N-30D 1 g5300_oppstrategicbondva.txt Semiannual Report June 30, 2002 Oppenheimer STRATEGIC BOND FUND/VA A Series of Oppenheimer Variable Account Funds [LOGO OMITTED] OPPENHEIMERFUNDS[REGISTRATION MARK] The Right Way to Invest OPPENHEIMER STRATEGIC BOND FUND/VA ================================================================================ OBJECTIVE OPPENHEIMER STRATEGIC BOND FUND/VA, a series of Oppenheimer Variable Account Funds, seeks a high level of current income principally derived from interest on debt securities. ================================================================================ NARRATIVE BY ART STEINMETZ, CO-PORTFOLIO MANAGER We are generally pleased with the Fund's performance during the six-month period ended June 30, 2002, particularly in light of the markets' volatility resulting from such factors as the well-publicized accounting and reporting concerns of some major U.S. corporations.(1) In fact, the multi-sector approach to fixed-income investing again proved its worth with the strong performance of emerging-markets securities and domestic mortgage-backed securities and the potential for recovery in the high yield market. In early 2002 we began to see signs that the economic deterioration had stopped, and investors started to look ahead to the recovery phase of the next economic cycle. And when the Federal Reserve Board (the Fed) kept interest rates stable in late January 2002, mortgage rates began to move higher and refinancing activity waned. As a result, mortgage-backed securities rallied strongly. Similarly, emerging-markets bonds rebounded sharply as Argentina's financial problems of 2001 did not spread, and a potential economic recovery in the U.S. held positive implications for exports. However, the high-yield corporate bond market was not improving, primarily due to persistent weakness among the telecommunications companies sector. We still believe in the recovery of the U.S. economy, and therefore we sold some of our emerging market debt holdings to purchase additional high yield bonds, which historically have done well in an improving economy. One distinct advantage of this move is that since both are low-grade investments, the Fund's overall credit quality stayed relatively stable. We have also seen good returns in mortgage-backed securities, which tend to do well in stable interest rate environments when people are less likely to refinance.(2) And while leading economic indicators have been encouraging, most analysts don't expect the Fed to reverse course and raise interest rates anytime soon. 1. 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. 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. 2 OPPENHEIMER STRATEGIC BOND FUND/VA In this environment the Fund concentrated on government bonds, low-grade or high yield bonds, emerging market debt and developed market or international debt. Our emphasis on emerging-markets bonds was a particularly positive contributor to the Fund's performance.(3) The economic downturn, while unsettling to many investors, provided the opportunity to purchase high yielding bonds at what we consider bargain prices. Indeed, a look at past periods of economic weakness suggests that the bond market tends to "overshoot" when the news is bad and that it subsequently rebounds to more normal price levels as the economy recovers. That began to happen during the first six months of 2002. While there is no guarantee that the market will repeat this pattern, we believe that it will. Looking forward, as the economic recovery gathers strength, investors should become more comfortable assuming credit risk. We also believe in the long-term prospects for emerging-market bonds, which should benefit from improving export activity. Over the near term, however, we may see this market pull back as it consolidates recent gains, and we have positioned the Fund accordingly. In the meantime, both sectors should continue to produce competitive yields, while U.S. and foreign government securities should provide some income and a lesser degree of price volatility. This diversified approach to the global bond markets is an important element of what makes Oppenheimer Strategic Bond Fund/VA part of THE RIGHT WAY TO INVEST. 3. Lower-grade debt securities (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 obligations to pay interest and principal. Emerging market countries may have less developed legal and accounting systems and investments maybe subject to greater risks of government restrictions on withdrawing the sales proceeds of securities from the country. 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. 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 STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS June 30, 2002 / Unaudited
PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ===================================================================================== ASSET-BACKED SECURITIES--2.9% American Money Management Corp., Commercial Debt Obligations Sub. Bonds, Series I, Cl. D1, 13.602%, 1/15/12(1) $ 200,000 $ 148,000 Conseco Finance Securitizations Corp., Home Equity Loan Pass- Through Certificates, Series 2001-D, Cl. M2, 3.59%, 11/15/32(1,2) 3,000,000 2,978,438 Consumer Credit Reference Index Securities Program, Credit Card Asset-Backed Certificates, Series 2002-B, Cl. FX, 10.421%, 3/22/07(1) 500,000 516,250 Embarcadero Aircraft Securitization Trust, Airplane Collateral Obligations, Series 2000-A, Cl. B, 2.94%, 8/15/25(1,2) 1,820,063 728,025 Impac Secured Assets CMN Owner Trust, Home Equity Collateralized Mtg. Obligations, Series 2001-5, Cl. M1, 7.25%, 8/23/31 2,197,000 2,269,776 Lehman ABS Manufactured Housing Contract, Commercial Mtg. Pass- Through Certificates, Series 2001-B, Cl. A4, 5.27%, 9/15/18 3,000,000 3,041,250 NC Finance Trust, Collateralized Mtg. Obligations, Series 1999-I, Cl. ECFD, 8.75%, 12/25/28(1) 95,245 76,672 Option One Mortgage Securities Corp., Home Equity Collateralized Mtg. Obligations, Series 1999-1, Cl. CTFS, 10.06%, 3/26/29(1) 88,328 84,408 Principal Residential Mortgage Capital Resources Trust, Real Estate Mtg. Investment Conduit Participation Certificates, Series 2000-1, Cl. B, 3.55%, 6/20/05(1,2) 1,000,000 994,375 ----------------- Total Asset-Backed Securities (Cost $11,884,835) 10,837,194 ===================================================================================== MORTGAGE-BACKED OBLIGATIONS--57.1% ------------------------------------------------------------------------------------- GOVERNMENT AGENCY--48.3% ------------------------------------------------------------------------------------- FHLMC/FNMA/SPONSORED--43.4% Federal Home Loan Mortgage Corp., Gtd. Multiclass Mtg. Pass-Through Certificates: 11%, 11/1/14 258,573 290,843 Series 151, Cl. F, 9%, 5/15/21(13) 357,447 379,116 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ===================================================================================== Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.- Backed Security: Series 192, Cl. IO, 6.50%, 2/1/28(3) $ 9,889,674 $ 1,944,712 Series 194, Cl. IO, 6.50%, 4/1/28(3) 29,972,624 6,408,990 Series 207, Cl. IO, 7%, 6/1/30(3) 8,521,329 1,467,266 Federal National Mortgage Assn.: 6%, 7/25/32(13) 39,500,000 39,401,250 6.50%, 7/1/28-5/1/32 9,434,509 9,634,718 6.50%, 7/1/28(13) 83,900,000 85,525,982 7%, 7/16/32(13) 10,000,000 10,356,300 7.50%, 8/1/25 156,882 165,755 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) 4,500,000 4,762,935 Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Interest- Only Stripped Mtg.-Backed Security: Trust 294, Cl. 2, 7%, 2/1/28(3) 1,166,117 218,647 Trust 313, Cl. 2, 6.50%, 6/25/31(3) 8,373,913 1,957,402 ----------------- 162,513,916 ------------------------------------------------------------------------------------- GNMA/GUARANTEED--4.9% Government National Mortgage Assn., Gtd. Multiclass Mtg. Participation Certificates, Series 1999-27, Cl. PQ, 7.50%, 8/16/28 8,220,125 8,769,805 Government National Mortgage Assn.: 6.63%, 11/20/25 57,344 59,316 7%, 3/15/28-7/15/28 7,391,837 7,699,337 7.50%, 2/15/27 995,218 1,059,389 8%, 11/15/25-5/15/26 821,374 879,483 ----------------- 18,467,330 ------------------------------------------------------------------------------------- PRIVATE--8.8% ------------------------------------------------------------------------------------- COMMERCIAL--6.2% AMRESCO Commercial Mortgage Funding I Corp., Multiclass Mtg. Pass-Through Certificates, Series 1997-C1, Cl. G, 7%, 6/17/29(5) 100,000 92,037 Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates: Series 1996-MD6, Cl. A7, 7.964%, 11/13/26(2) 2,000,000 1,860,313 Series 1997-D4, Cl. B1, 7.525%, 4/14/29 375,000 315,410 Series 1997-D5, Cl. B1, 6.93%, 2/14/41 300,000 153,328 Series 1997-D5, Cl. B2, 1.375%, 2/14/41(1,2) 1,250,000 281,250
4 OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- COMMERCIAL Continued FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Series 1994-C1, Cl. 2G, 8.70%, 9/25/25(1) $ 153,594 $ 150,258 First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates: Series 1997-CHL1, Cl. D, 8.126%, 5/25/08(1,2) 350,000 329,985 Series 1997-CHL1, Cl. E, 8.168%, 2/25/11(1,2) 600,000 484,688 First Union-Lehman Brothers Commercial Mortgage Trust, Commercial Mtg. Pass-Through Certificates, Series 1997-C2, Cl. F, 7.50%, 9/18/15 225,000 185,379 General Motors Acceptance Corp., Collateralized Mtg. Obligations, Series 1998-C1, Cl. E, 7.096%, 3/15/11(2) 800,000 821,750 GMAC Commercial Mortgage Securities, Inc., Interest-Only Stripped Mtg.-Backed Security Pass-Through Certificates, Series 1997-C1, Cl. X, 2.01%, 7/15/27(3) 3,536,335 232,625 GMAC Commercial Mortgage Securities, Inc., Mtg. Pass-Through Certificates: Series 1997-C1, Cl. G, 7.414%, 11/15/11 440,000 351,450 Series 1997-C2, Cl. F, 6.75%, 4/16/29 250,000 147,900 Series 1998-C1, Cl. F, 7.104%, 5/15/30(2) 1,800,000 1,701,333 Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-Through Certificates, Series 1995-C2, Cl. D, 7.596%, 6/15/21(2) 231,556 245,083 Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates: Series 1996-C1, Cl. E, 7.428%, 3/15/06(1,2) 553,342 534,988 Series 1996-C1, Cl. F, 7.42%, 2/15/28(2,5) 162,744 138,331 Series 1997-HF1, Cl. F, 6.86%, 2/15/10(5) 150,000 137,540 Series 1997-RR, Cl. D, 7.713%, 4/30/39(2,5) 450,024 398,658 Series 1997-RR, Cl. E, 7.713%, 4/30/39(2,5) 300,016 230,098 Series 1997-RR, Cl. F, 7.713%, 4/30/39(2,5) 600,032 390,138 Series 1997-XL1, Cl. G, 7.695%, 10/3/30(5) 390,000 360,506 Series 1998-HF1, Cl. F, 7.18%, 12/15/09(5) 1,500,000 1,418,617 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- Mortgage Capital Funding, Inc., Commercial Mtg. Pass-Through Certificates: Series 1996-MC1, Cl. G, 7.15%, 6/15/06(5) $ 1,800,000 $ 1,724,906 Series 1996-MC2, Cl. F, 5.75%, 12/21/26 4,350,000 3,885,773 Series 1997-MC1, Cl. F, 7.452%, 5/20/07(5) 63,720 58,682 Prudential Mortgage Capital Co. II LLC, Commercial Mtg. Pass-Through Certificates, Series PRU-HTG 2000- C1, Cl. A2, 7.306%, 10/6/15 4,000,000 4,205,000 Salomon Brothers Mortgage Securities VII, Inc., Commercial Mtg. Pass- Through Certificates, Series 1996-C1, Cl. F, 8.687%, 1/20/06(2) 1,000,000 865,000 Strategic Hotel Capital, Inc., Commercial Mtg. Obligations, Series 2001-SCH1, Cl. E, 4.04%, 4/17/06(1,2) 1,496,870 1,377,120 Structured Asset Securities Corp., Commercial Mtg. Obligations, Series 1995-C4, Cl. E, 8.929%, 6/25/26(1,2) 73,349 73,349 ----------------- 23,151,495 ------------------------------------------------------------------------------------- RESIDENTIAL--2.6% Lehman Structured Securities Corp., Collateralized Mtg. Obligations, Series 2001-GE4, Cl. A, 6.632%, 10/25/30(2) 1,561,720 1,529,997 Norwest Asset Securities Corp., Collateralized Mtg. Obligations, Mtg. Pass-Through Certificates, Series 1999-20, Cl. A13, 6.75%, 8/25/29 4,378,307 4,437,107 Salomon Brothers Mortgage Securities VII, Inc., Commercial Mtg. Pass- Through Certificates, Series 1996-B, Cl. 1, 7.076%, 4/25/26(1,2) 291,093 220,685 Structured Asset Securities Corp. NIM Trust, Collateralized Mtg. Obligations, Series 2001-1, Cl. A, 7.50%, 7/25/30(1) 202,539 201,274 Washington Mutual Mortgage Loan Trust, Commercial Mtg. Obligations, Series 2001-S9, Cl. A12, 6.75%, 9/25/31(1) 3,328,027 3,355,068 ----------------- 9,744,131 ----------------- Total Mortgage-Backed Obligations (Cost $217,220,155) 213,876,872
5 OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Unaudited / Continued
PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ===================================================================================== U.S. GOVERNMENT OBLIGATIONS--7.3% Federal Home Loan Mortgage Corp. Sr. Unsec. Nts., 5.75%, 9/15/10 $ 940,000 $ 961,094 Federal National Mortgage Assn. Sr. Unsec. Nts., 2.125%, 10/9/07 430,000,000 3,918,288 Federal National Mortgage Assn. Unsec. Nts.: 1.75%, 3/26/08 260,000,000 2,330,803 5.25%, 4/15/07 2,890,000 2,999,543 U.S. Treasury Bonds: 5.375%, 2/15/31 790,000 773,830 8.75%, 5/15/17 1,660,000 2,215,401 8.875%, 2/15/19 735,000 999,923 11.875%, 11/15/03 500,000 564,009 U.S. Treasury Nts.: 5.875%, 2/15/04 2,300,000 2,420,946 6.50%, 2/15/10 4,810,000 5,378,508 6.75%, 5/15/05 2,700,000 2,947,641 7%, 7/15/06 1,760,000 1,966,455 ----------------- Total U.S. Government Obligations (Cost $26,665,337) 27,476,441 ===================================================================================== FOREIGN GOVERNMENT OBLIGATIONS--18.8% ------------------------------------------------------------------------------------- ALGERIA--0.1% Algeria (Republic of) Nts., 2.875%, 3/4/10(1,2) 520,000 463,450 ------------------------------------------------------------------------------------- ARGENTINA--0.4% Argentina (Republic of) Bonds: 3.063%, Series 2018, 6/19/18(6,7) 1,698,000 275,925 11.375%, 3/15/10(6,7) 1,065,000 207,675 11.75%, 6/15/15(6,7) 2,095,000 371,863 Argentina (Republic of) Par Bonds, 5.984%, 3/31/23(6,7) 565,000 251,425 Argentina (Republic of) Unsec. Bonds, 12.375%, 2/21/12(6,7) 360,000 73,800 Argentina (Republic of) Unsec. Unsub. Bonds, 11.75%, 4/7/09(6,7) 845,000 164,775 Argentina (Republic of) Unsub. Bonds, Series 2031, 2.79%, 6/19/31(6,7) 434,600 76,055 Buenos Aires (Province of) Bonds, Series PBA1, 3.257%, 4/1/07(1,6,7)[ARP] 137,148 13,374 ----------------- 1,434,892 ------------------------------------------------------------------------------------- AUSTRIA--0.6% Austria (Republic of) Bonds: 3.40%, 10/20/04[EUR] 450,000 437,754 4.30%, 7/15/03[EUR] 230,000 228,397 6.25%, 7/15/27[EUR] 345,000 379,224 Austria (Republic of) Nts., Series EMTN, 5.50%, 10/20/07[EUR] 890,000 912,365 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ===================================================================================== Austria (Republic of) Sr. Unsec. Unsub. Nts., Series MTN1, 5%, 7/15/12[EUR] 385,000 $ 376,081 ----------------- 2,333,821 ------------------------------------------------------------------------------------- BELGIUM--0.8% Belgium (Kingdom of) Bonds: 5%, 9/28/11[EUR] 320,000 313,788 5.50%, 3/28/28[EUR] 585,000 580,750 6.25%, Series 26, 3/28/07[EUR] 1,310,000 1,382,508 Belgium (Kingdom of) Debs., 7.25%, 4/29/04[EUR] 630,000 657,591 Belgium (Kingdom of) Treasury Bills, Zero Coupon, 3.44%, 9/19/02(8)[EUR] 95,000 93,138 ----------------- 3,027,775 ------------------------------------------------------------------------------------- BRAZIL--0.3% Brazil (Federal Republic of) Bonds, 8.875%, 4/15/24 2,486,000 1,211,925 ------------------------------------------------------------------------------------- BULGARIA--0.1% Bulgaria (Republic of) Interest Arrears Debs., 2.813%, 7/28/11(2) 245,000 216,212 ------------------------------------------------------------------------------------- CANADA--0.2% Canada (Government of) Bonds, 5.50%, 6/1/09[CAD] 1,065,000 712,764 ------------------------------------------------------------------------------------- CHILE--0.1% Chile (Republic of) Nts., 7.125%, 1/11/12 455,000 460,783 ------------------------------------------------------------------------------------- COLOMBIA--0.5% Colombia (Republic of) Bonds, 10%, 1/23/12 375,000 354,375 Colombia (Republic of) Unsec. Unsub. Bonds: 8.375%, 2/15/27 395,000 283,412 11.75%, 2/25/20 385,000 377,685 Colombia (Republic of) Unsec. Unsub. Nts., 11.375%, 1/31/08[EUR] 945,000 907,945 ----------------- 1,923,417 ------------------------------------------------------------------------------------- DOMINICAN REPUBLIC--0.1% Dominican Republic Unsec. Unsub. Bonds, 9.50%, 9/27/06 505,000 534,038 ------------------------------------------------------------------------------------- ECUADOR--0.4% Ecuador (Republic of) Unsec. Bonds, 5%, 8/15/30(2) 2,680,000 1,360,100 ------------------------------------------------------------------------------------- FRANCE--2.0% France (Government of) Obligations Assimilables du Tresor Bonds: 5%, 4/25/12[EUR] 740,000 729,143 5.75%, 10/25/32[EUR] 565,000 595,343
6 OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ===================================================================================== FRANCE Continued France (Government of) Treasury Nts.: 3.50%, 7/12/04[EUR] 2,070,000 $ 2,026,454 3.75%, 1/12/07[EUR] 4,330,000 4,144,876 ----------------- 7,495,816 ------------------------------------------------------------------------------------- GERMANY--2.0% Germany (Republic of) Bonds: 4%, Series 139, 2/16/07[EUR] 4,200,000 4,062,058 5%, Series 01, 7/4/11[EUR] 700,000 695,122 5.50%, 1/4/31[EUR] 590,000 602,204 Treuhandanstalt Gtd. Nts., 6.75%, 5/13/04[EUR] 1,875,000 1,942,856 ----------------- 7,302,240 ------------------------------------------------------------------------------------- GREAT BRITAIN--0.9% United Kingdom Treasury Bonds: 7.75%, 9/8/06[GBP] 1,163,000 1,952,519 8%, 12/7/15[GBP] 649,000 1,275,170 ----------------- 3,227,689 ------------------------------------------------------------------------------------- GREECE--0.4% Greece (Republic of) Bonds, 5.35%, 5/18/11[EUR] 980,000 975,489 Greece (Republic of) Sr. Unsub. Bonds, 4.65%, 4/19/07[EUR] 335,000 330,219 ----------------- 1,305,708 ------------------------------------------------------------------------------------- HUNGARY--0.2% Hungary (Government of) Bonds, Series 07/D, 6.25%, 6/12/07[HUF] 199,320,000 736,722 ------------------------------------------------------------------------------------- ITALY--1.0% Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali: 0.375%, 10/10/06[JPY] 89,000,000 747,582 6%, 5/1/31[EUR] 1,860,000 1,977,829 Italy (Republic of) Treasury Bonds, Cert Di Credito Del Tesoro, Zero Coupon, 3.48%, 7/15/02(8)[EUR] 1,005,000 991,436 ----------------- 3,716,847 ------------------------------------------------------------------------------------- IVORY COAST--0.0% Ivory Coast (Government of) Past Due Interest Bonds, 1.895%, 3/29/18(1,6,7)[FRF] 2,194,500 77,231 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- MEXICO--0.7% United Mexican States Bonds: 5.01%, 12/31/19[DEM] 1,200,000 $ 512,021 11.50%, 5/15/26 600,000 762,600 United Mexican States Bonds, Series MTN, 8.30%, 8/15/31 1,455,000 1,418,625 ----------------- 2,693,246 ------------------------------------------------------------------------------------- NIGERIA--0.0% Nigeria (Federal Republic of) Promissory Nts., Series RC, 5.092%, 1/5/10 380,000 152,000 ------------------------------------------------------------------------------------- PANAMA--0.6% Panama (Republic of) Bonds: 9.375%, 7/23/12 250,000 235,625 9.625%, 2/8/11 680,000 661,300 Panama (Republic of) Interest Reduction Bonds, 4.75%, 7/17/14(2) 555,556 468,056 Panama (Republic of) Nts., 8.25%, 4/22/08 166,000 159,775 Panama (Republic of) Past Due Interest Debs., 2.625%, 7/17/16(2) 881,981 654,871 ----------------- 2,179,627 ------------------------------------------------------------------------------------- PERU--0.3% Peru (Republic of) Sr. Nts., Zero Coupon, 4.53%, 2/28/16(8) 2,651,452 1,296,030 ------------------------------------------------------------------------------------- PHILIPPINES--0.7% Philippines (Republic of) Bonds, 9.375%, 1/18/17 790,000 807,775 Philippines (Republic of) Nts., 10.625%, 3/16/25 445,000 461,020 Philippines (Republic of) Unsec. Bonds: 8.875%, 4/15/08 400,000 418,000 9.875%, 1/15/19 1,105,000 1,100,580 ----------------- 2,787,375 ------------------------------------------------------------------------------------- POLAND--0.6% Poland (Republic of) Bonds, Series 1106, 8.50%, 11/12/06[PLZ] 3,810,000 960,153 Poland (Republic of) Past Due Interest Bonds, 6%, 10/27/14(2) 1,138,000 1,143,690 ----------------- 2,103,843 ------------------------------------------------------------------------------------- PORTUGAL--0.4% Portugal (Republic of) Obrig Do Tes Medio Prazo Unsec. Unsub. Bonds, 5.85%, 5/20/10[EUR] 1,300,000 1,350,308
7 OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Unaudited / Continued
PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- RUSSIA--2.2% Deutsche Bank AG, OAO Gazprom Loan Participation Nts.: 9.50%, 2/19/03 $ 530,000 $ 539,222 10%, 12/9/02(1) 935,000 948,558 Russia (Government of) Debs., Series VI, 3%, 5/14/06 2,600,000 2,041,000 Russian Federation Unsec. Unsub. Nts., 8.75%, 7/24/05 740,000 771,450 Russian Federation Unsub. Nts., 5%, 3/31/30(2) 875 609 Russian Ministry of Finance Debs., 3%, 5/14/08 5,520,000 3,772,575 ----------------- 8,073,414 ------------------------------------------------------------------------------------- SOUTH AFRICA--0.4% South Africa (Republic of) Unsec. Nts.: 7.375%, 4/25/12 815,000 807,869 8.50%, 6/23/17 270,000 282,825 9.125%, 5/19/09 510,000 572,475 ----------------- 1,663,169 ------------------------------------------------------------------------------------- SPAIN--0.8% Spain (Kingdom of) Bonds, Bonos y Obligacion del Estado: 4.25%, 7/30/02[EUR] 1,695,000 1,675,037 5.75%, 7/30/32[EUR] 1,160,000 1,199,345 ----------------- 2,874,382 ------------------------------------------------------------------------------------- SUPRANATIONAL--0.2% European Investment Bank, 2.125%, 9/20/07[JPY] 80,000,000 730,385 ------------------------------------------------------------------------------------- THE NETHERLANDS--0.8% The Netherlands (Government of) Bonds: 5%, 7/15/11[EUR] 185,000 182,304 5.50%, 1/15/28[EUR] 470,000 474,755 5.75%, 1/15/04[EUR] 540,000 547,970 5.75%, Series 1, 2/15/07[EUR] 1,115,000 1,154,250 The Netherlands (Government of) Treasury Bills, Zero Coupon, 3.36%, 9/30/02(8)[EUR] 640,000 626,818 ----------------- 2,986,097 ------------------------------------------------------------------------------------- TURKEY--0.1% Turkey (Republic of) Sr. Unsec. Unsub. Nts., 11.875%, 1/15/30 375,000 321,094 Turkey (Republic of) Sr. Unsub. Bonds, 12.375%, 6/15/09 230,000 214,187 ----------------- 535,281 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ===================================================================================== UKRAINE--0.1% Ukraine (Republic of) Sr. Unsec. Nts., 11%, 3/15/07 $ 342,650 $ 349,417 ------------------------------------------------------------------------------------- VENEZUELA--0.8% Venezuela (Republic of) Bonds, 9.25%, 9/15/27 760,000 488,300 Venezuela (Republic of) Debs., Series DL, 2.875%, 12/18/07(2) 2,908,529 2,174,126 Venezuela (Republic of) Front- Loaded Interest Reduction Bonds, Series B, 3.313%, 3/31/07(2) 402,372 300,773 ----------------- 2,963,199 ----------------- Total Foreign Government Obligations (Cost $68,860,534) 70,279,203 ===================================================================================== LOAN PARTICIPATIONS--0.3% Deutsche Bank AG, Indonesia Rupiah Loan Participation Nts.: 2.60%, 5/21/04(13) 470,000 239,700 2.60%, 3/25/05(13) 265,000 135,150 2.60%, 12/14/13(13) 795,000 365,700 Morocco (Kingdom of) Loan Participation Agreement, Tranche A, 2.75%, 1/1/09(1,2) 205,000 181,938 PT Bank Ekspor Impor Indonesia Nts., Series 4 yr., 5.563%, 8/28/02(1,2) 300,000 291,750 ----------------- Total Loan Participations (Cost $1,225,821) 1,214,238 ===================================================================================== CORPORATE BONDS AND NOTES--36.3% ------------------------------------------------------------------------------------- CONSUMER DISCRETIONARY--10.9% ------------------------------------------------------------------------------------- AUTO COMPONENTS--0.8% Burke Industries, Inc., 10% Sr. Sub. Nts., 8/15/07(6,7) 150,000 -- Collins & Aikman Products Co., 10.75% Sr. Nts., 12/31/11(5) 400,021 404,000 Collins & Aikman Floorcoverings, Inc., 9.75% Sr. Sub. Nts., 2/15/10(5) 200,021 205,000 Dana Corp.: 9% Unsec. Nts., 8/15/11 300,000 297,000 10.125% Sr. Nts., 3/15/10(5) 200,000 205,000 Delco Remy International, Inc., 11% Sr. Unsec. Sub. Nts., 5/1/09 300,000 247,500 Dura Operating Corp.: 9% Sr. Sub. Nts., Series B, 5/1/09[EUR] 400,000 390,102 9% Sr. Unsec. Sub. Nts., Series D, 5/1/09 500,000 487,500
8 OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- AUTO COMPONENTS Continued Stoneridge, Inc., 11.50% Sr. Nts., 5/1/12(5) $ 600,021 $ 609,000 ----------------- 2,845,102 ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE--3.3% Apcoa, Inc., 9.25% Sr. Unsec. Sub. Nts., 3/15/08 100,021 42,625 Aztar Corp., 9% Sr. Unsec. Sub. Nts., 8/15/11 850,021 868,062 Boyd Gaming Corp., 8.75% Nts., 4/15/12(5) 300,021 303,000 Buffets, Inc., 11.25% Sr. Sub. Nts., 7/15/10(5) 300,000 301,500 Capstar Hotel Co., 8.75% Sr. Sub. Nts., 8/15/07 275,000 244,750 Coast Hotels & Casinos, Inc., 9.50% Sr. Sub. Nts., 4/1/09(5) 300,000 316,500 Family Restaurants, Inc., 9.75% Sr. Nts., 2/1/02(6,7) 500,000 2,500 Florida Panthers Holdings, Inc., 9.875% Sr. Sub. Nts., 4/15/09 450,021 468,000 Hollywood Casino Corp., 11.25% Sr. Sec. Nts., 5/1/07 250,021 271,250 Hollywood Park, Inc., 9.25% Sr. Unsec. Sub. Nts., Series B, 2/15/07 325,000 292,500 Intrawest Corp., 9.75% Sr. Nts., 8/15/08 350,000 357,000 Isle of Capri Casinos, Inc., 9% Sr. Sub. Nts., 3/15/12(5) 500,021 507,500 John Q. Hammons Hotels, Inc., 8.875% Nts., 5/15/12(5) 300,021 295,500 Jupiters Ltd., 8.50% Sr. Unsec. Nts., 3/1/06 400,000 410,000 Mandalay Resort Group, 10.25% Sr. Unsec. Sub. Nts., Series B, 8/1/07 650,021 684,937 MGM Mirage, Inc., 8.375% Sr. Unsec. Sub. Nts., 2/1/11(4) 1,200,000 1,212,000 Mohegan Tribal Gaming Authority: 8% Sr. Sub. Nts., 4/1/12(5) 400,021 403,500 8.125% Sr. Nts., 1/1/06 300,000 309,000 8.375% Sr. Sub. Nts., 7/1/11 600,021 615,750 8.75% Sr. Unsec. Sub. Nts., 1/1/09 700,000 728,875 Park Place Entertainment Corp., 7.875% Sr. Sub. Nts., 3/15/10(5) 200,021 199,500 Premier Cruise Ltd., 11% Sr. Nts., 3/15/08(1,6,7) 250,000 -- Premier Parks, Inc.: 0%/10% Sr. Disc. Nts., 4/1/08(9) 750,000 735,000 9.75% Sr. Nts., 6/15/07 500,000 515,000 Prime Hospitality Corp., 8.375% Sr. Sub. Nts., 5/1/12(5) 400,021 394,000 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- Station Casinos, Inc., 9.875% Sr. Unsec. Sub. Nts., 7/1/10 $ 800,000 $ 850,000 Sun International Hotels Ltd., 8.875% Sr. Sub. Nts., 8/15/11(5) 700,000 718,375 Trump Atlantic City Associates/ Trump Atlantic City Funding, Inc., 11.25% First Mtg. Nts., 5/1/06 25,000 18,938 Vail Resorts, Inc., 8.75% Sr. Unsec. Sub. Nts., 5/15/09 200,000 201,000 Venetian Casino Resort LLC/Las Vegas Sands, Inc., 11% Bonds, 6/15/10(5) 250,021 252,813 ----------------- 12,519,375 ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES--1.3% Beazer Homes USA, Inc., 8.375% Sr. Nts., 4/15/12(5) 400,000 406,000 Blount, Inc., 13% Sr. Sub. Nts., 8/1/09 300,000 204,000 D.R. Horton, Inc.: 7.875% Sr. Nts., 8/15/11 300,000 294,000 9.375% Sr. Unsec. Sub. Nts., 3/15/11 400,000 408,000 9.75% Sr. Sub. Nts., 9/15/10 400,000 416,000 Del Webb Corp, 10.25% Sr. Unsec. Sub. Nts., 2/15/10 300,000 330,750 KB Home: 7.75% Sr. Nts., 10/15/04 300,000 304,500 8.625% Sr. Sub. Nts., 12/15/08 250,000 253,750 9.50% Sr. Unsec. Sub. Nts., 2/15/11 400,000 413,000 Metromedia International Group, Inc., 10.50% Sr. Unsec. Disc. Nts., 9/30/07(1,2) 529,470 129,720 Salton, Inc., 10.75% Sr. Unsec. Sub. Nts., 12/15/05 425,000 429,250 Standard Pacific Corp., 9.25% Sr. Sub. Nts., 4/15/12 200,000 202,000 WCI Communities, Inc., 9.125% Sr. Sub. Nts., 5/1/12 300,000 299,250 Williams Scotsman, Inc., 9.875% Sr. Unsec. Nts., 6/1/07(5) 800,000 768,000 ----------------- 4,858,220 ------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL--0.3% Amazon.com, Inc., 0%/10% Sr. Unsec. Disc. Nts., 5/1/08(9) 1,100,000 1,006,500 ------------------------------------------------------------------------------------- MEDIA--3.9% Adelphia Communications Corp.: 7.875% Sr. Unsec. Nts., 5/1/09(6) 350,000 136,500 10.25% Sr. Unsec. Nts., 11/1/06(6) 400,000 160,000 10.25% Sr. Unsec. Sub. Nts., 6/15/11(6) 600,000 249,000 10.875% Sr. Unsec. Nts., 10/1/10(6) 500,000 200,000 AMC Entertainment, Inc., 9.50% Sr. Unsec. Sub. Nts., 2/1/11 500,000 498,125
9 OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Unaudited / Continued
PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- MEDIA Continued Block Communications, Inc., 9.25% Sr. Sub. Nts., 4/15/09(5) $ 400,000 $ 402,000 Chancellor Media Corp., 8.75% Sr. Unsec. Sub. Nts., Series B, 6/15/07 400,000 402,000 Charter Communications Holdings LLC/Charter Communications Holdings Capital Corp.: 0%/9.92% Sr. Unsec. Disc. Nts., 4/1/11(9) 900,000 434,250 8.25% Sr. Unsec. Nts., 4/1/07 250,000 168,750 8.625% Sr. Unsec. Nts., 4/1/09 200,000 135,000 10.75% Sr. Unsec. Nts., 10/1/09 1,100,000 778,250 11.125% Sr. Unsec. Nts., 1/15/11 499,979 347,500 Classic Cable, Inc., 10.50% Sr. Sub. Nts., 3/1/10(6,7) 199,979 45,250 Comcast UK Cable Partner Ltd., 11.20% Sr. Unsec. Disc. Debs., 11/15/07 249,979 226,250 Corus Entertainment, Inc., 8.75% Sr. Sub. Nts., 3/1/12 300,000 301,500 Cumulus Media, Inc., 10.375% Sr. Unsec. Sub. Nts., 7/1/08 450,000 479,250 Diamond Cable Communications plc, 11.75% Sr. Disc. Nts., 12/15/05(6) 500,000 132,500 Diamond Holdings plc, 9.125% Sr. Nts., 2/1/08(6) 49,979 44,750 EchoStar Broadband Corp., 10.375% Sr. Unsec. Nts., 10/1/07 799,979 768,000 EchoStar DBS Corp., 9.375% Sr. Unsec. Nts., 2/1/09 900,000 837,000 Emmis Communications Corp.: 0%/12.50% Sr. Unsec. Disc. Nts., 3/15/11(9) 700,000 507,500 8.125% Sr. Unsec. Sub. Nts., Series B, 3/15/09 600,000 588,000 Entravision Communications Corp., 8.125% Sr. Sub. Nts., 3/15/09(5) 399,979 404,000 Insight Midwest LP/Insight Capital, Inc., 9.75% Sr. Nts., 10/1/09 399,979 370,000 Key3Media Group, Inc., 11.25% Sr. Sub. Nts., 6/15/11 499,979 227,500 Lamar Advertising Co.: 8.625% Sr. Sub. Nts., 9/15/07 150,000 154,500 9.625% Sr. Unsec. Sub. Nts., 12/1/06 49,979 51,625 Mediacom LLC/Mediacom Capital Corp., 9.50% Sr. Unsec. Nts., 1/15/13 600,000 522,000 Penton Media, Inc., 10.375% Sr. Unsec. Sub. Nts., 6/15/11 600,000 369,000 Radio One, Inc., 8.875% Sr. Unsec. Sub. Nts., Series B, 7/1/11 199,979 200,500 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- Regal Cinemas, Inc., 9.375% Sr. Sub. Nts., 2/1/12(5) $ 199,979 $ 208,000 Rogers Cablesystems Ltd., 10% Second Priority Sr. Sec. Debs., 12/1/07 199,979 209,000 Shaw Communications, Inc., 8.54% Debs., 9/30/27[CAD] 340,000 202,268 Sinclair Broadcast Group, Inc.: 8% Sr. Sub. Nts., 3/15/12 749,979 742,500 8.75% Sr. Sub. Nts., 12/15/07 100,000 100,000 8.75% Sr. Sub. Nts., 12/15/11 299,979 301,500 9% Sr. Unsec. Sub. Nts., 7/15/07 500,000 502,500 Six Flags, Inc., 8.875% Sr. Nts., 2/1/10 800,000 800,000 Spanish Broadcasting System, Inc., 9.625% Sr. Unsec. Sub. Nts., 11/1/09 800,000 828,000 Telewest Communications plc, 0%/9.875% Sr. Disc. Nts., 4/15/09(9)[GBP] 100,000 51,064 United Pan-Europe Communications NV: 0%/13.375% Sr. Unsec. Disc. Nts., Series B, 11/1/09(6,7,9) 500,000 50,000 0%/13.75% Sr. Unsec. Disc. Nts., Series B, 2/1/10(6,7,9) 200,000 20,000 11.25% Sr. Nts., Series B, 11/1/09(6)[EUR] 250,000 30,245 WRC Media, Inc./Weekly Reader Corp./Compass Learning Corp., 12.75% Sr. Sub. Nts., 11/15/09 500,000 513,750 ----------------- 14,699,327 ------------------------------------------------------------------------------------- MULTILINE RETAIL--0.3% Saks, Inc.: 8.25% Sr. Unsec. Nts., 11/15/08 700,000 665,000 9.875% Nts., 10/1/11 400,000 404,000 ----------------- 1,069,000 ------------------------------------------------------------------------------------- SPECIALTY RETAIL--0.8% Asbury Automotive Group, Inc., 9% Sr. Sub. Nts., 6/15/12(5) 300,000 291,000 AutoNation, Inc., 9% Sr. Unsec. Nts., 8/1/08 500,000 517,500 CSK Auto, Inc., 12% Sr. Nts., 6/15/06(5) 400,000 429,500 Eye Care Centers of America, Inc., 9.125% Sr. Unsec. Sub. Nts., 5/1/08 200,000 171,000 Finlay Enterprises, Inc., 9% Debs., 5/1/08 100,000 96,875 Petco Animal Supplies, Inc., 10.75% Sr. Sub. Nts., 11/1/11 200,000 217,000 United Auto Group, Inc., 9.625% Sr. Sub. Nts., 3/15/12(5) 300,000 303,000 United Rentals (North America), Inc., 10.75% Sr. Unsec. Nts., 4/15/08 600,000 645,000
10 OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- SPECIALTY RETAIL Continued United Rentals, Inc., 9.25% Sr. Unsec. Sub. Nts., Series B, 1/15/09 $ 250,000 $ 252,500 ----------------- 2,923,375 ------------------------------------------------------------------------------------- TEXTILES & APPAREL--0.2% Finlay Fine Jewelry Corp., 8.375% Sr. Nts., 5/1/08 300,000 295,125 Galey & Lord, Inc., 9.125% Sr. Unsec. Sub. Nts., 3/1/08(6) 400,000 71,000 Phillips-Van Heusen Corp., 9.50% Sr. Unsec. Sub. Nts., 5/1/08 200,000 204,000 Russell Corp., 9.25% Sr. Nts., 5/1/10(5) 200,000 207,000 ----------------- 777,125 ------------------------------------------------------------------------------------- CONSUMER STAPLES--1.9% ------------------------------------------------------------------------------------- BEVERAGES--0.1% Constellation Brands, Inc., 8.125% Sr. Sub. Nts., 1/15/12 300,000 309,375 Packaged Ice, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/1/05 200,000 168,000 ----------------- 477,375 ------------------------------------------------------------------------------------- FOOD & DRUG RETAILING--0.7% Fleming Cos., Inc.: 10.125% Sr. Unsec. Nts., 4/1/08 400,000 408,000 10.625% Sr. Unsec. Sub. Nts., Series D, 7/31/07 600,000 591,000 Great Atlantic & Pacific Tea Co., Inc. (The), 9.125% Sr. Nts., 12/15/11 400,000 374,000 Pantry, Inc. (The), 10.25% Sr. Sub. Nts., 10/15/07 200,000 182,000 Pathmark Stores, Inc., 8.75% Sr. Sub. Nts., 2/1/12 500,000 510,000 Real Time Data Co., 13% Disc. Nts., 5/31/09(1,6,7) 142,981 18,588 Winn-Dixie Stores, Inc., 8.875% Sr. Nts., 4/1/08 400,000 402,000 ----------------- 2,485,588 ------------------------------------------------------------------------------------- FOOD PRODUCTS--0.7% American Seafood Group LLC, 10.125% Sr. Sub. Nts., 4/15/10(5) 200,000 203,000 Aurora Foods, Inc., 8.75% Sr. Sub. Nts., Series B, 7/1/08 300,000 202,500 Burns Philp Capital Pty Ltd., 9.75% Sr. Sub. Nts., 7/15/12(5) 200,000 199,000 Del Monte Corp., 9.25% Sr. Unsec. Sub. Nts., 5/15/11 300,000 313,500 Doane Pet Care Co., 9.75% Sr. Unsec. Sub. Nts., 5/15/07 200,000 175,000 Dole Food Co., Inc., 7.25% Nts., 5/1/09(5) 800,000 819,076 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- Smithfield Foods, Inc., 7.625% Sr. Unsec. Sub. Nts., 2/15/08 $ 400,000 $ 401,000 Sparkling Spring Water Group Ltd., 11.50% Sr. Sec. Sub. Nts., 11/15/07 200,000 195,250 ----------------- 2,508,326 ------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS--0.4% AKI Holdings Corp., 0%/13.50% Sr. Disc. Debs., 7/1/09(9) 150,000 75,937 AKI, Inc., 10.50% Sr. Unsec. Nts., 7/1/08 350,000 334,688 Holmes Products Corp., 9.875% Sr. Unsec. Sub. Nts., Series B, 11/15/07 200,000 131,500 Johnsondiversey, Inc., 9.625% Sr. Sub. Nts., 5/15/12(5) 250,021 262,500 Playtex Products, Inc., 9.375% Sr. Unsec. Sub. Nts., 6/1/11 500,021 532,500 Revlon Consumer Products Corp., 9% Sr. Nts., 11/1/06 300,000 211,500 Styling Technology Corp., 10.875% Sr. Unsec. Sub. Nts., 7/1/08(1,6,7) 70,000 -- ----------------- 1,548,625 ------------------------------------------------------------------------------------- ENERGY--3.1% ------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES--1.3% Clark Refining & Marketing, Inc., 8.875% Sr. Sub. Nts., 11/15/07 200,000 193,000 Denbury Management, Inc., 9% Sr. Sub. Nts., 3/1/08 400,000 395,000 Dresser, Inc., 9.375% Sr. Sub. Nts., 4/15/11(5) 300,000 305,250 Grant Geophysical, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/15/08(1) 560,000 254,800 Hanover Equipment Trust, 8.50% Sr. Sec. Nts., Trust 2001, Cl. A, 9/1/08(5) 500,000 465,000 Hornbeck-Leevac Marine Services, Inc., 10.625% Sr. Nts., 8/1/08 750,000 788,437 Leviathan Gas Pipeline Partners LP/ Leviathan Finance Corp., 10.375% Sr. Unsec. Sub. Nts., Series B, 6/1/09 400,000 426,000 Ocean Rig Norway AS, 10.25% Sr. Sec. Nts., 6/1/08 700,000 619,500 Petroleum Helicopters, Inc., 9.375% Sr. Nts., 5/1/09 200,000 206,000 Trico Marine Services, Inc., 8.875% Sr. Nts., 5/15/12(5) 600,000 597,000 Universal Compression Holdings, Inc., 0%/9.875% Sr. Disc. Nts., 2/15/08(9) 800,000 764,000 ----------------- 5,013,987
11 OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Unaudited / Continued
PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- OIL & GAS--1.8% Chesapeake Energy Corp., 8.125% Sr. Unsec. Nts., 4/1/11 $ 600,000 $ 592,500 Forest Oil Corp., 7.75% Sr. Nts., 5/1/14(5) 300,000 291,000 Frontier Oil Corp., 11.75% Sr. Nts., 11/15/09 400,000 427,000 Funding Corp./Beaver Valley Funding Corp., 9% Second Lease Obligation Bonds, 6/1/17 199,000 213,346 Giant Industries, Inc., 11% Sr. Sub. Nts., 5/15/12(5) 300,000 265,500 Magnum Hunter Resources, Inc., 9.60% Sr. Nts., 3/15/12(5) 400,000 414,000 PDVSA Finance Ltd., 9.375% Sr. Unsec. Nts., 11/15/07 235,000 232,650 Pennzoil-Quaker State Co., 6.75% Nts., 4/1/09 575,000 598,272 Petroleos Mexicanos, 9.375% Sr. Unsec. Bonds, 12/2/08 585,000 628,875 Petronas Capital Ltd., 7.875% Nts., 5/22/22(5) 820,000 817,037 Pioneer Natural Resources Co., 7.50% Sr. Nts., 4/15/12 600,000 612,599 Pogo Producing Co., 8.75% Sr. Sub. Nts., Series B, 5/15/07 300,000 305,625 Premcor USA, Inc., 11.50% Cum. Sr. Nts., 10/1/09(1) 78,000 82,290 RAM Energy, Inc., 11.50% Sr. Unsec. Nts., 2/15/08 900,000 459,000 Stone Energy Corp., 8.75% Sr. Sub. Nts., 9/15/07 270,000 276,750 XTO Energy, Inc., 7.50% Sr. Nts., 4/15/12 500,000 512,500 ----------------- 6,728,944 ------------------------------------------------------------------------------------- FINANCIALS--4.5% ------------------------------------------------------------------------------------- BANKS--1.0% Bank Plus Corp., 12% Sr. Nts., 7/18/07 7,000 7,525 Chohung Bank, 11.875% Sub. Nts., 4/1/10(2) 550,000 634,576 European Investment Bank, 3% Eligible Interest Nts., 9/20/06[JPY] 173,000,000 1,612,944 Local Financial Corp., 11% Sr. Nts., 9/8/04(5) 150,000 159,750 Ocwen Capital Trust I, 10.875% Capital Nts., 8/1/27 150,000 120,750 Ocwen Financial Corp., 11.875% Nts., 10/1/03 150,000 150,000 Ongko International Finance Co. BV, 10.50% Sec. Nts., 3/29/04(1,6,7) 90,000 1,350 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- Tokai Preferred Capital Co. LLC, 9.98% Non-Cum. Bonds, Series A, 12/29/49(2,5) $ 585,000 $ 495,945 Western Financial Bank, 9.625% Unsec. Sub. Debs., 5/15/12 500,000 502,500 ----------------- 3,685,340 ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIALS--1.0% AmeriCredit Corp., 9.875% Sr. Nts., 4/15/06(1) 600,000 606,000 AMRESCO, Inc.: 9.875% Sr. Sub. Nts., Series 98-A, 3/15/05(6,7) 300,000 64,500 10% Sr. Sub. Nts., Series 97-A, 3/15/04(6,7) 100,000 21,500 Finova Group, Inc. (The), 7.50% Nts., 11/15/09 1,000,000 335,000 Fuji JGB Investment LLC, 9.87% Non-Cum. Bonds, Series A, 12/31/49(2,5) 695,000 603,867 IBJ Preferred Capital Co. (The) LLC, 8.79% Bonds, 12/29/49(2,5) 1,685,000 1,393,113 IPC Acquisition Corp., 11.50% Sr. Sub. Nts., 12/15/09(5) 400,000 386,000 LaBranche & Co., Inc., 12% Sr. Unsec. Sub. Nts., 3/2/07 200,000 225,000 ----------------- 3,634,980 ------------------------------------------------------------------------------------- INSURANCE--0.0% Conseco, Inc., 10.75% Sr. Unsec. Nts., 6/15/09(5) 300,000 147,000 ------------------------------------------------------------------------------------- REAL ESTATE--1.0% CB Richard Ellis Services, Inc., 11.25% Sr. Unsec. Sub. Nts., 6/15/11 250,000 211,250 Corrections Corp. of America, 9.875% Sr. Nts., 5/1/09(5) 300,000 310,500 Felcor Lodging LP, 8.50% Sr. Nts., 6/1/11 406,000 399,910 Host Marriott LP, 9.50% Sr. Nts., 1/15/07(5) 400,000 405,500 IStar Financial, Inc., 8.75% Sr. Unsec. Nts., 8/15/08 200,000 198,574 MeriStar Hospitality Corp.: 8.75% Sr. Unsec. Sub. Nts., 8/15/07 325,000 289,250 9.125% Sr. Nts., 1/15/11 1,000,000 960,000 9.125% Sr. Unsec. Nts., 1/15/11(5) 300,000 288,000 10.50% Sr. Nts., 6/15/09(5) 400,000 406,000 Saul (B.F.) Real Estate Investment Trust, 9.75% Sr. Sec. Nts., Series B, 4/1/08 245,000 243,775 Ventas Realty LP, 9% Sr. Nts., 5/1/12(5) 200,000 206,000 ----------------- 3,918,759
12 OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- HEALTH CARE--2.1% ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES--0.5% ------------------------------------------------------------------------------------- Fisher Scientific International, Inc.: 8.125% Sr. Sub. Nts., 5/1/12(5) $ 300,000 $ 300,000 9% Sr. Unsec. Sub. Nts., 2/1/08 400,000 411,000 9% Sr. Unsec. Sub. Nts., 2/1/08 105,000 107,887 Kinetic Concepts, Inc., 9.625% Sr. Unsec. Sub. Nts., Series B, 11/1/07 250,000 250,000 Sybron Dental Specialties, Inc., 8.125% Sr. Sub. Nts., 6/15/12(5) 300,000 298,500 Vanguard Health Systems, Inc., 9.75% Sr. Unsec. Sub. Nts., 8/1/11 300,000 314,250 ----------------- 1,681,637 ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES--1.5% aaiPharma, Inc., 11% Sr. Sub. Nts., 4/1/10(5) 200,000 186,000 Beverly Enterprises, Inc., 9.625% Sr. Unsec. Nts., 4/15/09 800,000 824,000 Extendicare Health Services, Inc., 9.50% Sr. Nts., 7/1/10(5) 300,000 301,875 Fresenius Medical Care Capital Trust II, 7.875% Nts., 2/1/08 700,000 631,750 Fresenius Medical Care Capital Trust III, 7.375% Nts., 2/1/08[DEM] 25,000 11,551 Fresenius Medical Care Capital Trust IV, 7.875% Trust Preferred Nts., 6/15/11 600,000 540,000 Hanger Orthopedic Group, Inc., 10.375% Sr. Nts., 2/15/09(5) 125,000 130,625 Healthsouth Corp., 7.625% Nts., 6/1/12(5) 600,000 595,391 Magellan Health Services, Inc.: 9% Sr. Sub. Nts., 2/15/08 600,000 219,000 9.375% Sr. Nts., 11/15/07(5) 700,000 528,500 PacifiCare Health Systems, Inc., 10.75% Sr. Nts., 6/1/09(5) 900,000 925,875 Triad Hospitals, Inc., 8.75% Sr. Unsec. Nts., Series B, 5/1/09 400,000 420,000 US Oncology, Inc., 9.625% Sr. Sub. Nts., 2/1/12 400,000 390,000 ----------------- 5,704,567 ------------------------------------------------------------------------------------- PHARMACEUTICALS--0.1% Pfizer, Inc., 0.80% Unsec. Bonds, Series INTL, 3/18/08[JPY] 53,000,000 447,887 ------------------------------------------------------------------------------------- INDUSTRIALS--4.9% ------------------------------------------------------------------------------------- AEROSPACE & DEFENSE--0.6% Alliant Techsystems, Inc., 8.50% Sr. Unsec. Sub. Nts., 5/15/11 300,000 315,000 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- American Plumbing & Mechanical, Inc., 11.625% Sr. Sub. Nts., Series B, 10/15/08 $ 425,000 $ 422,875 BE Aerospace, Inc., 8.875% Sr. Unsec. Sub. Nts., 5/1/11 400,000 374,000 Fairchild Corp., 10.75% Sr. Unsec. Sub. Nts., 4/15/09 325,000 186,875 L-3 Communications Corp., 7.625% Sr. Sub. Nts., 6/15/12(5) 600,000 601,500 SC International Services, Inc., 9.25% Sr. Sub. Nts., Series B, 9/1/07 200,000 160,000 Transdigm, Inc., 10.375% Sr. Sub. Nts., 12/1/08(5) 200,000 206,000 ----------------- 2,266,250 ------------------------------------------------------------------------------------- AIR FREIGHT & COURIERS--0.1% Atlas Air, Inc.: 9.25% Sr. Nts., 4/15/08 100,000 50,500 9.375% Sr. Unsec. Nts., 11/15/06 650,000 328,250 ----------------- 378,750 ------------------------------------------------------------------------------------- AIRLINES--0.3% America West Airlines, Inc., 10.75% Sr. Nts., 9/1/05 450,000 250,312 Amtran, Inc.: 9.625% Nts., 12/15/05 300,000 208,500 10.50% Sr. Nts., 8/1/04 700,000 507,500 ----------------- 966,312 ------------------------------------------------------------------------------------- BUILDING PRODUCTS--0.3% Associated Materials, Inc., 9.75% Sr. Sub. Nts., 4/15/12(5) 200,000 206,000 Nortek, Inc.: 9.125% Sr. Unsec. Nts., Series B, 9/1/07 650,000 661,375 9.25% Sr. Nts., Series B, 3/15/07 150,000 152,625 9.875% Sr. Unsec. Sub. Nts., 6/15/11 250,000 253,750 ----------------- 1,273,750 ------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES--1.4% Allied Waste North America, Inc.: 8.50% Sr. Sub. Nts., 12/1/08 900,000 873,000 8.875% Sr. Nts., Series B, 4/1/08 800,000 788,000 10% Sr. Unsec. Sub. Nts., Series B, 8/1/09 900,000 888,822 Buhrmann US, Inc., 12.25% Sr. Unsec. Sub. Nts., 11/1/09 500,000 522,500 Coinmach Corp., 9% Sr. Nts., 2/1/10(5) 250,000 255,000 Dyncorp, Inc., 9.50% Sr. Sub. Nts., 3/1/07 350,000 364,000 Hydrochem Industrial Services, Inc., 10.375% Sr. Sub. Nts., 8/1/07(1) 150,000 117,750
13 OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Unaudited / Continued
PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES Continued IT Group, Inc., 11.25% Sr. Unsec. Sub. Nts., Series B, 4/1/09(1,6) $ 400,000 $ 500 Kindercare Learning Centers, Inc., 9.50% Sr. Sub. Nts., 2/15/09 500,000 497,500 Mail-Well, Inc., 9.625% Sr. Nts., 3/15/12(5) 400,000 404,000 Protection One, Inc./Protection One Alarm Monitoring, Inc., 7.375% Sr. Unsec. Nts., 8/15/05 400,000 354,000 Safety-Kleen Corp., 9.25% Sr. Unsec. Nts., 5/15/09(1,6,7) 400,000 10,000 Synagro Technologies, Inc., 9.50% Sr. Sub. Nts., 4/1/09(5) 200,000 206,000 ----------------- 5,281,072 ------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING--0.4% Brand Scaffold Services, Inc., 10.25% Sr. Unsec. Nts., 2/15/08 300,000 296,250 Integrated Electrical Services, Inc., 9.375% Sr. Sub. Nts., Series C, 2/1/09 700,000 675,500 Spectrasite Holdings, Inc., 0%/12% Sr. Disc. Nts., 7/15/08(9) 500,000 157,500 URS Corp., 12.25% Sr. Sub. Nts., Series B, 5/1/09 500,000 502,500 ----------------- 1,631,750 ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT--0.2% Cherokee International LLC, 10.50% Sr. Unsec. Sub. Nts., Series B, 5/1/09 500,000 252,500 Dayton Superior Corp., 13% Sr. Unsec. Sub. Nts., 6/15/09 200,000 201,000 UCAR Finance, Inc., 10.25% Sr. Nts., 2/15/12(5) 300,000 307,500 ----------------- 761,000 ------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES--0.3% Great Lakes Dredge & Dock Corp., 11.25% Sr. Unsec. Sub. Nts., 8/15/08 500,000 527,500 Tyco International Group SA, 6.375% Nts., 10/15/11 700,000 536,893 ----------------- 1,064,393 ------------------------------------------------------------------------------------- MACHINERY--0.9% Actuant Corp., 13% Sr. Sub. Nts., 5/1/09 208,000 242,320 AGCO Corp., 9.50% Sr. Unsec. Nts., 5/1/08 800,000 850,000 Eagle-Picher Industries, Inc., 9.375% Sr. Unsec. Sub. Nts., 3/1/08 300,000 249,000 Insilco Corp., 12% Sr. Sub. Nts., 8/15/07(6) 400,000 32,000 International Wire Group, Inc., 11.75% Sr. Sub. Nts., Series B, 6/1/05 125,000 112,500 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- Joy Global, Inc., 8.75% Sr. Sub. Nts., 3/15/12(5) $ 100,000 $ 102,750 NMHG Holding Co., 10% Sr. Nts., 5/15/09(5) 300,000 306,000 Roller Bearing Co. of America, Inc., 9.625% Sr. Sub. Nts., Series B, 6/15/07 540,000 523,800 Terex Corp.: 8.875% Sr. Unsec. Sub. Nts., 4/1/08 250,000 255,000 8.875% Sr. Unsec. Sub. Nts., Series C, 4/1/08 100,000 102,000 9.25% Sr. Unsec. Sub. Nts., 7/15/11 400,000 416,000 ----------------- 3,191,370 ------------------------------------------------------------------------------------- MARINE--0.2% CP Ships Ltd., 10.375% Sr. Nts., 7/15/12(5) 600,000 592,500 Millenium Seacarriers, Inc., Units (each unit consists of $1,000 principal amount of 12% first priority ship mtg. sr. sec. nts., 7/15/05 and one warrant to purchase five shares of common stock)(1,6,10) 250,000 137,500 Navigator Gas Transport plc, 10.50% First Priority Ship Mtg. Nts., 6/30/07(5) 175,000 81,375 ----------------- 811,375 ------------------------------------------------------------------------------------- ROAD & RAIL--0.1% Kansas City Southern Railway, 7.50% Sr. Nts., 6/15/09(5) 400,000 402,500 ------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE--0.1% Budget Group, Inc., 9.125% Sr. Unsec. Nts., 4/1/06(6) 700,000 171,500 Cambridge Industries, Inc., Liquidating Trust Interests, 7/15/07 77,456 -- ----------------- 171,500 ------------------------------------------------------------------------------------- INFORMATION TECHNOLOGY--1.4% ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT--0.0% CellNet Data Systems, Inc., 0%/14% Sr. Unsec. Disc. Nts., 10/1/07(1,6,7,9) 400,000 40 ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS--0.0% Seagate Technology Hdd Holdings, 8% Sr. Nts., 5/15/09(5) 200,000 201,000 ------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--0.6% ChipPAC International Co. Ltd., 12.75% Sr. Unsec. Sub. Nts., Series B, 8/1/09(1) 600,000 633,000
14 OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS Continued Communications & Power Industries, Inc., 12% Sr. Sub. Nts., Series B, 8/1/05(1) $ 250,000 $ 202,500 Flextronics International Ltd., 9.875% Sr. Unsec. Sub. Nts., 7/1/10 500,000 525,000 Ingram Micro, Inc., 9.875% Sr. Unsec. Sub. Nts., 8/15/08 700,000 731,500 ----------------- 2,092,000 ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES--0.1% Equinix, Inc., 13% Sr. Unsec. Nts., 12/1/07(1) 200,000 37,000 Exodus Communications, Inc., 10.75% Sr. Nts., 12/15/09(6,7)[EUR] 400,000 63,206 FirstWorld Communications, Inc., 0%/13% Sr. Disc. Nts., 4/15/08(1,6,7,9) 250,000 24,063 Globix Corp., 12.50% Sr. Unsec. Nts., 2/1/10(6) 300,000 55,500 PSINet, Inc.: 10.50% Sr. Unsec. Nts., 12/1/06(6,7)[EUR] 100,000 8,148 11% Sr. Nts., 8/1/09(6,7) 300,000 30,750 ----------------- 218,667 ------------------------------------------------------------------------------------- OFFICE ELECTRONICS--0.0% ASAT Finance LLC, 12.50% Sr. Unsec. Nts., 11/1/06(1) 162,500 129,187 ------------------------------------------------------------------------------------- SEMICONDUCTOR EQUIPMENT & PRODUCTS--0.7% Amkor Technology, Inc.: 9.25% Sr. Unsec. Nts., 5/1/06 700,000 577,500 9.25% Sr. Unsec. Sub. Nts., 2/15/08 250,000 205,000 Fairchild Semiconductor Corp.: 10.375% Sr. Unsec. Nts., 10/1/07 500,000 522,500 10.50% Sr. Unsec. Sub. Nts., 2/1/09 300,000 321,000 Micron Technology, Inc., 6.50% Sub. Nts., 9/30/05(1) 1,000,000 900,000 ----------------- 2,526,000 ------------------------------------------------------------------------------------- MATERIALS--4.6% ------------------------------------------------------------------------------------- CHEMICALS--1.0% Compass Minerals Group, Inc., 10% Sr. Sub. Nts., 8/15/11 450,000 477,000 Equistar Chemicals LP, 8.75% Sr. Unsec. Nts., 2/15/09 600,000 537,162 Huntsman Corp./ICI Chemical Co. plc: 10.125% Sr. Unsec. Sub. Nts., 7/1/09[EUR] 200,000 171,349 Zero Coupon Sr. Unsec. Disc. Nts., 13.09%, 12/31/09(8) 600,000 147,000 Huntsman International LLC, 9.875% Sr. Nts., 3/1/09(5) 300,000 302,250 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- ISP Holdings, Inc., 10.625% Bonds, 12/15/09(5) $ 200,000 $ 199,000 Lyondell Chemical Co.: 9.50% Sec. Nts., 12/15/08 300,000 280,500 9.625% Sr. Sec. Nts., Series A, 5/1/07(4) 400,000 383,000 9.875% Sec. Nts., Series B, 5/1/07 400,000 384,000 NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03 93,000 93,465 OM Group, Inc., 9.25% Sr. Sub. Nts., 12/15/11 200,000 208,000 PCI Chemicals Canada, 10% Sr. Sec. Nts., 12/31/08 113,061 77,588 Pioneer Cos., Inc., 5.355% Sr. Sec. Nts., 12/31/06(1,2) 37,688 24,733 Sterling Chemicals, Inc.: 11.75% Sr. Unsec. Sub. Nts., 8/15/06(6) 540,000 78,300 12.375% Sr. Sec. Nts., Series B, 7/15/06(6) 500,000 467,500 Unifrax Investment Corp., 10.50% Sr. Nts., 11/1/03 50,000 50,500 ----------------- 3,881,347 ------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS--0.0% Formica Corp., 10.875% Sr. Unsec. Sub. Nts., Series B, 3/1/09(6) 200,000 55,000 ------------------------------------------------------------------------------------- CONTAINERS & PACKAGING--1.0% Ball Corp.: 7.75% Sr. Unsec. Nts., 8/1/06 125,000 129,375 8.25% Sr. Unsec. Sub. Nts., 8/1/08 125,000 130,000 Graphic Packaging Corp., 8.625% Sr. Sub. Nts., 2/15/12(5) 500,000 518,750 Owens-Brockway Glass Container, Inc., 8.875% Sr. Sec. Nts., 2/15/09(5) 200,000 201,000 Packaging Corp. of America, 9.625% Sr. Unsec. Sub. Nts., 4/1/09 750,000 813,750 Silgan Holdings, Inc., 9% Sr. Sub. Debs., 6/1/09(5) 200,000 207,000 Stone Container Corp.: 8.375% Sr. Nts., 7/1/12(5) 400,000 405,000 9.25% Sr. Unsec. Nts., 2/1/08 200,000 211,500 9.75% Sr. Unsec. Nts., 2/1/11 600,000 645,000 TriMas Corp., 9.875% Sr. Sub. Nts., 6/15/12(5) 500,000 501,250 ----------------- 3,762,625 ------------------------------------------------------------------------------------- METALS & MINING--1.8% AK STEEL CORP.: 7.75% Sr. Unsec. Nts., 6/15/12(5) 1,200,000 1,194,000 7.875% Sr. Unsec. Nts., 2/15/09 500,000 502,500 Better Minerals & Aggregates Co., 13% Sr. Unsec. Sub. Nts., 9/15/09 100,000 94,500
15 OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Unaudited / Continued
PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- METALS & MINING Continued California Steel Industries Corp., 8.50% Sr. Unsec. Nts., Series B, 4/1/09 $ 200,000 $ 202,500 Centaur Mining & Exploration Ltd., 11% Sr. Nts., 12/1/07(6) 100,000 6,625 Century Aluminum Co., 11.75% Sr. Sec. Nts., 4/15/08 500,000 540,000 Great Lakes Carbon Corp., 10.25% Sr. Sub. Nts., Series B, 5/15/08 423,375 290,012 International Utility Structures, Inc., 13% Unsec. Sub. Nts., 2/1/08 71,000 14,200 Jorgensen (Earle M.) Co., 9.75% Sr. Sec. Nts., 6/1/12(5) 800,000 792,000 Kaiser Aluminum & Chemical Corp.: 10.875% Sr. Nts., Series B, 10/15/06(6) 500,000 392,500 12.75% Sr. Sub. Nts., 2/1/03(6) 800,000 148,000 Metallurg Holdings, Inc., 0%/12.75% Sr. Disc. Nts., 7/15/08(9) 300,000 138,750 Metallurg, Inc., 11% Sr. Nts., 12/1/07 500,000 452,500 National Steel Corp., 9.875% First Mtg. Bonds, Series D, 3/1/09(6) 800,000 300,000 P&L Coal Holdings Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 403,000 428,187 Steel Dynamics, Inc., 9.50% Sr. Nts., 3/15/09(5) 200,000 212,000 United States Steel LLC, 10.75% Sr. Nts., 8/1/08 800,000 836,000 ----------------- 6,544,274 ------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS--0.8% Ainsworth Lumber Co. Ltd.: 12.50% Sr. Nts., 7/15/07(11) 400,000 435,000 13.875% Sr. Sec. Nts., 7/15/07 400,000 450,000 Doman Industries Ltd., 8.75% Sr. Nts., 3/15/04(6) 900,000 184,500 Fort James Corp., 6.875% Sr. Nts., 9/15/07 500,000 474,520 Georgia-Pacific Corp., 8.125% Sr. Unsec. Nts., 5/15/11 1,450,000 1,389,931 U.S. Timberlands Co. LP, 9.625% Sr. Nts., 11/15/07 300,000 199,500 ----------------- 3,133,451 ------------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES--2.4% ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES--0.7% 360networks, Inc., 13% Sr. Unsec. Nts., 5/1/08(1,6,7)[EUR] 250,000 25 Adelphia Business Solutions, Inc., 12% Sr. Sub. Nts., 11/1/07(1,6) 200,000 20 American Tower Corp., 9.375% Sr. Nts., 2/1/09 400,000 222,000 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- COLO.com, Inc., 13.875% Sr. Nts., 3/15/10(1,6,7) $ 400,000 $ 7,000 Concentric Network Corp., 12.75% Sr. Unsec. Nts., 12/15/07(6,7) 80,000 2,400 Focal Communications Corp.: 0%/12.125% Sr. Unsec. Disc. Nts., 2/15/08(9) 80,000 6,000 11.875% Sr. Unsec. Nts., Series B, 1/15/10(1) 75,000 12,375 Intermedia Communications, Inc.: 0%/12.25% Sr. Disc. Nts., Series B, 3/1/09(6,7,9) 200,000 21,000 8.50% Sr. Nts., Series B, 1/15/08(6,7) 200,000 63,000 International CableTel, Inc., 11.50% Sr. Deferred Coupon Nts., Series B, 2/1/06(6) 500,000 135,000 KMC Telecom Holdings, Inc., 0%/12.50% Sr. Unsec. Disc. Nts., 2/15/08(1,9) 900,000 22,500 Level 3 Communications, Inc., 0%/10.50% Sr. Disc. Nts., 12/1/08(9) 1,100,000 214,500 Metromedia Fiber Network, Inc., 10% Sr. Unsec. Nts., Series B, 11/15/08(6) 400,000 6,000 NorthPoint Communications Group, Inc., 12.875% Nts., 2/15/10(6,7) 350,000 71,750 Ntelos, Inc., 13% Sr. Nts., 8/15/10(1) 350,000 141,750 NTL Communications Corp., 0%/9.75% Sr. Unsec. Nts., Series B, 4/15/09(6,7,9)[GBP] 775,000 333,726 Orion Network Systems, Inc., 12.50% Sr. Disc. Nts., 1/15/07 675,000 334,905 PanAmSat Corp., 8.50% Sr. Nts., 2/1/12(5) 900,000 832,500 RCN Corp., 10.125% Sr. Unsec. Nts., 1/15/10 357,000 92,820 Tele1 Europe BV, 11.875% Sr. Nts., 12/1/09[EUR] 500,000 64,194 Teligent, Inc., 11.50% Sr. Nts., 12/1/07(1,6,7) 500,000 50 Viatel, Inc., 11.25% Sr. Sec. Nts., 4/15/08(1,6,7) 500,000 3,750 Winstar Communications, Inc., 12.75% Sr. Nts., 4/15/10(1,6,7) 250,000 25 XO Communications, Inc.: 0%/12.25% Sr. Unsec. Disc. Nts., 6/1/09(6,7,9) 400,000 8,000 9% Sr. Unsec. Nts., 3/15/08(6) 250,000 7,500 9.625% Sr. Nts., 10/1/07(6,7) 200,000 6,000 10.75% Sr. Unsec. Nts., 11/15/08(6) 300,000 9,000 ----------------- 2,617,790
16 OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES--1.7% Alamosa Delaware, Inc., 12.50% Sr. Unsec. Nts., 2/1/11 $ 300,000 $ 85,500 American Cellular Corp., 9.50% Sr. Sub. Nts., 10/15/09 850,000 157,250 Crown Castle International Corp.: 0%/10.375% Sr. Disc. Nts., 5/15/11(9) 500,000 232,500 0%/10.625% Sr. Unsec. Disc. Nts., 11/15/07(9) 500,000 337,500 IPCS, Inc., 0%/14% Sr. Unsec. Disc. Nts., 7/15/10(9) 300,000 40,500 Leap Wireless International, Inc.: 0%/14.50% Sr. Unsec. Disc. Nts., 4/15/10(9) 700,000 38,500 12.50% Sr. Nts., 4/15/10 100,000 11,500 Microcell Telecommunications, Inc., 0%/11.125% Sr. Disc. Nts., Series B, 10/15/07(9)[CAD] 300,000 15,287 Millicom International Cellular SA, 13.50% Sr. Disc. Nts., 6/1/06 410,000 145,550 Nextel Communications, Inc.: 0%/10.65% Sr. Disc. Nts., 9/15/07(9) 750,000 410,625 9.375% Sr. Unsec. Nts., 11/15/09 350,000 178,500 Nextel Partners, Inc., 11% Sr. Unsec. Nts., 3/15/10 250,000 100,625 Omnipoint Corp., 11.50% Sr. Nts., 9/15/09(5) 735,000 738,675 Orbcomm Global LP (Escrow), 8/15/04 200,000 -- Price Communications Wireless, Inc.: 9.125% Sr. Sec. Nts., Series B, 12/15/06 250,000 261,562 11.75% Sr. Sub. Nts., 7/15/07 275,000 291,156 Rogers Communications, Inc., 8.75% Sr. Nts., 7/15/07[CAD] 400,000 243,935 Rural Cellular Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 300,000 139,500 SBA Communications Corp.: 0%/12% Sr. Unsec. Disc. Nts., 3/1/08(9) 1,000,000 565,000 10.25% Sr. Unsec. Nts., 2/1/09 600,000 363,000 TeleCorp PCS, Inc.: 0%/11.625% Sr. Unsec. Sub. Disc. Nts., 4/15/09(9) 304,000 232,560 10.625% Sr. Unsec. Sub. Nts., 7/15/10 293,000 275,420 Tritel PCS, Inc.: 0%/12.75% Sr. Unsec. Sub. Disc. Nts., 5/15/09(9) 221,000 174,590 10.375% Sr. Sub. Nts., 1/15/11 270,000 247,050 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- Triton PCS, Inc., 8.75% Sr. Unsec. Sub. Nts., 11/15/11 $ 200,000 $ 124,000 US Unwired, Inc., 0%/13.375% Sr. Unsec. Sub. Disc. Nts., Series B, 11/1/09(9) 900,000 220,500 VoiceStream Wireless Corp., 10.375% Sr. Unsec. Nts., 11/15/09 564,000 544,260 ----------------- 6,175,045 ------------------------------------------------------------------------------------- UTILITIES--2.0% ------------------------------------------------------------------------------------- ELECTRIC UTILITIES--1.9% AES Corp. (The): 8.75% Sr. Unsec. Unsub. Nts., 6/15/08 500,000 322,500 8.875% Sr. Unsec. Nts., 2/15/11 500,000 312,500 AES Drax Holdings Ltd., 10.41% Sr. Sec. Sub. Nts., Series B, 12/31/20 600,000 507,000 Caithness Coso Funding Corp., 9.05% Sr. Sec. Nts., Series B, 12/15/09 400,000 410,000 Calpine Corp., 8.50% Sr. Unsec. Nts., 2/15/11 1,900,000 1,282,500 Central Termica Guemes SA, 2.50% Unsec. Unsub. Bonds, 9/26/10(1,2) 90,000 6,750 CMS Energy Corp.: 8.50% Sr. Nts., 4/15/11 250,000 177,791 9.875% Sr. Unsec. Nts., 10/15/07 400,000 300,336 Edison Mission Energy: 9.875% Sr. Unsec. Nts., 4/15/11 200,000 198,344 10% Sr. Unsec. Nts., 8/15/08 800,000 797,076 Fuji JGB Investment LLC, 9.87% Non- Cum. Bonds, Series A, 12/31/49(2) 165,000 143,364 Hanvit Bank, 12.75% Unsec. Sub. Nts., 3/1/10(2) 440,000 516,228 IBJ Preferred Capital Co. (The) LLC, 8.79% Non-Cum. Bonds, Series A, 12/29/49(2) 105,000 86,811 Mirant Americas Generation LLC, 7.625% Sr. Unsec. Nts., 5/1/06 700,000 567,530 SBS Agro Finance BV, 10.25% Bonds, 7/21/00(1,6,7) 339,000 16,103 United Biscuits Finance plc, 10.75% Sr. Sub. Nts., 4/15/11[GBP] 400,000 684,411 Western Resources, Inc., 9.75% Sr. Unsec. Nts., 5/15/07(5) 800,000 767,160 ----------------- 7,096,404 ------------------------------------------------------------------------------------- GAS UTILITIES--0.1% AmeriGas Partners LP/AmeriGas Eagle Finance Corp., 8.875% Sr. Unsec. Nts., 5/20/11 300,000 313,500
17 OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Unaudited / Continued
PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- MULTI-UTILITIES--0.0% Dynegy Holdings, Inc., 8.75% Sr. Nts., 2/15/12 $ 250,000 $ 186,574 ----------------- Total Corporate Bonds and Notes (Cost $159,995,626) 135,813,965 SHARES ===================================================================================== PREFERRED STOCKS--0.7% AmeriKing, Inc., 13% Cum. Sr. Exchangeable, Non-Vtg, 12/1/08(1,11) 4,119 41 BankUnited Capital Trust, 10.25% Capital Securities, 12/31/26 100,021 96,250 Criimi Mae, Inc., 10.875% Cum. Cv., Series B, Non-Vtg. 46,000 736,920 Crown American Realty Trust, 11% Cum., Series A, Non-Vtg. 2,000 111,400 Doane Pet Care Co., 14.25% Jr. Sub. Debs., Non-Vtg.(1,7) 5,000 176,250 Dobson Communications Corp.: 12.25% Sr. Exchangeable, Non-Vtg.(11) 652 288,510 13% Sr. Exchangeable, Non-Vtg.(11) 459 216,645 e.spire Communications, Inc., 12.75% Jr. Redeemable, Non-Vtg.(1,7,11) 216 22 Eagle-Picher Holdings, Inc., 11.75% Cum. Exchangeable, Series B, Non-Vtg.(7) 5,000 121,250 Earthwatch, Inc., 12% Cv., Series C, Non-Vtg.(1) 5,779 1,560 ICG Holdings, Inc., 14.25% Exchangeable, Non-Vtg.(1,7,11) 151 2 Nebco Evans Holdings, Inc., 11.25% Sr. Redeemable Exchangeable, Non-Vtg.(1,7,11,12) 6,061 -- Nextel Communications, Inc., 13% Cum., Series D, Non-Vtg.(11) 2 58 Paxson Communications Corp., 13.25% Cum. Jr. Exchangeable, Non-Vtg.(11) 32 250,400 PRIMEDIA, Inc., 8.625% Exchangeable, Series H, Non-Vtg. 3,000 90,750 Rural Cellular Corp., 11.375% Cum., Series B, Non-Vtg.(11) 565 108,763 Sovereign Real Estate Investment Trust, 12% Non-Cum., Series A(1) 4,600 514,050 ----------------- Total Preferred Stocks (Cost $5,985,420) 2,712,871 ===================================================================================== COMMON STOCKS--0.2% Adelphia Business Solutions, Inc.(7) 363 4 Aurora Foods, Inc.(1) 1,307 1,052 Celcaribe SA(1,7) 24,390 244 Contour Energy Co.(7) 5,400 340 MARKET VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------- Covad Communications Group, Inc.(7) 16,528 $ 19,503 Criimi Mae, Inc. 71,447 527,993 Geotek Communications, Inc.(1) 90 -- Geotek Communications, Inc., Series B (Escrowed)(1,7) 210 -- Grove Investors, Inc.(7) 2,222 -- Horizon Natural Resources Co.(1,7) 6,667 73,337 ICO Global Communication Holdings Ltd.(7) 6,016 11,130 Orbital Sciences Corp.(7) 1,019 8,121 Pioneer Cos., Inc.(1,7) 7,312 13,381 Premier Holdings Ltd.(1,7) 18,514 -- Southern Pacific Funding Corp., Liquidating Trust(1,7) 83,868 -- Star Gas Partners LP 187 3,437 TVMAX Holdings, Inc.(1,7) 1,000 19,000 Wilshire Financial Services Group, Inc.(7) 6,273 21,642 WorldCom, Inc./MCI Group 8 1 WorldCom, Inc./WorldCom Group(7) 206 18 WRC Media Corp.(1,7) 1,082 11 ----------------- Total Common Stocks (Cost $1,248,447) 699,214 UNITS ===================================================================================== RIGHTS, WARRANTS AND CERTIFICATES--0.4% ASAT Finance LLC Wts., Exp. 11/1/06(1,7) 250 437 Charles River Laboratories International, Inc. Wts., Exp. 10/1/09(1,7) 350 64,750 Chesapeake Energy Corp. Wts.: Exp. 1/23/03(1,7) 1,668 -- Exp. 1/23/03(1,7) 953 -- Exp. 9/1/04(1,7) 2,800 -- Exp. 5/1/05(1,7) 2,182 -- COLO.com, Inc. Wts., Exp. 3/15/10(1,7) 400 4 Comunicacion Celular SA Wts., Exp. 11/15/03(1,7) 200 4 Concentric Network Corp. Wts., Exp. 12/15/07(1,7) 100 1 Covergent Communications, Inc. Wts., Exp. 4/1/08(1,7) 400 4 Equinix, Inc. Wts., Exp. 12/1/07(1,7) 200 2 Geotek Communications, Inc. Wts., Exp. 7/15/05(1,7) 7,500 -- Golden State Bancorp, Inc. Litigation Wts.(7) 2,404 2,621 Grove Investors, Inc., Tranche A Wts., Exp. 9/14/08(7) 617 -- Grove Investors, Inc., Tranche B Wts., Exp. 9/14/08(7) 617 -- HF Holdings, Inc. Wts., Exp. 9/27/09(1,7) 530 53
18 OPPENHEIMER STRATEGIC BOND FUND/VA
MARKET VALUE UNITS SEE NOTE 1 ===================================================================================== RIGHTS, WARRANTS AND CERTIFICATES Continued Horizon PCS, Inc. Wts., Exp. 10/1/10(1,7) 1,000 $ 50 ICG Communications, Inc. Wts., Exp. 9/15/05(1,7) 825 8 ICO Global Communication Holdings Ltd. Wts.: Exp. 5/16/06(7) 1,509 23 Exp. 5/16/06(1,7) 2 -- Imperial Credit Industries, Inc. Wts., Exp. 1/31/08(1,7) 2,135 -- In-Flight Phone Corp. Wts., Exp. 8/31/02(1,7) 200 -- Insilco Corp. Wts., Exp. 8/15/07(1,7) 270 3 International Utility Structures, Inc. Wts., Exp. 2/1/03(7) 50 -- IPCS, Inc. Wts., Exp. 6/15/10(1,7) 300 112 KMC Telecom Holdings, Inc. Wts., Exp. 4/15/08(1,7) 725 36 Leap Wireless International, Inc. Wts., Exp. 4/15/10(1,7) 275 172 Long Distance International, Inc. Wts., Exp. 4/13/08(1,7) 200 -- Loral Space & Communications Ltd. Wts., Exp. 1/15/07(1,7) 150 1 Mexico Value Rts., Exp. 6/30/03(7) 20,071 5 Microcell Telecommunications, Inc. Wts., Exp. 6/1/06(5,7) 600 191 Millenium Seacarriers, Inc. Wts., Exp. 7/15/05(1,7) 250 3 Morgan Stanley Wts., Exp. 6/5/03(7) 124,270 1,283,597 Ntelos, Inc. Wts., Exp. 8/15/10(1,7) 450 1,913 Occidente y Caribe Celular SA Wts., Exp. 3/15/04(1,7) 800 8 Pathmark Stores, Inc. Wts., Exp. 9/19/10(7) 5,710 28,836 PLD Telekom, Inc. Wts., Exp. 6/1/06 (cv. into Metromedia International Group, Inc.)(1,7) 300 3 PLD Telekom, Inc., 14% Sr. Cv. Disc. Nts. Wts., Exp. 3/31/03 (cv. into Metromedia International Group, Inc.)(1,7) 300 3 Real Time Data Co. Wts., Exp. 5/31/04(1,7) 36,431 -- Republic Technologies International LLC Wts., Exp. 7/15/09(1,7) 200 2 Telus Corp. Wts., Exp. 9/15/05(1,7) 269 404 Verado Holdings, Inc., Cl. B Wts., Exp. 4/15/08(1,7) 175 88 ----------------- Total Rights, Warrants and Certificates (Cost $1,414,019) 1,383,334 PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- STRUCTURED NOTES--4.5% Citibank NA, Turkish Lira Linked Nts., 1.71%, 7/10/02 $ 470,000 $ 437,899 Credit Suisse First Boston Corp. (Nassau Branch) U. S. Dollar/ Philippine Peso Linked Nts., 12.50%, 3/15/12[PHP] 47,430,000 926,640 Credit Suisse First Boston Corp. (New York Branch), Russian Obligatzii Federal'nogo Zaima Linked Nts.: Series 27005, 14.841%, 10/9/02(1,2)[RUR] 9,307,830 285,732 Series 27005, 14.841%, 10/9/02(1,2)[RUR] 277,180 8,509 Series 27006, 14.841%, 1/22/03(1,2)[RUR] 5,003,930 152,452 Series 27006, 14.841%, 1/22/03(1,2)[RUR] 277,180 8,445 Series 27007, 14.841%, 2/5/03(1,2)[RUR] 7,647,050 233,220 Series 27007, 14.841%, 2/5/03(1,2)[RUR] 277,180 8,453 Series 27008, 14.841%, 5/21/03(1,2)[RUR] 3,315,240 100,236 Series 27008, 14.841%, 5/21/03(1,2)[RUR] 277,180 8,380 Series 27009, 14.841%, 6/4/03(1,2)[RUR] 3,783,430 114,391 Series 27009, 14.841%, 6/4/03(1,2)[RUR] 277,180 8,380 Series 27009, 14.841%, 6/4/03(1,2)[RUR] 2,561,555 77,448 Series 27010, 14.841%, 9/17/03(1,2)[RUR] 2,047,150 61,207 Series 27010, 14.841%, 9/17/03(1,2)[RUR] 277,180 8,287 Series 27011, 14.841%, 10/8/03(1,2)[RUR] 3,646,190 107,720 Series 27011, 14.841%, 10/8/03(1,2)[RUR] 277,180 8,189 Series 28001, 14.841%,1/21/04(1,2)[RUR] 277,180 8,078 Credit Suisse First Boston International, U. S. Dollar/South African Rand Linked Nts., 1.965%, 5/23/22(1,2) 825,000 808,995 Deutsche Bank AG, Brazilian Real Linked Nts., 2.084%, 2/8/04(2) 1,340,000 1,118,900 Deutsche Bank AG, Colombian Peso Linked Nts., 2.201%, 4/22/04(2) 320,000 321,728 Deutsche Bank AG, Mexican Peso Linked Nts., 1.74%, 4/9/12(2) 2,110,050 1,955,172 JPMorgan Chase Bank, EMBI Plus/ EMBI Global Linked Bonds: 1.02%, 3/11/03 710,000 658,784 1.20%, 4/4/03 490,000 447,956 JPMorgan Chase Bank, 8.75% High Yield Index Linked Nts., 5/15/07 6,000,000 5,595,000 Lehman Brothers Holdings, Inc. /Redwood Capital I Ltd., Catastrophe Linked Bonds, 7.538%, 1/1/03(2,5) 400,000 397,600 Russia (Government of) Federal Loan Obligatzii Federal'nogo Zaima Bonds, Series 27010, 14.841%, 9/17/03(1,2)[RUR] 3,590,420 107,348
19 OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Unaudited / Continued
PRINCIPAL MARKET VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- STRUCTURED NOTES Continued Salomon Smith Barney, Inc., Czech Koruna Linked Nts., 1.37%, 9/25/02[CZK] 22,912,900 $ 767,575 Salomon Smith Barney, Inc., Mexican Peso Linked Nts., 1.78%, 12/6/02[MXN] 9,523,200 917,272 UBS AG, Australian Dollar Property Index Linked Nts., 7%, 7/30/02[AUD] 1,940,000 1,187,832 ----------------- Total Structured Notes (Cost $17,697,513) 16,847,828 DATE STRIKE CONTRACTS ===================================================================================== OPTIONS PURCHASED--0.1% Euro Call(1,7) 7/25/02 0.895 EUR 3,120,000 297,960 Japanese Yen Call(1,7) 7/29/02 127.68 JPY 360,000,000 198,360 ----------------- Total Options Purchased (Cost $99,237) 496,320 PRINCIPAL AMOUNT ===================================================================================== REPURCHASE AGREEMENTS--5.5% Repurchase agreement with Banc One Capital Markets, Inc., 1.90%, dated 6/28/02, to be repurchased at $20,422,233 on 7/1/02, collateralized by U.S. Treasury Bonds, 6.375%--8.125%, 11/15/16--8/15/27, with a value of $7,366,649 and U.S. Treasury Nts., 3.50%--5.50%, 1/31/03-- 11/15/06, with a value of $13,488,295 (Cost $20,419,000) $ 20,419,000 20,419,000 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $532,715,944) 134.1% 502,056,480 ------------------------------------------------------------------------------------- LIABILITIES IN EXCESS OF OTHER ASSETS (34.1) (127,660,260) --------------------------- NET ASSETS 100.0% $ 374,396,220 ===========================
FOOTNOTES TO STATEMENT OF INVESTMENTS Principal amount is reported in U.S. Dollars, except for those denoted in the following currencies: ARP Argentine Peso GBP British Pound Sterling AUD Australian Dollar HUF Hungarian Forint CAD Canadian Dollar JPY Japanese Yen CZK Czech Koruna MXN Mexican Nuevo Peso DEM German Mark PHP Philippines Peso EUR Euro PLZ Polish Zloty FRF French Franc RUR Russian Ruble 1. Identifies issues considered to be illiquid or restricted--See Note 9 of Notes to Financial Statements. 2. Represents the current interest rate for a variable or increasing rate security. 3. Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of mortgage loans. These securities typically decline in price as interest rates decline. Most other fixed income securities increase in price when interest rates decline. The principal amount of the underlying pool represents the notional amount on which current interest is calculated. The price of these securities is typically more sensitive to changes in prepayment rates than traditional mortgage-backed securities (for example, GNMA pass-throughs). Interest rates disclosed represent current yields based upon the current cost basis and estimated timing and amount of future cash flows. 4. Securities with an aggregate market value of $1,778,790 are held in collateralized accounts to cover initial margin requirements on open futures sales contracts. See Note 6 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 $37,330,506 or 9.97% of the Fund's net assets as of June 30, 2002. 6. Issuer is in default. 7. Non-income producing security. 8. Zero coupon bond reflects effective yield on the date of purchase. 9. Denotes a step bond: a zero coupon bond that converts to a fixed or variable interest rate at a designated future date. 10. 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. 11. Interest or dividend is paid-in-kind. 12. 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. 13. When-issued security to be delivered and settled after June 30, 2002. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 20 OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF ASSETS AND LIABILITIES Unaudited
June 30, 2002 ======================================================================================================================== ASSETS Investments, at value (cost $532,715,944)-- see accompanying statement $502,056,480 ------------------------------------------------------------------------------------------------------------------------ Cash--foreign currencies (cost $17,166) 16,098 ------------------------------------------------------------------------------------------------------------------------ Unrealized appreciation on foreign currency contracts 515,766 ------------------------------------------------------------------------------------------------------------------------ Receivables and other assets: Investments sold (including $1,348,300 sold on a when-issued basis) 13,595,809 Interest, dividends and principal paydowns 6,201,797 Shares of beneficial interest sold 1,561,516 Swap contract 993 Other 2,600 ------------- Total assets 523,951,059 ======================================================================================================================== LIABILITIES Bank overdraft 2,090,126 ------------------------------------------------------------------------------------------------------------------------ Unrealized depreciation on foreign currency contracts 766,051 ------------------------------------------------------------------------------------------------------------------------ Payables and other liabilities: Investments purchased (including $138,835,019 purchased on a when-issued basis) 140,460,539 Closed foreign currency contracts 6,010,523 Shares of beneficial interest redeemed 188,480 Shareholder reports 14,470 Daily variation on futures contracts 4,245 Transfer and shareholder servicing agent fees 1,467 Service plan fees 453 Trustees' compensation 316 Other 18,169 ------------- Total liabilities 149,554,839 ======================================================================================================================== NET ASSETS $374,396,220 ============= ------------------------------------------------------------------------------------------------------------------------ COMPOSITION OF NET ASSETS Par value of shares of beneficial interest $ 86,243 ------------------------------------------------------------------------------------------------------------------------ Additional paid-in capital 419,262,810 ------------------------------------------------------------------------------------------------------------------------ Undistributed net investment income 11,631,281 ------------------------------------------------------------------------------------------------------------------------ Accumulated net realized loss on investments and foreign currency transactions (26,145,163) ------------------------------------------------------------------------------------------------------------------------ Net unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies (30,438,951) ------------------------------------------------------------------------------------------------------------------------ NET ASSETS $374,396,220 ============= ------------------------------------------------------------------------------------------------------------------------ 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 $372,715,012 and 85,864,722 shares of beneficial interest outstanding) $4.34 ------------------------------------------------------------------------------------------------------------------------ Service shares: Net asset value, redemption price per share and offering price per share (based on net assets of $1,681,208 and 378,311 shares of beneficial interest outstanding) $4.44
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 21 OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF OPERATIONS Unaudited
For the Six Months Ended June 30, 2002 ======================================================================================================================== INVESTMENT INCOME Interest (net of foreign withholding taxes of $3,155) $13,485,212 ------------------------------------------------------------------------------------------------------------------------ Dividends 217,045 ------------- Total investment income 13,702,257 ======================================================================================================================== EXPENSES Management fees 1,322,214 ------------------------------------------------------------------------------------------------------------------------ Distribution and service plan fees--Service shares 452 ------------------------------------------------------------------------------------------------------------------------ Transfer and shareholder servicing agent fees 6,503 ------------------------------------------------------------------------------------------------------------------------ Shareholder reports 29,383 ------------------------------------------------------------------------------------------------------------------------ Custodian fees and expenses 20,256 ------------------------------------------------------------------------------------------------------------------------ Trustees' compensation 5,647 ------------------------------------------------------------------------------------------------------------------------ Other 28,721 ------------- Total expenses 1,413,176 Less reduction to custodian expenses (2,854) Less voluntary reimbursement of expenses (44,031) ------------- Net expenses 1,366,291 ======================================================================================================================== NET INVESTMENT INCOME 12,335,966 ======================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments (including premiums on options exercised) (4,333,106) Closing of futures contracts (729,389) Closing and expiration of option contracts written 2,955 Foreign currency transactions 4,674,312 ------------- Net realized loss (385,228) ------------------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation (depreciation) on: Investments (8,669,267) Translation of assets and liabilities denominated in foreign currencies 3,820,972 ------------- Net change (4,848,295) ------------- Net realized and unrealized loss (5,233,523) ======================================================================================================================== NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,102,443 =============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 22 OPPENHEIMER STRATEGIC 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 $ 12,335,966 $ 29,031,053 ---------------------------------------------------------------------------------------------------------------------- Net realized loss (385,228) (16,488,698) ---------------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) (4,848,295) 2,675,923 ----------------------------------- Net increase in net assets resulting from operations 7,102,443 15,218,278 ====================================================================================================================== DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income: Non-Service shares (28,654,014) (20,045,483) Service shares (2,128) -- ====================================================================================================================== BENEFICIAL INTEREST TRANSACTIONS Net increase in net assets resulting from beneficial interest transactions: Non-Service shares 42,568,951 51,951,764 Service shares 1,690,800 3,983 ====================================================================================================================== NET ASSETS Total increase 22,706,052 47,128,542 ====================================================================================================================== Beginning of period 351,690,168 304,561,626 ----------------------------------- End of period [including undistributed net investment income of $11,631,281 and $27,951,457, respectively] $374,396,220 $351,690,168 ===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 23 OPPENHEIMER STRATEGIC 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 $ 4.62 $ 4.69 $ 4.97 $ 5.12 $ 5.12 $ 5.09 -------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .14 .41 .41 .45 .39 .39 Net realized and unrealized gain (loss) (.05) (.19) (.28) (.31) (.24) .04 ------------------------------------------------------------------------------- Total from investment operations .09 .22 .13 .14 .15 .43 -------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.37) (.29) (.41) (.29) (.09) (.39) Distributions from net realized gain -- -- -- -- (.06) (.01) ------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (.37) (.29) (.41) (.29) (.15) (.40) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 4.34 $ 4.62 $ 4.69 $ 4.97 $ 5.12 $ 5.12 =============================================================================== ================================================================================================================================ TOTAL RETURN, AT NET ASSET VALUE(1) 2.04% 4.85% 2.63% 2.83% 2.90% 8.71% ================================================================================================================================ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $372,715 $351,686 $304,562 $282,086 $279,200 $207,839 -------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $361,725 $330,711 $289,923 $278,668 $250,227 $159,934 -------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:(2) Net investment income 6.87% 8.78% 9.23% 9.08% 8.17% 8.23% Expenses 0.79% 0.79% 0.79% 0.78% 0.80%(3) 0.83%(3) Expenses, net of reduction to custodian expenses and/or voluntary reimbursement of expenses 0.76% N/A N/A N/A N/A N/A -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 36% 104% 104% 81% 134% 150%
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. 24 OPPENHEIMER STRATEGIC BOND FUND/VA
SIX MONTHS PERIOD ENDED ENDED JUNE 30, 2002 DECEMBER 31, SERVICE SHARES (UNAUDITED) 2001(1) =================================================================================================================== PER SHARE OPERATING DATA Net asset value, beginning of period $ 4.73 $4.64 ------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) (.01) .15 Net realized and unrealized gain (loss) .09 (.06) ------------------------------- Total from investment operations .08 .09 ------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.37) -- Distributions from net realized gain -- -- ------------------------------- Total dividends and/or distributions to shareholders (.37) -- ------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 4.44 $4.73 =============================== =================================================================================================================== TOTAL RETURN, AT NET ASSET VALUE(2) 1.75% 1.94% =================================================================================================================== RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $1,681 $4 ------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 393 $2 ------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:(3) Net investment income 7.40% 8.17% Expenses 1.02% 0.92% Expenses, net of reduction to custodian expenses and/or voluntary reimbursement of expenses 0.99% N/A ------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 36% 104%
1. For the period from March 19, 2001 (inception of offering) to December 31, 2001. 2. Assumes an investment on the business day before the first day of the fiscal period (or inception of offering), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 3. Annualized for periods of less than one full year. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 25 OPPENHEIMER STRATEGIC BOND FUND/VA NOTES TO FINANCIAL STATEMENTS UNAUDITED ================================================================================ 1. SIGNIFICANT ACCOUNTING POLICIES Oppenheimer Strategic Bond Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds (the Trust), an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek a high level of current income principally derived from interest on debt securities. The Trust's investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers two classes of shares. Both classes are sold at their offering price, which is the net asset value per share, to separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. The class of shares designated as Service shares is subject to a distribution and service plan. All classes of shares have identical rights and voting privileges. Earnings, net assets and net asset value per share may differ by minor amounts due to each class having its own expenses directly attributable to that class. The following is a summary of significant accounting policies consistently followed by the Fund. -------------------------------------------------------------------------------- SECURITIES VALUATION. Securities listed or traded on National Stock Exchanges or other domestic or foreign exchanges are valued based on the last sale price of the security traded on that exchange prior to the time when the Fund's assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the closing bid and asked prices, and if not, at the closing bid price. Securities (including restricted securities) for which quotations are not readily available are valued primarily using dealer-supplied valuations, a portfolio pricing service authorized by the Board of Trustees, or at their fair value. Fair value is determined in good faith under consistently applied procedures under the supervision of the Board of Trustees. Short-term "money market type" debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value). -------------------------------------------------------------------------------- STRUCTURED NOTES. The Fund invests in foreign currency-linked structured notes whose market values and redemption prices are linked to foreign currency exchange rates. The structured notes are leveraged, which increases the volatility of each note's market value relative to the change in the underlying foreign currency exchange rate. Fluctuations in value of these securities are recorded as unrealized gains and losses in the accompanying financial statements. The Fund records a realized gain or loss when a structured note is sold or matures. As of June 30, 2002, the market value of these securities comprised 4.5% of the Fund's net assets and resulted in unrealized losses in the current period of $849,685. The Fund also hedges a portion of the foreign currency exposure generated by these securities, as discussed in Note 5. -------------------------------------------------------------------------------- SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Delivery and payment for securities that have been purchased by the Fund on a when-issued basis can take place a month or more after the trade date. Normally the settlement date occurs within six months after the trade date; however, the Fund may, from time to time, purchase securities whose settlement date extends beyond six months or more beyond trade date. During this period, such securities do not earn interest, are subject to market fluctuation and may increase or decrease in value prior to their delivery. The Fund maintains segregated assets with a market value equal to or greater than the amount of its purchase commitments. The purchase of securities on a when-issued basis may increase the volatility of the Fund's net asset value to the extent the Fund makes such purchases while remaining substantially fully invested. As of June 30, 2002, the Fund had entered into net outstanding when-issued commitments of $137,486,719. 26 OPPENHEIMER STRATEGIC BOND FUND/VA In connection with its ability to purchase securities on a when-issued basis, the Fund may enter into forward roll transactions with respect to mortgage-related securities. Forward roll transactions require the sale of securities for delivery in the current month, and a simultaneous agreement with the same counterparty to repurchase similar (same type, coupon and maturity) but not identical securities on a specified future date. The forward roll may not extend for a period of greater than one year. The Fund generally records the incremental difference between the forward purchase and sell of each forward roll as interest income. Risks to the Fund of entering into forward roll transactions include the potential inability of the counterparty to meet the terms of the agreement; the potential of the Fund to receive inferior securities to what was sold to the counterparty at redelivery; counterparty credit risk; and the potential 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 $5,615,786, representing 1.50% 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. -------------------------------------------------------------------------------- ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than those attributable to a specific class), gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. -------------------------------------------------------------------------------- FEDERAL TAXES. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. 27 OPPENHEIMER STRATEGIC BOND FUND/VA NOTES TO FINANCIAL STATEMENTS Unaudited / Continued ================================================================================ 1. SIGNIFICANT ACCOUNTING POLICIES Continued As of June 30, 2002, the Fund had available for federal income tax purposes an estimated unused capital loss carryforward of $23,269,725. 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 unused capital loss carryforwards as follows: Expiring ----------------------------- 2006 $ 1,014,382 2007 5,399,072 2008 253,735 2009 9,904,928 ----------- Total $16,572,117 =========== -------------------------------------------------------------------------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. -------------------------------------------------------------------------------- CLASSIFICATION OF DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes primarily because of paydown gains and losses and the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund. -------------------------------------------------------------------------------- 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. 28 OPPENHEIMER STRATEGIC BOND FUND/VA ================================================================================ 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 YEAR ENDED DECEMBER 31, 2001(1) SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------------------------------------------ NON-SERVICE SHARES Sold 15,784,335 $ 70,299,260 21,317,660 $ 98,459,684 Dividends and/or distributions reinvested 6,617,555 28,654,013 4,374,282 20,045,483 Redeemed (12,660,507) (56,384,322) (14,476,879) (66,553,403) ------------------------------------------------------------------------------- Net increase 9,741,383 $ 42,568,951 11,215,063 $ 51,951,764 =============================================================================== ------------------------------------------------------------------------------------------------------------------------------ SERVICE SHARES Sold 377,176 $ 1,689,511 1,191 $ 5,626 Dividends and/or distributions reinvested 479 2,128 -- -- Redeemed (186) (839) (349) (1,643) ------------------------------------------------------------------------------- Net increase 377,469 $ 1,690,800 842 $ 3,983 ===============================================================================
1. For the year ended December 31, 2001, for Non-Service shares and for the period from March 19, 2001 (inception of offering) to December 31, 2001, for Service shares. ================================================================================ 3. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the six months ended June 30, 2002, were $188,094,530 and $150,580,000, 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 Agreements contain no expense limitation. However, the Manager has undertaken to voluntarily reduce the management fee of Oppenheimer Strategic Bond Fund/VA, commencing January 1, 2002, if the relative performance of that Fund is at or below the following criteria. If the trailing 12-month performance of Oppenheimer Strategic Bond Fund/VA at the end of any calendar quarter is ranked by Lipper, Inc. ("Lipper") in the fifth quintile of the Lipper peer group for that Fund (funds dedicated to variable insurance products in Lipper's general bond funds category), the Manager undertakes to reduce the management fee for that Fund by 0.10%, and for each quarter thereafter until its performance improves, and if Oppenheimer Strategic Bond Fund/VA is ranked by Lipper in the fourth quintile of that peer group, the Manager undertakes to reduce the management fee by 0.05% for the following fiscal quarter and for each quarter thereafter until its performance improves. This management fee waiver is voluntary and may be terminated by the Manager at any time, without advance notice. If the Fund's performance is ranked in the third quintile, the full management fee is charged. If the performance again declines, the same waiver applies again. The Fund's management fee for the six months ended June 30, 2002 was an annualized rate of 0.74%. 29 OPPENHEIMER STRATEGIC BOND FUND/VA NOTES TO FINANCIAL STATEMENTS Unaudited / Continued ================================================================================ 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a $22.50 per account fee. Additionally, funds offered in variable annuity separate accounts are subject to minimum fees of $5,000 for assets of less than $10 million and $10,000 for assets of $10 million or more. The Fund is subject to the minimum fee in the event that the per account fee does not equal or exceed the applicable minimum fee. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees up to an annual rate of 0.25% 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. FOREIGN CURRENCY CONTRACTS A foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. The Fund may enter into foreign currency contracts for operational purposes and to seek to protect against adverse exchange rate fluctuations. Risks to the Fund include the potential inability of the counterparty to meet the terms of the contract. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates as provided by a reliable bank, dealer or pricing service. Unrealized appreciation and depreciation on foreign currency contracts are reported in the Statement of Assets and Liabilities as a receivable or payable and in the Statement of Operations with the change in unrealized appreciation or depreciation. The Fund may realize a gain or loss upon the closing or settlement of the foreign currency transactions. Such realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. 30 OPPENHEIMER STRATEGIC BOND FUND/VA As of June 30, 2002, the Fund had outstanding foreign currency contracts as follows:
EXPIRATION CONTRACT VALUATION AS OF UNREALIZED UNREALIZED CONTRACT DESCRIPTION DATES AMOUNT (000S) JUNE 30, 2002 APPRECIATION DEPRECIATION ---------------------------------------------------------------------------------------------------------------------------------- CONTRACTS TO PURCHASE British Pound Sterling [GBP] 8/1/02-9/24/02 985 GBP $1,496,882 $ 8,974 $ 450 Canadian Dollar [CAD] 4/16/03-4/17/03 1,680 CAD 1,094,925 27,933 -- Euro [EUR] 9/24/02 1,235 EUR 1,214,991 30,873 -- Japanese Yen [JPY] 11/1/02-5/8/03 1,176,015 JPY 9,979,463 447,986 -- ---------------------------- 515,766 450 ---------------------------- CONTRACTS TO SELL Australian Dollar [aud] 9/18/02 1,230 AUD 685,442 -- 1,820 British Pound Sterling [GBP] 7/5/02-10/28/02 1,020 GBP 1,551,230 -- 79,370 Canadian Dollar [CAD] 8/21/02 800 CAD 525,296 -- 22,294 Euro [EUR] 7/5/02-5/5/03 9,055 EUR 8,862,317 -- 573,602 Japanese Yen [JPY] 5/2/03 168,680 JPY 1,433,865 -- 88,515 ---------------------------- -- 765,601 ---------------------------- Total Unrealized Appreciation and Depreciation $515,766 $766,051 ============================
================================================================================ 6. FUTURES CONTRACTS A futures contract is a commitment to buy or sell a specific amount of a commodity or financial instrument at a particular price on a stipulated future date at a negotiated price. Futures contracts are traded on a commodity exchange. The Fund may buy and sell futures contracts that relate to broadly based securities indices "financial futures" or debt securities "interest rate futures" in order to gain exposure to or to seek to protect against changes in market value of stock and bonds or interest rates. The Fund may also buy or write put or call options on these futures contracts. The Fund generally sells futures contracts to hedge against increases in interest rates and decreases in market value of portfolio securities. The Fund may also purchase futures contracts to gain exposure to market changes as it may be more efficient or cost effective than actually buying fixed income securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable and/or payable for the daily mark to market for variation margin. Realized gains and losses are reported on the Statement of Operations as closing and expiration of futures contracts. Risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. 31 OPPENHEIMER STRATEGIC BOND FUND/VA NOTES TO FINANCIAL STATEMENTS Unaudited / Continued ================================================================================ 6. FUTURES CONTRACTS Continued 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 9 $ 2,198,925 $ 325 90-Day Euro 3/17/03 37 8,995,163 52,187 DAX Index 9/20/02 3 327,501 2,222 Euro-Bundesobligation 9/6/02 7 742,616 12,789 FTSE 100 Index 9/20/02 1 70,926 99 Japan (Government of) Bonds 9/10/02 1 1,160,187 6,674 Nikkei 225 Index 9/12/02 2 105,350 (9,436) United Kingdom Long Gilt 9/26/02 2 343,669 5,827 U.S. Long Bonds 9/19/02 82 8,428,063 63,813 U.S. Treasury Nts., 2 yr. 9/27/02 92 19,315,688 82,750 U.S. Treasury Nts., 5 yr. 9/19/02 158 16,972,656 152,422 U.S. Treasury Nts., 10 yr. 9/19/02 102 10,937,906 (2,234) ------------- 367,438 ------------- CONTRACTS TO SELL Australia (Commonwealth of) Bonds, 10 yr. 9/16/02 20 1,120,298 912 NASDAQ 100 Index 9/19/02 7 737,800 46,095 ------------- 47,007 ------------- $414,445 =============
================================================================================ 7. OPTION ACTIVITY The Fund may buy and sell put and call options, or write put and covered call options on portfolio securities in order to produce incremental earnings or protect against changes in the value of portfolio securities. The Fund generally purchases put options or writes covered call options to hedge against adverse movements in the value of portfolio holdings. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option. Options are valued daily based upon the last sale price on the principal exchange on which the option is traded and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss upon the expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option is adjusted by the amount of premium received or paid. Securities designated to cover outstanding call options are noted in the Statement of Investments where applicable. Shares subject to call, expiration date, exercise price, premium received and market value are detailed in a note to the Statement of Investments. Options written are reported as a liability in the Statement of Assets and Liabilities. Realized gains and losses are reported in the Statement of Operations. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is 32 OPPENHEIMER STRATEGIC BOND FUND/VA 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 ------------------------------------------ PRINCIPAL (000S)/ NUMBER OF AMOUNT OF CONTRACT DESCRIPTION CONTRACTS PREMIUMS ------------------------------------------------------------------------------------------------ Options outstanding as of December 31, 2001 14,109 $ 329,907 Options written 1,311,484 145,846 Options closed or expired (1,310,719) (130,928) Options exercised (14,874) (344,825) ------------------------------------------ Options outstanding as of June 30, 2002 -- $ -- ==========================================
-------------------------------------------------------------------------------- 8. CREDIT SWAP TRANSACTIONS The Fund may enter into a credit swap transaction to seek to maintain a total return on a particular investment or portion of its portfolio, or for other non-speculative purposes. Because the principal amount is not exchanged, it represents neither an asset nor a liability to either counterparty, and is referred to as a notional principal amount. The Fund records an increase or decrease to interest income, in the amount due to or owed by the Fund at termination or settlement. The Fund enters into swaps only on securities it owns. Credit swaps are subject to credit risks (if the counterparty fails to meet its obligations). The Fund segregates liquid assets to cover any amounts it could owe under swaps that exceed the amounts it is entitled to receive. As of June 30, 2002, the Fund had entered into the following credit swap agreements:
EXPIRATION NUMBER OF VALUATION AS OF UNREALIZED CONTRACT DESCRIPTION DATE CONTRACTS JUNE 30, 2002 APPRECIATION ------------------------------------------------------------------------------------------------------------------ J.P. Morgan Chase Bank, Jordon (Kingdom of) Credit Nts. 6/6/06 250,000 $993 $993
33 OPPENHEIMER STRATEGIC BOND FUND/VA NOTES TO FINANCIAL STATEMENTS Unaudited / Continued ================================================================================ 9. 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 $21,525,399, which represents 5.75% of the Fund's net assets, of which $17,150 is considered restricted. Information concerning restricted securities is as follows:
UNREALIZED ACQUISITION VALUATION AS OF APPRECIATION SECURITY DATES COST JUNE 30, 2002 (DEPRECIATION) -------------------------------------------------------------------------------------------------------------------------- STOCKS AND/OR WARRANTS Aurora Foods, Inc. 9/18/00 $ -- $ 1,052 $ 1,052 Geotek Communications, Inc. 4/6/00 -- -- -- Geotek Communications, Inc., Series B (Escrowed) 1/4/01 840 -- (840) Real Time Data Co. Wts., Exp. 5/31/04 6/30/99 364 -- (364) CURRENCY Argentine Peso 1/15/02 2,407 1,381 (1,026) Russian Ruble 5/22/02-6/19/02 14,759 14,717 (42)
34 OPPENHEIMER STRATEGIC BOND FUND/VA OPPENHEIMER STRATEGIC 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 David P. Negri, Vice President Arthur P. Steinmetz, 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 about Oppenheimer Strategic Bond Fund/VA, please refer to the Prospectus. To obtain a copy or for more information on how to obtain a separate account prospectus, call OppenheimerFunds, Inc. at 1.800.981.2871. 35 OPPENHEIMER STRATEGIC BOND FUND/VA [COPYRIGHT]Copyright 2002 OppenheimerFunds, Inc. All rights reserved. [LOGO OMITTED] OPPENHEIMERFUNDS[REGISTRATION MARK] Distributor, Inc.