,215 7%, 3/15/28-7/15/28 15,023,969 14,507,447 7.50%, 2/15/27 2,469,631 2,441,848 8%, 11/15/25-5/15/26 2,222,437 2,246,631 - ------------------------------------------------------------------------------------------------------------ Government National Mortgage Assn., Gtd. Multiclass Mtg. Participation Certificates, Series 1999-27, Cl. PQ, 7.50%, 8/16/28 8,220,125 8,044,163 ----------- 27,417,304 - ------------------------------------------------------------------------------------------------------------ Private--3.8% - ------------------------------------------------------------------------------------------------------------ Commercial--2.5% AMMC, Collateralized Bond Obligations, Sub. Bonds, Series I, Cl. D1, 13.602%, 1/15/12(4) 200,000 200,000 - ------------------------------------------------------------------------------------------------------------ AMRESCO Commercial Mortgage Funding I Corp., Multiclass Mtg. Pass-Through Certificates, Series 1997-C1, Cl. G, 7%, 6/17/29(5) 100,000 76,937 - ------------------------------------------------------------------------------------------------------------ Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates: Series 1997-D4, Cl. B1, 7.525%, 4/14/29(6) 375,000 267,422 Series 1997-D5, Cl. B1, 6.93%, 2/14/41 300,000 198,984 Series 1997-D5, Cl. B2, 6.93%, 2/14/41 1,250,000 800,781 - ------------------------------------------------------------------------------------------------------------ CRIIMI MAE Trust I, Collateralized Mtg. Obligations, Series 1996-C1, Cl. A2, 7.56%, 8/30/05(4) 100,000 93,031 - ------------------------------------------------------------------------------------------------------------ FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Series 1994-C1, Cl. 2-G, 8.70%, 9/25/25 153,594 147,546 - ------------------------------------------------------------------------------------------------------------ First Union-Lehman Brothers Commercial Mortgage Trust, Commercial Mtg. Pass-Through Certificates, Series 1997-C2, Cl. F, 7.50%, 9/18/15 225,000 165,164 - ------------------------------------------------------------------------------------------------------------ General Motors Acceptance Corp., Collateralized Mtg. Obligations: Series 1997-C1, Cl. G, 7.414%, 11/15/11 440,000 309,787 Series 1997-C2, Cl. F, 6.75%, 4/16/29 250,000 150,078
4 Oppenheimer Strategic Bond Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - ------------------------------------------------------------------------------------------------------------ Commercial (continued) General Motors Acceptance Corp., Interest-Only Stripped Mtg.-Backed Security, Series 1997-C1, Cl. X, 8.726%, 7/15/27(2) $4,005,708 $ 301,680 - ------------------------------------------------------------------------------------------------------------ Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-Through Certificates, Series 1995-C2, Cl. D, 7.681%, 6/15/21(6) 236,084 232,304 - ------------------------------------------------------------------------------------------------------------ Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates: Series 1996-C1, Cl. F, 7.421%, 2/15/28(5)(6) 162,744 117,735 Series 1997-HF1, Cl. F, 6.86%, 2/15/10(5) 150,000 114,844 Series 1997-RR, Cl. D, 7.671%, 4/30/39(5) 450,024 316,072 Series 1997-RR, Cl. E, 7.718%, 4/30/39(5)(6) 300,016 185,213 Series 1997-RR, Cl. F, 7.649%, 4/30/39(5) 600,032 306,204 Series 1997-XL1, Cl. G, 7.695%, 10/3/30(5) 390,000 315,656 - ------------------------------------------------------------------------------------------------------------ NationsCommercial Corp., NB Commercial Mtg. Pass-Through Certificates, Series DMC, Cl. C, 8.921%, 8/12/11(5) 200,000 180,938 - ------------------------------------------------------------------------------------------------------------ NC Finance Trust, Collateralized Mtg. Obligations, Series 1999-I, Cl. ECFD, 8.75%, 12/25/28 407,527 395,938 - ------------------------------------------------------------------------------------------------------------ Nykredit AS, 7% Cv. Bonds, 10/1/29DKK 6,935,000 927,330 - ------------------------------------------------------------------------------------------------------------ Option One Mortgage Trust, Collateralized Mtg. Obligations, Series 1999-1A, 10.06%, 3/1/29(5) 291,866 287,671 - ------------------------------------------------------------------------------------------------------------ Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates: Series 1993-C1, Cl. D, 9.45%, 5/25/24 57,792 57,115 Series 1994-C2, Cl. E, 8%, 4/25/25 973,568 949,534 - ------------------------------------------------------------------------------------------------------------ Structured Asset Securities Corp., Multiclass Pass-Through Certificates, Series 1995-C4, Cl. E, 8.703%, 6/25/26(5)(6) 46,290 44,048 ----------- 7,142,012 - ------------------------------------------------------------------------------------------------------------ Multi-Family--0.5% Mortgage Capital Funding, Inc.: Commercial Mtg. Pass-Through Certificates, Series 1997-MC1, Cl. F, 7.452%, 5/20/07(5) 63,720 48,208 Multifamily Mtg. Pass-Through Certificates, Series 1996-MC1, Cl. G, 7.15%, 6/15/06(4) 800,000 617,500 - ------------------------------------------------------------------------------------------------------------ Salomon Brothers Mortgage Securities VII, Series 1996-CL, Cl. F, 9.078%, 1/20/06(6) 1,000,000 738,125 ----------- 1,403,833 - ------------------------------------------------------------------------------------------------------------ Residential--0.8% First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates, Series 1997: Cl. D, 8.126%, 5/25/08(5)(6) 350,000 273,000 Cl. E, 8.126%, 2/25/11(5)(6) 600,000 402,000 - ------------------------------------------------------------------------------------------------------------ Residential Asset Securitization Trust, Collateralized Mtg. Obligations, Non-Accelerated Security, Series 1997-A2, Cl. A8, 7.75%, 4/25/27 1,000,000 986,250 - ------------------------------------------------------------------------------------------------------------ Salomon Brothers Mortgage Securities VII, Series 1996-B, Cl. 1, 6.581%, 4/25/26(5) 378,900 249,956 - ------------------------------------------------------------------------------------------------------------ Salomon, Inc., Commercial Mtg. Pass-Through Certificates, Series 1998-1A, 5%, 12/25/00(5) 189,699 182,823 ----------- 2,094,029 ----------- Total Mortgage-Backed Obligations (Cost $65,313,699) 62,813,240 ============================================================================================================ U.S. Government Obligations--15.8% - ------------------------------------------------------------------------------------------------------------ U.S. Treasury Bonds: 6.50%, 11/15/26(7)(8) 5,200,000 5,070,000 8.125%, 8/15/21 1,415,000 1,624,155 11.875%, 11/15/03 1,000,000 1,180,938 STRIPS, 5.76%, 2/15/19(9) 6,500,000 1,783,704 STRIPS, 5.33%, 5/15/17(9) 6,000,000 1,850,442 STRIPS, 6.24%, 2/15/20(9) 5,704,000 4,028,085
Oppenheimer Strategic Bond Fund/VA 5 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 ============================================================================================================ U.S. Government Obligations (continued) - ------------------------------------------------------------------------------------------------------------ U.S. Treasury Nts.: 5.625%, 11/30/00 $ 9,705,000 $ 9,671,644 5.875%, 8/15/09 2,750,000 2,664,923 6.50%, 10/15/06 13,000,000 12,967,500 7%, 7/15/06 3,590,000 3,678,630 ----------- Total U.S. Government Obligations (Cost $47,265,561) 44,520,021 - ------------------------------------------------------------------------------------------------------------ Foreign Government Obligations--16.3% - ------------------------------------------------------------------------------------------------------------ Argentina--1.7% Argentina (Republic of) Bonds: Bonos de Consolidacion de Deudas, Series I, 2.868%, 4/1/07(6)ARP 1,736,732 1,215,876 Series L, 6.812%, 3/31/05(6) 281,600 256,960 - ------------------------------------------------------------------------------------------------------------ Argentina (Republic of) Global Unsec. Unsub. Bonds, Series BGL5, 11.375%, 1/30/17 789,000 787,027 - ------------------------------------------------------------------------------------------------------------ Argentina (Republic of) Nts.: 11%, 12/4/05 1,015,000 1,002,312 Series REGS, 11.75%, 2/12/07ARP 390,000 355,911 - ------------------------------------------------------------------------------------------------------------ Argentina (Republic of) Unsec. Unsub. Medium-Term Nts., 8.75%, 7/10/02ARP 970,000 875,513 - ------------------------------------------------------------------------------------------------------------ Banco Hipotecario Nacional (Argentina) Medium-Term Unsec. Nts., Series 3, 10.625%, 8/7/06(5) 314,000 313,215 - ------------------------------------------------------------------------------------------------------------ City of Buenos Aires Bonds, Series 3, 10.50%, 5/28/04ARP 160,000 133,613 ----------- 4,940,427 - ------------------------------------------------------------------------------------------------------------ Australia--0.0% Australia Postal Corp. Unsec. Unsub. Nts., 6%, 3/25/09AUD 180,000 107,551 - ------------------------------------------------------------------------------------------------------------ Brazil--1.8% Brazil (Federal Republic of) Bonds: 10.125%, 5/15/27 236,000 199,125 11.625%, 4/15/04 675,000 676,687 - ------------------------------------------------------------------------------------------------------------ Brazil (Federal Republic of) Bonds, Series RG, 5.938%, 4/15/12(6) 1,000,000 747,500 - ------------------------------------------------------------------------------------------------------------ Brazil (Federal Republic of) Capitalization Bonds, 6.916%, 4/15/14 2,387,597 1,799,651 - ------------------------------------------------------------------------------------------------------------ Brazil (Federal Republic of) Debt Conversion Bonds, 7%, 4/15/12(6) 593,000 443,267 - ------------------------------------------------------------------------------------------------------------ Brazil (Federal Republic of) Eligible Interest Bonds, 6.937%, 4/15/06(6) 789,600 696,822 - ------------------------------------------------------------------------------------------------------------ Brazil (Federal Republic of) Gtd. Bonds, 7%, 4/15/09(6) 480,000 391,800 ----------- 4,954,852 - ------------------------------------------------------------------------------------------------------------ Bulgaria--0.6% Bulgaria (Republic of) Disc. Bonds, Tranche A, 6.50%, 7/28/24(6) 908,000 727,535 - ------------------------------------------------------------------------------------------------------------ Bulgaria (Republic of) Front-Loaded Interest Reduction Bearer Bonds, Tranche A, 3%, 7/28/12 (6) 1,359,000 981,877 ----------- 1,709,412 - ------------------------------------------------------------------------------------------------------------ Canada--0.3% Canada (Government of) Bonds, 7.25%, 6/1/03CAD 1,140,000 813,848 - ------------------------------------------------------------------------------------------------------------ Colombia--0.4% Colombia (Republic of) Bonds, 9.75%, 4/23/09 1,000,000 958,750 - ------------------------------------------------------------------------------------------------------------ Financiera Energetica Nacional SA Nts., 9.375%, 6/15/06 150,000 127,125 ----------- 1,085,875 - ------------------------------------------------------------------------------------------------------------ Finland--0.2% Finland (Republic of) Bonds, 9.50%, 3/15/04EUR 504,563 593,424
6 Oppenheimer Strategic Bond Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - ----------------------------------------------------------------------------------------------------------- France--0.2% France (Government of) Bonds, Obligations Assimilables du Tresor, 5.50%, 10/25/07EUR 566,906 $ 574,528 - ----------------------------------------------------------------------------------------------------------- Germany--0.6% Germany (Republic of) Bonds: 6.75%, 5/13/04EUR 690,000 743,997 Series 98, 5.25%, 1/4/08EUR 945,000 946,673 ---------- 1,690,670 - ----------------------------------------------------------------------------------------------------------- Great Britain--0.6% United Kingdom Treasury Nts., 8%, 6/10/03GBP 1,070,000 1,813,287 - ----------------------------------------------------------------------------------------------------------- Greece--0.3% Hellenic (Republic of) Bonds, 8.60%, 3/26/08GRD 207,200,000 713,012 - ----------------------------------------------------------------------------------------------------------- Hungary--0.3% Hungary (Government of) Bonds, Series 01/H, 13.50%, 6/12/01HUF 213,220,000 859,615 - ----------------------------------------------------------------------------------------------------------- Italy--0.9% Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali: 6%, 11/1/07EUR 455,000 472,382 8.50%, 1/1/04EUR 964,481 1,067,720 8.75%, 7/1/06EUR 766,330 913,142 10.50%, 4/1/05EUR 90,379 111,433 ---------- 2,564,677 - ----------------------------------------------------------------------------------------------------------- Ivory Coast--0.1% Ivory Coast (Government of) Front Loaded Interest Reduction Bonds, 2%, 3/29/18(6) 524,000 96,940 Ivory Coast (Government of) Past Due Interest Bonds, 2%, 3/29/18(4)(6) 564,987 134,185 ---------- 231,125 - ----------------------------------------------------------------------------------------------------------- Japan--0.6% Japan (Government of) Unsec. Bonds, Series 137, 6.50%, 3/20/01JPY 157,000,000 1,649,091 - ----------------------------------------------------------------------------------------------------------- Jordan--0.0% Hashemite (Kingdom of Jordan) Bonds, Series DEF, 5.50%, 12/23/23(6) 60,000 40,650 - ----------------------------------------------------------------------------------------------------------- Hashemite (Kingdom of Jordan) Disc. Bonds, 7%, 12/23/23(6) 116,000 81,780 ---------- 122,430 - ----------------------------------------------------------------------------------------------------------- Mexico--1.7% United Mexican States Bonds: 6.63%, 12/31/19FRF 7,500,000 980,959 11.375%, 9/15/16 1,070,000 1,213,487 11.50%, 5/15/26 175,000 209,125 - ----------------------------------------------------------------------------------------------------------- United Mexican States Collateralized Fixed Rate Par Bonds: Series W-A, 6.25%, 12/31/19 950,000 750,500 Series W-B, 6.25%, 12/31/19 1,900,000 1,501,000 - ----------------------------------------------------------------------------------------------------------- United Mexican States Disc. Bonds, Series C, 6.836%, 12/31/19(6) 250,000 234,687 ---------- 4,889,758 - ----------------------------------------------------------------------------------------------------------- Nigeria--0.1% Nigeria (Federal Republic of) Promissory Nts., Series RC, 5.092%, 1/5/10 553,759 349,906 - ----------------------------------------------------------------------------------------------------------- Norway--0.8% Norway (Government of) Bonds, 9.50%, 10/31/02NOK 17,040,000 2,313,165 - ----------------------------------------------------------------------------------------------------------- Panama--0.4% Panama (Republic of) Interest Reduction Bonds, 4.25%, 7/17/14(6) 843,000 661,755 - ----------------------------------------------------------------------------------------------------------- Panama (Republic of) Past Due Interest Debs., 5.819%, 7/17/16(6) 588,447 465,609 ---------- 1,127,364
Oppenheimer Strategic Bond Fund/VA 7 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - ------------------------------------------------------------------------------------------------------------ Peru--0.7% Peru (Republic of) Past Due Interest Bonds, Series 20 yr., 4.50%, 3/7/17(6) $ 600,000 $ 415,500 - ------------------------------------------------------------------------------------------------------------ Peru (Republic of) Sr. Nts., Zero Coupon, 4.52%, 2/28/16(9) 3,168,653 1,500,991 ----------- 1,916,491 - ------------------------------------------------------------------------------------------------------------ Poland--1.0% Poland (Republic of) Bonds: 12%, 6/12/01PLZ 4,016,000 936,743 Series 1000, 13%, 10/12/00PLZ 4,111,000 968,844 Series 1003, 12%, 10/12/03PLZ 1,010,000 240,359 Series 2 yr., 14%, 2/12/00PLZ 1,000,000 239,952 - ------------------------------------------------------------------------------------------------------------ Poland (Republic of) Past Due Interest Bonds, 6%, 10/27/14(6) 370,000 328,375 ----------- 2,714,273 - ------------------------------------------------------------------------------------------------------------ Russia--1.1% Russia (Government of) Debs., 6.906%, 12/15/15(11)(15) 24,195 4,385 - ------------------------------------------------------------------------------------------------------------ Russia (Government of) Principal Loan Debs., Series 24 yr., 6.906%, 12/15/20(11)(15) 5,190,000 841,753 - ------------------------------------------------------------------------------------------------------------ Russia (Government of) Sr. Unsec. Unsub. Nts., 11.75%, 6/10/03 849,000 623,750 - ------------------------------------------------------------------------------------------------------------ Russia (Government of) Unsec. Bonds, 11%, 7/24/18 593,000 357,283 - ------------------------------------------------------------------------------------------------------------ Russian Federation Unsec. Unsub. Nts.: 8.75%, 7/24/05 1,180,000 734,550 12.75%, 6/24/28 670,000 450,274 ----------- 3,011,995 - ------------------------------------------------------------------------------------------------------------ South Africa--0.5% South Africa (Republic of) Bonds, Series 153, 13%, 8/31/10ZAR 8,242,000 1,290,887 - ------------------------------------------------------------------------------------------------------------ Spain--0.2% Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado: 4.50%, 7/30/04EUR 390,786 385,917 6%, 1/31/08EUR 73,323 76,111 ----------- 462,028 - ------------------------------------------------------------------------------------------------------------ Turkey--0.3% Turkey (Republic of) Sr. Unsub. Bonds, 12.375%, 6/15/09 800,000 860,000 - ------------------------------------------------------------------------------------------------------------ Venezuela--0.9% Venezuela (Republic of) Bonds, 9.25%, 9/15/27 1,559,000 1,018,651 - ------------------------------------------------------------------------------------------------------------ Venezuela (Republic of) Disc. Bonds, Series DL, 7%, 12/18/07(6) 1,481,142 1,170,103 - ------------------------------------------------------------------------------------------------------------ Venezuela (Republic of) Front-Loaded Interest Reduction Bonds, Series B, 6.875%, 3/31/07(6) 42,857 33,643 - ------------------------------------------------------------------------------------------------------------ Venezuela (Republic of) New Money Bonds, Series A, 7.125%, 12/18/05(6) 352,941 276,618 - ------------------------------------------------------------------------------------------------------------ Venezuela (Republic of) Unsec. Bonds, 13.625%, 8/15/18 150,000 135,375 ----------- 2,634,390 - ------------------------------------------------------------------------------------------------------------ Vietnam--0.0% Vietnam (Government of) Bonds, 3%, 3/12/28(5)(6) 54,000 18,225 ----------- Total Foreign Government Obligations (Cost $46,664,753) 46,012,306 ============================================================================================================ Loan Participations--1.0% - ------------------------------------------------------------------------------------------------------------ Algeria (Republic of) Reprofiled Debt Loan Participation Nts., Tranche 1, 6.812%, 9/4/06(5)(6) 72,000 55,890 - ------------------------------------------------------------------------------------------------------------ Algeria (Republic of) Trust III Nts., Tranche 3: 1.063%, 3/4/10(5)(6)JPY 76,905,000 387,421 6.812%, 3/4/10(5)(6) 457,000 328,469 - ------------------------------------------------------------------------------------------------------------ Central Bank of Indonesia Gtd. Nts., Series 4, 8.625%, 8/25/02(5)(6) 300,000 265,500
8 Oppenheimer Strategic Bond Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 ========================================================================================================== Loan Participations (continued) - ---------------------------------------------------------------------------------------------------------- Morocco (Kingdom of) Loan Participation Agreement: Tranche A, 2%, 1/1/09(5)(6) $ 539,523 $ 488,269 Tranche B, 6.844%, 1/1/09(5)(6) 160,000 153,200 - ---------------------------------------------------------------------------------------------------------- PT Bank Ekspor Impor Indonesia Nts., Series 4 yr., 9.406%, 8/25/02(5)(6) 300,000 265,500 - ---------------------------------------------------------------------------------------------------------- PT Lippo Bank Nts., 9.406%, 8/25/02(5)(6) 250,000 221,250 - ---------------------------------------------------------------------------------------------------------- Shoshone Partners Loan Trust Sr. Nts., 7.955%, 4/28/02 (representing a basket of reference loans and a total return swap between Chase Manhattan Bank and the Trust)(5)(6) 750,000 736,900 ---------- Total Loan Participations (Cost $2,579,408) 2,902,399 ========================================================================================================== Corporate Bonds and Notes--39.0% - ---------------------------------------------------------------------------------------------------------- Aerospace/Defense--1.0% Amtran, Inc.: 9.625% Nts., 12/15/05 100,000 96,500 10.50% Sr. Nts., 8/1/04 150,000 150,750 - ---------------------------------------------------------------------------------------------------------- Atlas Air, Inc.: 9.25% Sr. Nts., 4/15/08 300,000 288,000 9.375% Sr. Unsec. Nts., 11/15/06 300,000 291,000 10.75% Sr. Nts., 8/1/05 125,000 128,125 - ---------------------------------------------------------------------------------------------------------- BE Aerospace, Inc., 9.50% Sr. Unsec. Sub. Nts., 11/1/08 300,000 283,500 Constellation Finance LLC, 9.80% Airline Receivable Asset-Backed Nts., Series 1997-1, 1/1/01(5) 175,000 162,750 - ---------------------------------------------------------------------------------------------------------- Fairchild Corp., 10.75% Sr. Unsec. Sub. Nts., 4/15/09 750,000 640,312 - ---------------------------------------------------------------------------------------------------------- Greater Toronto Airports Authority, 5.40% Debs., 12/3/02CAD 240,000 161,911 - ---------------------------------------------------------------------------------------------------------- Pegasus Aircraft Lease Securitization Trust, 11.76% Sr. Nts., Series 1997-A, Cl. B, 6/15/04(5) 82,427 84,233 - ---------------------------------------------------------------------------------------------------------- Pentacon, Inc., 12.25% Sr. Unsec. Nts., Series B, 4/1/09 500,000 452,500 - ---------------------------------------------------------------------------------------------------------- SC International Services, Inc., 9.25% Sr. Sub. Nts., Series B, 9/1/07 200,000 189,000 ---------- 2,928,581 - ---------------------------------------------------------------------------------------------------------- Chemicals--1.4% ClimaChem, Inc., 10.75% Sr. Unsec. Nts., Series B, 12/1/07 150,000 38,250 - ---------------------------------------------------------------------------------------------------------- Huntsman Corp./ICI Chemical Co. plc: 10.125% Sr. Unsec. Sub. Nts., 7/1/09(4) 600,000 624,000 10.125% Sr. Unsec. Sub. Nts., 7/1/09EUR 300,000 320,790 Zero Coupon Sr. Disc. Nts., 13.09%, 12/31/09(4)(9) 850,000 260,312 - ---------------------------------------------------------------------------------------------------------- Lyondell Chemical Co., 10.875% Sr. Sub. Nts., 5/1/09 1,000,000 1,035,000 - ---------------------------------------------------------------------------------------------------------- NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03 140,000 145,600 - ---------------------------------------------------------------------------------------------------------- PCI Chemicals Canada, Inc., 9.25% Sec. Nts., 10/15/07 175,000 135,625 - ---------------------------------------------------------------------------------------------------------- Pioneer Americas Acquisition Corp., 9.25% Sr. Nts., 6/15/07 150,000 119,250 - ---------------------------------------------------------------------------------------------------------- Polymer Group, Inc., 9% Sr. Sub. Nts., 7/1/07 100,000 97,500 - ---------------------------------------------------------------------------------------------------------- Polytama International Finance BV, 11.25% Sec. Nts., 6/15/07(5) 136,248 20,097 - ---------------------------------------------------------------------------------------------------------- Reliance Industries Ltd., 10.50% Bonds, 8/6/46 250,000 236,736 - ---------------------------------------------------------------------------------------------------------- Sovereign Specialty Chemicals, Inc., 9.50% Sr. Unsec. Sub. Nts., Series B, 8/1/07 425,000 429,250 - ---------------------------------------------------------------------------------------------------------- Sterling Chemicals, Inc.: 11.25% Sr. Sub. Nts., 4/1/07 50,000 37,000 11.75% Sr. Unsec. Sub. Nts., 8/15/06 190,000 143,450 12.375% Sr. Sec. Nts., Series B, 7/15/06 400,000 416,000 ---------- 4,058,860
Oppenheimer Strategic Bond Fund/VA 9 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - ------------------------------------------------------------------------------------------------------------ Consumer Durables--0.1% Holmes Products Corp., 9.875% Sr. Unsec. Sub. Nts., Series B, 11/15/07 $200,000 $ 147,000 - ------------------------------------------------------------------------------------------------------------ Icon Health & Fitness, Inc., 12% Unsec. Nts., 7/15/05(5) 55,500 30,525 - ------------------------------------------------------------------------------------------------------------ TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(5) 100,000 109,658 ----------- 287,183 - ------------------------------------------------------------------------------------------------------------ Consumer Non-Durables--0.5% AKI Holdings, Inc.: 0%/13.50% Sr. Disc. Debs., 7/1/09(10) 150,000 71,625 10.50% Sr. Unsec. Nts., 7/1/08 100,000 89,500 - ------------------------------------------------------------------------------------------------------------ Bell Sports, Inc., 11% Sr. Unsec. Sub. Nts., Series B, 8/15/08 405,000 407,025 - ------------------------------------------------------------------------------------------------------------ Fruit of the Loom, Inc., 8.875% Sr. Unsec. Nts., 4/15/06(11) 350,000 19,250 - ------------------------------------------------------------------------------------------------------------ Globe Manufacturing Corp., 10% Sr. Unsec. Sub. Nts., Series B, 8/1/08 315,000 152,775 - ------------------------------------------------------------------------------------------------------------ Indorayon International Finance Co. BV, 10% Gtd. Unsec. Unsub. Nts., 3/29/01(5)(11)(15) 100,000 25,000 - ------------------------------------------------------------------------------------------------------------ Phillips-Van Heusen Corp., 9.50% Sr. Unsec. Sub. Nts., 5/1/08 200,000 187,000 - ------------------------------------------------------------------------------------------------------------ Revlon Consumer Products Corp.: 8.625% Sr. Unsec. Sub. Nts., 2/1/08 250,000 126,250 9% Sr. Nts., 11/1/06 135,000 101,925 - ------------------------------------------------------------------------------------------------------------ Styling Technology Corp., 10.875% Sr. Unsec. Sub. Nts., 7/1/08(5) 70,000 24,850 - ------------------------------------------------------------------------------------------------------------ William Carter Co., 10.375% Sr. Sub. Nts., Series A, 12/1/06 135,000 122,175 - ------------------------------------------------------------------------------------------------------------ Williams (J. B.) Holdings, Inc., 12% Sr. Nts., 3/1/04 100,000 108,500 ----------- 1,435,875 - ------------------------------------------------------------------------------------------------------------ Energy--1.8% Chesapeake Energy Corp.: 9.125% Sr. Unsec. Nts., 4/15/06 100,000 91,750 9.625% Sr. Unsec. Nts., Series B, 5/1/05 400,000 379,000 - ------------------------------------------------------------------------------------------------------------ Clark Refinancing & Marketing, Inc., 8.875% Sr. Sub. Nts., 11/15/07 245,000 128,625 - ------------------------------------------------------------------------------------------------------------ Clark USA, Inc., 10.875% Sr. Nts., Series B, 12/1/05 125,000 50,625 - ------------------------------------------------------------------------------------------------------------ Denbury Management, Inc., 9% Sr. Sub. Nts., 3/1/08 400,000 366,000 - ------------------------------------------------------------------------------------------------------------ Empresa Electric Del Norte, 10.50% Sr. Debs., 6/15/05(5) 100,000 47,093 - ------------------------------------------------------------------------------------------------------------ Forcenergy, Inc., 9.50% Sr. Sub. Nts., 11/1/06(11)(15) 100,000 81,875 - ------------------------------------------------------------------------------------------------------------ Frontier Oil Corp., 11.75% Sr. Nts., 11/15/09 250,000 247,500 - ------------------------------------------------------------------------------------------------------------ Gothic Energy Corp., 0%/14.125% Sr. Disc. Nts., 5/1/06(10)(11) 275,000 96,250 - ------------------------------------------------------------------------------------------------------------ Gothic Production Corp., 11.125% Sr. Sec. Nts., Series B, 5/1/05(4) 200,000 171,000 - ------------------------------------------------------------------------------------------------------------ Grant Geophysical, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/15/08 560,000 355,600 - ------------------------------------------------------------------------------------------------------------ Leviathan Gas Pipeline Partners, LP/Leviathan Finance Corp., 10.375% Sr. Unsec. Sub. Nts., Series B, 6/1/09 400,000 414,000 - ------------------------------------------------------------------------------------------------------------ Ocean Rig Norway AS, 10.25% Sr. Sec. Nts., 6/1/08 250,000 208,750 - ------------------------------------------------------------------------------------------------------------ Pogo Producing Co., 8.75% Sr. Sub. Nts., Series B, 5/15/07 370,000 353,350 - ------------------------------------------------------------------------------------------------------------ R&B Falcon Corp., 12.25% Sr. Unsec. Nts., 3/15/06 300,000 328,500 - ------------------------------------------------------------------------------------------------------------ RAM Energy, Inc., 11.50% Sr. Unsec. Nts., 2/15/08 630,000 292,950 - ------------------------------------------------------------------------------------------------------------ RBF Finance Co., 11% Sr. Sec. Nts., 3/15/06 375,000 401,250 - ------------------------------------------------------------------------------------------------------------ Statia Terminals International/Statia Terminals (Canada), Inc., 11.75% First Mtg. Nts., Series B, 11/15/03 175,000 179,156 - ------------------------------------------------------------------------------------------------------------ Stone Energy Corp., 8.75% Sr. Sub. Nts., 9/15/07 270,000 264,600
10 Oppenheimer Strategic Bond Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - ------------------------------------------------------------------------------------------------------------- Energy (continued) Universal Compression Holdings, Inc.: 0%/9.875% Sr. Disc. Nts., 2/15/08(10) $ 500,000 $ 312,500 0%/11.375% Sr. Disc. Nts., 2/15/09(10) 400,000 214,000 ---------- 4,984,374 - ------------------------------------------------------------------------------------------------------------- Financial--3.2% AB Spintab, 5.50% Bonds, Series 169, 9/17/03SEK 3,200,000 372,103 - ------------------------------------------------------------------------------------------------------------- Allgemeine Hypobk AG, 5% Sec. Nts., Series 501, 9/2/09EUR 1,600,000 1,521,193 - ------------------------------------------------------------------------------------------------------------- AMRESCO, Inc.: 9.875% Sr. Sub. Nts., Series 98-A, 3/15/05 300,000 190,500 10% Sr. Sub. Nts., Series 97-A, 3/15/04 100,000 63,500 - ------------------------------------------------------------------------------------------------------------- ASAT Finance LLC, Units (each unit consists of $1,000 principal amount of 12.50% sr. nts., 11/1/06 and one warrant to purchase shares of common stock)(4)(12) 250,000 270,000 - ------------------------------------------------------------------------------------------------------------- Bakrie Investindo, Zero Coupon Promissory Nts., 7/10/98 (5)(11)(15)IDR 1,000,000,000 21,467 - ------------------------------------------------------------------------------------------------------------- Bank Plus Corp., 12% Sr. Nts., 7/18/07 7,000 5,565 - ------------------------------------------------------------------------------------------------------------- Bayerische Vereinsbank AG, 5% Sec. Nts., Series 661, 7/28/04EUR 1,023,288 1,026,233 - ------------------------------------------------------------------------------------------------------------- DePfa Pfandbriefbank AG (DePfa-Bank), 5.50% Sec. Nts., 1/15/00EUR 565,000 558,267 - ------------------------------------------------------------------------------------------------------------- Dresdner Funding Trust II, 5.79% Sub. Nts., 6/30/11(4)EUR 550,000 499,856 - ------------------------------------------------------------------------------------------------------------- Federal Home Loan Bank, 5.625%, 6/10/03GBP 115,000 178,770 - ------------------------------------------------------------------------------------------------------------- Hypothekenbk in Essen, 3.50% Sec. Debs., 3/17/04EUR 2,915,000 2,759,836 - ------------------------------------------------------------------------------------------------------------- IBJ Preferred Capital Co. (The) LLC, 8.79% Bonds, 12/29/49(4)(6) 400,000 371,446 - ------------------------------------------------------------------------------------------------------------- Local Financial Corp., 11% Sr. Nts., 9/8/04(4) 150,000 156,750 - ------------------------------------------------------------------------------------------------------------- Ocwen Capital Trust I, 10.875% Capital Nts., 8/1/27(5) 150,000 96,750 - ------------------------------------------------------------------------------------------------------------- Ocwen Financial Corp., 11.875% Nts., 10/1/03 150,000 141,750 - ------------------------------------------------------------------------------------------------------------- Ongko International Finance Co. BV, 10.50% Gtd. Nts., 3/29/04(4)(11)(15) 90,000 3,150 - ------------------------------------------------------------------------------------------------------------- PT Polysindo Eka Perkasa: 11% Nts., 6/18/03(5)(11)(15) 100,000 13,000 24% Nts., 6/19/03 (11)(15)IDR 164,300,000 3,057 - ------------------------------------------------------------------------------------------------------------- Saul (B.F.) Real Estate Investment Trust, 9.75% Sr. Sec. Nts., Series B, 4/1/08 380,000 349,125 - ------------------------------------------------------------------------------------------------------------- SBS Agro Finance BV, 10.25% Bonds, 7/21/00(5)(11)(15) 339,000 19,492 - ------------------------------------------------------------------------------------------------------------- Southern Pacific Funding Corp., 11.50% Sr. Nts., 11/1/04(11)(15) 80,000 38,000 - ------------------------------------------------------------------------------------------------------------- Sovereign Bankcorp, 10.50% Sr. Unsec. Nts., 11/15/06 250,000 256,250 - ------------------------------------------------------------------------------------------------------------- Veritas Capital Trust, 10% Nts., 1/1/28 100,000 75,250 - ------------------------------------------------------------------------------------------------------------- Veritas Holdings, Inc., 9.625% Sr. Nts., 12/15/03 129,000 125,775 ---------- 9,117,085 - ------------------------------------------------------------------------------------------------------------- Food & Drug--0.4% AmeriKing, Inc., 10.75% Sr. Nts., 12/1/06 125,000 115,625 - ------------------------------------------------------------------------------------------------------------- Family Restaurants, Inc., 9.75% Sr. Nts., 2/1/02 500,000 237,500 - ------------------------------------------------------------------------------------------------------------- Fleming Cos., Inc., 10.625% Sr. Sub. Nts., Series B, 7/31/07 560,000 508,200 - ------------------------------------------------------------------------------------------------------------- Pathmark Stores, Inc.: 10.75% Jr. Sub. Deferred Coupon Nts., 11/1/03 260,000 32,500 12.625% Sub. Nts., 6/15/02 150,000 50,250 - ------------------------------------------------------------------------------------------------------------- Shoppers Food Warehouse Corp., 9.75% Sr. Nts., 6/15/04 155,000 165,075 ---------- 1,109,150
Oppenheimer Strategic Bond Fund/VA 11 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - ----------------------------------------------------------------------------------------------------------- Food/Tobacco--0.4% Aurora Foods, Inc., 8.75% Sr. Sub. Nts., Series B, 7/1/08 $150,000 $ 143,625 - ----------------------------------------------------------------------------------------------------------- Del Monte Foods Co., 0%/12.50% Sr. Disc. Nts., Series B, 12/15/07(10) 71,000 55,025 - ----------------------------------------------------------------------------------------------------------- Packaged Ice, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/1/05 200,000 184,000 - ----------------------------------------------------------------------------------------------------------- Purina Mills, Inc., 9% Sr. Unsec. Sub. Nts., 3/15/10(11) 200,000 51,000 - ----------------------------------------------------------------------------------------------------------- SmithField Foods, Inc., 7.625% Sr. Unsec. Sub. Nts., 2/15/08 400,000 362,000 - ----------------------------------------------------------------------------------------------------------- Sparkling Spring Water Group Ltd., 11.50% Sr. Sec. Sub. Nts., 11/15/07 200,000 163,000 - ----------------------------------------------------------------------------------------------------------- Triarc Consumer Products Group LLC, 10.25% Sr. Sub. Nts., 2/15/09(4) 200,000 195,000 ---------- 1,153,650 - ----------------------------------------------------------------------------------------------------------- Forest Products/Containers--1.3% American Pad & Paper Co., 13% Sr. Sub. Nts., Series B, 11/15/05(11) 150,000 17,250 - ----------------------------------------------------------------------------------------------------------- Ball Corp.: 7.75% Sr. Unsec. Nts., 8/1/06 125,000 122,500 8.25% Sr. Unsec. Sub. Nts., 8/1/08 125,000 120,625 - ----------------------------------------------------------------------------------------------------------- Consumers International, Inc., 10.25% Sr. Sec. Nts., 4/1/05 250,000 196,250 - ----------------------------------------------------------------------------------------------------------- Fletcher Challenge Finance U.S.A., Inc., 8.05% Debs., 6/15/03NZD 80,000 41,634 - ----------------------------------------------------------------------------------------------------------- Gaylord Container Corp., 9.75% Sr. Nts., 6/15/07 200,000 189,500 - ----------------------------------------------------------------------------------------------------------- Packaging Corp. of America, 9.625% Sr. Unsec. Sub. Nts., 4/1/09 750,000 769,687 - ----------------------------------------------------------------------------------------------------------- Repap New Brunswick, Inc., 10.625% Second Priority Sr. Sec. Nts., 4/15/05 500,000 467,500 - ----------------------------------------------------------------------------------------------------------- Riverwood International Corp.: 10.625% Sr. Unsec. Nts., 8/1/07 750,000 776,250 10.875% Sr. Sub. Nts., 4/1/08 250,000 247,500 - ----------------------------------------------------------------------------------------------------------- SD Warren Co.: 12% Sr. Sub. Nts., Series B, 12/15/04 200,000 209,500 14% Unsec. Nts., 12/15/06(13) 417,149 469,293 - ----------------------------------------------------------------------------------------------------------- U.S. Timberlands Co. LP, 9.625% Sr. Nts., 11/15/07 150,000 139,312 ---------- 3,766,801 - ----------------------------------------------------------------------------------------------------------- Gaming/Leisure--2.0% AP Holdings, Inc., 0%/11.25% Sr. Disc. Nts., 3/15/08(10) 50,000 20,250 - ----------------------------------------------------------------------------------------------------------- Apcoa, Inc., 9.25% Sr. Unsec. Sub. Nts., 3/15/08 100,000 70,500 - ----------------------------------------------------------------------------------------------------------- Capstar Hotel Co., 8.75% Sr. Sub. Nts., 8/15/07 275,000 254,719 - ----------------------------------------------------------------------------------------------------------- Casino Magic of Louisiana Corp., 13% First Mtg. Nts., Series B, 8/15/03 120,000 136,050 - ----------------------------------------------------------------------------------------------------------- Empress Entertainment, Inc., 8.125% Sr. Sub. Nts., 7/1/06 400,000 406,000 - ----------------------------------------------------------------------------------------------------------- Florida Panthers Holdings, Inc., 9.875% Sr. Sub. Nts., 4/15/09 450,000 438,750 - ----------------------------------------------------------------------------------------------------------- Hard Rock Hotel, Inc., 9.25% Sr. Sub. Nts., 4/1/05 100,000 71,500 - ----------------------------------------------------------------------------------------------------------- HMH Properties, Inc., 8.45% Sr. Nts., Series C, 12/1/08 500,000 465,000 - ----------------------------------------------------------------------------------------------------------- Hollywood Casino Corp., 11.25% Sr. Sec. Nts., 5/1/07 250,000 262,500 - ----------------------------------------------------------------------------------------------------------- Horseshoe Gaming LLC, 9.375% Sr. Sub. Nts., 6/15/07 425,000 425,000 - ----------------------------------------------------------------------------------------------------------- Intrawest Corp., 9.75% Sr. Nts., 8/15/08 350,000 344,750 - ----------------------------------------------------------------------------------------------------------- Isle of Capri Casinos, Inc., 8.75% Sr. Unsec. Nts., 4/15/09 350,000 323,750 - ----------------------------------------------------------------------------------------------------------- Jupiters Ltd., 8.50% Sr. Unsec. Nts., 3/1/06 400,000 384,000 - ----------------------------------------------------------------------------------------------------------- Meristar Hospitality Corp., 8.75% Sr. Unsec. Sub. Nts., 8/15/07 325,000 300,625 - ----------------------------------------------------------------------------------------------------------- Mohegan Tribal Gaming Authority: 8.125% Sr. Nts., 1/1/06 300,000 292,500 8.75% Sr. Unsec. Sub. Nts., 1/1/09 700,000 693,000
12 Oppenheimer Strategic Bond Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - ------------------------------------------------------------------------------------------------------- Gaming/Leisure (continued) Premier Cruise Ltd., 11% Sr. Nts., 3/15/08(4)(11)(15) $ 250,000 $ 60,000 - ------------------------------------------------------------------------------------------------------- Premier Parks, Inc.: 0%/10% Sr. Disc. Nts., 4/1/08(10) 200,000 139,000 9.25% Sr. Nts., 4/1/06 100,000 98,750 9.75% Sr. Nts., 6/15/07 250,000 250,000 - ------------------------------------------------------------------------------------------------------- Six Flags Entertainment Corp., 8.875% Sr. Nts., 4/1/06 200,000 196,250 ---------- 5,632,894 - ------------------------------------------------------------------------------------------------------- Healthcare--1.1% Charles River Labs ONC, Units (each unit consists of $1,000 principal amount of 13.50% sr. sub. nts., 10/1/09 and one warrant to purchase 3.942 shares of common stock)(4)(12) 350,000 365,750 - ------------------------------------------------------------------------------------------------------- Fresenius Medical Care Capital Trust II, 7.875% Nts., 2/1/08 900,000 832,500 - ------------------------------------------------------------------------------------------------------- ICN Pharmaceutical, Inc.: 8.75% Sr. Nts., 11/15/08(4) 200,000 192,000 8.75% Sr. Nts., 11/15/08(4) 350,000 336,000 - ------------------------------------------------------------------------------------------------------- Kinetic Concepts, Inc., 9.625% Sr. Unsec. Sub. Nts., Series B, 11/1/07 250,000 186,250 - ------------------------------------------------------------------------------------------------------- Magellan Health Services, Inc., 9% Sr. Sub. Nts., 2/15/08 250,000 203,750 - ------------------------------------------------------------------------------------------------------- Oxford Health Plans, Inc., 11% Sr. Unsec. Nts., 5/15/05 150,000 144,750 - ------------------------------------------------------------------------------------------------------- Tenet Healthcare Corp., 8.625% Sr. Sub. Nts., 1/15/07 600,000 582,000 - ------------------------------------------------------------------------------------------------------- Unilab Finance Corp., 12.75% Sr. Sub. Nts., 10/1/09(4) 300,000 312,000 ---------- 3,155,000 - ------------------------------------------------------------------------------------------------------- Housing--1.0% Building Materials Corp. of America, 8.625% Sr. Nts., Series B, 12/15/06 50,000 47,750 - ------------------------------------------------------------------------------------------------------- CB Richard Ellis Services, Inc., 8.875% Sr. Unsec. Sub. Nts., 6/1/06 250,000 223,750 - ------------------------------------------------------------------------------------------------------- D.R. Horton, Inc., 8% Sr. Nts., 2/1/09 400,000 368,000 - ------------------------------------------------------------------------------------------------------- Del Webb Corp., 10.25% Sr. Unsec. Sub. Nts., 2/15/10 300,000 293,250 - ------------------------------------------------------------------------------------------------------- Falcon Building Products, Inc., 9.50% Sr. Sub. Nts., 6/15/07 100,000 97,500 - ------------------------------------------------------------------------------------------------------- Kaufman & Broad Home Corp., 7.75% Sr. Nts., 10/15/04 300,000 283,500 - ------------------------------------------------------------------------------------------------------- Nortek, Inc.: 9.125% Sr. Nts., Series B, 9/1/07 650,000 632,125 9.25% Sr. Nts., Series B, 3/15/07 150,000 147,000 - ------------------------------------------------------------------------------------------------------- Panolam Industries International, Inc., 11.50% Sr. Sub. Nts., 2/15/09(4) 600,000 613,500 ---------- 2,706,375 - ------------------------------------------------------------------------------------------------------- Information Technology--1.2% Amkor Technologies, Inc., 9.25% Sr. Nts., 5/1/06(4) 700,000 686,000 - ------------------------------------------------------------------------------------------------------- Details, Inc., 10% Sr. Sub. Nts., Series B, 11/15/05 200,000 185,000 - ------------------------------------------------------------------------------------------------------- DII Group, Inc., 8.50% Sr. Sub. Nts., 9/15/07 20,000 20,000 - ------------------------------------------------------------------------------------------------------- Dyncorp, Inc., 9.50% Sr. Sub. Nts., 3/1/07 350,000 309,312 - ------------------------------------------------------------------------------------------------------- Fairchild Semiconductor International, Inc., 10.375% Sr. Unsec. Nts., 10/1/07 500,000 516,250 - ------------------------------------------------------------------------------------------------------- Fisher Scientific International, Inc., 9% Sr. Unsec. Sub. Nts., 2/1/08 505,000 486,694 - ------------------------------------------------------------------------------------------------------- Micron Technology, Inc., 6.50% Sub. Nts., 9/30/05(5) 1,000,000 800,000 - ------------------------------------------------------------------------------------------------------- Unisys Corp., 11.75% Sr. Nts., 10/15/04 150,000 164,625 - ------------------------------------------------------------------------------------------------------- Wavetek Corp., 10.125% Sr. Sub. Nts., 6/15/07 175,000 144,594 ---------- 3,312,475
Oppenheimer Strategic Bond Fund/VA 13 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - ------------------------------------------------------------------------------------------------------ Manufacturing--1.0% Applied Power, Inc., 8.75% Sr. Sub. Nts., 4/1/09 $ 150,000 $ 147,562 - ------------------------------------------------------------------------------------------------------ Axia, Inc., 10.75% Sr. Sub. Nts., 7/15/08 125,000 115,156 - ------------------------------------------------------------------------------------------------------ Blount, Inc., 13% Sr. Sub. Nts., 8/1/09(4) 300,000 318,000 - ------------------------------------------------------------------------------------------------------ Burke Industries, Inc., 10% Sr. Sub. Nts., 8/15/07 150,000 62,250 - ------------------------------------------------------------------------------------------------------ Communications & Power Industries, Inc., 12% Sr. Sub. Nts., Series B, 8/1/05 250,000 201,250 - ------------------------------------------------------------------------------------------------------ Eagle-Picher Industries, Inc., 9.375% Sr. Unsec. Sub. Nts., 3/1/08 300,000 262,500 - ------------------------------------------------------------------------------------------------------ Grove Worldwide LLC, 9.25% Sr. Sub. Nts., 5/1/08 250,000 71,250 - ------------------------------------------------------------------------------------------------------ Hydrochem Industrial Services, Inc., 10.375% Sr. Sub. Nts., 8/1/07 150,000 129,375 - ------------------------------------------------------------------------------------------------------ Insilco Corp., 12% Sr. Sub. Nts., 8/15/07 270,000 267,300 - ------------------------------------------------------------------------------------------------------ International Wire Group, Inc., 11.75% Sr. Sub. Nts., Series B, 6/1/05 125,000 129,687 - ------------------------------------------------------------------------------------------------------ Iron Mountain, Inc., 8.75% Sr. Sub. Nts., 9/30/09 150,000 143,625 - ------------------------------------------------------------------------------------------------------ Jordan Industries, Inc., 10.375% Sr. Unsec. Nts., Series D, 8/1/07 250,000 251,250 - ------------------------------------------------------------------------------------------------------ Moll Industries, Inc., 10.50% Sr. Unsec. Sub. Nts., 7/1/08 200,000 81,000 - ------------------------------------------------------------------------------------------------------ Roller Bearing Co. of America, Inc., 9.625% Sr. Sub. Nts., Series B, 6/15/07 540,000 491,400 - ------------------------------------------------------------------------------------------------------ Terex Corp., 8.875% Sr. Unsec. Sub. Nts., 4/1/08 150,000 142,500 - ------------------------------------------------------------------------------------------------------ Unifrax Investment Corp., 10.50% Sr. Nts., 11/1/03 50,000 49,312 ---------- 2,863,417 - ------------------------------------------------------------------------------------------------------ Media/Entertainment: Broadcasting--1.3% Azteca Holdings SA, 11% Sr. Sec. Nts., 6/15/02 155,000 139,887 - ------------------------------------------------------------------------------------------------------ Chancellor Media Corp.: 8.125% Sr. Sub. Nts., Series B, 12/15/07 200,000 200,000 8.75% Sr. Unsec. Sub. Nts., Series B, 6/15/07 400,000 405,000 10.50% Sr. Sub. Nts., Series B, 1/15/07 90,000 98,100 - ------------------------------------------------------------------------------------------------------ Emmis Communications Corp., 8.125% Sr. Unsec. Sub. Nts., Series B, 3/15/09 600,000 573,000 - ------------------------------------------------------------------------------------------------------ Paxson Communications Corp., 11.625% Sr. Sub. Nts., 10/1/02 95,000 99,275 - ------------------------------------------------------------------------------------------------------ Radio One, Inc., 7% Sr. Sub. Nts., Series B, 5/15/04(6) 100,000 107,000 - ------------------------------------------------------------------------------------------------------ RCN Corp., 10.125% Sr. Unsec. Nts., 1/15/10 800,000 800,000 - ------------------------------------------------------------------------------------------------------ Sinclair Broadcast Group, Inc.: 8.75% Sr. Sub. Nts., 12/15/07 150,000 139,125 9% Sr. Unsec. Sub. Nts., 7/15/07 210,000 197,925 - ------------------------------------------------------------------------------------------------------ Spanish Broadcasting System, Inc., 9.625% Sr. Sub. Nts., 11/1/09 400,000 404,000 - ------------------------------------------------------------------------------------------------------ TV Azteca SA de CV: 10.125% Sr. Nts., Series A, 2/15/04 100,000 89,500 10.50% Sr. Nts., Series B, 2/15/07 150,000 130,500 - ------------------------------------------------------------------------------------------------------ Young Broadcasting, Inc.: 8.75% Sr. Sub. Debs., 6/15/07 275,000 261,937 9% Sr. Sub. Nts., Series B, 1/15/06(15) 100,000 96,750 ---------- 3,741,999
14 Oppenheimer Strategic Bond Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - ---------------------------------------------------------------------------------------------------------- Media/Entertainment: Cable/Wireless Video--2.2% Adelphia Communications Corp.: 7.875% Sr. Unsec. Nts., 5/1/09 $ 350,000 $ 315,875 8.375% Sr. Nts., Series B, 2/1/08 100,000 93,250 9.25% Sr. Nts., 10/1/02 385,000 385,000 9.375% Sr. Nts., 11/15/09 500,000 492,500 10.50% Sr. Unsec. Nts., Series B, 7/15/04 70,000 72,975 - ---------------------------------------------------------------------------------------------------------- Bresnan Communications, Inc., 0%/9.25% Sr. Disc. Nts., 2/1/09(10) 250,000 173,750 - ---------------------------------------------------------------------------------------------------------- Charter Communication Holdings LLC/Charter Communication Holdings Capital Corp.: 0%/9.92% Sr. Unsec. Disc. Nts., 4/1/11(10) 1,700,000 1,005,125 8.25% Sr. Unsec. Nts., 4/1/07 400,000 371,000 - ---------------------------------------------------------------------------------------------------------- CSC Holdings, Inc., 9.875% Sr. Sub. Nts., 5/15/06 250,000 265,000 - ---------------------------------------------------------------------------------------------------------- EchoStar DBS Corp., 9.375% Sr. Unsec. Nts., 2/1/09 940,000 949,400 - ---------------------------------------------------------------------------------------------------------- EchoStar I, 8.25% Bonds, 2/26/01(5) 62,802 62,802 - ---------------------------------------------------------------------------------------------------------- EchoStar II, 8.25% Sinking Fund Bonds, 11/9/01(5) 78,168 78,169 - ---------------------------------------------------------------------------------------------------------- Falcon Holding Group LP: 0%/9.285% Sr. Disc. Debs., Series B, 4/15/10(10) 350,000 263,812 8.375% Sr. Unsec. Debs., Series B, 4/15/10 200,000 202,750 - ---------------------------------------------------------------------------------------------------------- Insight Midwest LP/Insight Capital, Inc., 9.75% Sr. Nts., 10/1/09(4) 400,000 415,000 - ---------------------------------------------------------------------------------------------------------- NTL Communications Corp., 9.875% Sr. Nts., 11/15/09(4)EUR 200,000 202,790 - ---------------------------------------------------------------------------------------------------------- Rogers Cablesystems Ltd., 10% Second Priority Sr. Sec. Debs., 12/1/07 200,000 214,250 - ---------------------------------------------------------------------------------------------------------- Rogers Communications, Inc., 8.75% Sr. Nts., 7/15/07CAD 400,000 278,450 - ---------------------------------------------------------------------------------------------------------- United International Holdings, Inc., 0%/10.75% Sr. Disc. Nts., Series B, 2/15/08(10) 770,000 496,650 ---------- 6,338,548 - ---------------------------------------------------------------------------------------------------------- Media/Entertainment: Diversified Media--1.4% AMC Entertainment, Inc., 9.50% Sr. Unsec. Sub. Nts., 2/1/11 700,000 623,000 - ---------------------------------------------------------------------------------------------------------- IPC Magazines Group plc, 9.625% Bonds, 3/15/08(5)GBP 300,000 295,637 - ---------------------------------------------------------------------------------------------------------- Lamar Advertising Co., 8.625% Sr. Sub. Nts., 9/15/07(5) 150,000 147,750 - ---------------------------------------------------------------------------------------------------------- Lamar Media Corp., 9.625% Sr. Unsec. Sub. Nts., 12/1/06 50,000 51,250 - ---------------------------------------------------------------------------------------------------------- Metromedia International Group, Inc., 0%/10.50% Sr. Unsec. Disc. Nts., 9/30/07(5)(10) 436,950 207,551 - ---------------------------------------------------------------------------------------------------------- Premier Graphics, Inc., 11.50% Sr. Unsec. Nts., 12/1/05 200,000 141,000 - ---------------------------------------------------------------------------------------------------------- Regal Cinemas, Inc.: 8.875% Sr. Unsec. Sub. Nts., 12/15/10 250,000 177,500 9.50% Sr. Unsec. Sub. Nts., 6/1/08 500,000 380,000 - ---------------------------------------------------------------------------------------------------------- SFX Entertainment, Inc.: 9.125% Sr. Unsec. Sub. Nts., 12/1/08 200,000 191,000 9.125% Sr. Unsec. Sub. Nts., Series B, 2/1/08 500,000 473,750 - ---------------------------------------------------------------------------------------------------------- Time Warner Entertainment Co. LP, 8.375% Sr. Debs., 3/15/23 300,000 313,677 - ---------------------------------------------------------------------------------------------------------- WRC Media Corp., Units (each unit consists of $1,000 principal amount of 12.75% sr. sub. nts., 11/15/09 and one warrant to purchase 1.353 shares of common stock)(4)(12) 800,000 798,000 ---------- 3,800,115
Oppenheimer Strategic Bond Fund/VA 15 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - --------------------------------------------------------------------------------------------------------- Media/Entertainment: Telecommunications--7.9% Adelphia Business Solutions, Inc., 12% Sr. Sub. Nts., 11/1/07 $ 400,000 $428,000 - --------------------------------------------------------------------------------------------------------- Amazon.com, Inc., 0%/10% Sr. Unsec. Disc. Nts., 5/1/08(10) 700,000 448,000 - --------------------------------------------------------------------------------------------------------- COLT Telecom Group plc: 0%/12% Sr. Unsec. Disc. Nts., 12/15/06(10) 200,000 173,000 7.625% Bonds, 7/31/08DEM 500,000 257,604 8.875% Sr. Nts., 11/30/07DEM 100,000 53,772 10.125% Sr. Nts., 11/30/07GBP 170,000 288,367 Units (each unit consists of $1,000 principal amount of 0%/12% sr. disc. nts., 12/15/06 and one warrant to purchase 7.8 ordinary shares)(10)(12) 200,000 203,000 - --------------------------------------------------------------------------------------------------------- Comcast UK Cable Partner Ltd., 0%/11.20% Sr. Disc. Debs., 11/15/07(10) 250,000 239,375 - --------------------------------------------------------------------------------------------------------- Concentric Network Corp., 12.75% Sr. Unsec. Nts., 12/15/07 80,000 84,600 - --------------------------------------------------------------------------------------------------------- Convergent Communications, Inc., 13% Sr. Nts., 4/1/08 50,000 35,375 - --------------------------------------------------------------------------------------------------------- Covad Communications Group, Inc., 0%/13.50% Sr. Disc. Nts., 3/15/08(10) 700,000 444,500 - --------------------------------------------------------------------------------------------------------- Diamond Cable Communications plc, 0%/11.75% Sr. Disc. Nts., 12/15/05(10) 825,000 783,750 - --------------------------------------------------------------------------------------------------------- Diamond Holdings plc, 9.125% Sr. Nts., 2/1/08 50,000 49,750 - --------------------------------------------------------------------------------------------------------- Equinix, Inc., Units (each unit consists of $1,000 principal amount of 13% sr. nts., 12/1/07 and one warrant to purchase 11.255 shares of common stock)(4)(12) 200,000 205,000 - --------------------------------------------------------------------------------------------------------- Exodus Communications, Inc.: 10.75% Sr. Nts., 12/15/09(4) 850,000 869,125 11.25% Sr. Nts., 7/1/08 665,000 689,937 - --------------------------------------------------------------------------------------------------------- FirstWorld Communications, Inc., 0%/13% Sr. Disc. Nts., 4/15/08(10) 175,000 97,125 - --------------------------------------------------------------------------------------------------------- Focal Communications Corp., 0%/12.125% Sr. Unsec. Disc. Nts., 2/15/08(10) 250,000 163,750 - --------------------------------------------------------------------------------------------------------- Global Crossing Ltd., 9.625% Sr. Nts., 5/15/08 510,000 512,550 - --------------------------------------------------------------------------------------------------------- Global Telesystems Group, Inc., 10.50% Sr. Unsec. Bonds, 12/1/06(4)EUR 250,000 254,745 - --------------------------------------------------------------------------------------------------------- GST Telecommunications, Inc., 0%/13.875% Cv. Sr. Sub. Disc. Nts., 12/15/05(4)(10) 25,000 28,000 - --------------------------------------------------------------------------------------------------------- GST Telecommunications, Inc./GST Network Funding Corp., Inc., 0%/10.50% Sr. Disc. Nts., 5/1/08(10) 125,000 60,937 - --------------------------------------------------------------------------------------------------------- GST USA, Inc., 0%/13.875% Gtd. Sr. Disc. Nts., 12/15/05(10) 255,000 189,975 - --------------------------------------------------------------------------------------------------------- ICG Holdings, Inc., 0%/12.50% Sr. Sec. Disc. Nts., 5/1/06(10) 195,000 146,737 - --------------------------------------------------------------------------------------------------------- ICG Services, Inc., 0%/10% Sr. Exchangeable Unsec. Disc. Nts., 2/15/08(10) 115,000 61,237 - --------------------------------------------------------------------------------------------------------- Intermedia Communications, Inc.: 8.50% Sr. Nts., Series B, 1/15/08 250,000 230,000 8.60% Sr. Unsec. Nts., Series B, 6/1/08 225,000 207,000 8.875% Sr. Nts., 11/1/07 365,000 341,275 - --------------------------------------------------------------------------------------------------------- Jazztel plc, 13.25% Sr. Nts., 12/15/09(4)EUR 900,000 911,987 - --------------------------------------------------------------------------------------------------------- KMC Telecom Holdings, Inc., 0%/12.50% Sr. Unsec. Disc. Nts., 2/15/08(10) 600,000 345,000 - --------------------------------------------------------------------------------------------------------- Level 3 Communications, Inc.: 0%/10.50% Sr. Disc. Nts., 12/1/08(10) 1,000,000 610,000 9.125% Sr. Unsec. Nts., 5/1/08 250,000 236,875 - --------------------------------------------------------------------------------------------------------- McLeodUSA, Inc.: 8.125% Sr. Unsec. Nts., 2/15/09 725,000 679,687 8.375% Sr. Nts., 3/15/08 513,000 487,350 9.25% Sr. Nts., 7/15/07 75,000 75,281 - --------------------------------------------------------------------------------------------------------- Metromedia Fiber Network, Inc.: 10% Sr. Nts., 12/15/09 250,000 257,500 10% Sr. Unsec. Nts., Series B, 11/15/08 400,000 411,000
16 Oppenheimer Strategic Bond Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - ---------------------------------------------------------------------------------------------------------- Media/Entertainment: Telecommunications (continued) Netia Holdings BV: 0%/11% Sr. Disc. Nts., 11/1/07(10)DEM 400,000 $ 134,816 0%/11% Sr. Disc. Nts., Series B, 11/1/07(10)DEM 200,000 67,408 0%/11.25% Sr. Disc. Nts., Series B, 11/1/07(10) 100,000 65,250 10.25% Sr. Nts., Series B, 11/1/07 50,000 42,625 - ---------------------------------------------------------------------------------------------------------- Netia Holdings II BV, 13.50% Sr. Nts., 6/15/09(4)EUR 400,000 414,637 - ---------------------------------------------------------------------------------------------------------- NEXTLINK Communications, Inc.: 9% Sr. Nts., 3/15/08 200,000 189,000 9.625% Sr. Nts., 10/1/07 350,000 343,000 10.75% Sr. Unsec. Nts., 11/15/08 300,000 310,500 10.75% Sr. Unsec. Nts., 6/1/09 310,000 320,075 - ---------------------------------------------------------------------------------------------------------- NTL Communications Corp., 0%/12.375% Sr. Unsec. Nts., Series B, 10/1/08(10) 85,000 60,563 - ---------------------------------------------------------------------------------------------------------- NTL, Inc.: 0%/9.75% Sr. Deferred Coupon Nts., Series B, 4/1/08(10) 300,000 208,500 0%/9.75% Sr. Nts., Series B, 4/15/09(10)GBP 775,000 723,820 0%/10.75% Sr. Unsec. Unsub. Nts., Series B, 4/1/08(10)GBP 115,000 123,035 7% Cv. Unsec. Sub. Nts., 12/15/08 100,000 264,500 10% Sr. Nts., Series B, 2/15/07 100,000 103,250 - ---------------------------------------------------------------------------------------------------------- Optel, Inc., 13% Sr. Nts., Series B, 2/15/05(11) 200,000 149,000 - ---------------------------------------------------------------------------------------------------------- PSINet, Inc.: 10% Sr. Unsec. Nts., Series B, 2/15/05(14) 700,000 695,625 10.50% Sr. Nts., 12/1/06(4)EUR 100,000 101,898 - ---------------------------------------------------------------------------------------------------------- Qwest Communications International, Inc.: 0%/8.29% Sr. Unsec. Disc. Nts., Series B, 2/1/08(10) 365,000 283,788 0%/9.47% Sr. Disc. Nts., 10/15/07(10) 495,000 403,425 - ---------------------------------------------------------------------------------------------------------- RSL Communications plc: 0%/10% Bonds, 3/15/08(10)DEM 100,000 31,903 10.50% Gtd. Sr. Nts., 11/15/08 250,000 236,250 - ---------------------------------------------------------------------------------------------------------- Shaw Communications, Inc., 8.54% Debs., 9/30/27CAD 340,000 211,797 - ---------------------------------------------------------------------------------------------------------- Tele1 Europe BV, 11.875% Sr. Nts., 12/1/09(4)EUR 500,000 507,603 - ---------------------------------------------------------------------------------------------------------- Telewest Communications plc: 0%/9.875% Sr. Nts., 4/15/09(4)(10)GBP 300,000 307,753 0%/11% Sr. Disc. Debs., 10/1/07(10) 200,000 187,500 - ---------------------------------------------------------------------------------------------------------- Teligent, Inc., 11.50% Sr. Nts., 12/1/07 500,000 485,000 - ---------------------------------------------------------------------------------------------------------- Time Warner Telecom LLC, 9.75% Sr. Nts., 7/15/08 100,000 103,500 - ---------------------------------------------------------------------------------------------------------- United Pan-Europe Communications NV: 0%/13.375% Sr. Disc. Nts., 11/1/09(4)(10) 500,000 282,500 10.875% Sr. Nts., 8/1/09EUR 750,000 765,178 10.875% Sr. Nts., 8/1/09 500,000 508,750 11.25% Sr. Nts., 11/1/09(4)EUR 250,000 257,261 - ---------------------------------------------------------------------------------------------------------- Verio, Inc.: 10.375% Sr. Unsec. Nts., 4/1/05 225,000 230,625 11.25% Sr. Unsec. Nts., 12/1/08 500,000 527,500 13.50% Sr. Unsec. Nts., 6/15/04 65,000 71,663 - ---------------------------------------------------------------------------------------------------------- Viatel, Inc., 11.25% Sr. Sec. Nts., 4/15/08 500,000 498,750 - ---------------------------------------------------------------------------------------------------------- WAM!NET, Inc., 0%/13.25% Sr. Unsec. Disc. Nts., Series B, 3/1/05(10) 500,000 292,500 - ---------------------------------------------------------------------------------------------------------- Worldwide Fiber, Inc., 12% Sr. Nts., 8/1/09(4) 100,000 103,500 ----------- 22,175,414
Oppenheimer Strategic Bond Fund/VA 17 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------- Media/Entertainment: Wireless Communications--3.6% Arch Communications, Inc., 12.75% Sr. Nts., 7/1/07 $100,000 $ 79,625 - -------------------------------------------------------------------------------------------------- Celcaribe SA, 14.50% Sr. Sec. Nts., 3/15/04 150,000 125,250 - -------------------------------------------------------------------------------------------------- CellNet Data Systems, Inc., 0%/14% Sr. Disc. Nts., 10/1/07(10) 400,000 43,500 - -------------------------------------------------------------------------------------------------- Clearnet Communications, Inc., 0%/14.75% Sr. Disc. Nts., 12/15/05(10) 25,000 24,656 - -------------------------------------------------------------------------------------------------- Comunicacion Celular SA, 0%/14.125% Sr. Unsec. Deferred Bonds, 3/1/05(4)(10) 350,000 168,000 - -------------------------------------------------------------------------------------------------- Crown Castle International Corp.: 0%/10.375% Sr. Disc. Nts., 5/15/11(10) 500,000 315,000 0%/10.625% Sr. Unsec. Disc. Nts., 11/15/07(10) 500,000 378,125 - -------------------------------------------------------------------------------------------------- CTI Holdings SA, 0%/11.50% Sr. Deferred Coupon Nts., 4/15/08(10) 175,000 101,063 - -------------------------------------------------------------------------------------------------- Dobson Communications Corp., 11.75% Sr. Nts., 4/15/07 460,000 522,100 - -------------------------------------------------------------------------------------------------- Geotek Communications, Inc.: 0%/15% Sr. Sec. Disc. Nts., Series B, 7/15/05(10)(11)(15) 90,000 36,450 12% Cv. Sr. Sub. Nts., 2/15/01(11)(15) 210,000 1,313 - -------------------------------------------------------------------------------------------------- ICO Global Communications (Holdings) Ltd., Units (each unit consists of $1,000 principal amount of 15% sr. nts., 8/1/05 and one warrant to purchase 19.85 shares of common stock)(11)(12) 100,000 46,500 - -------------------------------------------------------------------------------------------------- Loral Space & Communications Ltd., 9.50% Sr. Nts., 1/15/06 300,000 271,500 - -------------------------------------------------------------------------------------------------- Microcell Telecommunications, Inc.: 0%/11.125% Sr. Disc. Nts., Series B, 10/15/07(10)CAD 300,000 139,398 0%/14% Sr. Disc. Nts., Series B, 6/1/06(10) 300,000 266,250 - -------------------------------------------------------------------------------------------------- Millicom International Cellular SA, 0%/13.50% Sr. Disc. Nts., 6/1/06(10) 410,000 330,050 - -------------------------------------------------------------------------------------------------- Nextel Communications, Inc.: 0%/9.95% Sr. Disc. Nts., 2/15/08(10) 245,000 172,725 0%/10.65% Sr. Disc. Nts., 9/15/07(10) 800,000 600,000 9.75% Sr. Disc. Nts., 8/15/04 300,000 310,500 - -------------------------------------------------------------------------------------------------- Omnipoint Corp.: 11.50% Sr. Nts., 9/15/09(4) 735,000 793,800 11.625% Sr. Nts., 8/15/06 630,000 670,950 11.625% Sr. Nts., Series A, 8/15/06 400,000 426,000 - -------------------------------------------------------------------------------------------------- Orange plc: 8% Sr. Nts., 8/1/08 250,000 253,438 8.75% Sr. Unsec. Nts., 6/1/06 250,000 260,000 - -------------------------------------------------------------------------------------------------- ORBCOMM Global LP/ORBCOMM Capital Corp., 14% Sr. Nts., 8/15/04 200,000 145,000 - -------------------------------------------------------------------------------------------------- Orion Network Systems, Inc., 0%/12.50% Sr. Disc. Nts., 1/15/07(10) 550,000 255,750 - -------------------------------------------------------------------------------------------------- Pinnacle Holdings, Inc., 0%/10% Sr. Unsec. Disc. Nts., 3/15/08(10) 325,000 214,500 - -------------------------------------------------------------------------------------------------- Polska Telefoniz Cyfrowa International Financial II SA, 11.25% Sr. Sub. Nts., 12/1/09(4)EUR 200,000 203,796 - -------------------------------------------------------------------------------------------------- Price Communications Wireless, Inc.: 9.125% Sr. Sec. Nts., Series B, 12/15/06 250,000 254,375 11.75% Sr. Sub. Nts., 7/15/07 275,000 301,125 - -------------------------------------------------------------------------------------------------- PTC International Finance BV, 0%/10.75% Gtd. Sr. Unsec. Sub. Bonds, 7/1/07(5)(10) 134,000 90,115 - -------------------------------------------------------------------------------------------------- Real Time Data Co., 11% Disc. Nts., 5/31/09(4)(13) 118,366 113,825 - -------------------------------------------------------------------------------------------------- Rural Cellular Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 300,000 308,250 - -------------------------------------------------------------------------------------------------- SBA Communications Corp., 0%/12% Sr. Unsec. Disc. Nts., 3/1/08(10) 700,000 416,500
18 Oppenheimer Strategic Bond Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - ----------------------------------------------------------------------------------------------------- Media/Entertainment: Wireless Communications (continued) Spectrasite Holdings, Inc., 0%/12% Sr. Disc. Nts., 7/15/08(10) $500,000 $ 301,250 - ----------------------------------------------------------------------------------------------------- Sprint Spectrum LP/Sprint Spectrum Finance Corp., 0%/12.50% Sr. Disc. Nts., 8/15/06(10) 65,000 60,188 - ----------------------------------------------------------------------------------------------------- USA Mobile Communications, Inc. II, 14% Sr. Nts., 11/1/04 200,000 184,000 - ----------------------------------------------------------------------------------------------------- Voicestream Wireless Corp., 10.375% Sr. Nts., 11/15/09(4) 900,000 931,500 ----------- 10,116,367 - ----------------------------------------------------------------------------------------------------- Metals/Minerals--1.5% AEI Resources, Inc., 11.50% Sr. Sub. Nts., 12/15/06(4) 250,000 163,125 - ----------------------------------------------------------------------------------------------------- AK Steel Corp.: 7.875% Sr. Unsec. Nts., 2/15/09 500,000 475,000 9.125% Sr. Nts., 12/15/06 300,000 306,750 - ----------------------------------------------------------------------------------------------------- California Steel Industries Corp., 8.50% Sr. Unsec. Nts., Series B, 4/1/09 200,000 193,000 - ----------------------------------------------------------------------------------------------------- Centaur Mining & Exploration Ltd., 11% Sr. Nts., 12/1/07 100,000 99,625 - ----------------------------------------------------------------------------------------------------- Great Lakes Carbon Corp., 10.25% Sr. Sub. Nts., Series B, 5/15/08 500,000 477,500 - ----------------------------------------------------------------------------------------------------- International Utility Structures, Inc., 10.75% Sr. Sub. Nts., 2/1/08 50,000 42,250 - ----------------------------------------------------------------------------------------------------- Kaiser Aluminum & Chemical Corp., 12.75% Sr. Sub. Nts., 2/1/03 250,000 251,250 - ----------------------------------------------------------------------------------------------------- Metallurg Holdings, Inc., 0%/12.75% Sr. Disc. Nts., 7/15/08(10) 250,000 81,250 - ----------------------------------------------------------------------------------------------------- Metallurg, Inc., 11% Sr. Nts., 12/1/07 995,000 900,475 - ----------------------------------------------------------------------------------------------------- National Steel Corp., 9.875% First Mtg. Bonds, Series D, 3/1/09 500,000 517,500 - ----------------------------------------------------------------------------------------------------- P&L Coal Holdings Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 500,000 495,000 - ----------------------------------------------------------------------------------------------------- Republic Technologies International Holdings LLC/RTI Capital Corp., Units (each unit consists of $1,000 principal amount of 13.75% sr. nts., 7/15/09 and one warrant to purchase Cl. D common stock at $0.01 per share)(12) 200,000 133,000 ----------- 4,135,725 - ----------------------------------------------------------------------------------------------------- Retail--0.4% Boyds Collection Ltd. (The), 9% Sr. Unsec. Sub. Nts., Series B, 5/15/08 236,000 225,380 - ----------------------------------------------------------------------------------------------------- Central Termica Guemes, 12% Bonds, 11/26/01(4)(11)(15) 100,000 5,000 - ----------------------------------------------------------------------------------------------------- Eye Care Centers of America, Inc., 9.125% Sr. Unsec. Sub. Nts., 5/1/08 300,000 211,500 - ----------------------------------------------------------------------------------------------------- Finlay Enterprises, Inc., 9% Debs., 5/1/08 100,000 91,500 - ----------------------------------------------------------------------------------------------------- Finlay Fine Jewelry Corp., 8.375% Sr. Nts., 5/1/08 100,000 93,000 - ----------------------------------------------------------------------------------------------------- Home Interiors & Gifts, Inc., 10.125% Sr. Sub. Nts., 6/1/08 225,000 193,500 - ----------------------------------------------------------------------------------------------------- Pantry, Inc. (The), 10.25% Sr. Sub. Nts., 10/15/07 200,000 195,000 ----------- 1,014,880 - ----------------------------------------------------------------------------------------------------- Service--1.4% Allied Waste North America, Inc.: 7.875% Sr. Unsec. Nts., Series B, 1/1/09 435,000 386,606 10% Sr. Sub. Nts., 8/1/09(4) 950,000 855,000 - ----------------------------------------------------------------------------------------------------- Dura Operating Corp., 9% Sr. Sub. Nts., Series B, 5/1/09EUR 400,000 379,413 - ----------------------------------------------------------------------------------------------------- IT Group, Inc., 11.25% Sr. Unsec. Sub. Nts., Series B, 4/1/09 200,000 195,000 - ----------------------------------------------------------------------------------------------------- Kindercare Learning Centers, Inc., 9.50% Sr. Sub. Nts., 2/15/09 350,000 343,000 - ----------------------------------------------------------------------------------------------------- Protection One Alarm Monitoring, Inc.: 6.75% Cv. Sr. Sub. Nts., 9/15/03 125,000 60,000 7.375% Gtd. Sr. Unsec. Nts., 8/15/05 250,000 200,000
Oppenheimer Strategic Bond Fund/VA 19 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - ------------------------------------------------------------------------------------------------------------ Service (continued) Safety-Kleen Corp., 9.25% Sr. Unsec. Nts., 5/15/09 $ 400,000 $ 389,000 - ------------------------------------------------------------------------------------------------------------ United Rentals, Inc., 9.25% Sr. Unsec. Sub. Nts., Series B, 1/15/09 250,000 241,250 - ------------------------------------------------------------------------------------------------------------ URS Corp., 12.25% Sr. Sub. Nts., Series B, 5/1/09 500,000 515,000 - ------------------------------------------------------------------------------------------------------------ US Unwired, Inc., 0%/13.375% Sr. Disc. Nts., 11/1/09(4)(10) 700,000 413,000 ------------ 3,977,269 - ------------------------------------------------------------------------------------------------------------ Transportation--2.5% America West Airlines, Inc., 10.75% Sr. Nts., 9/1/05 450,000 439,313 - ------------------------------------------------------------------------------------------------------------ Amtran, Inc., 10.50% Sr. Nts., 8/1/04(4) 300,000 301,500 - ------------------------------------------------------------------------------------------------------------ Budget Group, Inc., 9.125% Sr. Unsec. Nts., 4/1/06 300,000 280,500 - ------------------------------------------------------------------------------------------------------------ Cambridge Industries, Inc., 10.25% Sr. Sub. Nts., Series B, 7/15/07 75,000 29,438 - ------------------------------------------------------------------------------------------------------------ Collins & Aikman Products Co., 11.50% Sr. Unsec. Sub. Nts., 4/15/06 250,000 248,125 - ------------------------------------------------------------------------------------------------------------ Federal-Mogul Corp., 7.875% Nts., 7/1/10 300,000 267,254 - ------------------------------------------------------------------------------------------------------------ General Motors Acceptance Corp., 6.875% Nts., Series EC, 9/9/04GBP 540,000 864,345 - ------------------------------------------------------------------------------------------------------------ Great Lakes Dredge & Dock Corp., 11.25% Sr. Unsec. Sub. Nts., 8/15/08 500,000 525,000 - ------------------------------------------------------------------------------------------------------------ Hayes Wheels International, Inc.: 9.125% Sr. Sub. Nts., 7/15/07 100,000 98,250 11% Sr. Sub. Nts., 7/15/06 225,000 236,250 - ------------------------------------------------------------------------------------------------------------ HDA Parts System, Inc., 12% Sr. Sub. Nts., 8/1/05 425,000 388,875 - ------------------------------------------------------------------------------------------------------------ Key Plastics, Inc., 10.25% Sr. Sub. Nts., Series B, 3/15/07 300,000 115,500 - ------------------------------------------------------------------------------------------------------------ Lear Corp., 9.50% Sub. Nts., 7/15/06 200,000 202,000 Millennium Seacarriers, Inc., Units (each unit consists of $1,000 principal amount of 12% first priority ship mtg. sr. sec. nts., 7/15/05 and one warrant to purchase five shares of common stock)(5)(12) 250,000 143,750 - ------------------------------------------------------------------------------------------------------------ Navigator Gas Transport plc: 10.50% First Priority Ship Mtg. Nts., 6/30/07(4) 275,000 127,875 Units (each unit consists of $1,000 principal amount of 11.63% second priority ship mtg. nts., 6/30/07 and 7.66 warrants)(4)(6)(12) 150,000 11,250 - ------------------------------------------------------------------------------------------------------------ Oxford Automotive, Inc., 10.125% Sr. Unsec. Sub. Nts., Series D, 6/15/07(5) 1,300,000 1,228,500 - ------------------------------------------------------------------------------------------------------------ Pycsa Panama SA, 10.28% Sr. Sec. Bonds, 12/15/12(5) 195,800 116,012 - ------------------------------------------------------------------------------------------------------------ Tenneco, Inc., 11.625% Sr. Sub. Nts., 10/15/09(4) 400,000 410,000 - ------------------------------------------------------------------------------------------------------------ Terex Corp., 8.875% Sr. Unsec. Sub. Nts., Series C, 4/1/08 100,000 95,000 - ------------------------------------------------------------------------------------------------------------ TFM SA de CV, 10.25% Sr. Nts., 6/15/07 200,000 184,500 - ------------------------------------------------------------------------------------------------------------ Trans World Airlines, Inc., 11.50% Sr. Sec. Nts., 12/15/04 430,000 278,963 - ------------------------------------------------------------------------------------------------------------ Transtar Holdings LP/Transtar Capital Corp., 13.375% Sr. Disc. Nts., Series B, 12/15/03 300,000 307,500 - ------------------------------------------------------------------------------------------------------------ Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(5) 184,770 83,609 ------------ 6,983,309 - ------------------------------------------------------------------------------------------------------------ Utility--0.4% Beaver Valley II Funding Corp., 9% Second Lease Obligation Bonds, 6/1/17 199,000 198,751 - ------------------------------------------------------------------------------------------------------------ Calpine Corp.: 7.75% Sr. Nts., 4/15/09 450,000 427,500 8.75% Sr. Nts., 7/15/07 230,000 231,725 10.50% Sr. Nts., 5/15/06 100,000 106,000 - ------------------------------------------------------------------------------------------------------------ El Paso Electric Co., 9.40% First Mtg. Sec. Nts., Series E, 5/1/11 250,000 267,687 ------------ 1,231,663 ------------ Total Corporate Bonds and Notes (Cost $120,275,567) 110,027,009
20 Oppenheimer Strategic Bond Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 ============================================================================================================ Preferred Stocks--2.1% - ------------------------------------------------------------------------------------------------------------ AmeriKing, Inc., 13% Cum. Sr. Exchangeable, Non-Vtg.(13) 2,995 $ 54,659 - ------------------------------------------------------------------------------------------------------------ BankUnited Capital Trust, 10.25% Gtd. Bonds, 12/31/26 100,000 90,250 - ------------------------------------------------------------------------------------------------------------ CGA Group Ltd., Series A(5)(13) 19,767 494,175 - ------------------------------------------------------------------------------------------------------------ Clark USA, Inc., 11.50% Cum. Sr. Exchangeable, Non-Vtg.(13) 61 16,622 - ------------------------------------------------------------------------------------------------------------ Concentric Network Corp., 13.50% Sr. Redeemable Exchangeable, Series B, Non-Vtg.(13) 242 240,185 - ------------------------------------------------------------------------------------------------------------ Contour Energy Co., $2.625 Cum. Cv.(15) 1,800 3,375 - ------------------------------------------------------------------------------------------------------------ CRIIMI MAE, Inc., 10.875% Cum. Cv., Series B, Non-Vtg. 46,000 759,000 - ------------------------------------------------------------------------------------------------------------ Crown American Realty Trust, 11% Cum., Series A, Non-Vtg. 2,000 70,750 - ------------------------------------------------------------------------------------------------------------ Doane Products Co., 14.25% Exchangeable, Non-Vtg.(5)(15) 5,000 222,500 - ------------------------------------------------------------------------------------------------------------ Dobson Communications Corp.: 12.25% Sr. Exchangeable, Non-Vtg.(13) 253 254,897 13% Sr. Exchangeable, Non-Vtg.(13) 319 348,507 - ------------------------------------------------------------------------------------------------------------ e.spire Communications, Inc., 12.75% Jr. Redeemable, Non-Vtg.(13) 185 37,462 - ------------------------------------------------------------------------------------------------------------ Eagle-Picher Holdings, Inc., 11.75% Cum. Exchangeable, Series B, Non-Vtg.(5)(15) 5,000 231,250 - ------------------------------------------------------------------------------------------------------------ Earthwatch, Inc., 12% Cv. Sr., Series C, Non-Vtg.(5) 4,491 11,227 - ------------------------------------------------------------------------------------------------------------ Fidelity Federal Bank FSB Glendale California, l2% Non-Cum. Exchangeable Perpetual, Series A(5) 20 300 - ------------------------------------------------------------------------------------------------------------ ICG Holdings, Inc., 14.25% Exchangeable, Non-Vtg.(13) 135 123,188 - ------------------------------------------------------------------------------------------------------------ Intermedia Communications, Inc., Depositary Shares Representing one one-hundredth 7% Cum. Cv. Jr., Series E, Non-Vtg.(4) 2,100 71,400 - ------------------------------------------------------------------------------------------------------------ International Utility Structures, Inc.: 13%, Non-Vtg.(4)(13) 9 7,493 Units (each unit consists of $1,000 principal amount of 13% sr. exchangeable preferred stock and one warrant to purchase 30 shares of common stock)(5)(12)(13) 50 44,625 - ------------------------------------------------------------------------------------------------------------ Nebco Evans Holdings, Inc., 11.25% Sr. Redeemable Exchangeable Preferred Stock, Non-Vtg.(13) 6,061 68,186 - ------------------------------------------------------------------------------------------------------------ Nextel Communications, Inc., 11.125% Exchangeable, Series E, Non-Vtg.(13) 121 121,303 - ------------------------------------------------------------------------------------------------------------ NEXTLINK Communications, Inc., 14% Cum., Non-Vtg.(13) 19,029 1,022,809 - ------------------------------------------------------------------------------------------------------------ Paxson Communications Corp., 13.25% Cum. Jr. Exchangeable, Non-Vtg.(13) 24 246,000 - ------------------------------------------------------------------------------------------------------------ PRIMEDIA, Inc.: 8.625% Exchangeable, Series H, Non-Vtg. 8,000 698,000 9.20% Exchangeable, Series F, Non-Vtg. 1,000 91,750 - ------------------------------------------------------------------------------------------------------------ Rural Cellular Corp., 11.375% Cum. Sr., Series B, Non-Vtg.(13) 235 241,463 - ------------------------------------------------------------------------------------------------------------ SF Holdings Group, Inc.: 13.75% Cum. Nts., Series B, 3/15/09, Non-Vtg.(13) 10 50,250 13.75% Exchangeable(4) 2 10,050 - ------------------------------------------------------------------------------------------------------------ Star Gas Partners, LP 187 2,478 - ------------------------------------------------------------------------------------------------------------ Walden Residential Properties, Inc.: 9.16% Cv., Series B, Non-Vtg. 10,000 241,250 9.20% Sr. 1,000 15,563 ---------- Total Preferred Stocks (Cost $7,931,185) 5,890,967 ============================================================================================================ Other Securities--0.0% - ------------------------------------------------------------------------------------------------------------ Fletcher Challenge Ltd.: 10% Cv. Unsec. Sub. Nts., 4/30/05NZD 60,000 32,036 14.50% Cv. Sub. Nts., 9/30/00NZD 60,000 32,981 ---------- Total Other Securities (Cost $91,017) 65,017
Oppenheimer Strategic Bond Fund/VA 21 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 ============================================================================================================ Common Stocks--0.9% - ------------------------------------------------------------------------------------------------------------ Celcaribe SA(4)(15) 24,390 $ 39,634 - ------------------------------------------------------------------------------------------------------------ Coinstar, Inc.(15) 700 9,800 - ------------------------------------------------------------------------------------------------------------ Golden State Bancorp, Inc.(15) 2,404 41,469 - ------------------------------------------------------------------------------------------------------------ Horizon Group Properties, Inc.(15) 358 1,208 - ------------------------------------------------------------------------------------------------------------ Intermedia Communications, Inc.(15) 320 12,420 - ------------------------------------------------------------------------------------------------------------ MCI WorldCom, Inc.(15) 10,327 547,977 - ------------------------------------------------------------------------------------------------------------ Optel, Inc.(15) 210 2 - ------------------------------------------------------------------------------------------------------------ Premier Holdings Ltd.(15) 18,514 62,485 - ------------------------------------------------------------------------------------------------------------ Price Communications Corp. 33,471 930,936 - ------------------------------------------------------------------------------------------------------------ SF Holdings Group, Inc., Cl. C(15) 370 4 - ------------------------------------------------------------------------------------------------------------ UnitedGlobalCom, Inc., Cl. A(15) 1,814 128,114 - ------------------------------------------------------------------------------------------------------------ Vail Resorts, Inc.(15) 15,500 278,031 - ------------------------------------------------------------------------------------------------------------ Viatel, Inc.(15) 1,189 63,760 - ------------------------------------------------------------------------------------------------------------ Weatherford International, Inc. 7,581 302,766 - ------------------------------------------------------------------------------------------------------------ Wilshire Financial Services Group, Inc.(15) 6,273 8,625 - ------------------------------------------------------------------------------------------------------------ Total Common Stocks (Cost $891,044) 2,427,231 Units ============================================================================================================ Rights, Warrants and Certificates--0.1% - ------------------------------------------------------------------------------------------------------------ Adelphia Business Solutions, Inc. Wts., Exp. 4/15/01(5) 60 10,500 - ------------------------------------------------------------------------------------------------------------ Argentina (Republic of) Wts., Exp. 2/25/00 1,315 2,762 - ------------------------------------------------------------------------------------------------------------ CGA Group Ltd. Wts., Exp. 6/16/07(5) 16,000 4,800 - ------------------------------------------------------------------------------------------------------------ Clearnet Communications, Inc. Wts., Exp. 9/15/05 165 3,706 - ------------------------------------------------------------------------------------------------------------ Comunicacion Celular SA Wts., Exp. 11/15/03(5) 200 10,025 - ------------------------------------------------------------------------------------------------------------ Concentric Network Corp. Wts., Exp. 12/15/07(5) 100 26,512 - ------------------------------------------------------------------------------------------------------------ Covergent Communications, Inc. Wts., Exp. 4/1/08 400 4,900 - ------------------------------------------------------------------------------------------------------------ FirstWorld Communications, Inc. Wts., Exp. 4/15/08(5) 175 26,272 - ------------------------------------------------------------------------------------------------------------ Geotek Communications, Inc. Wts., Exp. 7/15/05(5) 7,500 75 - ------------------------------------------------------------------------------------------------------------ Globix Corp. Wts., Exp. 5/1/05 325 78,000 - ------------------------------------------------------------------------------------------------------------ Golden State Bancorp, Inc. Wts., Exp. 1/1/01 2,404 2,103 - ------------------------------------------------------------------------------------------------------------ Gothic Energy Corp. Wts.: Exp. 1/23/03 1,668 -- Exp. 1/23/03(5) 953 10 Exp. 5/1/05(5) 2,181 218 Exp. 9/1/04(5) 2,800 2,976 - ------------------------------------------------------------------------------------------------------------ HF Holdings, Inc. Wts., Exp. 9/27/00(5) 531 7,969 - ------------------------------------------------------------------------------------------------------------ ICG Communications, Inc. Wts., Exp. 9/15/05 825 10,181 - ------------------------------------------------------------------------------------------------------------ In-Flight Phone Corp. Wts., Exp. 8/31/02 200 -- - ------------------------------------------------------------------------------------------------------------ Insilco Corp. Wts., Exp. 8/15/07(5) 270 -- - ------------------------------------------------------------------------------------------------------------ KMC Telecom Holdings, Inc. Wts., Exp. 4/15/08(5) 725 2,221 - ------------------------------------------------------------------------------------------------------------ Long Distance International, Inc. Wts., Exp. 4/13/08(5) 200 100 - ------------------------------------------------------------------------------------------------------------ Loral Space & Communications Ltd. Wts., Exp. 1/15/07(5) 150 1,819 - ------------------------------------------------------------------------------------------------------------ Mexico Value Rts., Exp. 6/30/03 384,000 -- - ------------------------------------------------------------------------------------------------------------ Microcell Telecommunications, Inc. Wts., Exp. 6/1/06(5) 600 40,017
22 Oppenheimer Strategic Bond Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Units Note 1 ================================================================================================================== Rights, Warrants and Certificates (continued) - ------------------------------------------------------------------------------------------------------------------ Millennium Seacarriers, Inc. Wts., Exp. 7/15/05(5) 250 $ 281 - ------------------------------------------------------------------------------------------------------------------ Occidente y Caribe Celular SA Wts., Exp. 3/15/04(5) 800 12,100 - ------------------------------------------------------------------------------------------------------------------ PLD Telekom, Inc.: Wts., Exp. 6/1/06(5) 300 15 14% Sr. Disc. Nts. Wts., Exp. 3/31/03 300 15 - ------------------------------------------------------------------------------------------------------------------ Real Time Data Co. Wts., Exp. 5/31/04(5) 36,431 364 - ------------------------------------------------------------------------------------------------------------------ WAM!NET, Inc. Wts., Exp. 3/1/05(4) 1,500 33,562 -------- Total Rights, Warrants and Certificates (Cost $26,622) 281,503 Principal Amount(1) ================================================================================================================== Structured Instruments--3.8% - ------------------------------------------------------------------------------------------------------------------ Citibank NA (Nassau Branch), Mexican Peso Linked Nts.: 26.10%, 10/29/01MXN 5,630,625 611,970 27.40%, 9/20/01 384,000 417,869 - ------------------------------------------------------------------------------------------------------------------ Citibank NA (New York), Mexican Peso Linked Nts., 23.95%, 11/5/01MXN 7,280,764 771,876 - ------------------------------------------------------------------------------------------------------------------ Citibank NA, Polish Zloty Linked Nts., 16.10%, 11/3/00PLZ 2,542,214 609,271 - ------------------------------------------------------------------------------------------------------------------ Credit Suisse First Boston Corp. (New York Branch), Russian OFZ Linked Nts.: 14%, 9/27/00(5)RUR 3,610,000 73,042 15%, 2/23/00(5)RUR 8,008,000 207,615 18.339%, 2/23/00(5) 240,000 171,422 18.598%, 10/25/00(5) 240,000 125,058 25%, 2/6/02(5)(6)RUR 277,180 4,035 25%, 2/6/02(5)(6)RUR 277,180 3,535 25%, 5/22/02(5)(6)RUR 277,180 3,691 25%, 6/5/02(5)(6)RUR 277,180 3,669 25%, 6/5/02(5)(6)RUR 3,150,400 57,977 25%, 9/18/02(5)(6)RUR 277,180 3,416 25%, 10/9/02(5)(6)RUR 277,180 3,641 25%, 2/5/03(5)(6)RUR 277,180 3,472 25%, 5/21/03(5)(6)RUR 277,180 3,254 25%, 6/4/03(5)(6)RUR 277,180 3,247 25%, 9/17/03(5)(6)RUR 277,180 3,113 25%, 10/8/03(5)(6)RUR 277,180 3,324 25%, 1/21/04(5)(6)RUR 277,180 3,114 Series 1, 25%, 6/4/03(6)RUR 2,561,555 41,561 Zero Coupon, 46.10%, 12/15/01(5)(9)RUR 950,000 7,990 - ------------------------------------------------------------------------------------------------------------------ Deutsche Bank AG, Indian Rupee/Japanese Yen Linked Nts., Zero Coupon, 12.56%, 8/17/01(9) 350,000 244,685 - ------------------------------------------------------------------------------------------------------------------ Deutsche Bank AG, Indonesian Rupiah Linked Nts., 13.667%, 6/30/00 475,000 457,615 - ------------------------------------------------------------------------------------------------------------------ Deutsche Bank AG, New York, Philippine Peso/Japanese Yen Linked Nts., 10.55%, 5/12/00 135,000 106,933 - ------------------------------------------------------------------------------------------------------------------ Deutsche Morgan Grenfell, Lehman High Yield Index Linked Nts., 8.75%, 5/5/00 750,000 757,433 - ------------------------------------------------------------------------------------------------------------------ Deutsche Morgan Grenfell, Turkish Lira Treasury Bill Linked Nts., Zero Coupon, 79.84%, 5/24/00(9)TRL 346,810,000,000 525,506 - ------------------------------------------------------------------------------------------------------------------ Goldman, Sachs & Co. Argentina Local Market Securities Trust, 11.30%, 4/1/00 [representing debt of Argentina (Republic of) Bonos del Tesoro Bonds, Series 10, 11.30%, 4/1/00 and an interest rate swap between Goldman Sachs and the Trust](5) 26,086 24,946
Oppenheimer Strategic Bond Fund/VA 23 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 =================================================================================================================== Structured Instruments (continued) - ------------------------------------------------------------------------------------------------------------------- J.P. Morgan & Co., Inc. Emerging Market Bond Index Linked Nts., 9.50%, 7/14/00 $ 2,493,380 $ 2,801,542 - ------------------------------------------------------------------------------------------------------------------- Merrill Lynch & Co., Inc. Turkey Treasury Bond Linked Nts.: 87.282%, 1/9/01(6)TRL 350,300,000,000 790,565 87.283%, 1/7/01(6)TRL 185,000,000,000 417,512 - ------------------------------------------------------------------------------------------------------------------- Russia (Government of) Federal Loan Bonds: Series 5022, 15%, 2/23/00(5)RUR 5,417,000 140,441 Series 27010, 25%, 9/17/03(5)(6)RUR 3,590,420 57,082 - ------------------------------------------------------------------------------------------------------------------- Salomon Smith Barney, Inc. Brazil Credit Linked Nts.: 6%, 4/2/03(5) 310,000 246,831 Series 2, 6%, 4/2/03(5) 310,000 246,831 - ------------------------------------------------------------------------------------------------------------------- Salomon Smith Barney, Inc. Turkey Treasury Bill Linked Nts.: 92.10%, 8/24/00(6) 320,000 270,371 94.10%, 8/24/00(6) 372,386 317,359 - ------------------------------------------------------------------------------------------------------------------- Salomon, Inc. Indonesian Rupiah Linked Nts.: 29.55%, 4/12/00 50,000 64,156 32.65%, 4/6/00 135,000 173,035 - ------------------------------------------------------------------------------------------------------------------- Standard Chartered Bank, Philippine Peso/Japanese Yen Linked Nts., 16.04%, 5/10/00 130,000 93,509 - ------------------------------------------------------------------------------------------------------------------- Total Structured Instruments (Cost $12,506,847) 10,873,514 Date Strike Contracts - ------------------------------------------------------------------------------------------------------------------- Options Purchased--0.1% - ------------------------------------------------------------------------------------------------------------------- European Monetary Unit Put (5) 1/14/00 1.020EUR 10,160,000 174,912 - ------------------------------------------------------------------------------------------------------------------- Hong Kong Dollar Put 1/11/00 7.894HKD 4,815,340 -- - ------------------------------------------------------------------------------------------------------------------- Japanese Yen Put 3/6/00 105.950JPY 144,000,000 8,496 - ------------------------------------------------------------------------------------------------------------------- South Korean Won Call 6/1/00 1,100.000KRW 1,600,500,000 20,406 - ------------------------------------------------------------------------------------------------------------------- Morgan Guaranty Trust Co. of New York, The Emerging Markets Bond Index Linked Nts. Call (5) 1/19/00 349.730% 1,600 126,056 - ------------------------------------------------------------------------------------------------------------------- Total Options Purchased (Cost $224,174) 329,870 - ------------------------------------------------------------------------------------------------------------------- Total Investments, at Value (Cost $303,769,877) 101.4% 286,143,077 - ------------------------------------------------------------------------------------------------------------------- Liabilities in Excess of Other Assets (1.4) (4,057,459) ------------- ------------ Net Assets 100.0% $282,085,618 ============= ============
24 Oppenheimer Strategic Bond Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. Principal amount is reported in U.S. Dollars, except for those denoted in the following currencies: ARP--Argentine Peso IDR--Indonesian Rupiah AUD--Australian Dollar JPY--Japanese Yen CAD--Canadian Dollar KRW--South Korean Won DEM--German Mark MXN--Mexican Nuevo Peso DKK--Danish Krone NOK--Norwegian Krone EUR--Euro NZD--New Zealand Dollar FRF--French Franc PLZ--Polish Zloty GBP--British Pound Sterling RUR--Russian Ruble GRD--Greek Drachma SEK--Swedish Krona HKD--Hong Kong Dollar TRL--Turkish Lira HUF--Hungarian Forint ZAR--South African Rand 2. Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of mortgage loans. These securities typically decline in price as interest rates decline. Most other fixed income securities increase in price when interest rates decline. The principal amount of the underlying pool represents the notional amount on which current interest is calculated. The price of these securities is typically more sensitive to changes in prepayment rates than traditional mortgage-backed securities (for example, GNMA pass-throughs). Interest rates disclosed represent current yields based upon the current cost basis and estimated timing and amount of future cash flows. 3. When-issued security to be delivered and settled after December 31, 1999. 4. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $16,799,089 or 5.96% of the Fund's net assets as of December 31, 1999. 5. Identifies issues considered to be illiquid or restricted--See Note 8 of Notes to Financial Statements. 6. Represents the current interest rate for a variable or increasing rate security. 7. A sufficient amount of securities has been designated to cover outstanding foreign currency contracts. See Note 5 of Notes to Financial Statements. 8. A sufficient amount of liquid assets has been designated to cover outstanding written options, as follows:
Principal Expiration Exercise Premium Market Value Subject to Call/Put Date Price Received Note 1 - -------------------------------------------------------------------------------------------------------- Brazilian Real Put (BRR) 3,347,205 1/28/00 2.054BRR $55,420 $ 3,347 Japanese Yen Call (JPY) 144,000,000 3/6/00 96.100JPY 14,910 13,104 ------- ------- $70,330 $16,451 ======= =======
9. For zero coupon bonds, the interest rate shown is the effective yield on the date of purchase. 10. Denotes a step bond: a zero coupon bond that converts to a fixed or variable interest rate at a designated future date. 11. Issuer is in default. 12. Units may be comprised of several components, such as debt and equity and/or warrants to purchase equity at some point in the future. For units which represent debt securities, principal amount disclosed represents total underlying principal. 13. Interest or dividend is paid in kind. 14. Securities with an aggregate market value of $577,958 are held in collateralized accounts to cover initial margin requirements on open futures sales contracts. See Note 6 of Notes to Financial Statements. 15. Non-income producing security. See accompanying Notes to Financial Statements. Oppenheimer Strategic Bond Fund/VA 25 - -------------------------------------------------------------------------------- Statement of Assets and Liabilities December 31, 1999 - -------------------------------------------------------------------------------- ================================================================================================ Assets Investments, at value (cost $303,769,877)--see accompanying statement $286,143,077 - ------------------------------------------------------------------------------------------------ Cash 780,123 - ------------------------------------------------------------------------------------------------ Cash--foreign currencies (cost $20,652) 20,652 - ------------------------------------------------------------------------------------------------ Unrealized appreciation on foreign currency contracts 56,495 - ------------------------------------------------------------------------------------------------ Receivables and other assets: Interest and principal paydowns 5,466,483 Shares of beneficial interest sold 168,739 Investments sold 26,690 Other 4,848 ------------ Total assets 292,667,107 ================================================================================================ Liabilities Unrealized depreciation on foreign currency contracts 102,696 - ------------------------------------------------------------------------------------------------ Options written, at value (premiums received $70,330)--see accompanying statement 16,451 - ------------------------------------------------------------------------------------------------ Payables and other liabilities: Investments purchased (including $9,294,950 purchased on a when-issued basis) 9,303,817 Shares of beneficial interest redeemed 1,098,260 Closed foreign currency contracts 16,992 Daily variation on futures contracts 675 Transfer and shareholder servicing agent fees 184 Trustees' compensation 22 Other 42,392 - ------------------------------------------------------------------------------------------------ Total liabilities 10,581,489 ================================================================================================ Net Assets $282,085,618 ============ ================================================================================================ Composition of Net Assets Paid-in capital $285,264,616 - ------------------------------------------------------------------------------------------------ Undistributed net investment income 22,685,394 - ------------------------------------------------------------------------------------------------ Accumulated net realized loss on investments and foreign currency transactions (8,158,504) - ------------------------------------------------------------------------------------------------ Net unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies (17,705,888) - ------------------------------------------------------------------------------------------------ Net assets--applicable to 56,728,056 shares of beneficial interest outstanding $282,085,618 ============ ================================================================================================ Net Asset Value, Redemption Price Per Share and Offering Price Per Share $4.97
See accompanying Notes to Financial Statements. 26 Oppenheimer Strategic Bond Fund/VA - -------------------------------------------------------------------------------- Statement of Operations For the Year Ended December 31, 1999 - -------------------------------------------------------------------------------- ====================================================================================== Investment Income Interest (net of foreign withholding taxes of $68,279) $26,884,872 - -------------------------------------------------------------------------------------- Dividends 554,128 ----------- Total income 27,439,000 ====================================================================================== Expenses Management fees 2,066,323 - -------------------------------------------------------------------------------------- Custodian fees and expenses 35,149 - -------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees 2,108 - -------------------------------------------------------------------------------------- Trustees' compensation 1,291 - -------------------------------------------------------------------------------------- Other 55,271 ----------- Total expenses 2,160,142 Less expenses paid indirectly (11,572) ----------- Net expenses 2,148,570 ====================================================================================== Net Investment Income 25,290,430 ====================================================================================== Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments (including premiums on options exercised) (6,481,356) Closing of futures contracts 406,580 Closing and expiration of option contracts written 203,611 Foreign currency transactions (2,492,662) - -------------------------------------------------------------------------------------- Net realized loss (8,363,827) - -------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation on: Investments (5,804,195) Translation of assets and liabilities denominated in foreign currencies (2,989,088) ----------- Net change (8,793,283) ----------- Net realized and unrealized loss (17,157,110) ====================================================================================== Net Increase in Net Assets Resulting from Operations $ 8,133,320 ===========
See accompanying Notes to Financial Statements. Oppenheimer Strategic Bond Fund/VA 27 - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 =========================================================================================================== Operations Net investment income $ 25,290,430 $ 20,451,817 - ----------------------------------------------------------------------------------------------------------- Net realized loss (8,363,827) (2,696,918) - ----------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation (8,793,283) (11,476,607) ------------ ------------ Net increase in net assets resulting from operations 8,133,320 6,278,292 =========================================================================================================== Dividends and/or Distributions to Shareholders - ----------------------------------------------------------------------------------------------------------- Dividends from net investment income (15,617,496) (3,974,494) - ----------------------------------------------------------------------------------------------------------- Distributions from net realized gain -- (2,561,341) =========================================================================================================== Beneficial Interest Transactions Net increase in net assets resulting from beneficial interest transactions 10,369,398 71,618,535 =========================================================================================================== Net Assets - ----------------------------------------------------------------------------------------------------------- Total increase 2,885,222 71,360,992 - ----------------------------------------------------------------------------------------------------------- Beginning of period 279,200,396 207,839,404 ------------ ------------ End of period (including undistributed net investment income of $22,685,394 and $15,570,425, respectively) $282,085,618 $279,200,396 ============ ============
See accompanying Notes to Financial Statements. 28 Oppenheimer Strategic Bond Fund/VA - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------ Per Share Operating Data Net asset value, beginning of period $5.12 $5.12 $5.09 $4.91 $4.60 - ------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income .45 .39 .39 .38 .38 Net realized and unrealized gain (loss) (.31) (.24) .04 .19 .30 - ------------------------------------------------------------------------------------------------------------------------------ Total income from investment operations .14 .15 .43 .57 .68 - ------------------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.29) (.09) (.39) (.39) (.37) Distributions from net realized gain -- (.06) (.01) -- -- - ------------------------------------------------------------------------------------------------------------------------------ Total dividends and/or distributions to shareholders (.29) (.15) (.40) (.39) (.37) - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $4.97 $5.12 $5.12 $5.09 $4.91 ===== ===== ===== ===== ===== - ------------------------------------------------------------------------------------------------------------------------------ Total Return, at Net Asset Value(1) 2.83% 2.90% 8.71% 12.07% 15.33% ============================================================================================================================== Ratios/Supplemental Data Net assets, end of period (in thousands) $282,086 $279,200 $207,839 $118,716 $60,098 - ------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $278,668 $250,227 $159,934 $82,604 $37,698 - ------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets:(2) Net investment income 9.08% 8.17% 8.23% 8.48% 9.32% Expenses 0.78% 0.80%(3) 0.83%(3) 0.85%(3) 0.85%(3) - ------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate(4) 81% 134% 150% 144% 87%
1. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 2. Annualized for periods less than one full year. 3. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. 4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended December 31, 1999, were $242,578,613 and $216,840,010, respectively. See accompanying Notes to Financial Statements. Oppenheimer Strategic Bond Fund/VA 29 - -------------------------------------------------------------------------------- Notes to Financial Statements - -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies Oppenheimer Strategic Bond Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds (the Trust), a diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek a high level of current income principally derived from interest of debt securities and seeks to enhance that income by writing covered call option on debt securities. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The following is a summary of significant accounting policies consistently followed by the Fund. - -------------------------------------------------------------------------------- Securities Valuation. Portfolio securities are valued at the close of the New York Stock Exchange on each trading day. Listed and unlisted securities for which such information is regularly reported are valued at the last sale price of the day or, in the absence of sales, at values based on the closing bid or the last sale price on the prior trading day. Long-term and short-term "non-money market" debt securities are valued by a portfolio pricing service approved by the Board of Trustees. Such securities which cannot be valued by an approved portfolio pricing service are valued using dealer-supplied valuations provided the Manager is satisfied that the firm rendering the quotes is reliable and that the quotes reflect current market value, or are valued under consistently applied procedures established by the Board of Trustees to determine fair value in good faith. Short-term "money market type" debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Foreign currency exchange contracts are valued based on the closing prices of the foreign currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. Options are valued based upon the last sale price on the principal exchange on which the option is traded or, in the absence of any transactions that day, the value is based upon the last sale price on the prior trading date if it is within the spread between the closing bid and asked prices. If the last sale price is outside the spread, the closing bid is used. - -------------------------------------------------------------------------------- Structured Notes. The Fund invests in foreign currency-linked structured notes whose market value and redemption price are linked to foreign currency exchange rates. The structured notes may be leveraged, which increases the notes' volatility relative to the face of the security. Fluctuations in value of these securities are recorded as unrealized gains and losses in the accompanying financial statements. As of December 31, 1999, the market value of these securities comprised 3.85% of the Fund's net assets and resulted in realized and unrealized losses of $1,597,657. The Fund also hedges a portion of the foreign currency exposure generated by these securities, as discussed in Note 5. - -------------------------------------------------------------------------------- Securities Purchased on a When-Issued Basis. Delivery and payment for securities that have been purchased by the Fund on a forward commitment or when-issued basis can take place a month or more after the transaction date. Normally the settlement date occurs within six months after the transaction date; however, the fund may, from time to time, purchase securities whose settlement date extends beyond six months and possibly as long as two years or more beyond trade date. During this period, such securities do not earn interest, are subject to market fluctuation and may increase or decrease in value prior to their delivery. The Fund maintains segregated assets with a market value equal to or greater than the amount of its purchase commitments. The purchase of securities on a when-issued or forward commitment basis may increase the volatility of the Fund's net asset value to the extent the Fund makes such purchases while remaining substantially fully invested. As of December 31, 1999, the Fund had entered into outstanding when-issued or forward commitments of $9,294,950. In connection with its ability to purchase securities on a when-issued or forward commitment basis, the Fund may enter into mortgage dollar-rolls in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar (same type, coupon and maturity) but not identical securities on a specified future date. The Fund records each dollar-roll as a sale and a new purchase transaction. 30 Oppenheimer Strategic Bond Fund/VA - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies (continued) Security Credit Risk. The Fund invests in high yield securities, which may be subject to a greater degree of credit risk, greater market fluctuations and risk of loss of income and principal, and may be more sensitive to economic conditions than lower yielding, higher rated fixed income securities. The Fund may acquire securities in default, and is not obligated to dispose of securities whose issuers subsequently default. As of December 31, 1999, securities with an aggregate market value of $1,533,192, representing 0.54% of the Fund's net assets, were in default. - -------------------------------------------------------------------------------- Foreign Currency Translation. The accounting records of the Fund are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange. Amounts related to the purchase and sale of foreign securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund's Statement of Operations. - -------------------------------------------------------------------------------- Repurchase Agreements. The Fund requires the custodian to take possession, to have legally segregated in the Federal Reserve Book Entry System or to have segregated within the custodian's vault, all securities held as collateral for repurchase agreements. The market value of the underlying securities is required to be at least 102% of the resale price at the time of purchase. If the seller of the agreement defaults and the value of the collateral declines, or if the seller enters an insolvency proceeding, realization of the value of the collateral by the Fund may be delayed or limited. - -------------------------------------------------------------------------------- Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by loss carryovers to shareholders. As of December 31, 1999, the Fund had available for federal income tax purposes an unused capital loss carryover of approximately $6,413,000, which expires between 2006 and 2007. - -------------------------------------------------------------------------------- Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. - -------------------------------------------------------------------------------- Classification of Distributions to Shareholders. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes primarily because of paydown gains and losses and the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes. The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund. The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, during the year ended December 31, 1999, amounts have been reclassified to reflect a decrease in undistributed net investment income of $2,557,965. Accumulated net realized loss on investments was decreased by the same amount. - -------------------------------------------------------------------------------- Expense Offset Arrangements. Expenses paid indirectly represent a reduction of custodian fees for earnings on cash balances maintained by the Fund. - -------------------------------------------------------------------------------- Other. Investment transactions are accounted for as of trade date and dividend income is recorded on the ex-dividend date. Discount on securities purchased is amortized over the life of the respective securities, in accordance with federal income tax requirements. Realized gains and losses on investments and options written and unrealized appreciation and depreciation are determined on an identified cost basis, which is the same basis used for federal income tax purposes. Dividends-in-kind are recognized as income on the ex-dividend date, at the current market value of the underlying security. Interest on payment-in-kind debt instruments is accrued as income at the coupon rate and a market adjustment is made periodically. Oppenheimer Strategic Bond Fund/VA 31 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies (continued) The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. ================================================================================ 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of no par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:
Year Ended December 31, 1999 Year Ended December 31, 1998 ------------------------------ ----------------------------- Shares Amount Shares Amount - -------------------------------------------------------------------------------------------------------------- Sold 13,301,419 $65,503,594 21,445,910 $109,659,739 Dividends and/or distributions reinvested 3,226,755 15,617,496 1,279,028 6,535,835 Redeemed (14,369,937) (70,751,692) (8,759,684) (44,577,039) ----------- ----------- ---------- ------------ Net increase 2,158,237 $10,369,398 13,965,254 $ 71,618,535 =========== =========== ========== ============
================================================================================ 3. Unrealized Gains and Losses on Securities As of December 31, 1999, net unrealized depreciation on securities and options written of $17,572,921 was composed of gross appreciation of $6,256,650, and gross depreciation of $23,829,571. ================================================================================ 4. Management Fees and Other Transactions with Affiliates Management Fees. Management Fees paid to the Manager were in accordance with the investment advisory agreement with the Trust. The annual fees are 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200 million and 0.50% of average annual net assets over $1 billion. The Fund's management fee for the year ended December 31, 1999 was 0.74% of average annual net assets. - -------------------------------------------------------------------------------- Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, is the transfer agent for the Fund and is responsible for maintaining the shareholder registry and shareholder accounting records for the Fund. OFS provides these services for cost. ================================================================================ 5. Foreign Currency Contracts A foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. The Fund may enter into foreign currency contracts for operational purposes and to seek to protect against adverse exchange rate fluctuations. Risks to the Fund include the potential inability of the counterparty to meet the terms of the contract. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates as provided by a reliable bank, dealer or pricing service. Unrealized appreciation and depreciation on foreign currency contracts are reported in the Statement of Assets and Liabilities. The Fund may realize a gain or loss upon the closing or settlement of the foreign currency transactions. Realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. Securities denominated in foreign currency to cover net exposure on outstanding foreign currency contracts are noted in the Statement of Investments where applicable. 32 Oppenheimer Strategic Bond Fund/VA - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 5. Foreign Currency Contracts (continued) As of December 31, 1999, the Fund had outstanding foreign currency contracts as follows:
Expiration Contract Valuation as of Unrealized Unrealized Contract Description Dates Amounts (000s) December 31, 1999 Appreciation Depreciation - ---------------------------------------------------------------------------------------------------------------------- Contracts to Purchase - --------------------- British Pound Sterling (GBP) 1/24/00 185 EUR $ 298,855 $ -- $ 826 Euro (EUR) 2/24/00 1,200 JPY 1,212,790 -- 43,034 Japanese Yen (JPY) 2/7/00 254,500 JPY 2,505,580 -- 1,562 ------- -------- -- 45,422 ------- -------- Contracts to Sell - ----------------- British Pound Sterling (GBP) 1/30/00-6/5/00 980 GBP 1,582,807 3,914 14,584 Euro (EUR) 1/24/00-6/5/00 2,170 EUR 2,192,917 44,664 -- Euro (EUR) 1/24/00 289 GBP 291,763 7,917 -- Hong Kong Dollar (HKD) 1/26/00-1/31/00 4,859 HKD 625,030 -- 15,030 Japanese Yen (JPY) 2/24/00 129,600 EUR 1,279,172 -- 23,348 Mexican Nuevo Peso (MXN) 2/17/00 6,270 MXN 649,557 -- 4,312 ------- -------- 56,495 57,274 ------- -------- Total Unrealized Appreciation and Depreciation $56,495 $102,696 ======= ========
================================================================================ 6. Futures Contracts The Fund may buy and sell futures contracts in order to gain exposure to or to seek to protect against changes in interest rates. The Fund may also buy or write put or call options on these futures contracts. The Fund generally sells futures contracts to hedge against increases in interest rates and the resulting negative effect on the value of fixed rate portfolio securities. The Fund may also purchase futures contracts to gain exposure to changes in interest rates as it may be more efficient or cost effective than actually buying fixed income securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund may recognize a realized gain or loss when the contract is closed or expires. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable and/or payable for the daily mark to market for variation margin. Risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Oppenheimer Strategic Bond Fund/VA 33 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 6. Futures Contracts (continued) As of December 31, 1999, the Fund had outstanding futures contracts as follows:
Unrealized Expiration Number of Valuation as of Appreciation Contract Description Date Contracts December 31, 1999 (Depreciation) - ----------------------------------------------------------------------------------------------------- Contracts to Purchase - --------------------- Euro-Bund 3/8/00 33 $3,458,613 $(35,868) U.S. Treasury Bonds, 20 yr. 3/22/00 22 2,000,625 (40,906) U.S. Treasury Nts., 10 yr. 3/22/00 6 575,156 (9,047) -------- (85,821) -------- Contracts to Sell - ----------------- Canadian Government Bonds, 10 yr. 3/22/00 5 409,383 2,522 Euro-Schatz 3/8/00 71 7,338,365 20,128 Japanese Government Bonds, 10 yr. 3/9/00 2 2,598,259 (33,845) United Kingdom Long Gilt 3/29/00 3 539,949 11,486 U.S. Treasury Nts., 5 yr. 3/22/00 31 3,038,484 39,094 -------- 39,385 -------- $(46,436) ========
================================================================================ 7. Option Activity The Fund may buy and sell put and call options, or write put and covered call options on portfolio securities in order to produce incremental earnings or protect against changes in the value of portfolio securities. The Fund generally purchases put options or writes covered call options to hedge against adverse movements in the value of portfolio holdings. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option. Options are valued daily based upon the last sale price on the principal exchange on which the option is traded and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss upon the expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option is adjusted by the amount of premium received or paid. Securities designated to cover outstanding call options are noted in the Statement of Investments where applicable. Shares subject to call, expiration date, exercise price, premium received and market value are detailed in a note to the Statement of Investments. Options written are reported as a liability in the Statement of Assets and Liabilities. Gains and losses are reported in the Statement of Operations. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. 34 Oppenheimer Strategic Bond Fund/VA - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 7. Option Activity (continued) Written option activity for the year ended December 31, 1999, was as follows:
Call Options Put Options ---------------------------- ------------------------- Number of Amount of Number of Amount of Options Premiums Options Premiums - ------------------------------------------------------------------------------------------- Options outstanding as of December 31, 1998 147,606,100 $ 25,235 -- $ -- Options written 509,978,550 50,659 28,409,390 402,988 Options closed or expired (513,584,650) (60,984) (25,059,496) (273,394) Options exercised -- -- (2,689) (74,174) ------------ -------- ----------- --------- Options outstanding as of December 31, 1999 144,000,000 $ 14,910 3,347,205 $ 55,420 ============ ======== =========== =========
================================================================================ 8. Illiquid or Restricted Securities and Currency As of December 31, 1999, investments in securities and currency included issues that are illiquid or restricted. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may also be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund intends to invest no more than 15% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid or restricted securities. Certain restricted securities, eligible for resale to qualified institutional investors, are not subject to that limitation. The aggregate value of illiquid or restricted securities subject to this limitation as of December 31, 1999, was $13,116,671, which represents 4.64% of the Fund's net assets, of which $629,649 is considered restricted. Information concerning restricted securities is as follows:
Valuation Per Unit as of Acquisition Cost Per December 31, Security Dates Unit 1999 - ---------------------------------------------------------------------------------------------------- Bonds - ----- TAGHeuer International SA, 12% Sr. Sub. Nts., 12/15/05 12/8/95 100.00% 109.66% Stocks and Warrants - ------------------- CGA Group Ltd., Preferred 6/17/97 $25.00 $25.00 - ---------------------------------------------------------------------------------------------------- CGA Group Ltd. Wts., Exp. 6/16/07 6/17/97 -- 0.30 - ---------------------------------------------------------------------------------------------------- Real Time Data Wts., Exp. 5/31/04 6/30/99 0.01 0.01 Currency - -------- Russian Ruble 12/22/99- 12/28/99 0.04 0.04
- -------------------------------------------------------------------------------- Independent Auditors' Report - -------------------------------------------------------------------------------- ================================================================================ To the Board of Trustees and Shareholders of Oppenheimer Small Cap Growth Fund/VA: We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Oppenheimer Small Cap Growth Fund/VA (which is a series of Oppenheimer Variable Account Funds) as of December 31, 1999, the related statement of operations for the year then ended, the statements of changes in net assets for the year ended December 31, 1999 and the period ended December 31, 1998 and the financial highlights for the period May 1, 1998, to December 31, 1999. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Oppenheimer Small Cap Growth Fund/VA as of December 31, 1999, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP - ---------------------------- Deloitte & Touche LLP Denver, Colorado January 24, 2000 - -------------------------------------------------------------------------------- Statement of Investments December 31, 1999 - --------------------------------------------------------------------------------
Market Value Shares Note 1 ============================================================================================================== Common Stocks--84.2% - -------------------------------------------------------------------------------------------------------------- Capital Goods--8.5% - -------------------------------------------------------------------------------------------------------------- Aerospace/Defense--0.5% Armor Holdings, Inc.(1) 2,500 $ 32,812 - -------------------------------------------------------------------------------------------------------------- Electrical Equipment--0.2% Plug Power, Inc.(1) 500 14,125 - -------------------------------------------------------------------------------------------------------------- Industrial Services--5.5% Corporate Executive Board Co.(1) 1,000 55,875 - -------------------------------------------------------------------------------------------------------------- CyberSource Corp.(1) 300 15,525 - -------------------------------------------------------------------------------------------------------------- Digimarc Corp.(1) 500 25,000 - -------------------------------------------------------------------------------------------------------------- Keynote Systems, Inc.(1) 300 22,125 - -------------------------------------------------------------------------------------------------------------- Loislaw.com, Inc.(1) 600 23,475 - -------------------------------------------------------------------------------------------------------------- Metamor Worldwide, Inc.(1) 1,200 34,950 - -------------------------------------------------------------------------------------------------------------- Navidec, Inc.(1) 900 10,800 - -------------------------------------------------------------------------------------------------------------- Navigant Consulting, Inc.(1) 1,100 11,962 - -------------------------------------------------------------------------------------------------------------- Source Information Management Co. (The)(1) 3,600 60,300 - -------------------------------------------------------------------------------------------------------------- Tetra Tech, Inc.(1) 6,000 92,250 - -------------------------------------------------------------------------------------------------------------- Waste Connections, Inc.(1) 1,800 25,987 -------- 378,249 - -------------------------------------------------------------------------------------------------------------- Manufacturing--2.3% AstroPower, Inc.(1) 1,500 21,000 - -------------------------------------------------------------------------------------------------------------- Asyst Technologies, Inc.(1) 600 39,337 - -------------------------------------------------------------------------------------------------------------- Koala Corp.(1) 6,000 84,000 - -------------------------------------------------------------------------------------------------------------- Metron Technology NV(1) 800 12,850 -------- 157,187 - -------------------------------------------------------------------------------------------------------------- Communication Services--6.9% - -------------------------------------------------------------------------------------------------------------- Telecommunications: Long Distance--4.1% Clarent Corp.(1) 600 46,650 - -------------------------------------------------------------------------------------------------------------- Efficient Networks, Inc.(1) 300 20,400 - -------------------------------------------------------------------------------------------------------------- Internap Network Services Corp.(1) 150 25,950 - -------------------------------------------------------------------------------------------------------------- Latitude Communications, Inc.(1) 1,000 26,125 - -------------------------------------------------------------------------------------------------------------- MGC Communications, Inc.(1) 2,100 106,575 - -------------------------------------------------------------------------------------------------------------- Network Plus Corp.(1) 1,300 27,300 - -------------------------------------------------------------------------------------------------------------- Triton PCS Holdings, Inc., Cl. A(1) 300 13,650 - -------------------------------------------------------------------------------------------------------------- Z-Tel Technologies, Inc.(1) 400 16,150 -------- 282,800 - -------------------------------------------------------------------------------------------------------------- Telephone Utilities--0.3% Allied Riser Communications Corp.(1) 1,100 22,756
4 Oppenheimer Small Cap Growth Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - -------------------------------------------------------------------------------------------------------------- Telecommunications: Wireless--2.5% Aether Systems, Inc.(1) 200 $ 14,325 - -------------------------------------------------------------------------------------------------------------- AirGate PCS, Inc.(1) 100 5,275 - -------------------------------------------------------------------------------------------------------------- Airnet Communications Corp.(1) 200 7,275 - -------------------------------------------------------------------------------------------------------------- Chartered Semiconductor Manufacturing, Sponsored ADR(1) 600 43,800 - -------------------------------------------------------------------------------------------------------------- Phone.com, Inc.(1) 150 17,391 - -------------------------------------------------------------------------------------------------------------- Proxim, Inc.(1) 600 66,000 - -------------------------------------------------------------------------------------------------------------- TeleCorp PCS, Inc.(1) 200 7,600 - -------------------------------------------------------------------------------------------------------------- Tritel, Inc.(1) 300 9,506 -------- 171,172 - -------------------------------------------------------------------------------------------------------------- Consumer Cyclicals--12.0% - -------------------------------------------------------------------------------------------------------------- Consumer Services--1.5% Cornell Corrections, Inc.(1) 4,000 33,500 - -------------------------------------------------------------------------------------------------------------- Getty Images, Inc.(1) 700 34,212 - -------------------------------------------------------------------------------------------------------------- Jupiter Communications, Inc.(1) 400 12,100 - -------------------------------------------------------------------------------------------------------------- Netcentives, Inc.(1) 400 24,925 -------- 104,737 - -------------------------------------------------------------------------------------------------------------- Leisure & Entertainment--2.0% Activision, Inc.(1) 3,000 45,937 - -------------------------------------------------------------------------------------------------------------- Handleman Co.(1) 3,500 46,812 - -------------------------------------------------------------------------------------------------------------- JAKKS Pacific, Inc.(1) 2,400 44,850 -------- 137,599 - -------------------------------------------------------------------------------------------------------------- Media--2.0% Lifeminders.com, Inc.(1) 500 28,875 - -------------------------------------------------------------------------------------------------------------- NetRatings, Inc.(1) 100 4,812 - -------------------------------------------------------------------------------------------------------------- True North Communications, Inc. 900 40,219 - -------------------------------------------------------------------------------------------------------------- Tweeter Home Entertainment Group, Inc. 1,800 63,900 -------- 137,806 - -------------------------------------------------------------------------------------------------------------- Retail: Specialty--6.5% BOLDER Technologies Corp.(1) 2,500 31,875 - -------------------------------------------------------------------------------------------------------------- Charlotte Russe Holding, Inc.(1) 800 16,800 - -------------------------------------------------------------------------------------------------------------- Chico's Fas, Inc.(1) 800 30,100 - -------------------------------------------------------------------------------------------------------------- Copart, Inc.(1) 1,200 52,200 - -------------------------------------------------------------------------------------------------------------- Cost Plus, Inc.(1) 800 28,500 - -------------------------------------------------------------------------------------------------------------- David's Bridal, Inc.(1) 3,800 42,512 - -------------------------------------------------------------------------------------------------------------- Factory 2-U Stores, Inc.(1) 2,000 56,750 - -------------------------------------------------------------------------------------------------------------- Pantry, Inc. (The)(1) 2,200 31,075 - -------------------------------------------------------------------------------------------------------------- PurchasePro.com, Inc.(1) 500 68,750 - -------------------------------------------------------------------------------------------------------------- School Specialty, Inc.(1) 1,600 24,200 - -------------------------------------------------------------------------------------------------------------- Whitehall Jewellers, Inc. 1,200 44,250 - -------------------------------------------------------------------------------------------------------------- Yankee Candle, Inc. (The)(1) 1,600 26,100 -------- 453,112
Oppenheimer Small Cap Growth Fund/VA 5 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - -------------------------------------------------------------------------------------------------------------- Consumer Staples--7.9% - -------------------------------------------------------------------------------------------------------------- Broadcasting--3.0% Citadel Communications Corp.(1) 900 $ 58,387 - -------------------------------------------------------------------------------------------------------------- Classic Communications, Inc.(1) 500 18,281 - -------------------------------------------------------------------------------------------------------------- Cumulus Media, Inc., Cl. A(1) 900 45,675 - -------------------------------------------------------------------------------------------------------------- Insight Communications Co., Inc.(1) 900 26,662 - -------------------------------------------------------------------------------------------------------------- Radio Unica Corp.(1) 400 11,550 - -------------------------------------------------------------------------------------------------------------- Spanish Broadcasting System, Inc., Cl. A(1) 1,200 48,300 -------- 208,855 - -------------------------------------------------------------------------------------------------------------- Education--0.8% Corinthian Colleges, Inc.(1) 1,700 40,587 - -------------------------------------------------------------------------------------------------------------- ZapMe! Corp.(1) 1,700 14,662 -------- 55,249 - -------------------------------------------------------------------------------------------------------------- Entertainment--3.4% Buca, Inc.(1) 4,000 41,000 - -------------------------------------------------------------------------------------------------------------- Cinar Films, Inc., Cl. B(1) 4,000 98,000 - -------------------------------------------------------------------------------------------------------------- Imax Corp.(1) 1,500 41,062 - -------------------------------------------------------------------------------------------------------------- P.F. Chang's China Bistro, Inc.(1) 2,300 57,212 -------- 237,274 - -------------------------------------------------------------------------------------------------------------- Food--0.7% Diedrich Coffee, Inc.(1) 5,000 20,312 - -------------------------------------------------------------------------------------------------------------- Wild Oats Markets, Inc.(1) 1,200 26,625 -------- 46,937 - -------------------------------------------------------------------------------------------------------------- Energy--0.4% - -------------------------------------------------------------------------------------------------------------- Energy Services--0.4% Cal Dive International, Inc.(1) 800 26,500 - -------------------------------------------------------------------------------------------------------------- Financial--3.4% - -------------------------------------------------------------------------------------------------------------- Banks--1.5% Investors Financial Services Corp. 1,500 69,000 - -------------------------------------------------------------------------------------------------------------- Labrance & Co., Inc.(1) 3,000 38,250 -------- 107,250 - -------------------------------------------------------------------------------------------------------------- Diversified Financial--1.4% MicroFinancial, Inc. 5,000 58,438 - -------------------------------------------------------------------------------------------------------------- NextCard, Inc.(1) 600 17,325 - -------------------------------------------------------------------------------------------------------------- ReSourcePhoenix.com, Inc.(1) 1,000 19,750 -------- 95,513 - -------------------------------------------------------------------------------------------------------------- Insurance--0.5% Advance Paradigm, Inc.(1) 1,600 34,500
6 Oppenheimer Small Cap Growth Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - -------------------------------------------------------------------------------------------------------------- Healthcare--5.1% - -------------------------------------------------------------------------------------------------------------- Healthcare/Drugs--3.8% Abgenix, Inc.(1) 500 $ 66,250 - -------------------------------------------------------------------------------------------------------------- BioCryst Pharmaceuticals, Inc.(1) 1,500 44,250 - -------------------------------------------------------------------------------------------------------------- Cubist Pharmaceuticals, Inc.(1) 1,100 21,175 - -------------------------------------------------------------------------------------------------------------- Maxygen, Inc.(1) 200 14,200 - -------------------------------------------------------------------------------------------------------------- Nuerocrine Biosciences, Inc.(1) 2,100 51,975 - -------------------------------------------------------------------------------------------------------------- Syncor International Corp.(1) 1,500 43,688 - -------------------------------------------------------------------------------------------------------------- Ventana Medical Systems, Inc.(1) 1,000 24,875 -------- 266,413 - -------------------------------------------------------------------------------------------------------------- Healthcare/Supplies & Services--1.3% Hanger Orthopedic Group, Inc.(1) 500 5,000 - -------------------------------------------------------------------------------------------------------------- NovaMed Eyecare, Inc.(1) 600 4,050 - -------------------------------------------------------------------------------------------------------------- PlanetRx.com, Inc.(1) 700 10,150 - -------------------------------------------------------------------------------------------------------------- Renal Care Group, Inc.(1) 2,400 56,100 - -------------------------------------------------------------------------------------------------------------- SciQuest.com, Inc.(1) 200 15,900 -------- 91,200 - -------------------------------------------------------------------------------------------------------------- Technology--40.0% - -------------------------------------------------------------------------------------------------------------- Computer Hardware--6.1% 3DO Co. (The) 5,500 50,016 - -------------------------------------------------------------------------------------------------------------- Creo Products, Inc.(1) 1,200 46,125 - -------------------------------------------------------------------------------------------------------------- Echelon Corp.(1) 1,000 19,563 - -------------------------------------------------------------------------------------------------------------- Gadzoox Networks, Inc. 300 13,069 - -------------------------------------------------------------------------------------------------------------- Network Appliance, Inc.(1) 1,200 99,675 - -------------------------------------------------------------------------------------------------------------- Optimal Robotics Corp.(1) 1,200 44,700 - -------------------------------------------------------------------------------------------------------------- SanDisk Corp.(1) 500 48,125 - -------------------------------------------------------------------------------------------------------------- SmartDisk Corp.(1) 300 9,825 - -------------------------------------------------------------------------------------------------------------- Xircom, Inc.(1) 1,200 90,000 -------- 421,098 - -------------------------------------------------------------------------------------------------------------- Computer Services--10.9% Alloy Online, Inc.(1) 1,800 28,350 - -------------------------------------------------------------------------------------------------------------- AppNet, Inc.(1) 600 26,250 - -------------------------------------------------------------------------------------------------------------- Art Technology Group, Inc.(1) 400 51,250 - -------------------------------------------------------------------------------------------------------------- BackWeb Technologies Ltd.(1) 800 33,700 - -------------------------------------------------------------------------------------------------------------- Braun Consulting, Inc.(1) 1,200 85,800 - -------------------------------------------------------------------------------------------------------------- C-bridge Internet Solutions, Inc.(1) 300 14,588 - -------------------------------------------------------------------------------------------------------------- CAIS Internet, Inc.(1) 1,000 35,500 - -------------------------------------------------------------------------------------------------------------- Critical Path, Inc.(1) 300 28,313 - -------------------------------------------------------------------------------------------------------------- El Sitio, Inc.(1) 200 7,350 - -------------------------------------------------------------------------------------------------------------- Finisar Corp.(1) 100 8,988 - -------------------------------------------------------------------------------------------------------------- Interactive Pictures Corp.(1) 900 20,981 - -------------------------------------------------------------------------------------------------------------- Kopin Corp.(1) 900 37,800 - -------------------------------------------------------------------------------------------------------------- MedQuist, Inc.(1) 600 15,488 - -------------------------------------------------------------------------------------------------------------- OneSource Information Services, Inc.(1) 4,500 60,469
Oppenheimer Small Cap Growth Fund/VA 7 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - -------------------------------------------------------------------------------------------------------------- Computer Services (continued) Packeteer, Inc.(1) 400 $ 28,400 - -------------------------------------------------------------------------------------------------------------- pcOrder.com, Inc.(1) 600 30,600 - -------------------------------------------------------------------------------------------------------------- Predictive Systems, Inc.(1) 300 19,650 - -------------------------------------------------------------------------------------------------------------- Ramp Networks, Inc.(1) 1,600 24,400 - -------------------------------------------------------------------------------------------------------------- Salon.com, Inc.(1) 3,600 18,000 - -------------------------------------------------------------------------------------------------------------- Stamps.com, Inc.(1) 750 31,219 - -------------------------------------------------------------------------------------------------------------- Student Advantage, Inc.(1) 1,500 33,281 - -------------------------------------------------------------------------------------------------------------- Tanning Technology Corp. 450 26,522 - -------------------------------------------------------------------------------------------------------------- Viant Corp.(1) 300 29,700 - -------------------------------------------------------------------------------------------------------------- WatchGuard Technologies, Inc.(1) 700 21,175 - -------------------------------------------------------------------------------------------------------------- WebTrends Corp.(1) 500 40,500 -------- 758,274 - -------------------------------------------------------------------------------------------------------------- Computer Software--17.8% Accrue Software, Inc.(1) 400 21,650 - -------------------------------------------------------------------------------------------------------------- Active Software, Inc.(1) 400 36,800 - -------------------------------------------------------------------------------------------------------------- Advent Software, Inc.(1) 1,500 96,656 - -------------------------------------------------------------------------------------------------------------- AGENCY.COM Ltd.(1) 100 5,100 - -------------------------------------------------------------------------------------------------------------- Allaire Corp.(1) 300 43,894 - -------------------------------------------------------------------------------------------------------------- Andover.Net, Inc.(1) 400 14,250 - -------------------------------------------------------------------------------------------------------------- Best Software, Inc.(1) 1,000 29,500 - -------------------------------------------------------------------------------------------------------------- BindView Development Corp.(1) 2,600 129,188 - -------------------------------------------------------------------------------------------------------------- Brio Technology, Inc.(1) 1,500 63,000 - -------------------------------------------------------------------------------------------------------------- Data Return Corp.(1) 700 37,450 - -------------------------------------------------------------------------------------------------------------- E.piphany, Inc.(1) 150 33,469 - -------------------------------------------------------------------------------------------------------------- eCollege.com(1) 800 8,750 - -------------------------------------------------------------------------------------------------------------- FreeMarkets, Inc.(1) 50 17,066 - -------------------------------------------------------------------------------------------------------------- GRIC Communications, Inc.(1) 200 5,075 - -------------------------------------------------------------------------------------------------------------- iBasis, Inc.(1) 500 14,375 - -------------------------------------------------------------------------------------------------------------- iManage, Inc.(1) 200 6,425 - -------------------------------------------------------------------------------------------------------------- Interactive Intelligence, Inc.(1) 1,100 29,288 - -------------------------------------------------------------------------------------------------------------- Intertrust Technologies Corp.(1) 150 17,644 - -------------------------------------------------------------------------------------------------------------- Legato Systems, Inc.(1) 600 41,288 - -------------------------------------------------------------------------------------------------------------- McAfee.com Corp.(1) 400 18,000 - -------------------------------------------------------------------------------------------------------------- Metasolv Software, Inc.(1) 250 20,438 - -------------------------------------------------------------------------------------------------------------- Micromuse, Inc.(1) 700 119,000 - -------------------------------------------------------------------------------------------------------------- Mission Critical Software, Inc.(1) 400 28,000 - -------------------------------------------------------------------------------------------------------------- National Information Consortium, Inc.(1) 800 25,600 - -------------------------------------------------------------------------------------------------------------- NetIQ Corp.(1) 1,200 62,475 - -------------------------------------------------------------------------------------------------------------- Novadigm, Inc.(1) 1,300 26,975 - -------------------------------------------------------------------------------------------------------------- OnDisplay, Inc.(1) 100 9,088 - -------------------------------------------------------------------------------------------------------------- Optio Software, Inc.(1) 1,000 23,500 - -------------------------------------------------------------------------------------------------------------- Preview Systems, Inc.(1) 200 12,975 - -------------------------------------------------------------------------------------------------------------- Primus Knowledge Solutions, Inc.(1) 700 31,719
8 Oppenheimer Small Cap Growth Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 - -------------------------------------------------------------------------------------------------------------- Computer Software (continued) Quest Software, Inc.(1) 200 $ 20,400 - -------------------------------------------------------------------------------------------------------------- SERENA Software, Inc.(1) 1,200 37,125 - -------------------------------------------------------------------------------------------------------------- SonicWALL, Inc. 400 16,100 - -------------------------------------------------------------------------------------------------------------- Telemate.Net Software, Inc.(1) 1,000 16,250 - -------------------------------------------------------------------------------------------------------------- TenFold Corp.(1) 700 27,956 - -------------------------------------------------------------------------------------------------------------- Verity, Inc.(1) 800 34,050 - -------------------------------------------------------------------------------------------------------------- Viador, Inc.(1) 700 29,663 - -------------------------------------------------------------------------------------------------------------- Vitria Technology, Inc.(1) 100 23,400 ---------- 1,233,582 - -------------------------------------------------------------------------------------------------------------- Communications Equipment--1.4% Advanced Fibre Communications, Inc.(1) 1,200 53,625 - -------------------------------------------------------------------------------------------------------------- Extreme Networks, Inc.(1) 150 12,525 - -------------------------------------------------------------------------------------------------------------- Inet Technologies, Inc.(1) 450 31,444 ---------- 97,594 - -------------------------------------------------------------------------------------------------------------- Electronics--3.8% ACT Manufacturing, Inc.(1) 1,200 45,000 - -------------------------------------------------------------------------------------------------------------- Alpha Industries, Inc.(1) 800 45,850 - -------------------------------------------------------------------------------------------------------------- ANADIGICS, Inc.(1) 400 18,875 - -------------------------------------------------------------------------------------------------------------- ASM International NV(1) 1,800 41,400 - -------------------------------------------------------------------------------------------------------------- ATMI, Inc.(1) 1,300 42,981 - -------------------------------------------------------------------------------------------------------------- Audiovox Corp., Cl. A(1) 1,000 30,375 - -------------------------------------------------------------------------------------------------------------- Caliper Technologies Corp.(1) 100 6,675 - -------------------------------------------------------------------------------------------------------------- InterTAN, Inc.(1) 1,200 31,350 ---------- 262,506 ---------- Total Common Stocks (Cost $4,138,541) 5,835,100 Principal Amount - -------------------------------------------------------------------------------------------------------------- Repurchase Agreements--1.5% - -------------------------------------------------------------------------------------------------------------- Repurchase agreement with Banc One Capital Markets, Inc., 2.75%, dated 12/31/99, to be repurchased at $100,023 on 1/3/00, collateralized by U.S. Treasury Bonds, 5.25%-12%, 2/15/01-11/15/28, with a value of $39,249 and U.S. Treasury Nts., 5%-7.50%, 12/31/00-2/15/07, with a value of $62,809 (Cost $100,000) $100,000 100,000 - -------------------------------------------------------------------------------------------------------------- Total Investments, at Value (Cost $4,238,541) 85.7% 5,935,100 - -------------------------------------------------------------------------------------------------------------- Other Assets Net of Liabilities 14.3 991,496 --------- ---------- Net Assets 100.0% $6,926,596 ========= ==========
1. Non-income producing security. See accompanying Notes to Financial Statements. Oppenheimer Small Cap Growth Fund/VA 9 - -------------------------------------------------------------------------------- Statement of Assets and Liabilities December 31, 1999 - -------------------------------------------------------------------------------- ========================================================================================== Assets Investments, at value (cost $4,238,541)--see accompanying statement $5,935,100 - ------------------------------------------------------------------------------------------ Cash 1,000,432 - ------------------------------------------------------------------------------------------ Receivables and other assets: Investments sold 3,066 Interest and dividends 343 Other 5,360 ---------- Total assets 6,944,301 ========================================================================================== Liabilities Payables and other liabilities: Shares of beneficial interest redeemed 12,487 Shareholder reports 2,780 Legal, auditing and other professional fees 1,158 Registration and filing fees 1,080 Trustees' compensation 76 Other 124 ---------- Total liabilities 17,705 ========================================================================================== Net Assets $6,926,596 ========== ========================================================================================== Composition of Net Assets Paid-in capital $4,791,913 - ------------------------------------------------------------------------------------------ Accumulated net realized gain on investment transactions 438,124 - ------------------------------------------------------------------------------------------ Net unrealized appreciation on investments 1,696,559 ---------- Net assets--applicable to 492,201 shares of beneficial interest outstanding $6,926,596 ========== ========================================================================================== Net Asset Value, Redemption Price Per Share and Offering Price Per Share $14.07
See accompanying Notes to Financial Statements. 10 Oppenheimer Small Cap Growth Fund/VA - -------------------------------------------------------------------------------- Statement of Operations For the Year Ended December 31, 1999 - -------------------------------------------------------------------------------- ========================================================================================== Investment Income Interest $ 25,318 - ------------------------------------------------------------------------------------------ Dividends 1,127 ---------- Total income 26,445 ========================================================================================== Expenses Management fees 20,414 - ------------------------------------------------------------------------------------------ Shareholder reports 16,643 - ------------------------------------------------------------------------------------------ Legal, auditing and other professional fees 7,311 - ------------------------------------------------------------------------------------------ Custodian fees and expenses 2,410 - ------------------------------------------------------------------------------------------ Trustees' compensation 1,051 - ------------------------------------------------------------------------------------------ Other 2,373 ---------- Total expenses 50,202 Less expenses paid indirectly (2,398) Less voluntary assumption of expenses (11,200) ---------- Net expenses 36,604 ========================================================================================== Net Investment Loss (10,159) ========================================================================================== Realized and Unrealized Gain Net realized gain on investments 493,584 - ------------------------------------------------------------------------------------------ Net change in unrealized appreciation or depreciation on investments 1,591,588 ---------- Net realized and unrealized gain 2,085,172 ========================================================================================== Net Increase in Net Assets Resulting from Operations $2,075,013 ==========
See accompanying Notes to Financial Statements. Oppenheimer Small Cap Growth Fund/VA 11 - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
Year Ended Period Ended December 31, December 31, 1999 1998(1) =============================================================================================================== Operations Net investment loss $ (10,159) $ (2,339) - --------------------------------------------------------------------------------------------------------------- Net realized gain (loss) 493,584 (45,301) - --------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation 1,591,588 104,971 ---------- -------- Net increase in net assets resulting from operations 2,075,013 57,331 =============================================================================================================== Beneficial Interest Transactions Net increase in net assets resulting from beneficial interest transactions 3,857,279 936,973 =============================================================================================================== Net Assets Total increase 5,932,292 994,304 - --------------------------------------------------------------------------------------------------------------- Beginning of period 994,304 -- ---------- -------- End of period $6,926,596 $994,304 ========== ========
1. For the period from May 1, 1998 (commencement of operations) to December 31, 1998. See accompanying Notes to Financial Statements. 12 Oppenheimer Small Cap Growth Fund/VA - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998(1) =========================================================================================== Per Share Operating Data Net asset value, beginning of period $ 9.60 $10.00 - ------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (.02) (.02) Net realized and unrealized gain (loss) 4.49 (.38) - ------------------------------------------------------------------------------------------- Total income (loss) from investment operations 4.47 (.40) - ------------------------------------------------------------------------------------------- Net asset value, end of period $14.07 $ 9.60 ====== ====== =========================================================================================== Total Return, at Net Asset Value(2) 46.56% (4.00)% =========================================================================================== Ratios/Supplemental Data Net assets, end of period (in thousands) $6,927 $994 - ------------------------------------------------------------------------------------------- Average net assets (in thousands) $2,738 $441 - ------------------------------------------------------------------------------------------- Ratios to average net assets:(3) Net investment loss (0.37)% (0.79)% Expenses 1.83% 0.87%(4) Expenses, net of voluntary assumption of expenses 1.34% N/A - ------------------------------------------------------------------------------------------- Portfolio turnover rate(5) 176% 61%
1. For the period from May 1, 1998 (commencement of operations) to December 31, 1998. 2. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period (or commencement of operations), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods of less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 3. Annualized for periods less than one full year. 4. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. 5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended December 31, 1999, were $7,060,737 and $4,155,665, respectively. See accompanying Notes to Financial Statements. Oppenheimer Small Cap Growth Fund/VA 13 - -------------------------------------------------------------------------------- Notes to Financial Statements - -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies Oppenheimer Small Cap Growth Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds (the Trust), a diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek capital appreciation. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The following is a summary of significant accounting policies consistently followed by the Fund. - -------------------------------------------------------------------------------- Securities Valuation. Portfolio securities are valued at the close of the New York Stock Exchange on each trading day. Listed and unlisted securities for which such information is regularly reported are valued at the last sale price of the day or, in the absence of sales, at values based on the closing bid or the last sale price on the prior trading day. Long-term and short-term "non-money market" debt securities are valued by a portfolio pricing service approved by the Board of Trustees. Such securities which cannot be valued by an approved portfolio pricing service are valued using dealer-supplied valuations provided the Manager is satisfied that the firm rendering the quotes is reliable and that the quotes reflect current market value, or are valued under consistently applied procedures established by the Board of Trustees to determine fair value in good faith. Short-term "money market type" debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Foreign currency exchange contracts are valued based on the closing prices of the foreign currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. Options are valued based upon the last sale price on the principal exchange on which the option is traded or, in the absence of any transactions that day, the value is based upon the last sale price on the prior trading date if it is within the spread between the closing bid and asked prices. If the last sale price is outside the spread, the closing bid is used. - -------------------------------------------------------------------------------- Repurchase Agreements. The Fund requires the custodian to take possession, to have legally segregated in the Federal Reserve Book Entry System or to have segregated within the custodian's vault, all securities held as collateral for repurchase agreements. The market value of the underlying securities is required to be at least 102% of the resale price at the time of purchase. If the seller of the agreement defaults and the value of the collateral declines, or if the seller enters an insolvency proceeding, realization of the value of the collateral by the Fund may be delayed or limited. - -------------------------------------------------------------------------------- Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by loss carryovers to shareholders. - -------------------------------------------------------------------------------- Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. - -------------------------------------------------------------------------------- Classification of Distributions to Shareholders. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund. The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, during the year ended December 31, 1999, amounts have been reclassified to reflect a decrease in accumulated net investment loss of $10,159. Accumulated net realized gain on investments was decreased by the same amount. - -------------------------------------------------------------------------------- Expense Offset Arrangements. Expenses paid indirectly represent a reduction of custodian fees for earnings on cash balances maintained by the Fund. 14 Oppenheimer Small Cap Growth Fund/VA - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Other. Investment transactions are accounted for as of trade date and dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Realized gains and losses on investments and unrealized appreciation and depreciation are determined on an identified cost basis, which is the same basis used for federal income tax purposes. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. ================================================================================ 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of no par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:
Year Ended December 31, 1999 Year Ended December 31, 1998(1) ---------------------------- ------------------------------ Shares Amount Shares Amount - ------------------------------------------------------------------------------------ Sold 504,223 $5,008,676 114,434 $1,030,883 Redeemed (115,553) (1,151,397) (10,903) (93,910) -------- ---------- ------- ---------- Net increase 388,670 $3,857,279 103,531 $ 936,973 ======== ========== ======= ==========
1. For the period from May 1, 1998 (commencement of operations) to December 31, 1998. ================================================================================ 3. Unrealized Gains and Losses on Securities As of December 31, 1999, net unrealized appreciation on securities of $1,696,559 was composed of gross appreciation of $1,896,881, and gross depreciation of $200,322. ================================================================================ 4. Management Fees and Other Transactions with Affiliates Management Fees. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund which provides for a fee of 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million and 0.60% of average annual net assets over $800 million. The Manager has voluntarily reimbursed certain Fund expenses. The Fund's management fee for the year ended December 31, 1999 was 0.75% of average annual net assets. - -------------------------------------------------------------------------------- Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, is the transfer agent for the Fund and is responsible for maintaining the shareholder registry and shareholder accounting records for the Fund. OFS provides these services for cost. - -------------------------------------------------------------------------------- Independent Auditors' Report - -------------------------------------------------------------------------------- ================================================================================ To the Board of Trustees and Shareholders of Oppenheimer Main Street Growth & Income Fund/VA: We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Oppenheimer Main Street Growth & Income/VA (which is a series of Oppenheimer Variable Account Funds) as of December 31, 1999, the related statement of operations for the year then ended, the statements of changes in net assets for the years ended December 31, 1999 and 1998 and the financial highlights for the period July 5, 1995, to December 31, 1999. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Oppenheimer Main Street Growth & Income Fund/VA as of December 31, 1999, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP - ---------------------------- Deloitte & Touche LLP Denver, Colorado January 24, 2000 - -------------------------------------------------------------------------------- Statement of Investments December 31, 1999 - --------------------------------------------------------------------------------
Market Value Shares Note 1 =================================================================================================================== Common Stocks--94.6% - ------------------------------------------------------------------------------------------------------------------- Basic Materials--2.9% - ------------------------------------------------------------------------------------------------------------------- Chemicals--2.0% Dexter Corp. 7,000 $ 278,250 - ------------------------------------------------------------------------------------------------------------------- Dow Chemical Co. 18,500 2,472,062 - ------------------------------------------------------------------------------------------------------------------- Du Pont (E.I.) De Nemours & Co. 88,400 5,823,350 - ------------------------------------------------------------------------------------------------------------------- Ecolab, Inc. 6,900 269,962 - ------------------------------------------------------------------------------------------------------------------- Engelhard Corp. 3,000 56,625 - ------------------------------------------------------------------------------------------------------------------- Great Lakes Chemical Corp. 1,200 45,825 - ------------------------------------------------------------------------------------------------------------------- International Flavors & Fragrances, Inc. 3,000 113,250 - ------------------------------------------------------------------------------------------------------------------- Lafarge Corp. 8,100 223,762 - ------------------------------------------------------------------------------------------------------------------- Rohm & Haas Co. 6,900 280,744 - ------------------------------------------------------------------------------------------------------------------- Schulman (A.), Inc. 10,000 163,125 - ------------------------------------------------------------------------------------------------------------------- Union Carbide Corp. 20,500 1,368,375 - ------------------------------------------------------------------------------------------------------------------- Universal Corp. 5,000 114,062 - ------------------------------------------------------------------------------------------------------------------- W.R. Grace & Co.(1) 4,000 55,500 ----------- 11,264,892 - ------------------------------------------------------------------------------------------------------------------- Gold & Precious Minerals--0.0% Homestake Mining Co. 10,100 78,906 - ------------------------------------------------------------------------------------------------------------------- Metals--0.6% AK Steel Holding Corp. 10,000 188,750 - ------------------------------------------------------------------------------------------------------------------- Alcoa, Inc. 18,400 1,527,200 - ------------------------------------------------------------------------------------------------------------------- Inco Ltd.(1) 19,900 467,650 - ------------------------------------------------------------------------------------------------------------------- Nucor Corp. 6,000 328,875 - ------------------------------------------------------------------------------------------------------------------- Reliance Steel & Aluminum Co. 15,000 351,562 - ------------------------------------------------------------------------------------------------------------------- Ryerson Tull, Inc. 13,000 252,687 - ------------------------------------------------------------------------------------------------------------------- Worthington Industries, Inc. 1,600 26,500 ----------- 3,143,224 - ------------------------------------------------------------------------------------------------------------------- Paper--0.3% Georgia Pacific Group 7,600 385,700 - ------------------------------------------------------------------------------------------------------------------- Louisiana-Pacific Corp. 21,300 303,525 - ------------------------------------------------------------------------------------------------------------------- Rayonier, Inc. 4,000 193,250 - ------------------------------------------------------------------------------------------------------------------- Weyerhaeuser Co. 8,300 596,044 - ------------------------------------------------------------------------------------------------------------------- Willamette Industries, Inc. 7,000 325,062 ----------- 1,803,581 - ------------------------------------------------------------------------------------------------------------------- Capital Goods--10.5% - ------------------------------------------------------------------------------------------------------------------- Aerospace/Defense--1.6% Boeing Co. 147,100 6,113,844 - ------------------------------------------------------------------------------------------------------------------- General Dynamics Corp. 25,300 1,334,575 - ------------------------------------------------------------------------------------------------------------------- Lockheed Martin Corp. 11,600 253,750 - ------------------------------------------------------------------------------------------------------------------- Northrop Grumman Corp. 8,000 432,500 - ------------------------------------------------------------------------------------------------------------------- Raytheon Co., Cl. B 15,000 398,437 - ------------------------------------------------------------------------------------------------------------------- TRW, Inc. 7,600 394,725 ----------- 8,927,831 4 Oppenheimer Main Street Growth & Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- Market Value Shares Note 1 - ------------------------------------------------------------------------------------------------------------------- Electrical Equipment--3.7% AVX Corp. 9,400 $ 469,412 - ------------------------------------------------------------------------------------------------------------------- CommScope, Inc.(1) 65,000 2,620,312 - ------------------------------------------------------------------------------------------------------------------- Conexant Systems, Inc.(1) 9,400 623,925 - ------------------------------------------------------------------------------------------------------------------- Emerson Electric Co. 30,000 1,721,250 - ------------------------------------------------------------------------------------------------------------------- General Electric Co. 80,000 12,380,000 - ------------------------------------------------------------------------------------------------------------------- Integrated Device Technology, Inc.(1) 7,000 203,000 - ------------------------------------------------------------------------------------------------------------------- Rockwell International Corp. 24,700 1,182,512 - ------------------------------------------------------------------------------------------------------------------- SPX Corp.(1) 6,000 484,875 - ------------------------------------------------------------------------------------------------------------------- Symbol Technologies, Inc. 8,850 562,528 ----------- 20,247,814 - ------------------------------------------------------------------------------------------------------------------- Industrial Services--0.6% Coflexip SA, Sponsored ADR 62,500 2,375,000 - ------------------------------------------------------------------------------------------------------------------- Fluor Corp. 4,900 224,787 - ------------------------------------------------------------------------------------------------------------------- Payches, Inc. 3,300 132,000 - ------------------------------------------------------------------------------------------------------------------- Valassis Communications, Inc.(1) 10,000 422,500 ----------- 3,154,287 - ------------------------------------------------------------------------------------------------------------------- Manufacturing--4.6% American Standard Cos., Inc.(1) 75,000 3,440,625 - ------------------------------------------------------------------------------------------------------------------- Avery-Dennison Corp. 28,500 2,076,937 - ------------------------------------------------------------------------------------------------------------------- Ball Corp. 3,400 133,875 - ------------------------------------------------------------------------------------------------------------------- Bemis Co., Inc. 4,700 163,912 - ------------------------------------------------------------------------------------------------------------------- Briggs & Stratton Corp. 4,000 214,500 - ------------------------------------------------------------------------------------------------------------------- Cooper Industries, Inc. 13,900 562,081 - ------------------------------------------------------------------------------------------------------------------- Corning, Inc. 4,500 580,219 - ------------------------------------------------------------------------------------------------------------------- Crown Cork & Seal Co., Inc. 2,500 55,937 - ------------------------------------------------------------------------------------------------------------------- Cummins Engine Co., Inc. 1,200 57,975 - ------------------------------------------------------------------------------------------------------------------- Danaher Corp. 5,700 275,025 - ------------------------------------------------------------------------------------------------------------------- Dover Corp. 23,200 1,052,700 - ------------------------------------------------------------------------------------------------------------------- Eaton Corp. 8,700 631,837 - ------------------------------------------------------------------------------------------------------------------- Honeywell International, Inc. 84,375 4,867,383 - ------------------------------------------------------------------------------------------------------------------- Illinois Tool Works, Inc. 20,300 1,371,519 - ------------------------------------------------------------------------------------------------------------------- Mark IV Industries, Inc. 15,000 265,312 - ------------------------------------------------------------------------------------------------------------------- Mettler-Toledo International, Inc.(1) 6,000 229,125 - ------------------------------------------------------------------------------------------------------------------- Microchip Technology, Inc.(1) 3,000 205,312 - ------------------------------------------------------------------------------------------------------------------- Miller (Herman), Inc. 10,000 230,000 - ------------------------------------------------------------------------------------------------------------------- Minnesota Mining & Manufacturing Co. 42,500 4,159,687 - ------------------------------------------------------------------------------------------------------------------- PACCAR, Inc. 1,800 79,762 - ------------------------------------------------------------------------------------------------------------------- Parker-Hannifin Corp. 7,100 364,319 - ------------------------------------------------------------------------------------------------------------------- Pentair, Inc. 2,000 77,000 - ------------------------------------------------------------------------------------------------------------------- Temple-Inland, Inc. 2,000 131,875 - ------------------------------------------------------------------------------------------------------------------- Tyco International Ltd. 33,300 1,294,537 - ------------------------------------------------------------------------------------------------------------------- United Technologies Corp. 47,500 3,087,500 ----------- 25,608,954 Oppenheimer Main Street Growth & Income Fund/VA 5 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- Market Value Shares Note 1 - ------------------------------------------------------------------------------------------------------------------- Communication Services--5.7% - ------------------------------------------------------------------------------------------------------------------- Telecommunications: Long Distance--3.8% ADC Telecommunications, Inc.(1) 5,700 $ 413,606 - ------------------------------------------------------------------------------------------------------------------- ALLTELL Corp. 21,000 1,736,437 - ------------------------------------------------------------------------------------------------------------------- AT&T Corp. 299,300 15,189,475 - ------------------------------------------------------------------------------------------------------------------- Comverse Technology, Inc.(1) 4,000 579,000 - ------------------------------------------------------------------------------------------------------------------- Intermedia Communications, Inc.(1)(2) 1,230 38,191 - ------------------------------------------------------------------------------------------------------------------- Sprint Corp. (Fon Group) 50,000 3,365,625 ----------- 21,322,334 - ------------------------------------------------------------------------------------------------------------------- Telephone Utilities--1.9% BellSouth Corp. 166,000 7,770,875 - ------------------------------------------------------------------------------------------------------------------- GTE Corp. 29,800 2,102,762 - ------------------------------------------------------------------------------------------------------------------- Western Wireless Corp.(1) 9,000 600,750 ----------- 10,474,387 - ------------------------------------------------------------------------------------------------------------------- Telecommunications: Wireless--0.0% United States Cellular Corp.(1) 2,000 201,875 - ------------------------------------------------------------------------------------------------------------------- Consumer Cyclicals--17.1% - ------------------------------------------------------------------------------------------------------------------- Autos & Housing--2.2% Arvin Industries, Inc. 6,900 195,787 - ------------------------------------------------------------------------------------------------------------------- Bandag, Inc. 2,000 50,000 - ------------------------------------------------------------------------------------------------------------------- Centex Construction Products, Inc. 6,000 234,000 - ------------------------------------------------------------------------------------------------------------------- Cooper Tire & Rubber Co. 7,700 119,831 - ------------------------------------------------------------------------------------------------------------------- Dana Corp. 3,800 113,762 - ------------------------------------------------------------------------------------------------------------------- Delphi Automotive Systems Corp. 79,231 1,247,888 - ------------------------------------------------------------------------------------------------------------------- Fortune Brands, Inc. 15,000 495,937 - ------------------------------------------------------------------------------------------------------------------- Furniture Brands International, Inc.(1) 5,000 110,000 - ------------------------------------------------------------------------------------------------------------------- General Motors Corp. 57,500 4,179,531 - ------------------------------------------------------------------------------------------------------------------- Hughes Supply, Inc. 6,900 148,781 - ------------------------------------------------------------------------------------------------------------------- Johns Manville Corp. 25,800 361,200 - ------------------------------------------------------------------------------------------------------------------- Johnson Controls, Inc. 6,600 375,375 - ------------------------------------------------------------------------------------------------------------------- Lear Corp.(1) 17,500 560,000 - ------------------------------------------------------------------------------------------------------------------- Leggett & Platt, Inc. 14,100 302,269 - ------------------------------------------------------------------------------------------------------------------- Masco Corp. 9,000 228,375 - ------------------------------------------------------------------------------------------------------------------- Maytag Corp. 9,000 432,000 - ------------------------------------------------------------------------------------------------------------------- Meritor Automotive, Inc. 12,000 232,500 - ------------------------------------------------------------------------------------------------------------------- NVR, Inc.(1) 5,000 238,750 - ------------------------------------------------------------------------------------------------------------------- Ryland Group, Inc. (The) 7,000 161,437 - ------------------------------------------------------------------------------------------------------------------- Snap-On, Inc. 4,300 114,219 - ------------------------------------------------------------------------------------------------------------------- Southdown, Inc. 5,400 278,775 - ------------------------------------------------------------------------------------------------------------------- Toll Brothers, Inc.(1) 10,000 186,250 - ------------------------------------------------------------------------------------------------------------------- Tower Automotive, Inc.(1) 8,900 137,394 - ------------------------------------------------------------------------------------------------------------------- Vulcan Materials Co. 8,000 319,500 6 Oppenheimer Main Street Growth & Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- Market Value Shares Note 1 - ------------------------------------------------------------------------------------------------------------------- Autos & Housing (continued) Webb (Del E.) Corp.(1) 9,900 $ 246,881 - ------------------------------------------------------------------------------------------------------------------- Whirlpool Corp. 12,700 826,294 - ------------------------------------------------------------------------------------------------------------------- York International Corp. 4,800 131,700 ----------- 12,028,436 - ------------------------------------------------------------------------------------------------------------------- Consumer Services--0.8% Avis Rent A Car, Inc.(1) 18,000 460,125 - ------------------------------------------------------------------------------------------------------------------- Catalina Marketing Corp.(1) 3,500 405,125 - ------------------------------------------------------------------------------------------------------------------- CDI Corp.(1) 9,900 238,837 - ------------------------------------------------------------------------------------------------------------------- Dun & Bradstreet Corp. 12,000 354,000 - ------------------------------------------------------------------------------------------------------------------- H&R Block, Inc. 14,000 612,500 - ------------------------------------------------------------------------------------------------------------------- Hertz Corp., Cl. A 5,000 250,625 - ------------------------------------------------------------------------------------------------------------------- Interpublic Group of Cos., Inc. 27,000 1,557,562 - ------------------------------------------------------------------------------------------------------------------- Young & Rubicam, Inc. 8,000 566,000 ----------- 4,444,774 - ------------------------------------------------------------------------------------------------------------------- Leisure & Entertainment--0.5% Brunswick Corp. 25,000 556,250 - ------------------------------------------------------------------------------------------------------------------- Harley-Davidson, Inc. 10,000 640,625 - ------------------------------------------------------------------------------------------------------------------- Hasbro, Inc. 10,000 190,625 - ------------------------------------------------------------------------------------------------------------------- Marriott International, Inc., Cl. A 17,000 536,562 - ------------------------------------------------------------------------------------------------------------------- MGM Grand, Inc. 8,624 433,895 - ------------------------------------------------------------------------------------------------------------------- Park Place Entertainment Corp.(1) 50,000 625,000 ----------- 2,982,957 - ------------------------------------------------------------------------------------------------------------------- Media--3.0% Central Newspapers, Inc., Cl. A 5,000 196,875 - ------------------------------------------------------------------------------------------------------------------- Deluxe Corp. 10,000 274,375 - ------------------------------------------------------------------------------------------------------------------- Dow Jones & Co., Inc. 4,000 272,000 - ------------------------------------------------------------------------------------------------------------------- Gannett Co., Inc. 28,000 2,283,750 - ------------------------------------------------------------------------------------------------------------------- Harland (John H.) Co. 10,000 183,125 - ------------------------------------------------------------------------------------------------------------------- Knight-Ridder, Inc. 10,800 642,600 - ------------------------------------------------------------------------------------------------------------------- McClatchy Co., Cl. A 5,000 216,250 - ------------------------------------------------------------------------------------------------------------------- New York Times Co., Cl. A 15,000 736,875 - ------------------------------------------------------------------------------------------------------------------- R.H. Donnelley Corp.(1) 9,900 186,862 - ------------------------------------------------------------------------------------------------------------------- Readers Digest Assn., Inc., Cl. A, Non-Vtg. 28,300 827,775 - ------------------------------------------------------------------------------------------------------------------- Snyder Communications, Inc.(1) 5,000 96,250 - ------------------------------------------------------------------------------------------------------------------- Time Warner, Inc. 114,700 8,308,581 - ------------------------------------------------------------------------------------------------------------------- Times Mirror Co. (The), Cl. A 2,400 160,800 - ------------------------------------------------------------------------------------------------------------------- Tribune Co. 20,000 1,101,250 - ------------------------------------------------------------------------------------------------------------------- USA Networks, Inc.(1) 20,000 1,105,000 ----------- 16,592,368 Oppenheimer Main Street Growth & Income Fund/VA 7 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- Market Value Shares Note 1 - ------------------------------------------------------------------------------------------------------------------- Retail: General--4.8% Dayton Hudson Corp. 15,600 $ 1,145,625 - ------------------------------------------------------------------------------------------------------------------- Dillard's, Inc. 4,000 80,750 - ------------------------------------------------------------------------------------------------------------------- Dollar General Corp. 15,600 354,900 - ------------------------------------------------------------------------------------------------------------------- Family Dollar Stores, Inc. 6,000 97,875 - ------------------------------------------------------------------------------------------------------------------- Federated Department Stores, Inc.(1) 87,500 4,424,219 - ------------------------------------------------------------------------------------------------------------------- K Mart Corp.(1) 55,000 553,437 - ------------------------------------------------------------------------------------------------------------------- Kohl's Corp.(1) 7,700 555,844 - ------------------------------------------------------------------------------------------------------------------- May Department Stores Co. 45,000 1,451,250 - ------------------------------------------------------------------------------------------------------------------- Nordstrom, Inc. 6,000 157,125 - ------------------------------------------------------------------------------------------------------------------- Penney (J.C.) Co., Inc. 7,000 139,562 - ------------------------------------------------------------------------------------------------------------------- Sears Roebuck & Co. 42,000 1,278,375 - ------------------------------------------------------------------------------------------------------------------- Wal-Mart Stores, Inc. 237,700 16,431,012 ----------- 26,669,974 - ------------------------------------------------------------------------------------------------------------------- Retail: Specialty--5.1% Abercrombie & Fitch Co., Cl. A(1) 43,000 1,147,562 - ------------------------------------------------------------------------------------------------------------------- American Eagle Outfitters, Inc.(1) 11,200 504,000 - ------------------------------------------------------------------------------------------------------------------- American Greetings Corp., Cl. A 2,200 51,975 - ------------------------------------------------------------------------------------------------------------------- Ann Taylor Stores Corp.(1) 10,000 344,375 - ------------------------------------------------------------------------------------------------------------------- Bed Bath & Beyond, Inc.(1) 2,700 93,825 - ------------------------------------------------------------------------------------------------------------------- Best Buy Co., Inc.(1) 23,000 1,154,312 - ------------------------------------------------------------------------------------------------------------------- BJ's Wholesale Club, Inc.(1) 8,000 292,000 - ------------------------------------------------------------------------------------------------------------------- Circuit City Stores-Circuit City Group 9,600 432,600 - ------------------------------------------------------------------------------------------------------------------- Gap, Inc. 55,500 2,553,000 - ------------------------------------------------------------------------------------------------------------------- Home Depot, Inc. 180,600 12,382,387 - ------------------------------------------------------------------------------------------------------------------- Lands' End, Inc.(1) 4,700 163,325 - ------------------------------------------------------------------------------------------------------------------- Limited, Inc. 20,700 896,569 - ------------------------------------------------------------------------------------------------------------------- Linens 'N Things, Inc.(1) 5,000 148,125 - ------------------------------------------------------------------------------------------------------------------- Lowe's Cos., Inc. 21,500 1,284,625 - ------------------------------------------------------------------------------------------------------------------- Nike, Inc., Cl. B 20,000 991,250 - ------------------------------------------------------------------------------------------------------------------- Office Depot, Inc.(1) 20,000 218,750 - ------------------------------------------------------------------------------------------------------------------- Payless ShoeSource, Inc.(1) 15,000 705,000 - ------------------------------------------------------------------------------------------------------------------- Ross Stores, Inc. 43,000 771,312 - ------------------------------------------------------------------------------------------------------------------- Sherwin-Williams Co. 23,000 483,000 - ------------------------------------------------------------------------------------------------------------------- Shopko Stores, Inc.(1) 10,000 230,000 - ------------------------------------------------------------------------------------------------------------------- Tandy Corp. 20,000 983,750 - ------------------------------------------------------------------------------------------------------------------- Tiffany & Co. 10,000 892,500 - ------------------------------------------------------------------------------------------------------------------- TJX Cos., Inc. 31,200 637,650 - ------------------------------------------------------------------------------------------------------------------- Too, Inc.(1) 2,957 51,008 - ------------------------------------------------------------------------------------------------------------------- Toys "R" Us, Inc.(1) 23,000 329,187 - ------------------------------------------------------------------------------------------------------------------- Zale Corp.(1) 12,000 580,500 ----------- 28,322,587 8 Oppenheimer Main Street Growth & Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- Market Value Shares Note 1 - ------------------------------------------------------------------------------------------------------------------- Textile/Apparel & Home Furnishings--0.7% Jones Apparel Group, Inc.(1) 65,099 $1,765,810 - ------------------------------------------------------------------------------------------------------------------- Liz Claiborne, Inc. 14,000 526,750 - ------------------------------------------------------------------------------------------------------------------- Mohawk Industries, Inc.(1) 7,900 208,362 - ------------------------------------------------------------------------------------------------------------------- Shaw Industries, Inc. 46,000 710,125 - ------------------------------------------------------------------------------------------------------------------- VF Corp. 16,000 480,000 - ------------------------------------------------------------------------------------------------------------------- Warnaco Group, Inc. (The), Cl. A 11,600 142,825 - ------------------------------------------------------------------------------------------------------------------- WestPoint Stevens, Inc. 12,000 210,000 ---------- 4,043,872 - ------------------------------------------------------------------------------------------------------------------- Consumer Staples--5.7% - ------------------------------------------------------------------------------------------------------------------- Beverages--0.5% Adolph Coors Co., Cl. B 3,500 183,750 - ------------------------------------------------------------------------------------------------------------------- Anheuser-Busch Cos., Inc. 37,800 2,679,075 - ------------------------------------------------------------------------------------------------------------------- Brown-Forman Corp., Cl. B 700 40,075 ---------- 2,902,900 - ------------------------------------------------------------------------------------------------------------------- Broadcasting--1.7% CBS Corp.(1) 38,000 2,429,625 - ------------------------------------------------------------------------------------------------------------------- Comcast Corp., Cl. A Special 101,000 5,106,813 - ------------------------------------------------------------------------------------------------------------------- Cox Communications, Inc., Cl. A(1) 10,000 515,000 - ------------------------------------------------------------------------------------------------------------------- MediaOne Group, Inc.(1) 21,000 1,613,063 ---------- 9,664,501 - ------------------------------------------------------------------------------------------------------------------- Entertainment--0.7% Brinker International, Inc.(1) 85,000 2,040,000 - ------------------------------------------------------------------------------------------------------------------- Darden Restaurants, Inc. 14,600 264,625 - ------------------------------------------------------------------------------------------------------------------- Ruby Tuesday, Inc. 10,000 181,875 - ------------------------------------------------------------------------------------------------------------------- Tricon Global Restaurants, Inc.(1) 27,600 1,066,050 - ------------------------------------------------------------------------------------------------------------------- Wendy's International, Inc. 26,600 548,625 ---------- 4,101,175 - ------------------------------------------------------------------------------------------------------------------- Food--0.4% Agribrands International, Inc.(1) 10,000 460,000 - ------------------------------------------------------------------------------------------------------------------- ConAgra, Inc. 12,500 282,031 - ------------------------------------------------------------------------------------------------------------------- Corn Products International, Inc. 9,900 324,225 - ------------------------------------------------------------------------------------------------------------------- Hormel Foods Corp. 4,000 162,500 - ------------------------------------------------------------------------------------------------------------------- IBP, Inc. 12,000 216,000 - ------------------------------------------------------------------------------------------------------------------- Sysco Corp. 20,800 822,900 ---------- 2,267,656 - ------------------------------------------------------------------------------------------------------------------- Food & Drug Retailers--0.4% Albertson's, Inc. 31,800 1,025,550 - ------------------------------------------------------------------------------------------------------------------- CVS Corp. 26,500 1,058,344 - ------------------------------------------------------------------------------------------------------------------- SUPERVALU, Inc. 7,700 154,000 - ------------------------------------------------------------------------------------------------------------------- Walgreen Co. 5,100 149,175 ---------- 2,387,069 - ------------------------------------------------------------------------------------------------------------------- Household Goods--0.6% Kimberly-Clark Corp. 50,000 3,262,500 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- Market Value Shares Note 1 - ------------------------------------------------------------------------------------------------------------------- Tobacco--1.4% Philip Morris Cos., Inc. 275,000 $ 6,376,563 - ------------------------------------------------------------------------------------------------------------------- R.J. Reynolds Tobacco Holdings, Inc. 44,900 791,363 - ------------------------------------------------------------------------------------------------------------------- UST, Inc. 15,700 395,444 ----------- 7,563,370 - ------------------------------------------------------------------------------------------------------------------- Energy--11.5% - ------------------------------------------------------------------------------------------------------------------- Energy Services--3.0% BJ Services Co.(1) 57,500 2,404,219 - ------------------------------------------------------------------------------------------------------------------- Coastal Corp. 4,600 163,013 - ------------------------------------------------------------------------------------------------------------------- Cooper Cameron Corp.(1) 60,000 2,936,250 - ------------------------------------------------------------------------------------------------------------------- Nabors Industries, Inc.(1) 30,000 928,125 - ------------------------------------------------------------------------------------------------------------------- Noble Drilling Corp.(1) 60,000 1,965,000 - ------------------------------------------------------------------------------------------------------------------- Santa Fe International Corp. 50,000 1,293,750 - ------------------------------------------------------------------------------------------------------------------- Stolt Comex Seaway SA, ADR(1) 315,000 3,465,000 - ------------------------------------------------------------------------------------------------------------------- Transocean Sedco Forex, Inc. 39,000 1,313,813 - ------------------------------------------------------------------------------------------------------------------- Weatherford International, Inc. 50,000 1,996,875 ----------- 16,466,045 - ------------------------------------------------------------------------------------------------------------------- Oil: Domestic--5.2% Amerada Hess Corp. 13,700 777,475 - ------------------------------------------------------------------------------------------------------------------- Burlington Resources, Inc. 37,500 1,239,844 - ------------------------------------------------------------------------------------------------------------------- Chevron Corp. 37,700 3,265,763 - ------------------------------------------------------------------------------------------------------------------- Chieftain International, Inc.(1) 53,600 924,600 - ------------------------------------------------------------------------------------------------------------------- Conoco, Inc., Cl. B 11,000 273,625 - ------------------------------------------------------------------------------------------------------------------- Devon Energy Corp. 25,000 821,875 - ------------------------------------------------------------------------------------------------------------------- EOG Resources, Inc. 35,600 625,225 - ------------------------------------------------------------------------------------------------------------------- Exxon Mobil Corp. 140,288 11,301,952 - ------------------------------------------------------------------------------------------------------------------- Frontier Oil Corp.(1) 61,300 413,775 - ------------------------------------------------------------------------------------------------------------------- Murphy Oil Corp. 21,600 1,239,300 - ------------------------------------------------------------------------------------------------------------------- Newfield Exploration Co.(1) 16,000 428,000 - ------------------------------------------------------------------------------------------------------------------- Noble Affiliates, Inc. 8,000 171,500 - ------------------------------------------------------------------------------------------------------------------- Phillips Petroleum Co. 15,000 705,000 - ------------------------------------------------------------------------------------------------------------------- Stone Energy Corp.(1) 9,700 345,563 - ------------------------------------------------------------------------------------------------------------------- Tesoro Petroleum Corp.(1) 34,000 393,125 - ------------------------------------------------------------------------------------------------------------------- Texaco, Inc. 55,100 2,992,619 - ------------------------------------------------------------------------------------------------------------------- Tosco Corp. 5,000 135,938 - ------------------------------------------------------------------------------------------------------------------- Vastar Resources, Inc. 50,000 2,950,000 ----------- 29,005,179 10 Oppenheimer Main Street Growth & Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- Market Value Shares Note 1 - ------------------------------------------------------------------------------------------------------------------- Oil: International--3.3% Anderson Exploration Ltd.(1) 66,400 $ 791,405 - ------------------------------------------------------------------------------------------------------------------- Beau Canada Exploration Ltd.(1) 308,600 362,482 - ------------------------------------------------------------------------------------------------------------------- Berkley Petroleum Corp.(1) 90,000 786,637 - ------------------------------------------------------------------------------------------------------------------- Canadian 88 Energy Corp. 300,000 414,565 - ------------------------------------------------------------------------------------------------------------------- Canadian Hunter Exploration Ltd.(1) 15,000 246,148 - ------------------------------------------------------------------------------------------------------------------- Canadian Natural Resources Ltd.(1) 70,000 1,704,899 - ------------------------------------------------------------------------------------------------------------------- Encal Energy Ltd.(1) 70,000 319,215 - ------------------------------------------------------------------------------------------------------------------- Newport Petroleum Corp.(1) 152,500 347,716 - ------------------------------------------------------------------------------------------------------------------- Paramount Resources Ltd. 49,900 586,126 - ------------------------------------------------------------------------------------------------------------------- Prize Energy, Inc.(1) 57,692 11,959 - ------------------------------------------------------------------------------------------------------------------- Ranger Oil Ltd.(1) 85,300 265,218 - ------------------------------------------------------------------------------------------------------------------- Rio Alto Exploration Ltd.(1) 29,300 412,990 - ------------------------------------------------------------------------------------------------------------------- Royal Dutch Petroleum Co., NY Shares 173,100 10,461,731 - ------------------------------------------------------------------------------------------------------------------- Talisman Energy, Inc.(1) 50,000 1,274,788 - ------------------------------------------------------------------------------------------------------------------- Ulster Petroleums Ltd.(1) 35,000 310,751 ----------- 18,296,630 - ------------------------------------------------------------------------------------------------------------------- Financial--9.2% - ------------------------------------------------------------------------------------------------------------------- Banks--2.7% Bank of America Corp. 30,000 1,505,625 - ------------------------------------------------------------------------------------------------------------------- BB&T Corp. 11,600 317,550 - ------------------------------------------------------------------------------------------------------------------- Chase Manhattan Corp. 70,000 5,438,125 - ------------------------------------------------------------------------------------------------------------------- First Union Corp. 41,200 1,351,875 - ------------------------------------------------------------------------------------------------------------------- M&T Bank Corp. 100 41,425 - ------------------------------------------------------------------------------------------------------------------- National City Corp. 6,000 142,125 - ------------------------------------------------------------------------------------------------------------------- Northern Trust Corp. 10,600 561,800 - ------------------------------------------------------------------------------------------------------------------- Old Kent Financial Corp. 17,000 601,375 - ------------------------------------------------------------------------------------------------------------------- PNC Bank Corp. 32,000 1,424,000 - ------------------------------------------------------------------------------------------------------------------- Prosperity Bancshares, Inc. 67,500 1,080,000 - ------------------------------------------------------------------------------------------------------------------- TCF Financial Corp. 3,000 74,625 - ------------------------------------------------------------------------------------------------------------------- Wachovia Corp. 6,800 462,400 - ------------------------------------------------------------------------------------------------------------------- Wells Fargo Co. 42,800 1,730,725 - ------------------------------------------------------------------------------------------------------------------- Zions Bancorp 3,000 177,563 ----------- 14,909,213 Oppenheimer Main Street Growth & Income Fund/VA 11 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- Market Value Shares Note 1 - ------------------------------------------------------------------------------------------------------------------- Diversified Financial--3.6% AMBAC Financial Group, Inc. 7,000 $ 365,313 - ------------------------------------------------------------------------------------------------------------------- Bear Stearns Cos., Inc. 8,500 363,375 - ------------------------------------------------------------------------------------------------------------------- Citigroup, Inc. 134,500 7,473,156 - ------------------------------------------------------------------------------------------------------------------- Financial Security Assurance Holdings Ltd. 7,000 364,875 - ------------------------------------------------------------------------------------------------------------------- Freddie Mac 26,800 1,261,275 - ------------------------------------------------------------------------------------------------------------------- Goldman Sachs Group, Inc. (The) 18,600 1,751,888 - ------------------------------------------------------------------------------------------------------------------- Household International, Inc. 17,000 633,250 - ------------------------------------------------------------------------------------------------------------------- MGIC Investment Corp. 21,500 1,294,031 - ------------------------------------------------------------------------------------------------------------------- Morgan Stanley Dean Witter & Co. 17,300 2,469,575 - ------------------------------------------------------------------------------------------------------------------- PaineWebber Group, Inc. 7,400 287,213 - ------------------------------------------------------------------------------------------------------------------- PMI Group, Inc. (The) 30,000 1,464,375 - ------------------------------------------------------------------------------------------------------------------- Providian Financial Corp. 19,000 1,730,188 - ------------------------------------------------------------------------------------------------------------------- SEI Investments Co. 2,000 238,031 ----------- 19,696,545 - ------------------------------------------------------------------------------------------------------------------- Insurance--2.4% Aetna, Inc. 9,000 502,313 - ------------------------------------------------------------------------------------------------------------------- AFLAC, Inc. 6,300 297,281 - ------------------------------------------------------------------------------------------------------------------- Allmerica Financial Corp. 16,000 890,000 - ------------------------------------------------------------------------------------------------------------------- Allstate Corp. 48,000 1,152,000 - ------------------------------------------------------------------------------------------------------------------- American General Corp. 11,400 864,975 - ------------------------------------------------------------------------------------------------------------------- AXA Financial, Inc. 46,000 1,558,250 - ------------------------------------------------------------------------------------------------------------------- Cigna Corp. 32,000 2,578,000 - ------------------------------------------------------------------------------------------------------------------- Cincinnati Financial Corp. 9,700 302,519 - ------------------------------------------------------------------------------------------------------------------- Conseco, Inc. 14,600 260,975 - ------------------------------------------------------------------------------------------------------------------- Hartford Life, Inc., Cl. A 10,000 440,000 - ------------------------------------------------------------------------------------------------------------------- Jefferson-Pilot Corp. 9,500 648,375 - ------------------------------------------------------------------------------------------------------------------- Lincoln National Corp. 20,000 800,000 - ------------------------------------------------------------------------------------------------------------------- Loews Corp. 15,100 916,381 - ------------------------------------------------------------------------------------------------------------------- Marsh & McLennan Cos., Inc. 8,000 765,500 - ------------------------------------------------------------------------------------------------------------------- Progressive Corp. 5,200 380,250 - ------------------------------------------------------------------------------------------------------------------- Quantum Corp.-DLT & Storage Systems(1) 6,000 90,750 - ------------------------------------------------------------------------------------------------------------------- Radian Group, Inc. 4,000 191,000 - ------------------------------------------------------------------------------------------------------------------- UnumProvident Corp. 12,000 384,750 ----------- 13,023,319 - ------------------------------------------------------------------------------------------------------------------- Savings & Loans--0.5% Dime Bancorp, Inc. 15,000 226,875 - ------------------------------------------------------------------------------------------------------------------- Golden State Bancorp, Inc.(1) 30,000 517,500 - ------------------------------------------------------------------------------------------------------------------- Golden West Financial Corp. 5,000 167,500 - ------------------------------------------------------------------------------------------------------------------- Greenpoint Financial Corp. 13,000 309,563 - ------------------------------------------------------------------------------------------------------------------- Washington Mutual, Inc. 62,000 1,612,000 - ------------------------------------------------------------------------------------------------------------------- Webster Financial Corp. 5,000 117,813 ----------- 2,951,251 12 Oppenheimer Main Street Growth & Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- Market Value Shares Note 1 - ------------------------------------------------------------------------------------------------------------------- Healthcare--7.4% - ------------------------------------------------------------------------------------------------------------------- Healthcare/Drugs--6.4% Abbott Laboratories 51,100 $ 1,855,569 - ------------------------------------------------------------------------------------------------------------------- Alpharma, Inc. 5,000 153,750 - ------------------------------------------------------------------------------------------------------------------- ALZA Corp., Cl. A(1) 5,000 173,125 - ------------------------------------------------------------------------------------------------------------------- Amgen, Inc.(1) 84,200 5,057,263 - ------------------------------------------------------------------------------------------------------------------- Andrx Corp.(1) 10,000 423,125 - ------------------------------------------------------------------------------------------------------------------- Biogen, Inc.(1) 19,000 1,605,500 - ------------------------------------------------------------------------------------------------------------------- Bristol-Myers Squibb Co. 98,500 6,322,469 - ------------------------------------------------------------------------------------------------------------------- Johnson & Johnson 92,200 8,586,125 - ------------------------------------------------------------------------------------------------------------------- Mallinckrodt, Inc. 4,000 127,250 - ------------------------------------------------------------------------------------------------------------------- Medimmune, Inc.(1) 6,000 995,250 - ------------------------------------------------------------------------------------------------------------------- Merck & Co., Inc. 88,600 5,941,738 - ------------------------------------------------------------------------------------------------------------------- Millennium Pharmaceuticals, Inc.(1) 6,000 732,000 - ------------------------------------------------------------------------------------------------------------------- Pharmacia & Upjohn, Inc. 16,800 756,000 - ------------------------------------------------------------------------------------------------------------------- Schering-Plough Corp. 57,500 2,425,781 - ------------------------------------------------------------------------------------------------------------------- Trigon Healthcare, Inc.(1) 7,500 221,250 ----------- 35,376,195 - ------------------------------------------------------------------------------------------------------------------- Healthcare/Supplies & Services--1.0% Alberto-Culver Co., Cl. B 2,000 51,625 - ------------------------------------------------------------------------------------------------------------------- Allergan, Inc. 15,200 756,200 - ------------------------------------------------------------------------------------------------------------------- Biomet, Inc. 7,000 280,000 - ------------------------------------------------------------------------------------------------------------------- Cardinal Health, Inc. 33,000 1,579,875 - ------------------------------------------------------------------------------------------------------------------- Guidant Corp.(1) 2,100 98,700 - ------------------------------------------------------------------------------------------------------------------- PacifiCare Health Systems, Inc.(1) 2,600 137,800 - ------------------------------------------------------------------------------------------------------------------- PerkinElmer, Inc. 5,200 216,775 - ------------------------------------------------------------------------------------------------------------------- Shared Medical Systems Corp. 1,000 50,938 - ------------------------------------------------------------------------------------------------------------------- United Healthcare Corp. 31,600 1,678,750 - ------------------------------------------------------------------------------------------------------------------- VISX, Inc.(1) 8,000 414,000 ----------- 5,264,663 - ------------------------------------------------------------------------------------------------------------------- Technology--20.8% - ------------------------------------------------------------------------------------------------------------------- Computer Hardware--4.9% Adaptec, Inc.(1) 12,000 598,500 - ------------------------------------------------------------------------------------------------------------------- Apple Computer, Inc.(1) 17,000 1,747,813 - ------------------------------------------------------------------------------------------------------------------- Cabletron Systems, Inc.(1) 42,000 1,092,000 - ------------------------------------------------------------------------------------------------------------------- Electronics for Imaging, Inc.(1) 14,000 813,750 - ------------------------------------------------------------------------------------------------------------------- Gateway, Inc.(1) 8,000 576,500 - ------------------------------------------------------------------------------------------------------------------- Hewlett-Packard Co. 50,000 5,696,875 - ------------------------------------------------------------------------------------------------------------------- International Business Machines Corp. 109,000 11,772,000 - ------------------------------------------------------------------------------------------------------------------- KLA Instruments Corp.(1) 4,800 534,600 - ------------------------------------------------------------------------------------------------------------------- Lexmark International Group, Inc., Cl. A(1) 15,300 1,384,650 - ------------------------------------------------------------------------------------------------------------------- NCR Corp.(1) 5,000 189,375 - ------------------------------------------------------------------------------------------------------------------- Pitney Bowes, Inc. 15,400 744,013 - ------------------------------------------------------------------------------------------------------------------- Seagate Technology, Inc.(1) 31,000 1,443,438 Oppenheimer Main Street Growth & Income Fund/VA 13 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- Market Value Shares Note 1 - ------------------------------------------------------------------------------------------------------------------- Computer Hardware (continued) Xircom, Inc.(1) 10,000 $ 750,000 ----------- 27,343,514 - ------------------------------------------------------------------------------------------------------------------- Computer Services--0.7% Automatic Data Processing, Inc. 28,300 1,524,663 - ------------------------------------------------------------------------------------------------------------------- DST Systems, Inc.(1) 3,000 228,938 - ------------------------------------------------------------------------------------------------------------------- First Data Corp. 33,000 1,627,313 - ------------------------------------------------------------------------------------------------------------------- Keane, Inc.(1) 6,000 190,500 ----------- 3,571,414 - ------------------------------------------------------------------------------------------------------------------- Computer Software--6.7% Adobe Systems, Inc. 8,000 538,000 - ------------------------------------------------------------------------------------------------------------------- BMC Software, Inc.(1) 12,900 1,031,194 - ------------------------------------------------------------------------------------------------------------------- Cadence Design Systems, Inc.(1) 9,000 216,000 - ------------------------------------------------------------------------------------------------------------------- Computer Sciences Corp.(1) 4,000 378,500 - ------------------------------------------------------------------------------------------------------------------- Compuware Corp.(1) 29,000 1,080,250 - ------------------------------------------------------------------------------------------------------------------- Electronic Arts, Inc.(1) 4,000 336,000 - ------------------------------------------------------------------------------------------------------------------- Electronic Data Systems Corp. 31,500 2,108,531 - ------------------------------------------------------------------------------------------------------------------- Legato Systems, Inc.(1) 10,000 688,125 - ------------------------------------------------------------------------------------------------------------------- Microsoft Corp.(1) 228,150 26,636,513 - ------------------------------------------------------------------------------------------------------------------- Peoplesoft, Inc.(1) 20,000 426,250 - ------------------------------------------------------------------------------------------------------------------- Siebel Systems, Inc.(1) 10,000 840,000 - ------------------------------------------------------------------------------------------------------------------- Synopsys, Inc.(1) 3,400 226,950 - ------------------------------------------------------------------------------------------------------------------- Veritas Software Corp.(1) 18,000 2,576,250 ----------- 37,082,563 - ------------------------------------------------------------------------------------------------------------------- Communications Equipment--2.3% Cisco Systems, Inc.(1) 94,000 10,069,750 - ------------------------------------------------------------------------------------------------------------------- General Instrument Corp.(1) 11,000 935,000 - ------------------------------------------------------------------------------------------------------------------- Harmonic, Inc.(1) 4,000 379,750 - ------------------------------------------------------------------------------------------------------------------- Tellabs, Inc.(1) 17,400 1,116,863 ----------- 12,501,363 - ------------------------------------------------------------------------------------------------------------------- Electronics--5.5% Advanced Micro Devices, Inc. 12,400 358,825 - ------------------------------------------------------------------------------------------------------------------- Analog Devices, Inc.(1) 18,000 1,674,000 - ------------------------------------------------------------------------------------------------------------------- Cypress Semiconductor Corp.(1) 36,000 1,165,500 - ------------------------------------------------------------------------------------------------------------------- Grainger (W.W.), Inc. 17,000 812,813 - ------------------------------------------------------------------------------------------------------------------- Intel Corp. 187,000 15,392,438 - ------------------------------------------------------------------------------------------------------------------- Lam Research Corp.(1) 10,000 1,115,625 - ------------------------------------------------------------------------------------------------------------------- Micron Technology, Inc. 40,000 3,110,000 - ------------------------------------------------------------------------------------------------------------------- Motorola, Inc. 9,300 1,369,425 - ------------------------------------------------------------------------------------------------------------------- National Semiconductor Corp.(1) 34,700 1,485,594 - ------------------------------------------------------------------------------------------------------------------- QLogic Corp.(1) 6,000 959,250 - ------------------------------------------------------------------------------------------------------------------- RF Micro Devices, Inc.(1) 7,000 479,063 - ------------------------------------------------------------------------------------------------------------------- Teradyne, Inc.(1) 14,500 957,000 - ------------------------------------------------------------------------------------------------------------------- Waters Corp.(1) 9,400 498,200 - ------------------------------------------------------------------------------------------------------------------- Xilinx, Inc.(1) 30,000 1,364,063 ----------- 30,741,796 14 Oppenheimer Main Street Growth & Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- Market Value Shares Note 1 - ------------------------------------------------------------------------------------------------------------------- Photography--0.7% Eastman Kodak Co. 46,000 $3,047,500 - ------------------------------------------------------------------------------------------------------------------- Xerox Corp. 45,000 1,020,938 ---------- 4,068,438 - ------------------------------------------------------------------------------------------------------------------- Transportation--1.4% - ------------------------------------------------------------------------------------------------------------------- Air Transportation--0.8% Alaska Air Group, Inc.(1) 16,000 562,000 - ------------------------------------------------------------------------------------------------------------------- Continental Airlines, Inc., Cl. B(1) 51,558 2,287,886 - ------------------------------------------------------------------------------------------------------------------- Delta Air Lines, Inc. 25,000 1,245,313 - ------------------------------------------------------------------------------------------------------------------- Northwest Airlines Corp., Cl. A(1) 3,000 66,750 - ------------------------------------------------------------------------------------------------------------------- UAL Corp.(1) 2,900 224,931 ---------- 4,386,880 - ------------------------------------------------------------------------------------------------------------------- Railroads & Truckers--0.6% Burlington Northern Santa Fe Corp. 35,800 868,150 - ------------------------------------------------------------------------------------------------------------------- CNF Transportation, Inc. 10,000 345,000 - ------------------------------------------------------------------------------------------------------------------- Navistar International Corp.(1) 2,000 94,750 - ------------------------------------------------------------------------------------------------------------------- Rollins Truck Leasing Co. 10,000 119,375 - ------------------------------------------------------------------------------------------------------------------- Union Pacific Corp. 39,600 1,727,550 - ------------------------------------------------------------------------------------------------------------------- USFreightways Corp. 2,000 95,750 - ------------------------------------------------------------------------------------------------------------------- XTRA Corp.(1) 5,000 213,125 ---------- 3,463,700 - ------------------------------------------------------------------------------------------------------------------- Utilities--2.4% - ------------------------------------------------------------------------------------------------------------------- Electric Utilities--2.4% Allegheny Energy, Inc. 20,000 538,750 - ------------------------------------------------------------------------------------------------------------------- Ameren Corp. 13,300 435,575 - ------------------------------------------------------------------------------------------------------------------- Calpine Corp.(1) 6,000 384,000 - ------------------------------------------------------------------------------------------------------------------- Carolina Power & Light Co. 3,500 106,531 - ------------------------------------------------------------------------------------------------------------------- Conectiv, Inc. 4,000 67,250 - ------------------------------------------------------------------------------------------------------------------- Consolidated Edison Co. of New York, Inc. 12,000 414,000 - ------------------------------------------------------------------------------------------------------------------- DTE Energy Co. 16,700 523,963 - ------------------------------------------------------------------------------------------------------------------- Duke Energy Corp. 11,000 551,375 - ------------------------------------------------------------------------------------------------------------------- Edison International 5,500 144,031 - ------------------------------------------------------------------------------------------------------------------- Energy East Corp. 30,000 624,375 - ------------------------------------------------------------------------------------------------------------------- Entergy Corp. 19,300 496,975 - ------------------------------------------------------------------------------------------------------------------- FirstEnergy Corp. 30,000 680,625 - ------------------------------------------------------------------------------------------------------------------- Florida Progress Corp. 16,000 677,000 - ------------------------------------------------------------------------------------------------------------------- FPL Group, Inc. 21,600 924,750 - ------------------------------------------------------------------------------------------------------------------- GPU, Inc. 15,000 449,063 - ------------------------------------------------------------------------------------------------------------------- IPALCO Enterprises, Inc. 10,000 170,625 - ------------------------------------------------------------------------------------------------------------------- Northeast Utilities Co. 10,400 213,850 - ------------------------------------------------------------------------------------------------------------------- OGE Energy Corp. 9,900 188,100 - ------------------------------------------------------------------------------------------------------------------- Peco Energy Co. 19,600 681,100 - ------------------------------------------------------------------------------------------------------------------- PG&E Corp. 31,300 641,650 - ------------------------------------------------------------------------------------------------------------------- PP&L Resources, Inc. 25,500 583,313 Oppenheimer Main Street Growth & Income Fund/VA 15 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- Market Value Shares Note 1 - ------------------------------------------------------------------------------------------------------------------- Electric Utilities (continued) Public Service Enterprise Group, Inc. 25,000 $ 870,313 - ------------------------------------------------------------------------------------------------------------------- Southern Co. 32,300 759,050 - ------------------------------------------------------------------------------------------------------------------- Texas Utilities Co. 16,000 569,000 - ------------------------------------------------------------------------------------------------------------------- TNP Enterprises, Inc. 18,000 742,500 - ------------------------------------------------------------------------------------------------------------------- Unicom Corp. 26,000 871,000 - ------------------------------------------------------------------------------------------------------------------- UtiliCorp United, Inc. 3,000 58,313 ------------ 13,367,077 - ------------------------------------------------------------------------------------------------------------------- Gas Utilities--0.0% NICOR, Inc. 1,200 39,000 - ------------------------------------------------------------------------------------------------------------------- Sempra Energy 8,700 151,163 ------------ 190,163 ------------ Total Common Stocks (Cost $460,541,934) 525,168,172 =================================================================================================================== Other Securities--0.5% - ------------------------------------------------------------------------------------------------------------------- Reliant Energy, Inc., 7% Automatic Common Exchange Securities for Time Warner, Inc. Common Stock (Cost $1,170,994) 25,000 3,012,500 Principal Amount =================================================================================================================== Repurchase Agreements--7.3% - ------------------------------------------------------------------------------------------------------------------- Repurchase agreement with PaineWebber, Inc., 3%, dated 12/31/99, to be repurchased at $40,310,075 on 1/3/00, collateralized by U.S. Treasury Nts., 5.625%-6.125%, 11/30/00-12/31/01, with a value of $41,163,751 (Cost $40,300,000) $40,300,000 40,300,000 - ------------------------------------------------------------------------------------------------------------------- Total Investments, at Value (Cost $502,012,928) 102.4% 568,480,672 - ------------------------------------------------------------------------------------------------------------------- Liabilities in Excess of Other Assets (2.4) (13,169,640) ----------- ------------ Net Assets 100.0% $555,311,032 =========== ============
1. Non-income producing security. 2. Identifies issues considered to be illiquid or restricted--See Note 7 of Notes to Financial Statements. See accompanying Notes to Financial Statements. 16 Oppenheimer Main Street Growth & Income Fund/VA - -------------------------------------------------------------------------------- Statement of Assets and Liabilities December 31, 1999 - -------------------------------------------------------------------------------- =============================================================================================== Assets Investments, at value (cost $502,012,928)--see accompanying statement $568,480,672 - ----------------------------------------------------------------------------------------------- Cash 815,492 - ----------------------------------------------------------------------------------------------- Receivables and other assets: Investments sold 1,561,996 Shares of beneficial interest sold 1,353,452 Interest and dividends 408,004 Other 5,662 ------------ Total assets 572,625,278 =============================================================================================== Liabilities Payables and other liabilities: Investments purchased 16,455,193 Shares of beneficial interest redeemed 757,476 Transfer and shareholder servicing agent fees 186 Other 101,391 ------------ Total liabilities 17,314,246 =============================================================================================== Net Assets $555,311,032 ============ =============================================================================================== Composition of Net Assets Paid-in capital $454,999,711 - ----------------------------------------------------------------------------------------------- Undistributed net investment income 2,471,016 - ----------------------------------------------------------------------------------------------- Accumulated net realized gain on investments and foreign currency transactions 31,372,614 - ----------------------------------------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 66,467,691 ------------ Net assets--applicable to 22,545,003 shares of beneficial interest outstanding $555,311,032 ============ =============================================================================================== Net Asset Value, Redemption Price Per Share and Offering Price Per Share $24.63
See accompanying Notes to Financial Statements. Oppenheimer Main Street Growth & Income Fund/VA 17 - -------------------------------------------------------------------------------- Statement of Operations For the Year Ended December 31, 1999 - -------------------------------------------------------------------------------- ================================================================================================ Investment Income Dividends (net of foreign withholding taxes of $9,543) $ 4,116,206 - ------------------------------------------------------------------------------------------------ Interest 1,409,101 ----------- Total income 5,525,307 ================================================================================================ Expenses Management fees 2,864,220 - ------------------------------------------------------------------------------------------------ Custodian fees and expenses 102,216 - ------------------------------------------------------------------------------------------------ Trustees' compensation 2,364 - ------------------------------------------------------------------------------------------------ Transfer and shareholder servicing agent fees 2,103 - ------------------------------------------------------------------------------------------------ Other 85,634 ----------- Total expenses 3,056,537 Less expenses paid indirectly (5,133) ----------- Net expenses 3,051,404 ================================================================================================ Net Investment Income 2,473,903 ================================================================================================ Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments (including premiums on options exercised) 37,106,529 Closing and expiration of option contracts written (1,299,413) Foreign currency transactions (2,141) ----------- Net realized gain 35,804,975 - ------------------------------------------------------------------------------------------------ Net change in unrealized appreciation or depreciation on: Investments 41,728,791 Translation of assets and liabilities denominated in foreign currencies 150,803 ----------- Net change 41,879,594 ----------- Net realized and unrealized gain 77,684,569 ================================================================================================ Net Increase in Net Assets Resulting from Operations $80,158,472 ===========
See accompanying Notes to Financial Statements. 18 Oppenheimer Main Street Growth & Income Fund/VA - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 ================================================================================================== Operations Net investment income $ 2,473,903 $ 1,744,608 - -------------------------------------------------------------------------------------------------- Net realized gain (loss) 35,804,975 (1,957,235) - -------------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation 41,879,594 6,335,797 ------------ ------------ Net increase in net assets resulting from operations 80,158,472 6,123,170 ================================================================================================== Dividends and/or Distributions to Shareholders Dividends from net investment income (1,427,635) (449,201) - -------------------------------------------------------------------------------------------------- Distributions from net realized gain (2,405,256) (9,891,403) ================================================================================================== Beneficial Interest Transactions Net increase in net assets resulting from beneficial interest transactions 170,632,137 157,202,998 ================================================================================================== Net Assets Total increase 246,957,718 152,985,564 - -------------------------------------------------------------------------------------------------- Beginning of period 308,353,314 155,367,750 ------------ ------------ End of period (including undistributed net investment income of $2,471,016 and $1,425,924, respectively) $555,311,032 $308,353,314 ============ ============
See accompanying Notes to Financial Statements. Oppenheimer Main Street Growth & Income Fund/VA 19 - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995(1) =========================================================================================================================== Per Share Operating Data Net asset value, beginning of period $20.48 $20.58 $16.37 $12.51 $10.00 - --------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income .11 .13 .19 .14 .01 Net realized and unrealized gain 4.29 .92 4.91 3.91 2.52 - --------------------------------------------------------------------------------------------------------------------------- Total income from investment operations 4.40 1.05 5.10 4.05 2.53 - --------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.09) (.05) (.17) (.14) (.02) Distributions from net realized gain (.16) (1.10) (.72) (.05) -- - --------------------------------------------------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (.25) (1.15) (.89) (.19) (.02) - --------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $24.63 $20.48 $20.58 $16.37 $12.51 ====== ====== ====== ====== ====== =========================================================================================================================== Total Return, at Net Asset Value(2) 21.71% 4.70% 32.48% 32.51% 25.25% =========================================================================================================================== Ratios/Supplemental Data Net assets, end of period (in thousands) $555,311 $308,353 $155,368 $47,009 $4,288 - --------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $391,063 $234,306 $ 94,906 $21,562 $1,809 - --------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:(3) Net investment income 0.63% 0.74% 1.15% 1.41% 0.50% Expenses 0.78% 0.79%(4) 0.83%(4) 1.00%(4) 2.07%(4) - --------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(5) 118% 86% 79% 113% 24%
1. For the period from July 5, 1995 (commencement of operations) to December 31, 1995. 2. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period (or commencement of operations), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 3. Annualized for periods less than one full year. 4. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. 5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended December 31, 1999, were $585,193,287 and $443,805,600, respectively. See accompanying Notes to Financial Statements. 20 Oppenheimer Main Street Growth & Income Fund/VA - -------------------------------------------------------------------------------- Notes to Financial Statements - -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies Oppenheimer Main Street Growth & Income Fund/VA (the Fund), formerly known as Oppenheimer Growth & Income Fund, is a separate series of Oppenheimer Variable Account Funds (the Trust), a diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek a high total return (which includes growth in the value of its shares as well as current income) from equity and debt securities. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The following is a summary of significant accounting policies consistently followed by the Fund. - -------------------------------------------------------------------------------- Securities Valuation. Portfolio securities are valued at the close of the New York Stock Exchange on each trading day. Listed and unlisted securities for which such information is regularly reported are valued at the last sale price of the day or, in the absence of sales, at values based on the closing bid or the last sale price on the prior trading day. Long-term and short-term "non-money market" debt securities are valued by a portfolio pricing service approved by the Board of Trustees. Such securities which cannot be valued by an approved portfolio pricing service are valued using dealer-supplied valuations provided the Manager is satisfied that the firm rendering the quotes is reliable and that the quotes reflect current market value, or are valued under consistently applied procedures established by the Board of Trustees to determine fair value in good faith. Short-term "money market type" debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Foreign currency exchange contracts are valued based on the closing prices of the foreign currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. Options are valued based upon the last sale price on the principal exchange on which the option is traded or, in the absence of any transactions that day, the value is based upon the last sale price on the prior trading date if it is within the spread between the closing bid and asked prices. If the last sale price is outside the spread, the closing bid is used. - -------------------------------------------------------------------------------- Foreign Currency Translation. The accounting records of the Fund are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange. Amounts related to the purchase and sale of foreign securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund's Statement of Operations. - -------------------------------------------------------------------------------- Repurchase Agreements. The Fund requires the custodian to take possession, to have legally segregated in the Federal Reserve Book Entry System or to have segregated within the custodian's vault, all securities held as collateral for repurchase agreements. The market value of the underlying securities is required to be at least 102% of the resale price at the time of purchase. If the seller of the agreement defaults and the value of the collateral declines, or if the seller enters an insolvency proceeding, realization of the value of the collateral by the Fund may be delayed or limited. - -------------------------------------------------------------------------------- Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by loss carryovers to shareholders. - -------------------------------------------------------------------------------- Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. Oppenheimer Main Street Growth & Income Fund/VA 21 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. Significant Accounting Policies (continued) Classification of Distributions to Shareholders. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes primarily because of the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes. The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund. The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, during the year ended December 31, 1999, amounts have been reclassified to reflect a decrease in undistributed net investment income of $1,176. Accumulated net realized gain on investments was increased by the same amount. - -------------------------------------------------------------------------------- Expense Offset Arrangements. Expenses paid indirectly represent a reduction of custodian fees for earnings on cash balances maintained by the Fund. - -------------------------------------------------------------------------------- Other. Investment transactions are accounted for as of trade date and dividend income is recorded on the ex-dividend date. Realized gains and losses on investments and options written and unrealized appreciation and depreciation are determined on an identified cost basis, which is the same basis used for federal income tax purposes. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. ================================================================================ 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of no par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:
Year Ended December 31, 1999 Year Ended December 31, 1998 ---------------------------------- ------------------------------ Shares Amount Shares Amount - -------------------------------------------------------------------------------------------------------------------- Sold 9,936,050 $224,240,741 9,181,075 $189,060,690 Dividends and/or distributions reinvested 186,334 3,832,892 468,325 10,340,604 Redeemed (2,632,085) (57,441,496) (2,145,877) (42,198,296) ---------- ------------ ---------- ------------ Net increase 7,490,299 $170,632,137 7,503,523 $157,202,998 ========== ============ ========== ============
================================================================================ 3. Unrealized Gains and Losses on Securities As of December 31, 1999, net unrealized appreciation on securities of $66,467,744 was composed of gross appreciation of $85,539,274, and gross depreciation of $19,071,530. ================================================================================ 4. Management Fees and Other Transactions with Affiliates Management Fees. Management Fees paid to the Manager were in accordance with the investment advisory agreement with the Trust. The annual fees are 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million and 0.60% of average annual net assets over $800 million. The Fund's management fee for the year ended December 31, 1999 was 0.73% of average annual net assets. - -------------------------------------------------------------------------------- Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, is the transfer agent for the Fund and is responsible for maintaining the shareholder registry and shareholder accounting records for the Fund. OFS provides these services for cost. 22 Oppenheimer Main Street Growth & Income Fund/VA - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 5. Foreign Currency Contracts A foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. The Fund may enter into foreign currency contracts for operational purposes and to seek to protect against adverse exchange rate fluctuations. Risks to the Fund include the potential inability of the counterparty to meet the terms of the contract. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates as provided by a reliable bank, dealer or pricing service. Unrealized appreciation and depreciation on foreign currency contracts are reported in the Statement of Assets and Liabilities. Securities denominated in foreign currency to cover net exposure on outstanding foreign currency contracts are noted in the Statement of Investments where applicable. ================================================================================ 6. Option Activity The Fund may buy and sell put and call options, or write put and covered call options on portfolio securities in order to produce incremental earnings or protect against changes in the value of portfolio securities. The Fund generally purchases put options or writes covered call options to hedge against adverse movements in the value of portfolio holdings. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option. Options are valued daily based upon the last sale price on the principal exchange on which the option is traded and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss upon the expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option is adjusted by the amount of premium received or paid. Securities designated to cover outstanding call options are noted in the Statement of Investments where applicable. Shares subject to call, expiration date, exercise price, premium received and market value are detailed in a note to the Statement of Investments. Options written are reported as a liability in the Statement of Assets and Liabilities. Gains and losses are reported in the Statement of Operations. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Written option activity for the year ended December 31, 1999, was as follows:
Call Options Put Options -------------------------------- -------------------------- Number of Amount of Number of Amount of Options Premiums Options Premiums - -------------------------------------------------------------------------------------------------------------------------- Options outstanding as of December 31, 1998 1,325 $ 570,160 100 $ 41,573 Options written 6,829 5,027,060 -- -- Options closed or expired (7,593) (5,445,702) -- -- Options exercised (561) (151,518) (100) (41,573) ------ ----------- ---- -------- Options outstanding as of December 31, 1999 -- $ -- -- $ -- ====== =========== ==== ========
Oppenheimer Main Street Growth & Income Fund/VA 23 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 7. Illiquid or Restricted Securities As of December 31, 1999, investments in securities included issues that are illiquid or restricted. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may also be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund intends to invest no more than 15% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid or restricted securities. Certain restricted securities, eligible for resale to qualified institutional investors, are not subject to that limitation. The aggregate value of illiquid or restricted securities subject to this limitation as of December 31, 1999, was $38,191, which represents 0.01% of the Fund's net assets, of which $38,191 is considered restricted. Information concerning restricted securities is as follows:
Valuation Per Unit as of Acquisition Cost Per December 31, Security Dates Unit 1999 - ------------------------------------------------------------------------------------------------------- Intermedia Communications, Inc. 9/29/98-12/29/98 $12.51-$21.54 $31.05
Appendix A - ------------------------------------------------------------------------------- RATINGS DEFINITIONS - ------------------------------------------------------------------------------- Below are summaries of the rating definitions used by the nationally-recognized rating agencies listed below. Those ratings represent the opinion of the agency as to the credit quality of issues that they rate. The summaries below are based upon publicly-available information provided by the rating organizations. Moody's Investors Service, Inc. - ------------------------------------------------------------------------------- Long-Term (Taxable) Bond Ratings Aaa: Bonds rated Aaa are judged to be the best quality. They carry the smallest degree of investment risk. Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, the changes that can be expected are most unlikely to impair the fundamentally strong position of such issues. Aa: Bonds rated Aa are judged to be of high quality by all standards. Together with the Aaa group, they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as with Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than those of Aaa securities. A: Bonds rated A possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa: Bonds rated Baa are considered medium grade obligations; that is, they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and have speculative characteristics as well. Ba: Bonds rated Ba are judged to have speculative elements. Their future cannot be considered well-assured. Often the protection of interest and principal payments may be very moderate and not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B: Bonds rated B generally lack characteristics of desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa: Bonds rated Caa are of poor standing and may be in default or there may be present elements of danger with respect to principal or interest. Ca: Bonds rated Ca represent obligations which are speculative in a high degree and are often in default or have other marked shortcomings. C: Bonds rated C are the lowest class of rated bonds and can be regarded as having extremely poor prospects of ever attaining any real investment standing. Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa through Caa. The modifier "1" indicates that the obligation ranks in the higher end of its category; the modifier "2" indicates a mid-range ranking and the modifier "3" indicates a ranking in the lower end of the category. Short-Term Ratings - Taxable Debt These ratings apply to the ability of issuers to repay punctually senior debt obligations having an original maturity not exceeding one year: Prime-1: Issuer has a superior ability for repayment of senior short-term debt obligations. Prime-2: Issuer has a strong ability for repayment of senior short-term debt obligations. Earnings trends and coverage, while sound, may be subject to variation. Capitalization characteristics, while appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Prime-3: Issuer has an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained. Not Prime: Issuer does not fall within any Prime rating category. Standard & Poor's Rating Services - ------------------------------------------------------------------------------- Long-Term Credit Ratings AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong. AA: Bonds rated "AA" differ from the highest rated obligations only in small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong. A: Bonds rated "A" are somewhat more susceptible to adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong. BBB: Bonds rated BBB exhibit adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. Bonds rated BB, B, CCC, CC and C are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions. BB: Bonds rated BB are less vulnerable to nonpayment than other speculative issues. However, these face major uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. B: A bond rated B is more vulnerable to nonpayment than an obligation rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligation. CCC: A bond rated CCC is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. CC: An obligation rated CC is currently highly vulnerable to nonpayment. C: The C rating may used where a bankruptcy petition has been filed or similar action has been taken, but payments on this obligation are being continued. D: Bonds rated D are in default. Payments on the obligation are not being made on the date due. The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. The "r" symbol is attached to the ratings of instruments with significant noncredit risks. Short-Term Issue Credit Ratings A-1: Rated in the highest category. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, a plus (+) sign designation indicates the issuer's capacity to meet its financial obligation is very strong. A-2: Obligation is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory. A-3: Exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. B: Regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation. However, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. C: Currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. D: In payment default. Payments on the obligation have not been made on the due date. The rating may also be used if a bankruptcy petition has been filed or similar actions jeopardize payments on the obligation. Fitch IBCA, Inc. - ------------------------------------------------------------------------------- International Long-Term Credit Ratings Investment Grade: AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of credit risk. They are assigned only in the case of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. AA: Very High Credit Quality. "AA" ratings denote a very low expectation of credit risk. They indicate a very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. A: High Credit Quality. "A" ratings denote a low expectation of credit risk. The capacity for timely payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings. BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a low expectation of credit risk. The capacity for timely payment of financial commitments is considered adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity. This is the lowest investment-grade category. Speculative Grade: BB: Speculative. "BB" ratings indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time. However, business or financial alternatives may be available to allow financial commitments to be met. B: Highly Speculative. "B" ratings indicate that significant credit risk is present, but a limited margin of safety remains. Financial commitments are currently being met. However, capacity for continued payment is contingent upon a sustained, favorable business and economic environment. CCC, CC C: High Default Risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments. A "CC" rating indicates that default of some kind appears probable. "C" ratings signal imminent default. DDD, DD, and D: Default. Securities are not meeting current obligations and are extremely speculative. "DDD" designates the highest potential for recovery of amounts outstanding on any securities involved. Plus (+) and minus (-) signs may be appended to a rating symbol to denote relative status within the rating category. Plus and minus signs are not added to the "AAA" category or to categories below "CCC." International Short-Term Credit Ratings F1: Highest credit quality. Strongest capacity for timely payment. May have an added "+" to denote exceptionally strong credit feature. F2: Good credit quality. A satisfactory capacity for timely payment, but the margin of safety is not as great as in higher ratings. F3: Fair credit quality. Capacity for timely payment is adequate. However, near-term adverse changes could result in a reduction to non-investment grade. B: Speculative. Minimal capacity for timely payment, plus vulnerability to near-term adverse changes in financial and economic conditions. C: High default risk. Default is a real possibility, Capacity for meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment. D: Default. Denotes actual or imminent payment default. Duff & Phelps Credit Rating Co. Ratings Long-Term Debt and Preferred Stock AAA: Highest credit quality. The risk factors are negligible, being only slightly more than for risk-free U.S. Treasury debt. AA+, AA, AA-: High credit quality. Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. A+, A & A-: Protection factors are average but adequate. However, risk factors are more variable in periods of greater economic stress. BBB+, BBB & BBB-: Below average protection factors but still considered sufficient for prudent investment. Considerable variability in risk during economic cycles. BB+, BB & BB-: Below investment grade but deemed likely to meet obligations when due. Present or prospective financial protection factors fluctuate according to industry conditions. Overall quality may move up or down frequently within the category. B+, B & B-: Below investment grade and possessing risk that obligations will not be met when due. Financial protection factors will fluctuate widely according to economic cycles, industry conditions and/or company fortunes. Potential exists for frequent changes in the rating within this category or into a higher of lower rating grade. CCC: Well below investment-grade securities. Considerable uncertainty exists as to timely payment of principal, interest or preferred dividends. Protection factors are narrow and risk can be substantial with unfavorable economic/industry conditions, and/or with unfavorable company developments. DD: Defaulted debt obligations. Issuer failed to meet scheduled principal and/or interest payments. DP: Preferred stock with dividend arrearages. Short-Term Debt: High Grade: D-1+: Highest certainty of timely payment. Safety is just below risk-free U.S. Treasury short-term debt. D-1: Very high certainty of timely payment. Risk factors are minor. D-1-: High certainty of timely payment. Risk factors are very small. Good Grade: D-2: Good certainty of timely payment. Risk factors are small. Satisfactory Grade: D-3: Satisfactory liquidity and other protection factors qualify issues as to investment grade. Risk factors are larger and subject to more variation. Nevertheless, timely payment is expected. Non-Investment Grade: D-4: Speculative investment characteristics. Liquidity is not sufficient to insure against disruption in debt service. Default: D-5: Issuer failed to meet scheduled principal and/or interest payments. B-1 Appendix B - ------------------------------------------------------------------------------- Industry Classifications - ------------------------------------------------------------------------------- Aerospace/Defense Food and Drug Retailers Air Transportation Gas Utilities Asset-Backed Health Care/Drugs Auto Parts and Equipment Health Care/Supplies & Services Automotive Homebuilders/Real Estate Bank Holding Companies Hotel/Gaming Banks Industrial Services Beverages Information Technology Broadcasting Insurance Broker-Dealers Leasing & Factoring Building Materials Leisure Cable Television Manufacturing Chemicals Metals/Mining Commercial Finance Nondurable Household Goods Communication Equipment Office Equipment Computer Hardware Oil - Domestic Computer Software Oil - International Conglomerates Paper Consumer Finance Photography Consumer Services Publishing Containers Railroads Convenience Stores Restaurants Department Stores Savings & Loans Diversified Financial Shipping Diversified Media Special Purpose Financial Drug Wholesalers Specialty Printing Durable Household Goods Specialty Retailing Education Steel Electric Utilities Telecommunications - Technology Electrical Equipment Telephone - Utility Electronics Textile/Apparel Energy Services & Producers Tobacco Entertainment/Film Trucks and Parts Environmental Wireless Services Food C-3 APPENDIX C - MAJOR SHAREHOLDERS As of April 1, 2000, the number of shares and approximate percentage of shares held of record by separate accounts of the following insurance companies (and their respective subsidiaries) that held 5% or more of the outstanding shares of one of the Funds as shown in the tables below. The full name and address of each insurance company is shown under "Major Shareholders" on page 41: Monarch ReliaStar GE Nationwide Aetna Money Fund/VA 26,171,804.122 11,093,546.362 * * * 12.47% 5.28% High Income Fund/VA * * 16,604,140.786 * * 48.99% Bond Fund/VA * * 7,448,544.944 26,927,389.349 * 14.11% 50.99% Aggressive Growth * * 4,983,384.798 3,330,369.703 * Fund/VA 16.44% 10.99% Capital Appreciation Fund/VA * * 6,535,825.800 12,600,353.500 * 18.52% 35.70% Multiple Strategies 2,927,574.165 2,066,955.383 5,345,372.214 19,388,503.010 * Fund/VA 8.21% 5.80% 15.00% 54.40% Global Securities * * * 31,070,936.176 * Fund/VA 45.87% Strategic Bond Fund/VA * * * * 8,607,862.354 13.99% Main Street Growth & Income * * * 8,455,401.615 3,167,637.365 Fund/VA 29.28% 10.97% Small Cap Growth Fund/VA * * * * * - --------------- *Less than 5% of the outstanding shares of that Fund. (continued) MassMutual Jefferson-Pilot CUNA American General Money Fund/VA 150,976,417.325 * * * 71.92% High Income Fund/VA 6,815,140.706 * 5,817,683.356 * 20.10% 17.16% Bond Fund/VA 12,069,185.864 4,073,511.357 * * 22.86% 7.71% Aggressive Growth 18,771,463,001 * * * Fund/VA 61.92% Capital Appreciation Fund/VA 8,195,775.646 3,187,616.811 * * 23.21% 9.03% Multiple Strategies 3,788,175.008 * * * Fund/VA 10.63% Global Securities 32,566,965.144 * * * Fund/VA 48.08% Strategic Bond Fund/VA 41,864,107.650 * * * 68.03% Main Street Growth & Income 12,674,904.018 * * * Fund/VA 43.90% Small Cap Growth 656,758.164 * * 207,970.245 Fund/VA 72.22% 22.87% - ----------- *Less than 5% of the outstanding shares of that Fund. (continued) Protective Money Fund/VA 13,991,905.170 6.67% High Income Fund/VA * Bond Fund/VA * Aggressive Growth * Fund/VA Capital Appreciation Fund/VA * Multiple Strategies Fund/VA * Global Securities * Fund/VA Strategic Bond Fund/VA 6,211,146.010 10.09% Main Street Growth & Income 3,121,995.390 Fund/VA 10.81% Small Cap Growth * Fund/VA - ------------------------------------------------------------------------------- Oppenheimer Variable Account Funds - ------------------------------------------------------------------------------- Investment Adviser OppenheimerFunds, Inc. Two World Trade Center New York, New York 10048-0203 Transfer Agent OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217 1-888-470-0861 Custodian Bank The Bank of New York One Wall Street New York, New York 10015 Independent Auditors Deloitte & Touche LLP 555 Seventeenth Street Denver, Colorado 80202 Legal Counsel Myer, Swanson, Adams & Wolf, P.C. 1600 Broadway Denver, Colorado 80202 (OppenheimerFunds logo) -----END PRIVACY-ENHANCED MESSAGE-----