-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T80yu4bp92j2YfzeKvwpYt3H4y4QQ9SZHOUtFswO3qnRWcygpkpJNu4J+Bljqf5L ZdqSUF/ioS1n8GKvXLPNJg== 0000935069-03-000243.txt : 20030228 0000935069-03-000243.hdr.sgml : 20030228 20030228155920 ACCESSION NUMBER: 0000935069-03-000243 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030228 EFFECTIVENESS DATE: 20030228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPPENHEIMER VARIABLE ACCOUNT FUNDS CENTRAL INDEX KEY: 0000752737 IRS NUMBER: 840974272 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04108 FILM NUMBER: 03586797 BUSINESS ADDRESS: STREET 1: 6803 SOUTH TUCSON WAY CITY: CENTENNIAL STATE: CO ZIP: 80112-3924 BUSINESS PHONE: 3036713200 MAIL ADDRESS: STREET 2: 6803 SOUTH TUCSON WAY CITY: CENTENNIAL STATE: CO ZIP: 80112-3924 FORMER COMPANY: FORMER CONFORMED NAME: OPPENHEIMER VARIABLE LIFE FUNDS DATE OF NAME CHANGE: 19860609 N-30D 1 ra0640_6459vef.txt RA0640_6459VEF December 31, 2002 - -------------------------------------------------------------------------------- Oppenheimer Annual Report High Income Fund/VA ---------- A Series of Oppenheimer Variable Account Funds Management Commentaries - -------------------------------------------------------------------------------- [GRAPHIC] Performance Update Investment Strategy Discussion Financial Statements [LOGO] OppenheimerFunds(R) The Right Way to Invest OPPENHEIMER HIGH INCOME FUND/VA - -------------------------------------------------------------------------------- Objective Oppenheimer High Income Fund/VA, a series of Oppenheimer Variable Account Funds, seeks a high level of current income from investment in high-yield fixed-income securities. - -------------------------------------------------------------------------------- Narrative by your Portfolio Management Team Like the high-yield market as a whole, the Fund's performance was quite volatile for the year ended December 31, 2002, but nonetheless managed to recapture some of the ground lost in the preceding half-year. Although the Fund is still in negative territory, we are encouraged by the direction it has taken since June. The market was caught in a net of economic stagnation. High-yield bonds are very sensitive to economic conditions, because the companies issuing them do not have substantial financial strength. The issuers may find it harder to meet their debt obligations when consumers and businesses rein in spending, as most do in a lethargic economy. So, with the uncertain economic situation, the high-yield market bounced around a great deal during the period, rising on the suggestion of a return to economic growth and dipping on news of downward revisions in corporate earnings. During the final five weeks, the market rallied, after the Federal Reserve trimmed interest rates by 0.50% in an attempt to stimulate economic growth. Default rates for high-yield bonds, which are generally higher for junk bonds than for higher rated securities, had risen to record levels in the first half of the year, which certainly added to investors' unease. Fortunately, the default rate dipped a bit during this most recent period. Even better news is that the number of distressed securities, or those trading at yields of 20% or greater, declined. Distressed securities could possibly be next year's defaulted bonds, so a lower number of bonds in the "distressed" category could mean fewer defaults in the future. The Fund's performance improved as the market regained some strength. And, in some cases, the bonds that were most detrimental to results in early 2002--for instance, telecommunications issues--became the biggest contributors to performance. Bonds in the telecom sector had been beaten down to very low levels after WorldCom declared bankruptcy, but bounced back strongly after September. Another sector that generated gains was autos and transportation. Some auto manufacturers have reduced their costs so that, despite lower sales volumes, they can still be profitable. The improved financial outlook means that banks are more willing to lend to them, to meet short-term liquidity needs. That, in turn, lowers the possibility that a company will miss an interest payment on its bonds. Much of the Fund's underperformance was due to the airline and utilities bonds in the portfolio. The entire airline industry has been slow to recover from a sharp falloff in business after September 11th events. As for the utilities sector, the explanation is overcapacity. There is simply more power available than customers need, a fact that keeps prices down and hurts corporate revenue streams. The other reason for the lagging results is the portfolio's improved credit quality. With the market in a freefall earlier in the year, we opted to trade some of the lowest-rated bonds, which were suffering the most, for relatively higher-rated (e.g., single-B) high-yield bonds and even some investment-grade bonds. As it turned out, the lower-rated issues enjoyed the biggest rebound between July and December. 2 | OPPENHEIMER HIGH INCOME FUND/VA We believe the rebound may continue, but not with the strength of the past few weeks. With the uncertain economy, the possibility of war with Iraq and terrorist activity worldwide, there are plenty of factors that could keep investor optimism in check, supporting a positive, but weaker market in the coming months. For this reason, we have positioned the portfolio somewhat conservatively. At the same time, we recognize that, by most measures, high-yield bonds are relatively inexpensive, and we have fully invested the Fund's assets. In our view, the portfolio is well positioned to withstand the present sluggish economy and perform solidly when the economy shifts into a higher gear. It is this combination of prudence and long-term perspective that make Oppenheimer High Income Fund/VA a part of The Right Way to Invest. In reviewing performance, please remember that past performance cannot guarantee future results. Because of ongoing market volatility, the Fund's performance may be subject to fluctuations, and current performance may be less than the results shown. The Fund's portfolio is subject to change. The Fund's investment strategy and focus can change over time. The mention of specific fund holdings does not constitute a recommendation by OppenheimerFunds, Inc. Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested. 3 | OPPENHEIMER HIGH INCOME FUND/VA FUND PERFORMANCE Management's Discussion of Fund Performance. The twelve months ended December 31, 2002 proved to be a very challenging period for Oppenheimer High Income Fund/VA. The Fund delivered negative performance and underperformed the high-yield market during the one-year period. Economic stagnation coupled with high default rates for high-yield bonds influenced the Fund's dismal numbers. After the September 11, 2001 attacks, the slow recovery in the airline industry and overcapacity in the utilities sector proved detrimental to the airline and utilities bonds in the portfolio that detracted most from overall performance. The Fund's performance improved after the markets regained some strength. Bonds in the telecom sector as well as auto and transportation generated gains for the Fund during the period. In light of the uncertain economy and continued geopolitical risks, we have positioned the Fund conservatively, but also were fully invested at the end of the period, believing that high-yield bonds are currently attractively priced. The Fund's holdings, strategy and management are subject to change. Comparing the Fund's Performance to the Market. The graphs that follow shows the performance of a hypothetical $10,000 investment in each share class of the Fund held until December 31, 2002. In the case of Non-Service, performance is measured over a ten-year period. In the case of Service shares, performance is measured from inception of the class on September 18, 2001. Performance information does not reflect charges that apply to separate accounts investing in the Fund. If these charges were taken into account, performance would be lower. The graphs assume that all dividends and capital gains distributions were reinvested in additional shares. The Fund's performance is compared to the performance of the Merrill Lynch High Yield Master Index, an unmanaged index of U.S. corporate and government bonds that is a measure of the performance of the high-yield corporate bond market. Index performance reflects the reinvestment of income but does not consider the effect of transaction costs. The Fund's performance reflects the effects of the Fund's business and operating expenses. While index comparisons may be useful to provide a benchmark for the Fund's performance, it must be noted that the Fund's investments are not limited to the investments in the index. 4 | OPPENHEIMER HIGH INCOME FUND/VA Non-Service shares Comparison of Change in Value of $10,000 Hypothetical Investments in: [LINE CHART] Oppenheimer High Income Merrill Lynch High Fund/VA (Non-Service) Yield Master Index 12/31/92 10,000 10,000 3/31/93 10,997 10,621 6/30/93 11,611 11,045 9/30/93 11,950 11,326 12/31/93 12,634 11,718 3/31/94 12,397 11,502 6/30/94 12,431 11,368 9/30/94 12,551 11,523 12/31/94 12,232 11,582 3/31/95 12,771 12,281 6/30/95 13,589 13,060 9/30/95 14,101 13,441 12/31/95 14,723 13,888 3/31/96 15,265 14,090 6/30/96 15,651 14,284 9/30/96 16,311 14,841 12/31/96 16,969 15,425 3/31/97 17,038 15,586 6/30/97 17,772 16,326 9/30/97 18,749 16,965 12/31/97 19,042 17,403 3/31/98 19,793 17,888 6/30/98 19,949 18,187 9/30/98 18,528 17,537 12/31/98 19,100 18,040 3/31/99 19,771 18,235 6/30/99 19,826 18,358 9/30/99 19,603 18,128 12/31/99 19,919 18,324 3/31/00 19,650 17,994 6/30/00 19,795 18,106 9/30/00 20,043 18,352 12/31/00 19,174 17,629 3/31/01 19,987 18,725 6/30/01 19,552 18,487 9/30/01 18,430 17,740 12/31/01 19,552 18,723 3/31/02 19,668 19,090 6/30/02 18,855 17,917 9/30/02 18,169 17,352 12/31/02 19,084 18,509 Average Annual Total Returns of Non-Service shares of the Fund at 12/31/02 1-Year -2.40% 5-Year 0.04% 10-Year 6.68% Service shares Comparison of Change in Value of $10,000 Hypothetical Investments in: [LINE CHART] Oppenheimer High Income Merrill Lynch High Fund/VA (Service) Yield Master Index 9/18/01 10,000 10,000 9/30/01 9,583 10,000 12/31/01 10,167 10,554 3/31/02 10,225 10,761 6/30/02 9,789 10,100 9/30/02 9,432 9,781 12/31/02 9,895 10,433 Average Annual Total Returns of Service shares of the Fund at 12/31/02 1-Year -2.67% Since Inception -0.82% Because of ongoing market volatility, the Fund's performance has been subject to fluctuations and current performance may be less than the results shown. For updates on the Fund's performance, please call us at 1.800.981.2871. Past performance is not predictive of future performance. The inception dates of the Fund were 4/30/86 for the Non-Service shares and 9/18/01 for its Service shares. The performance information in the graphs for the Merrill Lynch High Yield Master Index begins on 12/31/92 in the first graph and on 9/30/01 for the second graph. Total returns include changes in net asset value per share and does 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. Total returns and the ending account value in the graphs show change in share value and include reinvestment of all dividends and capital gains distributions. Graphs are not drawn to same scale. An explanation of the calculation of the performance is in the Statement of Additional Information. 5 | OPPENHEIMER HIGH INCOME FUND/VA Financial Statements Pages 7-29 6 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENT OF INVESTMENTS December 31, 2002 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Asset-Backed Securities--0.1% Consumer Credit Reference Index Securities Program, Credit Card Asset-Backed Certificates, Series 2002-B, Cl. FX, 10.421%, 3/22/07 1 (Cost $497,606) $ 500,000 $ 519,063 - -------------------------------------------------------------------- Corporate Loans--0.0% Telergy, Inc., Sr. Sec. Credit Facilities Term Loan, 11.111%, 1/1/02 1,2,3 (Cost $966,644) 986,362 4,932 - -------------------------------------------------------------------- Mortgage-Backed Obligations--2.8% AMRESCO Commercial Mortgage Funding I Corp., Multiclass Mtg. Pass-Through Certificates, Series 1997-C1, Cl. H, 7%, 6/17/29 4 200,000 182,563 - -------------------------------------------------------------------- Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates: Series 1996-D2, Cl. A3, 7.499%, 2/14/29 5 3,000,000 3,150,201 Series 1997-D4, Cl. B1, 7.525%, 4/14/29 167,000 164,220 Series 1997-D4, Cl. B2, 7.525%, 4/14/29 167,000 139,732 Series 1997-D4, Cl. B3, 7.525%, 4/14/29 166,000 132,722 - -------------------------------------------------------------------- CBA Mortgage Corp., Commercial Mtg. Pass-Through Certificates, Series 1993-C1, Cl. F, 6.72%, 12/25/03 4 700,000 696,631 - -------------------------------------------------------------------- First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates: Series 1997-CHL1, Cl. D, 8.114%, 4/29/39 1,5 300,000 304,828 Series 1997-CHL1, Cl. E, 8.114%, 4/29/39 1,5 1,500,000 1,285,782 - -------------------------------------------------------------------- Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates: Series 1996-C1, Cl. E, 7.428%, 2/15/28 1,5 835,342 847,873 Series 1997-RR, Cl. D, 7.727%, 4/30/39 4,5 2,150,116 1,989,529 - -------------------------------------------------------------------- Mortgage Capital Funding, Inc., Commercial Mtg. Pass-Through Certificates, Series 1997-MC1, Cl. F, 7.452%, 5/20/07 4 509,780 495,946 - -------------------------------------------------------------------- Salomon Brothers Mortgage Securities VII, Inc., Commercial Mtg. Pass-Through Certificates, Series 1996-B, Cl. 1, 6.957%, 4/25/26 1,5 811,029 659,468 -------------- Total Mortgage-Backed Obligations (Cost $9,518,632) 10,049,495 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Corporate Bonds and Notes--80.2% - -------------------------------------------------------------------- Consumer Discretionary--26.7% - -------------------------------------------------------------------- Auto Components--2.4% American Axle & Manufacturing, Inc., 9.75% Sr. Sub. Nts., 3/1/09 $ 400,000 $ 431,000 - -------------------------------------------------------------------- Burke Industries, Inc., 10% Sr. Sub. Nts., 8/15/07 2,3 400,000 92,000 - -------------------------------------------------------------------- Collins & Aikman Floorcoverings, Inc., 9.75% Sr. Sub. Nts., Series B, 2/15/10 800,000 804,000 - -------------------------------------------------------------------- Collins & Aikman Products Co., 10.75% Sr. Nts., 12/31/11 500,000 478,750 - -------------------------------------------------------------------- Dana Corp.: 9% Unsec. Nts., 8/15/11 1,180,000 1,144,600 10.125% Nts., 3/15/10 500,000 508,750 - -------------------------------------------------------------------- Dura Operating Corp.: 8.625% Sr. Nts., Series B, 4/15/12 1,000,000 1,010,000 9% Sr. Sub. Nts., Series B, 5/1/09 [EUR] 300,000 292,782 9% Sr. Unsec. Sub. Nts., Series D, 5/1/09 400,000 366,000 - -------------------------------------------------------------------- Exide Corp., 10% Sr. Unsec. Nts., 4/15/05 1,2,3 600,000 54,000 - -------------------------------------------------------------------- Goodyear Tire & Rubber Co. (The), 8.125% Unsub. Nts., 3/15/03 200,000 200,121 - -------------------------------------------------------------------- Lear Corp., 8.11% Sr. Unsec. Nts., Series B, 5/15/09 1,400,000 1,487,500 - -------------------------------------------------------------------- Metaldyne Corp., 11% Sr. Sub. Nts., 6/15/12 750,000 618,750 - -------------------------------------------------------------------- Stoneridge, Inc., 11.50% Sr. Nts., 5/1/12 1,100,000 1,056,000 -------------- 8,544,253 - -------------------------------------------------------------------- Automobiles--0.9% Ford Motor Credit Co.: 7.25% Nts., 10/25/11 2,360,000 2,296,816 7.375% Unsec. Nts., 2/1/11 1,000,000 973,841 -------------- 3,270,657 - -------------------------------------------------------------------- Hotels, Restaurants & Leisure--7.0% Apcoa, Inc., 9.25% Sr. Unsec. Sub. Nts., 3/15/08 1 940,000 286,700 - -------------------------------------------------------------------- Aztar Corp., 9% Sr. Unsec. Sub. Nts., 8/15/11 450,000 463,500 - -------------------------------------------------------------------- Boca Resorts, Inc., 9.875% Sr. Sub. Nts., 4/15/09 800,000 836,000 - -------------------------------------------------------------------- Boyd Gaming Corp., 8.75% Sr. Sub. Nts., 4/15/12 800,000 836,000 - -------------------------------------------------------------------- Buffets, Inc., 11.25% Sr. Sub. Nts., 7/15/10 4 200,000 190,000 - -------------------------------------------------------------------- Capital Gaming International, Inc., 11.50% Promissory Nts., 8/1/1995 1,2,3 9,500 -- 7 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENT OF INVESTMENTS Continued Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Hotels, Restaurants & Leisure Continued Coast Hotels & Casinos, Inc., 9.50% Sr. Unsec. Sub. Nts., 4/1/09 $ 1,100,000 $ 1,182,500 - -------------------------------------------------------------------- Family Restaurants, Inc., 10.875% Sr. Sub. Disc. Nts., 2/1/04 1,2,3 100,000 1,000 - -------------------------------------------------------------------- Hilton Hotels Corp.: 7.625% Nts., 5/15/08 700,000 716,981 7.625% Nts., 12/1/12 500,000 505,796 - -------------------------------------------------------------------- Hollywood Casino Corp., 11.25% Sr. Sec. Nts., 5/1/07 1 500,000 542,500 - -------------------------------------------------------------------- Hollywood Park, Inc., 9.25% Sr. Unsec. Sub. Nts., Series B, 2/15/07 500,000 445,000 - -------------------------------------------------------------------- Intrawest Corp., 9.75% Sr. Nts., 8/15/08 900,000 922,500 - -------------------------------------------------------------------- Isle of Capri Casinos, Inc., 9% Sr. Sub. Nts., 3/15/12 1,000,000 1,045,000 - -------------------------------------------------------------------- John Q. Hammons Hotels, Inc., 8.875% Sr. Nts., Series B, 5/15/12 900,000 909,000 - -------------------------------------------------------------------- Jupiters Ltd., 8.50% Sr. Unsec. Nts., 3/1/06 1,000,000 1,015,000 - -------------------------------------------------------------------- Mandalay Resort Group, 10.25% Sr. Unsec. Sub. Nts., Series B, 8/1/07 800,000 882,000 - -------------------------------------------------------------------- MGM Mirage, Inc., 8.375% Sr. Unsec. Sub. Nts., 2/1/11 6 1,700,000 1,840,250 - -------------------------------------------------------------------- Mohegan Tribal Gaming Authority: 8% Sr. Sub. Nts., 4/1/12 700,000 733,250 8.375% Sr. Sub. Nts., 7/1/11 1,200,000 1,267,500 8.75% Sr. Unsec. Sub. Nts., 1/1/09 1,500,000 1,582,500 - -------------------------------------------------------------------- Park Place Entertainment Corp., 7.875% Sr. Sub. Nts., 3/15/10 1,500,000 1,533,750 - -------------------------------------------------------------------- Penn National Gaming, Inc., 8.875% Sr. Sub. Nts., 3/15/10 600,000 618,000 - -------------------------------------------------------------------- Premier Parks, Inc., 0%/10% Sr. Disc. Nts., 4/1/08 7 1,200,000 1,167,000 - -------------------------------------------------------------------- Prime Hospitality Corp., 8.375% Sr. Sub. Nts., 5/1/12 400,000 390,000 - -------------------------------------------------------------------- Royal Caribbean Cruises Ltd., 8.75% Sr. Unsub. Nts., 2/2/11 900,000 841,500 - -------------------------------------------------------------------- Six Flags, Inc., 8.875% Sr. Nts., 2/1/10 400,000 378,000 - -------------------------------------------------------------------- Starwood Hotels & Resorts Worldwide, Inc., 7.875% Nts., 5/1/12 4 1,500,000 1,492,500 - -------------------------------------------------------------------- Sun International Hotels Ltd., 8.875% Sr. Unsec. Sub. Nts., 8/15/11 1,000,000 1,025,000 - -------------------------------------------------------------------- Vail Resorts, Inc., 8.75% Sr. Unsec. Sub. Nts., 5/15/09 700,000 721,000 - -------------------------------------------------------------------- Venetian Casino Resort LLC/Las Vegas Sands, Inc., 11% Bonds, 6/15/10 4 550,000 577,500 - -------------------------------------------------------------------- Yum! Brands, Inc., 7.70% Sr. Nts., 7/1/12 600,000 627,000 -------------- 25,574,227 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Household Durables--2.3% Beazer Homes USA, Inc., 8.375% Sr. Nts., 4/15/12 $ 500,000 $ 517,500 - -------------------------------------------------------------------- D.R. Horton, Inc.: 7.875% Sr. Nts., 8/15/11 200,000 196,000 9.75% Sr. Sub. Nts., 9/15/10 300,000 309,000 - -------------------------------------------------------------------- Del Webb Corp., 10.25% Sr. Unsec. Sub. Debs., 2/15/10 600,000 657,000 - -------------------------------------------------------------------- Interface, Inc., 10.375% Sr. Nts., 2/1/10 500,000 487,500 - -------------------------------------------------------------------- K. Hovnanian Enterprises, Inc., 8.875% Sr. Sub. Nts., 4/1/12 1,000,000 960,000 - -------------------------------------------------------------------- KB Home: 8.625% Sr. Sub. Nts., 12/15/08 150,000 156,000 9.50% Sr. Unsec. Sub. Nts., 2/15/11 350,000 372,750 - -------------------------------------------------------------------- Meritage Corp., 9.75% Sr. Unsec. Nts., 6/1/11 500,000 525,000 - -------------------------------------------------------------------- Salton, Inc., 10.75% Sr. Unsec. Sub. Nts., 12/15/05 800,000 781,000 - -------------------------------------------------------------------- Standard Pacific Corp., 9.25% Sr. Sub. Nts., 4/15/12 700,000 679,000 - -------------------------------------------------------------------- Toll Corp., 8.25% Sr. Sub. Nts., 12/1/11 500,000 505,000 - -------------------------------------------------------------------- WCI Communities, Inc.: 9.125% Sr. Sub. Nts., 5/1/12 800,000 724,000 10.625% Sr. Unsec. Sub. Nts., 2/15/11 600,000 582,000 - -------------------------------------------------------------------- Williams Scotsman, Inc., 9.875% Sr. Unsec. Nts., 6/1/07 1,000,000 930,000 -------------- 8,381,750 - -------------------------------------------------------------------- Internet & Catalog Retail--0.4% Amazon.com, Inc., 0%/10% Sr. Unsec. Disc. Nts., 5/1/08 7 1,300,000 1,306,500 - -------------------------------------------------------------------- Media--10.1% Adelphia Communications Corp.: 7.875% Sr. Unsec. Nts., 5/1/09 2 360,000 135,000 8.125% Sr. Nts., Series B, 7/15/03 2 1,000,000 375,000 8.375% Sr. Nts., Series B, 2/1/08 2 1,000,000 375,000 10.25% Sr. Unsec. Nts., 11/1/06 2 200,000 76,000 - -------------------------------------------------------------------- Allbritton Communications Co., 7.75% Sr. Sub Nts., 12/15/12 4 1,500,000 1,509,375 - -------------------------------------------------------------------- AMC Entertainment, Inc., 9.50% Sr. Unsec. Sub. Nts., 2/1/11 1,200,000 1,188,000 - -------------------------------------------------------------------- AOL Time Warner, Inc., 6.875% Nts., 5/1/12 850,000 899,548 - -------------------------------------------------------------------- Block Communications, Inc., 9.25% Sr. Sub. Nts., 4/15/09 600,000 622,500 - -------------------------------------------------------------------- British Sky Broadcasting Group plc: 6.875% Nts., 2/23/09 800,000 819,224 8.20% Sr. Unsec. Nts., 7/15/09 800,000 865,322 - -------------------------------------------------------------------- Carmike Cinemas, Inc., 10.375% Gtd. Sr. Sub. Nts., Series B, 2/1/09 1,250,000 1,139,062 8 | OPPENHEIMER HIGH INCOME FUND/VA Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Media Continued Chancellor Media Corp.: 8.125% Sr. Sub. Nts., Series B, 12/15/07 $ 300,000 $ 313,875 8.75% Sr. Unsec. Sub. Nts., Series B, 6/15/07 1,6 400,000 419,500 - -------------------------------------------------------------------- Charter Communications Holdings LLC/Charter Communications Holdings Capital Corp.: 0%/9.92% Sr. Unsec. Disc. Nts., 4/1/11 7 600,000 213,000 0%/11.75% Sr. Unsec. Sub. Disc. Nts., 5/15/11 7 1,500,000 382,500 8.625% Sr. Unsec. Nts., 4/1/09 1,200,000 540,000 10% Sr. Nts., 4/1/09 500,000 225,000 11.125% Sr. Unsec. Nts., 1/15/11 600,000 274,500 - -------------------------------------------------------------------- Cinemark USA, Inc., 9.625% Sr. Sub. Nts., Series B, 8/1/08 250,000 251,250 - -------------------------------------------------------------------- Classic Cable, Inc., 10.50% Sr. Sub. Nts., 3/1/10 1,2,3 1,000,000 125,000 - -------------------------------------------------------------------- Comcast Cable Communications, Inc., 6.75% Sr. Unsub. Nts., 1/30/11 1,100,000 1,146,665 - -------------------------------------------------------------------- Corus Entertainment, Inc., 8.75% Sr. Sub. Nts., 3/1/12 800,000 851,000 - -------------------------------------------------------------------- Cox Communications, Inc.: 7.125% Nts., 10/1/12 1,000,000 1,112,718 7.75% Sr. Nts., 11/1/10 1,000,000 1,140,658 - -------------------------------------------------------------------- CSC Holdings, Inc., 7.625% Sr. Unsec. Unsub. Nts., Series B, 4/1/11 3,100,000 2,925,625 - -------------------------------------------------------------------- Cumulus Media, Inc., 10.375% Sr. Unsec. Sub. Nts., 7/1/08 400,000 432,500 - -------------------------------------------------------------------- Diva Systems Corp., 0%/12.625% Sr. Disc. Nts., Series B, 3/1/08 1,2,3,7 500,000 12,500 - -------------------------------------------------------------------- EchoStar DBS Corp.: 9.125% Sr. Nts., 1/15/09 300,000 317,250 9.375% Sr. Unsec. Nts., 2/1/09 650,000 690,625 10.375% Sr. Unsec. Nts., 10/1/07 1,800,000 1,957,500 - -------------------------------------------------------------------- Emmis Communications Corp., 8.125% Sr. Unsec. Sub. Nts., Series B, 3/15/09 800,000 832,000 - -------------------------------------------------------------------- Entravision Communications Corp., 8.125% Sr. Sub. Nts., 3/15/09 600,000 627,000 - -------------------------------------------------------------------- Garden State Newspapers, Inc., 8.75% Sr. Sub. Nts., 10/1/09 500,000 510,000 - -------------------------------------------------------------------- Gray Television, Inc., 9.25% Sr. Sub. Nts., 12/15/11 500,000 540,625 - -------------------------------------------------------------------- Hollinger International Publishing, Inc., 9% Sr. Nts., 12/15/10 4 600,000 608,250 - -------------------------------------------------------------------- Lamar Media Corp.: 7.25% Sr. Sub. Nts., 1/1/13 4 200,000 204,250 9.625% Sr. Unsec. Sub. Nts., 12/1/06 500,000 517,500 - -------------------------------------------------------------------- Liberty Media Corp., 7.875% Sr. Nts., 7/15/09 1,750,000 1,900,822 - -------------------------------------------------------------------- Mediacom LLC/Mediacom Capital Corp., 9.50% Sr. Unsec. Nts., 1/15/13 300,000 271,500 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Media Continued News America Holdings, Inc., 8.875% Sr. Debs., 4/26/23 $ 625,000 $ 695,196 - -------------------------------------------------------------------- PanAmSat Corp., 8.50% Sr. Nts., 2/1/12 4 1,200,000 1,152,000 - -------------------------------------------------------------------- R.H. Donnelley Financial Corp. I: 8.875% Sr. Nts., 12/15/10 4 700,000 752,500 10.875% Sr. Sub. Nts., 12/15/12 4 1,000,000 1,095,000 - -------------------------------------------------------------------- Radio One, Inc., 8.875% Sr. Unsec. Sub. Nts., Series B, 7/1/11 300,000 322,500 - -------------------------------------------------------------------- Regal Cinemas, Inc., 9.375% Sr. Sub. Nts., Series B, 2/1/12 1,500,000 1,605,000 - -------------------------------------------------------------------- Rogers Communications, Inc., 8.75% Sr. Nts., 7/15/07 [CAD] 500,000 301,462 - -------------------------------------------------------------------- Sinclair Broadcast Group, Inc.: 8% Sr. Sub. Nts., 3/15/12 900,000 942,750 8% Sr. Sub. Nts., 3/15/12 4 700,000 733,250 - -------------------------------------------------------------------- Spanish Broadcasting System, Inc., 9.625% Sr. Unsec. Sub. Nts., 11/1/09 600,000 624,000 - -------------------------------------------------------------------- United Pan-Europe Communications NV: 0%/13.375% Sr. Unsec. Disc. Nts., Series B, 11/1/09 2,3,7 1,000,000 65,000 10.875% Sr. Unsec. Nts., Series B, 8/1/09 2,3 600,000 48,000 11.25% Sr. Nts., Series B, 11/1/09 2,3 [EUR] 500,000 31,482 - -------------------------------------------------------------------- Vertis, Inc., 10.875% Sr. Nts., 6/15/09 4 400,000 418,000 - -------------------------------------------------------------------- WRC Media, Inc./Weekly Reader Corp./Compass Learning Corp., 12.75% Sr. Sub. Nts., 11/15/09 600,000 591,000 -------------- 36,724,784 - -------------------------------------------------------------------- Multiline Retail--0.5% J. C. Penney Co., Inc., 7.60% Nts., 4/1/07 1,000,000 1,017,500 - -------------------------------------------------------------------- Saks, Inc.: 8.25% Sr. Unsec. Nts., 11/15/08 250,000 250,000 9.875% Nts., 10/1/11 600,000 630,000 -------------- 1,897,500 - -------------------------------------------------------------------- Specialty Retail--2.4% Asbury Automotive Group, Inc., 9% Sr. Sub. Nts., 6/15/12 600,000 525,000 - -------------------------------------------------------------------- AutoNation, Inc., 9% Sr. Unsec. Nts., 8/1/08 1,200,000 1,218,000 - -------------------------------------------------------------------- Building Materials Corp., 8% Sr. Nts., 12/1/08 300,000 241,500 - -------------------------------------------------------------------- CSK Auto, Inc., 12% Sr. Unsec. Nts., 6/15/06 900,000 967,500 - -------------------------------------------------------------------- Finlay Enterprises, Inc., 9% Debs., 5/1/08 900,000 796,500 - -------------------------------------------------------------------- Finlay Fine Jewelry Corp., 8.375% Sr. Nts., 5/1/08 600,000 567,000 9 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENT OF INVESTMENTS Continued - -------------------------------------------------------------------------------- Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Specialty Retail Continued Gap, Inc. (The): 6.90% Nts., 9/15/07 $ 650,000 $ 637,000 10.55% Unsub. Nts., 12/15/08 200,000 219,000 - -------------------------------------------------------------------- Hollywood Entertainment Corp., 9.625% Sr. Sub. Nts., 3/15/11 800,000 820,000 - -------------------------------------------------------------------- Petco Animal Supplies, Inc., 10.75% Sr. Sub. Nts., 11/1/11 750,000 829,688 - -------------------------------------------------------------------- United Auto Group, Inc., 9.625% Sr. Sub. Nts., 3/15/12 4 200,000 195,000 - -------------------------------------------------------------------- United Rentals (North America), Inc.: 10.75% Sr. Nts., 4/15/08 4 500,000 495,000 10.75% Sr. Unsec. Nts., 4/15/08 600,000 600,000 - -------------------------------------------------------------------- United Rentals, Inc.: 9% Sr. Unsec. Sub. Nts., Series B, 4/1/09 200,000 160,500 9.25% Sr. Unsec. Sub. Nts., Series B, 1/15/09 400,000 329,000 -------------- 8,600,688 - -------------------------------------------------------------------- Textiles & Apparel--0.7% Galey & Lord, Inc., 9.125% Sr. Unsec. Sub. Nts., 3/1/08 1,2,3 700,000 73,500 - -------------------------------------------------------------------- Levi Strauss & Co.: 6.80% Nts., 11/1/03 855,000 846,450 11.625% Sr. Unsec. Nts., 1/15/08 200,000 196,500 12.25% Sr. Nts., 12/15/12 4 600,000 591,000 - -------------------------------------------------------------------- Polymer Group, Inc., 8.75% Sr. Sub. Nts., 3/1/08 1,2,3 1,500,000 307,500 - -------------------------------------------------------------------- Russell Corp., 9.25% Sr. Nts., 5/1/10 600,000 645,000 -------------- 2,659,950 - -------------------------------------------------------------------- Consumer Staples--4.9% - -------------------------------------------------------------------- Beverages--0.3% Constellation Brands, Inc., 8.125% Sr. Sub. Nts., 1/15/12 500,000 520,000 - -------------------------------------------------------------------- Packaged Ice, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/1/05 800,000 629,000 -------------- 1,149,000 - -------------------------------------------------------------------- Food & Drug Retailing--0.8% Delhaize America, Inc., 8.125% Unsub. Debs., 4/15/11 1,000,000 968,925 - -------------------------------------------------------------------- Fleming Cos., Inc., 10.125% Sr. Unsec. Nts., 4/1/08 700,000 605,500 - -------------------------------------------------------------------- Great Atlantic & Pacific Tea Co., Inc. (The): 7.75% Nts., 4/15/07 200,000 145,000 9.125% Sr. Nts., 12/15/11 400,000 294,000 - -------------------------------------------------------------------- Pantry, Inc. (The), 10.25% Sr. Sub. Nts., 10/15/07 325,000 293,312 - -------------------------------------------------------------------- Pathmark Stores, Inc., 8.75% Sr. Sub. Nts., 2/1/12 300,000 277,500 - -------------------------------------------------------------------- Real Time Data Co., 13% Disc. Nts., 5/31/09 1,2,3,8 476,601 85,788 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Food & Drug Retailing Continued Winn-Dixie Stores, Inc., 8.875% Sr. Nts., 4/1/08 $ 300,000 $ 308,250 -------------- 2,978,275 - -------------------------------------------------------------------- Food Products--2.5% American Seafood Group LLC, 10.125% Sr. Sub. Nts., 4/15/10 500,000 512,500 - -------------------------------------------------------------------- Aurora Foods, Inc., 8.75% Sr. Sub. Nts., Series B, 7/1/08 500,000 245,000 - -------------------------------------------------------------------- Burns Philp Capital Pty Ltd., 9.75% Sr. Sub. Nts., 7/15/12 4 400,000 386,000 - -------------------------------------------------------------------- Del Monte Corp.: 8.625% Sr. Sub. Nts., 12/15/12 4 1,000,000 1,025,000 9.25% Sr. Unsec. Sub. Nts., 5/15/11 100,000 104,625 - -------------------------------------------------------------------- Doane Pet Care Co., 9.75% Sr. Unsec. Sub. Nts., 5/15/07 490,000 387,100 - -------------------------------------------------------------------- Dole Food Co., Inc.: 6.375% Nts., 10/1/05 400,000 425,475 7.25% Sr. Nts., 5/1/09 900,000 872,708 - -------------------------------------------------------------------- Michael Foods, Inc., 11.75% Sr. Unsec. Sub. Nts., 4/1/11 400,000 450,000 - -------------------------------------------------------------------- New World Pasta Co., 9.25% Sr. Nts., 2/15/09 1 200,000 110,000 - -------------------------------------------------------------------- Smithfield Foods, Inc.: 7.625% Sr. Unsec. Sub. Nts., 2/15/08 925,000 906,500 8% Sr. Nts., Series B, 10/15/09 900,000 922,500 - -------------------------------------------------------------------- Sparkling Spring Water Group Ltd., 11.50% Sr. Sec. Sub. Nts., 11/15/07 1 600,000 636,000 - -------------------------------------------------------------------- Swift & Co., 10.125% Sr. Nts., 10/1/09 4 1,000,000 950,000 - -------------------------------------------------------------------- United Biscuits Finance plc, 10.625% Sr. Sub. Nts., 4/15/11 1 [EUR] 1,000,000 1,183,854 -------------- 9,117,262 - -------------------------------------------------------------------- Household Products--1.3% AKI Holdings Corp., 0%/13.50% Sr. Disc. Debs., 7/1/09 7 580,000 496,625 - -------------------------------------------------------------------- AKI, Inc., 10.50% Sr. Unsec. Nts., 7/1/08 1,000,000 976,250 - -------------------------------------------------------------------- Armkel LLC/Armkel Finance, Inc., 9.50% Sr. Sub. Nts., 8/15/09 600,000 654,000 - -------------------------------------------------------------------- Holmes Products Corp., 9.875% Sr. Unsec. Sub. Nts., Series B, 11/15/07 300,000 201,000 - -------------------------------------------------------------------- Playtex Products, Inc., 9.375% Sr. Unsec. Sub. Nts., 6/1/11 1,000,000 1,110,000 - -------------------------------------------------------------------- Revlon Consumer Products Corp., 12% Sr. Sec. Nts., 12/1/05 1,200,000 1,164,000 - -------------------------------------------------------------------- Styling Technology Corp., 10.875% Sr. Unsec. Sub. Nts., 7/1/08 1,2,3 600,000 -- -------------- 4,601,875 10 | OPPENHEIMER HIGH INCOME FUND/VA Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Energy--5.7% - -------------------------------------------------------------------- Energy Equipment & Services--2.1% BRL Universal Equipment Corp., 8.875% Sr. Sec. Nts., 2/15/08 $ 750,000 $ 783,750 - -------------------------------------------------------------------- Dresser, Inc., 9.375% Sr. Sub. Nts., 4/15/11 400,000 404,000 - -------------------------------------------------------------------- Grant Geophysical, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/15/08 1 1,025,000 258,812 - -------------------------------------------------------------------- Grant Prideco, Inc., 9% Sr. Nts., 12/15/09 4 300,000 313,500 - -------------------------------------------------------------------- Hanover Equipment Trust, 8.50% Sr. Sec. Nts., Trust 2001, Cl. A, 9/1/08 4 500,000 490,000 - -------------------------------------------------------------------- Hornbeck-Leevac Marine Services, Inc., 10.625% Sr. Nts., 8/1/08 1,500,000 1,590,000 - -------------------------------------------------------------------- Ocean Rig Norway AS, 10.25% Sr. Sec. Nts., 6/1/08 1,600,000 1,448,000 - -------------------------------------------------------------------- Petroleum Helicopters, Inc., 9.375% Sr. Nts., 5/1/09 600,000 633,750 - -------------------------------------------------------------------- Universal Compression Holdings, Inc., 0%/9.875% Sr. Disc. Nts., 2/15/08 1,7 1,700,000 1,759,500 ------------- 7,681,312 - -------------------------------------------------------------------- Oil & Gas--3.6% - -------------------------------------------------------------------- Belden & Blake Corp., 9.875% Sr. Sub. Nts., 6/15/07 500,000 427,500 - -------------------------------------------------------------------- Chesapeake Energy Corp.: 8.125% Sr. Unsec. Nts., 4/1/11 1,000,000 1,035,000 8.375% Sr. Unsec. Nts., 11/1/08 1,000,000 1,040,000 9% Sr. Unsec. Nts., 8/15/12 4 300,000 316,500 - -------------------------------------------------------------------- Forest Oil Corp.: 7.75% Sr. Nts., 5/1/14 1,000,000 1,025,000 10.50% Sr. Unsec. Sub. Nts., 1/15/06 250,000 265,000 - -------------------------------------------------------------------- Frontier Oil Corp., 11.75% Sr. Nts., 11/15/09 800,000 828,000 - -------------------------------------------------------------------- Newfield Exploration Co., 8.375% Sr. Sub. Nts., 8/15/12 600,000 641,094 - -------------------------------------------------------------------- Pioneer Natural Resources Co., 7.50% Sr. Nts., 4/15/12 1,000,000 1,083,476 - -------------------------------------------------------------------- Pogo Producing Co., 8.75% Sr. Sub. Nts., Series B, 5/15/07 1 600,000 629,250 - -------------------------------------------------------------------- Stone Energy Corp.: 8.25% Sr. Unsec. Sub. Nts., 12/15/11 1 800,000 836,000 8.75% Sr. Sub. Nts., 9/15/07 1 735,000 768,075 - -------------------------------------------------------------------- Teekay Shipping Corp., 8.875% Sr. Nts., 7/15/11 575,000 592,969 - -------------------------------------------------------------------- Tesoro Petroleum Corp., 9.625% Sr. Sub. Nts., 4/1/12 800,000 524,000 - -------------------------------------------------------------------- Transcontinental Gas Pipe Line Corp.: 6.125% Nts., 1/15/05 200,000 192,000 8.875% Nts., 7/15/12 4 200,000 201,000 - -------------------------------------------------------------------- Westport Resources Corp.: 8.25% Sr. Sub. Nts., 11/1/11 4 800,000 844,000 8.25% Sr. Unsec. Sub. Nts., 11/1/11 600,000 633,000 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Oil & Gas Continued XTO Energy, Inc., 7.50% Sr. Nts., 4/15/12 $ 1,000,000 $ 1,067,500 ------------- 12,949,364 - -------------------------------------------------------------------- Financials--2.9% - -------------------------------------------------------------------- Banks--0.7% Bank Plus Corp., 12% Sr. Nts., 7/18/07 1 517,000 556,421 - -------------------------------------------------------------------- Decrane Aircraft Holdings, Inc., 12% Sr. Unsec. Sub. Nts., Series B, 9/30/08 1,750,000 710,938 - -------------------------------------------------------------------- Local Financial Corp., 11% Sr. Nts., 9/8/04 1 800,000 826,000 - -------------------------------------------------------------------- Western Financial Bank, 9.625% Unsec. Sub. Debs., 5/15/12 1 400,000 390,000 ------------- 2,483,359 - -------------------------------------------------------------------- Diversified Financials--0.6% AmeriCredit Corp., 9.875% Sr. Nts., 4/15/06 800,000 676,000 - -------------------------------------------------------------------- Berry Plastics Corp., 10.75% Sr. Sub. Nts., 7/15/12 800,000 856,000 - -------------------------------------------------------------------- Finova Group, Inc. (The), 7.50% Nts., 11/15/09 500,000 175,000 - -------------------------------------------------------------------- LaBranche & Co., Inc., 12% Sr. Unsec. Sub. Nts., 3/2/07 600,000 672,000 ------------- 2,379,000 - -------------------------------------------------------------------- Real Estate--1.6% Capstar Hotel Co., 8.75% Sr. Sub. Nts., 8/15/07 200,000 135,000 - -------------------------------------------------------------------- CB Richard Ellis Services, Inc., 11.25% Sr. Unsec. Sub. Nts., 6/15/11 300,000 277,500 - -------------------------------------------------------------------- Corrections Corp. of America, 9.875% Sr. Nts., 5/1/09 4 500,000 532,500 - -------------------------------------------------------------------- Felcor Lodging LP: 8.50% Sr. Nts., 6/1/11 780,000 772,200 9.50% Sr. Unsec. Nts., 9/15/08 200,000 205,000 - -------------------------------------------------------------------- HMH Properties, Inc., 7.875% Sr. Nts., Series B, 8/1/08 1,750,000 1,706,250 - -------------------------------------------------------------------- IStar Financial, Inc., 8.75% Sr. Unsec. Nts., 8/15/08 250,000 266,352 - -------------------------------------------------------------------- MeriStar Hospitality Corp., 9.125% Sr. Unsec. Nts., 1/15/11 400,000 350,000 - -------------------------------------------------------------------- Saul (B.F.) Real Estate Investment Trust, 9.75% Sr. Sec. Nts., Series B, 4/1/08 1 1,500,000 1,496,250 ------------- 5,741,052 - -------------------------------------------------------------------- Health Care--5.3% - -------------------------------------------------------------------- Health Care Equipment & Supplies--0.5% Kinetic Concepts, Inc., 9.625% Sr. Unsec. Sub. Nts., Series B, 11/1/07 400,000 416,000 11 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENT OF INVESTMENTS Continued Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Health Care Equipment & Supplies Continued Sybron Dental Specialties, Inc., 8.125% Sr. Sub. Nts., 6/15/12 $ 700,000 $ 710,500 - -------------------------------------------------------------------- Vanguard Health Systems, Inc., 9.75% Sr. Unsec. Sub. Nts., 8/1/11 500,000 480,000 -------------- 1,606,500 - -------------------------------------------------------------------- Health Care Providers & Services--4.8% Alliance Imaging, Inc., 10.375% Sr. Unsec. Sub. Nts., 4/15/11 1,000,000 980,000 - -------------------------------------------------------------------- AmerisourceBergen Corp., 7.25% Sr. Nts., 11/15/12 4 200,000 206,000 - -------------------------------------------------------------------- Beverly Enterprises, Inc., 9.625% Sr. Unsec. Nts., 4/15/09 1,125,000 950,625 - -------------------------------------------------------------------- Extendicare Health Services, Inc., 9.50% Sr. Nts., 7/1/10 4 500,000 487,500 - -------------------------------------------------------------------- Fresenius Medical Care Capital Trust II, 7.875% Nts., 2/1/08 1,600,000 1,580,000 - -------------------------------------------------------------------- Fresenius Medical Care Capital Trust IV, 7.875% Trust Preferred Nts., 6/15/11 100,000 97,500 - -------------------------------------------------------------------- Hanger Orthopedic Group, Inc., 10.375% Sr. Nts., 2/15/09 400,000 416,000 - -------------------------------------------------------------------- HCA, Inc.: 6.95% Sr. Nts., 5/1/12 1,000,000 1,055,628 7.875% Sr. Nts., 2/1/11 305,000 334,903 - -------------------------------------------------------------------- HCA-Healthcare Co. (The), 8.75% Sr. Nts., 9/1/10 400,000 461,016 - -------------------------------------------------------------------- Healthsouth Corp., 7.625% Nts., 6/1/12 1,950,000 1,618,500 - -------------------------------------------------------------------- InSight Health Services Corp., 9.875% Sr. Sub. Nts., 11/1/11 500,000 482,500 - -------------------------------------------------------------------- Magellan Health Services, Inc., 9.375% Sr. Nts., 11/15/07 4 1,000,000 795,000 - -------------------------------------------------------------------- Medquest, Inc., 11.875% Sr. Sub. Nts., 8/15/12 4 800,000 784,000 - -------------------------------------------------------------------- PacifiCare Health Systems, Inc., 10.75% Sr. Unsec. Unsub. Nts., 6/1/09 900,000 967,500 - -------------------------------------------------------------------- Rotech Healthcare, Inc., 9.50% Sr. Sub. Nts., 4/1/12 4 600,000 603,750 - -------------------------------------------------------------------- Select Medical Corp., 9.50% Sr. Unsec. Sub. Nts., 6/15/09 200,000 208,000 - -------------------------------------------------------------------- Stewart Enterprises, Inc., 10.75% Sr. Unsec. Sub. Nts., 7/1/08 1,800,000 1,998,000 - -------------------------------------------------------------------- Tenet Healthcare Corp.: 6.375% Sr. Nts., 12/1/11 1,460,000 1,316,583 6.50% Sr. Nts., 6/1/12 400,000 362,738 - -------------------------------------------------------------------- Unilab Corp., 12.75% Sr. Sub. Nts., 10/1/09 1 250,000 292,500 - -------------------------------------------------------------------- US Oncology, Inc., 9.625% Sr. Sub. Nts., 2/1/12 300,000 306,000 - -------------------------------------------------------------------- Vicar Operating, Inc., 9.875% Sr. Sub. Nts., 12/1/09 1,000,000 1,085,000 -------------- 17,389,243 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Pharmaceuticals--0.0% aaiPharma, Inc., 11% Sr. Sub. Nts., 4/1/10 $ 100,000 $ 100,500 - -------------------------------------------------------------------- Industrials--11.5% - -------------------------------------------------------------------- Aerospace & Defense--1.0% Alliant Techsystems, Inc., 8.50% Sr. Unsec. Sub. Nts., 5/15/11 900,000 976,500 - -------------------------------------------------------------------- American Plumbing & Mechanical, Inc., 11.625% Sr. Sub. Nts., Series B, 10/15/08 1 500,000 147,500 - -------------------------------------------------------------------- K&F Industries, Inc., 9.625% Sr. Sub. Nts., 12/15/10 4 500,000 511,250 - -------------------------------------------------------------------- L-3 Communications Corp., 7.625% Sr. Sub. Nts., 6/15/12 800,000 828,000 - -------------------------------------------------------------------- Rexnord Corp., 10.125% Sr. Sub. Nts., 12/15/12 4 700,000 721,000 - -------------------------------------------------------------------- TransDigm, Inc., 10.375% Sr. Sub. Nts., 12/1/08 400,000 416,000 -------------- 3,600,250 - -------------------------------------------------------------------- Air Freight & Couriers--0.0% Atlas Air, Inc., 9.25% Sr. Nts., 4/15/08 500,000 106,250 - -------------------------------------------------------------------- Airlines--0.4% America West Airlines, Inc., 10.75% Sr. Nts., 9/1/05 1,000,000 405,000 - -------------------------------------------------------------------- Amtran, Inc.: 9.625% Nts., 12/15/05 800,000 336,000 10.50% Sr. Nts., 8/1/04 1,800,000 756,000 -------------- 1,497,000 - -------------------------------------------------------------------- Building Products--0.5% Associated Materials, Inc., 9.75% Sr. Sub. Nts., 4/15/12 700,000 742,000 - -------------------------------------------------------------------- GSP I Corp., 10.15% First Mtg. Bonds, 6/24/10 4 355,902 382,529 - -------------------------------------------------------------------- Nortek, Inc.: 9.125% Sr. Unsec. Nts., Series B, 9/1/07 200,000 206,000 9.875% Sr. Unsec. Sub. Nts., 6/15/11 400,000 402,500 -------------- 1,733,029 - -------------------------------------------------------------------- Commercial Services & Supplies--4.7% Allied Waste North America, Inc.: 7.875% Sr. Unsec. Nts., Series B, 1/1/09 400,000 396,000 8.50% Sr. Sub. Nts., 12/1/08 1,300,000 1,313,000 8.875% Sr. Nts., Series B, 4/1/08 900,000 918,000 9.25% Sr. Nts., 9/1/12 4 2,300,000 2,369,000 10% Sr. Unsec. Sub. Nts., Series B, 8/1/09 700,000 698,250 - -------------------------------------------------------------------- American Pad & Paper Co., 13% Sr. Sub. Nts., Series B, 11/15/05 1,2,3 200,000 3,000 - -------------------------------------------------------------------- Budget Group, Inc., 9.125% Sr. Unsec. Nts., 4/1/06 2,3 900,000 202,500 - -------------------------------------------------------------------- Buhrmann US, Inc., 12.25% Sr. Unsec. Sub. Nts., 11/1/09 600,000 561,000 12 | OPPENHEIMER HIGH INCOME FUND/VA Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Commercial Services & Supplies Continued Coinmach Corp., 9% Sr. Nts., 2/1/10 $ 800,000 $ 843,000 - -------------------------------------------------------------------- Dyncorp, Inc., 9.50% Sr. Sub. Nts., 3/1/07 1 625,000 650,000 - -------------------------------------------------------------------- Hydrochem Industrial Services, Inc., 10.375% Sr. Sub. Nts., 8/1/07 1 250,000 189,063 - -------------------------------------------------------------------- Iron Mountain, Inc.: 7.75% Sr. Sub. Nts., 1/15/15 500,000 502,500 8.625% Sr. Unsec. Sub. Nts., 4/1/13 2,100,000 2,205,000 - -------------------------------------------------------------------- IT Group, Inc., 11.25% Sr. Unsec. Sub. Nts., Series B, 4/1/09 1,2,3 550,000 715 - -------------------------------------------------------------------- Kindercare Learning Centers, Inc., 9.50% Sr. Sub. Nts., 2/15/09 750,000 731,250 - -------------------------------------------------------------------- Mail-Well I Corp., 9.625% Sr. Nts., 3/15/12 400,000 358,000 - -------------------------------------------------------------------- NDCHealth Corp., 10.50% Sr. Sub. Nts., 12/1/12 4 600,000 603,000 - -------------------------------------------------------------------- Protection One, Inc./Protection One Alarm Monitoring, Inc., 7.375% Sr. Unsec. Nts., 8/15/05 900,000 742,500 - -------------------------------------------------------------------- Stericycle, Inc., 12.375% Sr. Unsec. Sub. Nts., Series B, 11/15/09 488,000 561,200 - -------------------------------------------------------------------- Synagro Technologies, Inc., 9.50% Sr. Sub. Nts., 4/1/09 700,000 733,250 - -------------------------------------------------------------------- Waste Management, Inc.: 6.375% Nts., 11/15/12 4 1,000,000 1,030,926 7.375% Sr. Unsub. Nts., 8/1/10 1,300,000 1,424,463 -------------- 17,035,617 - -------------------------------------------------------------------- Construction & Engineering--0.1% Integrated Electrical Services, Inc.: 9.375% Sr. Sub. Nts., Series B, 2/1/09 1 100,000 92,500 9.375% Sr. Sub. Nts., Series C, 2/1/09 1 100,000 92,500 - -------------------------------------------------------------------- URS Corp., 11.50% Sr. Nts., 9/15/09 4 300,000 268,500 -------------- 453,500 - -------------------------------------------------------------------- Electrical Equipment--0.0% Dayton Superior Corp., 13% Sr. Unsec. Sub. Nts., 6/15/09 100,000 86,500 - -------------------------------------------------------------------- Industrial Conglomerates--1.5% Great Lakes Dredge & Dock Corp., 11.25% Sr. Unsec. Sub. Nts., 8/15/08 1,715,000 1,794,319 - -------------------------------------------------------------------- Norse CBO Ltd., 9.342% Sub. Bonds, Series 1A, Cl. C2, 8/13/10 1 1,500,000 600,000 - -------------------------------------------------------------------- Tyco International Group SA: 6.25% Unsec. Unsub. Nts., 6/15/03 800,000 794,103 6.375% Nts., 10/15/11 200,000 187,367 6.375% Nts., 10/15/11 2,150,000 2,014,197 -------------- 5,389,986 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Machinery--2.2% Actuant Corp., 13% Sr. Sub. Nts., 5/1/09 $ 378,000 $ 444,150 - -------------------------------------------------------------------- AGCO Corp., 9.50% Sr. Unsec. Nts., 5/1/08 1,000,000 1,085,000 - -------------------------------------------------------------------- Blount, Inc., 13% Sr. Sub. Nts., 8/1/09 500,000 313,750 - -------------------------------------------------------------------- Cummins, Inc., 9.50% Sr. Nts., 12/1/10 700,000 749,000 - -------------------------------------------------------------------- Eagle-Picher Industries, Inc., 9.375% Sr. Unsec. Sub. Nts., 3/1/08 1 850,000 603,500 - -------------------------------------------------------------------- Manitowoc Co., Inc. (The), 10.50% Sr. Sub. Nts., 8/1/12 4 800,000 834,000 - -------------------------------------------------------------------- NMHG Holding Co., 10% Sr. Nts., 5/15/09 600,000 603,000 - -------------------------------------------------------------------- Roller Bearing Co. of America, Inc., 9.625% Sr. Sub. Nts., Series B, 6/15/07 560,000 529,900 - -------------------------------------------------------------------- SPX Corp., 7.50% Sr. Nts., 1/1/13 1,600,000 1,630,000 - -------------------------------------------------------------------- Terex Corp.: 8.875% Sr. Unsec. Sub. Nts., 4/1/08 510,000 462,187 9.25% Sr. Unsec. Sub. Nts., 7/15/11 800,000 733,000 -------------- 7,987,487 - -------------------------------------------------------------------- Marine--0.8% CP Ships Ltd., 10.375% Sr. Nts., 7/15/12 1,000,000 1,055,000 - -------------------------------------------------------------------- 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) 1,2,3,9 700,000 350,000 - -------------------------------------------------------------------- Navigator Gas Transport plc, 10.50% First Priority Ship Mtg. Nts., 6/30/07 2,4 1,000,000 307,500 - -------------------------------------------------------------------- Pacific & Atlantic Holdings, Inc., 10.50% Sec. Nts., 12/31/07 4 349,808 142,109 - -------------------------------------------------------------------- Sea Containers Ltd., 7.875% Sr. Nts., 2/15/08 1,500,000 982,500 ------------- 2,837,109 - -------------------------------------------------------------------- Road & Rail--0.3% Kansas City Southern Railway Co. (The), 7.50% Sr. Nts., 6/15/09 500,000 530,000 - -------------------------------------------------------------------- Stena AB, 9.625% Sr. Nts., 12/1/12 4 600,000 622,500 ------------- 1,152,500 - -------------------------------------------------------------------- Information Technology--3.0% - -------------------------------------------------------------------- Communications Equipment--0.4% CellNet Data Systems, Inc., 14% Sr. Unsec. Disc. Nts., 10/1/07 1,2,3 1,834,000 -- - -------------------------------------------------------------------- Motorola, Inc., 7.625% Sr. Nts., 11/15/10 1,000,000 1,025,559 - -------------------------------------------------------------------- Orion Network Systems, Inc., 12.50% Sr. Disc. Nts., 1/15/07 1 1,150,000 301,875 ------------- 1,327,434 13 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENT OF INVESTMENTS Continued Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Computers & Peripherals--0.3% Seagate Technology Hdd Holdings, 8% Sr. Nts., 5/15/09 4 $ 900,000 $ 936,000 - -------------------------------------------------------------------- Electronic Equipment & Instruments--1.4% ChipPAC International Co. Ltd., 12.75% Sr. Unsec. Sub. Nts., Series B, 8/1/09 500,000 527,500 - -------------------------------------------------------------------- Fisher Scientific International, Inc.: 8.125% Sr. Sub. Nts., 5/1/12 900,000 936,000 9% Sr. Unsec. Sub. Nts., 2/1/08 750,000 785,625 9% Sr. Unsec. Sub. Nts., 2/1/08 1 365,000 382,337 - -------------------------------------------------------------------- Flextronics International Ltd., 9.875% Sr. Unsec. Sub. Nts., 7/1/10 700,000 757,750 - -------------------------------------------------------------------- Ingram Micro, Inc., 9.875% Sr. Unsec. Sub. Nts., 8/15/08 1,200,000 1,272,000 - -------------------------------------------------------------------- Insilco Corp., 12% Sr. Sub. Nts., 8/15/07 2,3 1,200,000 30,000 - -------------------------------------------------------------------- PerkinElmer, Inc., 8.875% Sr. Sub. Nts., 1/15/13 4 600,000 594,000 -------------- 5,285,212 - -------------------------------------------------------------------- Internet Software & Services--0.1% Equinix, Inc., 13% Sr. Unsec. Nts., 12/1/07 1,2 1,000,000 165,000 - -------------------------------------------------------------------- Exodus Communications, Inc., 10.75% Sr. Nts., 12/15/09 1,2,3 [EUR] 1,000,000 47,223 - -------------------------------------------------------------------- FirstWorld Communications, Inc., 0%/13% Sr. Disc. Nts., 4/15/08 1,2,3,7 500,000 625 - -------------------------------------------------------------------- Globix Corp., 9.075% Sr. Nts., 4/26/08 98,360 70,819 - -------------------------------------------------------------------- PSINet, Inc.: 10.50% Sr. Unsec. Nts., 12/1/06 1,2,3 [EUR] 1,000,000 69,523 11% Sr. Nts., 8/1/09 1,2,3 919,280 32,175 -------------- 385,365 - -------------------------------------------------------------------- IT Consulting & Services--0.0% Comforce Operating, Inc., 12% Sr. Nts., Series B, 12/1/07 1 350,000 159,250 - -------------------------------------------------------------------- Office Electronics--0.1% ASAT Finance LLC, 12.50% Sr. Unsec. Nts., 11/1/06 325,000 245,375 - -------------------------------------------------------------------- Xerox Corp., 7.15% Nts., 8/1/04 200,000 194,000 -------------- 439,375 - -------------------------------------------------------------------- Semiconductor Equipment & Products--0.7% Amkor Technology, Inc.: 9.25% Sr. Unsec. Nts., 5/1/06 200,000 172,000 9.25% Sr. Unsec. Sub. Nts., 2/15/08 800,000 680,000 - -------------------------------------------------------------------- Fairchild Semiconductor Corp.: 10.375% Sr. Unsec. Nts., 10/1/07 850,000 896,750 10.50% Sr. Unsec. Sub. Nts., 2/1/09 750,000 813,750 -------------- 2,562,500 - -------------------------------------------------------------------- Materials--9.5% - -------------------------------------------------------------------- Chemicals--2.2% Applied Extrusion Technologies, Inc., 10.75% Sr. Nts., Series B, 7/1/11 $ 450,000 $ 292,500 - -------------------------------------------------------------------- ClimaChem, Inc., 10.75% Sr. Unsec. Nts., Series B, 12/1/07 250,000 101,250 - -------------------------------------------------------------------- Compass Minerals Group, Inc., 10% Sr. Sub. Nts., 8/15/11 1,200,000 1,320,000 - -------------------------------------------------------------------- Equistar Chemicals LP, 8.75% Sr. Unsec. Nts., 2/15/09 600,000 525,712 - -------------------------------------------------------------------- Huntsman Corp./ICI Chemical Co. plc: 10.125% Sr. Unsec. Sub. Nts., 7/1/09 [EUR] 100,000 79,755 Zero Coupon Sr. Unsec. Disc. Nts., 13.09%, 12/31/09 10 400,000 92,000 - -------------------------------------------------------------------- Huntsman International LLC, 9.875% Sr. Nts., 3/1/09 800,000 804,000 - -------------------------------------------------------------------- ISP Chemco, Inc., 10.25% Sr. Unsec. Sub. Nts., 7/1/11 500,000 520,000 - -------------------------------------------------------------------- ISP Holdings, Inc., 10.625% Sr. Sec. Nts., 12/15/09 300,000 262,500 - -------------------------------------------------------------------- Lyondell Chemical Co.: 9.50% Sec. Nts., 12/15/08 600,000 561,000 9.625% Sr. Sec. Nts., Series A, 5/1/07 600,000 579,000 9.875% Sec. Nts., Series B, 5/1/07 800,000 772,000 10.875% Sr. Sub. Nts., 5/1/09 200,000 172,000 - -------------------------------------------------------------------- Noveon, Inc., 11% Sr. Unsec. Sub. Nts., Series B, 2/28/11 1,200,000 1,323,000 - -------------------------------------------------------------------- OM Group, Inc., 9.25% Sr. Sub. Nts., 12/15/11 100,000 54,500 - -------------------------------------------------------------------- PCI Chemicals Canada, 10% Sr. Sec. Nts., 12/31/08 319,909 225,536 - -------------------------------------------------------------------- Pioneer Cos., Inc., 4.90% Sr. Sec. Nts., 12/31/06 5 106,636 74,245 - -------------------------------------------------------------------- Sterling Chemicals, Inc.: 10% Sr. Sec. Nts., 12/19/07 383,000 248,950 11.25% Sr. Sub. Nts., 8/15/06 2,3 300,000 -- -------------- 8,007,948 - -------------------------------------------------------------------- Containers & Packaging--3.8% Ball Corp.: 6.875% Sr. Nts., 12/15/12 4 400,000 404,000 7.75% Sr. Unsec. Nts., 8/1/06 1 700,000 738,500 8.25% Sr. Unsec. Sub. Nts., 8/1/08 800,000 846,000 - -------------------------------------------------------------------- Graphic Packaging Corp., 8.625% Sub. Nts., 2/15/12 1,000,000 1,057,500 - -------------------------------------------------------------------- Jefferson Smurfit Corp., 8.25% Sr. Nts., 10/1/12 4 800,000 820,000 - -------------------------------------------------------------------- MDP Acquisitions plc, 9.625% Sr. Nts., 10/1/12 4 800,000 836,000 14 | OPPENHEIMER HIGH INCOME FUND/VA Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Containers & Packaging Continued Owens-Brockway Glass Container, Inc.: 8.75% Sr. Sec. Nts., 11/15/12 4 $ 750,000 $ 765,000 8.75% Sr. Sec. Nts., 11/15/12 4 600,000 612,000 8.875% Sr. Sec. Nts., 2/15/09 1,300,000 1,345,500 - -------------------------------------------------------------------- Packaging Corp. of America, 9.625% Sr. Unsec. Sub. Nts., 4/1/09 750,000 808,125 - -------------------------------------------------------------------- Riverwood International Corp.: 10.625% Sr. Unsec. Nts., 8/1/07 500,000 520,000 10.875% Sr. Sub. Nts., 4/1/08 500,000 505,000 - -------------------------------------------------------------------- Silgan Holdings, Inc., 9% Sr. Sub. Debs., 6/1/09 600,000 628,500 - -------------------------------------------------------------------- Stone Container Corp.: 8.375% Sr. Nts., 7/1/12 900,000 927,000 9.25% Sr. Unsec. Nts., 2/1/08 1,000,000 1,062,500 9.75% Sr. Unsec. Nts., 2/1/11 1,000,000 1,075,000 - -------------------------------------------------------------------- TriMas Corp., 9.875% Sr. Sub. Nts., 6/15/12 4 1,000,000 995,000 -------------- 13,945,625 - -------------------------------------------------------------------- Metals & Mining--2.3% AK Steel Corp., 7.75% Sr. Unsec. Nts., 6/15/12 4 900,000 911,250 - -------------------------------------------------------------------- California Steel Industries Corp., 8.50% Sr. Unsec. Nts., Series B, 4/1/09 300,000 303,750 - -------------------------------------------------------------------- Century Aluminum Co., 11.75% Sr. Sec. Nts., 4/15/08 885,000 862,875 - -------------------------------------------------------------------- Great Lakes Carbon Corp., 7.94% Sr. Sub. Nts., Series B, 5/15/08 847,000 605,605 - -------------------------------------------------------------------- Jorgensen (Earle M.) Co., 9.75% Sr. Sec. Nts., 6/1/12 800,000 818,000 - -------------------------------------------------------------------- Kaiser Aluminum & Chemical Corp.: 10.875% Sr. Nts., Series B, 10/15/06 2,3 1,000,000 675,000 12.75% Sr. Sub. Nts., 2/1/03 2,3 1,200,000 96,000 - -------------------------------------------------------------------- Metallurg, Inc., 11% Sr. Nts., 12/1/07 740,000 532,800 - -------------------------------------------------------------------- National Steel Corp., 9.875% First Mtg. Bonds, Series D, 3/1/09 2,3 1,300,000 511,875 - -------------------------------------------------------------------- Oregon Steel Mills, Inc., 10% Nts., 7/15/09 4 800,000 816,000 - -------------------------------------------------------------------- P&L Coal Holdings Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 645,000 684,506 - -------------------------------------------------------------------- Steel Dynamics, Inc., 9.50% Sr. Nts., 3/15/09 400,000 421,000 - -------------------------------------------------------------------- UCAR Finance, Inc., 10.25% Sr. Nts., 2/15/12 600,000 480,000 - -------------------------------------------------------------------- United States Steel LLC, 10.75% Sr. Nts., 8/1/08 600,000 594,000 -------------- 8,312,661 - -------------------------------------------------------------------- Paper & Forest Products--1.2% Abitibi-Consolidated, Inc., 8.55% Nts., 8/1/10 300,000 333,525 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Paper & Forest Products Continued Ainsworth Lumber Co. Ltd.: 12.50% Sr. Nts., 7/15/07 8 $ 400,000 $ 418,000 13.875% Sr. Sec. Nts., 7/15/07 550,000 591,250 - -------------------------------------------------------------------- Doman Industries Ltd., 8.75% Sr. Nts., 3/15/04 2 2,000,000 260,000 - -------------------------------------------------------------------- Georgia-Pacific Corp., 8.125% Sr. Unsec. Nts., 5/15/11 1,500,000 1,432,500 - -------------------------------------------------------------------- Louisiana-Pacific Corp., 10.875% Sr. Sub. Nts., 11/15/08 250,000 270,000 - -------------------------------------------------------------------- Tembec Industries, Inc., 7.75% Sr. Nts., 3/15/12 700,000 682,500 - -------------------------------------------------------------------- U.S. Timberlands Co. LP, 9.625% Sr. Nts., 11/15/07 300,000 183,000 -------------- 4,170,775 - -------------------------------------------------------------------- Telecommunication Services--6.2% - -------------------------------------------------------------------- Diversified Telecommunication Services--1.9% 360networks, Inc.: 13% Sr. Unsec. Nts., 5/1/08 1,2,3 400,000 40 13% Sr. Unsec. Nts., 5/1/08 1,2,3 [EUR] 500,000 52 - -------------------------------------------------------------------- COLO.com, Inc., 13.875% Sr. Nts., 3/15/10 1,2,3 517,087 5,171 - -------------------------------------------------------------------- Concentric Network Corp., 12.75% Sr. Unsec. Nts., 12/15/07 1,2,3 800,000 5,000 - -------------------------------------------------------------------- Dex Media East LLC, 9.875% Sr. Nts., 11/15/09 4 800,000 860,000 - -------------------------------------------------------------------- Diamond Cable Communications plc, 11.75% Sr. Disc. Nts., 12/15/05 2,3 600,000 57,000 - -------------------------------------------------------------------- Diamond Holdings plc, 9.125% Sr. Nts., 2/1/08 1 200,000 125,000 - -------------------------------------------------------------------- Focal Communications Corp., 11.875% Sr. Unsec. Nts., Series B, 1/15/10 1,2 100,000 2,500 - -------------------------------------------------------------------- Intermedia Communications, Inc., 0%/12.25% Sr. Disc. Nts., Series B, 3/1/09 1,2,3,7 200,000 27,000 - -------------------------------------------------------------------- IPC Acquisition Corp., 11.50% Sr. Sub. Nts., 12/15/09 550,000 475,750 - -------------------------------------------------------------------- KMC Telecom Holdings, Inc., 0%/12.50% Sr. Unsec. Disc. Nts., 2/15/08 1,2,7 1,700,000 25,500 - -------------------------------------------------------------------- Level 3 Communications, Inc.: 0%/10.50% Sr. Disc. Nts., 12/1/08 7 800,000 382,000 0%/12.875% Sr. Unsec. Disc. Nts., 3/15/10 7 800,000 286,000 9.125% Sr. Unsec. Nts., 5/1/08 1,700,000 1,096,500 - -------------------------------------------------------------------- Metromedia Fiber Network, Inc., 10% Sr. Unsec. Nts., Series B, 11/15/08 1,2,3 600,000 10,500 - -------------------------------------------------------------------- NorthPoint Communications Group, Inc., 12.875% Nts., 2/15/10 2,3 300,000 46,500 15 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENT OF INVESTMENTS Continued Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Diversified Telecommunication Services Continued NTL Communications Corp.: 0%/9.75% Sr. Unsec. Nts., Series B, 4/15/09 2,3,7 [GBP] 2,050,000 $ 264,023 0%/11.50% Sr. Nts., 11/15/09 2,3,7 [EUR] 500,000 38,041 - -------------------------------------------------------------------- NTL, Inc., 0%/10.75% Sr. Unsec. Unsub. Nts., Series B, 4/1/08 1,2,3,7 [GBP] 50,000 7,446 - -------------------------------------------------------------------- Qwest Corp., 8.875% Nts., 3/15/12 4 1,200,000 1,170,000 - -------------------------------------------------------------------- Sprint Capital Corp., 8.375% Nts., 3/15/12 1,450,000 1,445,495 - -------------------------------------------------------------------- Telewest Communications plc: 0%/9.25% Sr. Disc. Nts., 4/15/09 2,7 1,000,000 145,000 0%/9.875% Sr. Disc. Nts., 4/15/09 1,2,7 [GBP] 500,000 124,767 11.25% Sr. Nts., 11/1/08 2 800,000 148,000 - -------------------------------------------------------------------- Teligent, Inc., 11.50% Sr. Nts., 12/1/07 1,2,3 400,000 40 - -------------------------------------------------------------------- Viatel, Inc., 11.25% Sr. Sec. Nts., 4/15/08 1,2,3 600,000 -- - -------------------------------------------------------------------- Winstar Communications, Inc., 12.75% Sr. Nts., 4/15/10 1,2,3 1,000,000 100 - -------------------------------------------------------------------- XO Communications, Inc.: 0%/12.25% Sr. Unsec. Disc. Nts., 6/1/09 1,2,3,7 500,000 3,125 9% Sr. Unsec. Nts., 3/15/08 1,2,3 800,000 5,000 9.625% Sr. Nts., 10/1/07 1,2,3 500,000 3,125 10.75% Sr. Unsec. Nts., 11/15/08 1,2,3 200,000 1,250 -------------- 6,759,925 - -------------------------------------------------------------------- Wireless Telecommunication Services--4.3% Alamosa Delaware, Inc., 12.50% Sr. Unsec. Nts., 2/1/11 400,000 122,000 - -------------------------------------------------------------------- American Cellular Corp., 9.50% Sr. Sub. Nts., 10/15/09 2 1,500,000 292,500 - -------------------------------------------------------------------- AT&T Corp.: 7.80% Sr. Nts., 11/15/11 5 1,000,000 1,095,129 8.50% Sr. Nts., 11/15/31 5 500,000 553,010 - -------------------------------------------------------------------- AT&T Wireless Services, Inc., 7.875% Sr. Unsec. Nts., 3/1/11 1,300,000 1,308,832 - -------------------------------------------------------------------- Crown Castle International Corp.: 10.625% Sr. Unsec. Disc. Nts., 11/15/07 940,000 850,700 10.75% Sr. Nts., 8/1/11 200,000 176,000 - -------------------------------------------------------------------- CTI Holdings SA, 0%/11.50% Sr. Deferred Coupon Nts., 4/15/08 1,2,3,7 1,000,000 55,000 - -------------------------------------------------------------------- Dobson Communications Corp., 10.875% Sr. Unsec. Nts., 7/1/10 500,000 425,000 - -------------------------------------------------------------------- IPCS, Inc., 0%/14% Sr. Unsec. Disc. Nts., 7/15/10 7 350,000 15,750 - -------------------------------------------------------------------- Leap Wireless International, Inc.: 0%/14.50% Sr. Unsec. Disc. Nts., 4/15/10 2,7 400,000 38,000 12.50% Sr. Nts., 4/15/10 1,2 400,000 58,000 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Wireless Telecommunication Services Continued Microcell Telecommunications, Inc., 0%/12% Sr. Unsec. Disc. Nts., 6/1/09 2,7 $ 600,000 $ 21,000 - -------------------------------------------------------------------- Nextel Communications, Inc.: 9.375% Sr. Unsec. Nts., 11/15/09 3,950,000 3,594,500 10.65% Sr. Disc. Nts., 9/15/07 500,000 480,000 12% Sr. Unsec. Nts., 11/1/08 250,000 247,500 - -------------------------------------------------------------------- Nextel Partners, Inc.: 0%/14% Sr. Disc. Nts., 2/1/09 7 300,000 226,500 11% Sr. Unsec. Nts., 3/15/10 100,000 85,500 12.50% Sr. Nts., 11/15/09 900,000 814,500 - -------------------------------------------------------------------- Omnipoint Corp., 11.50% Sr. Nts., 9/15/09 4 1,500,000 1,597,500 - -------------------------------------------------------------------- Orbcomm Global LP (Escrow), 8/15/04 2,3 600,000 -- - -------------------------------------------------------------------- Rural Cellular Corp.: 9.625% Sr. Sub. Nts., Series B, 5/15/08 650,000 393,250 9.75% Sr. Sub. Nts., 1/15/10 400,000 242,000 - -------------------------------------------------------------------- SBA Communications Corp., 0%/12% Sr. Unsec. Disc. Nts., 3/1/08 7 900,000 481,500 - -------------------------------------------------------------------- TeleCorp PCS, Inc.: 0%/11.625% Sr. Unsec. Sub. Disc. Nts., 4/15/09 7 490,000 464,275 10.625% Sr. Unsec. Sub. Nts., 7/15/10 358,000 386,640 - -------------------------------------------------------------------- Tritel PCS, Inc.: 0%/12.75% Sr. Unsec. Sub. Disc. Nts., 5/15/09 7 224,000 209,440 10.375% Sr. Sub. Nts., 1/15/11 345,000 370,875 - -------------------------------------------------------------------- Triton PCS, Inc.: 8.75% Sr. Unsec. Sub. Nts., 11/15/11 800,000 652,000 9.375% Sr. Unsec. Sub. Nts., 2/1/11 600,000 501,000 - -------------------------------------------------------------------- US Unwired, Inc., 0%/13.375% Sr. Unsec. Sub. Disc. Nts., Series B, 11/1/09 7 800,000 52,000 -------------- 15,809,901 - -------------------------------------------------------------------- Utilities--4.5% - -------------------------------------------------------------------- Electric Utilities--1.9% AES Drax Holdings Ltd., 10.41% Sr. Sec. Sub. Nts., Series B, 12/31/20 300,000 163,500 - -------------------------------------------------------------------- Caithness Coso Funding Corp., 9.05% Sr. Sec. Nts., Series B, 12/15/09 464,074 457,113 - -------------------------------------------------------------------- Calpine Corp., 8.50% Sr. Unsec. Nts., 2/15/11 1,900,000 836,000 - -------------------------------------------------------------------- CMS Energy Corp., 9.875% Sr. Unsec. Nts., 10/15/07 1,000,000 951,053 - -------------------------------------------------------------------- CMS Panhandle Holding Co.: 6.125% Sr. Nts., 3/15/04 1,325,000 1,316,138 7% Sr. Nts., 7/15/29 985,000 875,744 - -------------------------------------------------------------------- Edison Mission Energy, 10% Sr. Unsec. Nts., 8/15/08 400,000 194,000 - -------------------------------------------------------------------- ESI Tractebel Acquisition Corp., 7.99% Sec. Bonds, Series B, 12/30/11 982,000 886,009 16 | OPPENHEIMER HIGH INCOME FUND/VA Principal Market Value Amount See Note 1 - -------------------------------------------------------------------- Electric Utilities Continued FirstEnergy Corp., 7.375% Sr. Unsub. Nts., Series C, 11/15/31 $ 1,000,000 $ 972,785 - -------------------------------------------------------------------- Mirant Americas Generation LLC, 8.30% Sr. Unsec. Nts., 5/1/11 300,000 144,000 - -------------------------------------------------------------------- Panhandle Eastern Pipe Line Co., 8.25% Sr. Nts., Series B, 4/1/10 200,000 200,713 -------------- 6,997,055 - -------------------------------------------------------------------- Gas Utilities--2.2% AmeriGas Partners LP/AmeriGas Eagle Finance Corp.: 8.875% Sr. Nts., 5/20/11 4 400,000 418,000 8.875% Sr. Unsec. Nts., 5/20/11 1,000,000 1,045,000 - -------------------------------------------------------------------- El Paso Energy Corp., 7.625% Nts., 7/15/11 500,000 335,553 - -------------------------------------------------------------------- El Paso Energy Partners LP: 8.50% Sr. Sub. Nts., 6/1/11 4 300,000 279,750 8.50% Sr. Unsec. Sub. Nts., Series B, 6/1/11 1 400,000 373,000 10.625% Sr. Sub. Nts., 12/1/12 4 1,100,000 1,130,250 - -------------------------------------------------------------------- Leviathan Gas Pipeline Partners LP/Leviathan Finance Corp., 10.375% Sr. Unsec. Sub. Nts., Series B, 6/1/09 1 500,000 510,000 - -------------------------------------------------------------------- Southern Natural Gas Co.: 7.35% Nts., 2/15/31 600,000 505,601 8% Sr. Unsub. Nts., 3/1/32 900,000 794,451 - -------------------------------------------------------------------- Tennessee Gas Pipeline Co., 7.50% Bonds, 4/1/17 750,000 627,769 - -------------------------------------------------------------------- Williams Cos., Inc. (The), 7.125% Nts., 9/1/11 2,750,000 1,815,000 -------------- 7,834,374 - -------------------------------------------------------------------- Multi-Utilities--0.3% Consumers Energy Co.: 6.25% Nts., 9/15/06 300,000 295,306 6.375% Sr. Sec. Nts., 2/1/08 450,000 436,672 7.375% Nts., 9/15/23 350,000 339,835 -------------- 1,071,813 - -------------------------------------------------------------------- Water Utilities--0.1% National Waterworks, Inc., 10.50% Sr. Sub. Nts., 12/1/12 4 300,000 314,625 -------------- Total Corporate Bonds and Notes (Cost $325,226,240) 291,336,117 Market Value Shares See Note 1 - -------------------------------------------------------------------- Preferred Stocks--0.5% AmeriKing, Inc., 13% Cum. Sr. Exchangeable, Non-Vtg. 1,8 13,764 $ 138 - -------------------------------------------------------------------- e.spire Communications, Inc., 12.75% Jr. Redeemable, Non-Vtg. 1,8 498 50 - -------------------------------------------------------------------- Eagle-Picher Holdings, Inc., 11.75% Cum. Exchangeable, Series B, Non-Vtg. 8,000 162,000 - -------------------------------------------------------------------- Global Crossing Holdings Ltd., 10.50% Sr. Exchangeable, Non-Vtg. 1,3,8 7,893 -- - -------------------------------------------------------------------- ICG Holdings, Inc., 14.25% Exchangeable, Non-Vtg. 1,8 342 5 - -------------------------------------------------------------------- McLeodUSA, Inc., 2.50% Cv., Series A 3 3,258 13,390 - -------------------------------------------------------------------- Nebco Evans Holdings, Inc., 11.25% Sr. Redeemable Exchangeable, Non-Vtg. 1,8 7,274 -- - -------------------------------------------------------------------- Nextel Communications, Inc., 13% Cum., Series D, Non-Vtg. 8 2 184 - -------------------------------------------------------------------- Pacific & Atlantic Holdings, Inc., 7.50% Cum. Cv., Series A 1,3,8 18,905 37,810 - -------------------------------------------------------------------- Paxson Communications Corp., 13.25% Cum. Jr. Exchangeable, Non-Vtg. 8 70 365,750 - -------------------------------------------------------------------- Rural Cellular Corp., 11.375% Cum., Series B, Non-Vtg. 8 1,114 281,285 - -------------------------------------------------------------------- Sovereign Real Estate Investment Trust, 12% Non-Cum., Series A 1 10,000 1,112,500 - -------------------------------------------------------------------- XO Communications, Inc., 13.50% Sr., Series E, Non-Vtg. 3,8 1 -- -------------- Total Preferred Stocks (Cost $5,577,695) 1,973,112 - -------------------------------------------------------------------- Common Stocks--0.3% Celcaribe SA 1 121,950 1,219 - -------------------------------------------------------------------- Chesapeake Energy Corp. 100,000 774,000 - -------------------------------------------------------------------- Covad Communications Group, Inc. 3 20,660 19,420 - -------------------------------------------------------------------- Geotek Communications, Inc. 1,3 226 -- - -------------------------------------------------------------------- Globix Corp. 3 11,467 22,934 - -------------------------------------------------------------------- Gulfstream Holding, Inc. 1,3 56 -- - -------------------------------------------------------------------- Horizon Natural Resources Co. 1,3 20,000 200 - -------------------------------------------------------------------- ICO Global Communication Holdings Ltd. 3 42,107 53,476 - -------------------------------------------------------------------- Manitowoc Co., Inc. (The) 1,039 26,495 - -------------------------------------------------------------------- Orbital Sciences Corp. 3 1,370 5,781 - -------------------------------------------------------------------- Pioneer Cos., Inc. 1,3 20,688 36,204 - -------------------------------------------------------------------- Prandium, Inc. 3 62,829 18,849 17 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENT OF INVESTMENTS Continued Market Value Shares See Note 1 - -------------------------------------------------------------------- Common Stocks Continued Southern Pacific Funding Corp., Liquidating Trust 1,3 251,604 $ -- - -------------------------------------------------------------------- Sterling Chemicals, Inc. 3 359 12,565 - -------------------------------------------------------------------- TVMAX Holdings, Inc. 1,3 7,500 75 - -------------------------------------------------------------------- Viatel Holding Ltd. (Bermuda) 1,3 2,349 1,198 - -------------------------------------------------------------------- WRC Media Corp. 1,3 1,353 14 -------------- Total Common Stocks (Cost $3,933,939) 972,430 Units - -------------------------------------------------------------------- Rights, Warrants and Certificates--0.1% ASAT Finance LLC Wts., Exp. 11/1/06 1,3 500 625 - -------------------------------------------------------------------- Charles River Laboratories International, Inc. Wts., Exp. 10/1/09 1,3 1,100 203,500 - -------------------------------------------------------------------- Chesapeake Energy Corp. Wts.: Exp. 1/23/03 1,3 8,351 -- Exp. 1/23/03 1,3 4,767 -- Exp. 9/1/04 3 2,671 -- - -------------------------------------------------------------------- Citigroup, Inc. Wts., Exp. 12/31/50 3 15,626 16,407 - -------------------------------------------------------------------- COLO.com, Inc. Wts., Exp. 3/15/10 1,3 600 6 - -------------------------------------------------------------------- Concentric Network Corp. Wts., Exp. 12/15/07 1,3 750 7 - -------------------------------------------------------------------- Covergent Communications, Inc. Wts., Exp. 4/1/08 1,3 2,000 20 - -------------------------------------------------------------------- Decrane Aircraft Holdings, Inc. Wts., Exp. 9/30/08 1,3 1,750 -- - -------------------------------------------------------------------- Diva Systems Corp. Wts., Exp. 3/1/08 1,3 1,500 15 - -------------------------------------------------------------------- e.spire Communications, Inc. Wts., Exp. 11/1/05 1,3 475 5 - -------------------------------------------------------------------- Equinix, Inc. Wts., Exp. 12/1/07 1,3 1,000 10 - -------------------------------------------------------------------- Horizon PCS, Inc. Wts., Exp. 10/1/10 1,3 1,300 65 - -------------------------------------------------------------------- ICG Communications, Inc. Wts., Exp. 9/15/05 1,3,9 5,940 59 - -------------------------------------------------------------------- ICO Global Communication Holdings Ltd. Wts.: Exp. 5/16/06 1,3 10,561 11 Exp. 5/16/06 1,3 16 -- - -------------------------------------------------------------------- Imperial Credit Industries, Inc. Wts., Exp. 1/31/08 1,3 5,148 -- - -------------------------------------------------------------------- Insilco Corp. Wts., Exp. 8/15/07 1,3 765 8 - -------------------------------------------------------------------- IPCS, Inc. Wts., Exp. 6/15/10 1,3 750 281 - -------------------------------------------------------------------- KMC Telecom Holdings, Inc. Wts., Exp. 4/15/08 1,3 2,455 25 - -------------------------------------------------------------------- Leap Wireless International, Inc. Wts., Exp. 4/15/10 1,3 550 5 - -------------------------------------------------------------------- Long Distance International, Inc. Wts., Exp. 4/13/08 1,3 800 -- - -------------------------------------------------------------------- Loral Space & Communications Ltd. Wts., Exp. 1/15/07 1,3 800 8 Market Value Units See Note 1 - -------------------------------------------------------------------- Rights, Warrants and Certificates Continued McLeodUSA, Inc. Wts., Exp. 4/16/07 1,3 7,220 $ 72 - -------------------------------------------------------------------- Microcell Telecommunications, Inc. Wts., Exp. 6/1/06 3,4 3,200 778 - -------------------------------------------------------------------- Millenium Seacarriers, Inc. Wts., Exp. 7/15/05 1,3 1,500 15 - -------------------------------------------------------------------- Ntelos, Inc. Wts., Exp. 8/15/10 1,3 1,000 1,625 - -------------------------------------------------------------------- Pathmark Stores, Inc. Wts., Exp. 9/19/10 3 20,000 15,400 - -------------------------------------------------------------------- PLD Telekom, Inc., 9% Cv. Sub. Nts. Wts., Exp. 3/31/03 (cv. into Metromedia International Group, Inc.) 1,3 170 2 - -------------------------------------------------------------------- Protection One, Inc. Wts.: Exp. 11/1/03 1,3 28,000 -- Exp. 6/30/05 1,3 1,600 -- - -------------------------------------------------------------------- Transocean, Inc. Wts., Exp. 5/1/09 3,4 1,000 67,500 - -------------------------------------------------------------------- Real Time Data Co. Wts., Exp. 5/31/04 1,3 121,440 -- - -------------------------------------------------------------------- Republic Technologies International LLC Wts., Exp. 7/15/09 1,3 500 5 - -------------------------------------------------------------------- Sterling Chemicals, Inc. Wts., Exp. 12/31/07 3 583 -- - -------------------------------------------------------------------- Telergy, Inc. Wts., Exp. 9/25/10 1,3 2,019 20 - -------------------------------------------------------------------- Telus Corp. Wts., Exp. 9/15/05 1,3 1,079 540 -------------- Total Rights, Warrants and Certificates (Cost $237,019) 307,014 Principal Amount - -------------------------------------------------------------------- Structured Notes--3.8% JPMorgan Chase Bank, High Yield Index Credit-Linked Trust Nts., 9.70%, 11/15/07 (Cost $13,367,651) $14,200,000 13,987,000 - -------------------------------------------------------------------- Joint Repurchase Agreements--10.4% 11 Undivided interest of 5.44% in joint repurchase agreement (Market Value $694,610,000) with Banc One Capital Markets, Inc., 1.07%, dated 12/31/02, to be repurchased at $37,771,245 on 1/2/03, collateralized by U.S. Treasury Nts., 3%--6.50%, 2/15/03--2/15/12, with a value of $311,989,144 and U.S. Treasury Bonds, 1.75%--9.375%, 4/30/04--2/15/23, with a value of $397,082,690 (Cost $37,769,000) 37,769,000 37,769,000 - -------------------------------------------------------------------- Total Investments, at Value (Cost $397,094,426) 98.2% 356,918,163 - -------------------------------------------------------------------- Other Assets Net of Liabilities 1.8 6,456,550 ---------------------------- Net Assets 100.0% $363,374,713 ============================ 18 | OPPENHEIMER HIGH INCOME FUND/VA Footnotes to Statement of Investments Principal amount is reported in U.S. Dollars, except for those denoted in the following currencies: CAD Canadian Dollar EUR Euro GBP British Pound Sterling 1. Identifies issues considered to be illiquid or restricted--See Note 7 of Notes to Financial Statements. 2. Issuer is in default. 3. Non-income producing security. 4. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $42,633,011 or 11.73% of the Fund's net assets as of December 31, 2002. 5. Represents the current interest rate for a variable or increasing rate security. 6. Securities with an aggregate market value of $1,231,423 are held in collateralized accounts to cover initial margin requirements on open futures sales contracts. See Note 6 of Notes to Financial Statements. 7. Denotes a step bond: a zero coupon bond that converts to a fixed or variable interest rate at a designated future date. 8. Interest or dividend is paid-in-kind. 9. Units may be comprised of several components, such as debt and equity and/or warrants to purchase equity at some point in the future. For units, which represent debt securities, principal amount disclosed represents total underlying principal. 10. Zero coupon bond reflects effective yield on the date of purchase. 11. The Fund may have elements of risk due to concentrated investments. Such concentrations may subject the Fund to additional risks. See accompanying Notes to Financial Statements. 19 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENT OF ASSETS AND LIABILITIES December 31, 2002
- --------------------------------------------------------------------------------------- Assets Investments, at value (including $37,769,000 in repurchase agreements) (cost $397,094,426)--see accompanying statement $356,918,163 - --------------------------------------------------------------------------------------- Cash 177,740 - --------------------------------------------------------------------------------------- Receivables and other assets: Interest, dividends and principal paydowns 7,156,350 Shares of beneficial interest sold 360,153 Daily variation on futures contracts 26,156 Other 5,849 ------------- Total assets 364,644,411 - --------------------------------------------------------------------------------------- Liabilities Payables and other liabilities: Shares of beneficial interest redeemed 789,251 Investments purchased 421,422 Shareholder reports 18,002 Distribution and service plan fees 8,737 Trustees' compensation 547 Transfer and shareholder servicing agent fees 449 Other 31,290 ------------- Total liabilities 1,269,698 - --------------------------------------------------------------------------------------- Net Assets $363,374,713 ============= - --------------------------------------------------------------------------------------- Composition of Net Assets Par value of shares of beneficial interest $ 48,418 - --------------------------------------------------------------------------------------- Additional paid-in capital 484,117,192 - --------------------------------------------------------------------------------------- Undistributed net investment income 25,973,552 - --------------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (106,479,450) - --------------------------------------------------------------------------------------- Net unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies (40,284,999) ------------- Net Assets $363,374,713 ============= - --------------------------------------------------------------------------------------- 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 $345,669,870 and 46,055,028 shares of beneficial interest outstanding) $7.51 - --------------------------------------------------------------------------------------- Service shares: Net asset value, redemption price per share and offering price per share (based on net assets of $17,704,843 and 2,363,163 shares of beneficial interest outstanding) $7.49
See accompanying Notes to Financial Statements. 20 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENT OF OPERATIONS For the Year Ended December 31, 2002
- --------------------------------------------------------------------------------------------------------- Investment Income Interest $30,380,433 - --------------------------------------------------------------------------------------------------------- Dividends 593,549 ------------ Total investment income 30,973,982 - --------------------------------------------------------------------------------------------------------- Expenses Management fees 2,518,441 - --------------------------------------------------------------------------------------------------------- Distribution and service plan fees-Service shares 13,856 - --------------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Non-Service shares 10,500 Service shares 476 - --------------------------------------------------------------------------------------------------------- Shareholder reports 24,829 - --------------------------------------------------------------------------------------------------------- Trustees' compensation 12,240 - --------------------------------------------------------------------------------------------------------- Custodian fees and expenses 8,490 - --------------------------------------------------------------------------------------------------------- Other 56,735 ------------ Total expenses 2,645,567 Less reduction to custodian expenses (2,557) Less voluntary waiver of transfer and shareholder servicing agent fees--Service shares (433) ------------ Net expenses 2,642,577 - --------------------------------------------------------------------------------------------------------- Net Investment Income 28,331,405 - --------------------------------------------------------------------------------------------------------- Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments (54,459,346) Closing of futures contracts 250,722 Foreign currency transactions (674,257) ------------ Net realized loss (54,882,881) - --------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation on: Investments 16,834,269 Translation of assets and liabilities denominated in foreign currencies 1,818,912 ------------ Net change 18,653,181 ------------ Net realized and unrealized loss (36,229,700) - --------------------------------------------------------------------------------------------------------- Net Decrease in Net Assets Resulting from Operations $(7,898,295) ============
See accompanying Notes to Financial Statements. 21 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENTS OF CHANGES IN NET ASSETS
Year Ended December 31, 2002 2001 - ---------------------------------------------------------------------------------------------------------- Operations Net investment income $ 28,331,405 $ 34,546,979 - ---------------------------------------------------------------------------------------------------------- Net realized loss (54,882,881) (28,960,743) - ---------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation 18,653,181 1,095,345 ------------------------------ Net increase (decrease) in net assets resulting from operations (7,898,295) 6,681,581 - ---------------------------------------------------------------------------------------------------------- Dividends and/or Distributions to Shareholders Dividends from net investment income: Non-Service shares (35,408,403) (34,924,849) Service shares (306) -- - ---------------------------------------------------------------------------------------------------------- Beneficial Interest Transactions Net increase in net assets resulting from beneficial interest transactions: Non-Service shares 44,572,082 39,498,599 Service shares 17,318,687 3,076 - ---------------------------------------------------------------------------------------------------------- Net Assets Total increase 18,583,765 11,258,407 - ---------------------------------------------------------------------------------------------------------- Beginning of period 344,790,948 333,532,541 ------------------------------ End of period [including undistributed net investment income of $25,973,552 and $33,752,821, respectively] $363,374,713 $344,790,948 ==============================
See accompanying Notes to Financial Statements. 22 | OPPENHEIMER HIGH INCOME FUND/VA FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Non-Service shares Year Ended December 31, 2002 2001 2000 1999 1998 - --------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $8.54 $9.27 $10.72 $11.02 $11.52 - --------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .58 .84 1.00 1.01 .95 Net realized and unrealized loss (.76) (.62) (1.36) (.55) (.90) ------------------------------------------------ Total from investment operations (.18) .22 (.36) .46 .05 - --------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.85) (.95) (1.09) (.76) (.25) Distributions from net realized gain -- -- -- -- (.30) ------------------------------------------------ Total dividends and/or distributions to shareholders (.85) (.95) (1.09) (.76) (.55) - --------------------------------------------------------------------------------------------- Net asset value, end of period $7.51 $8.54 $9.27 $10.72 $11.02 ================================================ - --------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 1 (2.40)% 1.97% (3.74)% 4.29% 0.31% - --------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $345,670 $344,788 $333,533 $340,829 $328,563 - --------------------------------------------------------------------------------------------- Average net assets (in thousands) $335,894 $347,723 $329,260 $340,519 $322,748 - --------------------------------------------------------------------------------------------- Ratios to average net assets: 2 Net investment income 8.29% 9.94% 10.47% 9.61% 8.65% Expenses 0.77% 0.79% 0.79% 0.75% 0.78% 3 - --------------------------------------------------------------------------------------------- Portfolio turnover rate 75% 46% 31% 33% 161% 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. 23 | OPPENHEIMER HIGH INCOME FUND/VA FINANCIAL HIGHLIGHTS Continued - -------------------------------------------------------------------------------- Service shares Year Ended December 31, 2002 2001 1 - --------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $8.54 $8.40 - --------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .88 .20 Net realized and unrealized loss (1.08) (.06) ----------------- Total from investment operations (.20) .14 - --------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.85) -- Distributions from net realized gain -- -- ----------------- Total dividends and/or distributions to shareholders (.85) -- - --------------------------------------------------------------------------- Net asset value, end of period $7.49 $8.54 ================= - --------------------------------------------------------------------------- Total Return, at Net Asset Value 2 (2.67)% 1.67% - --------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $17,705 $3 - --------------------------------------------------------------------------- Average net assets (in thousands) $ 5,602 $2 - --------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 8.91% 12.51% Expenses 1.02% 0.96% Expenses, net of reduction to custodian expenses and/or voluntary waiver of transfer agent fees 1.02% 4 0.96% - --------------------------------------------------------------------------- Portfolio turnover rate 75% 46% 1. For the period from September 18, 2001 (inception of offering) to December 31, 2001. 2. Assumes an investment on the business day before the first day of the fiscal period (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. 4. Less than 0.01%. See accompanying Notes to Financial Statements. 24 | OPPENHEIMER HIGH INCOME FUND/VA NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. Significant Accounting Policies Oppenheimer High Income Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds (the Trust), an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek a high level of current income from investment in high-yield fixed-income securities. The Trust's investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers two classes of shares. Both classes are sold at their offering price, which is the net asset value per share, to separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. The class of shares designated as Service shares is subject to a distribution and service plan. All classes of shares have identical rights and voting privileges. 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 index-linked structured notes whose principal and/or interest and redemption depend on the performance of an underlying index. The structured notes are leveraged, which increases the volatility of each note's market value relative to the change in the underlying index. Fluctuations in value of these securities are recorded as unrealized gains and losses in the accompanying financial statements. The Fund records a realized gain or loss when a structured note is sold or matures. As of December 31, 2002, the market value of these securities comprised 3.8% of the Fund's net assets and resulted in unrealized gains in the current period of $619,349. - -------------------------------------------------------------------------------- Security Credit Risk. The Fund invests in high-yield securities, which may be subject to a greater degree of credit risk, greater market fluctuations and risk of loss of income and principal, and may be more sensitive to economic conditions than lower-yielding, higher-rated fixed-income securities. The Fund may acquire securities in default, and is not obligated to dispose of securities whose issuers subsequently default. As of December 31, 2002, securities with an aggregate market value of $5,996,518, representing 1.65% 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 funds of the Manager, may transfer uninvested cash balances into one or more joint repurchase agreement accounts. These balances are invested in one or more 25 | OPPENHEIMER HIGH INCOME FUND/VA NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- 1. Significant Accounting Policies Continued 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. As of December 31, 2002, the Fund had available for federal income tax purposes unused capital loss carryforwards as follows: Expiring ------------------- 2006 $ 3,401,577 2007 4,933,260 2008 11,572,833 2009 22,696,701 2010 56,061,391 ----------- Total $98,665,762 =========== During the fiscal year ended December 31, 2002, the Fund did not utilize any capital loss carryforward. As of December 31, 2002, the Fund had approximately $3,940,000 of post-October losses available to offset future capital gains, if any. Such losses, if unutilized, will expire in 2011. - -------------------------------------------------------------------------------- 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. The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, during the year ended December 31, 2002, amounts have been reclassified to reflect a decrease in undistributed net investment income of $701,965. Accumulated net realized loss on investments was decreased by the same amount. Net assets of the Fund were unaffected by the reclassifications. 26 | OPPENHEIMER HIGH INCOME FUND/VA The tax character of distributions paid during the years ended December 31, 2002 and December 31, 2001 was as follows: Year Ended Year Ended December 31, 2002 December 31, 2001 ------------------------------------------------------- Distributions paid from: Ordinary income $35,408,709 $34,924,849 Long-term capital gain -- -- Return of capital -- -- ----------------------------- Total $35,408,709 $34,924,849 ============================= As of December 31, 2002, the components of distributable earnings on a tax basis were as follows: Undistributed net investment income $ 25,973,552 Accumulated net realized loss (106,479,450) Net unrealized depreciation (40,284,999) ------------- Total $(120,790,897) ============= - -------------------------------------------------------------------------------- Investment Income. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes accretion of discount and amortization of premium, is accrued as earned. - -------------------------------------------------------------------------------- Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. - -------------------------------------------------------------------------------- Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. - -------------------------------------------------------------------------------- 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
Year Ended December 31, 2002 Year Ended December 31, 2001 1 Shares Amount Shares Amount - ------------------------------------------------------------------------------------------------------------- Non-Service shares Sold 22,935,486 $ 176,263,288 16,771,940 $148,496,080 Dividends and/or distributions reinvested 4,568,826 35,408,403 3,924,140 34,924,849 Redeemed (21,816,082) (167,099,609) (16,326,208) (143,922,330) ------------------------------------------------------------------- Net increase 5,688,230 $ 44,572,082 4,369,872 $ 39,498,599 =================================================================== - ------------------------------------------------------------------------------------------------------------- Service shares Sold 2,741,181 $ 20,012,961 362 $ 3,083 Dividends and/or distributions reinvested 39 306 -- -- Redeemed (378,418) (2,694,580) (1) (7) ------------------------------------------------------------------- Net increase 2,362,802 $ 17,318,687 361 $ 3,076 ===================================================================
1. For the year ended December 31, 2001, for Non-Service shares and for the period from September 18, 2001 (inception of offering) to December 31, 2001, for Service shares. 27 | OPPENHEIMER HIGH INCOME FUND/VA NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- 3. Purchases and Sales of Securities The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the year ended December 31, 2002, were $260,090,620 and $214,009,003, respectively. As of December 31, 2002, unrealized appreciation (depreciation) based on cost of securities for federal income tax purposes of $401,078,301 was composed of: Gross unrealized appreciation $ 14,449,054 Gross unrealized depreciation (58,609,192) ------------ Net unrealized depreciation $(44,160,138) ============ The difference between book-basis and tax-basis unrealized appreciation and depreciation, if applicable, is attributable primarily to the tax deferral of losses on wash sales, or return of capital dividends, and the realization for tax purposes of unrealized gain (loss) on certain futures contracts, investments in passive foreign investment companies, and forward foreign currency exchange contracts. - -------------------------------------------------------------------------------- 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% on the next $200 million and 0.50% of average annual net assets over $1 billion. - -------------------------------------------------------------------------------- Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a $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 0.35% of average net assets of the Fund. This undertaking may be amended or withdrawn at any time. - -------------------------------------------------------------------------------- Distribution and Service Plan for Service Shares. The Fund has adopted a Distribution and Service Plan for Service shares to pay OppenheimerFunds Distributor, Inc., the Distributor, for distribution-related services for the Fund's Service shares. Under the Plan, payments are made quarterly at an annual rate of up to 0.25% of the average annual net assets of the Service shares of the Fund. For the year ended December 31, 2002, payments under the Service Plan totaled $13,856. - -------------------------------------------------------------------------------- 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. 28 | OPPENHEIMER HIGH INCOME FUND/VA - -------------------------------------------------------------------------------- 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 in the Statement of Operations as closing and expiration of futures contracts. Risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. As of December 31, 2002, the Fund had outstanding futures contracts as follows: Expiration Number of Valuation as of Unrealized Contract Description Dates Contracts December 31, 2002 Depreciation - -------------------------------------------------------------------------------- Contracts to Purchase Standard & Poor's 500 3/20/03 15 $3,295,875 $68,438 -------- Contracts to Sell U.S. Treasury Nts., 10 yr. 3/20/03 30 3,451,406 41,719 -------- $110,157 ======== - -------------------------------------------------------------------------------- 7. Illiquid or Restricted Securities As of December 31, 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 December 31, 2002 was $22,635,840, which represents 6.23% of the Fund's net assets, of which zero is considered restricted. Information concerning restricted securities is as follows: Acquisition Valuation as of Unrealized Security Dates Cost December 31, 2002 Depreciation - -------------------------------------------------------------------------------- Stocks and/or Warrants Geotek Communications, Inc 4/6/00 $ -- $-- $ -- Real Time Data Co. Wts. 6/30/99 1,214 -- 1,214 29 | OPPENHEIMER HIGH INCOME FUND/VA INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- To the Board of Trustees and Shareholders of Oppenheimer High Income Fund/VA: We have audited the accompanying statement of assets and liabilities of Oppenheimer High Income Fund/VA, which is a series of Oppenheimer Variable Account Funds, including the statement of investments, as of December 31, 2002, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2002, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer High Income Fund/VA as of December 31, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Denver, Colorado January 23, 2003 30 | OPPENHEIMER HIGH INCOME FUND/VA FEDERAL INCOME TAX INFORMATION Unaudited - -------------------------------------------------------------------------------- In early 2003, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2002. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. Dividends of $0.8519 and $0.8502 per share were paid to Non-Service and Service shareholders, respectively, on March 15, 2002, all of which was designated as "ordinary income" for federal income tax purposes. Dividends paid by the Fund during the fiscal year ended December 31, 2002 which are not designated as capital gain distributions should be multiplied by 2.06% to arrive at the amount eligible for the corporate dividend-received deduction. The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance. 31 | OPPENHEIMER HIGH INCOME FUND/VA TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- Name, Position(s) Held with Principal Occupation(s) During Past 5 Years; Fund, Length of Service, Other Trusteeships/Directorships Held by Age Trustee; Number of Portfolios in Fund Complex Currently Overseen by Trustee INDEPENDENT The address of each Trustee in the chart below TRUSTEES is 6803 S. Tucson Way, Centennial, CO 80112-3924. Each Trustee serves for an indefinite term, until his or her resignation, retirement, death or removal. James C. Swain, Formerly, Chief Executive Officer (until August Chairman and Trustee 27, 2002) of the Board II Funds, Vice Chairman (since 1986) (until January 2, 2002) of OppenheimerFunds, Age: 69 Inc. (the Manager) and President and a director (until 1997) of Centennial Asset Management Corporation (a wholly-owned investment advisory subsidiary of the Manager). Oversees 41 portfolios in the OppenheimerFunds complex. William L. Armstrong, Chairman of the following private mortgage Trustee (since 1999) banking companies: Cherry Creek Mortgage Age: 65 Company (since 1991), Centennial State Mortgage Company (since 1994), The El Paso Mortgage Company (since 1993), Transland Financial Services, Inc. (since 1997); Chairman of the following private companies: Great Frontier Insurance (insurance agency) (since 1995) and Ambassador Media Corporation (since 1984); a director of the following public companies: Storage Technology Corporation (computer equipment company) (since 1991), Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), UNUMProvident (insurance company) (since 1991). Formerly Director of International Family Entertainment (television channel) (1992-1997) and Natec Resources, Inc. (air pollution control equipment and services company) (1991-1995), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-1999), and Frontier Title (title insurance agency) (1995-June 1999); a U.S. Senator (January 1979-January 1991). Oversees 41 portfolios in the OppenheimerFunds complex. Robert G. Avis, Formerly, Director and President of A.G. Trustee (since 1993) Edwards Capital, Inc. (General Partner of Age: 71 private equity funds) (until February 2001); Chairman, President and Chief Executive Officer of A.G. Edwards Capital, Inc. (until March 2000); Vice Chairman and Director of A.G. Edwards, Inc. and Vice Chairman of A.G. Edwards & Sons, Inc. (its brokerage company subsidiary) (until March 1999); Chairman of A.G. Edwards Trust Company and A.G.E. Asset Management (investment advisor) (until March 1999); and a Director (until March 2000) of A.G. Edwards & Sons and A.G. Edwards Trust Company. Oversees 41 portfolios in the OppenheimerFunds complex. George C. Bowen, Formerly (until April 1999): Senior Vice Trustee (since 1997) President (from September 1987) and Treasurer Age: 66 (from March 1985) of the Manager; Vice President (from June 1983) and Treasurer (since March 1985) of OppenheimerFunds Distributor, Inc. (a subsidiary of the Manager); Senior Vice President (since February 1992), Treasurer (since July 1991) Assistant Secretary and a director (since December 1991) of Centennial Asset Management Corporation; Vice President (since October 1989) and Treasurer (since April 1986) of HarbourView Asset Management Corporation (an investment advisory subsidiary of the Manager); President, Treasurer and a director (June 1989-January 1990) of Centennial Capital Corporation (an investment advisory subsidiary of the Manager); Vice President and Treasurer (since August 1978) and Secretary (since April 1981) of Shareholder Services, Inc. (a transfer agent subsidiary of the Manager); Vice President, Treasurer and Secretary (since November 1989) of Shareholder Financial Services, Inc. (a transfer agent subsidiary of the Manager); Assistant Treasurer (since March 1998) of Oppenheimer Acquisition Corp. (the Manager's parent corporation); Treasurer (since November 1989) of Oppenheimer Partnership Holdings, Inc. (a holding company subsidiary of the Manager); Vice President and Treasurer (since July 1996) of Oppenheimer Real Asset Management, Inc. (an investment advisory subsidiary of the Manager); Chief Executive Officer and director (since March 1996) of MultiSource Services, Inc. (a broker-dealer subsidiary of the Manager); Treasurer (since October 1997) of OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc (offshore fund management subsidiaries of the Manager). Oversees 41 portfolios in the OppenheimerFunds complex. Edward L. Cameron, A member of The Life Guard of Mount Vernon, Trustee (since 1999) (George Washington's home) (since June 2000). Age: 64 Formerly (March 2001 - May 2002) Director of Genetic ID, Inc. and its subsidiaries (a privately held biotech company); a partner with PricewaterhouseCoopers LLP (from 1974-1999) (an accounting firm) and Chairman (from 1994-1998), Price Waterhouse LLP Global Investment Management Industry Services Group. Oversees 41 portfolios in the OppenheimerFunds complex. Jon S. Fossel, Chairman and Director (since 1998) of Rocky Trustee (since 1990) Mountain Elk Foundation (a not-for-profit Age: 60 foundation); and a director (since October 1999) of P.R. Pharmaceuticals (a privately held company) and UNUMProvident (an insurance company) (since June 1, 2002). Formerly Chairman and a director (until October 1996) and President 32 | OPPENHEIMER HIGH INCOME FUND/VA Jon S. Fossel, and Chief Executive Officer (until October Continued 1995) of the Manager; President, Chief Executive Officer and a director of Oppenheimer Acquisition Corp., Shareholders Services Inc. and Shareholder Financials Services, Inc. (until October 1995). Oversees 41 portfolios in the OppenheimerFunds complex. Sam Freedman, A trustee or director of other Oppenheimer Trustee (since 1996) funds. Formerly (until October 1994) Mr. Age: 62 Freedman held several positions in subsidiary or affiliated companies of the Manager. Oversees 41 portfolios in the OppenheimerFunds complex. Beverly L. Hamilton, Trustee (since 1996) of MassMutual Trustee (since 2002) Institutional Funds and of MML Series Age: 56 Investment Fund (open-end investment companies); Director of MML Services (since April 1987) and America Funds Emerging Markets Growth Fund (since October 1991) (both are investment companies), The California Endowment (a philanthropy organization) (since April 2002), and Community Hospital of Monterey Peninsula, (since February 2002); a trustee (since February 2000) of Monterey International Studies (an educational organization), and an advisor to Unilever (Holland)'s pension fund and to Credit Suisse First Boston's Sprout venture capital unit. Mrs. Hamilton also is a member of the investment committees of the Rockefeller Foundation, the University of Michigan and Hartford Hospital. Formerly, President (February 1991-April 2000) ARCO Investment Management Company. Oversees 40 portfolios in the OppenheimerFunds complex. Robert J. Malone, Director (since 2001) of Jones Knowledge, Inc. Trustee (since 2002) (a privately held company), U.S. Exploration, Age: 58 Inc., (since 1997), Colorado UpLIFT (a non-profit organization) (since 1986) and a trustee of the Gallagher Family Foundation (since 2000). Formerly, Chairman of U.S. Bank (a subsidiary of U.S. Bancorp and formerly Colorado National Bank,) (July 1996-April 1, 1999) and a director of Commercial Assets, Inc. (1993-2000). Oversees 40 portfolios in the OppenheimerFunds complex. F. William Marshall, Jr., Trustee (since 1996) of MassMutual Trustee (since 2000) Institutional Funds and of MML Series Age: 60 Investment Fund (open-end investment companies); Trustee and Chairman (since May 1987) of the investment committee for the Worcester Polytech Institute; President and Treasurer (since January 1999) of the SIS Fund (a private not for profit charitable organization); Trustee (since 1995) of the Springfield Library and Museum Association; Trustee (since 1996) of the Community Music School of Springfield; Member of the investment committee of the Community Foundation of Western Massachusetts (since 1998). Formerly, Chairman (January 1999-July 1999) of SIS & Family Bank, F.S.B. (formerly SIS Bank); President, Chief Executive Officer and Director (May 1993-December 1998) of SIS Bankcorp, Inc. and SIS Bank (formerly Springfield Institution for Savings) and Executive Vice President (January 1999-July 1999) of Peoples Heritage Financial Group, Inc. Oversees 41 portfolios in the OppenheimerFunds complex. - -------------------------------------------------------------------------------- INTERESTED TRUSTEE The address of Mr. Murphy in the chart below is AND OFFICER 498 Seventh Avenue, New York, NY 10018. Mr. Murphy serves for an indefinite term, until his resignation, retirement, death or removal. John V. Murphy, Chairman, Chief Executive Officer and director President and Trustee (since June 2001) and President (since (since 2001) September 2000) of the Manager; President and a Age: 53 director or trustee of other Oppenheimer funds; President and a director (since July 2001) of Oppenheimer Acquisition Corp. and of Oppenheimer Partnership Holdings, Inc.; a director (since November 2001) of OppenheimerFunds Distributor, Inc.; Chairman and a director (since July 2001) of Shareholder Services, Inc. and of Shareholder Financial Services, Inc.; President and a director (since July 2001) of OppenheimerFunds Legacy Program (a charitable trust program established by the Manager); a director of the following investment advisory subsidiaries of OppenheimerFunds, Inc.: OFI Institutional Asset Management, Inc. and Centennial Asset Management Corporation (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 1, 2001) and a director (since July 2001) of Oppenheimer Real Asset Management, Inc.; a director (since November 2001) of Trinity Investment Management Corp. and Tremont Advisers, Inc. (investment advisory affiliates of the Manager); Executive Vice President (since February 1997) of Massachusetts Mutual Life Insurance Company (the Manager's parent company); a director (since June 1995) of DLB Acquisition Corporation (a holding company that owns the shares of David L. Babson & Company, Inc.); formerly, Chief Operating Officer (September 2000-June 2001) of the Manager; President and trustee (November 1999-November 2001) of MML Series Investment Fund and MassMutual Institutional Funds (open-end investment companies); a director (September 1999-August 2000) of C.M. Life Insurance Company; President, Chief Executive Officer and director (September 1999-August 2000) of MML Bay State Life Insurance Company; a director (June 1989-June 1998) of Emerald Isle Bancorp and Hibernia Savings Bank (a wholly-owned subsidiary of Emerald Isle Bancorp). Oversees 69 portfolios in the OppenheimerFunds complex. 33 | OPPENHEIMER HIGH INCOME FUND/VA TRUSTEES AND OFFICERS Continued - -------------------------------------------------------------------------------- OFFICERS The address of the Officers in the chart below is as follows: for Messrs. Kourkoulakos and Zack, 498 Seventh Avenue, New York, NY 10018, for Mr. Wixted, 6803 S. Tucson Way, Centennial, CO 80112-3924. Each Officer serves for an annual term or until his earlier resignation, retirement, death or removal. Dimitrios Kourkoulakos, Vice President of the Manager (since December Vice President (since 2002) 2001); formerly a High Yield Analyst (1998 - Age: 35 2001) and a Securities Analyst (1995 - 1998) of the Manager. An officer of 3 portfolios in the OppenheimerFunds complex. Brian W. Wixted, Senior Vice President and Treasurer (since Treasurer, Principal Financial March 1999) of the Manager; Treasurer (since and Accounting Officer March 1999) of HarbourView Asset Management (since 1999) Corporation, Shareholder Services, Inc., Age: 43 Oppenheimer Real Asset Management Corporation, Shareholder Financial Services, Inc., Oppenheimer Partnership Holdings, Inc., OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc (since May 2000) and OFI Institutional Asset Management, Inc. (since November 2000); Treasurer and Chief Financial Officer (since May 2000) of Oppenheimer Trust Company (a trust company subsidiary of the Manager); Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp. and OppenheimerFunds Legacy Program (since April 2000); formerly Principal and Chief Operating Officer (March 1995-March 1999), Bankers Trust Company-Mutual Fund Services Division. An officer of 85 portfolios in the OppenheimerFunds complex. Robert G. Zack, Senior Vice President (since May 1985) and Vice President and Secretary General Counsel (since February 2002) of the (since 2001) Manager; General Counsel and a director (since Age: 54 November 2001) of OppenheimerFunds Distributor, Inc.; Senior Vice President and General Counsel (since November 2001) of HarbourView Asset Management Corporation; Vice President and a director (since November 2000) of Oppenheimer Partnership Holdings, Inc.; Senior Vice President, General Counsel and a director (since November 2001) of Shareholder Services, Inc., Shareholder Financial Services, Inc., OFI Private Investments, Inc., Oppenheimer Trust Company and OFI Institutional Asset Management, Inc.; General Counsel (since November 2001) of Centennial Asset Management Corporation; a director (since November 2001) of Oppenheimer Real Asset Management, Inc.; Assistant Secretary and a director (since November 2001) of OppenheimerFunds International Ltd.; Vice President (since November 2001) of OppenheimerFunds Legacy Program; Secretary (since November 2001) of Oppenheimer Acquisition Corp.; formerly Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001); OppenheimerFunds International Ltd. And Oppenheimer Millennium Funds plc (October 1997-November 2001). An officer of 85 portfolios in the OppenheimerFunds complex. The Fund's Statement of Additional Information contains additional information about the Fund's Trustees and is available without charge upon request. 34 | OPPENHEIMER HIGH INCOME FUND/VA OPPENHEIMER HIGH INCOME FUND/VA A Series of Oppenheimer Variable Account Funds - -------------------------------------------------------------------------------- Investment Advisor OppenheimerFunds, Inc. - -------------------------------------------------------------------------------- Distributor OppenheimerFunds Distributor, Inc. - -------------------------------------------------------------------------------- Transfer Agent OppenheimerFunds Services - -------------------------------------------------------------------------------- Independent Auditors Deloitte & Touche LLP - -------------------------------------------------------------------------------- Legal Counsel to the Fund Myer, Swanson, Adams & Wolf, P.C. - -------------------------------------------------------------------------------- Legal Counsel to the Mayer Brown Rowe & Maw Independent Trustees For more complete information about Oppenheimer High Income Fund/VA, please refer to the Prospectus. To obtain a copy, call your financial advisor, or call OppenheimerFunds, Inc. at 1.800.981.2871. 35 | OPPENHEIMER HIGH INCOME FUND/VA [LOGO] OppenheimerFunds(R) Distributor, Inc. (C) Copyright 2003 OppenheimerFunds, Inc. All rights reserved. -----END PRIVACY-ENHANCED MESSAGE-----