-----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, UYS6U9+L7WGCBa21drRu5zRgqcIu4oq+0siJFll/iGifRvAsMFAKXDR06w4qFhpZ W7aIElzeFYowtDuD+OPifg== 0000935069-02-000971.txt : 20020829 0000935069-02-000971.hdr.sgml : 20020829 20020829135957 ACCESSION NUMBER: 0000935069-02-000971 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020829 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPPENHEIMER VARIABLE ACCOUNT FUNDS CENTRAL INDEX KEY: 0000752737 IRS NUMBER: 840974272 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04108 FILM NUMBER: 02752428 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 N-30D 1 g5295_oppbondva.txt SEMIANNUAL REPORT JUNE 30, 2002 Oppenheimer BOND FUND/VA A Series of Oppenheimer Variable Account Funds [LOGO OMITTED] OPPENHEIMERFUNDS [REGISTRATION MARK] The Right Way to Invest - -------------------------------------------------------------------------------- OPPENHEIMER BOND FUND/VA - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OBJECTIVE OPPENHEIMER BOND FUND/VA, a series of Oppenheimer Variable Account Funds, primarily seeks a high level of current income. As a secondary objective, the Fund seeks capital appreciation when consistent with its primary objective. - -------------------------------------------------------------------------------- NARRATIVE BY ANGELO MANIOUDAKIS, BENJAMIN GORD, CHARLES MOON AND CALEB WONG, CO-PORTFOLIO MANAGERS For the six-month period ended June 30, 2002, Oppenheimer Bond Fund/VA's results were satisfactory. The Fund's yields remained above average, and its total return outpaced its peer group of funds.(1) We would be more concerned about the Fund's performance if we hadn't spent the last three months repositioning the portfolio for what we believe will be more consistent results going forward. We assumed direction of Oppenheimer Bond Fund/VA on April 1, 2002, not long after three of us--Angelo Manioudakis, Benjamin Gord and Charles Moon--joined OppenheimerFunds. Previously, we had managed portfolios for an institutional fixed-income asset manager, and we brought with us the very disciplined approach we utilized there. Along with a fourth team member, Caleb Wong, we set about applying our approach to the Fund. Our approach is based in the belief that because the bond market is so complex, four heads are better than one when it comes to multi-sector bond funds. Each of us has expertise in a major bond market sector, which helps us select values within those sectors. In-depth knowledge of each sector and how it behaves under various interest-rate and economic scenarios also helps us make better decisions, as a group, about sector allocations and where to focus on the yield curve. The goal is to create a core of corporate bonds and treasuries that can generate a more consistent total return. In keeping with this, we increased the amount of investment-grade corporate bonds, a move that brought the Fund more in line with the composition of its benchmark index, the Lehman Brothers Corporate Bond Index. When it comes to high-yield and mortgage-backed securities, we tend to be opportunistic, using them to a greater or lesser degree, depending upon market conditions, to boost yields.(2) At the same time, we utilize programs that isolate the various risks in a portfolio, such as, interest rate sensitivity and prepayment risk. These programs, which we've developed over time, also estimate duration, as well as a number of other, more sophisticated measures of individual risks. Overall, we look for the best values in each sector while using these tools 1. The Fund's performance is compared to the average of the total returns of the 244 VA-dedicated funds in the Lipper Corporate Debt Funds A-Rated/VA Category for the six-month period ended 6/30/02. Total returns include changes in net asset value per share but do not include the charges associated with the separate account products which offer this Fund. Such performance would have been lower if such charges were taken into account, and can be provided by the separate account product sponsor. 2. High-yield securities are subject to greater market fluctuations and risk of loss of income and principal than investment grade securities. Mortgage-related securities are subject to prepayment risk and generally offer less potential for gains when prevailing interest rates rise. 2 OPPENHEIMER BOND FUND/VA to tell us what our risk exposures are. Then, we can adjust the specific exposures to acceptable levels. For instance, we might add longer-term corporate bonds about which we have a lot of conviction, and then use Treasury futures to hedge the portfolio's sensitivity to changing interest rates. Our analytical tools allow us to be fairly precise about these checks and balances, so, looking forward, we expect to see less volatility in the Fund's daily prices. Looking back over this reporting period, bond markets performed well, for the most part. Treasuries were fairly stable, as were high-yield bonds. And since both mortgage-backed and corporate securities outperformed the Treasury market, the commercial mortgage-backed and asset-backed securities selected by the previous managers were solid contributors to performance. On the other hand, some of the portfolio's investment-grade corporate bonds declined sharply as that market "split in two," a development that would have been difficult to anticipate last fall. Accounting irregularities and related questions about financial strength and credit quality roiled the market after January 2002, and the bonds of some well-respected companies hit the skids. Just as importantly, bonds of most companies with unusual accounting practices followed suit, especially those in the telecommunications sector. Meanwhile, bonds of companies that were not associated with these accounting and liquidity issues were in great demand, and their prices rose sharply. Even though the Fund's allocation to telecommunications bonds was small, the downturn there and in energy bonds hurt performance. As for the future, our strategy doesn't focus on trying to forecast macroeconomic moves. Instead, we gauge what the market is anticipating, or what assumptions about economic growth, interest rates and corporate profitability are embedded in securities prices. Right now, the market appears to expect higher interest rates and a flatter yield curve (i.e., smaller differences between short- and long-term yields) by year-end. The market also seems to be saying that this will not be an extreme change, so volatility in the market should be reasonably controlled. Thus, we could see a relatively calm period that provides opportunity to complete our repositioning of the portfolio and ensure that Oppenheimer Bond Fund/VA remains a key part of THE RIGHT WAY TO INVEST. IN REVIEWING PERFORMANCE, PLEASE REMEMBER THAT PAST PERFORMANCE CANNOT GUARANTEE FUTURE RESULTS. BECAUSE OF ONGOING MARKET VOLATILITY, THE FUND'S PERFORMANCE MAY BE SUBJECT TO FLUCTUATIONS, AND CURRENT PERFORMANCE MAY BE LESS THAN THE RESULTS SHOWN. The Fund's portfolio is subject to change. The Fund's investment strategy and focus can change over time. The mention of specific fund holdings does not constitute a recommendation by OppenheimerFunds, Inc. SHARES OF OPPENHEIMER FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK, ARE NOT GUARANTEED BY ANY BANK, ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY, AND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. 3 OPPENHEIMER BOND FUND/VA - -------------------------------------------------------------------------------- STATEMENT OF INVESTMENTS June 30, 2002 / Unaudited - -------------------------------------------------------------------------------- PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- ASSET-BACKED SECURITIES--6.0% AQ Finance NIM Trust, Home Equity Collateralized Mtg. Obligations: Series 2001-3A, Cl. Note, 8.835%, 2/25/32(1) $ 680,639 $ 680,639 Series 2002-1, Cl. Note, 9.50%, 6/25/32(1) 3,820,420 3,810,869 Lease Investment Flight Trust, Collateralized Plane Obligations, Series 1A, Cl. D2, 8%, 7/15/31(1) 5,850,000 2,047,500 Liberte American Loan Master Trust, Collateralized Loan Obligations, Series 1999-1A, Cl. D2, 6.90%, 11/25/06(1,2) 9,000,000 6,750,000 Litigation Settlement Monetized Fee Trust, Asset-Backed Certificates, Series 2001-1A, Cl. A1, 8.33%, 4/25/31(1) 5,302,585 5,673,766 Long Beach Asset Holdings Corp. NIM Trust, Home Equity Asset-Backed Pass-Through Certificates, Series 2001-3, 7.87%, 9/25/31 3,771,860 3,753,001 MSF Funding LLC, Collateralized Mtg. Obligations, Series 2000-1, Cl. C, 9.19%, 7/25/07(1,2) 1,094,900 1,084,937 NC Finance Trust, Collateralized Mtg. Obligations: Series 1999-I, Cl. ECFD, 8.75%, 12/25/28(1) 4,809,106 3,871,330 Series 2002-I, Cl. ECFD, 9.25%, 3/25/32(3) 5,334,004 5,250,660 ONYX Acceptance Auto Trust, Automobile Asset-Backed Certificates, Series 2002, Cl. A, 13.60%, 2/20/32 2,697,236 2,670,264 Option One Mortgage Securities Corp., Home Equity Collateralized Mtg. Obligations: Series 1999-1, Cl. CTFS, 10.06%, 3/26/29(1) 1,794,158 1,714,542 Series 1999-3, Cl. CTFS, 10.80%, 12/15/29 673,878 656,399 TS Authority, Asset-Backed Securities, Series 2001-A, 6.79%, 6/1/10 2,100,000 2,101,050 ------------- Total Asset-Backed Securities (Cost $43,984,351) 40,064,957 - -------------------------------------------------------------------------------- CORPORATE LOANS--0.2% Ferrell Cos., Inc., Sr. Sec. Credit Facilities Term Loan, Tranche B, Series 2002-I, Cl. ECFD, 5.947%, 6/17/06(1,2) (Cost $1,545,652) 1,561,265 1,498,814 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- MORTGAGE-BACKED OBLIGATIONS--54.9% - -------------------------------------------------------------------------------- GOVERNMENT AGENCY--31.0% - -------------------------------------------------------------------------------- FHLMC/FNMA/SPONSORED--31.0% Asset Securitization Corp., Interest-Only Stripped Mtg.-Backed Security Collateralized Mtg. Obligations, Series 1997-D4, Cl. PS1, 1.311%, 4/14/29(4) $ 51,017,762 $ 2,678,432 Federal Home Loan Mortgage Corp., Gtd. Multiclass Mtg. Pass-Through Certificates, Series 151, Cl. F, 9%, 5/15/21 238,298 252,744 Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates, Series 2054, Cl. TE, 6.25%, 4/15/24 109,000 112,610 Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security: Series 192, Cl. IO, 6.50%, 2/1/28(4) 44,667,652 8,783,475 Series 203, Cl. IO, 6.50%, 6/15/29(4) 14,549,654 3,207,744 Series 205, Cl. IO, 7%, 9/15/29(4) 14,964,446 2,801,157 Series 206, Cl. IO, 7.50%, 12/15/29(4) 10,757,331 1,882,533 Series 207, Cl. IO, 7%, 4/15/30(4) 9,781,819 1,662,909 Series 303, Cl. IO, 7.50%, 11/1/29(4) 3,807,634 677,640 Federal National Mortgage Assn.: 6%, 7/25/32(10) 27,000,000 26,932,500 6.50%, 3/1/11 267,727 279,465 6.50%, 7/1/28(10) 70,650,000 72,019,197 7%, 11/1/25 - 7/16/32 268,840 279,572 7%, 7/25/27(10) 73,400,000 76,015,242 7.50%, 1/1/08 - 1/1/26 1,031,715 1,090,947 8%, 5/1/17 93,286 100,463 Federal National Mortgage Assn., Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Trust 131, Cl. G, 8.75%, 11/25/05 428,508 453,412 Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Trust 1989-17, Cl. E, 10.40%, 4/25/19 297,367 305,729 Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Interest-Only Stripped Mtg.-Backed Security, Trust 299, Cl. 2, 6.50%, 5/1/28(4) 3,652,010 729,261 4 OPPENHEIMER BOND FUND/VA PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- FHLMC/FNMA/SPONSORED Continued First Union National Bank Commercial Mortgage Trust, Interest-Only Stripped Mtg.-Backed Security, Series 2001-C3, Cl. X1, 0.667%, 8/15/33(4) $134,490,008 $ 4,812,221 -------------- 205,077,253 - -------------------------------------------------------------------------------- GNMA/GUARANTEED--0.0% Government National Mortgage Assn., 7%, 1/15/09 213,942 227,215 - -------------------------------------------------------------------------------- PRIVATE--23.9% - -------------------------------------------------------------------------------- COMMERCIAL--21.0% Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates: Series 1996-D2, Cl. A3, 7.52%, 2/14/29(2) 10,000,000 10,100,000 Series 1996-MD6, Cl. A3, 7.364%, 11/13/29(2) 1,200,000 1,261,781 Series 1997-D5, Cl. B2, 1.375%, 2/14/41(1,2) 5,400,000 1,215,000 Asset Securitization Corp., Interest- Only Stripped Mtg.-Backed Security Commercial Mtg. Pass-Through Certificates, Series 1997-D5, Cl. PS1, 1.676%, 2/14/41(4) 17,383,982 1,291,576 Capital Lease Funding Securitization LP, Interest-Only Corporate-Backed Pass-Through Certificates, Series 1997-CTL1, 0.619%, 6/22/24(1,4) 28,249,964 962,264 Commercial Mortgage Acceptance Corp., Commercial Mtg. Obligations: Series 1996-C1, Cl. D, 7.338%, 12/25/20(1,2) 1,449,439 1,446,268 Series 2000-FL2A, Cl. J-NS, 4.14%, 7/15/02(2) 2,600,000 2,596,880 Criimi Mae Commercial Mortgage Trust I, Collateralized Mtg. Obligations, Series 1998-C1, Cl. A2, 7%, 6/2/33(3) 30,750,000 31,064,707 CS First Boston Mortgage Securities Corp., Commercial Mtg. Pass-Through Certificates, Series 2002-CKP1, Cl. E, 6.801%, 12/15/35 2,800,000 2,938,446 CS First Boston Mortgage Securities Corp., Interest-Only Stripped Mtg.-Backed Security, Series 1998-C1, Cl. AX, 1.257%, 4/11/30(4) 23,704,095 1,227,043 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- DLJ Commercial Mortgage Corp., Commercial Mtg. Pass-Through Certificates: Series 1999-STF1, Cl. B6, 5.004%, 7/5/08(1,2) $ 34,282,670 $ 34,283 Series 1999-STF1, Cl. B6, 5.004%, 7/5/08(1,3) 2,094,584 2,064,449 DLJ Mortgage Acceptance Corp., Commercial Mtg. Obligations: Series 1996-CF1, Cl. A3, 7.841%, 3/13/28(2) 2,000,000 2,184,602 Series 1996-CF1, Cl. B1, 8.291%, 3/13/28(2,3) 3,000,000 3,295,227 Series 1997-CF1, Cl. A3, 7.76%, 5/15/30(3) 6,660,000 7,170,046 FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates: Series 1994-C1, Cl. 2D, 8.70%, 9/25/25 760,833 739,910 Series 1994-C1, Cl. 2E, 8.70%, 9/25/25 1,500,000 1,459,688 First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates, Series 1997-CHL1, Cl. C, 8.168%, 7/25/06(1,2) 2,746,000 2,727,121 First Union National Bank Commercial Mortgage Trust, Commercial Mtg. Pass-Through Certificates, Series 2002-C1, Cl. D, 6.622%, 2/12/34 1,262,400 1,322,709 First Union-Chase Commercial Mortgage Trust, Interest-Only Commercial Mtg. Pass-Through Certificatesest-Only Commercial Mtg. Pass-Through Certificates, Series 1999-C2, Cl. IO, 0.701%, 6/15/31(4,5) 90,927,422 3,289,015 First Union-Lehman Brothers Commercial Mortgage Trust, Interest-Only Stripped Mtg.-Backed Security, Series 1998-C2, 0.794%, 5/18/28(4) 18,330,230 541,673 General Motors Acceptance Corp., Collateralized Mtg. Obligations, Series 1998-C1, Cl. E, 7.096%, 3/15/11 23,500,000 3,595,156 GMAC Commercial Mortgage Securities, Inc., Interest-Only Stripped Mtg.-Backed Security Pass-Through Certificates, Series 1997-C1, Cl. X, 2.01%, 7/15/27(4) 16,529,578 1,087,336 5 OPPENHEIMER BOND FUND/VA - -------------------------------------------------------------------------------- STATEMENT OF INVESTMENTS Unaudited / Continued - -------------------------------------------------------------------------------- PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- COMMERCIAL Continued GS Mortgage Securities Corp. II, Commercial Mtg. Obligations: Series 2001-Rock, Cl. C, 6.878%, 5/3/18(3) $ 4,800,000 $ 4,976,515 Series 2001-Rock, Cl. E, 7.108%, 5/3/18(2,3) 3,300,000 3,367,632 Hotel First Mortgage Trust, Commercial Mtg. Obligations, Series 1993-A, Cl. A, 8.52%, 8/5/08(1) 1,682,935 1,736,053 J.P. Morgan Chase Commercial Mortgage Securities Corp., Commercial Mtg. Obligations, Series 2001-FL1A, Cl. G, 3.21%, 7/13/13(1,2) 5,434,193 5,362,020 Lehman Brothers Commercial Conduit Mortgage Trust, Interest-Only Stripped Mtg.-Backed Security, Series 1998-C1, Cl. IO, 1.187%, 2/18/28(4) 24,986,223 1,056,058 Lehman Structured Securities Corp., Collateralized Mtg. Obligations, Series 2002-GE1, Cl. A, 6%, 7/26/24(1) 5,327,114 5,147,324 Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-Through Certificates, Series 1998-C2, Cl. C, 6.569%, 2/15/30(2) 6,000,000 6,340,313 Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates: Series 1996-C1, Cl. E, 7.428%, 3/15/06 1,2715,000 691,284 Series 1998-WF1, Cl. F, 7.30%, 3/15/30(1) 3,000,000 2,910,000 Mortgage Capital Funding, Inc., Commercial Mtg. Pass-Through Certificates, Series 1996-MC1, Cl. G, 7.15%, 6/15/06(3) 1,625,000 1,557,207 NationsBank Trust, Lease Pass-Through Certificates, Series 1997A-1, 7.442%, 1/10/11(2) 2,051,757 2,166,848 Nomura Asset Securities Corp., Commercial Mtg. Obligations, Series 1996-MD5, Cl. A3, 7.919%, 4/13/39(2) 8,400,000 9,155,127 PNC Mortgage Securities Corp., Collateralized Mtg. Obligations Pass-Through Certificates, Series 1998-12, Cl. 1A2, 5.75%, 1/25/29 9,685,500 9,355,515 Salomon Brothers Mortgage Securities VII, Inc., Interest-Only Commercial Mtg. Pass-Through Certificates, Series 1999-C1, Cl. X, 0.195%, 5/18/32(4) 421,756,993 1,993,461 -------------- 139,430,537 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- OTHER--0.0% Salomon Brothers Mortgage Securities VI, Inc., Interest-Only Stripped Mtg.- Backed Security, Series 1987-3, Cl. B, 12.50%, 10/23/17(1,4) $ 31,320 $ 7,203 Salomon Brothers Mortgage Securities VI, Inc., Principal-Only Stripped Mtg.-Backed Security, Series 1987-3, Cl. A, 19.59%, 10/23/17(1,6) 46,519 38,146 ------------- 45,349 - -------------------------------------------------------------------------------- RESIDENTIAL--2.9% Countrywide Funding Corp., Mtg. Pass-Through Certificates, Series 1993-12, Cl. B1, 6.625%, 2/25/24 720,459 731,713 Salomon Brothers Mortgage Securities VII, Inc., Commercial Mtg. Pass- Through Certificates, Series 1999- NC2, Cl. M3, 5.09%, 4/25/29(2) 1,250,855 1,261,799 Structured Asset Securities Corp., Collateralized Mtg. Obligations, Mtg. Pass-Through Certificates: Series 1998-8, Cl. B, 3.14%, 8/25/28(2) 2,770,398 2,728,192 Series 2002-AL1, Cl. B2, 3.45%, 3/25/32(1) 3,320,036 2,668,479 Washington Mutual Finance Corp., Collateralized Mtg. Obligations, Series 2000-1, Cl. B1, 5.84%, 1/25/40(1,2) 5,200,000 5,135,000 Washington Mutual Mortgage Loan Trust, Commercial Mtg. Obligations, Series 2001-S9, Cl. A12, 6.75%, 9/25/31(1) 6,525,544 6,578,564 -------------- 19,103,747 -------------- Total Mortgage-Backed Obligations (Cost $369,522,463) 363,884,101 - -------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS--13.9% U.S. Treasury Bonds: 4.875%, 2/15/12 31,740,000 31,868,960 5.375%, 2/15/31 47,605,000 46,630,621 U.S. Treasury Inflationary Index Bonds, 3.375%, 1/15/12(7) 5,038,462 5,165,214 U.S. Treasury Nts., 5.875%, 11/15/04 7,940,000 8,441,220 -------------- Total U.S. Government Obligations (Cost $89,744,080) 92,106,015 6 OPPENHEIMER BOND FUND/VA PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- CORPORATE BONDS AND NOTES--43.1% - -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY--5.8% - -------------------------------------------------------------------------------- AUTO COMPONENTS--0.0% Federal-Mogul Corp., 7.375% Nts., 1/15/06(8) $ 625,000 $ 136,719 - -------------------------------------------------------------------------------- AUTOMOBILES--0.7% DaimlerChrysler NA Holding Corp.: 8% Nts., 6/15/10 3,050,000 3,319,818 8.50% Nts., 1/18/31 1,450,000 1,607,601 -------------- 4,927,419 - -------------------------------------------------------------------------------- DISTRIBUTORS--1.2% Scotia Pacific Co. LLC, 7.71% Sec. Nts., Series B, Cl. A-3, 1/20/14 10,319,000 7,690,957 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE--0.3% Intrawest Corp., 9.75% Sr. Nts., 8/15/08 600,000 612,000 MGM Mirage, Inc., 8.375% Sr. Unsec. Sub. Nts., 2/1/11 800,000 808,000 Mohegan Tribal Gaming Authority, 8.375% Sr. Sub. Nts., 7/1/11 300,000 307,875 -------------- 1,727,875 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES--0.8% K. Hovnanian Enterprises, Inc., 8.875% Sr. Sub. Nts., 4/1/12(3) 500,000 494,375 Pulte Corp., 8.125% Sr. Unsec. Nts., 3/1/11 3,600,000 3,798,255 Toll Corp., 8.25% Sr. Sub. Nts., 12/1/11 1,000,000 1,010,000 -------------- 5,302,630 - -------------------------------------------------------------------------------- MEDIA--2.8% AOL Time Warner, Inc., 6.875% Nts., 5/1/12 6,800,000 6,282,139 Chancellor Media Corp., 8.75% Sr. Unsec. Sub. Nts., Series B, 6/15/07 2,500,000 2,512,500 Imax Corp., 7.875% Sr. Nts., 12/1/05 900,000 724,500 Insight Midwest LP/Insight Capital, Inc., 9.75% Sr. Nts., 10/1/09 500,000 462,500 Penton Media, Inc., 10.375% Sr. Unsec. Sub. Nts., 6/15/11 400,000 246,000 Radio One, Inc., 8.875% Sr. Unsec. Sub. Nts., Series B, 7/1/11 250,000 250,625 TCI Communications, Inc., 9.80% Sr. Unsec. Debs., 2/1/12 7,400,000 8,068,990 -------------- 18,547,254 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- CONSUMER STAPLES--2.1% - -------------------------------------------------------------------------------- FOOD & DRUG RETAILING--1.5% Albertson's, Inc., 7.45% Unsec. Debs., 8/1/29 $ 6,250,000 $ 6,514,844 Kroger Co. (The), 6.75% Nts., 4/15/12 3,020,000 3,132,139 -------------- 9,646,983 - -------------------------------------------------------------------------------- FOOD PRODUCTS--0.5% Kraft Foods, Inc., 6.50% Bonds, 11/1/31 3,600,000 3,573,925 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS--0.1% Playtex Products, Inc., 9.375% Sr. Unsec. Sub. Nts., 6/1/11 500,021 532,500 Styling Technology Corp., 10.875% Sr. Unsec. Sub. Nts., 7/1/08(1,5,8) 360,000 -- -------------- 532,500 - -------------------------------------------------------------------------------- ENERGY--0.8% - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES--0.7% Colorado Interstate Gas Corp., 10% Sr. Debs., 6/15/05 500,000 544,838 Ocean Rig Norway AS, 10.25% Sr. Sec. Nts., 6/1/08 400,000 354,000 Williams Cos., Inc. (The), 8.125% Unsec. Nts., 3/15/123 4,050,000 3,402,186 -------------- 4,301,024 - -------------------------------------------------------------------------------- OIL & GAS--0.1% Pennzoil-Quaker State Co., 10% Sr. Nts., 11/1/08(1) 300,000 352,875 Westport Resources Corp., 8.25% Sr. Unsec. Sub. Nts., 11/1/11 500,000 515,000 -------------- 867,875 - -------------------------------------------------------------------------------- FINANCIALS--24.6% - -------------------------------------------------------------------------------- BANKS--2.2% Bank of America Corp., 7.40% Jr. Unsec. Sub. Nts., 1/15/11 3,550,000 3,894,183 Socgen Real Estate LLC, 7.64% Bonds, 12/29/49(3) 9,600,000 10,304,525 -------------- 14,198,708 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIALS--17.7% Aeltus CBO II Ltd./Aeltus CBO II Corp.,7.982% Sr. Sec. Sub. Bonds, 8/6/09(3) 5,000,000 5,085,050 AT&T Capital Corp., 6.60% Medium- Term Nts., Series F, 5/15/05 2,200,000 2,097,955 CIT Group, Inc., 7.75% Sr. Unsec. Unsub. Nts., 4/2/12 3,550,000 3,500,598 Citigroup, Inc.: 6.625% Unsec. Sub. Nts., 6/15/32 2,120,000 2,056,116 7.25% Sub. Nts., 10/1/10 3,235,000 3,526,784 7 OPPENHEIMER BOND FUND/VA - -------------------------------------------------------------------------------- STATEMENT OF INVESTMENTS Unaudited / Continued - -------------------------------------------------------------------------------- PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIALS Continued Dime Bancorp, Inc., 9.33% Capital Securities, Series A, 5/6/27 $ 10,228,000 $ 11,338,454 FMR Corp., 7.57% Bonds, 6/15/29(3) 6,600,000 7,193,347 Ford Motor Credit Co., 6.875% Nts., 2/1/06 4,260,000 4,361,686 General Electric Capital Corp.: 6% Nts., 6/15/12 5,000,000 4,985,510 6.75% Nts., Series A, 3/15/32 8,000,000 7,883,048 General Motors Acceptance Corp.: 6.75% Nts., 1/15/06 3,420,000 3,553,452 7% Auto Loan Nts., 2/1/12 6,579,000 6,598,934 Goldman Sachs Group, Inc. (The), 6.60% Sr. Unsec. Nts., 1/15/12 2,620,000 2,673,445 Household Finance Corp., 7% Nts., 5/15/12 5,400,000 5,378,962 J.P. Morgan Chase & Co., 6.625% Sub. Nts., 3/15/12 2,525,000 2,601,379 John Deere Capital Corp.: 6.90% Sr. Nts., Series C, 10/18/02 3,000,000 3,042,030 7% Sr. Nts., 3/15/12 6,500,000 6,976,684 MBNA America Bank NA, 6.625% Nts., 6/15/12 2,050,000 2,063,481 Morgan Stanley, 6.60% Nts., 4/1/12 3,410,000 3,481,296 NiSource Finance Corp., 7.875% Sr. Unsec. Nts., 11/15/10 2,570,000 2,660,156 PHH Corp., 8.125% Nts., 2/3/03 4,550,000 4,613,331 Prudential Holdings LLC, 8.695% Bonds, Series C, 12/18/23(3) 4,090,000 4,451,241 Simon DeBartolo Group LP, 6.875% Unsec. Nts., 11/15/06 3,100,000 3,246,041 Stilwell Financial, Inc., 7% Nts., 11/1/06(9) 8,000,000 8,071,040 Tyco Capital Corp., 6.625% Sr. Unsec. Nts., 6/15/05 5,680,000 5,365,385 U.S. Leasing International, Inc., 6.625% Sr. Nts., 5/15/03 750,000 769,054 -------------- 117,574,459 - -------------------------------------------------------------------------------- INSURANCE--4.7% AXA Group, 8.60% Unsec. Sub. Nts., 12/15/30 5,600,000 6,437,267 Farmers Insurance Exchange, 8.625% Nts., 5/1/24(3) 1,800,000 1,597,340 Metropolitan Life Global Funding I, 4.75% Nts., 6/20/07 5,250,000 5,225,850 Nationwide CSN Trust, 9.875% Sec. Nts., 2/15/25(3) 13,000,000 13,647,543 Nationwide Financial Services, Inc., 5.90% Nts., 7/1/12 940,000 932,553 Prudential Insurance Co. of America, 8.30% Nts., 7/1/25(3) 2,870,000 3,160,163 -------------- 31,000,716 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- HEALTH CARE--1.2% - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES--0.7% Cardinal Health, Inc., 4.45% Nts., 6/30/05 $ 5,000,000 $ 5,108,500 - -------------------------------------------------------------------------------- PHARMACEUTICALS--0.5% Bristol-Myers Squibb Co., 5.75% Nts., 10/1/11 3,200,000 3,189,475 - -------------------------------------------------------------------------------- INDUSTRIALS--3.8% - -------------------------------------------------------------------------------- AIR FREIGHT & COURIERS--0.3% Atlas Air, Inc., 8.01% Airline Pass- Through Certificates, Series 1998-1C, 1/2/10 2,087,379 1,766,257 - -------------------------------------------------------------------------------- BUILDING PRODUCTS--0.1% GSP I Corp., 10.15% First Mtg. Bonds, 6/24/10(3) 891,994 928,905 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES--0.5% Protection One, Inc./Protection One Alarm Monitoring, Inc., 7.375% Sr. Unsec. Nts., 8/15/05 300,000 265,500 Safety-Kleen Corp., 9.25% Sr. Unsec. Nts., 5/15/09(1,5,8) 800,000 20,000 Waste Management, Inc., 7.75% Bonds, 5/15/32(3) 3,100,000 3,119,555 -------------- 3,405,055 - -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES--1.1% Enron Corp., 9.875% Debs., 6/15/03(5,8) 375,000 50,625 MMCaps Funding I Ltd. Inc., 8.03% Sr. Nts., 6/15/31(3) 7,150,000 6,916,224 -------------- 6,966,849 - -------------------------------------------------------------------------------- MACHINERY--0.1% Roller Bearing Co. of America, Inc., 9.625% Sr. Sub. Nts., Series B, 6/15/07 500,000 485,000 Terex Corp., 9.25% Sr. Unsec. Sub. Nts., 7/15/11 250,000 260,000 -------------- 745,000 - -------------------------------------------------------------------------------- ROAD & RAIL--0.3% Burlington Northern Santa Fe Corp., 5.90% Sr. Nts., 7/1/12 2,030,000 2,006,555 - -------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE--1.4% Hertz Corp. (The), 7.625% Sr. Nts., 6/1/12 9,200,000 9,086,012 - -------------------------------------------------------------------------------- INFORMATION TECHNOLOGY--0.0% - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--0.0% Ingram Micro, Inc., 9.875% Sr. Unsec. Sub. Nts., 8/15/08 300,000 313,500 8 OPPENHEIMER BOND FUND/VA PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- MATERIALS--0.3% - -------------------------------------------------------------------------------- CHEMICALS--0.2% Avecia Group plc, 11% Sr. Unsec. Nts., 7/1/09 $ 800,000 $ 800,000 OM Group, Inc., 9.25% Sr. Sub. Nts., 12/15/11 250,000 260,000 -------------- 1,060,000 - -------------------------------------------------------------------------------- METALS & MINING--0.1% Great Lakes Carbon Corp., 10.25% Sr. Sub. Nts., Series B, 5/15/08 62 42 National Steel Corp., 9.875% First Mtg. Bonds, Series D, 3/1/09(8) 500,000 187,500 P&L Coal Holdings Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 725,000 770,313 -------------- 957,855 - -------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES--4.2% - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES--2.2% Cable & Wire Optus Ltd., 8.125% Nts., 6/15/09(3) 8,950,000 9,975,384 GTE North, Inc., 6.73% Debs., Series G, 2/15/28 3,000,000 2,724,213 International CableTel, Inc., 11.50% Sr. Deferred Coupon Nts., Series B, 2/1/06(8) 1,250,000 337,500 New England Telephone & Telegraph Co., 7.875% Debs., 11/15/29 1,500,000 1,558,530 PanAmSat Corp., 8.50% Sr. Nts., 2/1/12(3) 200,000 185,000 -------------- 14,780,627 - -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES--2.0% AT&T Corp.: 5.625% Nts., 3/15/04 3,300,000 3,037,422 8% Sr. Nts., 11/15/31(3) 3,680,000 2,896,627 AT&T Wireless Services, Inc., 7.50% Sr. Unsec. Nts., 5/1/07 6,500,000 5,596,481 Omnipoint Corp., 11.50% Sr. Nts., 9/15/09(3) 650,000 653,250 Price Communications Wireless, Inc., 9.125% Sr. Sec. Nts., Series B, 12/15/06 1,000,000 1,046,250 -------------- 13,230,030 - -------------------------------------------------------------------------------- UTILITIES--0.3% - -------------------------------------------------------------------------------- ELECTRIC UTILITIES--0.3% PSEG Power LLC, 8.625% Sr. Unsec. Nts., 4/15/31 1,400,000 1,550,544 South Carolina Electric & Gas Co., 9% Mtg. Bonds, 7/15/06 500,000 528,949 -------------- 2,079,493 Total Corporate Bonds and Notes (Cost $289,999,387) 285,653,157 MARKET VALUE SHARES SEE NOTE 1 - -------------------------------------------------------------------------------- PREFERRED STOCKS--0.6% CarrAmerica Realty Corp.: $25.00 Cum., Series B, Non-Vtg. 110,000 $ 2,783,000 $25.00 Cum., Series C, Non-Vtg. 30,000 759,300 $25.00 Cum., Series D 10,000 253,200 Total Preferred Stocks (Cost $3,787,500) 3,795,500 - -------------------------------------------------------------------------------- COMMON STOCKS--0.0% Aurora Foods, Inc.(1,5) 1,307 1,052 Pathmark Stores, Inc.(5) 7,645 143,803 -------------- Total Common Stocks (Cost $91,262) 144,855 UNITS - -------------------------------------------------------------------------------- RIGHTS, WARRANTS AND CERTIFICATES--0.0% Pathmark Stores, Inc. Wts., Exp. 9/19/10(5) (Cost $14,872) 5,408 27,310 PRINCIPAL AMOUNT - -------------------------------------------------------------------------------- REPURCHASE AGREEMENTS--8.1% Repurchase agreement with Banc One Capital Markets, Inc., 1.90%, dated 6/28/02, to be repurchased at $53,459,463 on 7/1/02, collateralized by U.S. Treasury Bonds, 6.375%--8.125%, 11/15/16--8/15/27, with a value of $19,283,743 and U.S. Treasury Nts., 3.50%--5.50%, 1/31/03-- 11/15/06, with a value of $35,308,430 (Cost $53,451,000) $ 53,451,000 53,451,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $852,140,567) 126.8% 840,625,709 - -------------------------------------------------------------------------------- LIABILITIES IN EXCESS OF OTHER ASSETS (26.8) (177,769,061) --------------------- NET ASSETS 100.0% $ 662,856,647 ===================== 9 OPPENHEIMER BOND FUND/VA - -------------------------------------------------------------------------------- STATEMENT OF INVESTMENTS Unaudited / Continued - -------------------------------------------------------------------------------- FOOTNOTES TO STATEMENT OF INVESTMENTS 1. Identifies issues considered to be illiquid or restricted--See Note 7 of Notes to Financial Statements. 2. Represents the current interest rate for a variable or increasing rate security. 3. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $135,918,559 or 20.50% of the Fund's net assets as of June 30, 2002. 4. Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of mortgage loans. These securities typically decline in price as interest rates decline. Most other fixed income securities increase in price when interest rates decline. The principal amount of the underlying pool represents the notional amount on which current interest is calculated. The price of these securities is typically more sensitive to changes in prepayment rates than traditional mortgage-backed securities (for example, GNMA pass-throughs). Interest rates disclosed represent current yields based upon the current cost basis and estimated timing and amount of future cash flows. 5. Non-income producing security. 6. Principal-Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. The value of these securities generally increases as interest rates decline and prepayment rates rise. The price of these securities is typically more volatile than that of coupon-bearing bonds of the same maturity. Interest rates disclosed represent current yields based upon the current cost basis and estimated timing of future cash flows. 7. Denotes an inflation-indexed security: coupon and principal are indexed to the consumer price index. 8. Issuer is in default. 9. Securities with an aggregate market value of $4,035,600 are held in collateralized accounts to cover initial margin requirements on open futures sales contracts. See Note 5 of Notes to Financial Statements. 10. When-issued security to be delivered and settled after June 30, 2002. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 10 OPPENHEIMER BOND FUND/VA - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES Unaudited - --------------------------------------------------------------------------------
June 30, 2002 - --------------------------------------------------------------------------------------------------------------------------- ASSETS Investments, at value (cost $852,140,567)-- see accompanying statement $840,625,709 - --------------------------------------------------------------------------------------------------------------------------- Receivables and other assets: Investments sold (including $54,727,125 sold on a when-issued basis) 57,381,146 Interest, dividends and principal paydowns 9,118,757 Shares of beneficial interest sold 1,433,155 Other 3,464 ------------- Total assets 908,562,231 - --------------------------------------------------------------------------------------------------------------------------- LIABILITIES Bank overdraft 1,953,604 - --------------------------------------------------------------------------------------------------------------------------- Payables and other liabilities: Investments purchased (including $228,814,117 purchased on a when-issued basis) 243,173,542 Shares of beneficial interest redeemed 398,973 Daily variation on futures contracts 76,181 Shareholder reports 64,405 Transfer and shareholder servicing agent fees 1,511 Trustees' compensation 1,140 Service plan fees 4 Other 36,224 ------------- Total liabilities 245,705,584 - --------------------------------------------------------------------------------------------------------------------------- NET ASSETS $662,856,647 ============= - --------------------------------------------------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS Par value of shares of beneficial interest $ 62,439 - --------------------------------------------------------------------------------------------------------------------------- Additional paid-in capital 716,286,248 - --------------------------------------------------------------------------------------------------------------------------- Undistributed net investment income 23,866,278 - --------------------------------------------------------------------------------------------------------------------------- Accumulated net realized loss on investment transactions (66,416,623) - --------------------------------------------------------------------------------------------------------------------------- Net unrealized depreciation on investments (10,941,695) ------------- NET ASSETS $662,856,647 ============= - --------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE Non-Service shares: Net asset value, redemption price per share and offering price per share (based on net assets of $662,793,846 and 62,432,692 shares of beneficial interest outstanding) $10.62 - --------------------------------------------------------------------------------------------------------------------------- Service shares: Net asset value, redemption price per share and offering price per share (based on net assets of $62,801 and 5,912 shares of beneficial interest outstanding) $10.62
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 11 OPPENHEIMER BOND FUND/VA - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS Unaudited - -------------------------------------------------------------------------------- For the Six Months Ended June 30, 2002 - -------------------------------------------------------------------------------- INVESTMENT INCOME - -------------------------------------------------------------------------------- Interest $ 26,207,168 - -------------------------------------------------------------------------------- Dividends 160,463 - -------------------------------------------------------------------------------- Total investment income 26,367,631 - -------------------------------------------------------------------------------- EXPENSES Management fees 2,382,713 - -------------------------------------------------------------------------------- Custodian fees and expenses 20,275 - -------------------------------------------------------------------------------- Trustees' compensation 14,198 - -------------------------------------------------------------------------------- Shareholder reports 13,316 - -------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees 6,495 - -------------------------------------------------------------------------------- Distribution and service plan fees--Service shares 4 - -------------------------------------------------------------------------------- Other 21,594 -------------- Total expenses 2,458,595 Less reduction to custodian expenses (4,710) -------------- Net expenses 2,453,885 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME 23,913,746 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments (24,124,251) Closing of futures contracts 1,333,088 Closing and expiration of option contracts written 138,286 -------------- Net realized loss (22,652,877) - -------------------------------------------------------------------------------- Net change in unrealized appreciation on investments 13,965,519 -------------- Net realized and unrealized loss (8,687,358) - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 15,226,388 ============== SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 12 OPPENHEIMER BOND FUND/VA - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED ENDED JUNE 30, 2002 DECEMBER 31, (UNAUDITED) 2001 - ----------------------------------------------------------------------------------------------------------------- OPERATIONS Net investment income $ 23,913,746 $ 50,640,353 - ----------------------------------------------------------------------------------------------------------------- Net realized gain (loss) (22,652,877) 6,571,787 - ----------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) 13,965,519 (14,467,548) ----------------------------- Net increase in net assets resulting from operations 15,226,388 42,744,592 - ----------------------------------------------------------------------------------------------------------------- DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income: Non-Service shares (50,820,794) (44,272,510) Service shares -- -- - ----------------------------------------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS Net increase in net assets resulting from beneficial interest transactions: Non-Service shares 4,687,276 132,884,316 Service shares 62,772 -- - ----------------------------------------------------------------------------------------------------------------- NET ASSETS Total increase (decrease) (30,844,358) 131,356,398 - ----------------------------------------------------------------------------------------------------------------- Beginning of period 693,701,005 562,344,607 ----------------------------- End of period [including undistributed net investment income of $23,866,278 and $50,773,326, respectively] $662,856,647 $693,701,005 =============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 13 OPPENHEIMER BOND FUND/VA FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED ENDED JUNE 30, 2002 DECEMBER 31, NON-SERVICE SHARES (UNAUDITED) 2001 2000 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA Net asset value, beginning of period $ 11.21 $ 11.25 $ 11.52 $ 12.32 $ 11.91 $ 11.63 - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income .40 .81 .94 .88 .72 .76 Net realized and unrealized gain (loss) (.16) .03 (.29) (1.06) .07 .28 ------------------------------------------------------------------------------- Total from investment operations .24 .84 .65 (.18) .79 1.04 - ------------------------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.83) (.88) (.92) (.57) (.20) (.72) Distributions from net realized gain -- -- -- (.05) (.18) (.04) ------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (.83) (.88) (.92) (.62) (.38) (.76) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 10.62 $ 11.21 $ 11.25 $ 11.52 $ 12.32 $ 11.91 =============================================================================== - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN, AT NET ASSET VALUE(1) 2.37% 7.79% 6.10% (1.52)% 6.80% 9.25% - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $662,794 $693,701 $562,345 $601,064 $655,543 $520,078 - ------------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $673,282 $638,820 $557,873 $633,059 $586,242 $449,760 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets:(2) Net investment income 7.16% 7.93% 7.94% 7.22% 6.31% 6.72% Expenses 0.74% 0.77% 0.76% 0.73% 0.74%(3) 0.78%(3) - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 126% 186% 260% 256% 76% 117% 1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 2. Annualized for periods of less than one full year. 3. Expense ratio has been calculated without adjustment for the reduction to custodian expenses.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 14 OPPENHEIMER BOND FUND/VA PERIOD ENDED JUNE 30, 2002(1) SERVICE SHARES (UNAUDITED) - --------------------------------------------------------------------------- PER SHARE OPERATING DATA Net asset value, beginning of period $ 10.46 - --------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .02 Net realized and unrealized gain .14 -------------- Total from investment operations .16 -------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- Distributions from net realized gain -- ------------- Total dividends and/or distributions to shareholders -- - --------------------------------------------------------------------------- Net asset value, end of period $10.62 ============== - --------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE(2) 1.53% - --------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $63 - --------------------------------------------------------------------------- Average net assets (in thousands) $10 - --------------------------------------------------------------------------- Ratios to average net assets:(3) Net investment income 5.56% Expenses 0.98% - --------------------------------------------------------------------------- Portfolio turnover rate 126% 1. For the period from May 1, 2002 (inception of offering) to June 30, 2002. 2. Assumes an investment on the business day before the first day of the fiscal period (or inception of offering), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 3. Annualized for periods of less than one full year. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 15 OPPENHEIMER BOND FUND/VA - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS Unaudited - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Oppenheimer Bond Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds (the Trust), an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's main investment objective is to seek a high level of current income. The Trust's investment advisor is OppenheimerFunds, Inc. (the Manager). The following is a summary of significant accounting policies consistently followed by the Fund. The Fund offers two classes of shares. Both classes are sold at their offering price, which is the net asset value per share, to separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. The class of shares designated as Service shares is subject to a distribution and service plan. All classes of shares have identical rights and voting privileges. Earnings, net assets and net asset value per share may differ by minor amounts due to each class having its own expenses directly attributable to that class. The following is a summary of significant accounting policies consistently followed by the Fund. - -------------------------------------------------------------------------------- SECURITIES VALUATION. Securities listed or traded on National Stock Exchanges or other domestic or foreign exchanges are valued based on the last sale price of the security traded on that exchange prior to the time when the Fund's assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the closing bid and asked prices, and if not, at the closing bid price. Securities (including restricted securities) for which quotations are not readily available are valued primarily using dealer-supplied valuations, a portfolio pricing service authorized by the Board of Trustees, or at their fair value. Fair value is determined in good faith under consistently applied procedures under the supervision of the Board of Trustees. Short-term "money market type" debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value). - -------------------------------------------------------------------------------- SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Delivery and payment for securities that have been purchased by the Fund on a when-issued basis can take place a month or more after the trade date. Normally the settlement date occurs within six months after the trade date; however, the Fund may, from time to time, purchase securities whose settlement date extends beyond six months or more beyond trade date. During this period, such securities do not earn interest, are subject to market fluctuation and may increase or decrease in value prior to their delivery. The Fund maintains segregated assets with a market value equal to or greater than the amount of its purchase commitments. The purchase of securities on a when-issued basis may increase the volatility of the Fund's net asset value to the extent the Fund makes such purchases while remaining substantially fully invested. As of June 30, 2002, the Fund had entered into net outstanding when-issued commitments of $174,086,992. In connection with its ability to purchase securities on a when-issued basis, the Fund may enter into forward roll transactions with respect to mortgage-related securities. Forward roll transactions require the sale of securities for delivery in the current month, and a simultaneous agreement with the same counterparty to repurchase similar (same type, coupon and maturity) but not identical securities on a specified future date. The forward roll may not extend for a period of greater than one year. The Fund generally records the incremental difference between the forward purchase and sell of each forward roll as interest income. 16 OPPENHEIMER BOND FUND/VA Risks to the Fund of entering into forward roll transactions include the potential inability of the counterparty to meet the terms of the agreement; the potential of the Fund to receive inferior securities to what was sold to the counterparty at redelivery; counterparty credit risk; and the potential paydown speed variance between the mortgage-related pools. - -------------------------------------------------------------------------------- SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be subject to a greater degree of credit risk, greater market fluctuations and risk of loss of income and principal, and may be more sensitive to economic conditions than lower-yielding, higher-rated fixed-income securities. The Fund may acquire securities in default, and is not obligated to dispose of securities whose issuers subsequently default. As of June 30, 2002, securities with an aggregate market value of $732,344, representing 0.11% of the Fund's net assets, were in default. - -------------------------------------------------------------------------------- FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange. Amounts related to the purchase and sale of foreign securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund's Statement of Operations. - -------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS. The Fund, along with other affiliated entities managed by OFI, may transfer uninvested cash balances into one or more joint repurchase agreement accounts. These balances are invested in one or more repurchase agreements, secured by U.S. government securities. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal; however, in the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings. - -------------------------------------------------------------------------------- FEDERAL TAXES. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. As of June 30, 2002, the Fund had available for federal income tax purposes an estimated unused capital loss carryforward of $60,824,776. This estimated capital loss carryforward represents carryforward as of the end of the last fiscal year, increased for losses deferred under tax accounting rules to the current fiscal year and increased or decreased by capital losses or gains realized in the first six months of the current fiscal year. As of December 31, 2001, the Fund had available for federal income tax purposes an unused capital loss carryforward as follows: EXPIRING -------------------------------- 2008 $13,955,380 - -------------------------------------------------------------------------------- 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. 17 OPPENHEIMER BOND FUND/VA - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS Unaudited / Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued CLASSIFICATION OF DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes primarily because of paydown gains and losses and the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund. - -------------------------------------------------------------------------------- INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes accretion of discount and amortization of premium, is accrued as earned. SECURITY TRANSACTIONS. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. - -------------------------------------------------------------------------------- OTHER. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. - -------------------------------------------------------------------------------- 2. SHARES OF BENEFICIAL INTEREST The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:
SIX MONTHS ENDED JUNE 30, 2002(1) YEAR ENDED DECEMBER 31, 2001 SHARES AMOUNT SHARES AMOUNT - ---------------------------------------------------------------------------------------------------------------- NON-SERVICE SHARES Sold 8,052,916 $ 87,136,140 24,573,653 $ 275,467,782 Dividends and/or distributions reinvested 4,914,970 50,820,793 4,099,306 44,272,509 Redeemed (12,430,014) (133,269,657) (16,752,613) (186,855,975) ----------------------------------------------------------------- Net increase 537,872 $ 4,687,276 11,920,346 $ 132,884,316 ================================================================= - ---------------------------------------------------------------------------------------------------------------- SERVICE SHARES Sold 7,808 $ 82,886 -- $ -- Dividends and/or distributions reinvested -- -- -- -- Redeemed (1,896) (20,114) -- -- ----------------------------------------------------------------- Net increase 5,912 $ 62,772 -- $ -- =================================================================
1. For the six months ended June 30, 2002, for Non-Service shares and for the period from May 1, 2002 (inception of offering) to June 30, 2002, for Service shares. 18 OPPENHEIMER BOND FUND/VA - -------------------------------------------------------------------------------- 3. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the six months ended June 30, 2002, were $642,974,647 and $666,888,409, respectively. - -------------------------------------------------------------------------------- 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Trust. 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 six months ended June 30, 2002 was an annualized rate of 0.71%. - -------------------------------------------------------------------------------- TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a $22.50 per account fee. Additionally, funds offered in variable annuity separate accounts are subject to minimum fees of $5,000 for assets of less than $10 million and $10,000 for assets of $10 million or more. The Fund is subject to the minimum fee in the event that the per account fee does not equal or exceed the applicable minimum fee. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees up to an annual rate of 0.25% of average net assets of the fund. This undertaking may be amended or withdrawn at any time. - -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE PLAN FOR SERVICE SHARES. The Fund has adopted a Distribution and Service Plan for Service shares to pay OppenheimerFunds Distributor, Inc., the Distributor, for distribution-related services for the Fund's Service shares. Under the Plan, payments are made quarterly at an annual rate of up to 0.25% of the average annual net assets of the Service shares of the Fund. - -------------------------------------------------------------------------------- 5. FUTURES CONTRACTS A futures contract is a commitment to buy or sell a specific amount of a commodity or financial instrument at a particular price on a stipulated future date at a negotiated price. Futures contracts are traded on a commodity exchange. The Fund may buy and sell futures contracts that relate to broadly based securities indices "financial futures" or debt securities "interest rate futures" in order to gain exposure to or to seek to protect against changes in market value of stock and bonds or interest rates. The Fund may also buy or write put or call options on these futures contracts. The Fund generally sells futures contracts to hedge against increases in interest rates and decreases in market value of portfolio securities. The Fund may also purchase futures contracts to gain exposure to market changes as it may be more efficient or cost effective than actually buying fixed income securities. 19 OPPENHEIMER BOND FUND/VA - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS Unaudited / Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 5. FUTURES CONTRACTS Continued Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable and/or payable for the daily mark to market for variation margin. Realized gains and losses are reported on the Statement of Operations as closing and expiration of futures contracts. Risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. As of June 30, 2002, the Fund had outstanding futures contracts as follows:
UNREALIZED EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION CONTRACT DESCRIPTION DATES CONTRACTS JUNE 30, 2002 (DEPRECIATION) - -------------------------------------------------------------------------------------------------------------- CONTRACTS TO PURCHASE 90-Day Euro 12/16/02 46 $ 11,238,950 $ (2,300) 90-Day Euro 3/17/03 216 52,512,300 309,088 U.S. Long Bond 9/19/02 126 12,950,438 (120,750) U.S. Treasury Nts., 2 yr. 9/27/02 703 147,597,047 378,031 U.S. Treasury Nts., 10 yr. 9/19/02 100 10,723,438 (24,203) ------------ 539,866 ------------ CONTRACTS TO SELL U.S. Treasury Nts., 5 yr. 9/19/02 80 8,593,750 33,297 ------------ $ 573,163 ============
- -------------------------------------------------------------------------------- 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 20 OPPENHEIMER BOND FUND/VA detailed in a note to the Statement of Investments. Options written are reported as a liability in the Statement of Assets and Liabilities. Realized gains and losses are reported in the Statement of Operations. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Written option activity for the six months ended June 30, 2002 was as follows:
CALL OPTIONS PUT OPTIONS ---------------------------------------------------------------------- PRINCIPAL (000S) PRINCIPAL (000S) NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF CONTRACT DESCRIPTION CONTRACTS PREMIUMS CONTRACTS PREMIUMS - ------------------------------------------------------------------------------------------------------------------- Options outstanding as of December 31, 2001 -- $ -- -- $ -- Options written 63,087 414,409 2,400 667,688 Options closed or expired (63,087) (414,409) (2,400) (667,688) --------------------------------------------------------------------- Options outstanding as of June 30, 2002 -- $ -- -- $ -- =====================================================================
- -------------------------------------------------------------------------------- 7. ILLIQUID OR RESTRICTED SECURITIES As of June 30, 2002, investments in securities included issues that are illiquid or restricted. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may also be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund intends to invest no more than 15% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid or restricted securities. Certain restricted securities, eligible for resale to qualified institutional investors, are not subject to that limitation. The aggregate value of illiquid or restricted securities subject to this limitation as of June 30, 2002 was $66,229,782, which represents 9.99% of the Fund's net assets, of which $1,052 is considered restricted. Information concerning restricted securities is as follows:
ACQUISITION VALUATION AS OF UNREALIZED SECURITY DATE COST JUNE 30, 2002 APPRECIATION - --------------------------------------------------------------------------------------------------- STOCKS AND/OR WARRANTS Aurora Foods, Inc. 9/18/00 $-- $1,052 $1,052
21 OPPENHEIMER BOND FUND/VA - -------------------------------------------------------------------------------- OPPENHEIMER BOND FUND/VA - -------------------------------------------------------------------------------- A SERIES OF OPPENHEIMER VARIABLE ACCOUNT FUNDS - -------------------------------------------------------------------------------- TRUSTEES AND OFFICERS James C. Swain, Trustee, CEO and Chairman of the Board John V. Murphy, President and Trustee William L. Armstrong, Trustee Robert G. Avis, Trustee George C. Bowen, Trustee Edward L. Cameron, Trustee Jon S. Fossel, Trustee Sam Freedman, Trustee Beverly L. Hamilton, Trustee Robert J. Malone, Trustee F. William Marshall, Jr., Trustee Angelo Manioudakis, Vice President Robert G. Zack, Vice President and Secretary Brian W. Wixted, Treasurer Katherine P. Feld, Assistant Secretary Kathleen T. Ives, Assistant Secretary Denis R. Molleur, Assistant Secretary - -------------------------------------------------------------------------------- INVESTMENT ADVISOR OppenheimerFunds, Inc. - -------------------------------------------------------------------------------- DISTRIBUTOR OppenheimerFunds Distributor, Inc. - -------------------------------------------------------------------------------- TRANSFER AGENT OppenheimerFunds Services - -------------------------------------------------------------------------------- INDEPENDENT AUDITORS Deloitte & Touche LLP - -------------------------------------------------------------------------------- LEGAL COUNSEL Myer, Swanson, Adams & Wolf, P.C. The financial statements included herein have been taken from the records of the Fund without examination of those records by the independent auditors. For more complete information on Oppenheimer Bond Fund/VA, please refer to the Prospectus. To obtain a copy or for information on how to obtain a separate account prospectus, call OppenheimerFunds, Inc. at 1.800.981.2871. 22 OPPENHEIMER BOND FUND/VA This page intentionally left blank. [LOGO OMITTED] OPPENHEIMERFUNDS [REGISTRATION MARK] DISTRIBUTOR, INC. [COPYRIGHT]Copyright 2002 OppenheimerFunds, Inc. All rights reserved. -----END PRIVACY-ENHANCED MESSAGE-----