-----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, AhlegFZDPjzqPeQkT0rkvoPzxXmurhsxc+/YAoG8DXw6J94zU4D8fT5a7fTVC2Zo v92HCy8mkBRETlRWFjJbmw== 0000935069-03-000264.txt : 20030303 0000935069-03-000264.hdr.sgml : 20030303 20030228185334 ACCESSION NUMBER: 0000935069-03-000264 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030303 EFFECTIVENESS DATE: 20030303 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: 03587892 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 ra0265_6453vef.txt RA0265_6453VEF December 31, 2002 Oppenheimer Strategic Bond Fund/VA A Series of Oppenheimer Variable Account Funds - -------------------------------------------------------------------------------- Annual Report ---------- Management Commentaries - -------------------------------------------------------------------------------- Performance Update Investment Strategy Discussion Financial Statements [LOGO] OppenheimerFunds(R) The Right Way to Invest OPPENHEIMER STRATEGIC BOND FUND/VA - ------------------------------------------------------------------------------- Objective Oppenheimer Strategic Bond Fund/VA, a series of Oppenheimer Variable Account Funds, seeks a high level of current income principally derived from interest on debt securities. - ------------------------------------------------------------------------------- Narrative by Art Steinmetz, Portfolio Manager We are pleased that Oppenheimer Strategic Bond Fund/VA's non-service shares provided an average annual total return of 7.44% for the 12-month period that ended December 31, 2002. 1 During the period, the Fund felt the effects of lower yields of U.S. government securities, as well as our move toward relatively higher-quality corporate bonds. Also, the Fund was hurt by a high rate of defaults in the high yield market, especially during June and July 2002 (default rates are generally higher for junk bonds than for high rated securities). The bulk of the Fund's returns during the 12-month period were the result of its investments in foreign bonds. The value of foreign bonds generally rose for U.S. investors because of the effects of changing currency exchange rates. As the U.S. economy weakened and domestic bond yields fell, many overseas investors apparently found more attractive opportunities in other markets, causing their respective currencies to appreciate relative to the U.S. dollar. In addition, foreign bonds generally provided higher yields than domestic fixed-income securities. U.S. government securities also contributed to performance. During the beginning of the reporting period, the U.S. Federal Reserve Board put what we believe are the finishing touches on its aggressive interest rate-reduction campaign, driving short-term interest rates to their lowest levels since the early 1960s, 1.25%. Because bond prices rise when yields fall, these rate cuts were particularly beneficial to interest rate-sensitive bonds, such as U.S. Treasury securities and U.S. government agency securities. While the economic recession ended in early 2002, the recovery has been less robust than most analysts expected. Mortgage-backed securities were particularly volatile in this environment because they are highly sensitive to interest rate changes. Historically low mortgage rates led to a surge of refinancing activity and prepayments of existing mortgages. Fortunately, we anticipated these effects, and controlled the volatility to some degree by successfully "hedging" the Fund's mortgage-backed investments. On the other hand, the weak economy adversely affected the prices of most domestic corporate bonds, especially lower rated ones. That's because corporate bonds are more sensitive to changes in the perceived credit quality of their issuers than to interest rate trends. As business fundamentals deteriorated, many of these companies were shunned by the credit markets, making it virtually impossible for them to raise additional capital. In addition, high-yield bonds issued by companies in virtually all industry groups were adversely affected by a "flight to quality" among investors seeking a safe haven from a falling stock market. As mentioned earlier, we have increased the Fund's allocation to investment grade corporate bonds, those rated triple BBB and triple BBB minus. We did this mainly through reducing our exposure to government debt and lower-quality corporate debt. Those corporate yields peaked in the middle of October and prices have since rallied, contributing to the Fund's return. We held almost no bonds from Argentina issuers, successfully avoiding any aftermath of Argentina's 2001 default. In Brazil, general economic weakness was intensified by economic and political factors. The International Monetary Fund has since injected capital into Brazil's economy, and we expect the situation there to improve as political risks abate. 1. Includes changes in net asset value per share and does not include the charges associated with the separate account products that offer this Fund. Such performance is shown for non-service shares and would have been lower if such charges were taken into account. 2 | OPPENHEIMER STRATEGIC BOND FUND/VA The Fund also has invested relatively heavily in Eastern Europe, especially Russia. Outside of the United States, Russia is the largest single country represented in the Fund. Russian bonds have performed exceptionally well as the nation has become one of the world's leading oil producers, and its political climate has stabilized. It's important to remember that investing abroad involves greater risks and expenses, including political, currency and economic uncertainties, and should be undertaken with a long-term approach in mind. Investing in emerging markets stocks may entail greater risks of short-term volatility than other investments. We are cautiously optimistic. Our caution stems primarily from the potential for higher interest rates, which could erode the value of some bonds that have recently performed well. With interest rates at historically low levels, we believe there is little room for further declines, but plenty of room for rates to eventually move higher. We are optimistic regarding the prospects of foreign bonds and domestic corporate bonds. These sectors currently represent compelling values, in our opinion. They currently provide attractive opportunities for income, and they may help boost the Fund's total return, if and when economic growth gains momentum. Of course, the possibility of a war could be a factor in the coming year. In the meantime, we believe that our multi-sector approach to the global bond markets should help income-oriented investors weather the current low interest-rate environment. That is part of what makes Oppenheimer Strategic Bond Fund/VA, 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 STRATEGIC BOND FUND/VA FUND PERFORMANCE Management's Discussion of Fund Performance. During the Fund's fiscal year that ended December 31, 2002, Oppenheimer Strategic Bond Fund/VA performance was strongly influenced by adverse U.S. economic and market conditions. An anemic recovery from the 2001 recession, corporate accounting scandals and falling stock prices created a "flight to quality" among investors, benefiting holdings of U.S. government securities, but hurting the Fund's corporate bond investments, especially high-yield securities. However, these influences were largely offset by returns from foreign bonds, which were driven primarily by currency effects as the value of many other currencies to appreciate relative to the U.S. dollar. Near the end of the period, the Fund increased its allocation to investment grade corporate bonds (triple BBB and triple BBB minus). This was done by reducing the Fund's exposure to government debt and lower- quality corporate debt. The Fund's portfolio holdings and allocations are subject to change. Comparing the Fund's Performance to the Market. The graphs that follow show 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 shares, performance is measured from inception of the class on May 3, 1993. In the case of service shares, performance is measured from inception of the class on March 19, 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 Lehman Brothers Aggregate Bond Index, an unmanaged index of U.S. corporate and government bonds, and to the Salomon Brothers World Government Bond Index, an unmanaged index of debt securities of major foreign governments. 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 STRATEGIC BOND FUND/VA Non-Service shares Comparison of Change in Value of $10,000 Hypothetical Investments in: [LINE CHART] Oppenheimer Strategic Bond Lehman Brothers Salomon Brothers Fund/VA (Non-Service) Aggregate Bond Index World Government Bond Index 5/3/93 $10,000 $10,000 $10,000 6/30/93 10,020 10,194 10,079 9/30/93 10,120 10,460 10,535 12/31/93 10,425 10,466 10,530 3/31/94 10,040 10,166 10,531 6/30/94 10,070 10,062 10,601 9/30/94 10,215 10,123 10,726 12/31/94 10,032 10,161 10,777 3/31/95 10,207 10,674 11,955 6/30/95 10,809 11,324 12,593 9/30/95 11,105 11,546 12,461 12/31/95 11,569 12,038 12,829 3/31/96 11,758 11,825 12,588 6/30/96 12,048 11,892 12,640 9/30/96 12,516 12,112 12,984 12/31/96 12,966 12,475 13,293 3/31/97 12,960 12,406 12,744 6/30/97 13,480 12,861 13,130 9/30/97 13,932 13,289 13,297 12/31/97 14,095 13,680 13,324 3/31/98 14,446 13,893 13,429 6/30/98 14,560 14,217 13,696 9/30/98 14,248 14,818 14,837 12/31/98 14,503 14,868 15,364 3/31/99 14,523 14,794 14,771 6/30/99 14,523 14,664 14,262 9/30/99 14,553 14,764 14,908 12/31/99 14,913 14,746 14,708 3/31/00 15,077 15,071 14,734 6/30/00 15,175 15,334 14,712 9/30/00 15,338 15,796 14,326 12/31/00 15,306 16,460 14,942 3/31/01 15,616 16,960 14,487 6/30/01 15,492 17,056 14,260 9/30/01 15,387 17,842 15,281 12/31/01 16,047 17,850 14,794 3/31/02 16,299 17,867 14,556 6/30/02 16,374 18,527 16,251 9/30/02 16,449 19,376 16,880 12/31/02 17,242 19,681 17,678 Average Annual Total Returns of Non-Service shares of the Fund at 12/31/02 1-Year 7.44% 5-Year 4.11% Since Inception 5.80% Service shares Comparison of Change in Value of $10,000 Hypothetical Investments in: [LINE CHART] Oppenheimer Strategic Bond Lehman Brothers Salomon Brothers Fund/VA (Service) Aggregate Bond Index World Government Bond Index 03/19/2001 $10,000 $10,000 $10,000 03/31/2001 9,914 10,000 10,000 06/30/2001 9,871 10,056 9,843 09/30/2001 9,784 10,520 10,548 12/31/2001 10,194 10,525 10,212 03/31/2002 10,326 10,535 10,047 06/30/2002 10,373 10,924 11,218 09/30/2002 10,419 11,425 11,652 12/31/2002 10,910 11,604 12,203 Average Annual Total Returns of Service shares of the Fund at 12/31/02 1-Year 7.03% Since Inception 5.01% 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 5/3/93 for the non-service shares and 3/19/01 for its service shares. The performance information in the graphs for both indices begins on 4/30/93 in the first graph and on 3/31/01 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 STRATEGIC BOND FUND/VA Financial Statements Pages 7-37 6 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS December 31, 2002 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Asset-Backed Securities--2.4% American Money Management Corp., Commercial Debt Obligations Sub. Bonds, Series I, Cl. D1, 13.602%, 1/15/12 1 $ 172,858 $ 86,429 - -------------------------------------------------------------------------------- Conseco Finance Securitizations Corp., Home Equity Loan Pass-Through Certificates, Series 2001-D, Cl. M2, 3.17%, 11/15/32 2 3,000,000 2,808,787 - -------------------------------------------------------------------------------- Consumer Credit Reference Index Securities Program, Credit Card Asset-Backed Certificates, Series 2002-B, Cl. FX, 10.421%, 3/22/07 1 500,000 519,062 - -------------------------------------------------------------------------------- Embarcadero Aircraft Securitization Trust, Airplane Collateral Obligations, Series 2000-A, Cl. B, 2.52%, 8/15/25 1,2 1,820,063 91,003 - -------------------------------------------------------------------------------- Impac Secured Assets CMN Owner Trust, Home Equity Collateralized Mtg. Obligations, Series 2001-5, Cl. M1, 7.25%, 8/25/31 2,197,000 2,395,420 - -------------------------------------------------------------------------------- Lehman ABS Manufactured Housing Contract, Commercial Mtg Pass-Through Certificates, Series 2001-B, Cl. A4, 5.27%, 9/15/18 3,000,000 3,125,854 - -------------------------------------------------------------------------------- NC Finance Trust, Collateralized Mtg. Obligations, Series 1999-I, Cl. ECFD, 8.75%, 12/25/28 1 84,826 37,323 - -------------------------------------------------------------------------------- Option One Mortgage Securities Corp., Home Equity Collateralized Mtg. Obligations, Series 1999-1, Cl. CTFS, 10.06%, 3/26/29 1 14,195 13,651 - -------------------------------------------------------------------------------- Principal Residential Mortgage Capital Resources Trust, Real Estate Mtg. Investment Conduit Participation Certificates, Series 2000-1, Cl. B, 3.07%, 6/20/05 1,2 1,000,000 986,563 ------------- Total Asset-Backed Securities (Cost $11,773,045) 10,064,092 - -------------------------------------------------------------------------------- Mortgage-Backed Obligations--54.0% - -------------------------------------------------------------------------------- Government Agency--46.8% - -------------------------------------------------------------------------------- FHLMC/FNMA/Sponsored--42.9% Federal Home Loan Mortgage Corp., Gtd. Mtg. Pass-Through Participation Certificates: 11%, 11/1/14 223,625 252,201 Series 151, Cl. F, 9%, 5/15/21 289,715 300,302 - -------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., Home Equity Loan Structured Pass-Through Certificates, Series HOO2, Cl. A2, 1.861%, 12/15/06 860,000 856,036 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- FHLMC/FNMA/Sponsored Continued Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security: Series 192, Cl. IO, 6.50%, 2/1/28 3 $ 6,781,014 $ 804,186 Series 194, Cl. IO, 6.50%, 4/1/28 3 20,492,874 2,526,387 Series 208, Cl. IO, 7%, 6/1/30 3 5,132,557 606,283 - -------------------------------------------------------------------------------- Federal National Mortgage Assn.: 6%, 2/25/33 4 136,295,000 140,894,956 6.50%, 5/1/29-1/25/33 4 12,608,155 13,133,703 7%, 1/25/33 4 12,293,000 12,930,699 7.50%, 8/1/25 123,998 132,507 - -------------------------------------------------------------------------------- Federal National Mortgage Assn., Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Trust 1993-202, Cl. PH, 6.50%, 2/25/22 5 4,500,000 4,634,294 - -------------------------------------------------------------------------------- Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: Trust 294, Cl. 2, 7%, 2/1/28 3 797,126 99,143 Trust 313, Cl. 2, 6.50%, 6/25/31 3 6,122,886 822,763 ------------- 177,993,460 - -------------------------------------------------------------------------------- GNMA/Guaranteed--3.9% Government National Mortgage Assn.: 6.625%, 11/20/25 45,425 46,909 7%, 3/15/28-7/15/28 5,408,713 5,745,243 7.50%, 2/15/27 676,070 723,172 8%, 11/15/25-5/15/26 695,932 759,837 - -------------------------------------------------------------------------------- Government National Mortgage Assn., Gtd. Multiclass Mtg Participation Certificates, Series 1999-27, Cl. PQ, 7.50%, 8/16/28 8,220,125 8,886,661 ------------- 16,161,822 - -------------------------------------------------------------------------------- Private--7.2% - -------------------------------------------------------------------------------- Commercial--6.6% AMRESCO Commercial Mortgage Funding I Corp., Multiclass Mtg Pass-Through Certificates, Series 1997-C1, Cl. G, 7%, 6/17/29 6 100,000 97,844 - -------------------------------------------------------------------------------- Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates: Series 1996-D2, Cl. A3, 7.499%, 2/14/29 2 3,000,000 3,150,201 Series 1996-MD6, Cl. A7, 7.689%, 11/13/29 2 2,000,000 1,727,662 Series 1997-D4, Cl. B1, 7.525%, 4/14/29 375,000 368,758 7 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Commercial Continued FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Series 1994-C1, Cl. 2G, 8.70%, 9/25/25 1 $ 153,594 $ 150,522 - -------------------------------------------------------------------------------- First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates: Series 1997-CHL1, Cl. D, 8.114%, 4/29/39 1,2 350,000 355,633 Series 1997-CHL1, Cl. E, 8.114%, 4/29/39 1,2 600,000 514,313 - -------------------------------------------------------------------------------- First Union-Lehman Brothers Commercial Mortgage Trust, Commercial Mtg. Pass-Through Certificates: Series 1997-C2, Cl. F, 7.50%, 11/18/29 225,000 199,898 Series 1997-C2, Cl. G, 7.50%, 11/18/29 2,000,000 1,674,375 - -------------------------------------------------------------------------------- GMAC Commercial Mortgage Securities, Inc., Interest-Only Stripped Mtg.-Backed Security Pass-Through Certificates, Series 1997-C1, Cl. X, 11.692%, 7/15/27 3 3,455,059 203,524 - -------------------------------------------------------------------------------- GMAC Commercial Mortgage Securities, Inc., Mtg. Pass-Through Certificates: Series 1997-C1, Cl. G, 7.414%, 7/15/29 440,000 378,284 Series 1997-C2, Cl. F, 6.75%, 4/15/29 250,000 100,000 Series 1998-C1, Cl. F, 7.175%, 5/15/30 2 1,800,000 1,659,996 - -------------------------------------------------------------------------------- Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-Through Certificates, Series 1995-C2, Cl. D, 7.756%, 6/15/21 2 202,600 218,553 - -------------------------------------------------------------------------------- Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates: Series 1996-C1, Cl. E, 7.428%, 2/15/28 1,2 553,342 561,643 Series 1996-C1, Cl. F, 7.428%, 2/15/28 2,6 162,744 146,549 Series 1997-HF1, Cl. F, 6.86%, 2/15/10 6 150,000 149,318 Series 1997-RR, Cl. D, 7.727%, 4/30/39 2,6 450,024 416,413 Series 1997-RR, Cl. E, 7.699%, 4/30/39 2,6 300,016 249,517 Series 1997-RR, Cl. F, 7.727%, 4/30/39 2,6 600,032 409,756 Series 1997-XL1, Cl. G, 7.695%, 10/3/30 6 390,000 382,977 Series 1998-HF1, Cl. F, 7.18%, 12/15/09 6 1,500,000 1,512,356 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Commercial Continued Mortgage Capital Funding, Inc., Commercial Mtg. Pass-Through Certificates: Series 1996-MC1, Cl. G, 7.15%, 6/15/06 1 $ 1,800,000 $ 1,801,125 Series 1996-MC2, Cl. F, 5.75%, 12/21/26 4,350,000 4,162,746 Series 1997-MC1, Cl. F, 7.452%, 5/20/07 6 63,720 61,991 - -------------------------------------------------------------------------------- Prudential Mortgage Capital Co. II LLC, Commercial Mtg. Pass-Through Certificates, Series PRU-HTG 2000-C1, Cl. A2, 7.306%, 10/6/15 4,000,000 4,474,133 - -------------------------------------------------------------------------------- Salomon Brothers Mortgage Securities VII, Inc., Commercial Mtg. Pass-Through Certificates, Series 1996-C1, Cl. F, 8.493%, 1/20/06 1,2 1,000,000 953,750 - -------------------------------------------------------------------------------- Strategic Hotel Capital, Inc., Commercial Mtg. Obligations, Series 2001-SCH1, Cl. E, 3.62%, 4/17/06 1,2 1,496,870 1,279,823 - -------------------------------------------------------------------------------- Structured Asset Securities Corp., Commercial Mtg Obligations, Series 1995-C4, Cl. E, 8.963%, 6/25/26 2,6 45,923 45,904 ------------- 27,407,564 - -------------------------------------------------------------------------------- Residential--0.6% Lehman Structured Securities Corp., Collateralized Mtg Obligations, Series 2001-GE4, Cl. A, 7.466%, 10/25/30 2 1,068,580 1,078,264 - -------------------------------------------------------------------------------- Salomon Brothers Mortgage Securities VII, Inc., Commercial Mtg. Pass-Through Certificates, Series 1996-B, Cl. 1, 6.957%, 4/25/26 1,2 216,274 175,858 - -------------------------------------------------------------------------------- Washington Mutual Mortgage Securities Corp., Collateralized Mtg. Obligations, Pass-Through Certificates, Series 2002-AR19, Cl. A-1, 1.771%, 1/25/33 1,040,000 1,040,000 ------------- 2,294,122 ------------- Total Mortgage-Backed Obligations (Cost $228,137,120) 223,856,968 - -------------------------------------------------------------------------------- U.S. Government Obligations--8.6% Federal Home Loan Mortgage Corp. Sr. Unsec. Nts., 5.75%, 9/15/10 [EUR] 940,000 1,086,668 - -------------------------------------------------------------------------------- Federal National Mortgage Assn Sr. Unsec. Nts., 2.125%, 10/9/07 [JPY] 160,000,000 1,463,824 8 | OPPENHEIMER STRATEGIC BOND FUND/VA Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- U.S. Government Obligations Continued Federal National Mortgage Assn. Unsec. Nts.: 1.75%, 3/26/08 [JPY] 260,000,000 $ 2,349,575 5.25%, 4/15/07 2,890,000 3,166,986 - -------------------------------------------------------------------------------- U.S. Treasury Bonds: 5.375%, 2/15/31 4,018,000 4,381,504 8.75%, 5/15/17 1,660,000 2,400,516 8.875%, 2/15/19 735,000 1,085,561 11.875%, 11/15/03 500,000 545,801 - -------------------------------------------------------------------------------- U.S. Treasury Nts.: 3%, 11/15/07 7 4,216,000 4,268,042 4%, 11/15/12 1,707,000 1,731,673 5.875%, 2/15/04 2,300,000 2,419,223 6.50%, 2/15/10 8 4,810,000 5,750,961 6.75%, 5/15/05 2,700,000 3,011,029 7%, 7/15/06 1,760,000 2,041,120 ------------ Total U.S. Government Obligations (Cost $33,559,051) 35,702,483 - -------------------------------------------------------------------------------- Foreign Government Obligations--21.0% - -------------------------------------------------------------------------------- Argentina--0.4% Argentina (Republic of) Bonds: 11.375%, 3/15/10 1,9,10 1,065,000 239,625 11.75%, 6/15/15 9,10 2,095,000 490,230 Series 2008, 7%, 12/19/08 9,10 922,000 207,450 Series 2018, 3.063%, 6/19/18 9,10 1,698,000 348,090 - -------------------------------------------------------------------------------- Argentina (Republic of) Par Bonds, 6.017%, 3/31/23 9 565,000 265,550 - -------------------------------------------------------------------------------- Argentina (Republic of) Unsub Bonds, Series 2031, 2.79%, 6/19/31 9,10 1,378,000 282,490 - -------------------------------------------------------------------------------- Buenos Aires (Province of) Bonds, Bonos de Consolidacion de Deudas, Series PBA1, 3.257%, 4/1/07 1,9 [ARP] 95,836 22,281 ------------ 1,855,716 - -------------------------------------------------------------------------------- Australia--0.3% Australia (Commonwealth of) Bonds, Series 808, 8.75%, 8/15/08 [AUD] 1,575,000 1,054,344 - -------------------------------------------------------------------------------- Austria--0.6% Austria (Republic of) Bonds, 6.25%, 7/15/27 [EUR] 158,000 196,976 - -------------------------------------------------------------------------------- Austria (Republic of) Nts.: 3.40%, 10/20/04 [EUR] 414,000 439,448 4.30%, 7/15/03 [EUR] 230,000 243,172 5.50%, 10/20/07 [EUR] 825,000 941,513 - -------------------------------------------------------------------------------- Austria (Republic of) Sr. Unsec Unsub. Nts., Series MTN1, 5%, 7/15/12 [EUR] 529,000 586,398 ------------ 2,407,507 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Belgium--1.7% Belgium (Kingdom of) Bonds: 5%, 9/28/11 [EUR] 410,000 $ 454,951 5.50%, 3/28/28 [EUR] 1,115,000 1,268,251 Series 26, 6.25%, 3/28/07 [EUR] 3,170,000 3,696,848 - -------------------------------------------------------------------------------- Belgium (Kingdom of) Debs., 7.25%, 4/29/04 [EUR] 1,545,000 1,715,522 ------------ 7,135,572 - -------------------------------------------------------------------------------- Belize--0.1% Belize (Government of) Bonds, 9.50%, 8/15/12 1 265,000 263,012 - -------------------------------------------------------------------------------- Brazil--0.5% Brazil (Federal Republic of) Bonds, 8.875%, 4/15/24 2,986,000 1,649,765 - -------------------------------------------------------------------------------- Brazil (Federal Republic of) Debt Conversion Bonds: Series 18 yr., 2.625%, 4/15/12 2 675,000 369,562 Series D, 2.625%, 4/15/12 2 50,000 27,375 ------------ 2,046,702 - -------------------------------------------------------------------------------- Bulgaria--0.2% Bulgaria (Republic of) Interest Arrears Debs., Series PDI, 2.688%, 7/28/11 2 868,150 807,379 - -------------------------------------------------------------------------------- Canada--0.2% Canada (Government of) Bonds, 5.50%, 6/1/09 [CAD] 1,377,000 927,963 - -------------------------------------------------------------------------------- Chile--0.2% Chile (Republic of) Nts., 7.125%, 1/11/12 820,000 923,636 - -------------------------------------------------------------------------------- Colombia--0.3% Colombia (Republic of) Bonds, 10%, 1/23/12 225,000 227,812 - -------------------------------------------------------------------------------- Colombia (Republic of) Nts.: 8.625%, 4/1/08 280,000 280,700 10.50%, 7/9/10 95,000 99,987 - -------------------------------------------------------------------------------- Colombia (Republic of) Unsec Unsub. Bonds, 8.375%, 2/15/27 1,095,000 845,888 ------------ 1,454,387 - -------------------------------------------------------------------------------- Dominican Republic--0.1% Dominican Republic Unsec Unsub. Bonds, 9.50%, 9/27/06 346,000 367,625 - -------------------------------------------------------------------------------- Ecuador--0.3% Ecuador (Republic of) Unsec Bonds, 6%, 8/15/30 2 2,553,000 1,065,877 - -------------------------------------------------------------------------------- El Salvador--0.2% El Salvador (Republic of) Bonds, 7.75%, 1/24/23 6 315,000 314,212 - -------------------------------------------------------------------------------- El Salvador (Republic of) Unsec. Nts., 8.50%, 7/25/11 6 675,000 727,313 ------------ 1,041,525 9 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- France--2.2% France (Government of) Obligations Assimilables du Tresor Bonds: 5%, 4/25/12 [EUR] 1,060,000 $ 1,166,870 5.75%, 10/25/32 [EUR] 820,000 980,080 - -------------------------------------------------------------------------------- France (Government of) Treasury Nts.: 3.50%, 7/12/04 [EUR] 2,455,000 2,607,849 3.75%, 1/12/07 [EUR] 4,185,000 4,470,000 ------------ 9,224,799 - -------------------------------------------------------------------------------- Germany--2.6% Germany (Republic of) Bonds: 4.75%, 7/4/28 [EUR] 600,000 619,251 Series 01, 5%, 7/4/11 [EUR] 710,000 790,672 Series 02, 5%, 7/4/12 [EUR] 3,710,000 4,126,870 Series 139, 4%, 2/16/07 [EUR] 2,890,000 3,111,315 Series 140, 4.50%, 8/17/07 [EUR] 335,000 367,334 - -------------------------------------------------------------------------------- Treuhandanstalt Gtd. Nts., 6.75%, 5/13/04 [EUR] 1,540,000 1,702,213 ------------ 10,717,655 - -------------------------------------------------------------------------------- Great Britain--0.9% United Kingdom Treasury Bonds, 5.75%, 12/7/09 [GBP] 2,025,000 3,545,954 - -------------------------------------------------------------------------------- Greece--0.3% Greece (Republic of) Bonds, 5.35%, 5/18/11 [EUR] 980,000 1,102,761 - -------------------------------------------------------------------------------- Guatemala--0.2% Guatemala (Republic of) Nts.: 8.50%, 8/3/07 25,000 26,563 10.25%, 11/8/11 1 820,000 928,650 ------------ 955,213 - -------------------------------------------------------------------------------- Italy--0.7% Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali: 0.375%, 10/10/06 [JPY] 89,000,000 754,554 5.25%, 8/1/11 [EUR] 1,015,000 1,142,896 - -------------------------------------------------------------------------------- Italy (Republic of) Treasury Nts., Cert Di Credito Del Tesoro, 3.90%, 2/1/03 2 [EUR] 985,000 1,033,762 ------------ 2,931,212 - -------------------------------------------------------------------------------- Ivory Coast--0.0% Ivory Coast (Government of) Past Due Interest Bonds, 3/29/18 9,10 [FRF] 2,194,500 50,028 - -------------------------------------------------------------------------------- Mexico--1.7% United Mexican States Bonds: 8.30%, 8/15/31 300,000 317,250 10.375%, 2/17/09 620,000 765,080 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Mexico Continued United Mexican States Nts.: 7.50%, 1/14/12 $ 1,314,000 $ 1,409,265 8.125%, 12/30/19 1,160,000 1,226,700 8.375%, 1/14/11 2,290,000 2,593,425 Series A, 9.875%, 2/1/10 435,000 535,094 ------------ 6,846,814 - -------------------------------------------------------------------------------- Nigeria--0.1% Nigeria (Federal Republic of) Promissory Nts., Series RC, 5.092%, 1/5/10 9 501,751 283,399 - -------------------------------------------------------------------------------- Norway--0.4% Norway (Kingdom of) Bonds, 5.50%, 5/15/09 [NOK] 8,950,000 1,282,207 - -------------------------------------------------------------------------------- Norway (Kingdom of) Treasury Bills, Zero Coupon, Series SS75, 6.69%, 3/19/03 11 [NOK] 3,210,000 457,874 ------------ 1,740,081 - -------------------------------------------------------------------------------- Panama--0.1% Panama (Republic of) Bonds, 9.375%, 4/1/29 222,000 238,650 - -------------------------------------------------------------------------------- Panama (Republic of) Interest Reduction Bonds, 5%, 7/17/14 2 62,225 55,380 - -------------------------------------------------------------------------------- Panama (Republic of) Nts., 8.25%, 4/22/08 71,000 73,840 - -------------------------------------------------------------------------------- Panama (Republic of) Past Due Interest Debs., 20 yr., 2.75%, 7/17/16 2 85,907 68,511 ------------ 436,381 - -------------------------------------------------------------------------------- Peru--0.3% Peru (Republic of) Sr. Nts., Zero Coupon, 4.53%, 2/28/16 11 2,553,583 1,364,124 - -------------------------------------------------------------------------------- Philippines--0.7% Philippines (Republic of) Bonds, 9.375%, 1/18/17 790,000 813,700 - -------------------------------------------------------------------------------- Philippines (Republic of) Nts., 10.625%, 3/16/25 175,000 180,687 - -------------------------------------------------------------------------------- Philippines (Republic of) Unsec. Bonds: 8.875%, 4/15/08 400,000 417,000 9.875%, 1/15/19 1,719,000 1,706,108 ------------ 3,117,495 - -------------------------------------------------------------------------------- Portugal--0.4% Portugal (Republic of) Obrig Do Tes Medio Prazo Unsec. Unsub. Bonds, 5.85%, 5/20/10 [EUR] 1,300,000 1,518,411 - -------------------------------------------------------------------------------- Russia--1.7% Russian Federation Unsec. Unsub Nts., 8.75%, 7/24/05 115,000 124,775 - -------------------------------------------------------------------------------- Russian Federation Unsub. Nts., 5%, 3/31/30 2 7,274,875 5,783,526 10 | OPPENHEIMER STRATEGIC BOND FUND/VA Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Russia Continued Russian Ministry of Finance Unsec. Debs., Series IV, 3%, 5/14/03 $ 1,030,000 $ 1,023,627 ------------ 6,931,928 - -------------------------------------------------------------------------------- South Africa--0.3% South Africa (Republic of) Unsec. Nts.: 7.375%, 4/25/12 445,000 482,825 8.50%, 6/23/17 795,000 902,325 ------------ 1,385,150 - -------------------------------------------------------------------------------- Supranational--0.2% European Investment Bank Nts., 2.125%, 9/20/07 [JPY] 80,000,000 733,193 - -------------------------------------------------------------------------------- Sweden--0.1% Sweden (Kingdom of) Debs., Series 1040, 6.50%, 5/5/08 [SEK] 4,400,000 558,942 - -------------------------------------------------------------------------------- The Netherlands--0.9% The Netherlands (Government of) Bonds: 5%, 7/15/11 [EUR] 435,000 484,609 5.50%, 1/15/28 [EUR] 168,000 192,765 5.75%, 1/15/04 [EUR] 488,000 527,880 6.50%, 4/15/03 [EUR] 480,000 509,253 Series 1, 5.75%, 2/15/07 [EUR] 1,015,000 1,164,732 - -------------------------------------------------------------------------------- The Netherlands (Government of) Treasury Bills, Zero Coupon, 3.13%, 2/28/03 11 [EUR] 650,000 679,088 ------------ 3,558,327 - -------------------------------------------------------------------------------- Trinidad & Tobago--0.1% Trinidad & Tobago (Republic of) Nts., 9.875%, 10/1/09 385,000 468,738 - -------------------------------------------------------------------------------- Turkey--0.4% Turkey (Republic of) Bonds, 11.75%, 6/15/10 235,000 249,687 - -------------------------------------------------------------------------------- Turkey (Republic of) Sr. Unsec Unsub. Nts., 11.875%, 1/15/30 895,000 941,988 - -------------------------------------------------------------------------------- Turkey (Republic of) Sr. Unsub Bonds, 12.375%, 6/15/09 315,000 341,775 ------------ 1,533,450 - -------------------------------------------------------------------------------- Ukraine--0.6% Ukraine (Republic of) Sr. Unsec Nts., 11%, 3/15/07 2,387,280 2,463,554 - -------------------------------------------------------------------------------- Uruguay--0.0% Banco Central Del Uruguay Nts., Series A, 6.75%, 2/19/21 185,000 126,263 - -------------------------------------------------------------------------------- Venezuela--1.0% Venezuela (Republic of) Bonds, 9.25%, 9/15/27 1,340,000 914,550 - -------------------------------------------------------------------------------- Venezuela (Republic of) Collateralized Par Bonds, Series W-A, 6.75%, 3/31/20 415,000 335,112 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Venezuela Continued Venezuela (Republic of) Debs., Series DL, 2.313%, 12/18/07 2 $ 2,743,332 $ 2,105,507 - -------------------------------------------------------------------------------- Venezuela (Republic of) Front-Loaded Interest Reduction Bonds: Series A, 2.688%, 3/31/07 2 508,273 392,641 Series B, 2.688%, 3/31/07 2 362,134 280,654 ------------ 4,028,464 ------------ Total Foreign Government Obligations (Cost $81,326,566) 86,973,581 - -------------------------------------------------------------------------------- Loan Participations--0.6% Algeria (Republic of) Loan Participation Nts., 2.625%, 3/4/10 1,2 582,500 524,978 - -------------------------------------------------------------------------------- Deutsche Bank AG, Indonesia Rupiah Loan Participation Nts.: 2.636%, 5/21/04 1,9 525,000 257,250 2.636%, 3/25/05 1,9 265,000 137,800 2.636%, 12/14/13 1,9 795,000 365,700 - -------------------------------------------------------------------------------- Deutsche Bank AG, OAO Gazprom Loan Participation Nts., 9.50%, 2/19/03 530,000 531,855 - -------------------------------------------------------------------------------- Ministry Finance of Russia Debs., Series VI, 3%, 5/14/06 20,000 17,700 - -------------------------------------------------------------------------------- Morocco (Kingdom of) Loan Participation Agreement, Tranche A, 2.563%, 1/1/09 1,2 455,000 416,325 ------------ Total Loan Participations (Cost $2,331,571) 2,251,608 - -------------------------------------------------------------------------------- Corporate Bonds and Notes--37.8% - -------------------------------------------------------------------------------- Consumer Discretionary--12.3% - -------------------------------------------------------------------------------- Auto Components--0.7% Burke Industries, Inc., 10% Sr. Sub. Nts., 8/15/07 9,10 150,000 34,500 - -------------------------------------------------------------------------------- Cambridge Industries, Inc., Liquidating Trust Interests, 7/15/07 77,456 -- - -------------------------------------------------------------------------------- Collins & Aikman Floorcoverings, Inc., 9.75% Sr. Sub. Nts., Series B, 2/15/10 200,000 201,000 - -------------------------------------------------------------------------------- Collins & Aikman Products Co., 10.75% Sr. Nts., 12/31/11 400,000 383,000 - -------------------------------------------------------------------------------- Dana Corp.: 9% Unsec. Nts., 8/15/11 420,000 407,400 10.125% Nts., 3/15/10 200,000 203,500 - -------------------------------------------------------------------------------- Dura Operating Corp.: 9% Sr. Sub. Nts., Series B, 5/1/09 [EUR] 400,000 390,377 9% Sr. Unsec. Sub. Nts., Series D, 5/1/09 500,000 457,500 - -------------------------------------------------------------------------------- Metaldyne Corp., 11% Sr. Sub. Nts., 6/15/12 300,000 247,500 - -------------------------------------------------------------------------------- Stoneridge, Inc., 11.50% Sr. Nts., 5/1/12 600,000 576,000 ------------ 2,900,777 11 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Automobiles--0.5% Ford Motor Credit Co.: 7.25% Nts., 10/25/11 $ 1,442,000 $ 1,403,393 7.375% Nts., 10/28/09 615,000 610,345 - -------------------------------------------------------------------------------- General Motors Acceptance Corp., 6.875% Unsec. Unsub. Nts., 8/28/12 305,000 301,176 -------------- 2,314,914 - -------------------------------------------------------------------------------- Hotels, Restaurants & Leisure--3.3% Apcoa, Inc., 9.25% Sr. Unsec. Sub. Nts., 3/15/08 1 100,000 30,500 - -------------------------------------------------------------------------------- Aztar Corp., 9% Sr. Unsec. Sub. Nts., 8/15/11 850,000 875,500 - -------------------------------------------------------------------------------- Boca Resorts, Inc., 9.875% Sr. Sub. Nts., 4/15/09 450,000 470,250 - -------------------------------------------------------------------------------- Boyd Gaming Corp., 8.75% Sr. Sub. Nts., 4/15/12 300,000 313,500 - -------------------------------------------------------------------------------- Buffets, Inc., 11.25% Sr. Sub. Nts., 7/15/10 6 300,000 285,000 - -------------------------------------------------------------------------------- Coast Hotels & Casinos, Inc., 9.50% Sr. Unsec. Sub. Nts., 4/1/09 300,000 322,500 - -------------------------------------------------------------------------------- Hilton Hotels Corp., 7.625% Nts., 12/1/12 400,000 404,637 - -------------------------------------------------------------------------------- Hollywood Casino Corp., 11.25% Sr. Sec. Nts., 5/1/07 1 250,000 271,250 - -------------------------------------------------------------------------------- Hollywood Park, Inc., 9.25% Sr. Unsec. Sub. Nts., Series B, 2/15/07 325,000 289,250 - -------------------------------------------------------------------------------- Intrawest Corp., 9.75% Sr. Nts., 8/15/08 350,000 358,750 - -------------------------------------------------------------------------------- Isle of Capri Casinos, Inc., 9% Sr. Sub. Nts., 3/15/12 500,000 522,500 - -------------------------------------------------------------------------------- John Q. Hammons Hotels, Inc., 8.875% Sr. Nts., Series B, 5/15/12 300,000 303,000 - -------------------------------------------------------------------------------- Jupiters Ltd., 8.50% Sr. Unsec. Nts., 3/1/06 400,000 406,000 - -------------------------------------------------------------------------------- Mandalay Resort Group, 10.25% Sr. Unsec. Sub. Nts., Series B, 8/1/07 650,000 716,625 - -------------------------------------------------------------------------------- MGM Mirage, Inc., 8.375% Sr. Unsec. Sub. Nts., 2/1/11 5 1,200,000 1,299,000 - -------------------------------------------------------------------------------- Mohegan Tribal Gaming Authority: 8% Sr. Sub. Nts., 4/1/12 400,000 419,000 8.125% Sr. Nts., 1/1/06 300,000 317,250 8.375% Sr. Sub. Nts., 7/1/11 600,000 633,750 8.75% Sr. Unsec. Sub. Nts., 1/1/09 700,000 738,500 - -------------------------------------------------------------------------------- Park Place Entertainment Corp., 7.875% Sr. Sub. Nts., 3/15/10 200,000 204,500 - -------------------------------------------------------------------------------- Premier Cruise Ltd., 11% Sr. Nts., 3/15/08 1,9,10 250,000 -- - -------------------------------------------------------------------------------- Premier Parks, Inc.: 0%/10% Sr. Disc. Nts., 4/1/08 12 750,000 729,375 9.75% Sr. Nts., 6/15/07 500,000 487,500 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Hotels, Restaurants & Leisure Continued Prime Hospitality Corp., 8.375% Sr. Sub. Nts., 5/1/12 $ 400,000 $ 390,000 - -------------------------------------------------------------------------------- Six Flags, Inc., 8.875% Sr. Nts., 2/1/10 800,000 756,000 - -------------------------------------------------------------------------------- Station Casinos, Inc., 9.875% Sr. Unsec. Sub. Nts., 7/1/10 800,000 872,000 - -------------------------------------------------------------------------------- Sun International Hotels Ltd., 8.875% Sr. Unsec. Sub. Nts., 8/15/11 700,000 717,500 - -------------------------------------------------------------------------------- Trump Atlantic City Associates/ Trump Atlantic City Funding, Inc., 11.25% First Mtg. Nts., 5/1/06 25,000 19,625 - -------------------------------------------------------------------------------- Vail Resorts, Inc., 8.75% Sr. Unsec. Sub. Nts., 5/15/09 200,000 206,000 - -------------------------------------------------------------------------------- Venetian Casino Resort LLC/ Las Vegas Sands, Inc., 11% Bonds, 6/15/10 6 250,000 262,500 -------------- 13,621,762 - -------------------------------------------------------------------------------- Household Durables--1.1% Beazer Homes USA, Inc., 8.375% Sr. Nts., 4/15/12 400,000 414,000 - -------------------------------------------------------------------------------- D.R. Horton, Inc.: 7.875% Sr. Nts., 8/15/11 300,000 294,000 9.375% Sr. Unsec. Sub. Nts., 3/15/11 400,000 404,000 9.75% Sr. Sub. Nts., 9/15/10 400,000 412,000 - -------------------------------------------------------------------------------- Del Webb Corp., 10.25% Sr. Unsec. Sub. Debs., 2/15/10 300,000 328,500 - -------------------------------------------------------------------------------- KB Home: 7.75% Sr. Nts., 10/15/04 300,000 307,500 8.625% Sr. Sub. Nts., 12/15/08 250,000 260,000 9.50% Sr. Unsec. Sub. Nts., 2/15/11 400,000 426,000 - -------------------------------------------------------------------------------- Salton, Inc., 10.75% Sr. Unsec. Sub. Nts., 12/15/05 425,000 414,906 - -------------------------------------------------------------------------------- Standard Pacific Corp., 9.25% Sr. Sub. Nts., 4/15/12 200,000 194,000 - -------------------------------------------------------------------------------- WCI Communities, Inc., 9.125% Sr. Sub. Nts., 5/1/12 300,000 271,500 - -------------------------------------------------------------------------------- Williams Scotsman, Inc., 9.875% Sr. Unsec. Nts., 6/1/07 800,000 744,000 -------------- 4,470,406 - -------------------------------------------------------------------------------- Internet & Catalog Retail--0.4% Amazon.com, Inc., 0%/10% Sr. Unsec. Disc. Nts., 5/1/08 12 1,100,000 1,105,500 - -------------------------------------------------------------------------------- USA Interactive, 7% Nts., 1/15/13 6 473,000 489,973 -------------- 1,595,473 12 | OPPENHEIMER STRATEGIC BOND FUND/VA Principal Market Value Amount See Note 1 - ------------------------------------------------------------------------------- Media--5.0% Adelphia Communications Corp.: 7.875% Sr. Unsec. Nts., 5/1/09 9 $ 350,000 $ 131,250 10.25% Sr. Unsec. Nts., 11/1/06 9 400,000 152,000 10.25% Sr. Unsec. Sub. Nts., 6/15/11 9,10 400,000 156,000 10.875% Sr. Unsec. Nts., 10/1/10 9,10 200,000 77,000 - ------------------------------------------------------------------------------- Allbritton Communications Co., 7.75% Sr. Sub. Nts., 12/15/12 6 1,200,000 1,207,500 - ------------------------------------------------------------------------------- AMC Entertainment, Inc., 9.50% Sr. Unsec. Sub. Nts., 2/1/11 500,000 495,000 - ------------------------------------------------------------------------------- AOL Time Warner, Inc., 6.875% Nts., 5/1/12 1,321,000 1,398,004 - ------------------------------------------------------------------------------- Block Communications, Inc., 9.25% Sr. Sub. Nts., 4/15/09 400,000 415,000 - ------------------------------------------------------------------------------- Chancellor Media Corp., 8.75% Sr. Unsec. Sub. Nts., Series B, 6/15/07 1 300,000 314,625 - ------------------------------------------------------------------------------- Charter Communications Holdings LLC/Charter Communications Holdings Capital Corp.: 0%/9.92% Sr. Unsec. Disc. Nts., 4/1/11 12 900,000 319,500 8.625% Sr. Unsec. Nts., 4/1/09 200,000 90,000 10.75% Sr. Unsec. Nts., 10/1/09 1,100,000 503,250 11.125% Sr. Unsec. Nts., 1/15/11 500,000 228,750 - ------------------------------------------------------------------------------- Classic Cable, Inc., 10.50% Sr. Sub. Nts., 3/1/10 1,9,10 200,000 25,000 - ------------------------------------------------------------------------------- Comcast Cable Communications, Inc.: 6.75% Sr. Unsub. Nts., 1/30/11 848,000 883,975 8.875% Unsub. Nts., 5/1/17 877,000 1,024,401 - ------------------------------------------------------------------------------- Corus Entertainment, Inc., 8.75% Sr. Sub. Nts., 3/1/12 300,000 319,125 - ------------------------------------------------------------------------------- Cox Communications, Inc., 7.125% Nts., 10/1/12 1,128,000 1,255,146 - ------------------------------------------------------------------------------- CSC Holdings, Inc., 7.625% Sr. Unsec. Unsub. Nts., Series B, 4/1/11 850,000 802,187 - ------------------------------------------------------------------------------- Cumulus Media, Inc., 10.375% Sr. Unsec. Sub. Nts., 7/1/08 150,000 162,187 - ------------------------------------------------------------------------------- EchoStar DBS Corp.: 9.375% Sr. Unsec. Nts., 2/1/09 750,000 796,875 10.375% Sr. Unsec. Nts., 10/1/07 800,000 870,000 - ------------------------------------------------------------------------------- Emmis Communications Corp.: 0%/12.50% Sr. Unsec. Disc. Nts., 3/15/11 12 548,000 442,510 8.125% Sr. Unsec. Sub. Nts., Series B, 3/15/09 600,000 624,000 - ------------------------------------------------------------------------------- Entravision Communications Corp., 8.125% Sr. Sub. Nts., 3/15/09 400,000 418,000 - ------------------------------------------------------------------------------- Hollinger International Publishing, Inc., 9% Sr. Nts., 12/15/10 6 400,000 405,500 - ------------------------------------------------------------------------------- Insight Midwest LP/Insight Capital, Inc., 9.75% Sr. Nts., 10/1/09 200,000 191,000 Principal Market Value Amount See Note 1 - ------------------------------------------------------------------------------- Media Continued Lamar Media Corp.: 8.625% Sr. Sub. Nts., 9/15/07 $ 150,000 $ 157,125 9.625% Sr. Unsec. Sub. Nts., 12/1/06 50,000 51,750 - ------------------------------------------------------------------------------- Mediacom LLC/Mediacom Capital Corp., 9.50% Sr. Unsec. Nts., 1/15/13 500,000 452,500 - ------------------------------------------------------------------------------- News America Holdings, Inc., 8.875% Sr. Debs., 4/26/23 625,000 695,196 - ------------------------------------------------------------------------------- News America, Inc., 7.625% Sr. Debs., 11/30/28 280,000 286,696 - ------------------------------------------------------------------------------- PanAmSat Corp., 8.50% Sr. Nts., 2/1/12 6 900,000 864,000 - ------------------------------------------------------------------------------- R.H. Donnelley Financial Corp. I, 10.875% Sr. Sub. Nts., 12/15/12 6 400,000 438,000 - ------------------------------------------------------------------------------- Radio One, Inc., 8.875% Sr. Unsec. Sub. Nts., Series B, 7/1/11 200,000 215,000 - ------------------------------------------------------------------------------- Regal Cinemas, Inc., 9.375% Sr. Sub. Nts., Series B, 2/1/12 200,000 214,000 - ------------------------------------------------------------------------------- Rogers Cablesystems Ltd., 10% Second Priority Sr. Sec. Debs., 12/1/07 200,000 205,000 - ------------------------------------------------------------------------------- Rogers Communications, Inc., 8.75% Sr. Nts., 7/15/07 [CAD] 400,000 241,170 - ------------------------------------------------------------------------------- Shaw Communications, Inc., 8.54% Debs., 9/30/27 [CAD] 340,000 141,068 - ------------------------------------------------------------------------------- Sinclair Broadcast Group, Inc.: 8% Sr. Sub. Nts., 3/15/12 750,000 785,625 8% Sr. Sub. Nts., 3/15/12 6 300,000 314,250 8.75% Sr. Sub. Nts., 12/15/07 100,000 104,625 8.75% Sr. Sub. Nts., 12/15/11 300,000 324,375 - ------------------------------------------------------------------------------- Spanish Broadcasting System, Inc., 9.625% Sr. Unsec. Sub. Nts., 11/1/09 800,000 832,000 - ------------------------------------------------------------------------------- United Pan-Europe Communications NV: 0%/13.375% Sr. Unsec. Disc. Nts., Series B, 11/1/09 9,10,12 500,000 32,500 0%/13.75% Sr. Unsec. Disc. Nts., Series B, 2/1/10 9,10,12 200,000 13,000 11.25% Sr. Nts., Series B, 11/1/09 9,10 [EUR] 250,000 15,741 - ------------------------------------------------------------------------------- WRC Media, Inc./Weekly Reader Corp./Compass Learning Corp., 12.75% Sr. Sub. Nts., 11/15/09 500,000 492,500 ------------- 20,583,906 - ------------------------------------------------------------------------------- Multiline Retail--0.3% Saks, Inc.: 8.25% Sr. Unsec. Nts., 11/15/08 700,000 700,000 9.875% Nts., 10/1/11 400,000 420,000 ------------- 1,120,000 13 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Specialty Retail--0.8% Asbury Automotive Group, Inc., 9% Sr. Sub. Nts., 6/15/12 $ 300,000 $ 262,500 - -------------------------------------------------------------------------------- AutoNation, Inc., 9% Sr. Unsec. Nts., 8/1/08 500,000 507,500 - -------------------------------------------------------------------------------- CSK Auto, Inc., 12% Sr. Unsec. Nts., 6/15/06 400,000 430,000 - -------------------------------------------------------------------------------- Eye Care Centers of America, Inc., 9.125% Sr. Unsec. Sub. Nts., 5/1/08 200,000 167,000 - -------------------------------------------------------------------------------- Finlay Enterprises, Inc., 9% Debs., 5/1/08 100,000 88,500 - -------------------------------------------------------------------------------- Finlay Fine Jewelry Corp., 8.375% Sr. Nts., 5/1/08 300,000 283,500 - -------------------------------------------------------------------------------- Gap, Inc. (The), 6.90% Nts., 9/15/07 100,000 98,000 - -------------------------------------------------------------------------------- Hollywood Entertainment Corp., 9.625% Sr. Sub. Nts., 3/15/11 400,000 410,000 - -------------------------------------------------------------------------------- Petco Animal Supplies, Inc., 10.75% Sr. Sub. Nts., 11/1/11 200,000 221,250 - -------------------------------------------------------------------------------- United Rentals (North America), Inc.: 10.75% Sr. Nts., 4/15/08 6 300,000 297,000 10.75% Sr. Unsec. Nts., 4/15/08 500,000 500,000 - -------------------------------------------------------------------------------- United Rentals, Inc., 9.25% Sr. Unsec. Sub. Nts., Series B, 1/15/09 250,000 205,625 ----------- 3,470,875 - -------------------------------------------------------------------------------- Textiles & Apparel--0.2% Galey & Lord, Inc., 9.125% Sr. Unsec. Sub. Nts., 3/1/08 1,9,10 400,000 42,000 - -------------------------------------------------------------------------------- Levi Strauss & Co., 12.25% Sr. Nts., 12/15/12 6 600,000 591,000 - -------------------------------------------------------------------------------- Phillips-Van Heusen Corp., 9.50% Sr. Unsec. Sub. Nts., 5/1/08 200,000 201,500 - -------------------------------------------------------------------------------- Russell Corp., 9.25% Sr. Nts., 5/1/10 200,000 215,000 ----------- 1,049,500 - -------------------------------------------------------------------------------- Consumer Staples--1.6% - -------------------------------------------------------------------------------- Beverages--0.1% Constellation Brands, Inc., 8.125% Sr. Sub. Nts., 1/15/12 300,000 312,000 - -------------------------------------------------------------------------------- Packaged Ice, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/1/05 200,000 157,250 ----------- 469,250 - -------------------------------------------------------------------------------- Food & Drug Retailing--0.5% Delhaize America, Inc., 8.125% Unsub. Debs., 4/15/11 632,000 612,361 - -------------------------------------------------------------------------------- Fleming Cos., Inc.: 10.125% Sr. Unsec. Nts., 4/1/08 400,000 346,000 10.625% Sr. Unsec. Sub. Nts., Series D, 7/31/07 200,000 131,000 - -------------------------------------------------------------------------------- Great Atlantic & Pacific Tea Co., Inc. (The), 9.125% Sr. Nts., 12/15/11 400,000 294,000 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Food & Drug Retailing Continued Pantry, Inc. (The), 10.25% Sr. Sub. Nts., 10/15/07 $ 200,000 $ 180,500 - -------------------------------------------------------------------------------- Pathmark Stores, Inc., 8.75% Sr. Sub. Nts., 2/1/12 500,000 462,500 - -------------------------------------------------------------------------------- Real Time Data Co., 13% Disc. Nts., 5/31/09 1,9,10,13 142,981 25,736 ----------- 2,052,097 - -------------------------------------------------------------------------------- Food Products--0.7% American Seafood Group LLC, 10.125% Sr. Sub. Nts., 4/15/10 200,000 205,000 - -------------------------------------------------------------------------------- Aurora Foods, Inc., 8.75% Sr. Sub. Nts., Series B, 7/1/08 200,000 98,000 - -------------------------------------------------------------------------------- Burns Philp Capital Pty Ltd., 9.75% Sr. Sub. Nts., 7/15/12 6 450,000 434,250 - -------------------------------------------------------------------------------- Del Monte Corp., 8.625% Sr. Sub. Nts., 12/15/12 6 400,000 410,000 - -------------------------------------------------------------------------------- Doane Pet Care Co., 9.75% Sr. Unsec. Sub. Nts., 5/15/07 200,000 158,000 - -------------------------------------------------------------------------------- Dole Food Co., Inc., 7.25% Sr. Nts., 5/1/09 400,000 387,870 - -------------------------------------------------------------------------------- Smithfield Foods, Inc., 7.625% Sr. Unsec. Sub. Nts., 2/15/08 400,000 392,000 - -------------------------------------------------------------------------------- Sparkling Spring Water Group Ltd., 11.50% Sr. Sec. Sub. Nts., 11/15/07 1 200,000 212,000 - -------------------------------------------------------------------------------- United Biscuits Finance plc, 10.75% Sr. Sub. Nts., 4/15/11 1 [GBP] 400,000 734,115 ----------- 3,031,235 - -------------------------------------------------------------------------------- Household Products--0.3% AKI Holdings Corp., 0%/13.50% Sr. Disc. Debs., 7/1/09 12 150,000 128,437 - -------------------------------------------------------------------------------- AKI, Inc., 10.50% Sr. Unsec. Nts., 7/1/08 350,000 341,688 - -------------------------------------------------------------------------------- Playtex Products, Inc., 9.375% Sr. Unsec. Sub. Nts., 6/1/11 500,000 555,000 - -------------------------------------------------------------------------------- Styling Technology Corp., 10.875% Sr. Unsec. Sub. Nts., 7/1/08 1,9,10 70,000 -- ----------- 1,025,125 - -------------------------------------------------------------------------------- Energy--2.8% - -------------------------------------------------------------------------------- Energy Equipment & Services--0.9% Dresser, Inc., 9.375% Sr. Sub. Nts., 4/15/11 300,000 303,000 - -------------------------------------------------------------------------------- Grant Geophysical, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/15/08 1 560,000 141,400 - -------------------------------------------------------------------------------- Hanover Equipment Trust, 8.50% Sr. Sec. Nts., Trust 2001, Cl. A, 9/1/08 6 500,000 490,000 - -------------------------------------------------------------------------------- Hornbeck-Leevac Marine Services, Inc., 10.625% Sr. Nts., 8/1/08 750,000 795,000 14 | OPPENHEIMER STRATEGIC BOND FUND/VA Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Energy Equipment & Services Continued Ocean Rig Norway AS, 10.25% Sr. Sec. Nts., 6/1/08 $ 700,000 $ 633,500 - -------------------------------------------------------------------------------- Petroleum Helicopters, Inc., 9.375% Sr. Nts., 5/1/09 200,000 211,250 - -------------------------------------------------------------------------------- Petroliam Nasional Berhad, 7.125% Unsub. Nts., 10/18/06 6 330,000 369,660 - -------------------------------------------------------------------------------- Universal Compression Holdings, Inc., 0%/9.875% Sr. Disc. Nts., 2/15/08 1,12 800,000 828,000 ------------- 3,771,810 - -------------------------------------------------------------------------------- Oil & Gas--1.9% Chesapeake Energy Corp.: 7.75% Sr. Nts., 1/15/15 6 400,000 400,000 8.125% Sr. Unsec. Nts., 4/1/11 600,000 621,000 - -------------------------------------------------------------------------------- Forest Oil Corp., 7.75% Sr. Nts., 5/1/14 300,000 307,500 - -------------------------------------------------------------------------------- Frontier Oil Corp., 11.75% Sr. Nts., 11/15/09 400,000 414,000 - -------------------------------------------------------------------------------- Giant Industries, Inc., 11% Sr. Sub. Nts., 5/15/12 300,000 202,500 - -------------------------------------------------------------------------------- Newfield Exploration Co., 8.375% Sr. Sub. Nts., 8/15/12 500,000 534,245 - -------------------------------------------------------------------------------- Pemex Project Funding Master Trust, 8.50% Unsub. Nts., 2/15/08 420,000 469,350 - -------------------------------------------------------------------------------- Petroleos Mexicanos: 7.375% Unsec. Nts., 8/13/07 1 [ITL] 550,900,000 303,722 9.375% Sr. Unsec. Bonds, 12/2/08 585,000 677,137 - -------------------------------------------------------------------------------- Petronas Capital Ltd.: 7.875% Nts., 5/22/22 1,015,000 1,094,709 7.875% Nts., 5/22/22 6 355,000 382,589 - -------------------------------------------------------------------------------- Pioneer Natural Resources Co., 7.50% Sr. Nts., 4/15/12 600,000 650,086 - -------------------------------------------------------------------------------- Pogo Producing Co., 8.75% Sr. Sub. Nts., Series B, 5/15/07 1 300,000 314,625 - -------------------------------------------------------------------------------- Premcor USA, Inc., 11.50% Cum. Sr. Nts., 10/1/09 78,000 75,270 - -------------------------------------------------------------------------------- Stone Energy Corp., 8.75% Sr. Sub. Nts., 9/15/07 1 270,000 282,150 - -------------------------------------------------------------------------------- Westport Resources Corp., 8.25% Sr. Sub. Nts., 11/1/11 6 400,000 422,000 - -------------------------------------------------------------------------------- XTO Energy, Inc., 7.50% Sr. Nts., 4/15/12 500,000 533,750 ------------- 7,684,633 - -------------------------------------------------------------------------------- Financials--3.3% - -------------------------------------------------------------------------------- Banks--1.0% Bank Plus Corp., 12% Sr. Nts., 7/18/07 1 7,000 7,534 - -------------------------------------------------------------------------------- BankUnited Capital Trust, 10.25% Capital Securities, 12/31/26 1 100,000 100,375 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Banks Continued Chohung Bank, 11.875% Sub. Nts., 4/1/10 2 $ 550,000 $ 636,335 - -------------------------------------------------------------------------------- European Investment Bank Eligible Interest Nts., 3%, 9/20/06 [JPY] 173,000,000 1,609,001 - -------------------------------------------------------------------------------- Hanvit Bank, 12.75% Unsec. Sub. Nts., 3/1/10 2 639,000 744,351 - -------------------------------------------------------------------------------- Local Financial Corp., 11% Sr. Nts., 9/8/04 1 150,000 154,875 - -------------------------------------------------------------------------------- Ongko International Finance Co. BV, 10.50% Sec. Nts., 3/29/04 1,9,10 90,000 675 - -------------------------------------------------------------------------------- Tokai Preferred Capital Co. LLC, 9.98% Non-Cum. Bonds, Series A, 12/29/49 2,6 585,000 513,967 - -------------------------------------------------------------------------------- Western Financial Bank, 9.625% Unsec. Sub. Debs., 5/15/12 1 500,000 487,500 ------------- 4,254,613 - -------------------------------------------------------------------------------- Diversified Financials--1.5% AmeriCredit Corp., 9.875% Sr. Nts., 4/15/06 600,000 507,000 - -------------------------------------------------------------------------------- Berry Plastics Corp., 10.75% Sr. Sub. Nts., 7/15/12 400,000 428,000 - -------------------------------------------------------------------------------- CIT Group, Inc., 7.75% Sr. Unsec. Unsub. Nts., 4/2/12 655,000 736,904 - -------------------------------------------------------------------------------- Finova Group, Inc. (The), 7.50% Nts., 11/15/09 900,000 315,000 - -------------------------------------------------------------------------------- Fuji JGB Investment LLC: 9.87% Non-Cum. Bonds, Series A, 12/31/49 2 165,000 146,610 9.87% Non-Cum. Bonds, Series A, 12/31/49 2,6 695,000 617,541 - -------------------------------------------------------------------------------- Household Finance Corp., 7% Nts., 5/15/12 1,356,000 1,487,792 - -------------------------------------------------------------------------------- IBJ Preferred Capital Co. (The) LLC: 8.79% Bonds, 12/29/49 2,6 1,685,000 1,426,968 8.79% Non-Cum. Bonds, Series A, 12/29/49 2 105,000 88,921 - -------------------------------------------------------------------------------- LaBranche & Co., Inc., 12% Sr. Unsec. Sub. Nts., 3/2/07 200,000 224,000 - -------------------------------------------------------------------------------- Ocwen Financial Corp., 11.875% Nts., 10/1/03 235,000 237,350 - -------------------------------------------------------------------------------- SBS Agro Finance BV, 10.25% Bonds, 7/21/00 1,9,10 339,000 15,255 ------------- 6,231,341 - -------------------------------------------------------------------------------- Insurance--0.0% Conseco, Inc., 10.75% Sr. Unsec. Nts., 6/15/09 6,9 300,000 76,500 - -------------------------------------------------------------------------------- Real Estate--0.8% Capstar Hotel Co., 8.75% Sr. Sub. Nts., 8/15/07 175,000 118,125 15 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Real Estate Continued CB Richard Ellis Services, Inc., 11.25% Sr. Unsec. Sub. Nts., 6/15/11 $ 250,000 $ 231,250 - -------------------------------------------------------------------------------- Corrections Corp. of America, 9.875% Sr. Nts., 5/1/09 6 300,000 319,500 - -------------------------------------------------------------------------------- Felcor Lodging LP, 8.50% Sr. Nts., 6/1/11 406,000 401,940 - -------------------------------------------------------------------------------- Host Marriott LP, 9.50% Sr. Nts., 1/15/07 400,000 408,000 - -------------------------------------------------------------------------------- IStar Financial, Inc., 8.75% Sr. Unsec. Nts., 8/15/08 200,000 213,081 - -------------------------------------------------------------------------------- MeriStar Hospitality Corp.: 8.75% Sr. Unsec. Sub. Nts., 8/15/07 325,000 219,375 9.125% Sr. Unsec. Nts., 1/15/11 1,300,000 1,137,500 - -------------------------------------------------------------------------------- Saul (B.F.) Real Estate Investment Trust, 9.75% Sr. Sec. Nts., Series B, 4/1/08 1 245,000 244,388 ------------ 3,293,159 - -------------------------------------------------------------------------------- Health Care--2.2% - -------------------------------------------------------------------------------- Health Care Equipment & Supplies--0.2% Kinetic Concepts, Inc., 9.625% Sr. Unsec. Sub. Nts., Series B, 11/1/07 250,000 260,000 - -------------------------------------------------------------------------------- Sybron Dental Specialties, Inc., 8.125% Sr. Sub. Nts., 6/15/12 300,000 304,500 - -------------------------------------------------------------------------------- Vanguard Health Systems, Inc., 9.75% Sr. Unsec. Sub. Nts., 8/1/11 300,000 288,000 ------------ 852,500 - -------------------------------------------------------------------------------- Health Care Providers & Services--1.8% AmerisourceBergen Corp., 7.25% Sr. Nts., 11/15/12 6 300,000 309,000 - -------------------------------------------------------------------------------- Beverly Enterprises, Inc., 9.625% Sr. Unsec. Nts., 4/15/09 800,000 676,000 - -------------------------------------------------------------------------------- Extendicare Health Services, Inc., 9.50% Sr. Nts., 7/1/10 6 300,000 292,500 - -------------------------------------------------------------------------------- Fresenius Medical Care Capital Trust II, 7.875% Nts., 2/1/08 900,000 888,750 - -------------------------------------------------------------------------------- Fresenius Medical Care Capital Trust III, 7.375% Nts., 2/1/08 [DEM] 25,000 12,877 - -------------------------------------------------------------------------------- Fresenius Medical Care Capital Trust IV, 7.875% Trust Preferred Nts., 6/15/11 600,000 585,000 - -------------------------------------------------------------------------------- Hanger Orthopedic Group, Inc., 10.375% Sr. Nts., 2/15/09 125,000 130,000 - -------------------------------------------------------------------------------- Healthsouth Corp., 7.625% Nts., 6/1/12 1,000,000 830,000 - -------------------------------------------------------------------------------- Magellan Health Services, Inc., 9.375% Sr. Nts., 11/15/07 6 700,000 556,500 - -------------------------------------------------------------------------------- Medquest, Inc., 11.875% Sr. Sub. Nts., 8/15/12 6 600,000 588,000 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Health Care Providers & Services Continued PacifiCare Health Systems, Inc., 10.75% Sr. Unsec. Unsub. Nts., 6/1/09 $ 900,000 $ 967,500 - -------------------------------------------------------------------------------- Tenet Healthcare Corp., 6.375% Sr. Nts., 12/1/11 959,000 864,797 - -------------------------------------------------------------------------------- Triad Hospitals, Inc., 8.75% Sr. Unsec. Nts., Series B, 5/1/09 400,000 430,500 - -------------------------------------------------------------------------------- US Oncology, Inc., 9.625% Sr. Sub. Nts., 2/1/12 300,000 306,000 ------------ 7,437,424 - -------------------------------------------------------------------------------- Pharmaceuticals--0.2% aaiPharma, Inc., 11% Sr. Sub. Nts., 4/1/10 200,000 201,000 - -------------------------------------------------------------------------------- Pfizer, Inc., 0.80% Unsec. Bonds, Series INTL, 3/18/08[JPY] 53,000,000 453,941 ------------ 654,941 - -------------------------------------------------------------------------------- Industrials--5.0% - -------------------------------------------------------------------------------- Aerospace & Defense--0.5% Alliant Techsystems, Inc., 8.50% Sr. Unsec. Sub. Nts., 5/15/11 300,000 325,500 - -------------------------------------------------------------------------------- American Plumbing & Mechanical, Inc., 11.625% Sr. Sub. Nts., Series B, 10/15/08 1 425,000 125,375 - -------------------------------------------------------------------------------- BE Aerospace, Inc., 8.875% Sr. Unsec. Sub. Nts., 5/1/11 200,000 148,000 - -------------------------------------------------------------------------------- Boeing Capital Corp., 5.80% Nts., 1/15/13 305,000 309,489 - -------------------------------------------------------------------------------- K&F Industries, Inc., 9.625% Sr. Sub. Nts., 12/15/10 6 225,000 230,063 - -------------------------------------------------------------------------------- L-3 Communications Corp., 7.625% Sr. Sub. Nts., 6/15/12 300,000 310,500 - -------------------------------------------------------------------------------- Rexnord Corp., 10.125% Sr. Sub. Nts., 12/15/12 6 350,000 360,500 - -------------------------------------------------------------------------------- TransDigm, Inc., 10.375% Sr. Sub. Nts., 12/1/08 200,000 208,000 ------------ 2,017,427 - -------------------------------------------------------------------------------- Air Freight & Couriers--0.0% Atlas Air, Inc.: 9.25% Sr. Nts., 4/15/08 100,000 21,250 9.375% Sr. Unsec. Nts., 11/15/06 650,000 138,125 ------------ 159,375 - -------------------------------------------------------------------------------- Airlines--0.1% America West Airlines, Inc., 10.75% Sr. Nts., 9/1/05 450,000 182,250 - -------------------------------------------------------------------------------- Amtran, Inc.: 9.625% Nts., 12/15/05 300,000 126,000 10.50% Sr. Nts., 8/1/04 700,000 294,000 ------------ 602,250 16 | OPPENHEIMER STRATEGIC BOND FUND/VA Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Building Products--0.3% Associated Materials, Inc., 9.75% Sr. Sub. Nts., 4/15/12 $ 200,000 $ 212,000 - -------------------------------------------------------------------------------- Nortek, Inc.: 9.125% Sr. Unsec. Nts., Series B, 9/1/07 650,000 669,500 9.25% Sr. Nts., Series B, 3/15/07 150,000 154,875 9.875% Sr. Unsec. Sub. Nts., 6/15/11 250,000 251,562 ----------- 1,287,937 - -------------------------------------------------------------------------------- Commercial Services & Supplies--1.9% Allied Waste North America, Inc.: 8.50% Sr. Sub. Nts., 12/1/08 900,000 909,000 8.875% Sr. Nts., Series B, 4/1/08 800,000 816,000 9.25% Sr. Nts., 9/1/12 6 1,450,000 1,493,500 10% Sr. Unsec. Sub. Nts., Series B, 8/1/09 900,000 897,750 - -------------------------------------------------------------------------------- Budget Group, Inc., 9.125% Sr. Unsec. Nts., 4/1/06 9,10 700,000 157,500 - -------------------------------------------------------------------------------- Buhrmann US, Inc., 12.25% Sr. Unsec. Sub. Nts., 11/1/09 500,000 467,500 - -------------------------------------------------------------------------------- Coinmach Corp., 9% Sr. Nts., 2/1/10 250,000 263,437 - -------------------------------------------------------------------------------- Dyncorp, Inc., 9.50% Sr. Sub. Nts., 3/1/07 1 350,000 364,000 - -------------------------------------------------------------------------------- Hydrochem Industrial Services, Inc., 10.375% Sr. Sub. Nts., 8/1/07 1 150,000 113,438 - -------------------------------------------------------------------------------- Iron Mountain, Inc., 7.75% Sr. Sub. Nts., 1/15/15 400,000 402,000 - -------------------------------------------------------------------------------- IT Group, Inc., 11.25% Sr. Unsec. Sub. Nts., Series B, 4/1/09 1,9,10 400,000 520 - -------------------------------------------------------------------------------- Kindercare Learning Centers, Inc., 9.50% Sr. Sub. Nts., 2/15/09 500,000 487,500 - -------------------------------------------------------------------------------- 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 6 250,000 251,250 - -------------------------------------------------------------------------------- Protection One, Inc./Protection One Alarm Monitoring, Inc., 7.375% Sr. Unsec. Nts., 8/15/05 400,000 330,000 - -------------------------------------------------------------------------------- Safety-Kleen Corp., 9.25% Sr. Unsec. Nts., 5/15/09 1,9,10 400,000 16,000 - -------------------------------------------------------------------------------- Synagro Technologies, Inc., 9.50% Sr. Sub. Nts., 4/1/09 200,000 209,500 - -------------------------------------------------------------------------------- Waste Management, Inc., 6.375% Nts., 11/15/12 6 183,000 188,659 ----------- 7,725,554 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Construction & Engineering--0.3% Integrated Electrical Services, Inc., 9.375% Sr. Sub. Nts., Series C, 2/1/09 1 $ 700,000 $ 647,500 - -------------------------------------------------------------------------------- URS Corp.: 11.50% Sr. Nts., 9/15/09 6 150,000 134,250 12.25% Sr. Sub. Nts., Series B, 5/1/09 375,000 301,875 ----------- 1,083,625 - -------------------------------------------------------------------------------- Electrical Equipment--0.0% Dayton Superior Corp., 13% Sr. Unsec. Sub. Nts., 6/15/09 200,000 173,000 - -------------------------------------------------------------------------------- Industrial Conglomerates--0.4% Great Lakes Dredge & Dock Corp., 11.25% Sr. Unsec. Sub. Nts., 8/15/08 500,000 523,125 - -------------------------------------------------------------------------------- Tyco International Group SA, 6.375% Nts., 10/15/11 1,000,000 936,836 ----------- 1,459,961 - -------------------------------------------------------------------------------- Machinery--1.1% Actuant Corp., 13% Sr. Sub. Nts., 5/1/09 208,000 244,400 - -------------------------------------------------------------------------------- AGCO Corp., 9.50% Sr. Unsec. Nts., 5/1/08 800,000 868,000 - -------------------------------------------------------------------------------- Blount, Inc., 13% Sr. Sub. Nts., 8/1/09 300,000 188,250 - -------------------------------------------------------------------------------- Cummins, Inc., 9.50% Sr. Nts., 12/1/10 200,000 214,000 - -------------------------------------------------------------------------------- Eagle-Picher Industries, Inc., 9.375% Sr. Unsec. Sub. Nts., 3/1/08 1 300,000 213,000 - -------------------------------------------------------------------------------- Manitowoc Co., Inc. (The), 10.50% Sr. Sub. Nts., 8/1/12 6 500,000 521,250 - -------------------------------------------------------------------------------- NMHG Holding Co., 10% Sr. Nts., 5/15/09 300,000 301,500 - -------------------------------------------------------------------------------- Roller Bearing Co. of America, Inc., 9.625% Sr. Sub. Nts., Series B, 6/15/07 540,000 510,975 - -------------------------------------------------------------------------------- SPX Corp., 7.50% Sr. Nts., 1/1/13 800,000 815,000 - -------------------------------------------------------------------------------- Terex Corp.: 8.875% Sr. Unsec. Sub. Nts., 4/1/08 250,000 226,563 8.875% Sr. Unsec. Sub. Nts., Series C, 4/1/08 100,000 90,625 9.25% Sr. Unsec. Sub. Nts., 7/15/11 400,000 366,500 ----------- 4,560,063 - -------------------------------------------------------------------------------- Marine--0.2% CP Ships Ltd., 10.375% Sr. Nts., 7/15/12 600,000 633,000 - -------------------------------------------------------------------------------- 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) 1,9,10,14 250,000 125,000 17 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Marine Continued Navigator Gas Transport plc, 10.50% First Priority Ship Mtg. Nts., 6/30/07 6,9 $ 175,000 $ 53,813 ------------ 811,813 - -------------------------------------------------------------------------------- Road & Rail--0.2% Kansas City Southern Railway Co. (The), 7.50% Sr. Nts., 6/15/09 400,000 424,000 - -------------------------------------------------------------------------------- Stena AB, 9.625% Sr. Nts., 12/1/12 6 250,000 259,375 ------------ 683,375 - -------------------------------------------------------------------------------- Information Technology--1.5% - -------------------------------------------------------------------------------- Communications Equipment--0.0% CellNet Data Systems, Inc., 14% Sr. Unsec. Disc. Nts., 10/1/07 1,9,10 400,000 -- - -------------------------------------------------------------------------------- Orion Network Systems, Inc., 12.50% Sr. Disc. Nts., 1/15/07 1 675,000 177,187 ------------ 177,187 - -------------------------------------------------------------------------------- Computers & Peripherals--0.1% Seagate Technology Hdd Holdings, 8% Sr. Nts., 5/15/09 6 200,000 208,000 - -------------------------------------------------------------------------------- Electronic Equipment & Instruments--0.8% ChipPAC International Co. Ltd., 12.75% Sr. Unsec. Sub. Nts., Series B, 8/1/09 600,000 633,000 - -------------------------------------------------------------------------------- Communications & Power Industries, Inc., 12% Sr. Sub. Nts., Series B, 8/1/05 1 250,000 211,250 - -------------------------------------------------------------------------------- Fisher Scientific International, Inc.: 8.125% Sr. Sub. Nts., 5/1/12 300,000 312,000 9% Sr. Unsec. Sub. Nts., 2/1/08 400,000 419,000 9% Sr. Unsec. Sub. Nts., 2/1/08 1 105,000 109,987 - -------------------------------------------------------------------------------- Flextronics International Ltd., 9.875% Sr. Unsec. Sub. Nts., 7/1/10 500,000 541,250 - -------------------------------------------------------------------------------- Ingram Micro, Inc., 9.875% Sr. Unsec. Sub. Nts., 8/15/08 700,000 742,000 - -------------------------------------------------------------------------------- Insilco Corp., 12% Sr. Sub. Nts., 8/15/07 9,10 400,000 10,000 - -------------------------------------------------------------------------------- PerkinElmer, Inc., 8.875% Sr. Sub. Nts., 1/15/13 6 300,000 297,000 ------------ 3,275,487 - -------------------------------------------------------------------------------- Internet Software & Services--0.0% Equinix, Inc., 13% Sr. Unsec. Nts., 12/1/07 1,9 200,000 33,000 - -------------------------------------------------------------------------------- Exodus Communications, Inc., 10.75% Sr. Nts., 12/15/09 1,9,10 [EUR] 400,000 18,889 - -------------------------------------------------------------------------------- FirstWorld Communications, Inc., 0%/13% Sr. Disc. Nts., 4/15/08 1,9,10,12 250,000 313 - -------------------------------------------------------------------------------- Globix Corp., 9.075% Sr. Nts., 4/26/08 59,016 42,492 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Internet Software & Services Continued PSINet, Inc.: 10.50% Sr. Unsec. Nts., 12/1/06 1,9,10 [EUR] 100,000 $ 6,952 11% Sr. Nts., 8/1/09 1,9,10 275,784 9,652 ------------ 111,298 - -------------------------------------------------------------------------------- Office Electronics--0.0% ASAT Finance LLC, 12.50% Sr. Unsec. Nts., 11/1/06 162,500 122,688 - -------------------------------------------------------------------------------- Semiconductor Equipment & Products--0.6% Amkor Technology, Inc.: 9.25% Sr. Unsec. Nts., 5/1/06 400,000 344,000 9.25% Sr. Unsec. Sub. Nts., 2/15/08 250,000 212,500 - -------------------------------------------------------------------------------- Fairchild Semiconductor Corp.: 10.375% Sr. Unsec. Nts., 10/1/07 500,000 527,500 10.50% Sr. Unsec. Sub. Nts., 2/1/09 300,000 325,500 - -------------------------------------------------------------------------------- Micron Technology, Inc., 6.50% Sub. Nts., 9/30/05 1,000,000 865,000 ------------ 2,274,500 - -------------------------------------------------------------------------------- Materials--4.8% - -------------------------------------------------------------------------------- Chemicals--0.8% Compass Minerals Group, Inc., 10% Sr. Sub. Nts., 8/15/11 450,000 495,000 - -------------------------------------------------------------------------------- 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] 200,000 159,509 Zero Coupon Sr. Unsec. Disc. Nts., 13.09%, 12/31/09 11 600,000 138,000 - -------------------------------------------------------------------------------- Huntsman International LLC, 9.875% Sr. Nts., 3/1/09 300,000 301,500 - -------------------------------------------------------------------------------- ISP Holdings, Inc., 10.625% Sr. Sec. Nts., 12/15/09 200,000 175,000 - -------------------------------------------------------------------------------- Lyondell Chemical Co.: 9.50% Sec. Nts., 12/15/08 300,000 280,500 9.625% Sr. Sec. Nts., Series A, 5/1/07 5 400,000 386,000 9.875% Sec. Nts., Series B, 5/1/07 400,000 386,000 - -------------------------------------------------------------------------------- OM Group, Inc., 9.25% Sr. Sub. Nts., 12/15/11 200,000 109,000 - -------------------------------------------------------------------------------- PCI Chemicals Canada, 10% Sr. Sec. Nts., 12/31/08 113,061 79,708 - -------------------------------------------------------------------------------- Pioneer Cos., Inc., 4.90% Sr. Sec. Nts., 12/31/06 2 37,688 26,240 - -------------------------------------------------------------------------------- Sterling Chemicals, Inc.: 10% Sr. Sec. Nts., 12/19/07 159,000 103,350 11.25% Sr. Sub. Nts., 8/15/06 9,10 540,000 -- - -------------------------------------------------------------------------------- Unifrax Investment Corp., 10.50% Sr. Nts., 11/1/03 1 50,000 50,313 ------------ 3,215,832 18 | OPPENHEIMER STRATEGIC BOND FUND/VA Principal Market Value Amount See Note 1 - ------------------------------------------------------------------------------- Construction Materials--0.0% Formica Corp., 10.875% Sr. Unsec. Sub. Nts., Series B, 3/1/09 1,9,10 $200,000 $ 49,000 - ------------------------------------------------------------------------------- Containers & Packaging--1.7% Ball Corp.: 6.875% Sr. Nts., 12/15/12 6 300,000 303,000 7.75% Sr. Unsec. Nts., 8/1/06 1 125,000 131,875 8.25% Sr. Unsec. Sub. Nts., 8/1/08 125,000 132,187 - ------------------------------------------------------------------------------- Graphic Packaging Corp., 8.625% Sub. Nts., 2/15/12 500,000 528,750 - ------------------------------------------------------------------------------- Jefferson Smurfit Corp., 8.25% Sr. Nts., 10/1/12 6 250,000 256,250 - ------------------------------------------------------------------------------- MDP Acquisitions plc, 9.625% Sr. Nts., 10/1/12 6 400,000 418,000 - ------------------------------------------------------------------------------- Owens-Brockway Glass Container, Inc.: 8.75% Sr. Sec. Nts., 11/15/12 6 600,000 612,000 8.75% Sr. Sec. Nts., 11/15/12 6 400,000 408,000 8.875% Sr. Sec. Nts., 2/15/09 200,000 207,000 - ------------------------------------------------------------------------------- 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., 8/1/07 750,000 780,000 10.875% Sr. Sub. Nts., 4/1/08 250,000 252,500 - ------------------------------------------------------------------------------- Silgan Holdings, Inc., 9% Sr. Sub. Debs., 6/1/09 200,000 209,500 - ------------------------------------------------------------------------------- Stone Container Corp.: 8.375% Sr. Nts., 7/1/12 600,000 618,000 9.25% Sr. Unsec. Nts., 2/1/08 200,000 212,500 9.75% Sr. Unsec. Nts., 2/1/11 600,000 645,000 - ------------------------------------------------------------------------------- TriMas Corp., 9.875% Sr. Sub. Nts., 6/15/12 6 500,000 497,500 ----------- 7,020,187 - ------------------------------------------------------------------------------- Metals & Mining--1.5% AK Steel Corp.: 7.75% Sr. Unsec. Nts., 6/15/12 6 1,200,000 1,215,000 7.875% Sr. Unsec. Nts., 2/15/09 500,000 507,500 - ------------------------------------------------------------------------------- Better Minerals & Aggregates Co., 13% Sr. Unsec. Sub. Nts., 9/15/09 100,000 36,500 - ------------------------------------------------------------------------------- California Steel Industries Corp., 8.50% Sr. Unsec. Nts., Series B, 4/1/09 200,000 202,500 - ------------------------------------------------------------------------------- Centaur Mining & Exploration Ltd., 11% Sr. Nts., 12/1/07 1,9 94,344 1,887 - ------------------------------------------------------------------------------- Century Aluminum Co., 11.75% Sr. Sec. Nts., 4/15/08 500,000 487,500 - ------------------------------------------------------------------------------- Great Lakes Carbon Corp., 7.94% Sr. Sub. Nts., Series B, 5/15/08 447,000 319,605 - ------------------------------------------------------------------------------- International Utility Structures, Inc., 13% Unsec. Sub. Nts., 2/1/08 1 71,000 14,200 - ------------------------------------------------------------------------------- Jorgensen (Earle M.) Co., 9.75% Sr. Sec. Nts., 6/1/12 500,000 511,250 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Metals & Mining Continued Kaiser Aluminum & Chemical Corp.: 10.875% Sr. Nts., Series B, 10/15/06 9,10 $ 500,000 $ 337,500 12.75% Sr. Sub. Nts., 2/1/03 9,10 800,000 64,000 - -------------------------------------------------------------------------------- Metallurg, Inc., 11% Sr. Nts., 12/1/07 500,000 360,000 - -------------------------------------------------------------------------------- National Steel Corp., 9.875% First Mtg. Bonds, Series D, 3/1/09 9,10 800,000 315,000 - -------------------------------------------------------------------------------- Oregon Steel Mills, Inc., 10% Nts., 7/15/09 6 400,000 408,000 - -------------------------------------------------------------------------------- P&L Coal Holdings Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 403,000 427,684 - -------------------------------------------------------------------------------- Steel Dynamics, Inc., 9.50% Sr. Nts., 3/15/09 200,000 210,500 - -------------------------------------------------------------------------------- UCAR Finance, Inc., 10.25% Sr. Nts., 2/15/12 300,000 240,000 - -------------------------------------------------------------------------------- United States Steel LLC, 10.75% Sr. Nts., 8/1/08 800,000 792,000 ----------- 6,450,626 - -------------------------------------------------------------------------------- Paper & Forest Products--0.8% Abitibi-Consolidated, Inc., 8.55% Nts., 8/1/10 200,000 222,350 - -------------------------------------------------------------------------------- Ainsworth Lumber Co. Ltd.: 12.50% Sr. Nts., 7/15/07 13 400,000 418,000 13.875% Sr. Sec. Nts., 7/15/07 400,000 430,000 - -------------------------------------------------------------------------------- Doman Industries Ltd., 8.75% Sr. Nts., 3/15/04 9 900,000 117,000 - -------------------------------------------------------------------------------- Fort James Corp., 6.875% Sr. Nts., 9/15/07 500,000 477,500 - -------------------------------------------------------------------------------- Georgia-Pacific Corp., 8.125% Sr. Unsec. Nts., 5/15/11 1,450,000 1,384,750 - -------------------------------------------------------------------------------- U.S. Timberlands Co. LP, 9.625% Sr. Nts., 11/15/07 300,000 183,000 ----------- 3,232,600 - -------------------------------------------------------------------------------- Telecommunication Services--2.6% - -------------------------------------------------------------------------------- Diversified Telecommunication Services--1.2% 360networks, Inc., 13% Sr. Unsec. Nts., 5/1/08 1,9,10 [EUR] 250,000 26 - -------------------------------------------------------------------------------- Adelphia Business Solutions, Inc., 12% Sr. Sub. Nts., 11/1/07 1,9,10 200,000 1,500 - -------------------------------------------------------------------------------- COLO.com, Inc., 13.875% Sr. Nts., 3/15/10 1,9,10 344,725 3,447 - -------------------------------------------------------------------------------- Comcast UK Cable Partner Ltd., 11.20% Sr. Unsec. Disc. Debs., 11/15/07 250,000 177,500 - -------------------------------------------------------------------------------- Concentric Network Corp., 12.75% Sr. Unsec. Nts., 12/15/07 1,9,10 80,000 500 19 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Diversified Telecommunication Services Continued Deutsche Telekom International Finance BV, 8.50% Unsub. Nts., 6/15/10 $ 305,000 $ 351,873 - -------------------------------------------------------------------------------- Dex Media East LLC, 9.875% Sr. Nts., 11/15/09 6 200,000 215,000 - -------------------------------------------------------------------------------- Diamond Cable Communications plc, 11.75% Sr. Disc. Nts., 12/15/05 9,10 500,000 47,500 - -------------------------------------------------------------------------------- Focal Communications Corp.: 0%/12.125% Sr. Unsec. Disc. Nts., 2/15/08 1,9,10,12 80,000 2,000 11.875% Sr. Unsec. Nts., Series B, 1/15/10 1,9 75,000 1,875 - -------------------------------------------------------------------------------- France Telecom SA, 9.25% Sr. Unsec. Nts., 3/1/11 1,040,000 1,204,646 - -------------------------------------------------------------------------------- Intermedia Communications, Inc., 0%/12.25% Sr. Disc. Nts., Series B, 3/1/09 1,9,10,12 200,000 27,000 - -------------------------------------------------------------------------------- IPC Acquisition Corp., 11.50% Sr. Sub. Nts., 12/15/09 400,000 346,000 - -------------------------------------------------------------------------------- Level 3 Communications, Inc., 0%/10.50% Sr. Disc. Nts., 12/1/08 12 700,000 334,250 - -------------------------------------------------------------------------------- Metromedia Fiber Network, Inc., 10% Sr. Unsec. Nts., Series B, 11/15/08 1,9,10 400,000 7,000 - -------------------------------------------------------------------------------- NorthPoint Communications Group, Inc., 12.875% Nts., 2/15/10 9,10 250,000 38,750 - -------------------------------------------------------------------------------- NTL Communications Corp., 0%/9.75% Sr. Unsec. Nts., Series B, 4/15/09 9,10,12 [GBP] 775,000 99,814 - -------------------------------------------------------------------------------- Qwest Corp., 8.875% Nts., 3/15/12 6 300,000 292,500 - -------------------------------------------------------------------------------- Sprint Capital Corp., 8.375% Nts., 3/15/12 450,000 448,602 - -------------------------------------------------------------------------------- Telewest Communications plc: 0%/9.25% Sr. Disc. Nts., 4/15/09 9,12 600,000 87,000 0%/9.875% Sr. Disc. Nts., 4/15/09 1,9,12 [GBP] 200,000 49,907 - -------------------------------------------------------------------------------- Teligent, Inc., 11.50% Sr. Nts., 12/1/07 1,9,10 500,000 50 - -------------------------------------------------------------------------------- Verizon Global Funding Corp., 7.375% Sr. Nts., 9/1/12 915,000 1,054,983 - -------------------------------------------------------------------------------- Viatel, Inc., 11.25% Sr. Sec. Nts., 4/15/08 1,9,10 500,000 -- - -------------------------------------------------------------------------------- Winstar Communications, Inc., 12.75% Sr. Nts., 4/15/10 1,9,10 250,000 25 - -------------------------------------------------------------------------------- XO Communications, Inc.: 0%/12.25% Sr. Unsec. Disc. Nts., 6/1/09 1,9,10,12 400,000 2,500 9% Sr. Unsec. Nts., 3/15/08 1,9,10 250,000 1,563 9.625% Sr. Nts., 10/1/07 1,9,10 200,000 1,250 10.75% Sr. Unsec. Nts., 11/15/08 1,9,10 300,000 1,875 ----------- 4,798,936 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Wireless Telecommunication Services--1.4% Alamosa Delaware, Inc., 12.50% Sr. Unsec. Nts., 2/1/11 $ 300,000 $ 91,500 - -------------------------------------------------------------------------------- American Cellular Corp., 9.50% Sr. Sub. Nts., 10/15/09 9 750,000 146,250 - -------------------------------------------------------------------------------- AT&T Corp., 8.50% Sr. Nts., 11/15/31 2 500,000 553,009 - -------------------------------------------------------------------------------- Crown Castle International Corp.: 0%/10.375% Sr. Disc. Nts., 5/15/11 12 500,000 327,500 10.625% Sr. Unsec. Disc. Nts., 11/15/07 12 500,000 452,500 - -------------------------------------------------------------------------------- IPCS, Inc., 0%/14% Sr. Unsec. Disc. Nts., 7/15/10 12 300,000 13,500 - -------------------------------------------------------------------------------- Leap Wireless International, Inc.: 0%/14.50% Sr. Unsec. Disc. Nts., 4/15/10 9,12 700,000 66,500 12.50% Sr. Nts., 4/15/10 1,9 100,000 14,500 - -------------------------------------------------------------------------------- Microcell Telecommunications, Inc., 11.125% Sr. Disc. Nts., Series B, 10/15/07 1,9 [CAD] 300,000 5,697 - -------------------------------------------------------------------------------- Nextel Communications, Inc.: 9.375% Sr. Unsec. Nts., 11/15/09 1,300,000 1,183,000 10.65% Sr. Disc. Nts., 9/15/07 750,000 720,000 - -------------------------------------------------------------------------------- Nextel Partners, Inc., 11% Sr. Unsec. Nts., 3/15/10 250,000 213,750 - -------------------------------------------------------------------------------- Orbcomm Global LP (Escrow), 8/15/04 9,10 200,000 -- - -------------------------------------------------------------------------------- Rural Cellular Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 300,000 181,500 - -------------------------------------------------------------------------------- SBA Communications Corp.: 0%/12% Sr. Unsec. Disc. Nts., 3/1/08 12 800,000 428,000 10.25% Sr. Unsec. Nts., 2/1/09 200,000 109,000 - -------------------------------------------------------------------------------- TeleCorp PCS, Inc.: 0%/11.625% Sr. Unsec. Sub. Disc. Nts., 4/15/09 12 304,000 288,040 10.625% Sr. Unsec. Sub. Nts., 7/15/10 293,000 316,440 - -------------------------------------------------------------------------------- Tritel PCS, Inc.: 0%/12.75% Sr. Unsec. Sub. Disc. Nts., 5/15/09 12 221,000 206,635 10.375% Sr. Sub. Nts., 1/15/11 270,000 290,250 - -------------------------------------------------------------------------------- Triton PCS, Inc., 8.75% Sr. Unsec. Sub. Nts., 11/15/11 200,000 163,000 - -------------------------------------------------------------------------------- US Unwired, Inc., 0%/13.375% Sr. Unsec. Sub. Disc. Nts., Series B, 11/1/09 12 900,000 58,500 ----------- 5,829,071 20 | OPPENHEIMER STRATEGIC BOND FUND/VA Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Utilities--1.7% - -------------------------------------------------------------------------------- Electric Utilities--1.1% AES Corp. (The): 8.75% Sr. Unsec. Unsub. Nts., 6/15/08 $ 500,000 $ 295,000 8.875% Sr. Unsec. Nts., 2/15/11 500,000 292,500 - -------------------------------------------------------------------------------- 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, 12/15/09 371,259 365,690 - -------------------------------------------------------------------------------- Calpine Corp., 8.50% Sr. Unsec. Nts., 2/15/11 1,900,000 836,000 - -------------------------------------------------------------------------------- Central Termica Guemes SA, 3% Unsec. Unsub. Bonds, 9/26/10 2 90,000 9,900 - -------------------------------------------------------------------------------- CMS Energy Corp.: 8.50% Sr. Nts., 4/15/11 250,000 217,867 9.875% Sr. Unsec. Nts., 10/15/07 400,000 380,421 - -------------------------------------------------------------------------------- Edison Mission Energy, 10% Sr. Unsec. Nts., 8/15/08 800,000 388,000 - -------------------------------------------------------------------------------- FirstEnergy Corp., 7.375% Sr. Unsub. Nts., Series C, 11/15/31 884,000 859,942 - -------------------------------------------------------------------------------- Funding Corp./Beaver Valley Funding Corp., 9% Second Lease Obligation Bonds, 6/1/17 199,000 220,820 - -------------------------------------------------------------------------------- Mirant Americas Generation LLC, 7.625% Sr. Unsec. Nts., 5/1/06 200,000 106,000 - -------------------------------------------------------------------------------- Westar Energy, Inc., 9.75% Sr. Unsec. Nts., 5/15/07 600,000 546,556 -------------- 4,682,196 - -------------------------------------------------------------------------------- Gas Utilities--0.5% AmeriGas Partners LP/ AmeriGas Eagle Finance Corp.: 8.875% Sr. Nts., 5/20/11 6 200,000 209,000 8.875% Sr. Unsec. Nts., 5/20/11 300,000 313,500 - -------------------------------------------------------------------------------- El Paso Energy Corp., 7.625% Nts., 7/15/11 200,000 134,222 - -------------------------------------------------------------------------------- El Paso Energy Partners LP, 10.625% Sr. Sub. Nts., 12/1/12 6 350,000 359,625 - -------------------------------------------------------------------------------- Leviathan Gas Pipeline Partners LP/Leviathan Finance Corp., 10.375% Sr. Unsec. Sub. Nts., Series B, 6/1/09 1 400,000 408,000 - -------------------------------------------------------------------------------- NiSource Finance Corp., 7.875% Sr. Unsec. Nts., 11/15/10 501,000 551,428 - -------------------------------------------------------------------------------- Williams Cos., Inc. (The), 7.125% Nts., 9/1/11 400,000 264,000 -------------- 2,239,775 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Multi-Utilities--0.1% Consumers Energy Co., 7.375% Nts., 9/15/23 $ 250,000 $ 242,739 - -------------------------------------------------------------------------------- Dynegy Holdings, Inc., 8.75% Sr. Nts., 2/15/12 250,000 88,750 -------------- 331,489 -------------- Total Corporate Bonds and Notes (Cost $175,707,408) 156,545,493 Shares - -------------------------------------------------------------------------------- Preferred Stocks--0.6% AmeriKing, Inc., 13% Cum. Sr. Exchangeable, Non-Vtg. 1,13 4,253 43 - -------------------------------------------------------------------------------- Criimi Mae, Inc., 10.875% Cum. Cv., Series B, Non-Vtg 46,000 966,000 - -------------------------------------------------------------------------------- Crown American Realty Trust, 11% Cum., Series A, Non-Vtg. 2,000 110,700 - -------------------------------------------------------------------------------- Doane Pet Care Co., 14.25% Jr. Sub. Debs., Non-Vtg. 1,10 5,000 151,250 - -------------------------------------------------------------------------------- e.spire Communications, Inc., 12.75% Jr. Redeemable, Non-Vtg. 1,10,13 216 22 - -------------------------------------------------------------------------------- Eagle-Picher Holdings, Inc., 11.75% Cum. Exchangeable, Series B, Non-Vtg. 10 5,000 101,250 - -------------------------------------------------------------------------------- Earthwatch, Inc., 12% Cv., Series C, Non-Vtg. 1 6,026 6,026 - -------------------------------------------------------------------------------- ICG Holdings, Inc., 14.25% Exchangeable, Non-Vtg. 1,10,13 151 2 - -------------------------------------------------------------------------------- Nebco Evans Holdings, Inc., 11.25% Sr. Redeemable Exchangeable, Non-Vtg. 1,10,13 6,061 -- - -------------------------------------------------------------------------------- Nextel Communications, Inc., 13% Cum., Series D, Non-Vtg. 13 2 184 - -------------------------------------------------------------------------------- Paxson Communications Corp., 13.25% Cum. Jr. Exchangeable, Non-Vtg. 13 34 177,650 - -------------------------------------------------------------------------------- Rural Cellular Corp., 11.375% Cum., Series B, Non-Vtg. 13 597 150,742 - -------------------------------------------------------------------------------- Sovereign Real Estate Investment Trust, 12% Non-Cum., Series A 1 4,600 511,750 -------------- Total Preferred Stocks (Cost $4,555,254) 2,175,619 - -------------------------------------------------------------------------------- Common Stocks--0.2% Adelphia Business Solutions, Inc. 10 363 8 - -------------------------------------------------------------------------------- Celcaribe SA 1 24,390 244 - -------------------------------------------------------------------------------- Contour Energy Co. 1,10 5,400 97 - -------------------------------------------------------------------------------- Covad Communications Group, Inc. 10 16,528 15,536 - -------------------------------------------------------------------------------- Criimi MAE, Inc. 10 71,447 728,045 - -------------------------------------------------------------------------------- Geotek Communications, Inc. 1,10 90 -- 21 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued Market Value Shares See Note 1 - -------------------------------------------------------------------------------- Common Stocks Continued Geotek Communications, Inc., Series B (Escrowed) 1,10 210 $ -- - -------------------------------------------------------------------------------- Globix Corp. 10 6,880 13,760 - -------------------------------------------------------------------------------- Horizon Natural Resources Co. 1,10 6,667 67 - -------------------------------------------------------------------------------- ICO Global Communication Holdings Ltd. 10 6,016 7,640 - -------------------------------------------------------------------------------- Orbital Sciences Corp. 10 457 1,929 - -------------------------------------------------------------------------------- Pioneer Cos., Inc. 1,10 7,312 12,796 - -------------------------------------------------------------------------------- Prandium, Inc. 10 24,165 7,249 - -------------------------------------------------------------------------------- Premier Holdings Ltd. 1,10 18,514 -- - -------------------------------------------------------------------------------- Southern Pacific Funding Corp., Liquidating Trust 1,10 83,868 -- - -------------------------------------------------------------------------------- Star Gas Partners LP 187 3,459 - -------------------------------------------------------------------------------- Sterling Chemicals, Inc. 10 647 22,645 - -------------------------------------------------------------------------------- TVMAX Holdings, Inc. 1,10 1,000 10 - -------------------------------------------------------------------------------- Viatel Holding Ltd. (Bermuda) 1,10 1,958 999 - -------------------------------------------------------------------------------- Wilshire Financial Services Group, Inc. 10 6,273 20,701 - -------------------------------------------------------------------------------- WRC Media Corp. 1,10 1,082 11 -------- Total Common Stocks (Cost $2,144,247) 835,196 Units - -------------------------------------------------------------------------------- Rights, Warrants and Certificates--0.3% ASAT Finance LLC Wts., Exp 11/1/06 1,10 250 312 - -------------------------------------------------------------------------------- Banco Central Del Uruguay Rts., Exp. 1/2/21 10 185,000 -- - -------------------------------------------------------------------------------- Charles River Laboratories International, Inc. Wts., Exp. 10/1/09 1,10 350 64,750 - -------------------------------------------------------------------------------- Chesapeake Energy Corp. Wts.: Exp. 1/23/03 1,10 1,668 -- Exp. 1/23/03 1,10 953 -- Exp. 5/1/05 10 416 -- Exp. 9/1/04 10 534 -- - -------------------------------------------------------------------------------- Citigroup, Inc. Wts., Exp. 12/31/50 10 2,404 2,524 - -------------------------------------------------------------------------------- COLO.com, Inc. Wts., Exp. 3/15/10 1,10 400 4 - -------------------------------------------------------------------------------- Comunicacion Celular SA Wts., Exp. 11/15/03 1,10 200 2 - -------------------------------------------------------------------------------- Concentric Network Corp. Wts., Exp. 12/15/07 1,10 100 1 - -------------------------------------------------------------------------------- Covergent Communications, Inc. Wts., Exp. 4/1/08 1,10 400 4 - -------------------------------------------------------------------------------- Equinix, Inc. Wts., Exp. 12/1/07 1,10 200 2 - -------------------------------------------------------------------------------- HF Holdings, Inc. Wts., Exp 9/27/09 1,10 530 53 - -------------------------------------------------------------------------------- Horizon PCS, Inc. Wts., Exp 10/1/10 1,10 1,000 50 Market Value Units See Note 1 - -------------------------------------------------------------------------------- Rights, Warrants and Certificates Continued ICG Communications, Inc. Wts., Exp. 9/15/05 1,10 825 $ 8 - -------------------------------------------------------------------------------- ICO Global Communication Holdings Ltd. Wts.: Exp. 5/16/06 1,10 1,509 2 Exp. 5/16/06 1,10 2 -- - -------------------------------------------------------------------------------- Imperial Credit Industries, Inc. Wts., Exp. 1/31/08 1,10 2,135 -- - -------------------------------------------------------------------------------- Insilco Corp. Wts., Exp. 8/15/07 1,10 270 3 - -------------------------------------------------------------------------------- International Utility Structures, Inc. Wts., Exp. 2/1/03 10 50 -- - -------------------------------------------------------------------------------- IPCS, Inc. Wts., Exp. 6/15/10 1,10 300 112 - -------------------------------------------------------------------------------- KMC Telecom Holdings, Inc. Wts., Exp. 4/15/08 1,10 725 7 - -------------------------------------------------------------------------------- Leap Wireless International, Inc. Wts., Exp. 4/15/10 1,10 275 3 - -------------------------------------------------------------------------------- Long Distance International, Inc. Wts., Exp. 4/13/08 1,10 200 -- - -------------------------------------------------------------------------------- Loral Space & Communications Ltd. Wts., Exp. 1/15/07 1,10 150 1 - -------------------------------------------------------------------------------- Mexico Value Rts., Exp. 6/30/03 1,10 20,071 6 - -------------------------------------------------------------------------------- Microcell Telecommunications, Inc. Wts., Exp. 6/1/06 6,10 600 146 - -------------------------------------------------------------------------------- Millenium Seacarriers, Inc. Wts., Exp. 7/15/05 1,10 250 3 - -------------------------------------------------------------------------------- Morgan Stanley Capital I, Inc. All Country Asia Free (except for Japan) Provisional Index Wts., Exp. 6/5/03 10 124,270 1,110,079 - -------------------------------------------------------------------------------- Ntelos, Inc. Wts., Exp. 8/15/10 1,10 450 731 - -------------------------------------------------------------------------------- Occidente y Caribe Celular SA Wts., Exp. 3/15/04 1,10 800 8 - -------------------------------------------------------------------------------- Pathmark Stores, Inc. Wts., Exp. 9/19/10 10 5,710 4,397 - -------------------------------------------------------------------------------- PLD Telekom, Inc. Wts., Exp. 6/1/06 (cv. into Metromedia International Group, Inc.) 1,10 300 3 - -------------------------------------------------------------------------------- PLD Telekom, Inc., 14% Sr. Cv. Disc. Nts. Wts., Exp. 3/31/03 (cv. into Metromedia International Group Inc.) 1,10 300 3 - -------------------------------------------------------------------------------- Real Time Data Co. Wts., Exp. 5/31/04 1,10 36,431 -- - -------------------------------------------------------------------------------- Republic Technologies International LLC Wts., Exp. 7/15/09 1,10 200 2 - -------------------------------------------------------------------------------- Sterling Chemicals, Inc. Wts., Exp. 12/31/07 10 1,050 -- 22 | OPPENHEIMER STRATEGIC BOND FUND/VA Market Value Units See Note 1 - -------------------------------------------------------------------------------- Rights, Warrants and Certificates Continued Telus Corp. Wts., Exp. 9/15/05 1,10 269 $ 135 - -------------------------------------------------------------------------------- Verado Holdings, Inc., Cl. B Wts., Exp. 4/15/08 1,10 175 88 ------------ Total Rights, Warrants and Certificates (Cost $1,360,921) 1,183,439 Principal Amount - -------------------------------------------------------------------------------- Structured Notes--4.4% Credit Suisse First Boston Corp. (Nassau Branch), U.S. Dollar/ Philippine Peso Linked Nts., 12.50%, 3/15/12 2 [PHP] 47,430,000 856,912 - -------------------------------------------------------------------------------- Credit Suisse First Boston Corp. (New York Branch), Russian Obligatzii Federal'nogo Zaima Linked Nts.: Series 27006, 10.028%, 1/22/03 1,2 [RUR] 5,003,930 151,997 Series 27006, 10.028%, 1/22/03 1,2 [RUR] 277,180 8,419 Series 27007, 10.028%, 2/5/03 1,2 [RUR] 7,647,050 232,092 Series 27007, 10.028%, 2/5/03 1,2 [RUR] 277,180 8,413 Series 27008, 10.028%, 5/21/03 1,2 [RUR] 3,315,240 99,945 Series 27008, 10.028%, 5/21/03 1,2 [RUR] 277,180 8,356 Series 27009, 10.028%, 6/4/03 1,2 [RUR] 3,783,430 113,977 Series 27009, 10.028%, 6/4/03 1,2 [RUR] 277,180 8,350 Series 27009, 10.028%, 6/4/03 1,2 [RUR] 2,561,555 77,167 Series 27010, 10.028%, 9/17/03 1,2 [RUR] 2,047,150 61,286 Series 27010, 10.028%, 9/17/03 1,2 [RUR] 277,180 8,298 Series 27011, 10.028%, 10/8/03 1,2 [RUR] 3,646,190 108,849 Series 27011, 10.028%, 10/8/03 1,2 [RUR] 277,180 8,275 Series 28001, 10.028%, 1/21/04 1,2 [RUR] 277,180 8,210 - -------------------------------------------------------------------------------- Credit Suisse First Boston International, U.S. Dollar/ South African Rand Linked Nts., 1.332%, 5/23/22 1,2 825,000 809,490 - -------------------------------------------------------------------------------- Deutsche Bank AG: Brazilian Real Linked Nts., 22%, 2/8/04 1,340,000 1,226,100 Colombian Peso Linked Nts., 1.824%, 4/22/04 2 320,000 333,440 Principal Market Value Amount See Note 1 - -------------------------------------------------------------------------------- Structured Notes Continued Indonesian Rupiah Linked Nts., 14.50%, 12/15/10 $ 512,575 $ 510,362 Mexican Peso Linked Nts., 1.56%, 4/9/12 2 2,110,050 2,056,877 - -------------------------------------------------------------------------------- JPMorgan Chase Bank: High Yield Index Credit-Linked Trust Nts., 8.75%, 11/15/07 8,035,000 8,095,262 Polish Zloty/Euro Linked Nts., 1.369%, 4/28/03 1,000,000 1,007,600 - -------------------------------------------------------------------------------- JPMorgan Chase Bank, EMBI Plus/ Egyptian Pounds Linked Certificate of Deposit: 0.42%, 3/11/03 710,000 680,200 0.60%, 4/4/03 490,000 469,265 - -------------------------------------------------------------------------------- JPMorgan Chase Bank, EMBI Plus/ Peruvian New Sol Linked Certificate of Deposit: 0.33%, 12/19/03 460,000 453,081 0.38%, 12/19/03 460,000 454,315 - -------------------------------------------------------------------------------- Lehman Brothers Holdings, Inc./ Redwood Capital I Ltd., Catastrophe Linked Bonds, 7.306%, 1/1/03 2,6 400,000 400,000 - -------------------------------------------------------------------------------- Russia (Government of) Federal Loan Obligatzii Federal'nogo Zaima Bonds, Series 27010, 10.028%, 9/17/03 1,2 [RUR] 3,590,420 107,488 ------------- Total Structured Notes (Cost $18,311,881) 18,364,026 Date Strike Contracts - -------------------------------------------------------------------------------- Options Purchased--0.0% - -------------------------------------------------------------------------------- Japanese Yen Call 1 (Cost $102,600) 2/18/03 116.33JPY 446,424,000 55,803 Principal Amount - -------------------------------------------------------------------------------- Joint Repurchase Agreements--6.9% Undivided interest of 14.39% in joint repurchase agreement (Market Value $198,591,000) with BNP Paribas Securities Corp., 1.07%, dated 12/31/02, to be repurchased at $28,571,698 on 1/2/03, collateralized by U.S. Treasury Bills, 6/26/03, with a value of $202,605,732 (Cost $28,570,000) $ 28,570,000 28,570,000 - -------------------------------------------------------------------------------- Total Investments, at Value (Cost $587,879,664) 136.8% 566,578,308 - -------------------------------------------------------------------------------- Liabilities in Excess of Other Assets (36.8) (152,313,795) ------------------------------ Net Assets 100.0% $ 414,264,513 ============================== 23 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued Footnotes to Statement of Investments Principal amount is reported in U.S. Dollars, except for those denoted in the following currencies: ARP Argentine Peso ITL Italian Lira AUD Australian Dollar JPY Japanese Yen CAD Canadian Dollar NOK Norwegian Krone DEM German Mark PHP Philippines Peso EUR Euro RUR Russian Ruble FRF French Franc SEK Swedish Krona GBP British Pound Sterling 1. Identifies issues considered to be illiquid or restricted--See Note 9 of Notes to Financial Statements. 2. Represents the current interest rate for a variable or increasing rate security. 3. Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of mortgage loans. These securities typically decline in price as interest rates decline. Most other fixed income securities increase in price when interest rates decline. The principal amount of the underlying pool represents the notional amount on which current interest is calculated. The price of these securities is typically more sensitive to changes in prepayment rates than traditional mortgage-backed securities (for example, GNMA pass-throughs). Interest rates disclosed represent current yields based upon the current cost basis and estimated timing and amount of future cash flows. These securities amount to $5,062,286 or 1.22% of the Fund's net assets as of December 31, 2002. 4. When-issued security to be delivered and settled after December 31, 2002. 5. Securities with an aggregate market value of $1,948,020 are held in collateralized accounts to cover initial margin requirements on open futures sales contracts. See Note 6 of Notes to Financial Statements. 6. 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 $26,869,529 or 6.49% of the Fund's net assets as of December 31, 2002. 7. A sufficient amount of liquid assets has been designated to cover outstanding written options, as follows:
Principal (000s) Expiration Exercise Premium Market Value Subject to Call Date Price Received See Note 1 - ----------------------------------------------------------------------------------------------------------------------------------- Euro 7,895 2/12/03 $1.043 $59,288 $141,084
8. A sufficient amount of securities has been designated to cover outstanding foreign currency contracts. See Note 5 of Notes to Financial Statements. 9. Issuer is in default. 10. Non-income producing security. 11. Zero coupon bond reflects effective yield on the date of purchase. 12. Denotes a step bond: a zero coupon bond that converts to a fixed or variable interest rate at a designated future date. 13. Interest or dividend is paid-in-kind. 14. 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. See accompanying Notes to Financial Statements. 24 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF ASSETS AND LIABILITIES December 31, 2002
- ----------------------------------------------------------------------------------------------------------------------- Assets Investments, at value (cost $587,879,664)--see accompanying statement $ 566,578,308 - ----------------------------------------------------------------------------------------------------------------------- Cash--foreign currencies (cost $15,066) 14,210 - ----------------------------------------------------------------------------------------------------------------------- Unrealized appreciation on foreign currency contracts 162,455 - ----------------------------------------------------------------------------------------------------------------------- Receivables and other assets: Interest, dividends and principal paydowns 7,358,062 Shares of beneficial interest sold 503,866 Swap contracts 15,468 Other 6,238 --------------- Total assets 574,638,607 - ----------------------------------------------------------------------------------------------------------------------- Liabilities Bank overdraft 802,345 - ----------------------------------------------------------------------------------------------------------------------- Unrealized depreciation on foreign currency contracts 110,885 - ----------------------------------------------------------------------------------------------------------------------- Options written, at value (premiums received $59,288)--see accompanying statement 141,084 - ----------------------------------------------------------------------------------------------------------------------- Payables and other liabilities: Investments purchased (including $157,886,453 purchased on a when-issued basis) 158,243,859 Closed foreign currency contracts 629,576 Shares of beneficial interest redeemed 303,327 Daily variation on futures contracts 65,893 Shareholder reports 31,252 Service plan fees 3,589 Transfer and shareholder servicing agent fees 465 Trustees' compensation 433 Other 41,386 --------------- Total liabilities 160,374,094 - ----------------------------------------------------------------------------------------------------------------------- Net Assets $ 414,264,513 =============== - ----------------------------------------------------------------------------------------------------------------------- Composition of Net Assets Par value of shares of beneficial interest $ 90,625 - ----------------------------------------------------------------------------------------------------------------------- Additional paid-in capital 438,687,789 - ----------------------------------------------------------------------------------------------------------------------- Undistributed net investment income 26,988,087 - ----------------------------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (29,949,132) - ----------------------------------------------------------------------------------------------------------------------- Net unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies (21,552,856) --------------- Net Assets $ 414,264,513 =============== - ----------------------------------------------------------------------------------------------------------------------- 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 $406,126,470 and 88,880,949 shares of beneficial interest outstanding) $4.57 - ----------------------------------------------------------------------------------------------------------------------- Service shares: Net asset value, redemption price per share and offering price per share (based on net assets of $8,138,043 and 1,743,847 shares of beneficial interest outstanding) $4.67
See accompanying Notes to Financial Statements. 25 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF OPERATIONS For the Year Ended December 31, 2002
- ------------------------------------------------------------------------------------------------------------- Investment Income Interest (net of foreign withholding taxes of $546) $ 28,590,743 - ------------------------------------------------------------------------------------------------------------- Dividends 301,586 --------------- Total investment income 28,892,329 - ------------------------------------------------------------------------------------------------------------- Expenses Management fees 2,771,643 - ------------------------------------------------------------------------------------------------------------- Distribution and service plan fees-Service shares 5,687 - ------------------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Non-Service shares 10,506 Service shares 551 - ------------------------------------------------------------------------------------------------------------- Shareholder reports 72,386 - ------------------------------------------------------------------------------------------------------------- Custodian fees and expenses 63,301 - ------------------------------------------------------------------------------------------------------------- Trustees' compensation 12,920 - ------------------------------------------------------------------------------------------------------------- Other 59,923 --------------- Total expenses 2,996,917 Less reduction to custodian expenses (5,600) Less voluntary reimbursement of expenses (44,031) Less voluntary waiver of transfer and shareholder servicing agent fees--Service shares (430) --------------- Net expenses 2,946,856 - ------------------------------------------------------------------------------------------------------------- Net Investment Income 25,945,473 - ------------------------------------------------------------------------------------------------------------- Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments (including premiums on options exercised) (6,626,164) Closing of futures contracts 2,001,088 Closing and expiration of option contracts written 37,312 Foreign currency transactions 2,145,866 --------------- Net realized loss (2,441,898) - ------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on: Investments (791,244) Translation of assets and liabilities denominated in foreign currencies 4,829,044 --------------- Net change 4,037,800 --------------- Net realized and unrealized gain 1,595,902 - ------------------------------------------------------------------------------------------------------------- Net Increase in Net Assets Resulting from Operations $27,541,375 ---------------
See accompanying Notes to Financial Statements. 26 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENTS OF CHANGES IN NET ASSETS
Year Ended December 31, 2002 2001 - --------------------------------------------------------------------------------------------------------------- Operations Net investment income $ 25,945,473 $ 29,031,053 - ------------------------------------------------------------------------------------------------------------- Net realized loss (2,441,898) (16,488,698) - ------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation 4,037,800 2,675,923 ------------------------------ Net increase in net assets resulting from operations 27,541,375 15,218,278 - ------------------------------------------------------------------------------------------------------------- Dividends and/or Distributions to Shareholders Dividends from net investment income: Non-Service shares (28,654,014) (20,045,483) Service shares (2,128) -- - ------------------------------------------------------------------------------------------------------------- Beneficial Interest Transactions Net increase in net assets resulting from beneficial interest transactions: Non-Service shares 55,824,134 51,951,764 Service shares 7,864,978 3,983 - ------------------------------------------------------------------------------------------------------------- Net Assets Total increase 62,574,345 47,128,542 - ------------------------------------------------------------------------------------------------------------- Beginning of period 351,690,168 304,561,626 ------------------------------ End of period [including undistributed net investment income of $26,988,087 and $27,951,457, respectively] $ 414,264,513 $351,690,168 ------------------------------
See accompanying Notes to Financial Statements. 27 | OPPENHEIMER STRATEGIC BOND 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 $4.62 $4.69 $4.97 $ 5.12 $ 5.12 - ---------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .29 .41 .41 .45 .39 Net realized and unrealized gain (loss) .03 (.19) (.28) (.31) (.24) -------------------------------------------------------------- Total from investment operations .32 .22 .13 .14 .15 - ---------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.37) (.29) (.41) (.29) (.09) Distributions from net realized gain -- -- -- -- (.06) -------------------------------------------------------------- Total dividends and/or distributions to shareholders (.37) (.29) (.41) (.29) (.15) - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.57 $4.62 $4.69 $4.97 $5.12 ============================================================== - ---------------------------------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 1 7.44% 4.85% 2.63% 2.83% 2.90% Ratios/Supplemental Data - ---------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $406,126 $351,686 $304,562 $282,086 $279,200 - ---------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $374,519 $330,711 $289,923 $278,668 $250,227 - ---------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 2 Net investment income 6.89% 8.78% 9.23% 9.08% 8.17% Expenses 0.79% 0.79% 0.79% 0.78% 0.80% 3 Expenses, net of reduction to custodian expenses and/or voluntary reimbursement of expenses 0.78% 0.79% 0.79% 0.78% 0.80% - ---------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 65% 104% 104% 81% 134%
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. 28 | OPPENHEIMER STRATEGIC BOND FUND/VA
Service shares Year Ended December 31, 2002 2001 1 - ----------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $ 4.73 $ 4.64 - ----------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .03 .15 Net realized and unrealized gain (loss) .28 (.06) --------------------- Total from investment operations .31 .09 - ----------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.37) -- Distributions from net realized gain -- -- --------------------- Total dividends and/or distributions to shareholders (.37) -- - ----------------------------------------------------------------------------------------------------- Net asset value, end of period $4.67 $4.73 ===================== - ----------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 2 7.03% 1.94% - ----------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $8,138 $4 - ----------------------------------------------------------------------------------------------------- Average net assets (in thousands) $2,307 $2 - ----------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 5.40% 8.17% Expenses 1.06% 0.92% Expenses, net of reduction to custodian expenses and/or voluntary reimbursement of expenses and/or waiver of transfer agent fees 1.03% 0.92% - ----------------------------------------------------------------------------------------------------- Portfolio turnover rate 65% 104%
1. For the period from March 19, 2001 (inception of offering) to December 31, 2001. 2. Assumes an investment on the business day before the first day of the fiscal period (or inception of offering), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 3. Annualized for periods of less than one full year. See accompanying Notes to Financial Statements. 29 | OPPENHEIMER STRATEGIC BOND FUND/VA NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. Significant Accounting Policies Oppenheimer Strategic Bond Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds (the Trust), an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek a high level of current income principally derived from interest on debt securities. The Trust's investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers two classes of shares. Both classes are sold at their offering price, which is the net asset value per share, to separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. The class of shares designated as Service shares is subject to a distribution and service plan. All classes of shares have identical rights and voting privileges. Earnings, net assets and net asset value per share may differ by minor amounts due to each class having its own expenses directly attributable to that class. The following is a summary of significant accounting policies consistently followed by the Fund. - -------------------------------------------------------------------------------- Securities Valuation. Securities listed or traded on National Stock Exchanges or other domestic or foreign exchanges are valued based on the last sale price of the security traded on that exchange prior to the time when the Fund's assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the closing bid and asked prices, and if not, at the closing bid price. Securities (including restricted securities) for which quotations are not readily available are valued primarily using dealer-supplied valuations, a portfolio pricing service authorized by the Board of Trustees, or at their fair value. Fair value is determined in good faith under consistently applied procedures under the supervision of the Board of Trustees. Short-term "money market type" debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value). - -------------------------------------------------------------------------------- Structured Notes. The Fund invests in foreign currency-linked structured notes whose market values and redemption prices are linked to foreign currency exchange rates. The Fund also invests in "index-linked" notes whose principal and/or interest payments 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 foreign currency exchange rate or 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 4.4% of the Fund's net assets and resulted in unrealized gains in the current period of $52,145. The Fund also hedges a portion of the foreign currency exposure generated by these securities, as discussed in Note 5. - -------------------------------------------------------------------------------- Securities Purchased on a When-Issued Basis. Delivery and payment for securities that have been purchased by the Fund on a when-issued basis can take place a month or more after the trade date. Normally the settlement date occurs within six months after the trade date; however, the Fund may, from time to time, purchase securities whose settlement date extends beyond six months or more beyond trade date. During this period, such securities do not earn interest, are subject to market fluctuation and may increase or decrease in value prior to their delivery. The Fund maintains segregated assets with a market value equal to or greater than the amount of its purchase commitments. The purchase of securities on a when-issued basis may increase the volatility of the Fund's net asset value to the extent the Fund makes such purchases while remaining substantially fully invested. As of December 31, 2002, the Fund had entered into when-issued purchase commitments of $157,886,453. In connection with its ability to purchase securities on a when-issued basis, the Fund may enter into forward roll transactions with respect to mortgage-related securities. Forward roll transactions require the sale of securities for delivery in the current month, and a simultaneous agreement with the same counterparty to repurchase similar (same type, coupon and maturity) but not identical securities on a specified future date. The forward roll may not extend for a period of greater than one year. The Fund generally records the incremental difference between the forward purchase and sell of each forward roll as interest income. 30 | OPPENHEIMER STRATEGIC BOND FUND/VA Risks to the Fund of entering into forward roll transactions include the potential inability of the counterparty to meet the terms of the agreement; the potential of the Fund to receive inferior securities to what was sold to the counterparty at redelivery; counterparty credit risk; and the potential pay down speed variance between the mortgage-related pools. - -------------------------------------------------------------------------------- Security Credit Risk. The Fund invests in high-yield securities, which may be subject to a greater degree of credit risk, greater market fluctuations and risk of loss of income and principal, and may be more sensitive to economic conditions than lower-yielding, higher-rated fixed-income securities. The Fund may acquire securities in default, and is not obligated to dispose of securities whose issuers subsequently default. As of December 31, 2002, securities with an aggregate market value of $5,669,605, representing 1.37% 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 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 $ 1,014,382 2007 5,399,072 2008 253,735 2009 9,904,928 2010 6,861,637 -------------- Total $23,433,754 -------------- As of December 31, 2002, the Fund had approximately $3,121,000 of post-October losses available to offset future capital gains, if any. Such losses, if unutilized, will expire in 2011. Additionally, the Fund had approximately $121,000 of post-October foreign currency losses which were deferred. If unutilized by the Fund in the following fiscal year, such losses will expire. 31 | OPPENHEIMER STRATEGIC BOND FUND/VA NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- 1. Significant Accounting Policies Continued Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. - -------------------------------------------------------------------------------- Classification of 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 an increase in undistributed net investment income of $1,747,299. Accumulated net realized loss on investments was increased by the same amount. Net assets of the Fund were unaffected by the reclassifications. 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 $28,656,142 $20,045,483 Long-term capital gain -- -- Return of capital -- -- ------------------------------------ Total $28,656,142 $20,045,483 ==================================== As of December 31, 2002, the components of distributable earnings on a tax basis were as follows: Undistributed net investment income $ 26,988,087 Accumulated net realized loss (29,949,132) Net unrealized depreciation (21,552,856) ------------- Total $(24,513,901) ============= - -------------------------------------------------------------------------------- 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. 32 | OPPENHEIMER STRATEGIC BOND FUND/VA - -------------------------------------------------------------------------------- 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest 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 39,611,608 $ 174,444,145 21,317,660 $ 98,459,684 Dividends and/or distributions reinvested 6,617,555 28,654,014 4,374,282 20,045,483 Redeemed (33,471,553) (147,274,025) (14,476,879) (66,553,403) ----------------------------------------------------------------- Net increase 12,757,610 $ 55,824,134 11,215,063 $ 51,951,764 ----------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Service shares Sold 1,855,564 $ 8,365,056 1,191 $ 5,626 Dividends and/or distributions reinvested 479 2,128 -- -- Redeemed (113,038) (502,206) (349) (1,643) ----------------------------------------------------------------- Net increase 1,743,005 $ 7,864,978 842 $ 3,983 -----------------------------------------------------------------
1. For the year ended December 31, 2001, for Non-Service shares and for the period from March 19, 2001 (inception of offering) to December 31, 2001, for Service shares. - -------------------------------------------------------------------------------- 3. Purchases and Sales of Securities The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the year ended December 31, 2002, were $349,832,766 and $279,938,676, respectively. As of December 31, 2002, unrealized appreciation (depreciation) based on cost of securities for federal income tax purposes of $591,578,548 was composed of: Gross unrealized appreciation $ 20,633,092 Gross unrealized depreciation (45,633,332) ------------- Net unrealized depreciation $(25,000,240) ============= 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% of the next $200 million and 0.50% of average annual net assets over $1 billion. OFI will reduce the management fee by 0.10% as long as the fund's trailing 12-month performance at the end of the quarter is in the fifth Lipper peer-group quintile; and by 0.05% as long as it is in the fourth quintile. If the Fund emerges from a "penalty box" position for a quarter but then slips back in the next quarter, OFI will reinstate the waiver. The waiver is voluntary and may be terminated by the Manager at any time. The waiver waterminated December 17, 2002. 33 | OPPENHEIMER STRATEGIC BOND FUND/VA NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- 4. Fees and Other Transactions with Affiliates Continued Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a $22.50 per account fee. Additionally, funds offered in variable annuity separate accounts are subject to minimum fees of $5,000 for assets of less than $10 million and $10,000 for assets of $10 million or more. The Fund is subject to the minimum fee in the event that the per account fee does not equal or exceed the applicable minimum fee. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees up to an annual rate of 0.35% 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 $5,687. - -------------------------------------------------------------------------------- 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. As of December 31, 2002, the Fund had outstanding foreign currency contracts as follows:
Expiration Contract Amount Valuation as of Unrealized Unrealized Contract Description Dates (000s) December 31, 2002 Appreciation Depreciation - ---------------------------------------------------------------------------------------------------------------------------------- Contracts to Purchase Euro [EUR] 2/7/03 - 5/6/03 8,675EUR $9,072,095 $159,273 $ -- Indonesia Rupiah [IDR] 1/24/03 4,459,415IDR 498,259 834 -- ------------------------------- 160,107 -- ------------------------------- Contracts to Sell British Pound Sterling [GBP] 3/6/03 -3/20/03 860GBP 1,377,817 -- 41,917 Canadian Dollar [CAD] 2/21/03 645CAD 407,448 -- 57 Euro [EUR] 4/7/03 645EUR 674,174 -- 45,301 Japanese Yen [JPY] 2/7/03 - 4/7/03 487,320JPY 4,115,637 2,348 15,327 Philippines Peso [PHP] 4/25/03 50,992PHP 938,283 -- 8,283 ------------------------------- 2,348 110,885 ------------------------------- Total Unrealized Appreciation and Depreciation $162,455 $110,885 ===============================
34 | OPPENHEIMER STRATEGIC BOND 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 on the Statement of Operations as closing and expiration of futures contracts. Risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. As of December 31, 2002, the Fund had outstanding futures contracts as follows:
Unrealized Expiration Number of Valuation as of Appreciation Contract Description Dates Contracts December 31, 2002 (Depreciation) - ---------------------------------------------------------------------------------------------------------------------------------- Contracts to Purchase Euro-Bundesobligation 3/6/03 7 $ 834,042 $ 17,336 Euro-Schatz 3/6/03 67 7,427,527 58,357 Japan (Government of) Bonds, 10 yr. 3/11/03 2 2,394,202 11,460 NASDAQ 100 Index 3/20/03 7 690,900 (28,770) Standard & Poor's 500 3/20/03 5 1,098,625 (22,813) United Kingdom Long Gilt 3/27/03 2 387,503 6,036 U.S. Long Bonds 3/20/03 162 18,255,375 395,219 U.S. Treasury Nts., 5 yr. 3/20/03 32 3,624,000 90,266 ---------- 527,091 ---------- Contracts to Sell DAX Index 3/21/03 3 228,599 17,000 FTSE 100 Index 3/21/03 1 62,971 (515) U.S. Treasury Nts., 2 yr. 3/27/03 288 61,974,000 (633,966) U.S. Treasury Nts., 10 yr. 3/20/03 60 6,902,813 (225,016) ---------- (842,497) ---------- $(315,406) ==========
35 | OPPENHEIMER STRATEGIC BOND FUND/VA NOTES TO FINANCIAL STATEMENTS Continued - ------------------------------------------------------------------------------- 7. Option Activity The Fund may buy and sell put and call options, or write put and covered call options on portfolio securities in order to produce incremental earnings or protect against changes in the value of portfolio securities. The Fund generally purchases put options or writes covered call options to hedge against adverse movements in the value of portfolio holdings. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option. Options are valued daily based upon the last sale price on the principal exchange on which the option is traded and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss upon the expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option is adjusted by the amount of premium received or paid. Securities designated to cover outstanding call options are noted in the Statement of Investments where applicable. Shares subject to call, expiration date, exercise price, premium received and market value are detailed in a note to the Statement of Investments. Options written are reported as a liability in the Statement of Assets and Liabilities. Realized gains and losses are reported in the Statement of Operations. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Written option activity for the year ended December 31, 2002 was as follows:
Call Options Put Options --------------------------------- ------------------------------------- Principal (000s)/ Principal (000s)/ Number of Amount of Number of Amount of Contracts Premiums Contracts Premiums - --------------------------------------------------------------------------------------------------------------------------------- Options outstanding as of December 31, 2001 14,109 $ 329,907 -- $ -- Options written 9,208,428 247,410 954 45,331 Options closed or expired (1,311,673) (165,284) -- -- Options exercised (15,864) (352,745) (954) (45,331) ------------------------------------------------------------------- Options outstanding as of December 31, 2002 7,895,000 $ 59,288 -- $ -- ===================================================================
- -------------------------------------------------------------------------------- 8. Credit Swap Transactions The Fund may enter into a credit swap transaction to seek to maintain a total return on a particular investment or portion of its portfolio, or for other non-speculative purposes. Because the principal amount is not exchanged, it represents neither an asset nor a liability to either counterparty, and is referred to as a notional principal amount. The Fund records an increase or decrease to interest income, in the amount due to or owed by the Fund at termination or settlement. Credit swaps are subject to credit risks (if the counterparty fails to meet its obligations). During the year ended December 31, 2002, the Fund entered into a transaction to hedge credit risk. The Fund pays an annual 2% interest fee on the notional amount in exchange for the counterparty paying in a potential credit event. Information regarding the credit swap is as follows:
Expiration Notional Valuation as of Unrealized Contract Description Date Amount December 31, 2002 Appreciation - --------------------------------------------------------------------------------------------------------------------------------- J.P. Morgan Chase Bank, Jordon (Kingdom of ) Credit Nts. 6/6/06 250,000 $15,468 $15,468
36 | OPPENHEIMER STRATEGIC BOND FUND/VA - -------------------------------------------------------------------------------- 9. 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 $20,806,332, which represents 5.02% of the Fund's net assets, none of which 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 $ -- $ -- $ -- Geotek Communications, Inc., Series B (Escrowed) 1/4/01 840 -- 840 Real Time Data Co. Wts. 6/30/99 364 -- 364 Currency Argentine Peso 1/15/02 2,407 1,589 818 Russian Ruble 11/20/02-12/18/02 12,659 12,621 38
37 | OPPENHEIMER STRATEGIC BOND FUND/VA INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- To the Board of Trustees and Shareholders of Oppenheimer Strategic Bond Fund/VA: We have audited the accompanying statement of assets and liabilities of Oppenheimer Strategic Bond 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 Strategic Bond 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 38 | OPPENHEIMER STRATEGIC BOND 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 $0.3732 and $0.3730 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 0.569% 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. 39 | OPPENHEIMER STRATEGIC BOND FUND/VA
TRUSTEES AND OFFICERS - ----------------------------------------------------------------------------------------------------------------------------------- Name, Position(s) Held Principal Occupation(s) During Past 5 Years; Other Trusteeships/Directorships with Fund, Length of Held by Trustee; Number of Portfolios in Fund Complex Currently Overseen by Service, Age Trustee INDEPENDENT TRUSTEES The address of each Trustee in the chart below 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 27, 2002) of the Board II Funds, Chairman and Trustee Vice Chairman (until January 2, 2002) of OppenheimerFunds, Inc. (the Manager) (since 1993) and President and a director (until 1997) of Centennial Asset Management Age: 69 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 banking companies: Cherry Creek Trustee (since 1999) Mortgage Company (since 1991), Centennial State Mortgage Company (since 1994), Age: 65 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. Edwards Capital, Inc. (General Partner Trustee (since 1993) of private equity funds) (until February 2001); Chairman, President and Chief Age: 71 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 President (from September 1987) and Trustee (since 1997) Treasurer (from March 1985) of the Manager; Vice President (from June 1983) and Age: 66 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, (George Washington's home) (since Trustee (since 1999) June 2000). Formerly (March 2001 - May 2002) Director of Genetic ID, Inc. and Age: 64 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 Mountain Elk Foundation (a Trustee (since 1993) not-for-profit foundation); and a director (since October 1999) of P.R. Age: 60 Pharmaceuticals (a privately held company) and UNUMProvident (an insurance company) (since June 1, 2002). Formerly Chairman and a director (until October 1996) and President and Chief Executive Officer (until October 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.
40 | OPPENHEIMER STRATEGIC BOND FUND/VA
Sam Freedman, A trustee or director of other Oppenheimer funds. Formerly (until October 1994) Trustee (since 1996) Mr. Freedman held several positions in subsidiary or affiliated companies of the Age: 62 Manager. Oversees 41 portfolios in the OppenheimerFunds complex. Beverly L. Hamilton, Trustee (since 1996) of MassMutual Institutional Funds and of MML Series Trustee (since 2002) Investment Fund (open-end investment companies); Director of MML Services (since Age: 56 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. (a privately held company), U.S. Trustee (since 2002) Exploration, Inc., (since 1997), Colorado UpLIFT (a non-profit organization) Age: 58 (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 Institutional Funds and of MML Series Trustee (since 2000) Investment Fund (open-end investment companies); Trustee and Chairman (since May Age: 60 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 498 Seventh Avenue, New York, NY AND OFFICER 10018. Mr. Murphy serves for an indefinite term, until his resignation, retirement, death or removal. John V. Murphy, Chairman, Chief Executive Officer and director (since June 2001) and President President and Trustee (since September 2000) of the Manager; President and a director or trustee of (since 2001) other Oppenheimer funds; President and a director (since July 2001) of Age: 53 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.
41 | OPPENHEIMER STRATEGIC BOND FUND/VA
TRUSTEES AND OFFICERS Continued - ----------------------------------------------------------------------------------------------------------------------------------- OFFICERS The address of the Officers in the chart below is as follows: for Messrs. Steinmetz 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. Arthur P. Steinmetz, Senior Vice President of the Manager (since March 1993) and of HarbourView Asset Vice President (since 1993) Management Corporation (since March 2000). An officer of 6 portfolios in the Age: 44 OppenheimerFunds complex. Brian W. Wixted, Senior Vice President and Treasurer (since March 1999) of the Manager; Treasurer Treasurer, Principal (since March 1999) of HarbourView Asset Management Corporation, Shareholder Financial and Accounting Services, Inc., Oppenheimer Real Asset Management Corporation, Shareholder Officer (since 1999) Financial Services, Inc., Oppenheimer Partnership Holdings, Inc., OFI Private Age: 43 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 General Counsel (since February 2002) Vice President and of the Manager; General Counsel and a director (since November 2001) of Secretary (since 2001) OppenheimerFunds Distributor, Inc.; Senior Vice President and General Counsel Age: 54 (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. 42 | OPPENHEIMER STRATEGIC BOND FUND/VA OPPENHEIMER STRATEGIC BOND 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 Myer, Swanson, Adams & Wolf, P.C. to the Fund - -------------------------------------------------------------------------------- Legal Counsel to the Mayer Brown Rowe & Maw Independent Trustees For more complete information about Oppenheimer Strategic Bond Fund/VA, please refer to the Prospectus. To obtain a copy, call your financial advisor, or call OppenheimerFunds, Inc. at 1.800.981.2871. 43 | OPPENHEIMER STRATEGIC BOND FUND/VA [LOGO] OppenheimerFunds(R) Distributor, Inc. (c) Copyright 2003 OppenheimerFunds, Inc. All rights reserved. -----END PRIVACY-ENHANCED MESSAGE-----