N-CSR 1 ra620_18671-ncsr.txt RA620_18671-NCSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-4108 OPPENHEIMER VARIABLE ACCOUNT FUNDS (Exact name of registrant as specified in charter) 6803 SOUTH TUCSON WAY, CENTENNIAL, COLORADO 80112-3924 (Address of principal executive offices) (Zip code) ROBERT G. ZACK, ESQ. OPPENHEIMERFUNDS, INC. TWO WORLD FINANCIAL CENTER, NEW YORK, NEW YORK 10281-1008 (Name and address of agent for service) Registrant's telephone number, including area code: (303) 768-3200 Date of fiscal year end: DECEMBER 31 Date of reporting period: DECEMBER 31, 2005 ITEM 1. REPORTS TO STOCKHOLDERS. OPPENHEIMER AGGRESSIVE GROWTH FUND/VA FUND PERFORMANCE DISCUSSION -------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE Oppenheimer Aggressive Growth Fund/VA produced strong returns relative to its benchmark, the S&P 500 Index, for its fiscal year ended December 31, 2005. We attributed these favorable results to our disciplined bottom-up stock selection process. The Fund benefited particularly from our holdings within the consumer discretionary, consumer staples, healthcare, financials and industrials sectors. Despite the Fund's solid performance, a few holdings within a variety of sectors, information technology, healthcare and consumer discretionary, produced disappointing results. The Fund's investment strategy focuses on high-growth companies that are industry leaders within their marketplace. We target those we believe possess competitive advantages, stable earnings, sustainable growth rates and experienced management teams with proven records. Our investment strategy succeeded in identifying high performing companies across many market sectors. During the period, our holdings within the consumer discretionary sector performed quite well, benefiting from a healthy economy and strong consumer spending. Top contributors to performance included women's clothing retailer, Chico's FAS, Inc. and O'Reilly Automotive, Inc., a specialty retailer of automotive aftermarket parts, tools and supplies. Within the consumer staples sector, the world's top natural foods chain, Whole Foods Market, Inc., benefited from a strong management team that successfully executed on its corporate plan, driving the company's stock price higher during the period. Stocks within the healthcare sector also performed well for the Fund. The strongest healthcare holding was Coventry Health Care, Inc., a firm that provides managed healthcare services. Coventry Health Care, Inc. successfully completed its acquisition of First Health Group Corp., which boosted profitability and produced greater margins. The financial sector also helped performance. Among the best performing stocks in this sector were the Chicago Mercantile Exchange Holdings, Inc. and Legg Mason, Inc. The Chicago Mercantile Exchange Holdings, Inc. profited from its new products and trading platform. Legg Mason, Inc.'s stock soared after a successful strategic realignment of the firm. Within industrials, Fastenal Co., a nuts and bolts distributor and Expeditors International of Washington, Inc., a freight forwarding company, benefited from a strong domestic and global economy. Among the few disappoints, Investors Financial Services Corp. suffered from a reduction in profitability due to the flattening of the yield curve as well as competitive pressures. Within healthcare, The Cooper Companies Inc.'s stock declined due to an increasingly competitive marketplace. In the consumer discretionary sector, Brunswick Corp., a global leader in the leisure products industry, suffered from weak sales due to consumer concerns over rising energy prices. Lastly, information technology services providers, Affiliated Computer Services, Inc. and Alliance Data Systems Corp. underperformed for the period. 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, 2005. In the case of non-service shares, performance is measured over a ten-year period. In the case of service shares, performance is measured from inception of the class on October 16, 2000. 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 S&P 500 Index, an unmanaged index of equity securities that is a measure of the general domestic stock market. Index performance reflects the reinvestment of income but does not consider the effect of transaction costs, and none of the data in the graphs shows the effect of taxes. 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 AGGRESSIVE GROWTH FUND/VA NON-SERVICE SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Aggressive Growth Fund/VA (Non-Service) S&P 500 Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Aggressive Growth Fund/VA (Non-Service) S&P 500 Index ---------------------- ------------- 12/31/1995 10,000 10,000 03/31/1996 10,842 10,537 06/30/1996 11,892 11,009 09/30/1996 12,398 11,349 12/31/1996 12,022 12,295 03/31/1997 10,600 12,625 06/30/1997 12,796 14,827 09/30/1997 14,543 15,937 12/31/1997 13,426 16,395 03/31/1998 15,176 18,680 06/30/1998 15,762 19,300 09/30/1998 12,097 17,385 12/31/1998 15,085 21,084 03/31/1999 16,549 22,134 06/30/1999 18,255 23,691 09/30/1999 18,992 22,215 12/31/1999 27,697 25,518 03/31/2000 34,801 26,103 06/30/2000 33,571 25,409 09/30/2000 35,638 25,163 12/31/2000 24,584 23,196 03/31/2001 18,030 20,447 06/30/2001 17,947 21,643 09/30/2001 15,541 18,468 12/31/2001 16,898 20,441 03/31/2002 16,025 20,497 06/30/2002 13,984 17,753 09/30/2002 11,864 14,687 12/31/2002 12,202 15,925 03/31/2003 12,014 15,423 06/30/2003 13,876 17,796 09/30/2003 14,640 18,267 12/31/2003 15,324 20,490 03/31/2004 16,151 20,837 06/30/2004 16,869 21,195 09/30/2004 16,318 20,799 12/31/2004 18,355 22,718 03/31/2005 18,229 22,230 06/30/2005 18,797 22,535 09/30/2005 19,791 23,347 12/31/2005 20,617 23,833 AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/2005 1-Year 12.33% 5-Year -3.46% 10-Year 7.50% SERVICE SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Aggressive Growth Fund/VA (Service) S&P 500 Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Aggressive Growth Fund/VA (Service) S&P 500 Index ---------------------- ------------- 10/16/2000 10,000 10,000 12/31/2000 7,240 9,257 03/31/2001 5,311 8,161 06/30/2001 5,285 8,638 09/30/2001 4,575 7,370 12/31/2001 4,973 8,158 03/31/2002 4,713 8,181 06/30/2002 4,110 7,085 09/30/2002 3,484 5,862 12/31/2002 3,578 6,356 03/31/2003 3,521 6,156 06/30/2003 4,067 7,103 09/30/2003 4,290 7,291 12/31/2003 4,489 8,178 03/31/2004 4,728 8,316 06/30/2004 4,936 8,459 09/30/2004 4,769 8,301 12/31/2004 5,361 9,067 03/31/2005 5,320 8,872 06/30/2005 5,481 8,994 09/30/2005 5,767 9,318 12/31/2005 6,003 9,512 AVERAGE ANNUAL TOTAL RETURN OF SERVICE SHARES OF THE FUND AT 12/31/2005 1-Year 11.99% 5-Year -3.68% Since Inception (10/16/00) -9.33% THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT. 5 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA FUND EXPENSES -------------------------------------------------------------------------------- FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include redemption fees, if any; and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 31, 2005. ACTUAL EXPENSES. The "actual" lines of the table provide information about actual account values and actual expenses. You may use the information on this line for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the "actual" line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio for each class of shares, and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the "hypothetical" lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included, your costs would have been higher. ---------------------------------------------------------------------------- BEGINNING ENDING EXPENSES PAID ACCOUNT ACCOUNT DURING 6 MONTHS VALUE VALUE ENDED (7/1/05) (12/31/05) DECEMBER 31, 2005 ---------------------------------------------------------------------------- Non-Service shares Actual $1,000.00 $1,096.80 $3.65 ---------------------------------------------------------------------------- Non-Service shares Hypothetical 1,000.00 1,021.73 3.52 ---------------------------------------------------------------------------- Service shares Actual 1,000.00 1,095.20 5.08 ---------------------------------------------------------------------------- Service shares Hypothetical 1,000.00 1,020.37 4.90 Hypothetical assumes 5% annual return before expenses. Expenses are equal to the Fund's annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Those annualized expense ratios based on the 6-month period ended December 31, 2005 are as follows: CLASS EXPENSE RATIOS ----------------------------------- Non-Service shares 0.69% ----------------------------------- Service shares 0.96 ----------------------------------- -------------------------------------------------------------------------------- 6 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA STATEMENT OF INVESTMENTS December 31, 2005 --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS--100.0% ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER DISCRETIONARY--18.8% ------------------------------------------------------------------------------------------------------------------------------------ HOTELS, RESTAURANTS & LEISURE--2.1% Cheesecake Factory, Inc. (The) 1 241,000 $ 9,010,990 ------------------------------------------------------------------------------------------------------------------------------------ Starbucks Corp. 1 569,600 17,093,696 ------------------ 26,104,686 ------------------------------------------------------------------------------------------------------------------------------------ HOUSEHOLD DURABLES--1.4% Harman International Industries, Inc. 181,300 17,740,205 ------------------------------------------------------------------------------------------------------------------------------------ LEISURE EQUIPMENT & PRODUCTS--2.0% Brunswick Corp. 628,800 25,567,008 ------------------------------------------------------------------------------------------------------------------------------------ MEDIA--2.7% Getty Images, Inc. 1 384,100 34,288,607 ------------------------------------------------------------------------------------------------------------------------------------ SPECIALTY RETAIL--6.9% Bed Bath & Beyond, Inc. 1 142,000 5,133,300 ------------------------------------------------------------------------------------------------------------------------------------ Chico's FAS, Inc. 1 564,900 24,816,057 ------------------------------------------------------------------------------------------------------------------------------------ O'Reilly Automotive, Inc. 1 1,069,524 34,235,463 ------------------------------------------------------------------------------------------------------------------------------------ Tractor Supply Co. 1 188,000 9,952,720 ------------------------------------------------------------------------------------------------------------------------------------ Urban Outfitters, Inc. 1 299,200 7,572,752 ------------------------------------------------------------------------------------------------------------------------------------ Williams-Sonoma, Inc. 1 146,100 6,304,215 ------------------ 88,014,507 ------------------------------------------------------------------------------------------------------------------------------------ TEXTILES, APPAREL & LUXURY GOODS--3.7% Coach, Inc. 1 736,000 24,538,240 ------------------------------------------------------------------------------------------------------------------------------------ Polo Ralph Lauren Corp. 391,800 21,995,652 ------------------ 46,533,892 ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER STAPLES--2.0% ------------------------------------------------------------------------------------------------------------------------------------ FOOD & STAPLES RETAILING--2.0% Whole Foods Market, Inc. 329,000 25,461,310 ------------------------------------------------------------------------------------------------------------------------------------ ENERGY--8.1% ------------------------------------------------------------------------------------------------------------------------------------ ENERGY EQUIPMENT & SERVICES--3.3% BJ Services Co. 469,000 17,198,230 ------------------------------------------------------------------------------------------------------------------------------------ Smith International, Inc. 659,700 24,481,467 ------------------ 41,679,697 ------------------------------------------------------------------------------------------------------------------------------------ OIL & GAS--4.8% Apache Corp. 310,600 21,282,312 ------------------------------------------------------------------------------------------------------------------------------------ Murphy Oil Corp. 372,500 20,111,275 ------------------------------------------------------------------------------------------------------------------------------------ XTO Energy, Inc. 428,399 18,823,852 ------------------ 60,217,439 ------------------------------------------------------------------------------------------------------------------------------------ FINANCIALS--9.4% ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL BANKS--2.1% Commerce Bancorp, Inc. 765,800 26,351,178 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES--5.6% Chicago Mercantile Exchange (The) 81,000 $ 29,766,690 ------------------------------------------------------------------------------------------------------------------------------------ Legg Mason, Inc. 343,500 41,113,515 ------------------ 70,880,205 ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE--1.7% Brown & Brown, Inc. 715,400 21,848,316 ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE--16.1% ------------------------------------------------------------------------------------------------------------------------------------ BIOTECHNOLOGY--2.3% Affymetrix, Inc. 1 200,200 9,559,550 ------------------------------------------------------------------------------------------------------------------------------------ Gilead Sciences, Inc. 1 378,000 19,894,140 ------------------ 29,453,690 ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE EQUIPMENT & SUPPLIES--7.3% Bard (C.R.), Inc. 518,500 34,179,520 ------------------------------------------------------------------------------------------------------------------------------------ Gen-Probe, Inc. 1 388,900 18,974,431 ------------------------------------------------------------------------------------------------------------------------------------ Idexx Laboratories, Inc. 1 17,900 1,288,442 ------------------------------------------------------------------------------------------------------------------------------------ ResMed, Inc. 1 299,900 11,489,169 ------------------------------------------------------------------------------------------------------------------------------------ Varian Medical Systems, Inc. 1 509,800 25,663,332 ------------------ 91,594,894 ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE PROVIDERS & SERVICES--6.5% American Healthways, Inc. 1 28,500 1,289,625 ------------------------------------------------------------------------------------------------------------------------------------ Coventry Health Care, Inc. 1 646,575 36,828,912 ------------------------------------------------------------------------------------------------------------------------------------ Health Management Associates, Inc., Cl. A 1,107,600 24,322,896 ------------------------------------------------------------------------------------------------------------------------------------ Patterson Cos., Inc. 1 588,300 19,649,220 ------------------ 82,090,653 ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRIALS--19.0% ------------------------------------------------------------------------------------------------------------------------------------ AEROSPACE & DEFENSE--3.1% L-3 Communications Holdings, Inc. 176,700 13,137,645 ------------------------------------------------------------------------------------------------------------------------------------ Rockwell Collins, Inc. 561,200 26,078,964 ------------------ 39,216,609 ------------------------------------------------------------------------------------------------------------------------------------ AIR FREIGHT & LOGISTICS--5.2% C.H. Robinson Worldwide, Inc. 719,700 26,650,491 ------------------------------------------------------------------------------------------------------------------------------------ Expeditors International of Washington, Inc. 573,100 38,689,981 ------------------ 65,340,472 ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL SERVICES & SUPPLIES--3.6% Corporate Executive Board Co. 283,900 25,465,830 ------------------------------------------------------------------------------------------------------------------------------------ Stericycle, Inc. 1 349,100 20,555,008 ------------------ 46,020,838
7 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ MACHINERY--3.9% Donaldson Co., Inc. 538,000 $ 17,108,400 ------------------------------------------------------------------------------------------------------------------------------------ Joy Global, Inc. 138,750 5,550,000 ------------------------------------------------------------------------------------------------------------------------------------ Oshkosh Truck Corp. 598,000 26,664,820 ------------------ 49,323,220 ------------------------------------------------------------------------------------------------------------------------------------ TRADING COMPANIES & DISTRIBUTORS--3.2% Fastenal Co. 1,048,200 41,078,958 ------------------------------------------------------------------------------------------------------------------------------------ INFORMATION TECHNOLOGY--25.7% ------------------------------------------------------------------------------------------------------------------------------------ COMMUNICATIONS EQUIPMENT--2.7% Comverse Technology, Inc. 1 1,291,300 34,335,667 ------------------------------------------------------------------------------------------------------------------------------------ ELECTRONIC EQUIPMENT & INSTRUMENTS--1.2% CDW Corp. 275,600 15,866,292 ------------------------------------------------------------------------------------------------------------------------------------ IT SERVICES--9.3% Alliance Data Systems Corp. 1 552,900 19,683,240 ------------------------------------------------------------------------------------------------------------------------------------ Cognizant Technology Solutions Corp. 1 546,000 27,491,100 ------------------------------------------------------------------------------------------------------------------------------------ Fiserv, Inc. 1 506,200 21,903,274 ------------------------------------------------------------------------------------------------------------------------------------ Global Payments, Inc. 487,400 22,717,714 ------------------------------------------------------------------------------------------------------------------------------------ NAVTEQ Corp. 1 290,700 12,753,009 ------------------------------------------------------------------------------------------------------------------------------------ SRA International, Inc., Cl.A 1 409,100 12,493,914 ------------------ 117,042,251 ------------------------------------------------------------------------------------------------------------------------------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--4.0% Linear Technology Corp. 703,600 25,378,852 ------------------------------------------------------------------------------------------------------------------------------------ Microchip Technology, Inc. 772,500 24,835,875 ------------------ 50,214,727 ------------------------------------------------------------------------------------------------------------------------------------ SOFTWARE--8.5% Activision, Inc. 1 1,297,200 17,823,528 ------------------------------------------------------------------------------------------------------------------------------------ Adobe Systems, Inc. 710,600 26,263,776 ------------------------------------------------------------------------------------------------------------------------------------ Amdocs Ltd. 1 345,900 9,512,250 ------------------------------------------------------------------------------------------------------------------------------------ Autodesk, Inc. 430,400 18,485,680 ------------------------------------------------------------------------------------------------------------------------------------ Electronic Arts, Inc. 1 241,400 12,627,634 ------------------------------------------------------------------------------------------------------------------------------------ FactSet Research Systems, Inc. 271,050 11,156,418 ------------------------------------------------------------------------------------------------------------------------------------ Intuit, Inc. 1 213,800 11,395,540 ------------------ 107,264,826 ------------------------------------------------------------------------------------------------------------------------------------ MATERIALS--0.1% ------------------------------------------------------------------------------------------------------------------------------------ CHEMICALS--0.1% Ecolab, Inc. 35,800 1,298,466 ------------------------------------------------------------------------------------------------------------------------------------ TELECOMMUNICATION SERVICES--0.8% ------------------------------------------------------------------------------------------------------------------------------------ DIVERSIFIED TELECOMMUNICATION SERVICES--0.8% NeuStar, Inc., Cl.A 1 328,700 10,022,063 ------------------ Total Common Stocks (Cost $913,364,850) 1,264,850,676 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--0.0% ------------------------------------------------------------------------------------------------------------------------------------ Blaze Network Products, Inc., 8% Cv., Series D 1,2,3 (Cost $7,346,317) 1,147,862 $ 2,586 PRINCIPAL AMOUNT ------------------------------------------------------------------------------------------------------------------------------------ JOINT REPURCHASE AGREEMENTS--0.2% ------------------------------------------------------------------------------------------------------------------------------------ Undivided interest of 3.09% in joint repurchase agreement (Principal Amount/Value $59,548,000, with a maturity value of $59,570,297) with DB Alex Brown LLC, 3.37%, dated 12/30/05, to be repurchased at $1,842,690 on 1/3/06, collateralized by U.S. Treasury Bills, 6/1/06 with a value of $60,758,966 (Cost $1,842,000) $1,842,000 1,842,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS, AT VALUE (COST $922,553,167) 100.2% 1,266,695,262 ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES IN EXCESS OF OTHER ASSETS (0.2) (2,263,239) ------------------------------- NET ASSETS 100.0% $ 1,264,432,023 ===============================
8 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA FOOTNOTES TO STATEMENT OF INVESTMENTS 1. Non-income producing security. 2. Illiquid or restricted security. The aggregate value of illiquid or restricted securities as of December 31, 2005 was $2,586, which represents less than 0.005% of the Fund's net assets, all of which is considered restricted. See Note 5 of Notes to Financial Statements. 3. Affiliated company. Represents ownership of at least 5% of the voting securities of the issuer, and is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 31, 2005. The aggregate fair value of securities of affiliated companies held by the Fund as of December 31, 2005 amounts to $2,586. Transactions during the period in which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES DECEMBER 31, 2004 ADDITIONS REDUCTIONS DECEMBER 31, 2005 -------------------------------------------------------------------------------------------------------------------------- Blaze Network Products, Inc., 8% Cv., Series D 1,147,862 -- -- 1,147,862 BroadBand Office, Inc., Cv., Series C 211,641 -- 211,641 -- Centerpoint Broadband Technologies, Inc., Cv., Series D 1,298,701 -- 1,298,701 -- Centerpoint Broadband Technologies, Inc., Cv., Series Z 262,439 -- 262,439 -- MicroPhotonix Integration Corp., Cv., Series C 633,383 -- 633,383 -- Multiplex, Inc., Cv., Series C 2,330,253 -- 2,330,253 -- Questia Media, Inc., Cv., Series B 2,329,735 -- 2,329,735 --
VALUE DIVIDEND REALIZED SEE NOTE 1 INCOME LOSS -------------------------------------------------------------------------------------------------------------------------- Blaze Network Products, Inc., 8% Cv., Series D $ 2,586 $ -- $ -- BroadBand Office, Inc., Cv., Series C -- -- 4,000,015 Centerpoint Broadband Technologies, Inc., Cv., Series D -- -- 13,999,997 Centerpoint Broadband Technologies, Inc., Cv., Series Z -- -- 6,999,992 MicroPhotonix Integration Corp., Cv., Series C -- -- 4,000,004 Multiplex, Inc., Cv., Series C -- -- 17,061,344 Questia Media, Inc., Cv., Series B -- -- 8,999,990 ---------------------------------------------- $ 2,586 $ -- $ 55,061,342 ==============================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 9 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA STATEMENT OF ASSETS AND LIABILITIES December 31, 2005 -------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------------ ASSETS ------------------------------------------------------------------------------------------------------------------------------------ Investments, at value - see accompanying statement of investments: Unaffiliated companies (cost $915,206,850) $ 1,266,692,676 Affiliated companies (cost $7,346,317) 2,586 ------------------ 1,266,695,262 ------------------------------------------------------------------------------------------------------------------------------------ Cash 120,065 ------------------------------------------------------------------------------------------------------------------------------------ Receivables and other assets: Interest and dividends 263,837 Shares of beneficial interest sold 164,392 Other 19,522 ------------------ Total assets 1,267,263,078 ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES ------------------------------------------------------------------------------------------------------------------------------------ Payables and other liabilities: Investments purchased 1,867,743 Shares of beneficial interest redeemed 788,827 Shareholder communications 71,029 Trustees' compensation 25,182 Distribution and service plan fees 21,502 Transfer and shareholder servicing agent fees 1,785 Other 54,987 ------------------ Total liabilities 2,831,055 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS $ 1,264,432,023 ================== ------------------------------------------------------------------------------------------------------------------------------------ COMPOSITION OF NET ASSETS ------------------------------------------------------------------------------------------------------------------------------------ Par value of shares of beneficial interest $ 25,611 ------------------------------------------------------------------------------------------------------------------------------------ Additional paid-in capital 1,692,523,839 ------------------------------------------------------------------------------------------------------------------------------------ Accumulated net investment loss (19,505) ------------------------------------------------------------------------------------------------------------------------------------ Accumulated net realized loss on investments (772,240,017) ------------------------------------------------------------------------------------------------------------------------------------ Net unrealized appreciation on investments 344,142,095 ------------------ NET ASSETS $ 1,264,432,023 ================== ------------------------------------------------------------------------------------------------------------------------------------ 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 $1,227,881,350 and 24,863,416 shares of beneficial interest outstanding) $ 49.39 ------------------------------------------------------------------------------------------------------------------------------------ Service Shares: Net asset value, redemption price per share and offering price per share (based on net assets of $36,550,673 and 747,871 shares of beneficial interest outstanding) $ 48.87
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 10 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA STATEMENT OF OPERATIONS For the Year Ended December 31, 2005 -------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME ------------------------------------------------------------------------------------------------------------------------------------ Dividends $ 4,960,043 ------------------------------------------------------------------------------------------------------------------------------------ Interest 137,712 ------------------ Total investment income 5,097,755 ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES ------------------------------------------------------------------------------------------------------------------------------------ Management fees 8,080,149 ------------------------------------------------------------------------------------------------------------------------------------ Distribution and service plan fees - Service shares 71,776 ------------------------------------------------------------------------------------------------------------------------------------ Transfer and shareholder servicing agent fees: Non-Service shares 10,746 Service shares 10,045 ------------------------------------------------------------------------------------------------------------------------------------ Shareholder communications: Non-Service shares 49,947 Service shares 1,198 ------------------------------------------------------------------------------------------------------------------------------------ Custodian fees and expenses 39,594 ------------------------------------------------------------------------------------------------------------------------------------ Trustees' compensation 22,330 ------------------------------------------------------------------------------------------------------------------------------------ Administration service fees 1,500 ------------------------------------------------------------------------------------------------------------------------------------ Other 66,914 ------------------ Total expenses 8,354,199 Less reduction to custodian fees (47) ------------------ Net expenses 8,354,152 ------------------------------------------------------------------------------------------------------------------------------------ NET INVESTMENT LOSS (3,256,397) ------------------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on: Investments: Unaffiliated companies 71,149,451 Affiliated companies (55,061,342) ------------------ Net realized gain 16,088,109 ------------------------------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation on investments 126,872,800 ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 139,704,512 ==================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 11 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005 2004 ------------------------------------------------------------------------------------------------------------------------------------ OPERATIONS ------------------------------------------------------------------------------------------------------------------------------------ Net investment loss $ (3,256,397) $ (4,465,478) ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) 16,088,109 (417,401) ------------------------------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation 126,872,800 213,639,469 ----------------------------------- Net increase in net assets resulting from operations 139,704,512 208,756,590 ------------------------------------------------------------------------------------------------------------------------------------ BENEFICIAL INTEREST TRANSACTIONS ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from beneficial interest transactions: Non-Service shares (117,803,338) (109,692,557) Service shares 8,921,013 9,104,838 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS ------------------------------------------------------------------------------------------------------------------------------------ Total increase 30,822,187 108,168,871 ------------------------------------------------------------------------------------------------------------------------------------ Beginning of period 1,233,609,836 1,125,440,965 ----------------------------------- End of period (including accumulated net investment loss of $19,505 and $13,347, respectively) $ 1,264,432,023 $ 1,233,609,836 ===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 12 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 43.97 $ 36.71 $ 29.23 $ 40.72 $ 70.77 ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) (.12) 1 (.15) 1 (.15) (.10) .23 Net realized and unrealized gain (loss) 5.54 7.41 7.63 (11.16) (21.38) --------------------------------------------------------------------------------- Total from investment operations 5.42 7.26 7.48 (11.26) (21.15) ----------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- -- -- (.23) (.54) Distributions from net realized gain -- -- -- -- (8.36) --------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders -- -- -- (.23) (8.90) ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 49.39 $ 43.97 $ 36.71 $ 29.23 $ 40.72 ================================================================================== ----------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 2 12.33% 19.78% 25.59% (27.79)% (31.27)% ----------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 1,227,881 $ 1,209,459 $ 1,113,743 $ 979,919 $1,621,550 ----------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 1,177,979 $ 1,124,874 $ 1,041,584 $ 1,240,435 $1,898,088 ----------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income (loss) (0.26)% (0.39)% (0.43)% (0.29)% 0.47% Total expenses 0.69% 4 0.69% 4 0.70% 4 0.68% 4 0.68% 4 ----------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 32% 53% 154% 54% 134%
1. Per share amounts calculated based on the average shares outstanding during the period. 2. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 13 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA FINANCIAL HIGHLIGHTS Continued --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 ---------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA ---------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 43.64 $ 36.54 $ 29.13 $ 40.70 $ 70.77 ---------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) (.25) 1 (.27) 1 -- 2 .16 .19 Net realized and unrealized gain (loss) 5.48 7.37 7.41 (11.53) (21.36) -------------------------------------------------------------------------------- Total from investment operations 5.23 7.10 7.41 (11.37) (21.17) ---------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- -- -- (.20) (.54) Distributions from net realized gain -- -- -- -- (8.36) -------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders -- -- -- (.20) (8.90) ---------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 48.87 $ 43.64 $ 36.54 $ 29.13 $ 40.70 ================================================================================ ---------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 11.99% 19.43% 25.44% (28.05)% (31.31)% ---------------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 36,551 $ 24,151 $ 11,698 $ 144 $ 54 ---------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 28,798 $ 17,579 $ 3,858 $ 72 $ 31 ---------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income (loss) (0.54)% (0.68)% (0.72)% (0.56)% 0.09% Total expenses 0.97% 0.99% 0.95% 1.55% 0.83% Expenses after payments and waivers and reduction to custodian expenses 0.97% 0.99% 0.95% 0.98% 0.83% ---------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 32% 53% 154% 54% 134%
1. Per share amounts calculated based on the average shares outstanding during the period. 2. Less than $0.005 per share. 3. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 14 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Oppenheimer Aggressive Growth Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds, an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek capital appreciation by investing in "growth type" companies. The Fund'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. Both classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. The following is a summary of significant accounting policies consistently followed by the Fund. -------------------------------------------------------------------------------- SECURITIES VALUATION. The Fund calculates the net asset value of its shares as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Securities may be valued primarily using dealer-supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Securities listed or traded on National Stock Exchanges or other domestic 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. Securities traded on NASDAQ are valued based on the closing price provided by NASDAQ 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 traded on foreign exchanges are valued based on the last sale price on the principal exchange on which the security is traded, in the country that is identified by the portfolio pricing service, prior to the time when the Fund's assets are valued. In the absence of a sale, the security is valued at the official closing price on the principal exchange. Corporate, government and municipal debt instruments having a remaining maturity in excess of sixty days and all mortgage-backed securities will be valued at the mean between the "bid" and "asked" prices. Futures contracts traded on a commodities or futures exchange will be valued at the final settlement price or official closing price on the principal exchange as reported by such principal exchange at its trading session ending at, or most recently prior to, the time when the Fund's assets are valued. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value. Foreign and domestic securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund's assets are valued but after the close of their respective exchanges will be fair valued. Fair value is determined in good faith using 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). -------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. 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. 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 on a daily basis 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. 15 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued FEDERAL TAXES. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. The tax components of capital shown in the table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes. NET UNREALIZED APPRECIATION BASED ON COST OF UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED SECURITIES AND OTHER NET INVESTMENT LONG-TERM LOSS INVESTMENTS FOR FEDERAL INCOME GAIN CARRYFORWARD 1,2,3,4 INCOME TAX PURPOSES ------------------------------------------------------------------------------- $-- $-- $772,178,091 $344,080,160 1. As of December 31, 2005, the Fund had $753,038,745 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. As of December 31, 2005, details of the capital loss carryforwards were as follows: EXPIRING ----------------------------- 2009 $ 522,813,923 2010 230,224,822 ------------- Total $ 753,038,745 ============= 2. As of December 31, 2005, the Fund had $19,139,346 of post-October losses available to offset future realized capital gains, if any. Such losses, if unutilized, will expire in 2014. 3. During the fiscal year ended December 31, 2005, the Fund utilized $24,465,493 of capital loss carryforward to offset capital gains realized in that fiscal year. 4. During the fiscal year ended December 31, 2004, the Fund utilized $9,896,185 of capital loss carryforward to offset capital gains realized in that fiscal year. Net investment income (loss) and net realized gain (loss) may differ for financial statement and 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. Accordingly, the following amounts have been reclassified for December 31, 2005. Net assets of the Fund were unaffected by the reclassifications. REDUCTION TO REDUCTION TO ACCUMULATED NET PAID-IN CAPITAL INVESTMENT LOSS ------------------------------------------- $3,250,239 $3,250,239 No distributions were paid during the years ended December 31, 2005 and December 31, 2004. The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 31, 2005 are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss. Federal tax cost of securities $ 922,615,102 =============== Gross unrealized appreciation $ 356,795,108 Gross unrealized depreciation (12,714,948) --------------- Net unrealized appreciation $ 344,080,160 =============== 16 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA -------------------------------------------------------------------------------- TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of "Other" within the asset section of the Statement of Assets and Liabilities. Deferral of trustees' fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund's assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the Plan. -------------------------------------------------------------------------------- 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. Income and capital gain distributions, if any, are declared and paid annually. -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts to the extent they are not offset by positive cash balances maintained by the Fund. The Reduction to Custodian Expenses line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings. -------------------------------------------------------------------------------- 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 U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. -------------------------------------------------------------------------------- 2. SHARES OF BENEFICIAL INTEREST The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004 SHARES AMOUNT SHARES AMOUNT ----------------------------------------------------------------------------------------------- NON-SERVICE SHARES Sold 2,464,320 $ 113,044,647 2,254,599 $ 88,253,010 Redeemed (5,107,185) (230,847,985) (5,085,553) (197,945,567) -------------------------------------------------------------- Net decrease (2,642,865) $(117,803,338) (2,830,954) $(109,692,557) ============================================================== ----------------------------------------------------------------------------------------------- SERVICE SHARES Sold 298,427 $ 13,509,067 312,167 $ 12,156,781 Redeemed (103,986) (4,588,054) (78,906) (3,051,943) -------------------------------------------------------------- Net increase 194,441 $ 8,921,013 233,261 $ 9,104,838 ==============================================================
17 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 3. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the year ended December 31, 2005, were as follows: PURCHASES SALES ----------------------------------------------------------------- Investment securities $383,650,177 $490,898,987 -------------------------------------------------------------------------------- 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 Fund which provides for a fee at an annual rate of 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $700 million and 0.58% of average annual net assets over $1.5 billion. -------------------------------------------------------------------------------- ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund's tax returns. -------------------------------------------------------------------------------- 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 per account fee. For the year ended December 31, 2005, the Fund paid $20,730 to OFS for services to the Fund. Additionally, funds offered in variable annuity separate accounts are subject to minimum fees of $10,000 per class, for class level assets of $10 million or more. Each class is subject to the minimum fee in the event that the per account fee does not equal or exceed the applicable minimum fee. -------------------------------------------------------------------------------- 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, personal service and account maintenance for the Fund's Service shares. Under the plan, payments are made periodically at an annual rate of up to 0.25% of the average annual net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsor(s) of the insurance product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service shares. The impact of the service plan is to increase operating expenses of the Service shares, which results in lower performance compared to the Fund's shares that are not subject to a service fee. Fees incurred by the Fund under the plan are detailed in the Statement of Operations. -------------------------------------------------------------------------------- WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes to 0.35% of average annual net assets per class. This undertaking may be amended or withdrawn at any time. -------------------------------------------------------------------------------- 5. ILLIQUID OR RESTRICTED SECURITIES As of December 31, 2005, investments in securities included issues that are illiquid or restricted. Restricted securities are 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 will not invest 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. Securities that are illiquid or restricted are marked with the applicable footnote on the Statement of Investments. Information concerning restricted securities is as follows:
ACQUISITION VALUATION AS OF UNREALIZED SECURITY DATE COST DECEMBER 31, 2005 DEPRECIATION --------------------------------------------------------------------------------------------------------------------- Blaze Network Products, Inc., 8% Cv., Series D 10/17/00 $7,346,317 $2,586 $7,343,731
18 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA -------------------------------------------------------------------------------- 6. LITIGATION A consolidated amended complaint has been filed as putative derivative and class actions against the Manager, OFS and the Distributor, as well as 51 of the Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and former Directors or Trustees and 8 present and former officers of the funds. This complaint, initially filed in the U.S. District Court for the Southern District of New York on January 10, 2005 and amended on March 4, 2005, consolidates into a single action and amends six individual previously-filed putative derivative and class action complaints. Like those prior complaints, the complaint alleges that the Manager charged excessive fees for distribution and other costs, improperly used assets of the funds in the form of directed brokerage commissions and 12b-1 fees to pay brokers to promote sales of the funds, and failed to properly disclose the use of assets of the funds to make those payments in violation of the Investment Company Act of 1940 and the Investment Advisers Act of 1940. Also, like those prior complaints, the complaint further alleges that by permitting and/or participating in those actions, the Directors/Trustees and the Officers breached their fiduciary duties to shareholders of the funds under the Investment Company Act of 1940 and at common law. The complaint seeks unspecified compensatory and punitive damages, rescission of the funds' investment advisory agreements, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. The defendants believe that the allegations contained in the Complaints are without merit and that they have meritorious defenses against the claims asserted. The defendants intend to defend these lawsuits vigorously and to contest any claimed liability. The defendants believe that it is premature to render any opinion as to the likelihood of an outcome unfavorable to them and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. 19 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER AGGRESSIVE GROWTH FUND/VA: We have audited the accompanying statement of assets and liabilities of Oppenheimer Aggressive Growth Fund/VA, a series of Oppenheimer Variable Account Funds, including the statement of investments, as of December 31, 2005, 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 each of the five years in the periods then ended. 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 the standards of the Public Company Accounting Oversight Board (United States). 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. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. 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 Aggressive Growth Fund/VA as of December 31, 2005, 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 each of the five years in the periods then ended, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Denver, Colorado February 13, 2006 20 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA FEDERAL INCOME TAX INFORMATION Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- In early 2006, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2005. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. 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. 21 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities ("portfolio proxies") held by the Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund's voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at www.sec.gov. The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund's Form N-Q filings are available on the SEC's website at http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 22 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Each year, the Board of Trustees (the "Board"), including a majority of the independent Trustees, is required to determine whether to renew the Fund's investment advisory agreement (the "Agreement"). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information, that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance. The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager's services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. Outlined below is a summary of the principal information considered by the Board as well as the Board's conclusions. NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information on the nature and extent of the services provided to the Fund and information regarding the Manager's key personnel that provide such services. The Manager's duties include providing the Fund with the services of the portfolio manager and the Manager's investment team, who provide research, analysis and other advisory services in regard to the Fund's investments; securities trading services; oversight of third party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund's investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel that are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund's operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund's shares. The Manager also provides the Fund with office space, facilities and equipment. The Board also considered the quality of the services provided and the quality of the Manager's resources that are available to the Fund. The Board took account of the fact that the Manager has had over forty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager's administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager's key personnel and the size and functions of its staff providing investment management services to the Fund. The Board also considered compliance reports from the Fund's Chief Compliance Officer. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of John O'Hare and the Manager's Growth Equity investment team and analysts. Mr. O'Hare has had over 18 years of experience managing equity investments. The Board members also considered the totality of their experiences with the Manager, as directors or trustees of the Fund and other funds advised by the Manager. In light of the foregoing, the Board concluded that the Fund benefits from the services provided under the Agreement as a result of the Manager's experience, reputation, personnel, operations, and resources. INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the Manager provided information on the performance of the Fund and the Manager at each Board meeting, including comparative performance information. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund's historical performance to relevant market indices and to the performance of other mid-cap growth funds (including both funds advised by the Manager and funds advised by other investment advisers). The Board noted that the Fund's one-year performance was better than its peer group median. However its three-year, five-year and ten-year performance were below its peer group median. 23 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited/Continued -------------------------------------------------------------------------------- COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board considered information regarding the Manager's costs in serving as the Fund's investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager's profitability from its relationship with the Fund. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also evaluated the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund, other mid-cap growth funds and other funds with comparable asset levels and distribution features. The Board concluded that the Fund's contractual and actual management fees and total expenses, which are all lower than its peer group median and average, are reasonable in light of the Fund's recent performance. ECONOMIES OF SCALE. The Board reviewed the extent to which the Manager may realize economies of scale in managing and supporting the Fund, the extent to which those economies of scale benefit the Fund's shareholders and the current level of Fund assets in relation to the Fund's breakpoint schedule for its management fees. The Board considered that the Fund has experienced moderate asset growth and that, based on current asset levels, the Fund is nearing, but has not reached its last management fee breakpoint. OTHER BENEFITS TO THE MANAGER. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager's affiliates and research provided to the Manager in connection with permissible brokerage arrangements (soft dollar arrangements). The Board considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide services to the Fund and that maintaining the financial viability of the Manager is important in order for the Manager to continue to provide significant services to the Fund and its shareholders. CONCLUSIONS. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees' counsel are both independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules. Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, concluded that the nature, extent and quality of the services provided to the Fund by the Manager are a benefit to the Fund and in the best interest of the Fund's shareholders and that the amount and structure of the compensation received by the Manager and its affiliates are reasonable in relation to the services provided. Accordingly, the Board elected to continue the advisory agreement for another year. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the factors together. The Board judged the terms and conditions of the advisory agreement, including the management fee, in light of all of the surrounding circumstances. 24 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA TRUSTEES AND OFFICERS Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING THE PAST 5 THE FUNDS, LENGTH OF SERVICE, YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD; AGE NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW TRUSTEES IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL. WILLIAM L. ARMSTRONG, Chairman of the following private mortgage Chairman of the Board of banking companies: Cherry Creek Mortgage Trustees (since 2003), Company (since 1991), Centennial State Mortgage Trustee (since 1999) Company (since 1994), and The El Paso Mortgage Age: 68 Company (since 1993); Chairman of the following private companies: Ambassador Media Corporation (since 1984) and Broadway Ventures (since 1984); Director of the following: Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), Campus Crusade for Christ (since 1991) and The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (since 2002); former Chairman of the following: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (insurance agency) (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Trustee (since 1993) Inc. (General Partner of private equity funds) Age: 74 (until February 2001); Chairman, President and Chief Executive Officer of A.G. Edwards Capital, Inc. (until March 2000); Director of A.G. Edwards & Sons, Inc. (brokerage company) (until 2000) and A.G. Edwards Trust Company (investment adviser) (until 2000); Vice Chairman and Director of A.G. Edwards, Inc. (until March 1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March 1999); Chairman of A.G. Edwards Trust Company (until March 1999) and A.G.E. Asset Management (investment adviser) (until March 1999). Oversees 38 portfolios in the OppenheimerFunds complex. GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Trustee (since 1999) Asset Management Corporation (December Age: 69 1991-April 1999); President, Treasurer and Director of Centennial Capital Corporation (June 1989-April 1999); Chief Executive Officer and Director of MultiSource Services, Inc. (March 1996-April 1999); Mr. Bowen held several positions with the Manager and with subsidiary or affiliated companies of the Manager (September 1987-April 1999). Oversees 38 portfolios in the OppenheimerFunds complex. EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon Trustee (since 1999) (George Washington historical site) (since June Age: 67 2000); Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002); Partner at PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (July 1994-June 1998). Oversees 38 portfolios in the OppenheimerFunds complex. JON S. FOSSEL, Director of UNUMProvident (insurance company) Trustee (since 1990) (since June 2002); Director of Northwestern Age: 64 Energy Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. ("OAC") (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 38 portfolios in the OppenheimerFunds complex. SAM FREEDMAN, Director of Colorado Uplift (charitable Trustee (since 1996) organization) (since September 1984). Mr. Age: 65 Freedman held several positions with the Manager and with subsidiary or affiliated companies of the Manager (until October 1994). Oversees 38 portfolios in the OppenheimerFunds complex. BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Trustee (since 2002) Studies (educational organization) (since Age: 59 February 2000); Director of The California Endowment (philanthropic organization) (since April 2002); Director of Community Hospital of Monterey Peninsula (since February 2002); Vice Chair of American Funds' Emerging Markets Growth Fund, Inc. (mutual fund) (since October 1991); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation and The University of Michigan; Advisor at Credit Suisse First Boston's Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member of the investment committee of Hartford Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 38 portfolios in the OppenheimerFunds complex. 25 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA TRUSTEES AND OFFICERS Unaudited/Continued -------------------------------------------------------------------------------- ROBERT J. MALONE, Director of Jones International University Trustee (since 2002) (educational organization) (since August 2005); Age: 61 Chairman, Chief Executive Officer and Director of Steele Street State Bank (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 38 portfolios in the OppenheimerFunds complex. F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly Trustee (since 2000) MassMutual Institutional Funds) (investment Age: 63 company) (since 1996) and MML Series Investment Fund (investment company) (since 1996), Trustee and Chairman of the Investment Committee (since 1994) of the Worcester Polytech Institute (private university); President and Treasurer of the SIS Funds (private charitable fund) (since January 1999); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Member of the Investment Committee of the Community Foundation of Western Massachusetts (1998-2003); and Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999). Oversees 40 portfolios in the OppenheimerFunds complex. -------------------------------------------------------------------------------- INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD AND OFFICER FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES. JOHN V. MURPHY, Chairman, Chief Executive Officer and Director President and Trustee (since June 2001) and President (since (since 2001) September 2000) of the Manager; President and Age: 56 Director or Trustee of other Oppenheimer funds; President and Director of OAC and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since November 2001); Chairman and Director of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since July 2001); President and Director of OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since July 2001); Director of the following investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 2001) and Director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director of DLB Acquisition Corporation (holding company parent of Babson Capital Management LLC) (since June 1995); Member of the Investment Company Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of the Manager (September 2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual Select Funds (open-end investment companies) (November 1999-November 2001); Director of C.M. Life Insurance Company (September 1999-August 2000); President, Chief Executive Officer and Director of MML Bay State Life Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 87 portfolios in the OppenheimerFunds complex. -------------------------------------------------------------------------------- OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART THE FUND BELOW ARE AS FOLLOWS: FOR MESSRS. O'HARE AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT DEATH OR REMOVAL. JOHN O'HARE, Vice President of the Manager since September Vice President and Portfolio 2003; Executive Vice President and Portfolio Manager (since 2003) Manager (June 2000-August 2003) and Portfolio Age: 47 Manager and Senior Vice President (August 1997-June 2000) at Geneva Capital Management, Ltd. (an investment advisor). Mr. O'Hare holds a BBA in Finance and Economics from the University of Wisconsin and is a Chartered Financial Analyst. An officer of 2 portfolios in the OppenheimerFunds complex. 26 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA MARK S. VANDEHEY, Senior Vice President and Chief Compliance Vice President and Chief Officer of the Manager (since March 2004); Vice Compliance Officer President of OppenheimerFunds Distributor, (since 2004) Inc., Centennial Asset Management Corporation Age:55 and Shareholder Services, Inc. (since June 1983); Vice President and Director of Internal Audit of the Manager (1997-February 2004). An officer of 87 portfolios in the OppenheimerFunds complex. BRIAN W. WIXTED, Senior Vice President and Treasurer of the Treasurer and Principal Manager (since March 1999); Treasurer of the Financial and Accounting following: HarbourView Asset Management Officer (since 1999) Corporation, Shareholder Financial Services, Age: 46 Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex. ROBERT G. ZACK, Executive Vice President (since January 2004) Vice President and Secretary and General Counsel (since March 2002) of the (since 2001) Manager; General Counsel and Director of the Age: 57 Distributor (since December 2001); General Counsel of Centennial Asset Management Corporation (since December 2001); Senior Vice President and General Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General Counsel and Director of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87 portfolios in the OppenheimerFunds complex. THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON REQUEST, BY CALLING 1.800.981.2871. 27 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA OPPENHEIMER BALANCED FUND/VA FUND PERFORMANCE DISCUSSION -------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. During its fiscal year ended December 31, 2005, the Oppenheimer Balanced Fund/VA performed well, but slightly underperformed its primary benchmark, the S&P 500 Index, however, produced higher returns than the 60% S&P 500/40% Lehman Aggregate Bond blended benchmark. We attribute this modest underperformance to the Fund's conservative asset allocation, which resulted in the Fund being underweight equities versus its benchmark. In addition, multiple Fund holdings underperformed during the last few months of the period, and gave up the strong performance the Fund had experienced earlier in the year. The Fund's fixed-income portion, while significantly outperforming its benchmark, produced modest gains. The Fund's performance was strong on the equity side for much of the period with particularly competitive performances coming from the financials and energy sectors. In the financials sector, strong security selection benefited performance. Top contributors to performance included, investment firm, Lehman Brothers Holdings, Inc., and investment management firm, UBS AG. The energy sector proved to be the highest performing sector within the S&P 500 Index, producing returns of over 30% for the period. Although the Fund was slightly underweight in energy versus its benchmark, the Fund's security selection in that sector added value to the overall Fund. In the consumer staples area, tobacco giant, Altria Group, Inc., benefited from easing litigation concerns and a planned corporate restructuring designed to unlock shareholder value. On the negative side, most of the Fund's underperformance came from its conservative asset allocation. To a lesser extent, a few individual stocks underperformed including Take-Two Interactive Software, Inc., Cendant Corp. and IDT Corp. On the fixed-income side, the bulk of the Fund's positive performance came from active interest rate management as we took advantage of what we perceived to be market overreactions to events. By maintaining a shorter position versus our benchmark, we were able to successfully navigate through the volatility that dominated this area of the market. The Fund's emphasis on short-maturity corporate bonds helped performance, as did the overweight to financials at the expense of industrial sector issuers. Among mortgage-backed securities, the Fund's focus on seasoned, higher-coupon mortgages helped support performance. 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, 2005. In the case of non-service shares, performance is measured over a ten-year period. In the case of service shares, performance is measured from inception of the class on May 1, 2002. 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 both the S&P 500 Index, an unmanaged index of U.S. equity securities that is a measure of the general domestic stock market and the Lehman Brothers Aggregate Bond Index, an unmanaged index of U.S. corporate, government and mortgage-backed securities that is a measure of the domestic bond market. Index performance reflects the reinvestment of income but does not consider the effect of transaction costs, and none of the data in the graphs shows the effect of taxes. 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 BALANCED FUND/VA FUND PERFORMANCE DISCUSSION -------------------------------------------------------------------------------- NON-SERVICE SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Balanced Fund/VA (Non-Service) S&P 500 Index Lehman Brothers Aggregate Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Lehman Brothers Balanced Fund/VA S&P Aggregate (Non-Service) 500 Index Bond Index ---------------- --------- --------------- 12/31/1995 10,000 10,000 10,000 03/31/1996 10,339 10,537 9,823 06/30/1996 10,618 11,009 9,879 09/30/1996 11,031 11,349 10,061 12/31/1996 11,550 12,295 10,363 03/31/1997 11,553 12,625 10,305 06/30/1997 12,607 14,827 10,684 09/30/1997 13,584 15,937 11,039 12/31/1997 13,539 16,395 11,364 03/31/1998 14,473 18,680 11,540 06/30/1998 14,499 19,300 11,810 09/30/1998 12,983 17,385 12,309 12/31/1998 14,440 21,084 12,351 03/31/1999 14,673 22,134 12,289 06/30/1999 15,662 23,691 12,181 09/30/1999 15,145 22,215 12,264 12/31/1999 16,143 25,518 12,249 03/31/2000 17,130 26,103 12,519 06/30/2000 17,224 25,409 12,737 09/30/2000 17,276 25,163 13,121 12/31/2000 17,182 23,196 13,673 03/31/2001 17,039 20,447 14,088 06/30/2001 18,099 21,643 14,168 09/30/2001 16,115 18,468 14,821 12/31/2001 17,563 20,441 14,828 03/31/2002 17,626 20,497 14,842 06/30/2002 16,334 17,753 15,390 09/30/2002 14,744 14,687 16,095 12/31/2002 15,737 15,925 16,348 03/31/2003 15,576 15,423 16,576 06/30/2003 17,527 17,796 16,991 09/30/2003 18,145 18,267 16,966 12/31/2003 19,664 20,490 17,019 03/31/2004 20,115 20,837 17,472 06/30/2004 19,928 21,195 17,045 09/30/2004 20,078 20,799 17,590 12/31/2004 21,650 22,718 17,758 03/31/2005 21,412 22,230 17,673 06/30/2005 21,978 22,535 18,204 09/30/2005 22,637 23,347 18,082 12/31/2005 22,492 23,833 18,189 AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/05 1-Year 3.89% 5-Year 5.53% 10-Year 8.44% SERVICE SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Balanced Fund/VA (Service) S&P 500 Index Lehman Brothers Aggregate Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Lehman Brothers Balanced Fund/VA S&P Aggregate (Service) 500 Index Bond Index ---------------- --------- --------------- 05/01/2002 10,000 10,000 10,000 06/30/2002 9,407 9,220 10,172 09/30/2002 8,491 7,628 10,638 12/31/2002 9,056 8,271 10,806 03/31/2003 8,951 8,010 10,956 06/30/2003 10,075 9,242 11,230 09/30/2003 10,423 9,487 11,214 12/31/2003 11,291 10,641 11,249 03/31/2004 11,542 10,822 11,548 06/30/2004 11,427 11,008 11,266 09/30/2004 11,506 10,802 11,626 12/31/2004 12,397 11,799 11,737 03/31/2005 12,254 11,545 11,681 06/30/2005 12,565 11,703 12,032 09/30/2005 12,936 12,125 11,951 12/31/2005 12,852 12,378 12,022 AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/05 1-Year 3.67% 5-Year N/A Since Inception (5/1/02) 7.08% THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT. 5 | OPPENHEIMER BALANCED FUND/VA FUND EXPENSES -------------------------------------------------------------------------------- FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include redemption fees, if any; and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 31, 2005. ACTUAL EXPENSES. The "actual" lines of the table provide information about actual account values and actual expenses. You may use the information on this line for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the "actual" line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio, and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the "hypothetical" lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included, your costs would have been higher. ---------------------------------------------------------------------------- BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE 6 MONTHS ENDED (7/1/05) (12/31/05) DECEMBER 31, 2005 ---------------------------------------------------------------------------- Non-Service shares Actual $1,000.00 $ 1,023.40 $3.78 ---------------------------------------------------------------------------- Non-Service shares Hypothetical 1,000.00 1,021.48 3.78 ---------------------------------------------------------------------------- Service shares Actual 1,000.00 1,022.90 5.11 ---------------------------------------------------------------------------- Service shares Hypothetical 1,000.00 1,020.16 5.10 Hypothetical assumes 5% annual return before expenses. Expenses are equal to the Fund's annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Those annualized expense ratios based on the 6-month period ended December 31, 2005 are as follows: CLASS EXPENSE RATIOS ------------------------------------- Non-Service shares 0.74% ------------------------------------- Service shares 1.00 ---------------------------------------------------------------------------- 6 | OPPENHEIMER BALANCED FUND/VA STATEMENT OF INVESTMENTS December 31, 2005 --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS--51.6% ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER DISCRETIONARY--6.2% ------------------------------------------------------------------------------------------------------------------------------------ DIVERSIFIED CONSUMER SERVICES--0.2% Corinthian Colleges, Inc. 1 119,600 $ 1,408,888 ------------------------------------------------------------------------------------------------------------------------------------ HOUSEHOLD DURABLES--0.3% WCI Communities, Inc. 1 63,500 1,704,975 ------------------------------------------------------------------------------------------------------------------------------------ MEDIA--5.5% Liberty Global, Inc., Series A 391,021 8,797,973 ------------------------------------------------------------------------------------------------------------------------------------ Liberty Global, Inc., Series C 1 391,021 8,289,645 ------------------------------------------------------------------------------------------------------------------------------------ Liberty Media Corp., Cl. A 1 1,469,400 11,564,178 ------------------------------------------------------------------------------------------------------------------------------------ Viacom, Inc., Cl. B 120,200 3,918,520 ------------------ 32,570,316 ------------------------------------------------------------------------------------------------------------------------------------ SPECIALTY RETAIL--0.2% Gap, Inc. (The) 75,000 1,323,000 ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER STAPLES--4.0% ------------------------------------------------------------------------------------------------------------------------------------ BEVERAGES--0.9% Constellation Brands, Inc., Cl. A 213,800 5,607,974 ------------------------------------------------------------------------------------------------------------------------------------ FOOD PRODUCTS--0.6% Tyson Foods, Inc., Cl. A 213,200 3,645,720 ------------------------------------------------------------------------------------------------------------------------------------ TOBACCO--2.5% Altria Group, Inc. 194,700 14,547,984 ------------------------------------------------------------------------------------------------------------------------------------ ENERGY--4.8% ------------------------------------------------------------------------------------------------------------------------------------ ENERGY EQUIPMENT & SERVICES--0.7% Halliburton Co. 67,000 4,151,320 ------------------------------------------------------------------------------------------------------------------------------------ OIL & GAS--4.1% BP plc, ADR 47,400 3,044,028 ------------------------------------------------------------------------------------------------------------------------------------ Kinder Morgan, Inc. 15,800 1,452,810 ------------------------------------------------------------------------------------------------------------------------------------ LUKOIL, Sponsored ADR 84,900 5,009,100 ------------------------------------------------------------------------------------------------------------------------------------ Petroleo Brasileiro SA, Preference 304,000 4,837,634 ------------------------------------------------------------------------------------------------------------------------------------ Talisman Energy, Inc. 129,600 6,867,702 ------------------------------------------------------------------------------------------------------------------------------------ TotalFinaElf SA, Sponsored ADR 22,500 2,844,000 ------------------ 24,055,274 ------------------------------------------------------------------------------------------------------------------------------------ FINANCIALS--9.5% ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL MARKETS--1.5% UBS AG 92,467 8,803,030 ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL BANKS--1.8% Bank of America Corp. 64,468 2,975,198 ------------------------------------------------------------------------------------------------------------------------------------ Wachovia Corp. 55,715 2,945,095 ------------------------------------------------------------------------------------------------------------------------------------ Wells Fargo & Co. 79,800 5,013,834 ------------------ 10,934,127 ------------------------------------------------------------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES--2.7% Capital One Financial Corp. 61,800 5,339,520 ------------------------------------------------------------------------------------------------------------------------------------ Citigroup, Inc. 89,100 4,324,023 ------------------------------------------------------------------------------------------------------------------------------------ JPMorgan Chase & Co. 163,200 6,477,408 ------------------ 16,140,951 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE--2.3% American International Group, Inc. 29,300 $ 1,999,139 ------------------------------------------------------------------------------------------------------------------------------------ Everest Re Group Ltd. 32,200 3,231,270 ------------------------------------------------------------------------------------------------------------------------------------ Genworth Financial, Inc., Cl. A 176,000 6,086,080 ------------------------------------------------------------------------------------------------------------------------------------ Platinum Underwriters Holdings Ltd. 66,800 2,075,476 ------------------ 13,391,965 ------------------------------------------------------------------------------------------------------------------------------------ REAL ESTATE--0.4% Host Marriott Corp. 128,000 2,425,600 ------------------------------------------------------------------------------------------------------------------------------------ THRIFTS & MORTGAGE FINANCE--0.8% Countrywide Financial Corp. 66,300 2,266,797 ------------------------------------------------------------------------------------------------------------------------------------ Freddie Mac 34,000 2,221,900 ------------------ 4,488,697 ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE--6.4% ------------------------------------------------------------------------------------------------------------------------------------ BIOTECHNOLOGY--1.3% MedImmune, Inc. 1 81,900 2,868,138 ------------------------------------------------------------------------------------------------------------------------------------ Wyeth 99,100 4,565,537 ------------------ 7,433,675 ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE EQUIPMENT & SUPPLIES--0.7% Beckman Coulter, Inc. 55,500 3,157,950 ------------------------------------------------------------------------------------------------------------------------------------ Cooper Cos., Inc. (The) 24,700 1,267,110 ------------------ 4,425,060 ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE PROVIDERS & SERVICES--0.5% Manor Care, Inc. 43,400 1,726,018 ------------------------------------------------------------------------------------------------------------------------------------ Tenet Healthcare Corp. 1 188,300 1,442,378 ------------------ 3,168,396 ------------------------------------------------------------------------------------------------------------------------------------ PHARMACEUTICALS--3.9% GlaxoSmithKline plc, ADR 79,900 4,033,352 ------------------------------------------------------------------------------------------------------------------------------------ Pfizer, Inc. 258,200 6,021,224 ------------------------------------------------------------------------------------------------------------------------------------ Sanofi-Aventis SA, ADR 131,200 5,759,680 ------------------------------------------------------------------------------------------------------------------------------------ Schering-Plough Corp. 2 159,700 3,329,745 ------------------------------------------------------------------------------------------------------------------------------------ Watson Pharmaceuticals, Inc. 1 112,800 3,667,128 ------------------ 22,811,129 ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRIALS--5.7% ------------------------------------------------------------------------------------------------------------------------------------ AEROSPACE & DEFENSE--3.7% Empresa Brasileira de Aeronautica SA, ADR 101,400 3,964,740 ------------------------------------------------------------------------------------------------------------------------------------ Honeywell International, Inc. 162,600 6,056,850 ------------------------------------------------------------------------------------------------------------------------------------ Orbital Sciences Corp. 1 680,864 8,742,294 ------------------------------------------------------------------------------------------------------------------------------------ United Technologies Corp. 61,500 3,438,465 ------------------ 22,202,349 ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL SERVICES & SUPPLIES--1.8% Cendant Corp. 601,100 10,368,975
7 | OPPENHEIMER BALANCED FUND/VA STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ ELECTRICAL EQUIPMENT--0.2% GrafTech International Ltd. 1 159,100 $ 989,602 ------------------------------------------------------------------------------------------------------------------------------------ INFORMATION TECHNOLOGY--11.4% ------------------------------------------------------------------------------------------------------------------------------------ COMMUNICATIONS EQUIPMENT--1.0% Cisco Systems, Inc. 1 351,600 6,019,392 ------------------------------------------------------------------------------------------------------------------------------------ COMPUTERS & PERIPHERALS--1.9% Hutchinson Technology, Inc. 1 89,700 2,551,965 ------------------------------------------------------------------------------------------------------------------------------------ International Business Machines Corp. 103,500 8,507,700 ------------------ 11,059,665 ------------------------------------------------------------------------------------------------------------------------------------ ELECTRONIC EQUIPMENT & INSTRUMENTS--0.5% Flextronics International Ltd. 1 317,100 3,310,524 ------------------------------------------------------------------------------------------------------------------------------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--1.5% ATI Technologies, Inc. 1,3 215,300 3,657,947 ------------------------------------------------------------------------------------------------------------------------------------ Freescale Semiconductor, Inc., Cl. A 1 198,000 4,987,620 ------------------ 8,645,567 ------------------------------------------------------------------------------------------------------------------------------------ SOFTWARE--6.5% Compuware Corp. 1 184,400 1,654,068 ------------------------------------------------------------------------------------------------------------------------------------ Microsoft Corp. 482,300 12,612,145 ------------------------------------------------------------------------------------------------------------------------------------ Novell, Inc. 1 548,900 4,846,787 ------------------------------------------------------------------------------------------------------------------------------------ Synopsys, Inc. 1 184,500 3,701,070 ------------------------------------------------------------------------------------------------------------------------------------ Take-Two Interactive Software, Inc. 1 898,050 15,895,485 ------------------ 38,709,555 ------------------------------------------------------------------------------------------------------------------------------------ MATERIALS--1.2% ------------------------------------------------------------------------------------------------------------------------------------ CHEMICALS--0.5% Praxair, Inc. 55,400 2,933,984 ------------------------------------------------------------------------------------------------------------------------------------ Sterling Chemicals, Inc. 1,4 18 225 ------------------ 2,934,209 ------------------------------------------------------------------------------------------------------------------------------------ METALS & MINING--0.7% Companhia Vale do Rio Doce, Sponsored ADR 108,900 3,947,625 ------------------------------------------------------------------------------------------------------------------------------------ TELECOMMUNICATION SERVICES--0.9% ------------------------------------------------------------------------------------------------------------------------------------ DIVERSIFIED TELECOMMUNICATION SERVICES--0.9% IDT Corp., Cl. B 1 479,400 5,608,980 ------------------------------------------------------------------------------------------------------------------------------------ WorldCom, Inc./WorldCom Group 1,4 375,000 -- ------------------ 5,608,980 ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES--1.5% ------------------------------------------------------------------------------------------------------------------------------------ ELECTRIC UTILITIES--1.5% AES Corp. (The) 1 355,500 5,627,565 ------------------------------------------------------------------------------------------------------------------------------------ Reliant Energy, Inc. 1 297,500 3,070,200 ------------------ 8,697,765 ------------------ Total Common Stocks (Cost $225,768,505) 305,532,289 VALUE UNITS SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ RIGHTS, WARRANTS AND CERTIFICATES--0.0% ------------------------------------------------------------------------------------------------------------------------------------ HF Holdings, Inc. Wts., Exp. 9/27/09 1,4 2,593 $ -- ------------------------------------------------------------------------------------------------------------------------------------ Lucent Technologies, Inc. Wts., Exp. 12/10/07 1 8,881 5,018 ------------------------------------------------------------------------------------------------------------------------------------ Sterling Chemicals, Inc. Wts., Exp. 12/19/08 1 31 3 ------------------ Total Rights, Warrants and Certificates (Cost $38,932) 5,021 PRINCIPAL AMOUNT ------------------------------------------------------------------------------------------------------------------------------------ ASSET-BACKED SECURITIES--6.0% ------------------------------------------------------------------------------------------------------------------------------------ Ace Securities Corp., Home Equity Loan Pass-Through Certificates, Series 2002-HE7, Cl. A2B, 4.559%, 11/25/35 5 $ 510,000 510,315 ------------------------------------------------------------------------------------------------------------------------------------ Aesop Funding II LLC, Automobile Asset-Backed Certificates, Series 2005-1A, Cl. A2, 4.43%, 4/20/08 5 370,000 370,264 ------------------------------------------------------------------------------------------------------------------------------------ BMW Vehicle Owner Trust, Automobile Loan Certificates, Series 2005-A, Cl. A2, 3.66%, 12/26/07 2,324,419 2,317,286 ------------------------------------------------------------------------------------------------------------------------------------ Capital Auto Receivables Asset Trust, Automobile Mtg.-Backed Nts.: Series 2004-2, Cl. A3, 3.58%, 1/15/09 1,270,000 1,246,708 Series 2005-1, Cl. A2B, 3.73%, 7/16/07 456,421 455,832 ------------------------------------------------------------------------------------------------------------------------------------ Capital One Prime Auto Receivables Trust, Automobile Loan Asset-Backed Securities, Series 2005-1, Cl. A2, 4.24%, 11/15/07 1,380,000 1,376,910 ------------------------------------------------------------------------------------------------------------------------------------ Centex Home Equity Co. LLC, Home Equity Loan Asset-Backed Certificates: Series 2004-D, Cl. AF1, 2.98%, 4/25/20 92,334 92,074 Series 2005-B, Cl. AF1, 4.02%, 3/26/35 224,944 223,786 Series 2005-C, Cl. AF1, 4.196%, 6/25/35 585,382 582,295 Series 2005-D, Cl. AF1, 5.04%, 10/25/35 1,109,443 1,106,517 Series 2005-D, Cl. AV2, 4.649%, 10/25/35 5 1,000,000 1,000,618 ------------------------------------------------------------------------------------------------------------------------------------ Chase Manhattan Auto Owner Trust, Automobile Loan Pass-Through Certificates, Series 2005-A, Cl. A2, 3.72%, 12/15/07 1,020,000 1,015,622 ------------------------------------------------------------------------------------------------------------------------------------ CIT Equipment Collateral, Equipment Receivable-Backed Nts., Series 2004-DFS, Cl. A2, 2.66%, 11/20/06 442,674 441,410 ------------------------------------------------------------------------------------------------------------------------------------ Citibank Credit Card Issuance Trust, Credit Card Receivable Nts., Series 2003-C4, Cl. C4, 5%, 6/10/15 180,000 176,691 ------------------------------------------------------------------------------------------------------------------------------------ Citigroup Mortgage Loan Trust, Inc., CMO, Series 2005-WF2, Cl. AF2, 4.922%, 8/25/35 5 1,384,208 1,379,863
8 | OPPENHEIMER BALANCED FUND/ VA
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ ASSET-BACKED SECURITIES Continued ------------------------------------------------------------------------------------------------------------------------------------ Consumer Credit Reference Index Securities Program, Credit Card Asset-Backed Certificates, Series 2002-B, Cl. FX, 10.421%, 3/22/07 6 $ 1,130,000 $ 1,129,013 ------------------------------------------------------------------------------------------------------------------------------------ Countrywide Asset-Backed Certificates, Inc., Home Equity Asset-Backed Certificates: Series 2002-4, Cl. A1, 4.749%, 2/25/33 5 18,836 18,873 Series 2005-7, Cl. AF1B, 4.317%, 11/25/35 5 708,346 704,654 Series 2005-16, Cl. 2AF2, 5.382%, 5/25/36 5 360,000 360,000 Series 2005-17, Cl. 1AF1, 4.58%, 12/27/35 5 750,000 749,976 Series 2005-17, Cl. 1AF2, 5.363%, 12/27/35 5 240,000 240,059 ------------------------------------------------------------------------------------------------------------------------------------ DaimlerChrysler Auto Trust, Automobile Loan Pass-Through Certificates: Series 2004-B, Cl. A2, 2.48%, 2/8/07 24,443 24,446 Series 2004-C, Cl. A2, 2.62%, 6/8/07 577,855 576,429 Series 2005-A, Cl. A2, 3.17%, 9/8/07 870,451 867,889 ------------------------------------------------------------------------------------------------------------------------------------ Equity One ABS, Inc., Home Equity Asset-Backed Security, Series 2004-3, Cl. AF2, 3.80%, 7/25/34 5 1,060,000 1,055,795 ------------------------------------------------------------------------------------------------------------------------------------ First Franklin Mortgage Loan Asset-Backed Certificates, Home Equity Receivables, Series 2005-FF10, Cl. A3, 4.589%, 11/25/35 5 1,480,000 1,480,914 ------------------------------------------------------------------------------------------------------------------------------------ Ford Credit Auto Owner Trust, Automobile Loan Pass-Through Certificates: Series 2005-A, Cl. A3, 3.48%, 11/17/08 930,000 918,825 Series 2005-B, Cl. A2, 3.78%, 9/15/07 600,281 599,032 ------------------------------------------------------------------------------------------------------------------------------------ GS Auto Loan Trust, Automobile Loan Asset-Backed Securities, Series 2005-1, Cl. A2, 4.32%, 5/15/08 2,650,000 2,643,038 ------------------------------------------------------------------------------------------------------------------------------------ Honda Auto Receivables Owner Trust, Automobile Receivable Obligations: Series 2005-1, Cl. A2, 3.21%, 5/21/07 385,751 384,697 Series 2005-3, Cl. A2, 3.73%, 10/18/07 950,000 945,461 ------------------------------------------------------------------------------------------------------------------------------------ Household Home Equity Loan Trust, Home Equity Loan Pass-Through Certificates, Series 2005-3, Cl. A1, 4.63%, 1/20/35 5 735,824 736,349 ------------------------------------------------------------------------------------------------------------------------------------ Lehman XS Trust, Home Equity Mtg Pass-Through Certificates, Series 2005-2, Cl. 2A1B, 3.63%, 8/25/35 5 1,178,368 1,180,032 ------------------------------------------------------------------------------------------------------------------------------------ MBNA Credit Card Master Note Trust, Credit Card Receivables, Series 2003-C7, Cl. C7, 5.719%, 3/15/16 5 1,710,000 1,813,716 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ ASSET-BACKED SECURITIES Continued ------------------------------------------------------------------------------------------------------------------------------------ Nissan Auto Lease Trust, Automobile Lease Obligations, Series 2004-A, Cl. A2, 2.55%, 1/15/07 $ 78,631 $ 78,611 ------------------------------------------------------------------------------------------------------------------------------------ Onyx Acceptance Owner Trust, Automobile Receivable Obligations, Series 2005-B, Cl. A2, 4.03%, 4/15/08 780,000 777,603 ------------------------------------------------------------------------------------------------------------------------------------ Popular ABS Mortgage Pass-Through Trust, Home Equity Pass-Through Certificates: Series 2004-5, Cl. A F2, 3.735%, 11/10/34 5 340,000 335,931 Series 2005-1, Cl. A F2, 3.914%, 5/25/35 5 260,000 256,419 Series 2005-2, Cl. A F2, 4.415%, 4/25/35 5 420,000 415,885 ------------------------------------------------------------------------------------------------------------------------------------ Residential Asset Mortgage Products, Inc., Home Equity Asset-Backed Pass-Through Certificates, Series 2004-RS7, Cl. AI3, 4.45%, 7/25/28 750,000 746,232 ------------------------------------------------------------------------------------------------------------------------------------ Structured Asset Securities Corp., CMO Pass-Through Certificates, Series 2005-4XS, Cl. 3A1, 5.18%, 3/26/35 1,581,283 1,581,879 ------------------------------------------------------------------------------------------------------------------------------------ USAA Auto Owner Trust, Automobile Loan Asset-Backed Nts.: Series 2004-2, Cl. A2, 2.41%, 2/15/07 25,105 25,097 Series 2004-3, Cl. A2, 2.79%, 6/15/07 266,266 265,842 ------------------------------------------------------------------------------------------------------------------------------------ Volkswagen Auto Lease Trust, Automobile Lease Asset-Backed Securities: Series 2004-A, Cl. A2, 2.47%, 1/22/07 251,402 250,986 Series 2005-A, Cl. A2, 3.52%, 4/20/07 995,523 992,471 ------------------------------------------------------------------------------------------------------------------------------------ Wachovia Auto Owner Trust, Automobile Receivable Nts., Series 2004-B, Cl. A2, 2.40%, 5/21/07 118,641 118,476 ------------------------------------------------------------------------------------------------------------------------------------ Wells Fargo Home Equity Trust, Home Equity Asset-Backed Certificates, Series 2004-2, Cl. AI1B, 2.94%, 9/25/18 5 489,236 485,786 ------------------------------------------------------------------------------------------------------------------------------------ WFS Financial Owner Trust, Automobile Receivable Obligations, Series 2002-2, Cl. A4, 4.50%, 2/20/10 224,691 224,802 ------------------------------------------------------------------------------------------------------------------------------------ Whole Auto Loan Trust, Automobile Loan Receivable Certificates, Series 2004-1, Cl. A2A, 2.59%, 5/15/07 425,935 424,365 --------------- Total Asset-Backed Securities (Cost $35,856,799) 35,705,774 ------------------------------------------------------------------------------------------------------------------------------------ MORTGAGE-BACKED OBLIGATIONS--29.9% ------------------------------------------------------------------------------------------------------------------------------------ GOVERNMENT AGENCY--25.0% ------------------------------------------------------------------------------------------------------------------------------------ FHLMC/FNMA/SPONSORED--24.9% Federal Home Loan Mortgage Corp.: 5%, 1/1/36 7 3,264,000 3,159,960 6.50%, 4/1/18-4/1/34 1,435,518 1,476,652 7%, 5/1/29-11/1/32 2,015,419 2,100,336
9 | OPPENHEIMER BALANCED FUND/VA STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ FHLMC/FNMA/SPONSORED Continued Federal Home Loan Mortgage Corp., CMO Gtd. Real Estate Mtg Investment Conduit Multiclass Pass- Through Certificates: Series 1669, Cl. G, 6.50%, 2/15/23 $ 7,859 $ 7,850 Series 2055, Cl. ZM, 6.50%, 5/15/28 503,457 516,776 Series 2075, Cl. D, 6.50%, 8/15/28 1,143,077 1,177,639 Series 2080, Cl. Z, 6.50%, 8/15/28 318,062 326,017 Series 2387, Cl. PD, 6%, 4/15/30 371,201 374,730 Series 2456, Cl. BD, 6%, 3/15/30 122,606 122,858 Series 2500, Cl. FD, 4.869%, 3/15/32 5 169,224 171,087 Series 2526, Cl. FE, 4.769%, 6/15/29 5 224,826 226,446 Series 2551, Cl. FD, 4.769%, 1/15/33 5 174,126 175,751 Series 2583, Cl. KA, 5.50%, 3/15/22 845,180 846,793 ------------------------------------------------------------------------------------------------------------------------------------ Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security: Series 176, Cl. IO, 13.464%, 6/1/26 8 319,307 67,968 Series 183, Cl. IO, 11.095%, 4/1/27 8 501,263 104,278 Series 184, Cl. IO, 16.712%, 12/1/26 8 542,118 107,200 Series 192, Cl. IO, 15.433%, 2/1/28 8 145,898 29,823 Series 200, Cl. IO, 14.015%, 1/1/29 8 173,243 37,662 Series 2003-118, Cl. S, 20.029%, 12/25/33 8 2,304,512 251,747 Series 2130, Cl. SC, 7.80%, 3/15/29 8 400,836 29,890 Series 2796, Cl. SD, 12.349%, 7/15/26 8 568,484 44,119 Series 2920, Cl. S, 14.307%, 1/15/35 8 3,282,354 158,671 Series 3000, Cl. SE, 20.785%, 7/15/25 8 3,000,954 109,673 ------------------------------------------------------------------------------------------------------------------------------------ Federal Home Loan Mortgage Corp., Principal-Only Stripped Mtg.-Backed Security, Series 176, Cl. PO, 4.477%, 6/1/26 9 140,525 118,542 ------------------------------------------------------------------------------------------------------------------------------------ Federal National Mortgage Assn.: 5%, 6/1/18-7/1/18 3,054,916 3,027,578 5%, 1/1/36 7 16,111,000 15,612,558 5.50%, 3/1/33-11/1/34 22,355,816 22,193,656 5.50%, 1/1/21-1/1/36 7 45,501,000 45,242,596 6%, 5/1/16-11/1/32 17,354,560 17,662,733 6%, 4/1/16-2/1/36 7 3,530,000 3,580,464 6.50%, 11/1/27-10/1/30 893,520 920,764 6.50%, 1/1/36 7 11,314,000 11,607,463 7%, 11/1/17 1,044,823 1,086,363 7.50%, 7/1/30-9/1/30 653,978 685,583 8.50%, 7/1/32 33,369 36,133 ------------------------------------------------------------------------------------------------------------------------------------ Federal National Mortgage Assn. Grantor Trust, CMO, Trust 2002-T1, Cl. A2, 7%, 11/25/31 1,099,542 1,138,392 ------------------------------------------------------------------------------------------------------------------------------------ Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates: Trust 1993-87, Cl. Z, 6.50%, 6/25/23 905,468 934,511 Trust 1998-63, Cl. PG, 6%, 3/25/27 27,026 26,962 Trust 2001-50, Cl. NE, 6%, 8/25/30 201,342 202,523 Trust 2001-51, Cl. OD, 6.50%, 10/25/31 1,210,444 1,246,693 Trust 2001-70, Cl. LR, 6%, 9/25/30 237,660 239,939 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ FHLMC/FNMA/SPONSORED Continued Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates: Continued Trust 2001-72, Cl. NH, 6%, 4/25/30 $ 143,748 $ 144,863 Trust 2001-74, Cl. PD, 6%, 5/25/30 58,300 58,447 Trust 2002-77, Cl. WF, 4.77%, 12/18/32 5 270,586 272,654 Trust 2003-28, Cl. KG, 5.50%, 4/25/23 1,052,000 1,074,984 Trust 2004-101, Cl. BG, 5%, 1/25/20 1,110,000 1,095,452 ------------------------------------------------------------------------------------------------------------------------------------ Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Interest-Only Stripped Mtg.-Backed Security: Trust 2002-47, Cl. NS, 9.594%, 4/25/32 8 677,333 54,618 Trust 2002-51, Cl. S, 9.762%, 8/25/32 8 621,952 50,378 ------------------------------------------------------------------------------------------------------------------------------------ Federal National Mortgage Assn., Interest-Only Stripped Mtg.- Backed Security: Trust 222, Cl. 2, 13.259%, 6/1/23 8 1,094,893 259,744 Trust 233, Cl. 2, 15.317%, 8/1/23 8 1,013,690 213,200 Trust 240, Cl. 2, 16.943%, 9/1/23 8 1,709,984 356,094 Trust 252, Cl. 2, 7.415%, 11/1/23 8 827,071 182,636 Trust 273, Cl. 2, 14.617%, 8/1/26 8 239,064 49,343 Trust 319, Cl. 2, 13.424%, 2/1/32 8 305,558 69,279 Trust 321, Cl. 2, 8.583%, 3/1/32 8 3,183,222 718,432 Trust 329, Cl. 2, 11.440%, 1/1/33 8 788,623 174,777 Trust 331, Cl. 9, (13.274)%, 2/1/33 8 888,280 201,543 Trust 333, Cl. 2, 11.739%, 3/1/33 8 9,059,836 2,030,151 Trust 334, Cl. 17, 2.19%, 2/1/33 8 511,105 113,255 Trust 338, Cl. 2, 10.333%, 6/1/33 8 3,482,532 778,253 Trust 346, Cl. 2, 13.216%, 12/1/33 8 324,296 71,910 Trust 350, Cl. 2, 12.229%, 2/1/34 8 2,414,476 535,453 Trust 2001-65, Cl. S, 21.164%, 11/25/31 8 1,364,146 126,249 Trust 2001-81, Cl. S, 11.605%, 1/25/32 8 314,337 27,369 Trust 2002-9, Cl. MS, 10.350%, 3/25/32 8 457,432 39,989 Trust 2002-52, Cl. SD, 6.658%, 9/25/32 8 755,815 62,207 Trust 2002-77, Cl. SH, 12.545%, 12/18/32 8 414,224 39,017 Trust 2002-84, Cl. SA, 21.481%, 12/25/32 8 1,172,738 112,431 Trust 2003-4, Cl. S, 20.563%, 2/25/33 8 759,145 80,593 Trust 2004-54, Cl. DS, 6.243%, 11/25/30 8 627,185 36,108 Trust 2005-6, Cl. SE, 13.927%, 2/25/35 8 2,225,278 115,774 Trust 2005-19, Cl. SA, 12.727%, 3/25/35 8 8,724,656 485,728 Trust 2005-40, Cl. SA, 13.682%, 5/25/35 8 1,901,755 101,330 Trust 2005-71, Cl. SA, 19.968%, 8/25/25 8 1,925,193 115,046
10 | OPPENHEIMER BALANCED FUND/VA
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ FHLMC/FNMA/SPONSORED Continued Federal National Mortgage Assn., Principal-Only Stripped Mtg.-Backed Security, Trust 1993-184, Cl. M, 5.779%, 9/25/23 9 $ 355,448 $ 298,366 --------------- 147,333,052 ------------------------------------------------------------------------------------------------------------------------------------ GNMA/GUARANTEED--0.1% Government National Mortgage Assn., 8%, 4/15/23 226,606 242,655 ------------------------------------------------------------------------------------------------------------------------------------ Government National Mortgage Assn., Interest-Only Stripped Mtg.- Backed Security: Series 2001-21, Cl. SB, 3.873%, 1/16/27 8 659,075 45,383 Series 2002-15, Cl. SM, 0.947%, 2/16/32 8 766,022 53,266 Series 2002-76, Cl. SY, 5.13%, 12/16/26 8 1,519,058 66,609 Series 2004-11, Cl. SM, (0.493)%, 1/17/30 8 548,353 23,126 --------------- 431,039 ------------------------------------------------------------------------------------------------------------------------------------ NON-AGENCY--4.9% ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL--4.5% Banc of America Commercial Mortgage, Inc., Commercial Mtg. Pass- Through Certificates: Series 2004-6, Cl. A3, 4.512%, 12/10/42 1,000,000 968,877 Series 2005-2, Cl. A4, 4.783%, 7/10/43 5 1,280,000 1,256,724 Series 2005-3, Cl. A2, 4.501%, 7/10/43 1,050,000 1,025,198 ------------------------------------------------------------------------------------------------------------------------------------ Banc of America Funding Corp., CMO Pass-Through Certificates, Series 2004-2, Cl. 2A1, 6.50%, 7/20/32 992,031 993,108 ------------------------------------------------------------------------------------------------------------------------------------ Banc of America Mortgage Securities, Inc., CMO Pass-Through Certificates: Series 2004-8, Cl. 5A1, 6.50%, 5/25/32 775,609 787,728 Series 2004-E, Cl. 2A9, 3.712%, 6/25/34 5 21,222 21,216 Series 2005-E, Cl. 2A2, 4.983%, 6/25/35 5 223,020 222,008 ------------------------------------------------------------------------------------------------------------------------------------ Bear Stearns Commercial Mortgage Securities, Inc., Commercial Mtg Obligations, Series 2005-PWR7, Cl. A2, 4.945%, 2/11/41 490,000 484,612 ------------------------------------------------------------------------------------------------------------------------------------ Citigroup/Deutsche Bank Commercial Mortgage Trust, Commercial Mtg Obligations, Series 2005-CD1, Cl. A4, 5.225%, 7/15/44 3 1,180,000 1,193,036 ------------------------------------------------------------------------------------------------------------------------------------ Countrywide Alternative Loan Trust, CMO, Series 2004-J9, Cl. 1A1, 4.559%, 10/25/34 5 287,805 288,027 ------------------------------------------------------------------------------------------------------------------------------------ First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates, Series 1997-CHL1, Cl. D, 7.674%, 4/29/39 5,6 770,000 773,850 ------------------------------------------------------------------------------------------------------------------------------------ First Union National Bank/Lehman Brothers/Bank of America Commercial Mtg. Trust, Pass-Through Certificates, Series 1998-C2, Cl. A2, 6.56%, 11/18/35 615,853 633,344 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL Continued GE Capital Commercial Mortgage Corp., Commercial Mtg. Obligations: Series 2005-CA, Cl. A3, 4.578%, 6/10/48 $ 440,000 $ 428,277 Series 2005-C3, Cl. A2, 4.853%, 7/10/45 620,000 615,889 ------------------------------------------------------------------------------------------------------------------------------------ GMAC Commercial Mortgage Securities, Inc., Commercial Mtg Pass-Through Certificates: Series 1997-C1, Cl. A3, 6.869%, 7/15/29 370,886 379,333 Series 2004-C3, Cl. A4, 4.547%, 12/10/41 640,000 619,902 ------------------------------------------------------------------------------------------------------------------------------------ Greenwich Capital Commercial Funding Corp., Commercial Mtg. Pass- Through Certificates: Series 2005-G G3, Cl. A2, 4.305%, 8/10/42 890,000 867,199 Series 2005-G G5, Cl. A2, 5.117%, 4/10/37 680,000 682,076 ------------------------------------------------------------------------------------------------------------------------------------ GS Mortgage Securities Corp. II, Commercial Mtg. Pass-Through Certificates: Series 2004-C1, Cl. A1, 3.659%, 10/10/28 677,741 656,816 Series 2004-GG2, Cl. A3, 4.602%, 8/10/38 410,000 404,980 ------------------------------------------------------------------------------------------------------------------------------------ JPMorgan Chase Commercial Mortgage Securities Corp., Commercial Mtg. Pass-Through Certificates, Series 2005-LDP2, Cl. A2, 4.575%, 7/15/42 260,000 254,856 ------------------------------------------------------------------------------------------------------------------------------------ LB-UBS Commercial Mortgage Trust, Commercial Mtg. Pass-Through Certificates, Series 2005-C5, Cl. A2, 4.885%, 9/15/30 740,000 735,154 ------------------------------------------------------------------------------------------------------------------------------------ Mastr Alternative Loan Trust, CMO Pass-Through Certificates: Series 2004-6, Cl. 10A1, 6%, 7/25/34 1,314,232 1,321,442 Series 2004-9, Cl. A3, 4.70%, 8/25/34 5 2,476,850 2,465,554 ------------------------------------------------------------------------------------------------------------------------------------ Mastr Seasoned Securities Trust, Mtg. Pass-Through Certificates, Series 2004-2, Cl. A1, 6.50%, 8/25/32 1,845,692 1,863,572 ------------------------------------------------------------------------------------------------------------------------------------ Nomura Asset Securities Corp., Commercial Mtg. Pass-Through Certificates, Series 1998-D6, Cl. A1B, 6.59%, 3/15/30 3 780,000 806,637 ------------------------------------------------------------------------------------------------------------------------------------ Prudential Mortgage Capital Co. II LLC, Commercial Mtg. Pass-Through Certificates, Series PRU-HTG 2000-C1, Cl. A2, 7.306%, 10/6/15 983,000 1,075,406 ------------------------------------------------------------------------------------------------------------------------------------ Residential Accredit Loans, Inc., Mtg. Asset-Backed Pass-Through Certificates, Series 2003-QS1, Cl. A2, 5.75%, 1/25/33 656,798 658,065
11 | OPPENHEIMER BALANCED FUND/VA STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL Continued Wachovia Bank Commercial Mortgage Trust, Commercial Mtg. Obligations: Series 2005-C17, Cl. A2, 4.782%, 3/15/42 $ 1,450,000 $ 1,434,005 Series 2005-C20, Cl. A5, 5.087%, 7/15/42 5 740,000 735,147 ------------------------------------------------------------------------------------------------------------------------------------ Washington Mutual Mortgage Securities Corp., CMO Pass-Through Certificates, Series 2005-AR5, Cl. A1, 4.681%, 5/25/35 5 862,701 862,081 ------------------------------------------------------------------------------------------------------------------------------------ Wells Fargo Mortgage-Backed Securities Trust, CMO, Series 2004-DD, Cl. 2A1, 4.522%, 1/25/35 5 856,248 853,630 --------------- 26,367,749 ------------------------------------------------------------------------------------------------------------------------------------ OTHER--0.1% JPMorgan Chase Commercial Mortgage Securities Corp., Commercial Mtg. Pass-Through Certificates, Series 2005-LDP4, Cl. A2, 4.79%, 10/15/42 890,000 878,671 ------------------------------------------------------------------------------------------------------------------------------------ RESIDENTIAL--0.3% Countrywide Alternative Loan Trust, CMO, Series 2005-J1, Cl. 3A1, 6.50%, 8/25/32 3 1,910,817 1,944,854 --------------- Total Mortgage-Backed Obligations (Cost $177,844,257) 176,955,365 ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOVERNMENT OBLIGATIONS--5.4% ------------------------------------------------------------------------------------------------------------------------------------ Federal Home Loan Bank Unsec. Bonds: 3.125%, 11/15/06 2,150,000 2,120,592 3.50%, 11/15/07 650,000 635,595 ------------------------------------------------------------------------------------------------------------------------------------ Federal Home Loan Mortgage Corp. Unsec. Nts.: 3.625%, 9/15/06 10 2,535,000 2,517,174 4.125%, 7/12/10 3 1,707,000 1,666,280 4.375%, 11/16/07 970,000 963,983 ------------------------------------------------------------------------------------------------------------------------------------ Federal National Mortgage Assn Unsec. Nts.: 4%, 2/28/07 1,470,000 1,457,668 4.25%, 7/15/07 3 2,215,000 2,199,307 6%, 5/15/11 2,500,000 2,647,123 7.25%, 1/15/10-5/15/30 1,575,000 1,901,423 ------------------------------------------------------------------------------------------------------------------------------------ Tennessee Valley Authority Bonds: 4.65%, 6/15/35 3 1,100,000 1,044,041 Series A, 6.79%, 5/23/12 7,916,000 8,771,862 ------------------------------------------------------------------------------------------------------------------------------------ U.S. Treasury Bonds: 5.375%, 2/15/31 3 1,025,000 1,151,684 8.875%, 8/15/17 3 440,000 611,566 ------------------------------------------------------------------------------------------------------------------------------------ U.S. Treasury Nts.: 3.875%, 7/15/10-9/15/10 3 1,939,000 1,899,645 4.25%, 11/30/07 138,000 137,639 4.25%, 10/15/10-8/15/15 3 263,000 260,036 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOVERNMENT OBLIGATIONS Continued ------------------------------------------------------------------------------------------------------------------------------------ 4.375%, 12/15/10 $ 171,000 $ 171,187 4.375%, 11/15/08 3 455,000 455,213 5%, 2/15/11-8/15/11 3 933,000 962,602 --------------- Total U.S. Government Obligations (Cost $32,028,590) 31,574,620 ------------------------------------------------------------------------------------------------------------------------------------ FOREIGN GOVERNMENT OBLIGATIONS--0.2% ------------------------------------------------------------------------------------------------------------------------------------ United Mexican States Nts., 7.50%, 1/14/12 (Cost $1,169,010) 1,065,000 1,190,138 ------------------------------------------------------------------------------------------------------------------------------------ NON-CONVERTIBLE CORPORATE BONDS AND NOTES--13.5% ------------------------------------------------------------------------------------------------------------------------------------ ABN Amro Bank NV (NY Branch), 7.125% Sub. Nts., Series B, 10/15/93 400,000 480,480 ------------------------------------------------------------------------------------------------------------------------------------ Aetna, Inc., 7.375% Sr. Unsec. Nts., 3/1/06 1,185,000 1,189,742 ------------------------------------------------------------------------------------------------------------------------------------ Albertson's, Inc., 8% Sr. Unsec. Debs., 5/1/31 3 710,000 700,402 ------------------------------------------------------------------------------------------------------------------------------------ Allied Waste North America, Inc., 8.875% Sr. Nts., Series B, 4/1/08 555,000 588,300 ------------------------------------------------------------------------------------------------------------------------------------ Allstate Financial Global Funding II, 4.25% Nts., 9/10/08 6 245,000 240,962 ------------------------------------------------------------------------------------------------------------------------------------ Archer Daniels Midland Co., 5.375% Nts., 9/15/35 615,000 592,025 ------------------------------------------------------------------------------------------------------------------------------------ AT&T Wireless Services, Inc., 8.125% Sr. Unsec. Nts., 5/1/12 815,000 942,861 ------------------------------------------------------------------------------------------------------------------------------------ Bankers Trust Corp., 7.375% Unsec. Sub. Nts., 5/1/08 100,000 105,356 ------------------------------------------------------------------------------------------------------------------------------------ Barclays Bank plc, 6.278% Perpetual Bonds 11 960,000 966,614 ------------------------------------------------------------------------------------------------------------------------------------ Beazer Homes USA, Inc., 6.875% Sr. Unsec. Nts., 7/15/15 3 595,000 573,431 ------------------------------------------------------------------------------------------------------------------------------------ British Sky Broadcasting Group plc, 7.30% Unsec. Nts., 10/15/06 216,000 219,536 ------------------------------------------------------------------------------------------------------------------------------------ British Telecommunications plc, 8.875% Bonds, 12/15/30 520,000 697,787 ------------------------------------------------------------------------------------------------------------------------------------ CenterPoint Energy, Inc., 7.25% Sr. Nts., Series B, 9/1/10 3 650,000 697,971 ------------------------------------------------------------------------------------------------------------------------------------ Chancellor Media CCU, 8% Sr. Unsec. Nts., 11/1/08 1,100,000 1,170,203 ------------------------------------------------------------------------------------------------------------------------------------ CIT Group, Inc.: 4.75% Sr. Nts., 8/15/08 170,000 169,455 7.75% Sr. Unsec. Unsub. Nts., 4/2/12 460,000 522,355 ------------------------------------------------------------------------------------------------------------------------------------ Citigroup, Inc., 6.625% Unsec. Sub. Nts., 6/15/32 465,000 527,184 ------------------------------------------------------------------------------------------------------------------------------------ Coca-Cola Co. (The), 7.375% Unsec. Debs., 7/29/93 360,000 467,017 ------------------------------------------------------------------------------------------------------------------------------------ ConAgra Foods, Inc., 6% Nts., 9/15/06 610,000 614,329 ------------------------------------------------------------------------------------------------------------------------------------ Constellation Energy Group, Inc., 7.60% Unsec. Nts., 4/1/32 795,000 959,413
12 | OPPENHEIMER BALANCED FUND/VA
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued ------------------------------------------------------------------------------------------------------------------------------------ Countrywide Financial Corp., 4.50% Nts., Series A, 6/15/10 $ 620,000 $ 602,419 ------------------------------------------------------------------------------------------------------------------------------------ Cox Communications, Inc., 4.625% Unsec. Nts., 1/15/10 1,230,000 1,191,781 ------------------------------------------------------------------------------------------------------------------------------------ Credit Suisse First Boston, Inc. (USA), 5.50% Nts., 8/15/13 1,130,000 1,154,487 ------------------------------------------------------------------------------------------------------------------------------------ D.R. Horton, Inc., 6.125% Nts., 1/15/14 525,000 525,937 ------------------------------------------------------------------------------------------------------------------------------------ DaimlerChrysler NA Holdings Corp., 8% Nts., 6/15/10 1,040,000 1,138,454 ------------------------------------------------------------------------------------------------------------------------------------ Dana Corp., 6.50% Unsec. Nts., 3/1/09 3 785,000 631,925 ------------------------------------------------------------------------------------------------------------------------------------ Delhaize America, Inc., 9% Unsub. Debs., 4/15/31 775,000 914,979 ------------------------------------------------------------------------------------------------------------------------------------ Deutsche Telekom International Finance BV, 8.50% Unsub. Nts., 6/15/10 5 725,000 822,754 ------------------------------------------------------------------------------------------------------------------------------------ Dominion Resources, Inc., 8.125% Sr Unsub. Nts., 6/15/10 845,000 940,082 ------------------------------------------------------------------------------------------------------------------------------------ DTE Energy Co., 6.45% Sr. Unsub. Nts., 6/1/06 580,000 583,775 ------------------------------------------------------------------------------------------------------------------------------------ EOP Operating LP: 6.763% Sr. Unsec. Nts., 6/15/07 180,000 183,804 8.10% Unsec. Nts., 8/1/10 700,000 773,879 8.375% Nts., 3/15/06 425,000 427,931 ------------------------------------------------------------------------------------------------------------------------------------ Federated Department Stores, Inc., 6.625% Sr. Unsec. Nts., 9/1/08 760,000 788,112 ------------------------------------------------------------------------------------------------------------------------------------ FedEx Corp., 2.65% Unsec. Nts., 4/1/07 1,230,000 1,196,800 ------------------------------------------------------------------------------------------------------------------------------------ FirstEnergy Corp.: 5.50% Sr. Unsub. Nts., Series A, 11/15/06 495,000 496,882 7.375% Sr. Unsub. Nts., Series C, 11/15/31 600,000 710,209 ------------------------------------------------------------------------------------------------------------------------------------ Ford Motor Credit Co.: 5.80% Sr. Unsec. Nts., 1/12/09 1,440,000 1,257,002 7.375% Nts., 10/28/09 255,000 226,336 ------------------------------------------------------------------------------------------------------------------------------------ France Telecom SA, 8.50% Sr. Unsec. Nts., 3/1/31 5 180,000 240,897 ------------------------------------------------------------------------------------------------------------------------------------ Gap, Inc. (The): 6.90% Nts., 9/15/07 685,000 700,212 9.55% Unsub. Nts., 12/15/08 5 141,000 156,794 ------------------------------------------------------------------------------------------------------------------------------------ General Mills, Inc., 3.875% Nts., 11/30/07 890,000 872,953 ------------------------------------------------------------------------------------------------------------------------------------ General Motors Acceptance Corp.: 6.15% Nts., 4/5/07 1,855,000 1,752,649 8% Bonds, 11/1/31 3 855,000 821,158 ------------------------------------------------------------------------------------------------------------------------------------ Goldman Sachs Group, Inc. (The), 5.70% Sr. Unsec. Nts., 9/1/12 1,710,000 1,761,462 ------------------------------------------------------------------------------------------------------------------------------------ Harrah's Operating Co., Inc., 5.625% Sr. Unsec. Bonds, 6/1/15 615,000 605,278 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued ------------------------------------------------------------------------------------------------------------------------------------ HCA, Inc., 7.125% Sr. Unsec. Nts., 6/1/06 $ 565,000 $ 572,458 ------------------------------------------------------------------------------------------------------------------------------------ Hilton Hotels Corp., 8.25% Sr. Unsec. Nts., 2/15/11 525,000 575,954 ------------------------------------------------------------------------------------------------------------------------------------ HSBC Finance Corp., 4.75% Sr. Unsec. Nts., 7/15/13 1,210,000 1,170,902 ------------------------------------------------------------------------------------------------------------------------------------ IPALCO Enterprises, Inc., 8.375% Sr. Sec. Nts., 11/14/08 5 540,000 568,350 ------------------------------------------------------------------------------------------------------------------------------------ iStar Financial, Inc.: 5.125% Sr. Unsec. Nts., Series B, 4/1/11 3 375,000 365,810 5.15% Sr. Unsec. Nts., 3/1/12 450,000 436,370 ------------------------------------------------------------------------------------------------------------------------------------ J.C. Penney Co., Inc. (Holding Co.), 7.40% Nts., 4/1/37 1,060,000 1,189,547 ------------------------------------------------------------------------------------------------------------------------------------ JPMorgan Chase Capital XV, 5.875% Sub. Nts. Series O, 3/15/35 820,000 818,098 ------------------------------------------------------------------------------------------------------------------------------------ K. Hovnanian Enterprises, Inc., 6.50% Sr. Nts., 1/15/14 595,000 571,989 ------------------------------------------------------------------------------------------------------------------------------------ Kaiser Aluminum & Chemical Corp., 10.875% Sr. Nts., Series B, 10/15/06 12 250,000 253,750 ------------------------------------------------------------------------------------------------------------------------------------ KB Home, 5.75% Sr. Unsec. Unsub. Nts., 2/1/14 750,000 710,903 ------------------------------------------------------------------------------------------------------------------------------------ Kinder Morgan, Inc., 6.50% Sr. Unsec. Nts., 9/1/12 655,000 694,834 ------------------------------------------------------------------------------------------------------------------------------------ Kraft Foods, Inc., 5.25% Nts., 6/1/07 795,000 798,496 ------------------------------------------------------------------------------------------------------------------------------------ Kroger Co. (The), 6.80% Sr. Unsec. Nts., 4/1/11 1,350,000 1,417,377 ------------------------------------------------------------------------------------------------------------------------------------ Lear Corp., 8.11% Sr. Unsec. Nts., Series B, 5/15/09 1,000,000 931,368 ------------------------------------------------------------------------------------------------------------------------------------ Lennar Corp., 5.95% Sr. Unsec. Nts., 3/1/13 3 585,000 589,652 ------------------------------------------------------------------------------------------------------------------------------------ Liberty Media Corp., 5.70% Sr. Unsec. Nts., 5/15/13 3 615,000 576,108 ------------------------------------------------------------------------------------------------------------------------------------ Liberty Property Trust, 5.65% Sr. Nts., 8/15/14 595,000 603,616 ------------------------------------------------------------------------------------------------------------------------------------ Marsh & McLennan Cos., Inc., 5.875% Sr. Unsec. Bonds, 8/1/33 735,000 705,927 ------------------------------------------------------------------------------------------------------------------------------------ May Department Stores Co., 7.90% Unsec. Debs., 10/15/07 410,000 427,049 ------------------------------------------------------------------------------------------------------------------------------------ MBNA Corp., 7.50% Sr. Nts., Series F, 3/15/12 905,000 1,020,609 ------------------------------------------------------------------------------------------------------------------------------------ Merrill Lynch & Co., Inc., 5% Sr. Unsub. Nts., Series C, 2/3/14 1,205,000 1,191,952 ------------------------------------------------------------------------------------------------------------------------------------ MetLife, Inc., 5.70% Sr. Unsec. Nts., 6/15/35 3 605,000 609,406 ------------------------------------------------------------------------------------------------------------------------------------ MidAmerican Energy Holdings Co., 5.875% Sr. Unsec. Nts., 10/1/12 1,005,000 1,038,962 ------------------------------------------------------------------------------------------------------------------------------------ Morgan Stanley, 6.60% Nts., 4/1/12 570,000 613,461 ------------------------------------------------------------------------------------------------------------------------------------ National City Bank, 6.20% Sub. Nts., 12/15/11 83,000 87,932
13 | OPPENHEIMER BALANCED FUND/VA STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Financial Services, Inc.: 5.90% Nts., 7/1/12 $ 440,000 $ 459,345 6.25% Sr. Unsec. Nts., 11/15/11 130,000 136,994 ------------------------------------------------------------------------------------------------------------------------------------ NiSource Finance Corp.: 3.20% Nts., 11/1/06 180,000 177,432 7.875% Sr. Unsec. Nts., 11/15/10 790,000 876,187 ------------------------------------------------------------------------------------------------------------------------------------ Pemex Project Funding Master Trust, 5.75% Unsec. Unsub. Nts., Series 12, 12/15/15 3,6 965,000 961,381 ------------------------------------------------------------------------------------------------------------------------------------ Petroleum Export Ltd. Cayman SPV, 4.623% Sr. Nts., Cl. A1, 6/15/10 6 1,798,000 1,782,057 ------------------------------------------------------------------------------------------------------------------------------------ PF Export Receivables Master Trust, 3.748% Sr. Nts., Series B, 6/1/13 6 382,567 363,513 ------------------------------------------------------------------------------------------------------------------------------------ Popular North America, Inc., 5.20% Nts., 12/12/07 1,195,000 1,194,387 ------------------------------------------------------------------------------------------------------------------------------------ Portland General Electric Co., 8.125% First Mortgage Nts., 2/1/10 6 470,000 519,209 ------------------------------------------------------------------------------------------------------------------------------------ Prudential Holdings LLC, 8.695% Bonds, Series C, 12/18/23 6 1,095,000 1,391,300 ------------------------------------------------------------------------------------------------------------------------------------ Prudential Insurance Co. of America, 8.30% Nts., 7/1/25 920,000 1,193,988 ------------------------------------------------------------------------------------------------------------------------------------ PSE&G Energy Holdings LLC, 7.75% Unsec. Nts., 4/16/07 595,000 618,800 ------------------------------------------------------------------------------------------------------------------------------------ PSE&G Power LLC, 6.875% Sr. Unsec. Nts., 4/15/06 560,000 562,939 ------------------------------------------------------------------------------------------------------------------------------------ PSEG Funding Trust I, 5.381% Nts., 11/16/07 610,000 611,199 ------------------------------------------------------------------------------------------------------------------------------------ R&B Falcon Corp., 9.50% Sr. Unsec. Nts., 12/15/08 500,000 561,637 ------------------------------------------------------------------------------------------------------------------------------------ Safeway, Inc., 7.50% Sr. Unsec. Nts., 9/15/09 795,000 849,801 ------------------------------------------------------------------------------------------------------------------------------------ SBC Communications, Inc., 5.30% Nts., 11/15/10 885,000 888,623 ------------------------------------------------------------------------------------------------------------------------------------ Sempra Energy, 7.95% Sr. Unsec. Unsub. Nts., 3/1/10 865,000 951,024 ------------------------------------------------------------------------------------------------------------------------------------ Simon Property Group LP, 5.375% Nts., 6/1/11 6 910,000 913,191 ------------------------------------------------------------------------------------------------------------------------------------ Socgen Real Estate LLC, 7.64% Bonds 6,11 45,000 46,839 ------------------------------------------------------------------------------------------------------------------------------------ Sprint Capital Corp., 8.75% Nts., 3/15/32 730,000 971,702 ------------------------------------------------------------------------------------------------------------------------------------ Starwood Hotels & Resorts Worldwide, Inc., 7.375% Nts., 5/1/07 900,000 922,500 ------------------------------------------------------------------------------------------------------------------------------------ Sterling Chemicals, Inc., 10% Sr. Sec. Nts., 12/19/07 3,4,13 93,882 90,596 ------------------------------------------------------------------------------------------------------------------------------------ TCI Communications, Inc., 9.80% Sr. Unsec. Debs., 2/1/12 1,095,000 1,322,563 ------------------------------------------------------------------------------------------------------------------------------------ Time Warner Entertainment Co. LP: 8.375% Sr. Nts., 7/15/33 370,000 438,364 10.15% Sr. Nts., 5/1/12 500,000 609,500 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued ------------------------------------------------------------------------------------------------------------------------------------ Travelers Property Casualty Corp., 3.75% Sr. Unsec. Nts., 3/15/08 $ 880,000 $ 858,720 ------------------------------------------------------------------------------------------------------------------------------------ TXU Energy Co., 6.125% Nts., 3/15/08 755,000 767,798 ------------------------------------------------------------------------------------------------------------------------------------ Tyco International Group SA: 6.125% Unsec. Unsub. Nts., 11/1/08 1,010,000 1,031,645 6.125% Unsec. Unsub. Nts., 1/15/09 3 136,000 139,093 6.375% Sr. Unsec. Unsub. Nts., 2/15/06 745,000 746,237 ------------------------------------------------------------------------------------------------------------------------------------ Univision Communications, Inc., 3.50% Sr. Unsec. Nts., 10/15/07 955,000 926,810 ------------------------------------------------------------------------------------------------------------------------------------ Verizon Global Funding Corp.: 5.85% Nts., 9/15/35 3 600,000 580,194 7.25% Sr. Unsec. Unsub. Nts., 12/1/10 540,000 586,577 ------------------------------------------------------------------------------------------------------------------------------------ Vornado Realty LP, 5.625% Sr. Unsec. Unsub. Nts., 6/15/07 1,175,000 1,183,626 ------------------------------------------------------------------------------------------------------------------------------------ Western Forest Products, Inc., 15% Sec. Nts., 7/28/09 6,13 151,402 162,757 ------------------------------------------------------------------------------------------------------------------------------------ Yum! Brands, Inc., 8.50% Sr. Unsec. Nts., 4/15/06 1,230,000 1,242,099 --------------- Total Non-Convertible Corporate Bonds and Notes (Cost $80,094,919) 80,085,881 ------------------------------------------------------------------------------------------------------------------------------------ JOINT REPURCHASE AGREEMENTS--6.2% ------------------------------------------------------------------------------------------------------------------------------------ Undivided interest of 2.61% in joint repurchase agreement (Principal Amount/Value $1,414,200,000, with a maturity value of $1,414,844,247) with UBS Warburg LLC, 4.10%, dated 12/30/05, to be repurchased at $36,876,792 on 1/3/06, collateralized by Federal Home Loan Mortgage Corp., 5%, 1/1/35, with a value of $157,513,104 and Federal National Mortgage Assn., 5%--5.50%, 3/1/34--10/1/35, with a value of $1,301,420,187 (Cost $36,860,000) 36,860,000 36,860,000 ------------------------------------------------------------------------------------------------------------------------------------ Total Investments, at Value (excluding Investments Purchased with Cash Collateral from Securities Loaned) (Cost $589,661,012) 667,909,088 ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--2.6% ------------------------------------------------------------------------------------------------------------------------------------ JOINT REPURCHASE AGREEMENTS--2.4% Undivided interest of 0.45% in joint repurchase agreement (Principal Amount/Value $3,150,000,000, with a maturity value of $3,151,501,500) with Nomura Securities, 4.29%, dated 12/30/05, to be repurchased at $14,166,566 on 1/3/06, collateralized by U.S. Agency Mortgages, 3.34%--9.50%, 6/1/08--5/1/38, with a value of $3,213,000,000 14 14,159,816 14,159,816
14 | OPPENHEIMER BALANCED FUND/VA
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ MASTER FLOATING NOTE--0.2% Bear Stearns, 4.37%, 1/3/06 14 $ 500,000 $ 500,000 ------------------------------------------------------------------------------------------------------------------------------------ Merrill Lynch Mortgage Capital, 4.35%, 1/3/06 14 500,000 500,000 -------------- 1,000,000 -------------- Total Investments Purchased with Cash Collateral from Securities Loaned (Cost $15,159,816) 15,159,816 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS, AT VALUE (COST $604,820,828) 115.4% $ 683,068,904 ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES IN EXCESS OF OTHER ASSETS (15.4) (91,159,850) --------------------------------- NET ASSETS 100.0% $ 591,909,054 =================================
FOOTNOTES TO STATEMENT OF INVESTMENTS 1. Non-income producing security. 2. A sufficient amount of liquid assets has been designated to cover outstanding written call options, as follows:
CONTRACTS EXPIRATION EXERCISE PREMIUM VALUE SUBJECT TO CALL DATE PRICE RECEIVED SEE NOTE 1 -------------------------------------------------------------------------------------------------- Schering-Plough Corp. 539 1/23/06 $ 22.50 $ 66,159 $ --
3. Partial or fully-loaned security. See Note 10 of Notes to Financial Statements. 4. Illiquid security. The aggregate value of illiquid securities as of December 31, 2005 was $90,821, which represents 0.02% of the Fund's net assets. See Note 9 of Notes to Financial Statements. 5. Represents the current interest rate for a variable or increasing rate security. 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 $8,284,072 or 1.40% of the Fund's net assets as of December 31, 2005. 7. When-issued security or forward commitment to be delivered and settled after December 31, 2005. See Note 1 of Notes to Financial Statements. 8. 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 $8,330,322 or 1.41% of the Fund's net assets as of December 31, 2005. 9. Principal-Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. The value of these securities generally increases as interest rates decline and prepayment rates rise. The price of these securities is typically more volatile than that of coupon-bearing bonds of the same maturity. Interest rates disclosed represent current yields based upon the current cost basis and estimated timing of future cash flows. These securities amount to $416,908 or 0.07% of the Fund's net assets as of December 31, 2005. 10. All or a portion of the security is held in collateralized accounts to cover initial margin requirements on open futures sales contracts. The aggregate market value of such securities is $1,290,858. See Note 6 of Notes to Financial Statements. 11. This bond has no contractual maturity date, is not redeemable and contractually pays an indefinite stream of interest. 12. Issue is in default. Non-income producing. See Note 1 of Notes to Financial Statements. 13. Interest or dividend is paid-in-kind. 14. The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Note 10 of Notes to Financial Statements. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 15 | OPPENHEIMER BALANCED FUND/VA STATEMENT OF ASSETS AND LIABILITIES December 31, 2005 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ASSETS -------------------------------------------------------------------------------- Investments, at value (including securities loaned of $21,629,669) (cost $604,820,828) --see accompanying statement of investments $ 683,068,904 -------------------------------------------------------------------------------- Cash 150,494 -------------------------------------------------------------------------------- Unrealized appreciation on swap contracts 9,971 -------------------------------------------------------------------------------- Receivables and other assets: Investments sold (including $14,057,962 sold on a when-issued basis or forward commitment) 14,873,541 Interest, dividends and principal paydowns 2,668,849 Shares of beneficial interest sold 299,712 Futures margins 178 Other 15,156 ----------------- Total assets 701,086,805 -------------------------------------------------------------------------------- LIABILITIES -------------------------------------------------------------------------------- Return of collateral for securities loaned 15,159,816 -------------------------------------------------------------------------------- Payables and other liabilities: Investments purchased (including $86,495,417 purchased on a when-issued basis or forward commitment) 93,416,936 Shares of beneficial interest redeemed 462,285 Distribution and service plan fees 52,151 Shareholder communications 41,586 Trustees' compensation 17,838 Transfer and shareholder servicing agent fees 1,755 Other 25,384 ----------------- Total liabilities 109,177,751 -------------------------------------------------------------------------------- NET ASSETS $ 591,909,054 ================ -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS -------------------------------------------------------------------------------- Par value of shares of beneficial interest $ 34,704 -------------------------------------------------------------------------------- Additional paid-in capital 474,605,891 -------------------------------------------------------------------------------- Accumulated net investment income 12,162,267 -------------------------------------------------------------------------------- Accumulated net realized gain on investments and foreign currency transactions 26,524,548 -------------------------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 78,581,644 ----------------- NET ASSETS $ 591,909,054 ================= -------------------------------------------------------------------------------- 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 $503,753,415 and 29,507,745 shares of beneficial interest outstanding) $ 17.07 -------------------------------------------------------------------------------- Service Shares: Net asset value, redemption price per share and offering price per share (based on net assets of $88,155,639 and 5,196,304 shares of beneficial interest outstanding) $ 16.97 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 16 | OPPENHEIMER BALANCED FUND/VA STATEMENT OF OPERATIONS For the Year Ended December 31, 2005 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- INVESTMENT INCOME -------------------------------------------------------------------------------- Interest $ 12,116,204 -------------------------------------------------------------------------------- Dividends (net of foreign withholding taxes of $116,955) 4,060,409 -------------------------------------------------------------------------------- Portfolio lending fees 38,039 ----------------- Total investment income 16,214,652 -------------------------------------------------------------------------------- EXPENSES -------------------------------------------------------------------------------- Management fees 4,290,435 -------------------------------------------------------------------------------- Distribution and service plan fees--Service shares 182,249 -------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Non-Service shares 10,441 Service shares 10,085 -------------------------------------------------------------------------------- Shareholder communications: Non-Service shares 28,182 Service shares 3,897 -------------------------------------------------------------------------------- Trustees' compensation 15,431 -------------------------------------------------------------------------------- Custodian fees and expenses 9,965 -------------------------------------------------------------------------------- Administration service fees 1,500 -------------------------------------------------------------------------------- Other 49,003 ----------------- Total expenses 4,601,188 Less reduction to custodian expenses (8,035) ----------------- Net expenses 4,593,153 -------------------------------------------------------------------------------- NET INVESTMENT INCOME 11,621,499 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -------------------------------------------------------------------------------- Net realized gain (loss) on: Investments 28,797,282 Closing and expiration of option contracts written (29,123) Closing and expiration of futures contracts 2,132,682 Foreign currency transactions 324,698 Swap contracts (92,399) ----------------- Net realized gain 31,133,140 -------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on: Investments (19,476,737) Translation of assets and liabilities denominated in foreign currencies (700,128) Futures contracts (220,128) Option contracts 66,159 Swap contracts (29,506) ----------------- Net change in unrealized appreciation (20,360,340) -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 22,394,299 ================= SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 17 | OPPENHEIMER BALANCED FUND/VA STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005 2004 ----------------------------------------------------------------------------------------------- OPERATIONS ----------------------------------------------------------------------------------------------- Net investment income $ 11,621,499 $ 8,957,568 ----------------------------------------------------------------------------------------------- Net realized gain 31,133,140 52,689,657 ----------------------------------------------------------------------------------------------- Net change in unrealized appreciation (20,360,340) (6,010,809) -------------------------------------- Net increase in net assets resulting from operations 22,394,299 55,636,416 ----------------------------------------------------------------------------------------------- DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS ----------------------------------------------------------------------------------------------- Dividends from net investment income: Non-Service shares (9,339,985) (5,486,430) Service shares (1,047,623) (294,219) ----------------------------------------------------------------------------------------------- Distributions from net realized gain: Non-Service shares (19,081,318) -- Service shares (2,361,220) -- ----------------------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ----------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from beneficial interest transactions: Non-Service shares (34,790,673) (31,808,087) Service shares 29,195,366 29,880,516 ----------------------------------------------------------------------------------------------- NET ASSETS ----------------------------------------------------------------------------------------------- Total increase (decrease) (15,031,154) 47,928,196 ----------------------------------------------------------------------------------------------- Beginning of period 606,940,208 559,012,012 -------------------------------------- End of period (including accumulated net investment income of $12,162,267 and $9,981,717, respectively) $ 591,909,054 $ 606,940,208 ======================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 18 | OPPENHEIMER BALANCED FUND/VA FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 ----------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA ----------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 17.35 $ 15.92 $ 13.16 $ 15.40 $ 16.55 ----------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .33 1 .26 1 .27 .50 .53 Net realized and unrealized gain (loss) .31 1.33 2.90 (2.02) (.19) -------------------------------------------------------------------- Total from investment operations .64 1.59 3.17 (1.52) .34 ----------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.30) (.16) (.41) (.51) (.64) Distributions from net realized gain (.62) -- -- (.21) (.85) -------------------------------------------------------------------- Total dividends and/or distributions to shareholders (.92) (.16) (.41) (.72) (1.49) ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 17.07 $ 17.35 $ 15.92 $ 13.16 $ 15.40 ==================================================================== ----------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 2 3.89% 10.10% 24.96% (10.40)% 2.22% ----------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA ----------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 503,753 $ 547,290 $ 533,710 $ 458,848 $ 593,033 ----------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 522,754 $ 528,655 $ 475,389 $ 517,516 $ 599,324 ----------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 1.98% 1.59% 1.82% 3.31% 3.42% Total expenses 0.74% 4 0.74% 4 0.76% 4 0.74% 4 0.76% 4 ----------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 67% 5 68% 5 248% 42% 30%
1. Per share amounts calculated based on the average shares outstanding during the period. 2. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. 5. The portfolio turnover rate excludes purchases and sales of To Be Announced (TBA) mortgage-related securities as follows: PURCHASE TRANSACTIONS SALE TRANSACTIONS -------------------------------------------------------------------------------- Year Ended December 31, 2005 $1,224,652,741 $1,250,455,539 Year Ended December 31, 2004 $1,460,076,994 $1,473,590,963 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 19 | OPPENHEIMER BALANCED FUND/VA FINANCIAL HIGHLIGHTS Continued --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 1 --------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA --------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 17.26 $ 15.87 $ 13.14 $ 14.51 --------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .29 2 .23 2 .39 .13 Net realized and unrealized gain (loss) .31 1.31 2.74 (1.50) ------------------------------------------------------------ Total from investment operations .60 1.54 3.13 (1.37) --------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.27) (.15) (.40) -- Distributions from net realized gain (.62) -- -- -- ------------------------------------------------------------ Total dividends and/or distributions to shareholders (.89) (.15) (.40) -- --------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 16.97 $ 17.26 $ 15.87 $ 13.14 ============================================================ --------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 3.67% 9.79% 24.69% (9.44)% --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA --------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 88,156 $ 59,650 $ 25,302 $ 2,306 --------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 72,977 $ 39,851 $ 9,908 $ 1,037 --------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 1.74% 1.41% 1.37% 3.30% Total expenses 1.00% 5 1.02% 5 1.01% 5 0.99% 5 --------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 67% 6 68% 6 248% 42%
1. For the period from May 1, 2002 (inception of offering) to December 31, 2002. 2. Per share amounts calculated based on the average shares outstanding during the period. 3. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year. 5. Reduction to custodian expenses less than 0.01%. 6. The portfolio turnover rate excludes purchases and sales of To Be Announced (TBA) mortgage-related securities as follows: PURCHASE TRANSACTIONS SALE TRANSACTIONS -------------------------------------------------------------------------------- Year Ended December 31, 2005 $1,224,652,741 $1,250,455,539 Year Ended December 31, 2004 $1,460,076,994 $1,473,590,963 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 20 | OPPENHEIMER BALANCED FUND/VA NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Oppenheimer Balanced Fund/VA (the Fund), formerly Oppenheimer Multiple Strategies Fund/VA, is a separate series of Oppenheimer Variable Account Funds, 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 total investment return, which includes current income and capital appreciation in the value of its shares. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The 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. Both classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. The following is a summary of significant accounting policies consistently followed by the Fund. -------------------------------------------------------------------------------- SECURITIES VALUATION. The Fund calculates the net asset value of its shares as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Securities may be valued primarily using dealer-supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Securities listed or traded on National Stock Exchanges or other domestic 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. Securities traded on NASDAQ are valued based on the closing price provided by NASDAQ 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 traded on foreign exchanges are valued based on the last sale price on the principal exchange on which the security is traded, in the country that is identified by the portfolio pricing service, prior to the time when the Fund's assets are valued. In the absence of a sale, the security is valued at the official closing price on the principal exchange. Corporate, government and municipal debt instruments having a remaining maturity in excess of sixty days and all mortgage-backed securities will be valued at the mean between the "bid" and "asked" prices. Futures contracts traded on a commodities or futures exchange will be valued at the final settlement price or official closing price on the principal exchange as reported by such principal exchange at its trading session ending at, or most recently prior to, the time when the Fund's assets are valued. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value. Foreign and domestic securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund's assets are valued but after the close of their respective exchanges will be fair valued. Fair value is determined in good faith using consistently applied procedures under the supervision of the Board of Trustees. Short-term "money market type" debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value). -------------------------------------------------------------------------------- SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment for securities that have been purchased by the Fund on a when-issued basis or forward commitment can take place up to ten days 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 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 internally designated 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 or forward commitment may increase the volatility of the Fund's net asset value to the extent the Fund executes such transactions while remaining substantially fully invested. The Fund may also sell securities that it purchased on a when-issued basis or forward commitment prior to settlement of the original purchase. As of December 31, 2005, the Fund had purchased 21 | OPPENHEIMER BALANCED FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued $86,495,417 of securities issued on a when-issued basis or forward commitment and sold $14,057,962 of securities issued on a when-issued basis or forward commitment. In connection with its ability to purchase or sell 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 Fund records the incremental difference between the forward purchase and sale of each forward roll as realized gain (loss) on investments or as fee income in the case of such transactions that have an associated fee in lieu of a difference in the forward purchase and sale price. Risks 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 at redelivery as compared to the securities sold to the counterparty; 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, market fluctuations and 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, 2005, securities with an aggregate market value of $253,750, representing 0.04% of the Fund's net assets, were in default. -------------------------------------------------------------------------------- FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in U.S. dollars. The values of securities denominated in foreign currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Foreign exchange rates may be valued primarily using dealer supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in exchange rates. 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. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. 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. 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 on a daily basis 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. 22 | OPPENHEIMER BALANCED FUND/VA -------------------------------------------------------------------------------- FEDERAL TAXES. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. The tax components of capital shown in the table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes. NET UNREALIZED APPRECIATION BASED ON COST OF SECURITIES UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED AND OTHER INVESTMENTS NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME INCOME GAIN CARRYFORWARD 1,2,3,4 TAX PURPOSES -------------------------------------------------------------------------- $15,937,671 $23,453,889 $368,687 $78,259,604 1. The Fund had $664 of post-October foreign currency losses which were deferred. 2. The Fund had $368,023 of straddle losses which were deferred. 3. During the fiscal year ended December 31, 2005, the Fund did not utilize any capital loss carryforward. 4.During the fiscal year ended December 31, 2004, the Fund utilized $28,540,378 of capital loss carryforward to offset capital gains realized in that fiscal year. Net investment income (loss) and net realized gain (loss) may differ for financial statement and 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. Accordingly, the following amounts have been reclassified for December 31, 2005. Net assets of the Fund were unaffected by the reclassifications. REDUCTION TO INCREASE TO ACCUMULATED NET INCREASE ACCUMULATED NET REALIZED GAIN TO PAID-IN CAPITAL INVESTMENT INCOME ON INVESTMENTS 5 ------------------------------------------------------------------------ $2,276,220 $946,659 $3,222,879 5. $2,276,220, including $1,962,296 of long-term capital gain, was distributed in connection with Fund share redemptions. The tax character of distributions paid during the years ended December 31, 2005 and December 31, 2004 was as follows: YEAR ENDED YEAR ENDED DECEMBER 31, 2005 DECEMBER 31, 2004 ------------------------------------------------------------------------ Distributions paid from: Ordinary income $ 10,387,608 $ 5,780,649 Long-term capital gain 21,442,538 -- ---------------------------------------- Total $ 31,830,146 $ 5,780,649 ======================================== The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 31, 2005 are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss. Federal tax cost of securities $ 604,843,283 Federal tax cost of other investments (94,325,512) ---------------- Total federal tax cost $ 510,517,771 ================ Gross unrealized appreciation $ 94,510,175 Gross unrealized depreciation (16,250,571) ---------------- Net unrealized appreciation $ 78,259,604 ================ 23 | OPPENHEIMER BALANCED FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of "Other" within the asset section of the Statement of Assets and Liabilities. Deferral of trustees' fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund's assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the Plan. -------------------------------------------------------------------------------- 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. Income and capital gain distributions, if any, are declared and paid annually. -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts to the extent they not offset by positive cash balances maintained by the Fund. The Reduction to Custodian Expenses line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings. At December 31, 2005, the Fund had $7 of such earnings on cash balances available to offset future custodian fees or interest expenses incurred during the next fiscal year. -------------------------------------------------------------------------------- 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 U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. -------------------------------------------------------------------------------- 2. SHARES OF BENEFICIAL INTEREST The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004 SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------------------------ NON-SERVICE SHARES Sold 1,776,358 $ 29,867,328 2,625,394 $ 42,309,798 Dividends and/or distributions reinvested 1,726,689 28,421,303 342,260 5,486,430 Redeemed (5,537,549) (93,079,304) (4,948,306) (79,604,315) --------------------------------------------------------------- Net decrease (2,034,502) $(34,790,673) (1,980,652) $(31,808,087) =============================================================== ------------------------------------------------------------------------------------------------------------- SERVICE SHARES Sold 1,918,395 $ 32,184,682 2,003,047 $ 32,170,140 Dividends and/or distributions reinvested 207,983 3,408,843 18,400 294,219 Redeemed (385,436) (6,398,159) (160,331) (2,583,843) --------------------------------------------------------------- Net increase 1,740,942 $ 29,195,366 1,861,116 $ 29,880,516 ===============================================================
24 | OPPENHEIMER BALANCED FUND/VA -------------------------------------------------------------------------------- 3. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the year ended December 31, 2005, were as follows: PURCHASES SALES ---------------------------------------------------------------- Investment securities $ 327,895,921 $ 332,518,100 U.S. government and government agency obligations 39,886,096 47,874,199 To Be Announced (TBA) mortgage-related securities 1,224,652,741 1,250,455,539 -------------------------------------------------------------------------------- 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 Fund which provides for a fee at an annual rate of 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million and 0.60% of average annual net assets over $800 million. -------------------------------------------------------------------------------- ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund's tax returns. -------------------------------------------------------------------------------- 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 per account fee. For the year ended December 31, 2005, the Fund paid $20,480 to OFS for services to the Fund. Additionally, funds offered in variable annuity separate accounts are subject to minimum fees of $10,000 per class, for class level assets of $10 million or more. Each class is subject to the minimum fee in the event that the per account fee does not equal or exceed the applicable minimum fee. -------------------------------------------------------------------------------- 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, personal service and account maintenance for the Fund's Service shares. Under the plan, payments are made periodically at an annual rate of up to 0.25% of the average annual net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsor(s) of the insurance product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service shares. The impact of the service plan is to increase operating expenses of the Service shares, which results in lower performance compared to the Fund's shares that are not subject to a service fee. Fees incurred by the Fund under the plan are detailed in the Statement of Operations. -------------------------------------------------------------------------------- WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes to 0.35% of average annual net assets per class. This undertaking may be amended or withdrawn at any time. -------------------------------------------------------------------------------- 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 to settle specific purchases or sales of securities denominated in a foreign currency and for protection from adverse exchange rate fluctuation. 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 prevailing foreign currency exchange rates. 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. 25 | OPPENHEIMER BALANCED FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 5. FOREIGN CURRENCY CONTRACTS Continued The Fund may realize a gain or loss upon the closing or settlement of the foreign transaction. Contracts closed or settled with the same broker are recorded as net realized gains or losses. Such realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. As of December 31, 2005, the Fund had no outstanding foreign currency contracts. -------------------------------------------------------------------------------- 6. FUTURES CONTRACTS A futures contract is a commitment to buy or sell a specific amount of a commodity or financial instrument at a negotiated price on a stipulated future date. 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 protection from changes in market value of stocks 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 as a 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 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 has expired. Cash held by the broker to cover initial margin requirements on open futures contracts is noted in the Statement of Assets and Liabilities. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable and/or payable for the daily mark to market for variation margin. Realized gains and losses are reported in the Statement of Operations as the closing and expiration of futures contracts. The net change in unrealized appreciation and depreciation is reported in the Statement of Operations. 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, 2005, the Fund had outstanding futures contracts as follows:
UNREALIZED EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION CONTRACT DESCRIPTION DATES CONTRACTS DECEMBER 31, 2005 (DEPRECIATION) ------------------------------------------------------------------------------------------- CONTRACTS TO PURCHASE U.S. Long Bonds 3/22/06 163 $ 18,612,563 $ 329,306 --------------- CONTRACTS TO SELL Euro-Bundesobligation, 10 yr. 3/8/06 30 4,327,370 (32,925) U.S. Treasury Nts., 2 yr. 3/31/06 373 76,534,938 (4,749) U.S. Treasury Nts., 5 yr. 3/22/06 180 19,141,875 (34,750) U.S. Treasury Nts., 10 yr. 3/22/06 118 12,909,938 498 --------------- (71,926) --------------- $ 257,380 ===============
26 | OPPENHEIMER BALANCED FUND/VA -------------------------------------------------------------------------------- 7. OPTION ACTIVITY The Fund may buy and sell put and call options, or write put and covered call options on portfolio securities in order to produce incremental earnings or protect against changes in the value of portfolio securities. The Fund generally purchases put options or writes covered call options to hedge against adverse movements in the value of portfolio holdings. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option. Options are valued daily based upon the last sale price on the principal exchange on which the option is traded and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss upon the expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option is adjusted by the amount of premium received or paid. Securities designated to cover outstanding call options are noted in the Statement of Investments where applicable. Contracts 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, 2005 was as follows: CALL OPTIONS PUT OPTIONS --------------------- --------------------- NUMBER OF AMOUNT OF NUMBER OF AMOUNT CONTRACTS PREMIUMS CONTRACTS PREMIUMS ----------------------------------------------------------------------------- Options outstanding as of December 31, 2004 -- $ -- -- $ -- Options written 539 66,159 575 29,503 Options closed or expired -- -- (575) (29,503) --------------------------------------------- Options outstanding as of December 31, 2005 539 $ 66,159 -- $ -- ============================================= -------------------------------------------------------------------------------- 8. TOTAL RETURN SWAP CONTRACTS The Fund may enter into a total return swap transaction 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 notional. The unrealized gain (loss) related to the valuation of such contracts as well as the amount due to (owed by) the Fund at termination or settlement is combined and separately disclosed as an asset (liability) on the Statement of Assets and Liabilities. The Fund also records any periodic payments received from (paid to) the counterparty under such contracts as realized gain (loss) on the Statement of Operations. Total return swaps are subject to risks (if the counterparty fails to meet its obligations). 27 | OPPENHEIMER BALANCED FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 8. TOTAL RETURN SWAP CONTRACTS Continued As of December 31, 2005, the Fund had entered into the following total return swap agreements:
SWAP NOTIONAL TERMINATION UNREALIZED COUNTERPARTY SWAP DESCRIPTION AMOUNT DATE APPRECIATION --------------------------------------------------------------------------------------------------------------- Received or paid monthly. If the sum of the Lehman Brothers CMBS Index Payer Payment Amount and the Floating Rate Payer Payment Amount is positive, the Counterparty will pay such amount to the Fund. Goldman Sachs If the sums are negative, then the Fund shall pay the Group, Inc. (The) absolute value of such amount to the Counterparty $3,530,000 6/1/06 $ 9,971
Abbreviations are as follows: CMBS Commercial Mortgage Backed Securities Markets -------------------------------------------------------------------------------- 9. ILLIQUID SECURITIES As of December 31, 2005, investments in securities included issues that are illiquid. A security may 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 will not invest more than 15% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid securities. Securities that are illiquid are marked with the applicable footnote on the Statement of Investments. -------------------------------------------------------------------------------- 10. SECURITIES LENDING The Fund lends portfolio securities from time to time in order to earn additional income. In return, the Fund receives collateral in the form of U.S. Treasury obligations or cash, against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the funds and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Fund could experience delays and cost in recovering the securities loaned or in gaining access to the collateral. Cash collateral is invested in cash equivalents. The Fund retains a portion of the interest earned from the collateral. The Fund continues to receive the economic benefit of interest or dividends paid on the securities loaned in the form of a substitute payment received from the borrower. As of December 31, 2005, the Fund had on loan securities valued at $21,629,669. Collateral of $22,050,962 was received for the loans, of which $15,159,816 was received in cash and subsequently invested in approved instruments. -------------------------------------------------------------------------------- 11. LITIGATION A consolidated amended complaint has been filed as putative derivative and class actions against the Manager, OFS and the Distributor, as well as 51 of the Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and former Directors or Trustees and 8 present and former officers of the funds. This complaint, initially filed in the U.S. District Court for the Southern District of New York on January 10, 2005 and amended on March 4, 2005, consolidates into a single action and amends six individual previously-filed putative derivative and class action complaints. Like those prior complaints, the complaint alleges that the Manager charged excessive fees for distribution and other costs, improperly used assets of the funds in the form of directed brokerage commissions and 12b-1 fees to pay brokers to promote sales of the funds, and failed to properly disclose the use of assets of the funds to make those payments in violation of the Investment Company Act of 1940 and the Investment Advisers Act of 1940. Also, like those prior complaints, the complaint further alleges that by permitting and/or participating in those actions, the Directors/Trustees and the Officers breached their fiduciary duties to shareholders of the funds under the Investment Company Act of 1940 and at common law. The complaint seeks unspecified compensatory and punitive damages, 28 | OPPENHEIMER BALANCED FUND/VA rescission of the funds' investment advisory agreements, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. The defendants believe that the allegations contained in the Complaints are without merit and that they have meritorious defenses against the claims asserted. The defendants intend to defend these lawsuits vigorously and to contest any claimed liability. The defendants believe that it is premature to render any opinion as to the likelihood of an outcome unfavorable to them and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. 29 | OPPENHEIMER BALANCED FUND/VA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER BALANCED FUND/VA: We have audited the accompanying statement of assets and liabilities of Oppenheimer Balanced Fund/VA, a series of Oppenheimer Variable Account Funds, including the statement of investments, as of December 31, 2005, 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 each of the five years in the periods presented. 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 the standards of the Public Company Accounting Oversight Board (United States). 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. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. 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 Balanced Fund/VA as of December 31, 2005, 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 each of the five years in the periods presented, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Denver, Colorado February 13, 2006 30 | OPPENHEIMER BALANCED FUND/VA FEDERAL INCOME TAX INFORMATION Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- In early 2006, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2005. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. Capital gain distributions of $0.6181 per share were paid to Non-Service and Service shareholders, respectively, on March 14, 2005. Whether received in stock or in cash, the capital gain distribution should be treated by shareholders as a gain from the sale of the capital assets held for more than one year (long-term capital gains). Dividends, if any, paid by the Fund during the fiscal year ended December 31, 2005 which are not designated as capital gain distributions should be multiplied by 18.84% to arrive at the amount eligible for the corporate dividend-received deduction. The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance. 31 | OPPENHEIMER BALANCED FUND/VA PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities ("portfolio proxies") held by the Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund's voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at www.sec.gov. The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund's Form N-Q filings are available on the SEC's website at http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 32 | OPPENHEIMER BALANCED FUND/VA BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Each year, the Board of Trustees (the "Board"), including a majority of the independent Trustees, is required to determine whether to renew the Fund's investment advisory agreement (the "Agreement"). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information, that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance. The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager's services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. Outlined below is a summary of the principal information considered by the Board as well as the Board's conclusions. NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information on the nature and extent of the services provided to the Fund and information regarding the Manager's key personnel that provide such services. The Manager's duties include providing the Fund with the services of the portfolio managers and the Manager's investment team, who provide research, analysis and other advisory services in regard to the Fund's investments; securities trading services; oversight of third party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund's investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel that are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund's operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund's shares. The Manager also provides the Fund with office space, facilities and equipment. The Board also considered the quality of the services provided and the quality of the Manager's resources that are available to the Fund. The Board took account of the fact that the Manager has had over forty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager's administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager's key personnel and the size and functions of its staff providing investment management services to the Fund. The Board also considered compliance reports from the Fund's Chief Compliance Officer. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of the Fund's portfolio managers and the Manager's value and fixed-income investment teams and analysts. The equity component of the Fund's portfolio has been managed by Emmanuel Ferreira and Christopher Leavy since January 2003. Messrs. Leavy and Ferreira each have had over 11 years of experience managing equity investments. The Fund's fixed-income component has been managed by a portfolio management team comprised of Angelo Manioudakis, Benjamin Gord, Charles Moon, Geoffrey Caan and Antulio N. Bomfim who have been portfolio managers of the Fund since 2003. Messrs. Manioudakis, Gord, Caan, Moon and Bomfim have each had between 11 and 15 years of experience managing fixed-income investments. The Board members also considered the totality of their experiences with the Manager, as directors or trustees of the Fund 33 | OPPENHEIMER BALANCED FUND/VA BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited / Continued -------------------------------------------------------------------------------- and other funds advised by the Manager. In light of the foregoing, the Board concluded that the Fund benefits from the services provided under the Agreement as a result of the Manager's experience, reputation, personnel, operations, and resources. INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the Manager provided information on the performance of the Fund and the Manager at each Board meeting, including comparative performance information. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund's historical performance to relevant market indices and to the performance of other balanced funds (including both funds advised by the Manager and funds advised by other investment advisers). The Board noted that the Fund's one-year, three-year, five-year and ten-year performance were all better than its peer group median. COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board considered information regarding the Manager's costs in serving as the Fund's investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager's profitability from its relationship with the Fund. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also evaluated the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund, other balanced funds and other funds with comparable asset levels and distribution features. The Board noted that the Fund's contractual and actual management fees are higher than its peer group average and median and that its total expenses are lower than its peer group average but higher than its peer group median. The Board concluded, however, that in light of the Fund's strong performance record, the management fee was reasonable. ECONOMIES OF SCALE. The Board considered whether the Manager may realize economies of scale in managing and supporting the Fund, whether those economies of scale benefit the Fund's shareholders and the current level of Fund assets in relation to the Fund's management fee breakpoints, which are intended to share with shareholders economies of scale that may exist as the Fund grows. OTHER BENEFITS TO THE MANAGER. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager's affiliates and research provided to the Manager in connection with permissible brokerage arrangements (soft dollar arrangements). The Board also considered the nature and quality of services provided by affiliates of the Manager, which it reviews at other times during the year in connection with the renewal of the Fund's service agreements. The Board considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide services to the Fund and that maintaining the financial viability of the Manager is important in order for the Manager to continue to provide significant services to the Fund and its shareholders. CONCLUSIONS. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees' counsel are both independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules. Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the advisory agreement for another year. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the factors together. The Board judged the terms and conditions of the advisory agreement, including the management fee, in light of all of the surrounding circumstances. 34 | OPPENHEIMER BALANCED FUND/VA TRUSTEES AND OFFICERS Unaudited --------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------ NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS; OTHER FUNDS, LENGTH OF SERVICE, AGE TRUSTEESHIPS/DIRECTORSHIPS HELD BY TRUSTEE; NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, TRUSTEES CENTENNIAL, COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL.. WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Chairman of the Board Mortgage Company (since 1991), Centennial State Mortgage Company (since of Trustees (since 2003), 1994), and The El Paso Mortgage Company (since 1993); Chairman of the Trustee (since 1999) following private companies: Ambassador Media Corporation (since 1984) and Age: 68 Broadway Ventures (since 1984); Director of the following: Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), Campus Crusade for Christ (since 1991) and The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (since 2002); former Chairman of the following: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (insurance agency) (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of Trustee (since 1993) private equity funds) (until February 2001); Chairman, President and Chief Age: 74 Executive Officer of A.G. Edwards Capital, Inc. (until March 2000); Director of A.G. Edwards & Sons, Inc. (brokerage company) (until 2000) and A.G. Edwards Trust Company (investment adviser) (until 2000); Vice Chairman and Director of A.G. Edwards, Inc. (until March 1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March 1999); Chairman of A.G. Edwards Trust Company (until March 1999) and A.G.E. Asset Management (investment adviser) (until March 1999). Oversees 38 portfolios in the OppenheimerFunds complex. GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Trustee (since 1999) Corporation (December 1991-April 1999); President, Treasurer and Director Age: 69 of Centennial Capital Corporation (June 1989-April 1999); Chief Executive Officer and Director of MultiSource Services, Inc. (March 1996-April 1999); Mr. Bowen held several positions with the Manager and with subsidiary or affiliated companies of the Manager (September 1987-April 1999). Oversees 38 portfolios in the OppenheimerFunds complex. EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical Trustee (since 1999) site) (since June 2000); Director of Genetic ID, Inc. (biotech company) Age: 67 (March 2001-May 2002); Partner at PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (July 1994-June 1998). Oversees 38 portfolios in the OppenheimerFunds complex. JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director Trustee (since 1990) of Northwestern Energy (public utility corporation) (since November 2004); Age: 64 Director of P.R. Pharmaceuticals (October Corp. 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. ("OAC") (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 38 portfolios in the OppenheimerFunds complex. SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September Trustee (since 1996) 1984). Mr. Freedman held positions with the Manager and with subsidiary or Age: 65 affiliated companies of the Manager (until October several 1994). Oversees 38 portfolios in the OppenheimerFunds complex. BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational Trustee (since 2002) organization) (since February Director of The California Endowment Age: 59 (philanthropic organization) (since April 2002); Director of 2000); Community Hospital of Monterey Peninsula (since February 2002); Vice Chair of American Funds' Emerging Markets Growth Fund, Inc. (mutual fund) (since October 1991); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation and The University of Michigan; Advisor at Credit Suisse First Boston's Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member
35 | OPPENHEIMER BALANCED FUND/VA TRUSTEES AND OFFICERS Unaudited / Continued -------------------------------------------------------------------------------- BEVERLY L. HAMILTON, of the investment committee of Hartford Hospital (2000-2003); and Advisor Continued to Unilever (Holland) pension fund (2000-2003). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT J. MALONE, Director of Jones International University (educational organization) Trustee (since 2002) (since August 2005); Chairman, Chief Executive Officer and Director of Age: 61 Steele Street State Bank (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 38 portfolios in the OppenheimerFunds complex. F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Trustee (since 2000) Funds) (investment company) (since 1996) and MML Series Investment Fund Age: 63 (investment company) (since 1996), Trustee and Chairman of the Investment Committee (since 1994) of the Worcester Polytech Institute (private university); President and Treasurer of the SIS Funds (private charitable fund) (since January 1999); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Member of the Investment Committee of the Community Foundation of Western Massachusetts (1998-2003); and Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999). Oversees 40 portfolios in the OppenheimerFunds complex. ------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY AND OFFICER STREET, 11TH FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES. JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President and Trustee President (since September 2000) of the Manager; President and Director or (since 2001) Trustee of other Oppenheimer funds; President and Director of OAC and of Age: 56 Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since November 2001); Chairman and Director of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since July 2001); President and Director of OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since July 2001); Director of the following investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 2001) and Director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director of DLB Acquisition Corporation (holding company parent of Babson Capital Management LLC) (since June 1995); Member of the Investment Company Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of the Manager (September 2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual Select Funds (open-end investment companies) (November 1999-November 2001); Director of C.M. Life Insurance Company (September 1999-August 2000); President, Chief Executive Officer and Director of MML Bay State Life Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned sub sidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 87 portfolios in the OppenheimerFunds complex. ------------------------------------------------------------------------------------------------------------ OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR THE FUND MESSRS. FERREIRA, LEAVY, MANIOUDAKIS AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT DEATH OR REMOVAL. EMMANUEL FERREIRA, Vice President of the Manager since January 2003; Portfolio Manager at Vice President and Portfolio Lashire Investments (July 1999-December 2002). An officer of 5 portfolios Manager (since 2003) in the OppenheimerFunds complex. Age: 38
36 | OPPENHEIMER BALANCED FUND/VA CHRISTOPHER LEAVY, Senior Vice President of the Manager since September 2000; portfolio Vice President and Portfolio manager of Morgan Stanley Dean Witter Investment Management Manager (since 2003) (1997-September 2000). An officer of 8 portfolios in the OppenheimerFunds Age: 34 complex. ANGELO MANIOUDAKIS, Senior Vice President of the Manager (since April 2002), of HarbourView Vice President and Portfolio Asset Management Corporation (since April, 2002 and of OFI Institutional Manager (since 2003) Asset Management, Inc. (since June 2002); Executive Director and portfolio Age: 39 manager for Miller, Anderson & Sherrerd, a division of Morgan Stanley Investment Management (August 1993-April 2002). An officer of 14 portfolios in the OppenheimerFunds complex. MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since Vice President and Chief March 2004); Vice President of OppenheimerFunds Distributor, Inc., Compliance Officer Centennial Asset Management Corporation and Shareholder Services, Inc. (since 2004) (since June 1983); Vice President and Director of Internal Audit of the Age: 55 Manager (1997-February 2004). An officer of 87 portfolios in the OppenheimerFunds complex. BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer and Principal Treasurer of the following: HarbourView Asset Management Corporation, Financial and Accounting Shareholder Financial Services, Inc., Shareholder Services, Inc., Officer (since 1999) Oppenheimer Real Asset Management Corporation, and Oppenheimer Partnership Age: 46 Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex. ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since Vice President and Secretary March 2002) of the Manager; General Counsel and Director of the (since 2001) Distributor (since December 2001); General Counsel of Centennial Asset Age: 57 Management Corporation (since December 2001); Senior Vice President and General Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General Counsel and Director of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON REQUEST, BY CALLING 1.800.981.2871. 37 | OPPENHEIMER BALANCED FUND/VA OPPENHEIMER CAPITAL APPRECIATION FUND/ VA FUND PERFORMANCE DISCUSSION -------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. Over the 12-month period ended December 31, 2005, the Fund participated in most of the U.S. stock market's overall gains. However, the Fund's returns were lower than those of its market benchmark, the S&P 500, primarily due to disappointing stock selections in the media industry. 1 During the reporting period, the Fund's performance benefited from its holdings in Broadcom Corp., Google, Inc., Teva Pharmaceutical Industries Ltd. and Exxon Mobil Corp. On the negative side, the Fund's holdings in Tyco International Ltd., Cisco Sytstems, Inc., Mercury Interactive Corp. and Wal-Mart Stores, Inc. all detracted from the Fund's performance. The Fund also had identified a number of dominant media companies selling at substantial discounts to historical averages due to a persistent advertising slump. The slump did not end for companies focused on traditional media, and their shares largely failed to rebound. Finally, some of the Fund's holdings of large pharmaceutical companies disappointed when company-specific problems, including product safety issues, put downward pressure on earnings. When the new management team took the Fund's reins in October, our focus was to build positions on attractively valued growth stocks and increase its focus on fundamentally sound and reasonably valued companies that we believed were poised to benefit from certain long-term, secular trends. In the health care area, we changed the Fund's emphasis from large pharmaceutical companies to leaders in the biotechnology industry, including several companies with drugs nearing FDA approval. It is important to note that biotechnology stocks may be especially volatile. We shifted the Fund's media holdings away from broadcasters and publishers toward companies in the vanguard of the faster-growing "new media," such as online advertising vehicles. We also complemented some of the Fund's attractively valued technology holdings, such as networking equipment provider Cisco Systems, Inc., with Internet leaders, including online auctioneer eBay, Inc. and search engine Google, Inc. Although just three months is too short a period to judge the merits of any long-term investment, we nonetheless are encouraged that these changes have produced a rapid improvement in the Fund's performance. 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, 2005. In the case of non-service shares, performance is measured over a ten-year period. In the case of service shares, performance is measured from inception of the class on September 18, 2001. Performance information does not reflect charges that apply to separate accounts investing in the Fund. If these charges were taken into account, performance would be lower. The graphs assume that all dividends and capital gains distributions were reinvested in additional shares. The Fund's performance is compared to the performance of the S&P 500 Index, an unmanaged index of equity securities that is a measure of the general domestic stock market. Index performance reflects the reinvestment of income but does not consider the effect of transaction costs, and none of the data in the graphs show the effect of taxes. 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. 1. The Fund's performance is compared to the 4.91% return for the S&P 500 Index for the one-year period ended 12/31/05. 4 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA NON-SERVICE SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Capital Appreciation Fund/VA (Non-Service) S&P 500 Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Capital Appreciation Fund/VA Date (Non-Service) S&P 500 Index 12/31/1995 10,000 10,000 03/31/1996 10,696 10,537 06/30/1996 11,137 11,009 09/30/1996 11,858 11,349 12/31/1996 12,520 12,295 03/31/1997 12,399 12,625 06/30/1997 14,375 14,827 09/30/1997 16,233 15,937 12/31/1997 15,861 16,395 03/31/1998 17,882 18,680 06/30/1998 18,563 19,300 09/30/1998 15,516 17,385 12/31/1998 19,668 21,084 03/31/1999 20,957 22,134 06/30/1999 22,779 23,691 09/30/1999 21,684 22,215 12/31/1999 27,860 25,518 03/31/2000 31,927 26,103 06/30/2000 30,485 25,409 09/30/2000 30,324 25,163 12/31/2000 27,796 23,196 03/31/2001 24,918 20,447 06/30/2001 26,440 21,643 09/30/2001 21,032 18,468 12/31/2001 24,301 20,441 03/31/2002 23,596 20,497 06/30/2002 19,637 17,753 09/30/2002 16,519 14,687 12/31/2002 17,774 15,925 03/31/2003 17,190 15,423 06/30/2003 19,974 17,796 09/30/2003 20,852 18,267 12/31/2003 23,274 20,490 03/31/2004 23,495 20,837 06/30/2004 23,825 21,195 09/30/2004 22,917 20,799 12/31/2004 24,888 22,718 03/31/2005 24,208 22,230 06/30/2005 24,323 22,535 09/30/2005 25,213 23,347 12/31/2005 26,157 23,833 AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/05 1-Year 5.10% 5-Year -1.21% 10-Year 10.09% SERVICE SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Capital Appreciation Fund/VA (Service) S&P 500 Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Capital Appreciation Fund/VA Date (Service) S&P 500 Index 09/18/2001 10,000 10,000 09/30/2001 10,000 10,000 12/31/2001 11,551 11,068 03/31/2002 11,209 11,099 06/30/2002 9,311 9,613 09/30/2002 7,825 7,953 12/31/2002 8,422 8,623 03/31/2003 8,131 8,352 06/30/2003 9,448 9,637 09/30/2003 9,859 9,892 12/31/2003 11,007 11,095 03/31/2004 11,102 11,283 06/30/2004 11,252 11,477 09/30/2004 10,815 11,262 12/31/2004 11,735 12,302 03/31/2005 11,407 12,038 06/30/2005 11,459 12,202 09/30/2005 11,868 12,642 12/31/2005 12,305 12,905 AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/05 1-Year 4.87% 5-Year N/A Since Inception (9/18/01) 4.96% THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT. 5 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA FUND EXPENSES -------------------------------------------------------------------------------- FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include redemption fees, if any; and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 31, 2005. ACTUAL EXPENSES. The "actual" lines of the table provide information about actual account values and actual expenses. You may use the information on this line for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the "actual" line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio for each class of shares, and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the "hypothetical" lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included, your costs would have been higher. -------------------------------------------------------------------------------- BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE 6 MONTHS ENDED (7/1/05 ) (12/31/05) DECEMBER 31, 2005 -------------------------------------------------------------------------------- Non-Service shares Actual $1,000.00 $1,075.40 $3.46 -------------------------------------------------------------------------------- Non-Service shares Hypothetical 1,000.00 1,021.88 3.37 -------------------------------------------------------------------------------- Service shares Actual 1,000.00 1,073.90 4.77 -------------------------------------------------------------------------------- Service shares Hypothetical 1,000.00 1,020.62 4.65 Hypothetical assumes 5% annual return before expenses. Expenses are equal to the Fund's annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Those annualized expense ratios based on the 6-month period ended December 31, 2005 are as follows: CLASS EXPENSE RATIOS ------------------------------------- Non-Service shares 0.66% ------------------------------------- Service shares 0.91 -------------------------------------------------------------------------------- 6 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA STATEMENT OF INVESTMENTS December 31, 2005 -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- COMMON STOCKS--97.8% -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY--14.3% -------------------------------------------------------------------------------- AUTOMOBILES--0.5% Toyota Motor Corp. 184,800 $ 9,668,452 -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE--2.0% Carnival Corp. 566,700 30,301,449 -------------------------------------------------------------------------------- Starbucks Corp. 1 354,000 10,623,540 ----------- 40,924,989 -------------------------------------------------------------------------------- HOUSEHOLD DURABLES--0.7% Toll Brothers, Inc. 1 399,500 13,838,680 -------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL--1.7% eBay, Inc. 1 832,600 36,009,950 -------------------------------------------------------------------------------- MEDIA--3.4% Comcast Corp., Cl. A Special, Non-Vtg. 1 984,400 25,289,236 -------------------------------------------------------------------------------- Time Warner, Inc. 1,030,000 17,963,200 -------------------------------------------------------------------------------- Walt Disney Co. (The) 615,000 14,741,550 -------------------------------------------------------------------------------- XM Satellite Radio Holdings, Inc., Cl. A 1 432,000 11,784,960 ----------- 69,778,946 -------------------------------------------------------------------------------- MULTILINE RETAIL--1.9% J.C. Penney Co., Inc. (Holding Co.) 207,200 11,520,320 -------------------------------------------------------------------------------- Kohl's Corp. 1 333,900 16,227,540 -------------------------------------------------------------------------------- Target Corp. 190,300 10,460,791 ----------- 38,208,651 -------------------------------------------------------------------------------- SPECIALTY RETAIL--3.8% Best Buy Co., Inc. 367,750 15,989,770 -------------------------------------------------------------------------------- Lowe's Cos., Inc. 368,300 24,550,878 -------------------------------------------------------------------------------- Michaels Stores, Inc. 306,400 10,837,368 -------------------------------------------------------------------------------- Staples, Inc. 766,100 17,398,131 -------------------------------------------------------------------------------- Williams-Sonoma, Inc. 1 187,200 8,077,680 ----------- 76,853,827 -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS--0.3% Coach, Inc. 1 189,300 6,311,262 -------------------------------------------------------------------------------- CONSUMER STAPLES--8.3% -------------------------------------------------------------------------------- BEVERAGES--1.1% PepsiCo, Inc. 399,000 23,572,920 -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING--2.8% Costco Wholesale Corp. 177,600 8,785,872 -------------------------------------------------------------------------------- CVS Corp. 718,400 18,980,128 -------------------------------------------------------------------------------- Sysco Corp. 408,700 12,690,135 -------------------------------------------------------------------------------- Wal-Mart Stores, Inc. 359,100 16,805,880 ----------- 57,262,015 VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- FOOD PRODUCTS--2.0% Cadbury Schweppes plc 1,825,680 $ 17,260,141 -------------------------------------------------------------------------------- Nestle SA 76,972 23,020,430 ------------ 40,280,571 -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS--2.4% Procter & Gamble Co. (The) 511,400 29,599,832 -------------------------------------------------------------------------------- Reckitt Benckiser plc 568,470 18,778,494 ------------ 48,378,326 -------------------------------------------------------------------------------- ENERGY--6.7% -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES--4.1% Halliburton Co. 247,600 15,341,296 -------------------------------------------------------------------------------- Schlumberger Ltd. 250,500 24,336,075 -------------------------------------------------------------------------------- Smith International, Inc. 615,100 22,826,361 -------------------------------------------------------------------------------- Transocean, Inc. 1 296,900 20,690,961 ------------ 83,194,693 -------------------------------------------------------------------------------- OIL & GAS--2.6% Apache Corp. 157,200 10,771,344 -------------------------------------------------------------------------------- EOG Resources, Inc. 190,600 13,984,322 -------------------------------------------------------------------------------- Kinder Morgan Management LLC 238,642 10,848,665 -------------------------------------------------------------------------------- Occidental Petroleum Corp. 212,400 16,966,512 ------------ 52,570,843 -------------------------------------------------------------------------------- FINANCIALS--9.4% -------------------------------------------------------------------------------- COMMERCIAL BANKS--0.5% Bank of America Corp. 197,900 9,133,085 -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES--5.4% American Express Co. 202,300 10,410,358 -------------------------------------------------------------------------------- Chicago Mercantile Exchange (The) 46,300 17,014,787 -------------------------------------------------------------------------------- Citigroup, Inc. 262,800 12,753,684 -------------------------------------------------------------------------------- Franklin Resources, Inc. 130,800 12,296,508 -------------------------------------------------------------------------------- Goldman Sachs Group, Inc. (The) 175,000 22,349,250 -------------------------------------------------------------------------------- Legg Mason, Inc. 118,500 14,183,265 -------------------------------------------------------------------------------- Lehman Brothers Holdings, Inc. 55,500 7,113,435 -------------------------------------------------------------------------------- Nomura Securities Co. Ltd. 479,700 9,192,538 -------------------------------------------------------------------------------- T. Rowe Price Group, Inc. 60,800 4,379,424 ------------ 109,693,249 -------------------------------------------------------------------------------- INSURANCE--3.5% American International Group, Inc. 573,550 39,133,317 -------------------------------------------------------------------------------- Hartford Financial Services Group, Inc. (The) 155,600 13,364,484 -------------------------------------------------------------------------------- Prudential Financial, Inc. 268,400 19,644,196 ------------ 72,141,997 7 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- HEALTH CARE--17.8% -------------------------------------------------------------------------------- BIOTECHNOLOGY--4.5% Amgen, Inc. 1 486,100 $ 38,333,846 -------------------------------------------------------------------------------- Genentech, Inc. 1 181,600 16,798,000 -------------------------------------------------------------------------------- Genzyme Corp. (General Division) 1 241,000 17,057,980 -------------------------------------------------------------------------------- Gilead Sciences, Inc. 1 139,200 7,326,096 -------------------------------------------------------------------------------- MedImmune, Inc. 1 363,200 12,719,264 ------------ 92,235,186 -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES--4.4% Fisher Scientific International, Inc. 222,100 13,739,106 -------------------------------------------------------------------------------- Medtronic, Inc. 765,200 44,052,564 -------------------------------------------------------------------------------- PerkinElmer, Inc. 497,700 11,725,812 -------------------------------------------------------------------------------- Stryker Corp. 180,500 8,019,615 -------------------------------------------------------------------------------- Varian Medical Systems, Inc. 1 228,300 11,492,622 ------------ 89,029,719 -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES--3.6% Aetna, Inc. 153,100 14,438,861 -------------------------------------------------------------------------------- Caremark Rx, Inc. 1 200,100 10,363,179 -------------------------------------------------------------------------------- Medco Health Solutions, Inc. 1 181,900 10,150,020 -------------------------------------------------------------------------------- Patterson Cos., Inc. 1 155,100 5,180,340 -------------------------------------------------------------------------------- Quest Diagnostics, Inc. 187,900 9,673,092 -------------------------------------------------------------------------------- UnitedHealth Group, Inc. 374,400 23,265,216 ------------ 73,070,708 -------------------------------------------------------------------------------- PHARMACEUTICALS--5.3% Eli Lilly & Co. 237,600 13,445,784 -------------------------------------------------------------------------------- Novartis AG 572,143 30,064,666 -------------------------------------------------------------------------------- Roche Holdings AG 156,478 23,494,623 -------------------------------------------------------------------------------- Sanofi-Aventis SA 184,980 16,205,761 -------------------------------------------------------------------------------- Teva Pharmaceutical Industries Ltd., Sponsored ADR 557,946 23,997,257 ------------ 107,208,091 -------------------------------------------------------------------------------- INDUSTRIALS--8.7% -------------------------------------------------------------------------------- AEROSPACE & DEFENSE--3.5% Empresa Brasileira de Aeronautica SA, ADR 473,700 18,521,670 -------------------------------------------------------------------------------- General Dynamics Corp. 153,700 17,529,485 -------------------------------------------------------------------------------- Lockheed Martin Corp. 278,100 17,695,503 -------------------------------------------------------------------------------- United Technologies Corp. 336,100 18,791,351 ------------ 72,538,009 -------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS--0.5% Expeditors International of Washington, Inc. 140,700 9,498,657 VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES--0.3% Corporate Executive Board Co. 66,700 $ 5,982,990 -------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES--1.1% Apollo Group, Inc., Cl. A 1 379,000 22,914,340 -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES--2.4% General Electric Co. 1,376,700 48,253,335 -------------------------------------------------------------------------------- MACHINERY--0.9% Danaher Corp. 337,900 18,848,062 -------------------------------------------------------------------------------- INFORMATION TECHNOLOGY--27.7% -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT--6.6% Cisco Systems, Inc. 1 3,496,300 59,856,656 -------------------------------------------------------------------------------- Corning, Inc. 1 673,000 13,231,180 -------------------------------------------------------------------------------- Motorola, Inc. 885,500 20,003,445 -------------------------------------------------------------------------------- Nokia Corp., Sponsored ADR 572,200 10,471,260 -------------------------------------------------------------------------------- QUALCOMM, Inc. 437,700 18,856,116 -------------------------------------------------------------------------------- Telefonaktiebolaget LM Ericsson, Sponsored ADR 335,700 11,548,080 ------------ 133,966,737 -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS--3.0% Apple Computer, Inc. 1 179,400 12,897,066 -------------------------------------------------------------------------------- Dell, Inc. 1 792,700 23,773,073 -------------------------------------------------------------------------------- EMC Corp. 1 1,008,200 13,731,684 -------------------------------------------------------------------------------- Network Appliance, Inc. 1 403,300 10,889,100 ------------ 61,290,923 -------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES--3.8% Google, Inc., Cl. A 1 77,900 32,317,594 -------------------------------------------------------------------------------- VeriSign, Inc. 1 462,700 10,142,384 -------------------------------------------------------------------------------- Yahoo!, Inc. 1 888,300 34,803,594 ------------ 77,263,572 -------------------------------------------------------------------------------- IT SERVICES--2.7% Automatic Data Processing, Inc. 607,400 27,873,586 -------------------------------------------------------------------------------- Cognizant Technology Solutions Corp. 1 323,100 16,268,085 -------------------------------------------------------------------------------- First Data Corp. 249,700 10,739,597 ------------ 54,881,268 -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--5.3% Advanced Micro Devices, Inc. 1 477,800 14,620,680 -------------------------------------------------------------------------------- Broadcom Corp., Cl. A 1 544,100 25,654,315 -------------------------------------------------------------------------------- International Rectifier Corp. 1 215,700 6,880,830 -------------------------------------------------------------------------------- Linear Technology Corp. 566,600 20,437,262 -------------------------------------------------------------------------------- Marvell Technology Group Ltd. 170,600 9,568,954 -------------------------------------------------------------------------------- Microchip Technology, Inc. 347,400 11,168,910 -------------------------------------------------------------------------------- Texas Instruments, Inc. 580,300 18,610,221 ------------ 106,941,172 8 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------ SOFTWARE--6.3% Adobe Systems, Inc. 609,400 $ 22,523,424 ------------------------------------------------------------------------------------ Amdocs Ltd. 1 298,500 8,208,750 ------------------------------------------------------------------------------------ Autodesk, Inc. 281,400 12,086,130 ------------------------------------------------------------------------------------ Microsoft Corp. 2,201,400 57,566,610 ------------------------------------------------------------------------------------ SAP AG, Sponsored ADR 629,800 28,385,086 -------------- 128,770,000 ------------------------------------------------------------------------------------ MATERIALS--3.1% ------------------------------------------------------------------------------------ CHEMICALS--3.1% Monsanto Co. 417,800 32,392,034 ------------------------------------------------------------------------------------ Praxair, Inc. 561,700 29,747,632 -------------- 62,139,666 ------------------------------------------------------------------------------------ TELECOMMUNICATION SERVICES--1.8% ------------------------------------------------------------------------------------ DIVERSIFIED TELECOMMUNICATION SERVICES--1.8% American Tower Corp. 1 532,500 14,430,750 ------------------------------------------------------------------------------------ Sprint Nextel Corp. 922,900 21,558,944 -------------- 35,989,694 -------------- Total Common Stocks (Cost $1,706,243,571) 1,988,644,585 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------ JOINT REPURCHASE AGREEMENTS--2.2% ------------------------------------------------------------------------------------ Undivided interest of 3.16% in joint repurchase agreement (Principal Amount/Value $1,414,200,000, with a maturity value of $1,414,844,247) with UBS Warburg LLC, 4.10%, dated 12/30/05, to be repur- chased at $44,704,356 on 1/3/06, collateralized by Federal Home Loan Mortgage Corp., 5%, 1/1/35, with a value of $157,513,104 and Federal National Mortgage Assn., 5%--5.50%, 3/1/34--10/1/35, with a value of $1,301,420,187 (Cost $44,684,000) $ 44,684,000 $ 44,684,000 ------------------------------------------------------------------------------------ TOTAL INVESTMENTS, AT VALUE (COST $1,750,927,571) 100.0% 2,033,328,585 ------------------------------------------------------------------------------------ OTHER ASSETS NET OF LIABILITIES 0.0 805,373 -------------------------------- NET ASSETS 100.0% $2,034,133,958 ================================
FOOTNOTE TO STATEMENT OF INVESTMENTS 1. Non-income producing security. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 9 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA STATEMENT OF ASSETS AND LIABILITIES December 31, 2005 --------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------- ASSETS ---------------------------------------------------------------------------------------------------------------------------------- Investments, at value (cost $1,750,927,571)--see accompanying statement of investments $ 2,033,328,585 ---------------------------------------------------------------------------------------------------------------------------------- Cash 150,866 ---------------------------------------------------------------------------------------------------------------------------------- Receivables and other assets: Shares of beneficial interest sold 2,167,616 Interest and dividends 1,499,017 Other 28,213 --------------- Total assets 2,037,174,297 ---------------------------------------------------------------------------------------------------------------------------------- LIABILITIES ---------------------------------------------------------------------------------------------------------------------------------- Payables and other liabilities: Shares of beneficial interest redeemed 1,458,014 Investments purchased 1,157,532 Distribution and service plan fees 226,032 Shareholder communications 115,525 Trustees' compensation 36,371 Transfer and shareholder servicing agent fees 1,829 Other 45,036 ---------------- Total liabilities 3,040,339 ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS $ 2,034,133,958 ================ ---------------------------------------------------------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ---------------------------------------------------------------------------------------------------------------------------------- Par value of shares of beneficial interest $ 52,879 ---------------------------------------------------------------------------------------------------------------------------------- Additional paid-in capital 2,062,730,165 ---------------------------------------------------------------------------------------------------------------------------------- Accumulated net investment income 6,819,916 ---------------------------------------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (317,858,614) ---------------------------------------------------------------------------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 282,389,612 ---------------- NET ASSETS $ 2,034,133,958 ================ ---------------------------------------------------------------------------------------------------------------------------------- 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 $1,652,282,029 and 42,890,708 shares of beneficial interest outstanding) $38.52 ---------------------------------------------------------------------------------------------------------------------------------- Service Shares: Net asset value, redemption price per share and offering price per share (based on net assets of $381,851,929 and 9,988,083 shares of beneficial interest outstanding) $38.23
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 10 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA STATEMENT OF OPERATIONS For the Year Ended December 31, 2005 --------------------------------------------------------------------------------
---------------------------------------------------------------------------------------- INVESTMENT INCOME ---------------------------------------------------------------------------------------- Dividends (net of foreign withholding taxes of $300,038) $ 20,637,580 ---------------------------------------------------------------------------------------- Interest 1,411,383 -------------- Total investment income 22,048,963 ---------------------------------------------------------------------------------------- EXPENSES ---------------------------------------------------------------------------------------- Management fees 12,603,901 ---------------------------------------------------------------------------------------- Distribution and service plan fees--Service shares 751,102 ---------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Non-Service shares 11,133 Service shares 10,230 ---------------------------------------------------------------------------------------- Shareholder communications: Non-Service shares 103,635 Service shares 19,714 ---------------------------------------------------------------------------------------- Trustees' compensation 33,689 ---------------------------------------------------------------------------------------- Custodian fees and expenses 26,918 ---------------------------------------------------------------------------------------- Administration service fees 1,500 ---------------------------------------------------------------------------------------- Other 66,282 -------------- Total expenses 13,628,104 Less reduction to custodian expenses (11,459) -------------- Net expenses 13,616,645 ---------------------------------------------------------------------------------------- NET INVESTMENT INCOME 8,432,318 ---------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ---------------------------------------------------------------------------------------- Net realized gain (loss) on: Investments (33,036,729) Foreign currency transactions 18,373 -------------- Net realized loss (33,018,356) ---------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on: Investments 127,868,004 Translation of assets and liabilities denominated in foreign currencies (6,625,121) -------------- Net change in unrealized appreciation 121,242,883 ---------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 96,656,845 ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 11 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2005 2004 -------------------------------------------------------------------------------------------------------------- OPERATIONS -------------------------------------------------------------------------------------------------------------- Net investment income $ 8,432,318 $ 18,471,549 -------------------------------------------------------------------------------------------------------------- Net realized gain (loss) (33,018,356) 83,060,536 -------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation 121,242,883 27,361,213 ----------------------------------- Net increase in net assets resulting from operations 96,656,845 128,893,298 -------------------------------------------------------------------------------------------------------------- DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS -------------------------------------------------------------------------------------------------------------- Dividends from net investment income: Non-Service shares (15,541,862) (5,404,905) Service shares (1,926,965) (357,596) -------------------------------------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS -------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from beneficial interest transactions: Non-Service shares (181,635,386) (53,964,830) Service shares 117,658,602 114,818,206 -------------------------------------------------------------------------------------------------------------- NET ASSETS -------------------------------------------------------------------------------------------------------------- Total increase 15,211,234 183,984,173 -------------------------------------------------------------------------------------------------------------- Beginning of period 2,018,922,724 1,834,938,551 ----------------------------------- End of period (including accumulated net investment income of $6,819,916 and $17,399,802, respectively) $ 2,034,133,958 $ 2,018,922,724 ===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 12 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 36.99 $ 34.70 $ 26.62 $ 36.58 $ 46.63 ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income .18 1 .35 1,2 .12 .11 .18 Net realized and unrealized gain (loss) 1.68 2.05 8.07 (9.89) (5.86) --------------------------------------------------------------------------------------- Total from investment operations 1.86 2.40 8.19 (9.78) (5.68) ------------------------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.33) (.11) (.11) (.18) (.27) Distributions from net realized gain -- -- -- -- (4.10) --------------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (.33) (.11) (.11) (.18) (4.37) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 38.52 $ 36.99 $ 34.70 $ 26.62 $ 36.58 ======================================================================================= ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN, AT NET ASSET VALUE 3 5.10% 6.93% 30.94% (26.86)% (12.58)% ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $1,652,282 $1,770,273 $1,715,240 $1,338,769 $1,975,345 ------------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $1,658,910 $1,708,511 $1,468,297 $1,630,430 $2,000,314 ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: 4 Net investment income 0.47% 0.99% 2 0.39% 0.35% 0.51% Total expenses 0.66% 5 0.66% 5 0.67% 5 0.66% 5 0.68% 5 ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 70% 44% 48% 32% 45%
1. Per share amounts calculated based on the average shares outstanding during the period. 2. Net investment income per share and the net investment income ratio include $.16 and 0.43%, respectively, resulting from a special dividend from Microsoft Corp. in November 2004. 3. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year. 5. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 13 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA FINANCIAL HIGHLIGHTS Continued --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 1 -------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 36.73 $ 34.53 $ 26.53 $ 36.56 $ 31.66 -------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .08 2 .29 2,3 .08 .20 -- 4 Net realized and unrealized gain (loss) 1.69 1.99 8.02 (10.05) 4.90 ------------------------------------------------------------------------------ Total from investment operations 1.77 2.28 8.10 (9.85) 4.90 -------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.27) (.08) (.10) (.18) -- Distributions from net realized gain -- -- -- -- -- ------------------------------------------------------------------------------ Total dividends and/or distributions to shareholders (.27) (.08) (.10) (.18) -- -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 38.23 $ 36.73 $ 34.53 $ 26.53 $ 36.56 ============================================================================== -------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 5 4.87% 6.62% 30.69% (27.09)% 15.51% -------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA -------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $381,852 $248,649 $119,699 $ 18,260 $ 90 -------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $301,780 $184,273 $ 48,178 $ 6,263 $ 16 -------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 6 Net investment income 0.20% 0.85% 3 0.14% 0.26% 0.11% Total expenses 0.91% 7 0.91% 7 0.94% 7 0.81% 7,8 0.81% 7 -------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 70% 44% 48% 32% 45%
1. For the period from September 18, 2001 (inception of offering) to December 31, 2001. 2. Per share amounts calculated based on the average shares outstanding during the period. 3. Net investment income per share and the net investment income ratio include $.16 and 0.43%, respectively, resulting from a special dividend from Microsoft Corp. in November 2004. 4. Less than $0.005 per share. 5. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 6. Annualized for periods of less than one full year. 7. Reduction to custodian expenses less than 0.01%. 8. Voluntary waiver of transfer agent fees less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 14 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Oppenheimer Capital Appreciation Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds, an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek capital appreciation by investing in securities of well-known, established companies. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The 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. Both classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. The following is a summary of significant accounting policies consistently followed by the Fund. -------------------------------------------------------------------------------- SECURITIES VALUATION. The Fund calculates the net asset value of its shares as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Securities may be valued primarily using dealer-supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Securities listed or traded on National Stock Exchanges or other domestic 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. Securities traded on NASDAQ are valued based on the closing price provided by NASDAQ 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 traded on foreign exchanges are valued based on the last sale price on the principal exchange on which the security is traded, in the country that is identified by the portfolio pricing service, prior to the time when the Fund's assets are valued. In the absence of a sale, the security is valued at the official closing price on the principal exchange. Corporate, government and municipal debt instruments having a remaining maturity in excess of sixty days and all mortgage-backed securities will be valued at the mean between the "bid" and "asked" prices. Futures contracts traded on a commodities or futures exchange will be valued at the final settlement price or official closing price on the principal exchange as reported by such principal exchange at its trading session ending at, or most recently prior to, the time when the Fund's assets are valued. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value. Foreign and domestic securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund's assets are valued but after the close of their respective exchanges will be fair valued. Fair value is determined in good faith using 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). -------------------------------------------------------------------------------- FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in U.S. dollars. The values of securities denominated in foreign currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Foreign exchange rates may be valued primarily using dealer supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in exchange rates. 15 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued 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. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. 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. 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 on a daily basis 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 comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. The tax components of capital shown in the table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes. NET UNREALIZED APPRECIATION BASED ON COST OF UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED SECURITIES AND OTHER NET INVESTMENT LONG-TERM LOSS INVESTMENTS FOR FEDERAL INCOME GAIN CARRYFORWARD 1,2,3 INCOME TAX PURPOSES ------------------------------------------------------------------------------ $6,847,723 $-- $311,768,028 $277,481,674 1. As of December 31, 2005, the Fund had $311,768,028 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. As of December 31, 2005, details of the capital loss carryforwards were as follows: EXPIRING ---------------------------- 2010 $ 83,313,825 2011 193,776,365 2013 34,677,838 ------------ Total $311,768,028 ============ 2. During the fiscal year ended December 31, 2005, the Fund did not utilize any capital loss carryforward. 3. During the fiscal year ended December 31, 2004, the Fund utilized $83,521,467 of capital loss carryforward to offset capital gains realized in that fiscal year. Net investment income (loss) and net realized gain (loss) may differ for financial statement and 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. Accordingly, the following amounts have been reclassified for December 31, 2005. Net assets of the Fund were unaffected by the reclassifications. REDUCTION TO REDUCTION TO ACCUMULATED ACCUMULATED NET NET INVESTMENT REALIZED LOSS INCOME ON INVESTMENTS ---------------------------------------- $221,093 $221,093 16| OPPENHEIMER CAPITAL APPRECIATION FUND/ VA The tax character of distributions paid during the years ended December 31, 2005 and December 31, 2004 was as follows: YEAR ENDED YEAR ENDED DECEMBER 31, 2005 DECEMBER 31, 2004 -------------------------------------------------------------------------- Distributions paid from: Ordinary income $17,468,827 $5,762,501 The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 31, 2005 are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss. Federal tax cost of securities $ 1,755,835,509 ================ Gross unrealized appreciation $ 320,276,404 Gross unrealized depreciation (42,794,730) ---------------- Net unrealized appreciation $ 277,481,674 ================ During the year ending December 31, 2005, the Fund recorded a decrease to cost of investments, resulting in an increase to net unrealized appreciation of $1,182,607, and a decrease to accumulated net investment income in the amount of $1,322,284, and a decrease to accumulated net realized loss of $139,677 to adjust for the recharacterization of certain stock dividends received in prior years. -------------------------------------------------------------------------------- TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of "Other" within the asset section of the Statement of Assets and Liabilities. Deferral of trustees' fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund's assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the Plan. -------------------------------------------------------------------------------- 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. Income and capital gain distributions, if any, are declared and paid annually. -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts to the extent they are not offset by positive cash balances maintained by the Fund. The Reduction to Custodian Expenses line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings. -------------------------------------------------------------------------------- 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. 17 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued OTHER. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. -------------------------------------------------------------------------------- 2. SHARES OF BENEFICIAL INTEREST The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004 SHARES AMOUNT SHARES AMOUNT ----------------------------------------------------------------------------------------------------------- NON-SERVICE SHARES Sold 4,329,144 $ 158,705,810 5,578,990 $ 194,357,727 Dividends and/or distributions reinvested 429,927 15,541,862 155,940 5,404,905 Redeemed (9,732,224) (355,883,058) (7,294,682) (253,727,462) ----------------------------------------------------------- Net decrease (4,973,153) $(181,635,386) (1,559,752) $ (53,964,830) =========================================================== ----------------------------------------------------------------------------------------------------------- SERVICE SHARES Sold 4,094,952 $ 149,465,324 3,992,696 $ 138,774,693 Dividends and/or distributions reinvested 53,616 1,926,965 10,365 357,596 Redeemed (929,573) (33,733,687) (700,538) (24,314,083) ----------------------------------------------------------- Net increase 3,218,995 $ 117,658,602 3,302,523 $ 114,818,206 ===========================================================
-------------------------------------------------------------------------------- 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, 2005, were as follows: PURCHASES SALES ----------------------------------------------------------- Investment securities $1,332,467,118 $1,392,912,865 -------------------------------------------------------------------------------- 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 Fund which provides for a fee at an annual rate of 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million and 0.60% of average annual net assets over $800 million. -------------------------------------------------------------------------------- ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund's tax returns. -------------------------------------------------------------------------------- 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 per account fee. For the year ended December 31, 2005, the Fund paid $21,307 to OFS for services to the Fund. Additionally, funds offered in variable annuity separate accounts are subject to minimum fees of $10,000 per class, for class level assets of $10 million or more. Each class is subject to the minimum fee in the event that the per account fee does not equal or exceed the applicable minimum fee. 18 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA -------------------------------------------------------------------------------- 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, personal service and account maintenance for the Fund's Service shares. Under the plan, payments are made periodically at an annual rate of up to 0.25% of the average annual net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsor(s) of the insurance product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service shares. The impact of the service plan is to increase operating expenses of the Service shares, which results in lower performance compared to the Fund's shares that are not subject to a service fee. Fees incurred by the Fund under the plan are detailed in the Statement of Operations. -------------------------------------------------------------------------------- WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes to 0.35% of average annual net assets per class. This undertaking may be amended or withdrawn at any time. -------------------------------------------------------------------------------- 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 to settle specific purchases or sales of securities denominated in a foreign currency and for protection from adverse exchange rate fluctuation. 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 prevailing foreign currency exchange rates. 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 transaction. Contracts closed or settled with the same broker are recorded as net realized gains or losses. Such realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. As of December 31, 2005, the Fund had no outstanding foreign currency contracts. -------------------------------------------------------------------------------- 6. LITIGATION A consolidated amended complaint has been filed as putative derivative and class actions against the Manager, OFS and the Distributor, as well as 51 of the Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and former Directors or Trustees and 8 present and former officers of the funds. This complaint, initially filed in the U.S. District Court for the Southern District of New York on January 10, 2005 and amended on March 4, 2005, consolidates into a single action and amends six individual previously-filed putative derivative and class action complaints. Like those prior complaints, the complaint alleges that the Manager charged excessive fees for distribution and other costs, improperly used assets of the funds in the form of directed brokerage commissions and 12b-1 fees to pay brokers to promote sales of the funds, and failed to properly disclose the use of assets of the funds to make those payments in violation of the Investment Company Act of 1940 and the Investment Advisers Act of 1940. Also, like those prior complaints, the complaint further alleges that by permitting and/or participating in those actions, the Directors/Trustees and the Officers breached their fiduciary duties to shareholders of the funds under the Investment Company Act of 1940 and at common law. The complaint seeks unspecified compensatory and punitive damages, rescission of the funds' investment advisory agreements, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. The defendants believe that the allegations contained in the Complaints are without merit and that they have meritorious defenses against the claims asserted. The defendants intend to defend these lawsuits vigorously and to contest any claimed liability. The defendants believe that it is premature to render any opinion as to the likelihood of an outcome unfavorable to them and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. 19 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER CAPITAL APPRECIATION FUND/VA: We have audited the accompanying statement of assets and liabilities of Oppenheimer Capital Appreciation Fund/VA, a series of Oppenheimer Variable Account Funds, including the statement of investments, as of December 31, 2005, 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 each of the five years in the periods presented. 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 the standards of the Public Company Accounting Oversight Board (United States). 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. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. 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 Capital Appreciation Fund/VA as of December 31, 2005, 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 each of the five years in the periods presented, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Denver, Colorado February 13, 2006 20 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA FEDERAL INCOME TAX INFORMATION Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- In early 2006, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2005. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. Dividends, if any, paid by the Fund during the fiscal year ended December 31, 2005 which are not designated as capital gain distributions should be multiplied by 100% 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. 21 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities ("portfolio proxies") held by the Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund's voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at www.sec.gov. The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund's Form N-Q filings are available on the SEC's website at http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 22 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Each year, the Board of Trustees (the "Board"), including a majority of the independent Trustees, is required to determine whether to renew the Fund's investment advisory agreement (the "Agreement"). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information, that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance. The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager's services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. Outlined below is a summary of the principal information considered by the Board as well as the Board's conclusions. NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information on the nature and extent of the services provided to the Fund and information regarding the Manager's key personnel that provide such services. The Manager's duties include providing the Fund with the services of the portfolio managers and the Manager's investment team, who provide research, analysis and other advisory services in regard to the Fund's investments; securities trading services; oversight of third party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund's investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel that are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund's operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund's shares. The Manager also provides the Fund with office space, facilities and equipment. The Board also considered the quality of the services provided and the quality of the Manager's resources that are available to the Fund. The Board took account of the fact that the Manager has had over forty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager's administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager's key personnel and the size and functions of its staff providing investment management services to the Fund. The Board also considered compliance reports from the Fund's Chief Compliance Officer. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of William L. Wilby and Marc Baylin and the Manager's Growth Equity and Global Equity investment teams and analysts. Messrs. Wilby and Baylin have had over 23 and 15 years of experience, respectively, managing equity investments. The Board members also considered the totality of their experiences with the Manager, as directors or trustees of the Fund and other funds advised by the Manager. In light of the foregoing, the Board concluded that the Fund benefits from the services provided under the Agreement as a result of the Manager's experience, reputation, personnel, operations, and resources. INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the Manager provided information on the performance of the Fund and the Manager at each Board meeting, including comparative performance informa- 23 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited/Continued -------------------------------------------------------------------------------- tion. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund's historical performance to relevant market indices and to the performance of other large-cap core funds (including both funds advised by the Manager and funds advised by other investment advisers). The Board noted that the Fund's three-year and ten-year performance were both better than its peer group median, although its one-year and five-year performance were below its peer group median. COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board considered information regarding the Manager's costs in serving as the Fund's investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager's profitability from its relationship with the Fund. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also evaluated the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund, other large-cap core funds and other funds with comparable asset levels and distribution features. The Board noted that the Fund's contractual and actual management fees are lower than its peer group average but higher than its peer group median and that its total expenses are lower than both its peer group average and median. In light of this, the Board concluded that the management fee was reasonable. ECONOMIES OF SCALE. The Board considered whether the Manager may realize economies of scale in managing and supporting the Fund, whether those economies of scale benefit the Fund's shareholders and the current level of Fund assets in relation to the Fund's management fee breakpoints, which are intended to share with shareholders economies of scale that may exist as the Fund grows. OTHER BENEFITS TO THE MANAGER. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager's affiliates and research provided to the Manager in connection with permissible brokerage arrangements (soft dollar arrangements). The Board also considered the nature and quality of services provided by affiliates of the Manager, which it reviews at other times during the year in connection with the renewal of the Fund's service agreements. The Board considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide services to the Fund and that maintaining the financial viability of the Manager is important in order for the Manager to continue to provide significant services to the Fund and its shareholders. CONCLUSIONS. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees' counsel are both independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules. Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the advisory agreement for another year. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the factors together. The Board judged the terms and conditions of the advisory agreement, including the management fee, in light of all of the surrounding circumstances. 24 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA TRUSTEES AND OFFICERS Unaudited --------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------ NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD; NUMBER OF THE FUNDS, LENGTH OF SERVICE, PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN AGE INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL. WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Mortgage Company (since Chairman of the Board of 1991), Centennial State Mortgage Company (since 1994), and The El Paso Mortgage Company (since 1993); Trustees (since 2003), Chairman of the following private companies: Ambassador Media Corporation (since 1984) and Broadway Trustee (since 1999) Ventures (since 1984); Director of the following: Helmerich & Payne, Inc. (oil and gas Age: 68 drilling/production company) (since 1992), Campus Crusade for Christ (since 1991) and The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (since 2002); former Chairman of the following: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (insurance agency) (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private equity funds) Trustee (since 1993) (until February 2001); Chairman, President and Chief Executive Officer of A.G. Edwards Capital, Inc. Age: 74 (until March 2000); Director of A.G. Edwards & Sons, Inc. (brokerage company) (until 2000) and A.G. Edwards Trust Company (investment adviser) (until 2000); Vice Chairman and Director of A.G. Edwards, Inc. (until March 1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March 1999); Chairman of A.G. Edwards Trust Company (until March 1999) and A.G.E. Asset Management (investment adviser) (until March 1999). Oversees 38 portfolios in the OppenheimerFunds complex. GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation (December 1991-April Trustee (since 1999) 1999); President, Treasurer and Director of Centennial Capital Corporation (June 1989-April 1999); Age: 69 Chief Executive Officer and Director of MultiSource Services, Inc. (March 1996-April 1999); Mr. Bowen held several positions with the Manager and with subsidiary or affiliated companies of the Manager (September 1987-April 1999). Oversees 38 portfolios in the OppenheimerFunds complex. EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since June 2000); Trustee (since 1999) Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002); Partner at Age: 67 PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (July 1994-June 1998). Oversees 38 portfolios in the OppenheimerFunds complex. JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Northwestern Energy Trustee (since 1990) Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals (October Age: 64 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. ("OAC") (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 38 portfolios in the OppenheimerFunds complex. SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September 1984). Mr. Freedman held Trustee (since 1996) several positions with the Manager and with subsidiary or affiliated companies of the Manager (until Age: 65 October 1994). Oversees 38 portfolios in the OppenheimerFunds complex.
25 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA TRUSTEES AND OFFICERS Unaudited --------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------- BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) (since February Trustee (since 2002) 2000); Director of The California Endowment (philanthropic organization) (since April 2002); Director Age: 59 of Community Hospital of Monterey Peninsula (since February 2002); Vice Chair of American Funds' Emerging Markets Growth Fund, Inc. (mutual fund) (since October 1991); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation and The University of Michigan; Advisor at Credit Suisse First Boston's Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member of the investment committee of Hartford Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund (2000- 2003). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT J. MALONE, Director of Jones International University (educational organization) (since August 2005); Chairman, Trustee (since 2002) Chief Executive Officer and Director of Steele Street State Bank (commercial banking) (since August Age: 61 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 38 portfolios in the OppenheimerFunds complex. F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment company) Trustee (since 2000) (since 1996) and MML Series Investment Fund (investment company) (since 1996), Trustee and Chairman Age: 63 of the Investment Committee (since 1994) of the Worcester Polytech Institute (private university); President and Treasurer of the SIS Funds (private charitable fund) (since January 1999); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Member of the Investment Committee of the Community Foundation of Western Massachusetts (1998-2003); and Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999). Oversees 40 portfolios in the OppenheimerFunds complex. ---------------------------------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW YORK, AND OFFICER NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES. JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President (since September 2000) President and Trustee (since of the Manager; President and Director or Trustee of other Oppenheimer funds; President and Director 2001) Age: 56 of OAC and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since November 2001); Chairman and Director of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since July 2001); President and Director of OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since July 2001); Director of the following investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 2001) and Director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director of DLB Acquisition Corporation (holding company parent of Babson Capital Management LLC) (since June 1995); Member of the Investment Company Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of the Manager (September 2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual Select Funds (open-end investment companies) (November 1999-November 2001); Director of C.M. Life Insurance Company (September 1999-August 2000); President, Chief Executive Officer and Director of MML Bay State Life Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 87 portfolios in the OppenheimerFunds complex.
26 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
---------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. BAYLIN, WILBY AND ZACK, THE FUND TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT DEATH OR REMOVAL. MARC L. BAYLIN, Vice President of the Manager and a member of the Growth Equity Investment Team. He was Managing Vice President and Portfolio Director and Lead Portfolio Manager at JP Morgan Fleming Investment Management from June 2002 to Manager (since 2005) August 2005 and was a Vice President of T. Rowe Price, where he was an analyst from June 1993 and Age: 37 a portfolio manager from March 1999 to June 2002. A portfolio manager of other Oppenheimer funds. WILLIAM L. WILBY. Senior Vice President of the Manager since July 1994 and Senior Investment Officer and Director of Vice President and Portfolio Equities of the Manager since July 2004. Mr. Wilby was Director of International Equities of the Manager (since 2005) Manager from May 2000 through July 2004 and Senior Vice President of HarbourView Asset Management Age: 61 Corporation from May 1999 through November 2001. Before joining OppenheimerFunds in 1991, Mr. Wilby was an International Strategist at Brown Brothers Harriman & Co., a Managing Director and Portfolio Manager at AIG Global Investors, an International Pension Manager at Northern Trust Bank in Chicago and an International Financial Economist at Northern Trust Bank and at the Federal Reserve Bank in Chicago. A portfolio manager of other Oppenheimer funds. MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Vice President Vice President and Chief of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Shareholder Compliance Officer Services, Inc. (since June 1983); Vice President and Director of Internal Audit of the Manager (since 2004) (1997-February 2004). An officer of 87 portfolios in the OppenheimerFunds complex. Age: 55 BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the following: Treasurer and Principal HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder Services, Financial and Accounting Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer Partnership Holdings, Inc. Officer (since 1999) (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International Age: 46 Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex. ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the Manager; Vice President and General Counsel and Director of the Distributor (since December 2001); General Counsel of Centennial Secretary (since 2001) Asset Management Corporation (since December 2001); Senior Vice President and General Counsel of Age: 57 HarbourView Asset Management Corporation (since December 2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General Counsel and Director of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON REQUEST, BY CALLING 1.800.981.2871. 27 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA OPPENHEIMER CORE BOND FUND/VA FUND PERFORMANCE DISCUSSION -------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. We are pleased to report that Oppenheimer Core Bond Fund/VA delivered a favorable, competitive yield and total return for the 12-month period ended December 31, 2005, during which the Fund outpaced the median of its peer group of similarly managed funds while slightly outperforming its primary benchmark, the Citigroup Broad Investment Grade Bond Index. 2 We attribute the Fund's positive fiscal-year results primarily to active management of the portfolio's exposure to interest-rate risk, and secondarily, to sector decisions and individual security selection among corporate bonds and agency and mortgage-related securities. Throughout the period, we generally kept the portfolio's duration, or interest-rate sensitivity, significantly lower than that of our benchmark. Since the year was underscored by substantial generally rising rates, this decision proved to be the most prominent contributor to performance for the year. At the same time, while maintaining our less-than-market exposure to interest-rate risk, we made slight adjustments to our interest-rate positioning at various points throughout the year so as to capitalize on interest-rate shifts and movements in the yield curve as they occurred. As such, our flexible, active management of the portfolio's duration, while maintaining an overall short duration position, also substantially benefited returns. Although our overall exposure to the mortgage sector did not support performance as strongly as it did last year, successful security selection within the mortgage category added to returns this year. For example, our decision to invest in seasoned, older mortgage securities that were showing reasonably good levels of prepayment activity helped performance, as these mortgages managed to fare well amidst a generally struggling mortgage market. Within the portfolio's exposure to the credit (corporate bond) sector, our decision to underweight longer-term, BBB-rated credit securities added to performance, since this segment of the investment grade corporate bond market--generally considered to be among the riskiest types of credit securities in that market--underperformed the corporate sector as a whole. Our substantially underweighted exposure to these bonds supported the Fund's returns for the year, as did our decision to underweight industrial bonds, which also lagged. At the same time, the fact that we chose to overweight our exposure to the financials sector, particularly to brokerage companies, definitively added to returns, as this sector of the high-grade corporate market fared well amidst positive earnings results throughout 2005. Finally, our tactical allocation to high-yield bonds in general helped buoy performance this year. On the negative side, security selection within the high-yield, or "junk" allocation of the portfolio detracted from returns. Our decision to own a few, select high-yield bonds issued by companies in the auto, auto parts and homebuilding sectors cost us a few basis points of performance, as some of the bonds in these sectors struggled. Similarly, had we maintained the underweighted exposure to longer-maturity industrial bonds that we established early in the period, we might have preserved a few basis points of performance. Our decision to move to a neutral exposure to these bonds later in the year hurt us when these types of corporate bonds lagged the general market. 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, 2005. In the case of non-service shares, performance is measured over a ten-year period. In the case of service shares, performance is measured from inception of the class on May 1, 2002. 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 graph assumes that all dividends and capital gains distributions were reinvested in additional shares. Beginning April 29, 2005, the Fund changed its primary index from the Lehman Brothers Credit Index to the Citigroup Broad Investment Grade Bond Index because the Fund believes that the Citigroup Broad Investment Grade Bond Index is a more appropriate benchmark reflecting the types of securities in which the Fund invests. The Citigroup Broad Investment Grade Bond Index consists of securities having a higher grade and a lower modified duration than the securities in the Lehman Brothers Credit Index. The Citigroup Broad Investment Grade Bond Index produced a total return of 2.57% for the 12 months ended December 31, 2005. 2. The Citigroup Broad Investment Grade Bond Index consists of securities having a higher grade and a lower modified duration than the securities in the Lehman Brothers Credit Index. The Citigroup Broad Investment Grade Bond Index produced a total return of 2.57% for the 12 months ended December 31, 2005. 5 | OPPENHEIMER CORE BOND FUND/VA FUND PERFORMANCE DISCUSSION -------------------------------------------------------------------------------- The Fund's performance is compared to the performance of its former primary benchmark, the Lehman Brothers Credit Index, a broad-based, unmanaged index of publicly-issued non-convertible investment grade corporate debt of U.S. issuers, widely recognized as a measure of the U.S. fixed-rate corporate bond market. Performance is also compared to its new primary benchmark, the Citigroup Broad Investment Grade Bond Index, a market-capitalization weighted index that includes fixed-rate Treasury, government-sponsored, corporate and mortgage securities. The Fund has also added a secondary benchmark, the Lehman Brothers Aggregate Bond Index, an unmanaged index of U.S. corporate and government bonds, to which performance is compared. Index performance reflects the reinvestment of income but does not consider the effect of transaction costs, and none of the data in the graphs shows the effect of taxes. 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. 6 | OPPENHEIMER CORE BOND FUND/VA NON-SERVICE SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Core Bond Fund/VA (Non-Service) Lehman Brothers Credit Index Citigroup Broad Investment Grade Bond Index Lehman Brothers Aggregate Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Citigroup Oppenheimer Lehman Broad Core Bond Brothers Investment Fund/VA Lehman Brothers Aggregate Grade (Non-Service) Credit Index** Bond Index Bond Index 12/31/1995 10,000 10,000 10,000 10,000 03/31/1996 9,871 9,742 9,823 9,825 06/30/1996 9,967 9,785 9,879 9,874 09/30/1996 10,169 9,981 10,061 10,058 12/31/1996 10,480 10,328 10,363 10,362 03/31/1997 10,434 10,225 10,305 10,308 06/30/1997 10,782 10,646 10,684 10,680 09/30/1997 11,128 11,063 11,039 11,035 12/31/1997 11,449 11,385 11,364 11,360 03/31/1998 11,613 11,559 11,540 11,543 06/30/1998 11,901 11,857 11,810 11,810 09/30/1998 12,238 12,287 12,309 12,300 12/31/1998 12,228 12,361 12,351 12,350 03/31/1999 12,189 12,274 12,289 12,293 06/30/1999 12,022 12,082 12,181 12,179 09/30/1999 11,990 12,116 12,264 12,267 12/31/1999 12,043 12,120 12,249 12,248 03/31/2000 12,163 12,293 12,519 12,516 06/30/2000 12,277 12,444 12,737 12,728 09/30/2000 12,504 12,826 13,121 13,116 12/31/2000 12,777 13,258 13,673 13,667 03/31/2001 13,292 13,824 14,088 14,089 06/30/2001 13,464 13,971 14,168 14,161 09/30/2001 13,993 14,507 14,821 14,829 12/31/2001 13,772 14,637 14,828 14,832 03/31/2002 13,727 14,598 14,842 14,842 06/30/2002 14,098 15,020 15,390 15,364 09/30/2002 14,656 15,694 16,095 16,071 12/31/2002 15,014 16,177 16,348 16,328 03/31/2003 15,316 16,565 16,576 16,557 06/30/2003 15,793 17,360 16,991 16,982 09/30/2003 15,892 17,335 16,966 16,953 12/31/2003 16,032 17,421 17,019 17,014 03/31/2004 16,501 17,992 17,472 17,471 06/30/2004 16,133 17,376 17,045 17,045 09/30/2004 16,677 18,105 17,590 17,601 12/31/2004 16,913 18,335 17,758 17,776 03/31/2005 16,870 18,141 17,673 17,686 06/30/2005 17,319 18,789 18,204 18,239 09/30/2005 17,257 18,601 18,082 18,116 12/31/2005 17,350 18,693 18,189 18,232 AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/05 1-Year 2.59% 5-Year 6.31% 10-Year 5.66% SERVICE SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Core Bond Fund/VA (Service) Lehman Brothers Credit Index Citigroup Broad Investment Grade Bond Index Lehman Brothers Aggregate Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Citigroup Oppenheimer Lehman Broad Core Bond Brothers Investment Fund/VA Lehman Brothers Aggregate Grade (Service) Credit Index** Bond Index Bond Index 05/01/2002 10,000 10,000 10,000 10,000 06/30/2002 10,153 10,148 10,172 10,159 09/30/2002 10,554 10,604 10,638 10,627 12/31/2002 10,803 10,930 10,806 10,797 03/31/2003 11,017 11,192 10,956 10,948 06/30/2003 11,350 11,729 11,230 11,229 09/30/2003 11,411 11,712 11,214 11,210 12/31/2003 11,512 11,770 11,249 11,251 03/31/2004 11,839 12,156 11,548 11,553 06/30/2004 11,564 11,740 11,266 11,271 09/30/2004 11,955 12,232 11,626 11,638 12/31/2004 12,113 12,388 11,737 11,754 03/31/2005 12,074 12,257 11,681 11,695 06/30/2005 12,385 12,695 12,032 12,060 09/30/2005 12,341 12,567 11,951 11,979 12/31/2005 12,396 12,630 12,022 12,056 AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/05 1-Year 2.33% 5-Year N/A Since Inception (5/1/02) 6.03% THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT. 7 | OPPENHEIMER CORE BOND FUND/VA FUND EXPENSES -------------------------------------------------------------------------------- FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include redemption fees, if any; and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 31, 2005. ACTUAL EXPENSES. The "actual" lines of the table provide information about actual account values and actual expenses. You may use the information on this line for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the "actual" line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio, and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the "hypothetical" lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included, your costs would have been higher. -------------------------------------------------------------------------------- BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE 6 MONTHS ENDED (7/1/05) (12/31/05) DECEMBER 31, 2005 -------------------------------------------------------------------------------- Non-Service shares Actual $1,000.00 $1,001.80 $3.79 -------------------------------------------------------------------------------- Non-Service shares Hypothetical 1,000.00 1,021.42 3.83 -------------------------------------------------------------------------------- Service shares Actual 1,000.00 1,000.90 5.26 -------------------------------------------------------------------------------- Service shares Hypothetical 1,000.00 1,019.96 5.31 Hypothetical assumes 5% annual return before expenses. Expenses are equal to the Fund's annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Those annualized expense ratios based on the 6-month period ended December 31, 2005 are as follows: CLASS EXPENSE RATIOS ------------------------------------ Non-Service shares 0.75% ------------------------------------ Service shares 1.04 ------------------------------------------------------------------------------- 8 | OPPENHEIMER CORE BOND FUND/VA STATEMENT OF INVESTMENTS December 31, 2005 ------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------- ASSET-BACKED SECURITIES--11.5% ------------------------------------------------------------------------------- Ace Securities Corp., Home Equity Loan Pass-Through Certificates, Series 2002-HE7, Cl. A2B, 4.559%, 11/25/35 1 $ 960,000 $ 960,593 ------------------------------------------------------------------------------- Aesop Funding II LLC, Automobile Asset-Backed Certificates, Series 2005-1A, Cl. A2, 4.43%, 4/20/08 1 640,000 640,457 ------------------------------------------------------------------------------- Capital Auto Receivables Asset Trust, Automobile Mtg.-Backed Nts., Series 2004-2, Cl. A3, 3.58%, 1/15/09 2,250,000 2,208,735 ------------------------------------------------------------------------------- Centex Home Equity Co. LLC, Home Equity Loan Asset-Backed Certificates: Series 2004-D, Cl. AF1, 2.98%, 4/25/20 196,979 196,425 Series 2005-B, Cl. AF1, 4.02%, 3/26/35 389,902 387,895 Series 2005-C, Cl. AF1, 4.196%, 6/25/35 1,177,416 1,171,206 Series 2005-D, Cl. AF1, 5.04%, 10/25/35 2,092,608 2,087,090 Series 2005-D, Cl. AV2, 4.649%, 10/25/35 1 1,920,000 1,921,186 ------------------------------------------------------------------------------- Chase Manhattan Auto Owner Trust, Automobile Loan Pass- Through Certificates, Series 2005-A, Cl. A2, 3.72%, 12/15/07 2,070,000 2,061,116 ------------------------------------------------------------------------------- CIT Equipment Collateral, Equipment Receivable-Backed Nts., Series 2004-DFS, Cl. A2, 2.66%, 11/20/06 905,022 902,437 ------------------------------------------------------------------------------- Citibank Credit Card Issuance Trust, Credit Card Receivable Nts., Series 2003-C4, Cl. C4, 5%, 6/10/15 310,000 304,300 ------------------------------------------------------------------------------- Citigroup Mortgage Loan Trust, Inc., CMO, Series 2005-WF2, Cl. AF2, 4.922%, 8/25/35 1 2,675,498 2,667,100 ------------------------------------------------------------------------------- Consumer Credit Reference Index Securities Program, Credit Card Asset-Backed Certificates, Series 2002-B, Cl. FX, 10.421%, 3/22/07 2 1,520,000 1,518,672 ------------------------------------------------------------------------------- Countrywide Asset-Backed Certificates, Inc., Home Equity Asset-Backed Certificates: Series 2002-4, Cl. A1, 4.749%, 2/25/33 1 35,747 35,817 Series 2005-7, Cl. AF1B, 4.317%, 11/25/35 1 1,416,692 1,409,308 Series 2005-16, Cl. 2AF2, 5.382%, 5/25/36 1 670,000 670,000 Series 2005-17, Cl. 1AF1, 4.58%, 12/27/35 1 1,390,000 1,389,956 Series 2005-17, Cl. 1AF2, 5.363%, 12/27/35 1 440,000 440,108 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------- ASSET-BACKED SECURITIES Continued ------------------------------------------------------------------------------- DaimlerChrysler Auto Trust, Automobile Loan Pass-Through Certificates: Series 2004-B, Cl. A2, 2.48%, 2/8/07 $ 16,377 $ 16,379 Series 2004-C, Cl. A2, 2.62%, 6/8/07 1,118,755 1,115,993 ------------------------------------------------------------------------------- Equity One ABS, Inc., Home Equity Asset-Backed Security, Series 2004-3, Cl. AF2, 3.80%, 7/25/34 1 410,000 408,373 ------------------------------------------------------------------------------- First Franklin Mortgage Loan Asset-Backed Certificates, Home Equity Receivables, Series 2005-FF10, Cl. A3, 4.589%, 11/25/35 1 2,840,000 2,841,754 ------------------------------------------------------------------------------- Ford Credit Auto Owner Trust, Automobile Loan Pass-Through Certificates: Series 2005-A, Cl. A3, 3.48%, 11/17/08 1,630,000 1,610,414 Series 2005-B, Cl. A2, 3.78%, 9/15/07 1,398,528 1,395,617 ------------------------------------------------------------------------------- Honda Auto Receivables Owner Trust, Automobile Receivable Obligations: Series 2005-1, Cl. A2, 3.21%, 5/21/07 661,288 659,480 Series 2005-3, Cl. A2, 3.73%, 10/18/07 1,930,000 1,920,780 ------------------------------------------------------------------------------- Household Home Equity Loan Trust, Home Equity Loan Pass- Through Certificates, Series 2005-3, Cl. A1, 4.63%, 1/20/35 1 1,408,058 1,409,063 ------------------------------------------------------------------------------- Lehman XS Trust, Home Equity Mtg. Pass-Through Certificates: Series 2005-4, Cl. 2A1B, 5.17%, 10/25/35 1,503,137 1,504,079 Series 2005-10, Cl. 2-A3B, 5.55%, 12/25/06 1,260,000 1,259,803 ------------------------------------------------------------------------------- Litigation Settlement Monetized Fee Trust, Asset-Backed Certificates, Series 2001-1A, Cl. A1, 8.33%, 4/25/31 3 3,490,311 3,547,552 ------------------------------------------------------------------------------- NC Finance Trust, CMO, Series 1999-I, Cl. ECFD, 1.079%, 1/25/29 3 3,370,016 775,104 ------------------------------------------------------------------------------- Nissan Auto Lease Trust, Automobile Lease Obligations, Series 2004-A, Cl. A2, 2.55%, 1/15/07 148,836 148,799 ------------------------------------------------------------------------------- Onyx Acceptance Owner Trust, Automobile Receivable Obligations, Series 2005-B, Cl. A2, 4.03%, 4/15/08 1,530,000 1,525,297 9 | OPPENHEIMER CORE BOND FUND/VA STATEMENT OF INVESTMENTS Continued ------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------- ASSET-BACKED SECURITIES Continued ------------------------------------------------------------------------------- Popular ABS Mortgage Pass-Through Trust, Home Equity Pass-Through Certificates: Series 2004-5, Cl. A F2, 3.735%, 11/10/34 1 $ 620,000 $ 612,579 Series 2005-1, Cl. A F2, 3.914%, 5/25/35 1 450,000 443,802 Series 2005-2, Cl. A F2, 4.415%, 4/25/35 1 730,000 722,848 Series 2005-6, Cl. A3, 5.68%, 1/25/36 1 690,000 690,000 ------------------------------------------------------------------------------- Residential Asset Mortgage Products, Inc., Home Equity Asset-Backed Pass-Through Certificates, Series 2004-RS7, Cl. AI3, 4.45%, 7/25/28 1,500,000 1,492,463 ------------------------------------------------------------------------------- Structured Asset Securities Corp., Home Equity Obligations, Series 2003-25XS, Cl. A4, 4.51%, 8/25/33 525,831 524,202 ------------------------------------------------------------------------------- Tobacco Settlement Authority, Asset-Backed Securities, Series 2001-A, 6.79%, 6/1/10 1,850,000 1,933,047 ------------------------------------------------------------------------------- USAA Auto Owner Trust, Automobile Loan Asset-Backed Nts.: Series 2004-2, Cl. A2, 2.41%, 2/15/07 55,329 55,311 Series 2004-3, Cl. A2, 2.79%, 6/15/07 500,061 499,264 ------------------------------------------------------------------------------- Volkswagen Auto Lease Trust, Automobile Lease Asset-Backed Securities, Series 2004-A, Cl. A2, 2.47%, 1/22/07 529,394 528,519 ------------------------------------------------------------------------------- Wachovia Auto Owner Trust, Automobile Receivable Nts., Series 2004-B, Cl. A2, 2.40%, 5/21/07 259,729 259,367 ------------------------------------------------------------------------------- Wells Fargo Home Equity Trust, Home Equity Asset-Backed Certificates, Series 2004-2, Cl. AI1B, 2.94%, 9/25/18 1 1,073,354 1,065,784 ------------------------------------------------------------------------------- Whole Auto Loan Trust, Automobile Loan Receivable Certificates, Series 2004-1, Cl. A2A, 2.59%, 5/15/07 796,141 793,206 -------------- Total Asset- Backed Securities (Cost $53,331,919) 50,731,280 ------------------------------------------------------------------------------- MORTGAGE-BACKED OBLIGATIONS--77.2% ------------------------------------------------------------------------------- GOVERNMENT AGENCY--62.7% ------------------------------------------------------------------------------- FHLMC/FNMA/SPONSORED--62.5% Fannie Mae Whole Loan, CMO Pass-Through Certificates, Trust 2004-W9, Cl.2A2, 7%, 2/25/44 853,587 894,398 ------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp.: 4.50%, 5/1/19 9,598,286 9,355,646 5%, 1/1/36 4 7,318,000 7,084,739 6%, 7/1/17-10/1/34 19,338,376 19,623,228 6.50%, 4/1/18-4/1/34 1,963,830 2,019,044 7%, 5/1/29-3/1/35 11,515,978 12,004,652 8%, 4/1/16 1,063,272 1,132,967 9%, 8/1/22-5/1/25 281,955 305,568 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------- FHLMC/FNMA/SPONSORED Continued Federal Home Loan Mortgage Corp., CMO Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates: Series 2326, Cl. ZP, 6.50%, 6/15/31 $ 690,083 $ 711,000 Series 2456, Cl. BD, 6%, 3/15/30 249,232 249,745 Series 2500, Cl. FD, 4.869%, 3/15/32 1 518,687 524,395 Series 2526, Cl. FE, 4.769%, 6/15/29 1 757,376 762,833 Series 2551, Cl. FD, 4.769%, 1/15/33 1 588,334 593,826 ------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., CMO Pass-Through Participation Certificates, Series 151, Cl. F, 9%, 5/15/21 50,585 50,508 ------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates, Series 2195, Cl. LH, 6.50%, 10/15/29 1,936,267 1,968,182 ------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security: Series 176, Cl. IO, 13.547%, 6/1/26 5 862,295 183,548 Series 183, Cl. IO, 11.169%, 4/1/27 5 1,306,024 271,694 Series 184, Cl. IO, 16.779%, 12/1/26 5 1,426,958 282,169 Series 192, Cl. IO, 15.506%, 2/1/28 5 337,869 69,063 Series 200, Cl. IO, 14.082%, 1/1/29 5 401,100 87,197 Series 206, Cl. IO, (8.658)%, 12/1/29 5 898,542 190,628 Series 2003-118, Cl. S, 20.029%, 12/25/33 5 4,452,581 486,405 Series 2130, Cl. SC, 7.80%, 3/15/29 5 939,101 70,028 Series 2796, Cl. SD, 12.317%, 7/15/26 5 1,481,155 114,951 Series 2920, Cl. S, 14.307%, 1/15/35 5 5,657,021 273,464 Series 3000, Cl. SE, 20.785%, 7/15/25 5 5,984,358 218,706 ------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., Principal-Only Stripped Mtg.-Backed Security, Series 176, Cl. PO, 4.467%, 6/1/26 6 351,312 296,356 ------------------------------------------------------------------------------- Federal National Mortgage Assn.: 4.50%, 3/1/19 427,430 417,013 5%, 6/1/18-7/1/18 5,567,591 5,517,766 5%, 1/1/36 4 28,720,000 27,831,461 5.50%, 3/1/33-1/1/34 17,241,161 17,120,113 5.50%, 1/1/21-1/1/36 4 93,165,000 92,483,494 6%, 7/1/17-11/1/32 19,010,848 19,379,393 6.50%, 3/1/11-11/1/31 3,498,859 3,606,370 6.50%, 1/1/36 4 20,425,000 20,954,784 7%, 11/1/17 2,325,321 2,417,771 7.50%, 1/1/08-1/1/26 49,399 51,519 8%, 5/1/17 12,783 13,636 8.50%, 7/1/32 119,264 129,141 10 | OPPENHEIMER CORE BOND FUND/VA PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------- FHLMC/FNMA/SPONSORED Continued Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates: Trust 1989-17, Cl. E, 10.40%, 4/25/19 $ 96,174 $ 105,637 Trust 1993-87, Cl. Z, 6.50%, 6/25/23 1,933,860 1,995,888 Trust 1998-58, Cl. PC, 6.50%, 10/25/28 1,614,759 1,672,003 Trust 2001-70, Cl. LR, 6%, 9/25/30 546,873 552,117 Trust 2001-72, Cl. NH, 6%, 4/25/30 328,566 331,114 Trust 2001-74, Cl. PD, 6%, 5/25/30 131,646 131,977 Trust 2002-77, Cl. WF, 4.77%, 12/18/32 1 914,234 921,223 Trust 2003-28, Cl. KG, 5.50%, 4/25/23 3,964,000 4,050,604 Trust 2004-101, Cl. BG, 5%, 1/25/20 1,908,000 1,882,994 Trust 2005-100, Cl. BQ, 5.50%, 11/25/25 1,120,000 1,104,646 ------------------------------------------------------------------------------- Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Interest-Only Stripped Mtg.-Backed Security: Trust 2002-47, Cl. NS, 9.594%, 4/25/32 5 1,763,065 142,167 Trust 2002-51, Cl. S, 9.762%, 8/25/32 5 1,618,499 131,099 ------------------------------------------------------------------------------- Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: Trust 222, Cl. 2, 13.902%, 6/1/23 5 2,764,925 655,930 Trust 240, Cl. 2, 15.709%, 9/1/23 5 3,274,430 681,880 Trust 252, Cl. 2, 7.505%, 11/1/23 5 2,163,710 477,796 Trust 273, Cl. 2, 14.694%, 8/1/26 5 645,636 133,261 Trust 303, Cl. IO, (5.151)%, 11/1/29 5 383,480 82,138 Trust 319, Cl. 2, 13.496%, 2/1/32 5 594,953 134,894 Trust 321, Cl. 2, 8.412%, 3/1/32 5 6,596,785 1,488,850 Trust 329, Cl. 2, 11.463%, 1/1/33 5 2,763,846 612,532 Trust 331, Cl. 9, (13.225)%, 2/1/33 5 1,566,593 355,447 Trust 333, Cl. 2, 11.720%, 3/1/33 5 6,731,416 1,508,393 Trust 334, Cl. 17, 2.277%, 2/1/33 5 1,078,978 239,090 Trust 338, Cl. 2, 10.275%, 6/1/33 5 5,492,556 1,227,440 Trust 346, Cl. 2, 10.433%, 12/1/33 5 5,543,938 1,229,327 Trust 350, Cl. 2, 12.244%, 2/1/34 5 5,883,199 1,304,704 Trust 2001-65, Cl. S, 21.164%, 11/25/31 5 2,657,880 245,981 Trust 2001-81, Cl. S, 11.605%, 1/25/32 5 687,447 59,856 Trust 2002-52, Cl. SD, 6.454%, 9/25/32 5 1,975,347 162,581 Trust 2002-77, Cl. SH, 12.545%, 12/18/32 5 835,935 78,739 Trust 2002-84, Cl. SA, 21.481%, 12/25/32 5 2,289,778 219,522 Trust 2003-4, Cl. S, 20.563%, 2/25/33 5 1,540,618 163,556 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------- FHLMC/FNMA/SPONSORED Continued Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: Continued Trust 2004-54, Cl. DS, 6.243%, 11/25/30 5 $ 1,394,541 $ 80,287 Trust 2005-6, Cl. SE, 13.927%, 2/25/35 5 3,887,194 202,238 Trust 2005-19, Cl. SA, 12.727%, 3/25/35 5 14,558,438 810,512 Trust 2005-40, Cl. SA, 13.682%, 5/25/35 5 3,310,799 176,407 Trust 2005-71, Cl. SA, 19.968%, 8/25/25 5 3,832,805 229,041 ------------------------------------------------------------------------------- Federal National Mortgage Assn., Principal-Only Stripped Mtg.-Backed Security, Trust 1993-184, Cl. M, 5.765%, 9/25/23 6 752,088 631,308 -------------- 275,960,580 ------------------------------------------------------------------------------- GNMA/GUARANTEED--0.2% Government National Mortgage Assn.: 7%, 1/15/09-5/15/09 31,363 32,329 8.50%, 8/15/17-12/15/17 383,846 414,228 ------------------------------------------------------------------------------- Government National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: Series 2001-21, Cl. SB, 3.873%, 1/16/27 5 1,477,254 101,722 Series 2002-15, Cl. SM, 0.947%, 2/16/32 5 1,775,879 123,487 Series 2004-11, Cl. SM, (0.493)%, 1/17/30 5 1,252,161 52,809 -------------- 724,575 ------------------------------------------------------------------------------- NON-AGENCY--14.5% ------------------------------------------------------------------------------- COMMERCIAL--12.2% Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates, Series 1996-MD6, Cl. A3, 7.408%, 11/13/29 1 1,200,000 1,245,687 ------------------------------------------------------------------------------- Asset Securitization Corp., Interest- Only Stripped Mtg.-Backed Security Collateralized Mtg. Obligations, Series 1997-D4, Cl. PS1, 4.501%, 4/14/29 5 40,459,738 1,158,666 ------------------------------------------------------------------------------- Banc of America Commercial Mortgage, Inc., Commercial Mtg. Pass-Through Certificates: Series 2004-6, Cl. A3, 4.512%, 12/10/42 1,720,000 1,666,468 Series 2005-2, Cl. A4, 4.783%, 7/10/43 1 2,550,000 2,503,629 Series 2005-3, Cl. A2, 4.501%, 7/10/43 2,100,000 2,050,396 11 | OPPENHEIMER CORE BOND FUND/VA STATEMENT OF INVESTMENTS Continued ------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------- COMMERCIAL Continued Banc of America Funding Corp., CMO Pass-Through Certificates, Series 2004-2, Cl. 2A1, 6.50%, 7/20/32 $ 2,187,555 $ 2,189,929 ------------------------------------------------------------------------------- Banc of America Mortgage Securities, Inc., CMO Pass-Through Certificates: Series 2004-8, Cl. 5A1, 6.50%, 5/25/32 1,643,675 1,669,358 Series 2004-E, Cl. 2A9, 3.712%, 6/25/34 1 45,685 45,670 Series 2005-E, Cl. 2A2, 4.983%, 6/25/35 1 458,430 456,349 ------------------------------------------------------------------------------- Bear Stearns Commercial Mortgage Securities, Inc., Commercial Mtg. Obligations, Series 2005-PWR7, Cl. A2, 4.945%, 2/11/41 860,000 850,543 ------------------------------------------------------------------------------- Capital Lease Funding Securitization LP, Interest-Only Corporate-Backed Pass-Through Certificates, Series 1997-CTL1, 7.304%, 6/22/24 5 20,351,718 791,232 ------------------------------------------------------------------------------- Citigroup/Deutsche Bank Commercial Mortgage Trust, Commercial Mtg. Obligations, Series 2005-CD1, Cl. A4, 5.225%, 7/15/44 7 2,260,000 2,284,968 ------------------------------------------------------------------------------- Countrywide Alternative Loan Trust, CMO: Series 2004-J9, Cl. 1A1, 4.559%, 10/25/34 1 553,925 554,354 Series 2005-J3, Cl. 3A1, 6.50%, 9/25/34 3,316,795 3,358,718 ------------------------------------------------------------------------------- First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates, Series 1997-CHL1, Cl. D, 7.674%, 4/29/39 1,2 1,480,000 1,487,400 ------------------------------------------------------------------------------- First Union National Bank/Lehman Brothers/Bank of America Commercial Mtg. Trust, Pass-Through Certificates, Series 1998-C2, Cl. A2, 6.56%, 11/18/35 1,367,557 1,406,397 ------------------------------------------------------------------------------- GE Capital Commercial Mortgage Corp., Commercial Mtg. Obligations: Series 2005-CA, Cl. A3, 4.578%, 6/10/48 730,000 710,551 Series 2005-C3, Cl. A2, 4.853%, 7/10/45 1,190,000 1,182,110 ------------------------------------------------------------------------------- GMAC Commercial Mortgage Securities, Inc., Commercial Mtg. Pass-Through Certificates: Series 1997-C1, Cl. A3, 6.869%, 7/15/29 843,466 862,676 Series 2004-C3, Cl. A4, 4.547%, 12/10/41 1,110,000 1,075,143 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------- COMMERCIAL Continued Greenwich Capital Commercial Funding Corp., Commercial Mtg. Pass-Through Certificates: Series 2005-G G3, Cl. A2, 4.305%, 8/10/42 $ 1,460,000 $ 1,422,596 Series 2005-G G5, Cl. A2, 5.117%, 4/10/37 7 1,290,000 1,293,938 ------------------------------------------------------------------------------- GS Mortgage Securities Corp. II, Commercial Mtg. Pass-Through Certificates, Series 2004-C1, Cl. A1, 3.659%, 10/10/28 1,257,259 1,218,442 ------------------------------------------------------------------------------- JPMorgan Chase Commercial Mortgage Securities Corp., Commercial Mtg. Pass-Through Certificates, Series 2005-LDP2, Cl. A2, 4.575%, 7/15/42 510,000 499,909 ------------------------------------------------------------------------------- LB-UBS Commercial Mortgage Trust, Commercial Mtg. Pass-Through Certificates, Series 2005-C5, Cl. A2, 4.885%, 9/15/30 1,430,000 1,420,635 ------------------------------------------------------------------------------- Lehman Brothers Commercial onduit Mortgage Trust, Interest- Only Stripped Mtg.-Backed Security, Series 1998-C1, Cl. IO, 5.665%, 2/18/30 5 16,854,496 435,867 ------------------------------------------------------------------------------- Lehman Structured Securities Corp., CMO, Series 2002-GE1, Cl. A, 2.514%, 7/26/24 3 339,520 274,427 ------------------------------------------------------------------------------- Mastr Alternative Loan Trust, CMO Pass-Through Certificates: Series 2004-6, Cl. 10A1, 6%, 7/25/34 2,443,554 2,456,958 Series 2004-9, Cl. A3, 4.70%, 8/25/34 1 2,885,183 2,872,025 ------------------------------------------------------------------------------- Mastr Seasoned Securities Trust, Mtg. Pass-Through Certificates, Series 2004-2, Cl. A1, 6.50%, 8/25/32 3,678,870 3,714,509 ------------------------------------------------------------------------------- Nomura Asset Securities Corp., Commercial Mtg. Pass-Through Certificates, Series 1998-D6, Cl. A1B, 6.59%, 3/15/30 7 1,680,000 1,737,372 ------------------------------------------------------------------------------- Residential Accredit Loans, Inc., Mtg. Asset-Backed Pass-Through Certificates, Series 2003-QS1, Cl. A2, 5.75%, 1/25/33 1,309,331 1,311,856 ------------------------------------------------------------------------------- Salomon Brothers Mortgage ecurities VII, Inc., Interest-Only Commercial Mtg. Pass-Through Certificates, Series 1999-C1, Cl. X, (2.668)%, 5/18/32 5 334,608,272 961,129 ------------------------------------------------------------------------------- Wachovia Bank Commercial Mortgage Trust, Commercial Mtg. Obligations: Series 2005-C17, Cl. A2, 4.782%, 3/15/42 2,520,000 2,492,202 Series 2005-C20, Cl. A5, 5.087%, 7/15/42 1 1,440,000 1,430,556 12 | OPPENHEIMER CORE BOND FUND/VA PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------- COMMERCIAL Continued Washington Mutual Mortgage Securities Corp., CMO Pass-Through Certificates, Series 2005-AR5, Cl. A1, 4.681%, 5/25/35 1 $ 1,967,219 $ 1,965,806 ------------------------------------------------------------------------------- Wells Fargo Mortgage-Backed Securities Trust, CMO, Series 2004-DD, Cl. 2A1, 4.522%, 1/25/35 1 962,332 959,389 -------------- 54,017,860 ------------------------------------------------------------------------------- OTHER--0.9% JPMorgan Chase Commercial Mortgage Securities Corp., Commercial Mtg. Pass-Through Certificates, Series 2005-LDP4, Cl. A2, 4.79%, 10/15/42 1,720,000 1,698,107 ------------------------------------------------------------------------------- Salomon Brothers Mortgage Securities VI, Inc., Interest-Only Stripped Mtg.-Backed Security, Series 1987-3, Cl. B, 50.122%, 10/23/17 5 17,847 4,411 ------------------------------------------------------------------------------- Salomon Brothers Mortgage Securities VI, Inc., Principal-Only Stripped Mtg.-Backed Security, Series1987-3, Cl. A, 7.65%, 10/23/17 6 26,413 23,567 ------------------------------------------------------------------------------- Washington Mutual Mortgage Securities Corp., CMO Pass-Through Certificates, Series 2005-AR8, Cl. 2AB1, 4.629%, 7/25/45 1 2,258,633 2,258,280 -------------- 3,984,365 ------------------------------------------------------------------------------- RESIDENTIAL--1.4% Countrywide Alternative Loan Trust, CMO, Series 2005-J1, Cl. 3A1, 6.50%, 8/25/32 7 3,685,969 3,751,627 ------------------------------------------------------------------------------- Structured Asset Securities Corp., CMO Pass-Through Certificates, Series 2002-AL1, Cl. B2, 3.45%, 2/25/32 2,747,746 2,401,856 -------------- 6,153,483 -------------- Total Mortgage-Backed Obligations (Cost $343,148,390) 340,840,863 ------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS--7.2% ------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp. Unsec. Nts.: 4.125%, 7/12/10 9,283,000 9,061,554 6.625%, 9/15/09 4,775,000 5,077,320 ------------------------------------------------------------------------------- Federal National Mortgage Assn. Unsec. Nts.: 6%, 5/15/11 1,815,000 1,921,811 6.625%, 9/15/09 8 2,260,000 2,405,121 7.25%, 5/15/30 7 1,665,000 2,210,675 ------------------------------------------------------------------------------- Tennessee Valley Authority Bonds: 4.65%, 6/15/35 3,555,000 3,374,150 Series A, 6.79%, 5/23/12 5,659,000 6,270,840 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS Continued ------------------------------------------------------------------------------- U.S. Treasury Bonds, 5.375%, 2/15/31 7 $ 141,000 $ 158,427 ------------------------------------------------------------------------------- U.S. Treasury Nts.: 4.25%, 11/30/07 369,000 368,034 4.375%, 11/15/08-12/15/10 906,000 906,660 -------------- Total U.S. Government Obligations (Cost $32,434,147) 31,754,592 ------------------------------------------------------------------------------- FOREIGN GOVERNMENT OBLIGATIONS--0.5% ------------------------------------------------------------------------------- United Mexican States Nts., 7.50%, 1/14/12 (Cost $2,085,151) 2,070,000 2,313,225 ------------------------------------------------------------------------------- CORPORATE BONDS AND NOTES--34.3% ------------------------------------------------------------------------------- CONSUMER DISCRETIONARY--10.0% ------------------------------------------------------------------------------- AUTO COMPONENTS--0.8% Dana Corp., 6.50% Unsec. Nts., 3/1/09 7 1,515,000 1,219,575 ------------------------------------------------------------------------------- Lear Corp., 8.11% Sr. Unsec. Nts., Series B, 5/15/09 2,265,000 2,109,549 -------------- 3,329,124 ------------------------------------------------------------------------------- AUTOMOBILES--2.2% DaimlerChrysler NA Holdings Corp., 8% Nts., 6/15/10 1,940,000 2,123,654 ------------------------------------------------------------------------------- Ford Motor Credit Co.: 5.80% Sr. Unsec. Nts., 1/12/09 2,670,000 2,330,691 7.375% Nts., 10/28/09 485,000 430,483 ------------------------------------------------------------------------------- General Motors Acceptance Corp.: 6.15% Nts., 4/5/07 3,449,000 3,258,698 8% Bonds, 11/1/31 7 1,640,000 1,575,087 -------------- 9,718,613 ------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE--1.4% Harrah's Operating Co., Inc., 5.625% Sr. Unsec. Bonds, 6/1/15 1,180,000 1,161,347 ------------------------------------------------------------------------------- Hilton Hotels Corp., 8.25% Sr. Unsec. Nts., 2/15/11 1,010,000 1,108,026 ------------------------------------------------------------------------------- Starwood Hotels & Resorts Worldwide, Inc., 7.375% Nts., 5/1/07 1,580,000 1,619,500 ------------------------------------------------------------------------------- Yum! Brands, Inc., 8.50% Sr. Unsec. Nts., 4/15/06 7 2,465,000 2,489,256 -------------- 6,378,129 ------------------------------------------------------------------------------- HOUSEHOLD DURABLES--1.3% Beazer Homes USA, Inc., 6.875% Sr. Unsec. Nts., 7/15/15 7 1,150,000 1,108,313 ------------------------------------------------------------------------------- D.R. Horton, Inc., 6.125% Nts., 1/15/14 1,035,000 1,036,847 ------------------------------------------------------------------------------- K. Hovnanian Enterprises, Inc., 6.50% Sr. Nts., 1/15/14 1,155,000 1,110,332 13 | OPPENHEIMER CORE BOND FUND/VA STATEMENT OF INVESTMENTS Continued ------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------- HOUSEHOLD DURABLES Continued KB Home, 5.75% Sr. Unsec. Unsub. Nts., 2/1/14 $ 1,445,000 $ 1,369,672 ------------------------------------------------------------------------------- Lennar Corp., 5.95% Sr. Unsec. Nts., 3/1/13 7 1,130,000 1,138,986 -------------- 5,764,150 ------------------------------------------------------------------------------- MEDIA--2.8% British Sky Broadcasting Group plc, 7.30% Unsec. Nts., 10/15/06 404,000 410,614 ------------------------------------------------------------------------------- Chancellor Media CCU, 8% Sr. Unsec. Nts., 11/1/08 2,145,000 2,281,896 ------------------------------------------------------------------------------- Cox Communications, Inc., 4.625% Unsec. Nts., 1/15/10 7 2,375,000 2,301,204 ------------------------------------------------------------------------------- Liberty Media Corp., 5.70% Sr. Unsec. Nts., 5/15/13 7 1,200,000 1,124,113 ------------------------------------------------------------------------------- TCI Communications, Inc., 9.80% Sr. Unsec. Debs., 2/1/12 2,210,000 2,669,282 ------------------------------------------------------------------------------- Time Warner Entertainment Co. LP: 8.375% Sr. Nts., 7/15/33 535,000 633,850 10.15% Sr. Nts., 5/1/12 1,073,000 1,307,986 ------------------------------------------------------------------------------- Univision Communications, Inc., 3.50% Sr. Unsec. Nts., 10/15/07 1,860,000 1,805,097 -------------- 12,534,042 ------------------------------------------------------------------------------- MULTILINE RETAIL--1.1% Federated Department Stores, Inc., 6.625% Sr. Unsec. Nts., 9/1/08 1,455,000 1,508,819 ------------------------------------------------------------------------------- J.C. Penney Co., Inc. (Holding Co.), 7.40% Nts., 4/1/37 2,060,000 2,311,761 ------------------------------------------------------------------------------- May Department Stores Co., 7.90% Unsec. Debs., 10/15/07 785,000 817,642 -------------- 4,638,222 ------------------------------------------------------------------------------- SPECIALTY RETAIL--0.4% Gap, Inc. (The): 6.90% Nts., 9/15/07 1,315,000 1,344,202 9.55% Unsub. Nts., 12/15/08 1 466,000 518,199 -------------- 1,862,401 ------------------------------------------------------------------------------- CONSUMER STAPLES--3.1% ------------------------------------------------------------------------------- FOOD & STAPLES RETAILING--1.7% Albertson's, Inc., 8% Sr. Unsec. Debs., 5/1/31 7 1,360,000 1,341,614 ------------------------------------------------------------------------------- Delhaize America, Inc., 9% Unsub. Debs., 4/15/31 1,500,000 1,770,927 ------------------------------------------------------------------------------- Kroger Co. (The), 6.80% Sr. Unsec. Nts., 4/1/11 2,520,000 2,645,771 ------------------------------------------------------------------------------- Safeway, Inc., 7.50% Sr. Unsec. Nts., 9/15/09 1,555,000 1,662,189 -------------- 7,420,501 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------- FOOD PRODUCTS--1.4% Archer Daniels Midland Co., 5.375% Nts., 9/15/35 $ 1,175,000 $ 1,131,104 ------------------------------------------------------------------------------- ConAgra Foods, Inc., 6% Nts., 9/15/06 7 1,320,000 1,329,367 ------------------------------------------------------------------------------- General Mills, Inc., 3.875% Nts., 11/30/07 1,715,000 1,682,151 ------------------------------------------------------------------------------- Kraft Foods, Inc., 5.25% Nts., 6/1/07 1,865,000 1,873,200 -------------- 6,015,822 ------------------------------------------------------------------------------- ENERGY--1.8% ------------------------------------------------------------------------------- OIL & GAS--1.8% Kinder Morgan, Inc., 6.50% Sr. Unsec. Nts., 9/1/12 1,265,000 1,341,932 ------------------------------------------------------------------------------- Pemex Project Funding Master Trust, 5.75% Unsec. Unsub. Nts., Series 12, 12/15/15 2,7 1,865,000 1,858,006 ------------------------------------------------------------------------------- Petroleum Export Ltd. Cayman SPV, 4.623% Sr. Nts., Cl. A1, 6/15/10 2 3,525,000 3,493,744 ------------------------------------------------------------------------------- PF Export Receivables Master Trust, 3.748% Sr. Nts., Series B, 6/1/13 2 1,371,222 1,302,928 -------------- 7,996,610 ------------------------------------------------------------------------------- FINANCIALS--9.6% ------------------------------------------------------------------------------- CAPITAL MARKETS--1.0% Credit Suisse First Boston, Inc. (USA), 5.50% Nts., 8/15/13 2,385,000 2,436,683 ------------------------------------------------------------------------------- JPMorgan Chase Sub. Capital XV, 5.875% Nts., Series O, 3/15/35 7 1,695,000 1,691,069 -------------- 4,127,752 ------------------------------------------------------------------------------- COMMERCIAL BANKS--1.5% Barclays Bank plc, 6.278% Perpetual Bonds 9 1,860,000 1,872,815 ------------------------------------------------------------------------------- HSBC Finance Corp., 4.75% Sr. Unsec. Nts., 7/15/13 2,335,000 2,259,551 ------------------------------------------------------------------------------- National City Bank, 6.20% Sub. Nts., 12/15/11 178,000 188,577 ------------------------------------------------------------------------------- Popular North America, Inc., 5.20% Nts., 12/12/07 2,225,000 2,223,859 ------------------------------------------------------------------------------- Socgen Real Estate LLC, 7.64% Bonds 1,2,9 90,000 93,678 -------------- 6,638,480 ------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES--2.5% CIT Group, Inc.: 4.75% Sr. Nts., 8/15/08 310,000 309,007 7.75% Sr. Unsec. Unsub. Nts., 4/2/12 930,000 1,056,066 ------------------------------------------------------------------------------- Citigroup, Inc., 6.625% Unsec. Sub. Nts., 6/15/32 890,000 1,009,018 ------------------------------------------------------------------------------- Goldman Sachs Group, Inc. (The), 5.70% Sr. Unsec. Nts., 9/1/12 3,190,000 3,286,003 14 | OPPENHEIMER CORE BOND FUND/VA PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES Continued MBNA Corp., 7.50% Sr. Nts., Series F, 3/15/12 $ 1,745,000 $ 1,967,915 ------------------------------------------------------------------------------- Merrill Lynch & Co., Inc., 5% Sr. Unsub. Nts., Series C, 2/3/14 2,325,000 2,299,825 ------------------------------------------------------------------------------- Morgan Stanley, 6.60% Nts., 4/1/12 1,130,000 1,216,159 -------------- 11,143,993 ------------------------------------------------------------------------------- INSURANCE--2.4% Allstate Financial Global Funding II, 4.25% Nts., 9/10/08 2 520,000 511,429 ------------------------------------------------------------------------------- Marsh & McLennan Cos., Inc., 5.875% Sr. Unsec. Bonds, 8/1/33 1,470,000 1,411,854 ------------------------------------------------------------------------------- MetLife, Inc., 5.70% Sr. Unsec. Nts., 6/15/35 7 1,170,000 1,178,520 ------------------------------------------------------------------------------- Nationwide Financial Services, Inc.: 5.90% Nts., 7/1/12 990,000 1,033,527 6.25% Sr. Unsec. Nts., 11/15/11 105,000 110,649 ------------------------------------------------------------------------------- Prudential Holdings LLC, 8.695% Bonds, Series C, 12/18/23 2 1,885,000 2,395,070 ------------------------------------------------------------------------------- Prudential Insurance Co. of America, 8.30% Nts., 7/1/25 1,885,000 2,446,378 ------------------------------------------------------------------------------- Travelers Property Casualty Corp., 3.75% Sr. Unsec. Nts., 3/15/08 1,700,000 1,658,891 -------------- 10,746,318 ------------------------------------------------------------------------------- REAL ESTATE--1.9% EOP Operating LP, 8.10% Unsec. Nts., 8/1/10 1,700,000 1,879,421 ------------------------------------------------------------------------------- iStar Financial, Inc.: 5.125% Sr. Unsec. Nts., Series B, 4/1/11 7 725,000 707,232 5.15% Sr. Unsec. Nts., 3/1/12 845,000 819,405 ------------------------------------------------------------------------------- Liberty Property Trust, 5.65% Sr. Nts., 8/15/14 1,185,000 1,202,160 ------------------------------------------------------------------------------- Simon Property Group LP, 5.375% Nts., 6/1/11 2 1,680,000 1,685,892 ------------------------------------------------------------------------------- Vornado Realty LP, 5.625% Sr. Unsec. Unsub. Nts., 6/15/07 2,225,000 2,241,334 -------------- 8,535,444 ------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE--0.3% Countrywide Financial Corp., 4.50% Nts., Series A, 6/15/10 1,265,000 1,229,130 ------------------------------------------------------------------------------- HEALTH CARE--0.9% ------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES--0.9% Aetna, Inc., 7.375% Sr. Unsec. Nts., 3/1/06 2,730,000 2,740,925 ------------------------------------------------------------------------------- HCA, Inc., 7.125% Sr. Unsec. Nts., 6/1/06 1,095,000 1,109,454 -------------- 3,850,379 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------- INDUSTRIALS--1.6% ------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS--0.5% FedEx Corp., 2.65% Unsec. Nts., 4/1/07 $ 2,390,000 $ 2,325,489 ------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES--0.3% Allied Waste North America, Inc., 8.875% Sr. Nts., Series B, 4/1/08 7 1,070,000 1,134,200 ------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES--0.8% Tyco International Group SA: 6.125% Unsec. Unsub. Nts., 11/1/08 1,875,000 1,915,183 6.125% Unsec. Unsub. Nts., 1/15/09 253,000 258,754 6.375% Sr. Unsec. Unsub. Nts., 2/15/06 1,445,000 1,447,400 -------------- 3,621,337 ------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES--2.5% ------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES--2.1% British Telecommunications plc, 8.875% Bonds, 12/15/30 1,015,000 1,362,026 ------------------------------------------------------------------------------- Deutsche Telekom International Finance BV, 8% Unsub. Nts., 6/15/10 1 1,405,000 1,594,440 ------------------------------------------------------------------------------- France Telecom SA, 8.50% Sr. Unsec. Nts., 3/1/31 1 350,000 468,411 ------------------------------------------------------------------------------- SBC Communications, Inc., 5.30% Nts., 11/15/10 1,680,000 1,686,878 ------------------------------------------------------------------------------- Sprint Capital Corp., 8.75% Nts., 3/15/32 1,455,000 1,936,749 ------------------------------------------------------------------------------- Verizon Global Funding Corp.: 5.85% Nts., 9/15/35 1,155,000 1,116,873 7.25% Sr. Unsec. Unsub. Nts., 12/1/10 1,010,000 1,097,116 -------------- 9,262,493 ------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES--0.4% AT&T Wireless Services, Inc., 8.125% Sr. Unsec. Nts., 5/1/12 1,545,000 1,787,387 ------------------------------------------------------------------------------- UTILITIES--4.8% ------------------------------------------------------------------------------- ELECTRIC UTILITIES--3.2% CenterPoint Energy, Inc., 7.25% Sr. Nts., Series B, 9/1/10 7 1,250,000 1,342,251 ------------------------------------------------------------------------------- Dominion Resources, Inc., 8.125% Sr. Unsub. Nts., 6/15/10 1,650,000 1,835,663 ------------------------------------------------------------------------------- DTE Energy Co., 6.45% Sr. Unsub. Nts., 6/1/06 725,000 729,718 ------------------------------------------------------------------------------- FirstEnergy Corp.: 5.50% Sr. Unsub. Nts., Series A, 11/15/06 995,000 998,784 7.375% Sr. Unsub. Nts., Series C, 11/15/31 1,160,000 1,373,070 ------------------------------------------------------------------------------- IPALCO Enterprises, Inc., 8.375% Sr. Sec. Nts., 11/14/08 1 1,180,000 1,241,950 ------------------------------------------------------------------------------- MidAmerican Energy Holdings Co., 5.875% Sr. Unsec. Nts., 10/1/12 1,955,000 2,021,065 15 | OPPENHEIMER CORE BOND FUND/VA STATEMENT OF INVESTMENTS Continued ------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------- ELECTRIC UTILITIES Continued Portland General Electric Co., 8.125% First Mortgage Nts., 2/1/10 2 $ 1,040,000 $ 1,148,887 ------------------------------------------------------------------------------- PSE&G Energy Holdings LLC, 7.75% Unsec. Nts., 4/16/07 1,575,000 1,638,000 ------------------------------------------------------------------------------- PSE&G Power LLC, 6.875% Sr. Unsec. Nts., 4/15/06 355,000 356,863 ------------------------------------------------------------------------------- TXU Energy Co., 6.125% Nts., 3/15/08 1,430,000 1,454,240 -------------- 14,140,491 ------------------------------------------------------------------------------- ENERGY TRADERS--0.4% Constellation Energy Group, Inc., 7.60% Unsec. Nts., 4/1/32 1,485,000 1,792,111 ------------------------------------------------------------------------------- GAS UTILITIES--0.8% NiSource Finance Corp., 7.875% Sr. Unsec. Nts., 11/15/10 1,590,000 1,763,466 ------------------------------------------------------------------------------- Sempra Energy, 7.95% Sr. Unsec. Unsub. Nts., 3/1/10 1,645,000 1,808,595 -------------- 3,572,061 ------------------------------------------------------------------------------- MULTI-UTILITIES & UNREGULATED POWER--0.4% PSEG Funding Trust I, 5.381% Nts., 11/16/07 1,835,000 1,838,608 -------------- Total Corporate Bonds and Notes (Cost $151,735,498) 151,403,287 UNITS ------------------------------------------------------------------------------- RIGHTS, WARRANTS AND CERTIFICATES--0.0% ------------------------------------------------------------------------------- Pathmark Stores, Inc. Wts., Exp. 9/19/10 10 (Cost $14,872) 5,408 1,514 ------------------------------------------------------------------------------- Total Investments, at Value (excluding Investments Purchased with Cash Collateral from Securities Loaned) (Cost $582,749,977) 577,044,761 PRINCIPAL AMOUNT ------------------------------------------------------------------------------- INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--5.2% ------------------------------------------------------------------------------- ASSET-BACKED FLOATING NOTE--0.5% Trust Money Market Securities, Series A-2, 4.44%, 1/17/06 11 $ 1,000,000 1,000,000 ------------------------------------------------------------------------------- Whitehawk CDO Funding Corp., 4.56%, 3/15/06 11 1,500,000 1,500,000 -------------- 2,500,000 ------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS--4.1% Undivided interest of 0.58% in joint repurchase agreement (Principal Amount/Value $3,150,000,000, with a maturity value of $3,151,501,500) with Nomura Securities, 4.29%, dated 12/30/05, to be repurchased at $18,181,696 on 1/3/06, collateralized by U.S. Agency Mortgages, 3.34%--9.50%, 6/1/08--5/1/38, with a value of $3,213,000,000 11 18,173,034 18,173,034 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------- MASTER FLOATING NOTE--0.6% Bear Stearns, 4.37%, 1/3/06 11 $ 2,500,000 $ 2,500,000 -------------- Total Investments Purchased with Cash Collateral from Securities Loaned (Cost $23,173,034) 23,173,034 ------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $605,923,011) 135.9% 600,217,795 ------------------------------------------------------------------------------- LIABILITIES IN EXCESS OF OTHER ASSETS (35.9) (158,465,926) ------------------------------- NET ASSETS 100.0% $ 441,751,869 =============================== FOOTNOTES TO STATEMENT OF INVESTMENTS 1. Represents the current interest rate for a variable or increasing rate security. 2. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $15,495,706 or 3.51% of the Fund's net assets as of December 31, 2005. 3. Illiquid security. The aggregate value of illiquid securities as of December 31, 2005 was $4,597,083, which represents 1.04% of the Fund's net assets. See Note 7 of Notes to Financial Statements. 4. When-issued security or forward commitment to be delivered and settled after December 31, 2005. See Note 1 of Notes to Financial Statements. 5. 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 $18,710,844 or 4.24% of the Fund's net assets as of December 31, 2005. 6. Principal-Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. The value of these securities generally increases as interest rates decline and prepayment rates rise. The price of these securities is typically more volatile than that of coupon-bearing bonds of the same maturity. Interest rates disclosed represent current yields based upon the current cost basis and estimated timing of future cash flows. These securities amount to $951,231 or 0.22% of the Fund's net assets as of December 31, 2005. 7. Partial or fully-loaned security. See Note 8 of Notes to Financial Statements. 8. All or a portion of the security is held in collateralized accounts to cover initial margin requirements on open futures sales contracts. The aggregate market value of such securities is $2,128,426. See Note 5 of Notes to Financial Statements. 9. This bond has no contractual maturity date, is not redeemable and contractually pays an indefinite stream of interest. 10. Non-income producing security. 11. The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Note 8 of Notes to Financial Statements. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 16 | OPPENHEIMER CORE BOND FUND/VA STATEMENT OF ASSETS AND LIABILITIES December 31, 2005 --------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------- ASSETS -------------------------------------------------------------------------------------------------------------------- Investments, at value (including securities loaned of $25,149,060) (cost $605,923,011) --see accompanying statement of investments $ 600,217,795 -------------------------------------------------------------------------------------------------------------------- Cash 722,988 -------------------------------------------------------------------------------------------------------------------- Unrealized appreciation on swap contracts 25,959 --------------------------------------------------------------------------------------------------------------------- Receivables and other assets: Investments sold (including $14,452,259 sold on a when-issued basis or forward commitment) 16,007,959 Interest and principal paydowns 4,155,247 Shares of beneficial interest sold 1,282,173 Futures margins 25,370 Other 14,005 -------------- Total assets 622,451,496 -------------------------------------------------------------------------------------------------------------------- LIABILITIES -------------------------------------------------------------------------------------------------------------------- Return of collateral for securities loaned 23,173,034 -------------------------------------------------------------------------------------------------------------------- Payables and other liabilities: Investments purchased (including $155,052,777 purchased on a when-issued basis or forward commitment) 157,117,831 Shares of beneficial interest redeemed 277,131 Shareholder communications 51,132 Trustees' compensation 17,194 Distribution and service plan fees 6,366 Transfer and shareholder servicing agent fees 1,791 Other 55,148 -------------- Total liabilities 180,699,627 --------------------------------------------------------------------------------------------------------------------- NET ASSETS $ 441,751,869 ============== --------------------------------------------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS --------------------------------------------------------------------------------------------------------------------- Par value of shares of beneficial interest $ 39,481 --------------------------------------------------------------------------------------------------------------------- Additional paid-in capital 458,186,060 --------------------------------------------------------------------------------------------------------------------- Accumulated net investment income 22,323,507 --------------------------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (33,516,342) --------------------------------------------------------------------------------------------------------------------- Net unrealized depreciation on investments (5,280,837) -------------- NET ASSETS $ 441,751,869 ============== --------------------------------------------------------------------------------------------------------------------- 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 $430,642,290 and 38,484,529 shares of beneficial interest outstanding) $ 11.19 --------------------------------------------------------------------------------------------------------------------- Service Shares: Net asset value, redemption price per share and offering price per share (based on net assets of $11,109,579 and 996,606 shares of beneficial interest outstanding) $ 11.15
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 17 | OPPENHEIMER CORE BOND FUND/VA STATEMENT OF OPERATIONS For the Year Ended December 31, 2005 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME --------------------------------------------------------------------------------------------------------------------- Interest $ 22,341,809 --------------------------------------------------------------------------------------------------------------------- Fee income 2,591,172 --------------------------------------------------------------------------------------------------------------------- Portfolio lending fees 68,983 -------------- Total investment income 25,001,964 --------------------------------------------------------------------------------------------------------------------- EXPENSES --------------------------------------------------------------------------------------------------------------------- Management fees 3,446,635 --------------------------------------------------------------------------------------------------------------------- Distribution and service plan fees--Service shares 17,979 --------------------------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Non-Service shares 10,405 Service shares 1,793 --------------------------------------------------------------------------------------------------------------------- Shareholder communications: Non-Service shares 38,482 Service shares 602 --------------------------------------------------------------------------------------------------------------------- Custodian fees and expenses 33,730 --------------------------------------------------------------------------------------------------------------------- Trustees' compensation 14,012 --------------------------------------------------------------------------------------------------------------------- Administration service fees 1,500 --------------------------------------------------------------------------------------------------------------------- Other 44,448 -------------- Total expenses 3,609,586 Less reduction to custodian expenses (10,329) -------------- Net expenses 3,599,257 --------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME 21,402,707 --------------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) --------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on: Investments (4,340,405) Closing and expiration of futures contracts 4,102,914 Foreign currency transactions (996) Swap contracts (242,059) -------------- Net realized loss (480,546) --------------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on: Investments (8,719,957) Futures contracts (315,772) Swap contracts 43,620 -------------- Net change in unrealized depreciation (8,992,109) --------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 11,930,052 ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 18 | OPPENHEIMER CORE BOND FUND/VA STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
YEAR ENDER DECEMBER 31, 2005 2004 --------------------------------------------------------------------------------------------------------------------- OPERATIONS --------------------------------------------------------------------------------------------------------------------- Net investment income $ 21,402,707 $ 21,186,973 --------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) (480,546) 15,136,520 --------------------------------------------------------------------------------------------------------------------- Net change in unrealized appeciation (depreciation) (8,992,109) (7,471,728) ------------------------------- Net increase in net assets resulting from operations 11,930,052 28,851,765 --------------------------------------------------------------------------------------------------------------------- DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS --------------------------------------------------------------------------------------------------------------------- Dividends from net investment income: Non-Service shares (24,996,468) (27,226,980) Service shares (231,902) (159,134) --------------------------------------------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS --------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from beneficial interest transactions: Non-Service shares (60,382,816) (115,482,453) Service shares 7,684,268 (303,187) --------------------------------------------------------------------------------------------------------------------- NET ASSETS --------------------------------------------------------------------------------------------------------------------- Total decrease (65,996,866) (114,319,989) --------------------------------------------------------------------------------------------------------------------- Beginning of period 507,748,735 622,068,724 ------------------------------- End of period (including accumulated net investment income of $22,323,507 and $24,100,215, respectively) $ 441,751,869 $ 507,748,735 ===============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 19 | OPPENHEIMER CORE BOND FUND/VA FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 -------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 11.50 $ 11.42 $ 11.31 $ 11.21 $ 11.25 -------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .51 1 .43 1 .51 .65 .81 Net realized and unrealized gain (loss) (.23) .18 .23 .27 .03 Payment from affiliate -- -- -- .01 -- --------------------------------------------------------------------- Total from investment operations .28 .61 .74 .93 .84 -------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.59) (.53) (.63) (.83) (.88) -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 11.19 $ 11.50 $ 11.42 $ 11.31 $ 11.21 ===================================================================== -------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN: -------------------------------------------------------------------------------------------------------------------------- Total return at net asset value 2 2.59% 5.49% 6.78% 9.02% 7.79% Total return before payment from affiliate 3 N/A N/A N/A 8.93% N/A -------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA -------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 430,642 $ 504,244 $ 618,234 $ 724,787 $ 693,701 -------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 466,033 $ 552,293 $ 691,931 $ 686,932 $ 638,820 -------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income before payment from affiliate 4.56% 3.82% 4.03% 5.91% 3 7.93% Net investment income after payment from affiliate N/A N/A N/A 6.07% N/A Total expenses 0.76% 5 0.75% 5 0.73% 5 0.73% 5 0.77% 5 -------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 111% 6 95% 6 101% 157% 186%
1. Per share amounts calculated based on the average shares outstanding during the period. 2. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. The Manager voluntarily reimbursed the Class $1,107,704 from an error in the calculation of the Fund's net asset value per share. 4. Annualized for periods of less than one full year. 5. Reduction to custodian expenses less than 0.01%. 6. The portfolio turnover rate excludes purchases and sales of To Be Announced (TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS ----------------------------------------------------------------------------------------- Year Ended December 31, 2005 $ 2,420,041,493 $ 2,423,498,913 Year Ended December 31, 2004 2,841,348,053 2,925,500,296
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 20 | OPPENHEIMER CORE BOND FUND/VA
SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 1 ------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 11.47 $ 11.39 $ 11.30 $ 10.46 ------------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income .47 2 .40 2 .43 .11 Net realized and unrealized gain (loss) (.22) .18 .28 .72 Payment from affiliate -- -- -- .01 ------------------------------------------------------------------- Total from investment operations .25 .58 .71 .84 ------------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.57) (.50) (.62) -- ------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 11.15 $ 11.47 $ 11.39 $ 11.30 =================================================================== ------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN: ------------------------------------------------------------------------------------------------------------------------ Total return at net asset value 3 2.33% 5.22% 6.56% 8.03% Total return before payment from affiliate 4 N/A N/A N/A 7.94% ------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA ------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $ 11,110 $ 3,505 $ 3,835 $ 2,435 ------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $ 7,213 $ 3,002 $ 3,903 $ 834 ------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: 5 Net investment income before payment from affiliate 4.29% 3.55% 3.73% 4.37% 4 Net investment income after payment from affiliate N/A N/A N/A 5.04% Total expenses 1.03% 6 0.99% 6 0.98% 6 0.98% 6,7 ------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 111% 8 95% 8 101% 157%
1. For the period from May 1, 2002 (inception of offering) to December 31, 2002. 2. Per share amounts calculated based on the average shares outstanding during the period. 3. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. The Manager voluntarily reimbursed the Class $3,723 from an error in the calculation of the Fund's net asset value per share. 5. Annualized for periods of less than one full year. 6. Reduction to custodian expenses less than 0.01%. 7. Voluntary waiver of transfer agent fees less than 0.01%. 8. The portfolio turnover rate excludes purchases and sales of To Be Announced (TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS ----------------------------------------------------------------------------------------- Year Ended December 31, 2005 $ 2,420,041,493 $ 2,423,498,913 Year Ended December 31, 2004 2,841,348,053 2,925,500,296
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 21 | OPPENHEIMER CORE BOND FUND/VA NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Oppenheimer Core Bond Fund/VA (the Fund), formerly Oppenheimer Bond Fund/VA, is a separate series of Oppenheimer Variable Account Funds, an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's main investment objective is to seek a high level of current income. As a secondary objective, the Fund seeks capital appreciation when consistent with its primary objective. The Fund'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. Both classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. The following is a summary of significant accounting policies consistently followed by the Fund. -------------------------------------------------------------------------------- SECURITIES VALUATION. The Fund calculates the net asset value of its shares as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Securities may be valued primarily using dealer-supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Securities listed or traded on National Stock Exchanges or other domestic 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. Securities traded on NASDAQ are valued based on the closing price provided by NASDAQ 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 traded on foreign exchanges are valued based on the last sale price on the principal exchange on which the security is traded, in the country that is identified by the portfolio pricing service, prior to the time when the Fund's assets are valued. In the absence of a sale, the security is valued at the official closing price on the principal exchange. Corporate, government and municipal debt instruments having a remaining maturity in excess of sixty days and all mortgage-backed securities will be valued at the mean between the "bid" and "asked" prices. Futures contracts traded on a commodities or futures exchange will be valued at the final settlement price or official closing price on the principal exchange as reported by such principal exchange at its trading session ending at, or most recently prior to, the time when the Fund's assets are valued. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value. Foreign and domestic securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund's assets are valued but after the close of their respective exchanges will be fair valued. Fair value is determined in good faith using consistently applied procedures under the supervision of the Board of Trustees. Short-term "money market type" debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value). -------------------------------------------------------------------------------- SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment for securities that have been purchased by the Fund on a when-issued basis or forward commitment can take place up to ten days 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 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 internally designated 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 or forward commitment may increase the volatility of the Fund's net asset value to the extent the Fund executes such transactions while remaining substantially fully invested. The Fund may also sell securities that it purchased on a when-issued basis or forward commitment prior to settlement of the original purchase. As of December 31, 2005, the Fund had purchased 22 | OPPENHEIMER CORE BOND FUND/VA $155,052,777 of securities issued on a when-issued basis or forward commitment and sold $14,452,259 of securities issued on a when-issued basis or forward commitment. In connection with its ability to purchase or sell 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 Fund records the incremental difference between the forward purchase and sale of each forward roll as realized gain (loss) on investments or as fee income in the case of such transactions that have an associated fee in lieu of a difference in the forward purchase and sale price. Risks 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 at redelivery as compared to the securities sold to the counterparty; counterparty credit risk; and the potential pay down speed variance between the mortgage-related pools. -------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. 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. 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 on a daily basis 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 comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. The tax components of capital shown in the table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes.
NET UNREALIZED DEPRECIATION BASED ON COST OF SECURITIES AND UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME INCOME GAIN CARRYFORWARD 1,2,3,4,5,6 TAX PURPOSES ------------------------------------------------------------------------------- $22,361,485 $-- $33,004,426 $5,816,915
1. As of December 31, 2005, the Fund had $29,942,849 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. As of December 31, 2005, details of the capital loss carryforwards were as follows: 23 | OPPENHEIMER CORE BOND FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued EXPIRING ------------------------- 2010 $29,885,554 2013 57,295 ----------- Total $29,942,849 =========== 2. As of December 31, 2005, the Fund had $3,056,554 of post-October losses available to offset future realized capital gains, if any. Such losses, if unutilized, will expire in 2014. 3. The Fund had $996 of post-October foreign currency losses which were deferred. 4. The Fund had $4,027 of straddle losses which were deferred. 5. During the fiscal year ended December 31, 2005, the Fund did not utilize any capital loss carryforward. 6. During the fiscal year ended December 31, 2004, the Fund utilized $9,566,561 of capital loss carryforward to offset capital gains realized in that fiscal year. Net investment income (loss) and net realized gain (loss) may differ for financial statement and 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. Accordingly, the following amounts have been reclassified for December 31, 2005. Net assets of the Fund were unaffected by the reclassifications. INCREASE TO INCREASE TO ACCUMULATED NET ACCUMULATED NET REALIZED LOSS INVESTMENT INCOME ON INVESTMENTS -------------------------------------------- $2,048,955 $2,048,955 The tax character of distributions paid during the years ended December 31, 2005 and December 31, 2004 was as follows: YEAR ENDED YEAR ENDED DECEMBER 31, 2005 DECEMBER 31, 2004 --------------------------------------------------------------------- Distributions paid from: Ordinary income $ 25,228,370 $ 27,386,114 The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 31, 2005 are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss. Federal tax cost of securities $ 605,993,704 Federal tax cost of other investments (139,714,992) --------------- Total federal tax cost $ 466,278,712 =============== Gross unrealized appreciation $ 4,688,316 Gross unrealized depreciation (10,505,231) --------------- Net unrealized depreciation $ (5,816,915) =============== -------------------------------------------------------------------------------- TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of "Other" within the asset section of the Statement of Assets 24 | OPPENHEIMER CORE BOND FUND/VA and Liabilities. Deferral of trustees' fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund's assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the Plan. -------------------------------------------------------------------------------- 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. Income and capital gain distributions, if any, are declared and paid annually. -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts to the extent they are not offset by positive cash balances maintained by the Fund. The Reduction to Custodian Expenses line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings. -------------------------------------------------------------------------------- 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 U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. -------------------------------------------------------------------------------- 2. SHARES OF BENEFICIAL INTEREST The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004 SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------------------------------- NON-SERVICE SHARES Sold 1,220,400 $ 13,663,072 1,867,203 $ 21,055,436 Dividends and/or distributions reinvested 2,291,152 24,996,468 2,424,486 27,226,980 Redeemed (8,857,827) (99,042,356) (14,578,269) (163,764,869) ------------------------------------------------------------------ Net decrease (5,346,275) $ (60,382,816) (10,286,580) $ (115,482,453) ================================================================== ---------------------------------------------------------------------------------------------------------------- SERVICE SHARES Sold 767,551 $ 8,537,370 132,217 $ 1,497,198 Dividends and/or distributions reinvested 21,295 231,902 14,183 159,134 Redeemed (97,717) (1,085,004) (177,573) (1,959,519) ------------------------------------------------------------------ Net increase (decrease) 691,129 $ 7,684,268 (31,173) $ (303,187) ==================================================================
25 | OPPENHEIMER CORE BOND FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 3. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the year ended December 31, 2005, were as follows:
PURCHASES SALES -------------------------------------------------------------------------------------- Investment securities $ 419,346,642 $ 401,609,165 U.S. government and government agency obligations 74,497,382 88,193,769 To Be Announced (TBA) mortgage-related securities 2,420,041,493 2,423,498,913
-------------------------------------------------------------------------------- 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 Fund which provides for a fee at an annual rate of 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200 million and 0.50% of average annual net assets over $1 billion. -------------------------------------------------------------------------------- ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund's tax returns. -------------------------------------------------------------------------------- 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 per account fee. For the year ended December 31, 2005, the Fund paid $11,280 to OFS for services to the Fund. -------------------------------------------------------------------------------- Additionally, funds offered in variable annuity separate accounts are subject to minimum fees of $10,000 per class, for class level assets of $10 million or more. Each class is subject to the minimum fee in the event that the per account fee does not equal or exceed the applicable minimum fee. -------------------------------------------------------------------------------- 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, personal service and account maintenance for the Fund's Service shares. Under the plan, payments are made periodically at an annual rate of up to 0.25% of the average annual net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsor(s) of the insurance product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service shares. The impact of the service plan is to increase operating expenses of the Service shares, which results in lower performance compared to the Fund's shares that are not subject to a service fee. Fees incurred by the Fund under the plan are detailed in the Statement of Operations. -------------------------------------------------------------------------------- WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes to 0.35% of average annual net assets per class. This undertaking may be amended or withdrawn at any time. -------------------------------------------------------------------------------- 5. FUTURES CONTRACTS A futures contract is a commitment to buy or sell a specific amount of a commodity or financial instrument at a negotiated price on a stipulated future date. 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 protection from changes in market value of stocks 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 as a 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 securities. 26 | OPPENHEIMER CORE BOND FUND/VA 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 has expired. Cash held by the broker to cover initial margin requirements on open futures contracts is noted in the Statement of Assets and Liabilities. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable and/or payable for the daily mark to market for variation margin. Realized gains and losses are reported in the Statement of Operations as the closing and expiration of futures contracts. The net change in unrealized appreciation and depreciation is reported in the Statement of Operations. 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, 2005, the Fund had outstanding futures contracts as follows:
UNREALIZED EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION CONTRACT DESCRIPTION DATES CONTRACTS DECEMBER 31, 2005 (DEPRECIATION) -------------------------------------------------------------------------------------------- CONTRACTS TO PURCHASE U.S. Long Bonds 3/22/06 372 $ 42,477,750 $ 735,655 U.S. Treasury Nts., 5 yr. 3/22/06 135 14,356,406 33,949 -------------- 769,604 -------------- CONTRACTS TO SELL Euro-Bundesobligation, 10 yr. 3/8/06 39 5,625,582 (42,124) U.S. Treasury Nts., 2 yr. 3/31/06 701 143,836,438 (8,594) U.S. Treasury Nts., 10 yr. 3/22/06 431 47,154,094 (319,787) -------------- (370,505) -------------- $ 399,099 ==============
-------------------------------------------------------------------------------- 6. TOTAL RETURN SWAP CONTRACTS The Fund may enter into a total return swap transaction 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 notional. The unrealized gain (loss) related to the valuation of such contracts as well as the amount due to (owed by) the Fund at termination or settlement is combined and separately disclosed as an asset (liability) on the Statement of Assets and Liabilities. The Fund also records any periodic payments received from (paid to) the counterparty under such contracts as realized gain (loss) on the Statement of Operations. Total return swaps are subject to risks (if the counterparty fails to meet its obligations). As of December 31, 2005, the Fund had entered into the following total return swap agreements:
SWAP NOTIONAL TERMINATION UNREALIZED COUNTERPARTY SWAP DESCRIPTION AMOUNT DATE APPRECIATION ------------------------------------------------------------------------------------------------------------------------ Received or paid monthly. If the sum of the Lehman Brothers CMBS Index Payer Payment Amount and the Floating Rate Payer Payment Amount is positive, the Counterparty will pay such amount to the Fund. If the sums are negative, then Goldman Sachs the Fund shall pay the absolute value of such amount to Group, Inc. (The) the Counterparty. $9,190,000 6/1/06 $25,959 Abbreviations are as follows: CMBS Commercial Mortgage Backed Securities
27 | OPPENHEIMER CORE BOND FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 7. ILLIQUID SECURITIES As of December 31, 2005, investments in securities included issues that are illiquid. A security may 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 will not invest more than 15% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid securities. Securities that are illiquid are marked with the applicable footnote on the Statement of Investments. -------------------------------------------------------------------------------- 8. SECURITIES LENDING The Fund lends portfolio securities from time to time in order to earn additional income. In return, the Fund receives collateral in the form of U.S. Treasury obligations or cash, against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the funds and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Fund could experience delays and cost in recovering the securities loaned or in gaining access to the collateral. Cash collateral is invested in cash equivalents. The Fund retains a portion of the interest earned from the collateral. The Fund continues to receive the economic benefit of interest or dividends paid on the securities loaned in the form of a substitute payment received from the borrower. As of December 31, 2005, the Fund had on loan securities valued at $25,149,060. Collateral of $25,551,864 was received for the loans, of which $23,173,034 was received in cash and subsequently invested in approved instruments. -------------------------------------------------------------------------------- 9. LITIGATION A consolidated amended complaint has been filed as putative derivative and class actions against the Manager, OFS and the Distributor, as well as 51 of the Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and former Directors or Trustees and 8 present and former officers of the funds. This complaint, initially filed in the U.S. District Court for the Southern District of New York on January 10, 2005 and amended on March 4, 2005, consolidates into a single action and amends six individual previously-filed putative derivative and class action complaints. Like those prior complaints, the complaint alleges that the Manager charged excessive fees for distribution and other costs, improperly used assets of the funds in the form of directed brokerage commissions and 12b-1 fees to pay brokers to promote sales of the funds, and failed to properly disclose the use of assets of the funds to make those payments in violation of the Investment Company Act of 1940 and the Investment Advisers Act of 1940. Also, like those prior complaints, the complaint further alleges that by permitting and/or participating in those actions, the Directors/Trustees and the Officers breached their fiduciary duties to shareholders of the funds under the Investment Company Act of 1940 and at common law. The complaint seeks unspecified compensatory and punitive damages, rescission of the funds' investment advisory agreements, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. The defendants believe that the allegations contained in the Complaints are without merit and that they have meritorious defenses against the claims asserted. The defendants intend to defend these lawsuits vigorously and to contest any claimed liability. The defendants believe that it is premature to render any opinion as to the likelihood of an outcome unfavorable to them and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. 28 | OPPENHEIMER CORE BOND FUND/VA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER CORE BOND FUND/VA: We have audited the accompanying statement of assets and liabilities of Oppenheimer Core Bond Fund/VA, formerly Oppenheimer Bond Fund/VA, a series of Oppenheimer Variable Account Funds, including the statement of investments, as of December 31, 2005, 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 each of the five years in the periods presented. 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 the standards of the Public Company Accounting Oversight Board (United States). 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. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. 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 Core Bond Fund/VA as of December 31, 2005, 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 each of the five years in the periods presented, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Denver, Colorado February 13, 2006 29 | OPPENHEIMER CORE BOND FUND/VA FEDERAL INCOME TAX INFORMATION Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- In early 2006, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2005. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. 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. 30 | OPPENHEIMER CORE BOND FUND/VA PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities ("portfolio proxies") held by the Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund's voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at www.sec.gov. The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund's Form N-Q filings are available on the SEC's website at http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 31 | OPPENHEIMER CORE BOND FUND/VA BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Each year, the Board of Trustees (the "Board"), including a majority of the independent Trustees, is required to determine whether to renew the Fund's investment advisory agreement (the "Agreement"). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information, that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance. The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager's services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. Outlined below is a summary of the principal information considered by the Board as well as the Board's conclusions. NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information on the nature and extent of the services provided to the Fund and information regarding the Manager's key personnel that provide such services. The Manager's duties include providing the Fund with the services of the portfolio managers and the Manager's investment team, who provide research, analysis and other advisory services in regard to the Fund's investments; securities trading services; oversight of third party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund's investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel that are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund's operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund's shares. The Manager also provides the Fund with office space, facilities and equipment. The Board also considered the quality of the services provided and the quality of the Manager's resources that are available to the Fund. The Board took account of the fact that the Manager has had over forty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager's administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager's key personnel and the size and functions of its staff providing investment management services to the Fund. The Board also considered compliance reports from the Fund's Chief Compliance Officer. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of the Fund's portfolio managers and the Manager's fixed-income investment team and analysts. The Fund has been managed by a portfolio management team comprised of Angelo Manioudakis, Benjamin Gord, Charles Moon, Geoffrey Caan and Antulio N. Bomfim. Messrs. Manioudakis, Gord and Moon have been portfolio managers of the Fund since April 2002 and Messrs Caan and Bomfim have been portfolio managers of the Fund since 2003. Messrs. Manioudakis, Gord, Caan, Moon and Bomfim have each had between 11 and 15 years of experience managing fixed-income investments. The Board members also considered the totality of their experiences with the Manager, as directors or trustees of the Fund and other funds 32 | OPPENHEIMER CORE BOND FUND/VA advised by the Manager. In light of the foregoing, the Board concluded that the Fund benefits from the services provided under the Agreement as a result of the Manager's experience, reputation, personnel, operations, and resources. INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the Manager provided information on the performance of the Fund and the Manager at each Board meeting, including comparative performance information. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund's historical performance to relevant market indices and to the performance of other A-rated corporate debt funds (including both funds advised by the Manager and funds advised by other investment advisers). The Board noted that the Fund's one-year, three-year, five-year and ten-year performance were all better than its peer group median. COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board considered information regarding the Manager's costs in serving as the Fund's investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager's profitability from its relationship with the Fund. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also evaluated the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund, other A-rated corporate debt and BBB-rated corporate debt funds and other funds with comparable asset levels and distribution features. The Board noted that the Fund's contractual and actual management fees are higher than its peer group average and median and that its total expenses are equal to its peer group median but higher than its peer group average. The Board concluded that, given the Fund's strong performance, the management fee was reasonable. ECONOMIES OF SCALE. The Board considered whether the Manager may realize economies of scale in managing and supporting the Fund, whether those economies of scale benefit the Fund's shareholders and the current level of Fund assets in relation to the Fund's management fee breakpoints, which are intended to share with shareholders economies of scale that may exist as the Fund grows. OTHER BENEFITS TO THE MANAGER. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager's affiliates. The Board also considered the nature and quality of services provided by affiliates of the Manager, which it reviews at other times during the year in connection with the renewal of the Fund's service agreements. The Board considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide services to the Fund and that maintaining the financial viability of the Manager is important in order for the Manager to continue to provide significant services to the Fund and its shareholders. CONCLUSIONS. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees' counsel are both independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules. Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the advisory agreement for another year. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the factors together. The Board judged the terms and conditions of the advisory agreement, including the management fee, in light of all of the surrounding circumstances. 33 | OPPENHEIMER CORE BOND FUND/VA TRUSTEES AND OFFICERS Unaudited --------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------ NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS FUNDS, LENGTH OF SERVICE, AGE HELD; NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, TRUSTEES COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL. WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Mortgage Chairman of the Board Company (since 1991), Centennial State Mortgage Company (since 1994), and The El Paso of Trustees (since 2003); Mortgage Company (since 1993); Chairman of the following private companies: Trustee (since 1999) Ambassador Media Corporation (since 1984) and Broadway Ventures (since 1984); Age: 68 Director of the following: Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), Campus Crusade for Christ (since 1991) and The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (since 2002); former Chairman of the following: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (insurance agency) (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private Trustee (since 1993) equity funds) (until February 2001); Chairman, President and Chief Executive Officer Age: 74 of A.G. Edwards Capital, Inc. (until March 2000); Director of A.G. Edwards & Sons, Inc. (brokerage company) (until 2000) and A.G. Edwards Trust Company (investment adviser) (until 2000); Vice Chairman and Director of A.G. Edwards, Inc. (until March 1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March 1999); Chairman of A.G. Edwards Trust Company (until March 1999) and A.G.E. Asset Management (investment adviser) (until March 1999). Oversees 38 portfolios in the OppenheimerFunds complex. GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation (December Trustee (since 1999) 1991-April 1999); President, Treasurer and Director of Centennial Capital Corporation Age: 69 (June 1989-April 1999); Chief Executive Officer and Director of MultiSource Services, Inc. (March 1996-April 1999); Mr. Bowen held several positions with the Manager and with subsidiary or affiliated companies of the Manager (September 1987-April 1999). Oversees 38 portfolios in the OppenheimerFunds complex. EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since Trustee (since 1999) June 2000); Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002); Age: 67 Partner at PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (July 1994-June 1998). Oversees 38 portfolios in the OppenheimerFunds complex. JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Trustee (since 1990) Northwestern Energy Corp. (public utility corporation) (since November 2004); Age: 64 Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. ("OAC") (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 38 portfolios in the OppenheimerFunds complex. SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September 1984). Mr. Trustee (since 1996) Freedman held several positions with the Manager and with subsidiary or affiliated Age: 65 companies of the Manager (until October 1994). Oversees 38 portfolios in the OppenheimerFunds complex. BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) Trustee (since 2002) (since February 2000); Director of The California Endowment (philanthropic Age: 59 organization) (since April 2002); Director of Community Hospital of Monterey Peninsula (since February 2002); Vice Chair of American Funds' Emerging Markets Growth Fund, Inc. (mutual fund) (since October 1991); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation and The University of Michigan; Advisor at Credit Suisse First Boston's Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004);
34 | OPPENHEIMER CORE BOND FUND/VA BEVERLY L. HAMILTON, Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Continued Member of the investment committee of Hartford Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT J. MALONE, Director of Jones International University (educational organization) (since August Trustee (since 2002) 2005); Chairman, Chief Executive Officer and Director of Steele Street State Bank Age: 61 (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 38 portfolios in the OppenheimerFunds complex. F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) Trustee (since 2000) (investment company) (since 1996) and MML Series Investment Fund (investment company) Age: 63 (since 1996), Trustee and Chairman of the Investment Committee (since 1994) of the Worcester Polytech Institute (private university); President and Treasurer of the SIS Funds (private charitable fund) (since January 1999); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Member of the Investment Committee of the Community Foundation of Western Massachusetts (1998-2003); and Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999). Oversees 40 portfolios in the OppenheimerFunds complex. ------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH AND OFFICER FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES. JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President (since President and Trustee September 2000) of the Manager; President and Director or Trustee of other (since 2001) Oppenheimer funds; President and Director of OAC and of Oppenheimer Partnership Age: 56 Holdings, Inc. (holding company subsidiary of the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since November 2001); Chairman and Director of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since July 2001); President and Director of OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since July 2001); Director of the following investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 2001) and Director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director of DLB Acquisition Corporation (holding company parent of Babson Capital Management LLC) (since June 1995); Member of the Investment Company Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of the Manager (September 2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual Select Funds (open-end investment companies) (November 1999-November 2001); Director of C.M. Life Insurance Company (September 1999-August 2000); President, Chief Executive Officer and Director of MML Bay State Life Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 87 portfolios in the OppenheimerFunds complex.
35 | OPPENHEIMER CORE BOND FUND/VA TRUSTEES AND OFFICERS Unaudited / Continued --------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------ OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS OF THE FUND MANIOUDAKIS AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT DEATH OR REMOVAL. ANGELO MANIOUDAKIS, Senior Vice President of the Manager (since April 2002), of HarbourView Asset Vice President and Management Corporation (since April, 2002 and of OFI Institutional Asset Management, Portfolio Manager Inc. (since June 2002); Executive Director and portfolio manager for Miller, Anderson (since 2002) & Sherrerd, a division of Morgan Stanley Investment Management (August 1993-April Age: 39 2002). An officer of 14 portfolios in the OppenheimerFunds complex. MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Vice President and Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Chief Compliance Officer Corporation and Shareholder Services, Inc. (since June 1983); Vice President and (since 2004) Director of Internal Audit of the Manager (1997-February 2004). An officer of 87 Age: 55 portfolios in the OppenheimerFunds complex. BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of Treasurer and the following: HarbourView Asset Management Corporation, Shareholder Financial Principal Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management and Accounting Officer Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI (since 1999) Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. and Age: 46 OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex. ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) Vice President and Secretary of the Manager; General Counsel and Director of the Distributor (since December (since 2001) 2001); General Counsel of Centennial Asset Management Corporation (since December Age: 57 2001); Senior Vice President and General Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General Counsel and Director of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON REQUEST, BY CALLING 1.800.981.2871. 36 | OPPENHEIMER CORE BOND FUND/VA OPPENHEIMER GLOBAL SECURITIES FUND/VA FUND PERFORMANCE DISCUSSION -------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. We are pleased with the Fund's performance during the reporting period and attribute our higher return than the MSCI World Index to the success of our individual stock selection strategy. It is important to bear in mind that a discussion of the stocks that added to or detracted from performance is merely meant to illustrate our investment approach rather than suggest any attempt to make a country, sector or thematic bet. With that logic in mind, the Fund actually benefited from quite a few of its holdings, mostly for company-specific reasons. Hyundai Heavy Industries, the world's largest shipbuilder, was one of the Fund's best performing stocks. A long-term holding for us, we bought the stock on the belief that the average tanker age was high and the move toward double-hulled tankers would create a demand for new ship construction. The stock was very reasonably priced due to some concerns over the company's ownership of non-core businesses, among other things. Those issues have now been resolved and the stock more than doubled during the reporting period. Another winner for the Fund was Advanced Micro Devices (AMD), whose new dual core processor chip achieved significant traction in the server market ahead of Intel's competitive offering. The market's skepticism of AMD's competitive position turned to acceptance over the period helping the stock's rise. Otherwise, two of the Fund's energy stocks--Husky Energy, Inc. and Transocean, Inc.--an oil reserves company and driller, respectively, helped fuel performance due to the rising price of oil and natural gas. On balance, a few of the Fund's stocks hindered returns during the reporting period, including JDS Uniphase Corp., an optical components company. We had bought this stock in previous years believing that there was a significant opportunity for a turnaround and that the risk was reflected in its stock price. However, the turnaround never really materialized and we have since sold the stock. Another negative contributor was Vodafone. As one of our largest holdings, Vodafone has yet to deliver performance in line with our expectations. A slow market in Europe coupled with greater than expected expenditure in Japan and a realized tax charge all contributed to lower-than-expected results. A lengthening of the sales cycle in video conferencing technology led to earnings disappointments at Tandberg, one of our poorest performers. We continue to believe the technology has merit, which will allow for adoption in the coming year. Our holdings in International Game Technology, the world's largest manufacturer of casino gaming machines, also disappointed. The company's earnings growth did not meet investors' expectations and consequently, its stock price fell. However, we believe the long-term prospects remain strong, the company is a leader in its industry and its stock is reasonably priced. Therefore, we added modestly to the stock position. 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, 2005. In the case of non-service shares, performance is measured over a ten-year period. In the case of service shares, performance is measured from inception of the class on July 13, 2000. In the case of Class 3 shares, performance is measured from inception of the class on May 1, 2003. In the case of Class 4 shares, performance is measured from inception of the class on May 3, 2004. 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 Morgan Stanley Capital International World Index, an unmanaged index of equity securities listed on stock exchanges of 20 foreign countries and the U.S. Index performance reflects the reinvestment of income but does not consider the effect of transaction costs, and none of the data in the graphs show the effect of taxes. 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. 5 | OPPENHEIMER GLOBAL SECURITIES FUND/VA FUND PERFORMANCE DISCUSSION -------------------------------------------------------------------------------- NON-SERVICE SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Global Securities Fund/VA (Non-Service) Morgan Stanley Capital International World Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Global Morgan Stanley Securities Fund/VA Capital International (Non-Service) World Index 12/31/1995 10,000 10,000 03/31/1996 10,380 10,419 06/30/1996 10,827 10,733 09/30/1996 11,173 10,889 12/31/1996 11,780 11,400 03/31/1997 12,377 11,445 06/30/1997 13,679 13,181 09/30/1997 14,772 13,570 12/31/1997 14,422 13,249 03/31/1998 15,874 15,161 06/30/1998 16,180 15,483 09/30/1998 13,652 13,640 12/31/1998 16,456 16,535 03/31/1999 17,032 17,139 06/30/1999 18,726 17,972 09/30/1999 19,046 17,720 12/31/1999 26,079 20,725 03/31/2000 29,846 20,952 06/30/2000 28,870 20,224 09/30/2000 28,400 19,222 12/31/2000 27,406 18,047 03/31/2001 23,305 15,742 06/30/2001 25,110 16,178 09/30/2001 20,624 13,865 12/31/2001 24,108 15,066 03/31/2002 24,573 15,159 06/30/2002 22,377 13,770 09/30/2002 18,273 11,250 12/31/2002 18,772 12,122 03/31/2003 17,352 11,522 06/30/2003 20,970 13,510 09/30/2003 22,972 14,177 12/31/2003 26,847 16,214 03/31/2004 28,024 16,655 06/30/2004 27,742 16,829 09/30/2004 27,514 16,677 12/31/2004 31,992 18,686 03/31/2005 30,938 18,499 06/30/2005 31,891 18,611 09/30/2005 34,947 19,929 12/31/2005 36,569 20,559 AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/05 1-Year 14.31% 5-Year 5.94% 10-Year 13.84% SERVICE SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Global Securities Fund/VA (Service) Morgan Stanley Capital International World Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Global Morgan Stanley Securities Fund/VA Capital International (Service) World Index 07/13/2000 10,000 10,000 09/30/2000 9,620 9,505 12/31/2000 9,280 8,924 03/31/2001 7,889 7,784 06/30/2001 8,498 8,000 09/30/2001 6,977 6,855 12/31/2001 8,151 7,449 03/31/2002 8,308 7,496 06/30/2002 7,560 6,808 09/30/2002 6,166 5,563 12/31/2002 6,328 5,994 03/31/2003 5,842 5,697 06/30/2003 7,062 6,680 09/30/2003 7,736 7,010 12/31/2003 9,040 8,017 03/31/2004 9,431 8,235 06/30/2004 9,332 8,321 09/30/2004 9,248 8,246 12/31/2004 10,746 9,239 03/31/2005 10,387 9,147 06/30/2005 10,701 9,202 09/30/2005 11,721 9,854 12/31/2005 12,257 10,166 AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/05 1-Year 14.06% 5-Year 5.72% Since Inception (7/13/00) 3.79% 6 | OPPENHEIMER GLOBAL SECURITIES FUND/VA CLASS 3 SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Global Securities Fund/VA (Class 3) Morgan Stanley Capital International World Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Global Morgan Stanley Securities Fund/VA Capital International (Class 3) World Index 05/01/2003 10,000 10,000 06/30/2003 11,225 10,763 09/30/2003 12,291 11,295 12/31/2003 14,353 12,918 03/31/2004 14,979 13,269 06/30/2004 14,835 13,408 09/30/2004 14,714 13,287 12/31/2004 17,108 14,888 03/31/2005 16,547 14,739 06/30/2005 17,054 14,828 09/30/2005 18,693 15,878 12/31/2005 19,561 16,380 AVERAGE ANNUAL TOTAL RETURNS OF CLASS 3 SHARES OF THE FUND AT 12/31/05 1-Year 14.34% 5-Year N/A Since Inception (5/1/03) 28.61% CLASS 4 SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Global Securities Fund/VA (Class 4) Morgan Stanley Capital International World Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Global Morgan Stanley Securities Fund/VA Capital International (Class 4) World Index 05/03/2004 10,000 10,000 06/30/2004 10,115 10,310 09/30/2004 10,024 10,216 12/31/2004 11,647 11,448 03/31/2005 11,259 11,333 06/30/2005 11,596 11,402 09/30/2005 12,702 12,209 12/31/2005 13,278 12,595 AVERAGE ANNUAL TOTAL RETURNS OF CLASS 4 SHARES OF THE FUND AT 12/31/05 1-Year 14.05% 5-Year N/A Since Inception (5/3/04) 18.61% THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT. 7 | OPPENHEIMER GLOBAL SECURITIES FUND/VA FUND EXPENSES -------------------------------------------------------------------------------- FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include redemption fees, if any; and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 31, 2005. ACTUAL EXPENSES. The "actual" lines of the table provide information about actual account values and actual expenses. You may use the information on this line for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the "actual" line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio, and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the "hypothetical" lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included, your costs would have been higher. -------------------------------------------------------------------------------- BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE 6 MONTHS ENDED (7/1/05) (12/31/05) DECEMBER 31, 2005 -------------------------------------------------------------------------------- Non-Service shares Actual $1,000.00 $1,146.70 $3.58 -------------------------------------------------------------------------------- Non-Service shares Hypothetical 1,000.00 1,021.88 3.37 -------------------------------------------------------------------------------- Service shares Actual 1,000.00 1,145.40 4.93 -------------------------------------------------------------------------------- Service shares Hypothetical 1,000.00 1,020.62 4.65 -------------------------------------------------------------------------------- Class 3 shares Actual 1,000.00 1,147.00 3.63 -------------------------------------------------------------------------------- Class 3 shares Hypothetical 1,000.00 1,021.83 3.42 -------------------------------------------------------------------------------- Class 4 shares Actual 1,000.00 1,145.50 5.04 -------------------------------------------------------------------------------- Class 4 shares Hypothetical 1,000.00 1,020.52 4.75 Hypothetical assumes 5% annual return before expenses. Expenses are equal to the Fund's annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Those annualized expense ratios based on the 6-month period ended December 31, 2005 are as follows: CLASS EXPENSE RATIOS ---------------------------------------- Non-Service shares 0.66% ---------------------------------------- Service shares 0.91 ---------------------------------------- Class 3 shares 0.67 ---------------------------------------- Class 4 shares 0.93 -------------------------------------------------------------------------------- 8 | OPPENHEIMER GLOBAL SECURITIES FUND/VA STATEMENT OF INVESTMENTS December 31, 2005 -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- COMMON STOCKS--97.8% -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY--17.9% -------------------------------------------------------------------------------- AUTOMOBILES--1.9% Bayerische Motoren Werke AG 407,295 $ 17,841,187 -------------------------------------------------------------------------------- Porsche AG, Preference 18,742 13,444,041 -------------------------------------------------------------------------------- Toyota Motor Corp. 548,000 28,670,517 -------------- 59,955,745 -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE--2.0% Carnival Corp. 520,300 27,820,441 -------------------------------------------------------------------------------- International Game Technology 622,600 19,163,628 -------------------------------------------------------------------------------- Starbucks Corp. 1 490,600 14,722,906 -------------- 61,706,975 -------------------------------------------------------------------------------- HOUSEHOLD DURABLES--2.5% Koninklijke (Royal) Philips Electronics NV 1,232,900 38,315,111 -------------------------------------------------------------------------------- Sony Corp. 950,300 38,838,733 -------------- 77,153,844 -------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL--2.0% Amazon.com, Inc. 1 231,500 10,915,225 -------------------------------------------------------------------------------- eBay, Inc. 1 938,300 40,581,475 -------------------------------------------------------------------------------- GUS plc 575,348 10,215,562 -------------- 61,712,262 -------------------------------------------------------------------------------- MEDIA--4.9% Grupo Televisa SA, Sponsored GDR 354,499 28,537,170 -------------------------------------------------------------------------------- JC Decaux SA 1 408,864 9,535,820 -------------------------------------------------------------------------------- Pearson plc 1,410,238 16,680,808 -------------------------------------------------------------------------------- Singapore Press Holdings Ltd. 4,779,840 12,361,779 -------------------------------------------------------------------------------- Sirius Satellite Radio, Inc. 1,2 3,978,082 26,653,149 -------------------------------------------------------------------------------- Television Broadcasts Ltd. 2,489,832 13,230,037 -------------------------------------------------------------------------------- Walt Disney Co. (The) 750,000 17,977,500 -------------------------------------------------------------------------------- WPP Group plc 886,660 9,595,326 -------------------------------------------------------------------------------- Zee Telefilms Ltd. 4,932,200 17,198,848 -------------- 151,770,437 -------------------------------------------------------------------------------- SPECIALTY RETAIL--2.7% Gap, Inc. (The) 429,100 7,569,324 -------------------------------------------------------------------------------- Hennes & Mauritz AB, B Shares 1,430,200 48,606,457 -------------------------------------------------------------------------------- Industria de Diseno Textil SA 648,800 21,161,448 -------------------------------------------------------------------------------- Tiffany & Co. 200,100 7,661,829 -------------- 84,999,058 -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS--1.9% Burberry Group plc 1 1,299,628 9,609,193 -------------------------------------------------------------------------------- Coach, Inc. 1 484,100 16,139,894 VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS Continued LVMH Moet Hennessey Louis Vuitton 398,690 $ 35,424,112 -------------- 61,173,199 -------------------------------------------------------------------------------- CONSUMER STAPLES--7.2% -------------------------------------------------------------------------------- BEVERAGES--1.5% Companhia de Bebidas das Americas, ADR, Preference 463,515 17,636,746 -------------------------------------------------------------------------------- Diageo plc 104,630 1,516,625 -------------------------------------------------------------------------------- Fomento Economico Mexicano SA de CV, UBD 2,353,700 17,045,370 -------------------------------------------------------------------------------- Grupo Modelo SA de CV, Series C 3,279,000 11,873,172 -------------- 48,071,913 -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING--0.3% Tesco plc 1,693,350 9,657,890 -------------------------------------------------------------------------------- FOOD PRODUCTS--1.0% Cadbury Schweppes plc 3,387,574 32,026,425 -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS--3.3% Hindustan Lever Ltd. 5,321,600 23,328,939 -------------------------------------------------------------------------------- Kao Corp. 433,000 11,601,984 -------------------------------------------------------------------------------- Procter & Gamble Co. (The) 216,152 12,510,878 -------------------------------------------------------------------------------- Reckitt Benckiser plc 1,661,338 54,879,634 -------------- 102,321,435 -------------------------------------------------------------------------------- PERSONAL PRODUCTS--0.8% Avon Products, Inc. 277,200 7,914,060 -------------------------------------------------------------------------------- Shiseido Co. Ltd. 825,000 15,341,694 -------------- 23,255,754 -------------------------------------------------------------------------------- TOBACCO--0.3% Altria Group, Inc. 110,400 8,249,088 -------------------------------------------------------------------------------- ENERGY--7.8% -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES--3.5% GlobalSantaFe Corp. 624,400 30,064,860 -------------------------------------------------------------------------------- Technip SA 574,600 34,854,690 -------------------------------------------------------------------------------- Transocean, Inc. 1 620,700 43,256,583 -------------- 108,176,133 -------------------------------------------------------------------------------- OIL & GAS--4.3% BP plc, ADR 425,969 27,355,729 -------------------------------------------------------------------------------- Burlington Resources, Inc. 363,100 31,299,220 -------------------------------------------------------------------------------- Chevron Corp. 345,444 19,610,856 -------------------------------------------------------------------------------- Husky Energy, Inc. 778,415 39,508,353 -------------------------------------------------------------------------------- Neste Oil Oyj 1 105,900 2,993,941 -------------------------------------------------------------------------------- Total SA, B Shares 55,560 13,957,915 -------------- 134,726,014 9 | OPPENHEIMER GLOBAL SECURITIES FUND/VA STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- FINANCIALS--15.7% -------------------------------------------------------------------------------- CAPITAL MARKETS--2.4% 3i Group plc 916,975 $ 13,370,547 -------------------------------------------------------------------------------- Credit Suisse Group 663,473 33,828,767 -------------------------------------------------------------------------------- Northern Trust Corp. 568,300 29,449,306 -------------- 76,648,620 -------------------------------------------------------------------------------- COMMERCIAL BANKS--5.0% Anglo Irish Bank Corp. 861,454 13,074,740 -------------------------------------------------------------------------------- Australia & New Zealand Banking Group Ltd. 391,050 6,865,958 -------------------------------------------------------------------------------- HSBC Holdings plc 1,851,329 29,726,704 -------------------------------------------------------------------------------- ICICI Bank Ltd., Sponsored ADR 432,350 12,451,680 -------------------------------------------------------------------------------- Resona Holdings, Inc. 1 4,959 19,869,059 -------------------------------------------------------------------------------- Royal Bank of Scotland Group plc (The) 1,498,487 45,246,197 -------------------------------------------------------------------------------- Societe Generale, Cl. A 229,670 28,250,930 -------------- 155,485,268 -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES--3.9% American Express Co. 476,600 24,525,836 -------------------------------------------------------------------------------- Citigroup, Inc. 171,266 8,311,539 -------------------------------------------------------------------------------- Credit Saison Co. Ltd. 395,100 19,671,275 -------------------------------------------------------------------------------- Investor AB, B Shares 646,652 11,314,070 -------------------------------------------------------------------------------- JPMorgan Chase & Co. 633,263 25,134,208 -------------------------------------------------------------------------------- Morgan Stanley 579,700 32,892,178 -------------- 121,849,106 -------------------------------------------------------------------------------- INSURANCE--4.4% ACE Ltd. 388,071 20,738,514 -------------------------------------------------------------------------------- Allianz AG 233,811 35,417,521 -------------------------------------------------------------------------------- Berkshire Hathaway, Inc., Cl. B 1 5,920 17,378,160 -------------------------------------------------------------------------------- Everest Re Group Ltd. 104,800 10,516,680 -------------------------------------------------------------------------------- Manulife Financial Corp. 279,713 16,427,379 -------------------------------------------------------------------------------- Prudential plc 2,504,680 23,701,013 -------------------------------------------------------------------------------- XL Capital Ltd., Cl. A 183,500 12,364,230 -------------- 136,543,497 -------------------------------------------------------------------------------- HEALTH CARE--12.7% -------------------------------------------------------------------------------- BIOTECHNOLOGY--3.6% Affymetrix, Inc. 1 322,800 15,413,700 -------------------------------------------------------------------------------- Amgen, Inc. 1 376,500 29,690,790 -------------------------------------------------------------------------------- Amylin Pharmaceuticals, Inc. 1 131,100 5,233,512 -------------------------------------------------------------------------------- Genentech, Inc. 1 186,300 17,232,750 -------------------------------------------------------------------------------- Gilead Sciences, Inc. 1 452,060 23,791,918 -------------------------------------------------------------------------------- ImClone Systems, Inc. 1 195,300 6,687,072 -------------------------------------------------------------------------------- Wyeth 305,500 14,074,385 -------------- 112,124,127 VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES--2.0% Biomet, Inc. 310,100 $ 11,340,357 -------------------------------------------------------------------------------- Boston Scientific Corp. 1 634,500 15,538,905 -------------------------------------------------------------------------------- Essilor International SA 54,752 4,420,764 -------------------------------------------------------------------------------- Medtronic, Inc. 120,500 6,937,185 -------------------------------------------------------------------------------- Nektar Therapeutics 1,2 314,361 4,139,506 -------------------------------------------------------------------------------- Smith & Nephew plc 2,197,537 20,246,392 -------------- 62,623,109 -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES--1.4% Express Scripts, Inc. 1 238,300 19,969,540 -------------------------------------------------------------------------------- Quest Diagnostics, Inc. 447,000 23,011,560 -------------- 42,981,100 -------------------------------------------------------------------------------- PHARMACEUTICALS--5.7% Chugai Pharmaceutical Co. Ltd. 622,100 13,410,150 -------------------------------------------------------------------------------- Novartis AG 331,768 17,433,568 -------------------------------------------------------------------------------- Novo Nordisk AS, Cl. B 139,600 7,852,777 -------------------------------------------------------------------------------- Pfizer, Inc. 541,619 12,630,555 -------------------------------------------------------------------------------- Roche Holdings AG 254,589 38,225,646 -------------------------------------------------------------------------------- Sanofi-Aventis SA 567,994 49,760,920 -------------------------------------------------------------------------------- Shionogi & Co. Ltd. 1,585,000 22,323,187 -------------------------------------------------------------------------------- Takeda Pharmaceutical Co. Ltd. 215,700 11,668,851 -------------------------------------------------------------------------------- Theravance, Inc. 1 271,000 6,102,920 -------------- 179,408,574 -------------------------------------------------------------------------------- INDUSTRIALS--8.4% -------------------------------------------------------------------------------- AEROSPACE & DEFENSE--4.2% Boeing Co. 284,900 20,011,376 -------------------------------------------------------------------------------- Empresa Brasileira de Aeronautica SA, ADR 784,434 30,671,369 -------------------------------------------------------------------------------- European Aeronautic Defence & Space Co. 857,190 32,372,833 -------------------------------------------------------------------------------- Lockheed Martin Corp. 222,900 14,183,127 -------------------------------------------------------------------------------- Northrop Grumman Corp. 248,200 14,919,302 -------------------------------------------------------------------------------- Raytheon Co. 474,400 19,047,160 -------------- 131,205,167 -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING--0.3% JGC Corp. 407,000 7,824,727 -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT--0.6% Emerson Electric Co. 264,200 19,735,740 -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES--2.2% 3M Co. 316,000 24,490,000 -------------------------------------------------------------------------------- Hutchison Whampoa Ltd. 1,175,000 11,191,342 -------------------------------------------------------------------------------- Siemens AG 390,010 33,415,445 -------------- 69,096,787 10 | OPPENHEIMER GLOBAL SECURITIES FUND/VA VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- MACHINERY--0.8% Fanuc Ltd. 104,500 $ 8,950,015 -------------------------------------------------------------------------------- Hyundai Heavy Industries Co. Ltd. 231,590 17,561,772 -------------- 26,511,787 -------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE--0.3% Macquarie Airports 3,801,284 8,790,500 -------------------------------------------------------------------------------- INFORMATION TECHNOLOGY--21.7% -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT--5.4% Cisco Systems, Inc. 1 923,000 15,801,760 -------------------------------------------------------------------------------- Corning, Inc. 1 1,825,800 35,895,228 -------------------------------------------------------------------------------- Juniper Networks, Inc. 1 352,300 7,856,290 -------------------------------------------------------------------------------- QUALCOMM, Inc. 566,200 24,391,896 -------------------------------------------------------------------------------- Telefonaktiebolaget LM Ericsson, B Shares 24,038,000 82,602,731 -------------- 166,547,905 -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS--1.1% International Business Machines Corp. 273,417 22,474,877 -------------------------------------------------------------------------------- Sun Microsystems, Inc. 1 2,588,100 10,844,139 -------------- 33,319,016 -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--2.6% Hoya Corp. 552,900 19,992,143 -------------------------------------------------------------------------------- Keyence Corp. 55,100 15,819,128 -------------------------------------------------------------------------------- Murata Manufacturing Co. Ltd. 416,900 26,981,275 -------------------------------------------------------------------------------- Nidec Corp. 138,200 11,890,814 -------------------------------------------------------------------------------- Tandberg ASA 1,153,550 7,033,373 -------------- 81,716,733 -------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES--0.3% Yahoo Japan Corp. 6,384 9,689,541 -------------------------------------------------------------------------------- IT SERVICES--1.3% Infosys Technologies Ltd. 599,358 39,918,348 -------------------------------------------------------------------------------- OFFICE ELECTRONICS--0.3% Canon, Inc. 172,700 10,155,232 -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--5.3% Advanced Micro Devices, Inc. 1 1,936,300 59,250,780 -------------------------------------------------------------------------------- Altera Corp. 1 735,800 13,634,374 -------------------------------------------------------------------------------- Cree, Inc. 1 573,300 14,470,092 -------------------------------------------------------------------------------- International Rectifier Corp. 1 429,200 13,691,480 -------------------------------------------------------------------------------- Samsung Electronics Co. 61,710 39,750,965 -------------------------------------------------------------------------------- Silicon Laboratories, Inc. 1 124,900 4,578,834 -------------------------------------------------------------------------------- Taiwan Semiconductor Manufacturing Co. Ltd. 10,658,194 20,177,949 -------------- 165,554,474 VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- SOFTWARE--5.4% Adobe Systems, Inc. 526,400 $ 19,455,744 -------------------------------------------------------------------------------- Cadence Design Systems, Inc. 1 562,370 9,515,300 -------------------------------------------------------------------------------- Enix Corp. 433,600 12,209,455 -------------------------------------------------------------------------------- Intuit, Inc. 1 458,600 24,443,380 -------------------------------------------------------------------------------- Microsoft Corp. 1,595,200 41,714,480 -------------------------------------------------------------------------------- Nintendo Co. Ltd. 91,100 11,073,570 -------------------------------------------------------------------------------- Novell, Inc. 1 2,193,226 19,366,186 -------------------------------------------------------------------------------- SAP AG 173,160 31,402,381 -------------- 169,180,496 -------------------------------------------------------------------------------- MATERIALS--0.2% -------------------------------------------------------------------------------- CHEMICALS--0.2% Syngenta AG 1 47,067 5,856,287 -------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES--5.0% -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES--0.5% Tele Norte Leste Participacoes SA, Preference 913,784 16,217,780 -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES--4.5% KDDI Corp. 6,323 36,457,710 -------------------------------------------------------------------------------- SK Telecom Co. Ltd., ADR 1,277,460 25,919,663 -------------------------------------------------------------------------------- Vodafone Group plc 34,955,950 75,477,379 -------------- 137,854,752 -------------------------------------------------------------------------------- UTILITIES--1.2% -------------------------------------------------------------------------------- ELECTRIC UTILITIES--0.7% Energias de Portugal SA 2,905,006 8,941,974 -------------------------------------------------------------------------------- Fortum Oyj 754,800 14,154,678 -------------- 23,096,652 -------------------------------------------------------------------------------- GAS UTILITIES--0.5% Hong Kong & China Gas Co. Ltd. 6,593,000 14,072,617 -------------- Total Common Stocks (Cost $2,137,087,963) 3,048,964,114 11 | OPuPENHEIMER GLOBAL SECURITIES FUND/VA STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT SEE NOTE 1 -------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS--1.8% -------------------------------------------------------------------------------- Undivided interest of 96.91% in joint repurchase agreement (Principal Amount/Value $59,548,000, with a maturity value of $59,570,297) with DB Alex Brown LLC, 3.37%, dated 12/30/05, to be repurchased at $57,727,608 on 1/3/06, collateralized by U.S. Treasury Bills, 6/1/06 with a value of $60,758,966 (Cost $57,706,000) $ 57,706,000 $ 57,706,000 -------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $2,194,793,963) 99.6% 3,106,670,114 -------------------------------------------------------------------------------- OTHER ASSETS NET OF LIABILITIES 0.4 11,694,656 ------------------------------- NET ASSETS 100.0% $3,118,364,770 =============================== FOOTNOTES TO STATEMENT OF INVESTMENTS 1. Non-income producing security. 2. Illiquid or restricted security. The aggregate value of illiquid or restricted securities as of December 31, 2005 was $30,792,655, which represents 0.99% of the Fund's net assets, all of which is considered restricted. See Note 6 of Notes to Financial Statements. -------------------------------------------------------------------------------- GEOGRAPHIC HOLDINGS UNAUDITED -------------------------------------------------------------------------------- DISTRIBUTION OF INVESTMENTS REPRESENTING GEOGRAPHIC HOLDINGS, AS A PERCENTAGE OF TOTAL INVESTMENTS AT VALUE, IS AS FOLLOWS: GEOGRAPHIC HOLDINGS VALUE PERCENT ------------------------------------------------------------------------------- United States $ 1,199,074,343 38.6% United Kingdom 379,305,424 12.2 Japan 352,439,060 11.3 France 208,577,984 6.7 Sweden 142,523,258 4.6 Germany 131,520,575 4.2 Switzerland 95,344,268 3.1 India 92,897,815 3.0 Korea, Republic of South 83,232,400 2.7 Brazil 64,525,895 2.1 Mexico 57,455,712 1.8 Canada 55,935,732 1.8 Hong Kong 38,493,996 1.2 The Netherlands 38,315,111 1.2 Cayman Islands 33,102,744 1.1 Spain 21,161,448 0.7 Taiwan 20,177,949 0.7 Finland 17,148,619 0.6 Australia 15,656,458 0.5 Ireland 13,074,740 0.4 Singapore 12,361,779 0.4 Bermuda 10,516,680 0.3 Portugal 8,941,974 0.3 Denmark 7,852,777 0.3 Norway 7,033,373 0.2 ------------------------------------ Total $ 3,106,670,114 100.0% ==================================== SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 12 | OPPENHEIMER GLOBAL SECURITIES FUND/VA STATEMENT OF ASSETS AND LIABILITIES December 31, 2005 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------- ASSETS --------------------------------------------------------------------------------------------------------- Investments, at value (cost $2,194,793,963)--see accompanying statement of investments $ 3,106,670,114 --------------------------------------------------------------------------------------------------------- Cash--foreign currencies (cost $693,347) 693,237 --------------------------------------------------------------------------------------------------------- Receivables and other assets: Shares of beneficial interest sold 6,385,447 Interest and dividends 5,656,310 Investments sold 2,483,759 Other 50,677 ----------------- Total assets 3,121,939,544 --------------------------------------------------------------------------------------------------------- LIABILITIES --------------------------------------------------------------------------------------------------------- Bank overdraft 180,503 --------------------------------------------------------------------------------------------------------- Payables and other liabilities: Shares of beneficial interest redeemed 1,315,170 Investments purchased 1,229,851 Distribution and service plan fees 367,674 Custodian fees 188,091 Shareholder communications 176,693 Trustees' compensation 62,814 Foreign capital gains tax 4,533 Transfer and shareholder servicing agent fees 3,610 Other 45,835 ----------------- Total liabilities 3,574,774 --------------------------------------------------------------------------------------------------------- NET ASSETS $ 3,118,364,770 ================= --------------------------------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS --------------------------------------------------------------------------------------------------------- Par value of shares of beneficial interest $ 93,488 --------------------------------------------------------------------------------------------------------- Additional paid-in capital 2,014,105,270 --------------------------------------------------------------------------------------------------------- Accumulated net investment income 20,023,318 --------------------------------------------------------------------------------------------------------- Accumulated net realized gain on investments and foreign currency transactions 172,276,512 --------------------------------------------------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 911,866,182 ----------------- NET ASSETS $ 3,118,364,770 ================= --------------------------------------------------------------------------------------------------------- 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 $2,124,413,211 and 63,633,976 shares of beneficial interest outstanding) $ 33.38 --------------------------------------------------------------------------------------------------------- Service Shares: Net asset value, redemption price per share and offering price per share (based on net assets of $557,283,442 and 16,807,481 shares of beneficial interest outstanding) $ 33.16 --------------------------------------------------------------------------------------------------------- Class 3 Shares: Net asset value, redemption price per share and offering price per share (based on net assets of $346,064,145 and 10,313,922 shares of beneficial interest outstanding) $ 33.55 --------------------------------------------------------------------------------------------------------- Class 4 Shares: Net asset value, redemption price per share and offering price per share (based on net assets of $90,603,972 and 2,733,015 shares of beneficial interest outstanding) $ 33.15
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 13 | OPPENHEIMER GLOBAL SECURITIES FUND/VA STATEMENT OF OPERATIONS For the Year Ended December 31, 2005 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------- INVESTMENT INCOME --------------------------------------------------------------------------------------------------------- Dividends (net of foreign withholding taxes of $3,943,319) $ 49,026,437 --------------------------------------------------------------------------------------------------------- Interest (net of foreign withholding taxes of $141) 1,253,928 ----------------- Total investment income 50,280,365 --------------------------------------------------------------------------------------------------------- EXPENSES --------------------------------------------------------------------------------------------------------- Management fees 18,210,907 --------------------------------------------------------------------------------------------------------- Distribution and service plan fees: Service shares 1,031,019 Class 4 shares 153,083 --------------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Non-Service shares 11,310 Service shares 10,288 Class 3 shares 10,210 Class 4 shares 10,066 --------------------------------------------------------------------------------------------------------- Shareholder communications: Non-Service shares 177,283 Service shares 36,646 Class 3 shares 25,501 Class 4 shares 5,586 --------------------------------------------------------------------------------------------------------- Custodian fees and expenses 651,268 --------------------------------------------------------------------------------------------------------- Trustees' compensation 58,004 --------------------------------------------------------------------------------------------------------- Administration service fees 1,500 --------------------------------------------------------------------------------------------------------- Other 110,324 ----------------- Total expenses 20,502,995 Less reduction to custodian expenses (5,511) ----------------- Net expenses 20,497,484 --------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME 29,782,881 --------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) --------------------------------------------------------------------------------------------------------- Net realized gain on: Investments 290,648,764 Foreign currency transactions 46,614,542 ----------------- Net realized gain 337,263,306 --------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on: Investments (net of foreign capital gains tax of $4,533) 167,289,009 Translation of assets and liabilities denominated in foreign currencies (180,202,791) ----------------- Net change in unrealized appreciation (12,913,782) --------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 354,132,405 =================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 14 | OPPENHEIMER GLOBAL SECURITIES FUND/VA STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005 2004 ------------------------------------------------------------------------------------------------------------------- OPERATIONS ------------------------------------------------------------------------------------------------------------------- Net investment income $ 29,782,881 $ 28,751,119 ------------------------------------------------------------------------------------------------------------------- Net realized gain 337,263,306 179,086,396 ------------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (12,913,782) 331,047,849 ----------------------------------- Net increase in net assets resulting from operations 354,132,405 538,885,364 ------------------------------------------------------------------------------------------------------------------- DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------- Dividends from net investment income: Non-Service shares (25,791,077) (30,456,227) Service shares (3,177,917) (2,439,240) Class 3 shares (2,857,511) (2,221,201) Class 4 shares (420,976) -- ------------------------------------------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from beneficial interest transactions: Non-Service shares (607,707,602) (177,302,804) Service shares 152,495,021 130,991,549 Class 3 shares 40,656,196 80,796,251 Class 4 shares 43,339,023 32,377,319 ------------------------------------------------------------------------------------------------------------------- NET ASSETS ------------------------------------------------------------------------------------------------------------------- Total increase (decrease) (49,332,438) 570,631,011 ------------------------------------------------------------------------------------------------------------------- Beginning of period 3,167,697,208 2,597,066,197 ----------------------------------- End of period (including accumulated net investment income of $20,023,318 and $13,762,145, respectively) $ 3,118,364,770 $ 3,167,697,208 ===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 15 | OPPENHEIMER GLOBAL SECURITIES FUND/VA FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 ---------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA ---------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 29.51 $ 25.08 $ 17.70 $ 22.84 $ 30.33 ---------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .32 1 .26 1 .19 .16 .17 Net realized and unrealized gain (loss) 3.85 4.49 7.34 (5.19) (3.85) --------------------------------------------------------------------- Total from investment operations 4.17 4.75 7.53 (5.03) (3.68) ---------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.30) (.32) (.15) (.11) (.19) Distributions from net realized gain -- -- -- -- (3.62) --------------------------------------------------------------------- Total dividends and/or distributions to shareholders (.30) (.32) (.15) (.11) (3.81) ---------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 33.38 $ 29.51 $ 25.08 $ 17.70 $ 22.84 ===================================================================== ---------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 2 14.31% 19.16% 43.02% (22.13)% (12.04)% ---------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA ---------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $2,124,413 $2,518,867 $2,280,752 $1,549,993 $1,905,890 ---------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $2,123,523 $2,451,188 $1,751,226 $1,776,289 $1,918,335 ---------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 1.08% 1.01% 0.99% 0.80% 0.70% Total expenses 0.67% 4 0.66% 4 0.67% 4 0.67% 4 0.70% 4 ---------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 30% 34% 34% 39%
1. Per share amounts calculated based on the average shares outstanding during the period. 2. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 16 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 ---------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA ---------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 29.33 $ 24.96 $ 17.61 $ 22.78 $ 30.30 ---------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .24 1 .20 1 .12 .12 .21 Net realized and unrealized gain (loss) 3.84 4.46 7.36 (5.19) (3.92) --------------------------------------------------------------------- Total from investment operations 4.08 4.66 7.48 (5.07) (3.71) ---------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.25) (.29) (.13) (.10) (.19) Distributions from net realized gain -- -- -- -- (3.62) --------------------------------------------------------------------- Total dividends and/or distributions to shareholders (.25) (.29) (.13) (.10) (3.81) ---------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 33.16 $ 29.33 $ 24.96 $ 17.61 $ 22.78 ===================================================================== ---------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 2 14.06% 18.88% 42.86% (22.37)% (12.17)% ---------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA ---------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 557,284 $ 346,403 $ 168,739 $ 52,830 $ 20,467 ---------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 413,849 $ 247,490 $ 91,800 $ 34,847 $ 8,502 ---------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 0.79% 0.77% 0.68% 0.51% 0.44% Total expenses 0.92% 4 0.91% 4 0.93% 4 0.90% 4 0.85% 4 ---------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 30% 34% 34% 39%
1. Per share amounts calculated based on the average shares outstanding during the period. 2. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 17 | OPPENHEIMER GLOBAL SECURITIES FUND/VA FINANCIAL HIGHLIGHTS Continued --------------------------------------------------------------------------------
CLASS 3 SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 1 ------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 29.65 $ 25.19 $ 17.55 ------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income .32 2 .26 2 .07 Net realized and unrealized gain 3.88 4.52 7.57 -------------------------------------- Total from investment operations 4.20 4.78 7.64 ------------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.30) (.32) -- Distributions from net realized gain -- -- -- -------------------------------------- Total dividends and/or distributions to shareholders (.30) (.32) -- ------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 33.55 $29.65 $ 25.19 ====================================== ------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN, AT NET ASSET VALUE 3 14.34% 19.19% 43.53% ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA ------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $346,064 $265,044 $147,576 ------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $296,252 $199,388 $ 80,579 ------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: 4 Net investment income 1.06% 1.00% 0.73% Total expenses 0.67% 5 0.66% 5 0.68% 5 ------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 35% 30% 34%
1. For the period from May 1, 2003 (inception of offering) to December 31, 2003. 2. Per share amounts calculated based on the average shares outstanding during the period. 3. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year. 5. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 18 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
CLASS 4 SHARES PERIOD ENDED DECEMBER 31, 2005 2004 1 --------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA --------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 29.35 $ 25.21 --------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .24 2 .09 2 Net realized and unrealized gain 3.84 4.05 ----------------------- Total from investment operations 4.08 4.14 --------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.28) -- Distributions from net realized gain -- -- ----------------------- Total dividends and/or distributions to shareholders (.28) -- --------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 33.15 $ 29.35 ======================= --------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 14.05% 16.42% --------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA --------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 90,604 $ 37,384 --------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 61,380 $ 19,774 --------------------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 0.79% 0.53% Total expenses 0.93% 5 0.94% 5 --------------------------------------------------------------------------------------------------------- Portfolio turnover rate 0.35% 30%
1. For the period from May 3, 2004 (inception of offering) to December 31, 2004. 2. Per share amounts calculated based on the average shares outstanding during the period. 3. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year. 5. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 19 | OPPENHEIMER GLOBAL SECURITIES FUND/VA NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Oppenheimer Global Securities Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds, an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek long-term capital appreciation by investing a substantial portion of its assets in securities of foreign issuers, "growth-type" companies, cyclical industries and special situations that are considered to have appreciation possibilities. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers Non-Service, Service, Class 3 and Class 4 shares. All 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. All classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. The classes of shares designated as Service shares and Class 4 shares are subject to a distribution and service plan. The Fund assesses a 1% fee on the proceeds of Class 3 and Class 4 shares that are redeemed (either by selling or exchanging to another Oppenheimer fund or other investment option offered through your variable life insurance or variable annuity contract) within 60 days of their purchase. The fee, which is retained by the Fund, is accounted for as an addition to paid-in capital. The following is a summary of significant accounting policies consistently followed by the Fund. -------------------------------------------------------------------------------- SECURITIES VALUATION. The Fund calculates the net asset value of its shares as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Securities may be valued primarily using dealer-supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Securities listed or traded on National Stock Exchanges or other domestic 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. Securities traded on NASDAQ are valued based on the closing price provided by NASDAQ 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 traded on foreign exchanges are valued based on the last sale price on the principal exchange on which the security is traded, in the country that is identified by the portfolio pricing service, prior to the time when the Fund's assets are valued. In the absence of a sale, the security is valued at the official closing price on the principal exchange. Corporate, government and municipal debt instruments having a remaining maturity in excess of sixty days and all mortgage-backed securities will be valued at the mean between the "bid" and "asked" prices. Futures contracts traded on a commodities or futures exchange will be valued at the final settlement price or official closing price on the principal exchange as reported by such principal exchange at its trading session ending at, or most recently prior to, the time when the Fund's assets are valued. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value. Foreign and domestic securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund's assets are valued but after the close of their respective exchanges will be fair valued. Fair value is determined in good faith using 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). -------------------------------------------------------------------------------- FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in U.S. dollars. The values of securities denominated in foreign currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Foreign exchange rates may be valued primarily using dealer supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes 20 | OPPENHEIMER GLOBAL SECURITIES FUND/VA recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in exchange rates. 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. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. 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. 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 on a daily basis 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 comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. The tax components of capital shown in the table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes. NET UNREALIZED APPRECIATION BASED ON COST OF UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED SECURITIES AND OTHER NET INVESTMENT LONG-TERM LOSS INVESTMENTS FOR FEDERAL INCOME GAIN CARRYFORWARD 1,2,3 INCOMETAX PURPOSES ---------------------------------------------------------------------------- $32,535,312 $176,426,744 $221,596 $895,474,132 1. The Fund had $221,596 of post-October foreign currency losses which were deferred. 2. During the fiscal year ended December 31, 2005, the Fund utilized $130,358,556 of capital loss carryforward to offset capital gains realized in that fiscal year. 3. During the fiscal year ended December 31, 2004, the Fund utilized $170,421,832 of capital loss carryforward to offset capital gains realized in that fiscal year. Net investment income (loss) and net realized gain (loss) may differ for financial statement and 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. Accordingly, the following amounts have been reclassified for December 31, 2005. Net assets of the Fund were unaffected by the reclassifications. REDUCTION TO INCREASE TO ACCUMULATED NET INCREASE TO ACCUMULATED NET REALIZED GAIN PAID-IN CAPITAL INVESTMENT INCOME ON INVESTMENTS 4 ------------------------------------------------------------------------- $23,806,559 $8,725,773 $32,532,332 4. $23,806,559, all of which was long-term capital gain, was distributed in connection with Fund share redemptions. 21 | OPPENHEIMER GLOBAL SECURITIES FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued The tax character of distributions paid during the years ended December 31, 2005 and December 31, 2004 was as follows: YEAR ENDED YEAR ENDED DECEMBER 31, 2005 DECEMBER 31, 2004 -------------------------------------------------------------------- Distributions paid from: Ordinary income $32,247,481 $35,116,668 The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 31, 2005 are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss. Federal tax cost of securities $2,211,186,013 Federal tax cost of other investments 692,459 --------------- Total federal tax cost $2,211,878,472 =============== Gross unrealized appreciation $ 926,555,047 Gross unrealized depreciation (31,080,915) --------------- Net unrealized appreciation $ 895,474,132 =============== Certain foreign countries impose a tax on capital gains which is accrued by the Fund based on unrealized appreciation, if any, on affected securities. The tax is paid when the gain is realized. -------------------------------------------------------------------------------- TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of "Other" within the asset section of the Statement of Assets and Liabilities. Deferral of trustees' fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund's assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the Plan. -------------------------------------------------------------------------------- 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. Income and capital gain distributions, if any, are declared and paid annually. -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts to the extent they are not offset by positive cash balances maintained by the Fund. The Reduction to Custodian Expenses line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings. -------------------------------------------------------------------------------- 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 U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 22 | OPPENHEIMER GLOBAL SECURITIES FUND/VA disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. -------------------------------------------------------------------------------- 2. SHARES OF BENEFICIAL INTEREST The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004 1 SHARES AMOUNT SHARES AMOUNT ----------------------------------------------------------------------------------------------------------------- NON-SERVICE SHARES Sold 8,706,521 $ 257,431,509 23,590,376 $ 610,109,742 Dividends and/or distributions reinvested 895,835 25,791,077 1,203,327 30,456,227 Redeemed (31,323,712) (890,930,188) (30,383,126) (817,868,773) ------------------------------------------------------------------- Net decrease (21,721,356) $(607,707,602) (5,589,423) $ (177,302,804) =================================================================== ----------------------------------------------------------------------------------------------------------------- SERVICE SHARES Sold 6,930,473 $ 208,836,898 6,516,321 $ 168,136,666 Dividends and/or distributions reinvested 110,922 3,177,917 96,757 2,439,240 Redeemed (2,043,354) (59,519,794) (1,562,747) (39,584,357) ------------------------------------------------------------------- Net increase 4,998,041 $ 152,495,021 5,050,331 $ 130,991,549 =================================================================== ----------------------------------------------------------------------------------------------------------------- CLASS 3 SHARES Sold 2,056,580 $ 61,404,566 3,286,454 $ 85,761,974 Dividends and/or distributions reinvested 98,739 2,857,511 87,346 2,221,201 Redeemed (779,132) (23,605,881) 2 (293,439) (7,186,924) 3 ------------------------------------------------------------------- Net increase 1,376,187 $ 40,656,196 3,080,361 $ 80,796,251 =================================================================== ----------------------------------------------------------------------------------------------------------------- CLASS 4 SHARES Sold 1,634,734 $ 48,519,848 1,345,840 $ 34,232,416 Dividends and/or distributions reinvested 14,694 420,976 -- -- Redeemed (189,923) (5,601,801) 2 (72,330) (1,855,097) 3 ------------------------------------------------------------------- Net increase 1,459,505 $ 43,339,023 1,273,510 $ 32,377,319 ===================================================================
1. For the year ended December 31, 2004, for Non-Service, Service and Class 3 shares and for the period from May 3, 2004 (inception of offering) to December 31, 2004, for Class 4 shares. 2. Net of redemption fees of $29,707 and $6,752 for Class 3 and Class 4 shares, respectively. 3. Net of redemption fees of $34,168 and $5,752 for Class 3 and Class 4 shares, respectively. -------------------------------------------------------------------------------- 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, 2005, were as follows: PURCHASES SALES ------------------------------------------------------------------------ Investment securities $996,540,059 $1,278,598,882 -------------------------------------------------------------------------------- 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 Fund which provides for a fee at an annual rate of 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million and 0.60% of average annual net assets over $800 million. -------------------------------------------------------------------------------- ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund's tax returns. 23 | OPPENHEIMER GLOBAL SECURITIES FUND/VA NOTES TO FINANCIAL STATEMENTS 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 per account fee. For the year ended December 31, 2005, the Fund paid $41,719 to OFS for services to the Fund. Additionally, funds offered in variable annuity separate accounts are subject to minimum fees of $10,000 per class, for class level assets of $10 million or more. Each class is subject to the minimum fee in the event that the per account fee does not equal or exceed the applicable minimum fee. -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE PLAN FOR SERVICE AND CLASS 4 SHARES. The Fund has adopted a Distribution and Service Plan for Service share class and Class 4 shares to pay OppenheimerFunds Distributor, Inc. (the Distributor), for distribution related services and personal service and account maintenance for the Fund's Service class and Class 4 shares. Under the plan, payments are made periodically at an annual rate of up to 0.25% of the average annual net assets of Service share class and Class 4 shares of the Fund. The Distributor currently uses all of those fees to compensate sponsor(s) of the insurance product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service class and Class 4 shares. The impact of the service plan is to increase operating expenses of the Service class and Class 4 shares, which results in lower performance compared to the Fund's shares that are not subject to a service fee. Fees incurred by the Fund under the plan are detailed in the Statement of Operations. -------------------------------------------------------------------------------- WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes to 0.35% of average annual net assets per class. This undertaking may be amended or withdrawn at any time. -------------------------------------------------------------------------------- 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 to settle specific purchases or sales of securities denominated in a foreign currency and for protection from adverse exchange rate fluctuation. 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 prevailing foreign currency exchange rates. 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 transaction. Contracts closed or settled with the same broker are recorded as net realized gains or losses. Such realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. As of December 31, 2005, the Fund had no outstanding foreign currency contracts. -------------------------------------------------------------------------------- 6. ILLIQUID OR RESTRICTED SECURITIES As of December 31, 2005, investments in securities included issues that are illiquid or restricted. Restricted securities are 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 will not invest 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. Securities that are illiquid or restricted are marked with the applicable footnote on the Statement of Investments. Information concerning restricted securities is as follows:
ACQUISITION VALUATION AS OF UNREALIZED SECURITY DATES COST DECEMBER 31, 2005 APPRECIATION -------------------------------------------------------------------------------------------------------------- Nektar Therapeutics 6/25/03 $ 3,568,000 $ 4,139,506 $ 571,506 Sirius Satellite Radio, Inc. 3/5/03 3,647,166 26,653,149 23,005,983 ------------------------------------------------- $ 7,215,166 $ 30,792,655 $ 23,577,489 =================================================
24 | OPPENHEIMER GLOBAL SECURITIES FUND/VA -------------------------------------------------------------------------------- 7. LITIGATION A consolidated amended complaint has been filed as putative derivative and class actions against the Manager, OFS and the Distributor, as well as 51 of the Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and former Directors or Trustees and 8 present and former officers of the funds. This complaint, initially filed in the U.S. District Court for the Southern District of New York on January 10, 2005 and amended on March 4, 2005, consolidates into a single action and amends six individual previously-filed putative derivative and class action complaints. Like those prior complaints, the complaint alleges that the Manager charged excessive fees for distribution and other costs, improperly used assets of the funds in the form of directed brokerage commissions and 12b-1 fees to pay brokers to promote sales of the funds, and failed to properly disclose the use of assets of the funds to make those payments in violation of the Investment Company Act of 1940 and the Investment Advisers Act of 1940. Also, like those prior complaints, the complaint further alleges that by permitting and/or participating in those actions, the Directors/Trustees and the Officers breached their fiduciary duties to shareholders of the funds under the Investment Company Act of 1940 and at common law. The complaint seeks unspecified compensatory and punitive damages, rescission of the funds' investment advisory agreements, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. The defendants believe that the allegations contained in the Complaints are without merit and that they have meritorious defenses against the claims asserted. The defendants intend to defend these lawsuits vigorously and to contest any claimed liability. The defendants believe that it is premature to render any opinion as to the likelihood of an outcome unfavorable to them and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. 25 | OPPENHEIMER GLOBAL SECURITIES FUND/VA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER GLOBAL SECURITIES FUND/VA: We have audited the accompanying statement of assets and liabilities of Oppenheimer Global Securities Fund/VA, a series of Oppenheimer Variable Account Funds, including the statement of investments, as of December 31, 2005, 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 each of the five years in the periods presented. 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 the standards of the Public Company Accounting Oversight Board (United States). 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. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. 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 Global Securities Fund/VA as of December 31, 2005, 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 each of the five years in the periods presented, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Denver, Colorado February 13, 2006 26 | OPPENHEIMER GLOBAL SECURITIES FUND/VA FEDERAL INCOME TAX INFORMATION Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- In early 2006, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2005. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. Dividends, if any, paid by the Fund during the fiscal year ended December 31, 2005 which are not designated as capital gain distributions should be multiplied by 23.36% to arrive at the amount eligible for the corporate dividend-received deduction. The Fund has elected the application of Section 853 of the Internal Revenue Code to permit shareholders to take a federal income tax credit or deduction, at their option, on a per share basis for an aggregate amount of $3,516,631 of foreign income taxes paid by the Fund during the fiscal year ended December 31, 2005. A separate notice will be mailed to each shareholder, which will reflect the proportionate share of such foreign taxes which must be treated by shareholders as gross income for federal income tax purposes. Gross income of $31,844,141 was derived from sources within foreign countries or possessions of the United States. 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. 27 | OPPENHEIMER GLOBAL SECURITIES FUND/VA PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities ("portfolio proxies") held by the Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund's voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at www.sec.gov. The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund's Form N-Q filings are available on the SEC's website at http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 28 | OPPENHEIMER GLOBAL SECURITIES FUND/VA BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Each year, the Board of Trustees (the "Board"), including a majority of the independent Trustees, is required to determine whether to renew the Fund's investment advisory agreement (the "Agreement"). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information, that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance. The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager's services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. Outlined below is a summary of the principal information considered by the Board as well as the Board's conclusions. NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information on the nature and extent of the services provided to the Fund and information regarding the Manager's key personnel that provide such services. The Manager's duties include providing the Fund with the services of the portfolio manager and the Manager's investment team, who provide research, analysis and other advisory services in regard to the Fund's investments; securities trading services; oversight of third party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund's investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel that are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund's operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund's shares. The Manager also provides the Fund with office space, facilities and equipment. The Board also considered the quality of the services provided and the quality of the Manager's resources that are available to the Fund. The Board took account of the fact that the Manager has had over forty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager's administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager's key personnel and the size and functions of its staff providing investment management services to the Fund. The Board also considered compliance reports from the Fund's Chief Compliance Officer. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Rajeev Bhaman and the Manager's global investment team and analysts. Mr. Bhaman has had over 16 years of experience managing global investments. The Board members also considered the totality of their experiences with the Manager, as directors or trustees of the Fund and other funds advised by the Manager. In light of the foregoing, the Board concluded that the Fund benefits from the services provided under the Agreement as a result of the Manager's experience, reputation, personnel, operations, and resources. 29 | OPPENHEIMER GLOBAL SECURITIES FUND/VA BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited/Continued -------------------------------------------------------------------------------- INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the Manager provided information on the performance of the Fund and the Manager at each Board meeting, including comparative performance information. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund's historical performance to relevant market indices and to the performance of other global large-cap growth and global multi-cap growth funds (including both funds advised by the Manager and funds advised by other investment advisers). The Board noted that the Fund's one-year, three-year, five-year and ten-year performance were all better than its peer group median. COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board considered information regarding the Manager's costs in serving as the Fund's investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager's profitability from its relationship with the Fund. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also evaluated the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund, other global large-cap growth, global large-cap core and global multi-cap growth funds and other funds with comparable asset levels and distribution features. The Board noted that the Fund's contractual and actual management fees and total expenses are all lower than its peer group median and average. In light of this, and the Fund's strong performance, the Board concluded that the management fee was reasonable. ECONOMIES OF SCALE. The Board considered whether the Manager may realize economies of scale in managing and supporting the Fund, whether those economies of scale benefit the Fund's shareholders and the current level of Fund assets in relation to the Fund's management fee breakpoints, which are intended to share with shareholders economies of scale that may exist as the Fund grows. OTHER BENEFITS TO THE MANAGER. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager's affiliates and research provided to the Manager in connection with permissible brokerage arrangements (soft dollar arrangements). The Board also considered the nature and quality of services provided by affiliates of the Manager, which it reviews at other times during the year in connection with the renewal of the Fund's service agreements. The Board considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide services to the Fund and that maintaining the financial viability of the Manager is important in order for the Manager to continue to provide significant services to the Fund and its shareholders. CONCLUSIONS. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees' counsel are both independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules. Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the advisory agreement for another year. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the factors together. The Board judged the terms and conditions of the advisory agreement, including the management fee, in light of all of the surrounding circumstances. 30 | OPPENHEIMER GLOBAL SECURITIES FUND/VA TRUSTEES AND OFFICERS Unaudited --------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------ NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS FUNDS, LENGTH OF SERVICE, AGE HELD; NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, TRUSTEES COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL. WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Mortgage Chairman of the Board of Company (since 1991), Centennial State Mortgage Company (since 1994), and The El Paso Trustees (since 2003), and Mortgage Company (since 1993); Chairman of the following private companies: Trustee (since 1999) Ambassador Media Corporation (since 1984) and Broadway Ventures (since 1984); Age: 68 Director of the following: Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), Campus Crusade for Christ (since 1991) and The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (since 2002); former Chairman of the following: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (insurance agency) (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private Trustee (since 1993) equity funds) (until February 2001); Chairman, President and Chief Executive Officer Age: 74 of A.G. Edwards Capital, Inc. (until March 2000); Director of A.G. Edwards & Sons, Inc. (brokerage company) (until 2000) and A.G. Edwards Trust Company (investment adviser) (until 2000); Vice Chairman and Director of A.G. Edwards, Inc. (until March 1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March 1999); Chairman of A.G. Edwards Trust Company (until March 1999) and A.G.E. Asset Management (investment adviser) (until March 1999). Oversees 38 portfolios in the OppenheimerFunds complex. GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation (December Trustee (since 1999) 1991-April 1999); President, Treasurer and Director of Centennial Capital Corporation Age: 69 (June 1989-April 1999); Chief Executive Officer and Director of MultiSource Services, Inc. (March 1996-April 1999); Mr. Bowen held several positions with the Manager and with subsidiary or affiliated companies of the Manager (September 1987-April 1999). Oversees 38 portfolios in the OppenheimerFunds complex. EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since Trustee (since 1999) June 2000); Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002); Age: 67 Partner at PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (July 1994-June 1998). Oversees 38 portfolios in the OppenheimerFunds complex. JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Trustee (since 1990) Northwestern Energy Corp. (public utility corporation) (since November 2004); Age: 64 Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. ("OAC") (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 38 portfolios in the OppenheimerFunds complex. SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September 1984). Mr. Trustee (since 1996) Freedman held several positions with the Manager and with subsidiary or affiliated Age: 65 companies of the Manager (until October 1994). Oversees 38 portfolios in the OppenheimerFunds complex.
31 | OPPENHEIMER GLOBAL SECURITIES FUND/VA TRUSTEES AND OFFICERS Unaudited / Continued -------------------------------------------------------------------------------- BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) Trustee (since 2002) (since February 2000); Director of The California Endowment (philanthropic Age: 59 organization) (since April 2002); Director of Community Hospital of Monterey Peninsula (since February 2002); Vice Chair of American Funds' Emerging Markets Growth Fund, Inc. (mutual fund) (since October 1991); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation and The University of Michigan; Advisor at Credit Suisse First Boston's Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member of the investment committee of Hartford Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT J. MALONE, Director of Jones International University (educational organization) (since August Trustee (since 2002) 2005); Chairman, Chief Executive Officer and Director of Steele Street State Bank Age: 61 (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 38 portfolios in the OppenheimerFunds complex. F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) Trustee (since 2000) (investment company) (since 1996) and MML Series Investment Fund (investment company) Age: 63 (since 1996), Trustee and Chairman of the Investment Committee (since 1994) of the Worcester Polytech Institute (private university); President and Treasurer of the SIS Funds (private charitable fund) (since January 1999); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Member of the Investment Committee of the Community Foundation of Western Massachusetts (1998-2003); and Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999). Oversees 40 portfolios in the OppenheimerFunds complex. ------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH AND OFFICER FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES. JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President (since President and Trustee September 2000) of the Manager; President and Director or Trustee of other (since 2001) Oppenheimer funds; President and Director of OAC and of Oppenheimer Partnership Age: 56 Holdings, Inc. (holding company subsidiary of the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since November 2001); Chairman and Director of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since July 2001); President and Director of OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since July 2001); Director of the following investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 2001) and Director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director of DLB Acquisition Corporation (holding company parent of Babson Capital Management LLC) (since June 1995); Member of the Investment Company Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of the Manager (September 2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual Select Funds (open-end investment companies) (November 1999-November 2001); Director of C.M. Life Insurance Company (September 1999-August 2000); President, Chief Executive Officer and Director of MML Bay State Life Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 87 portfolios in the OppenheimerFunds complex.
32 | OPPENHEIMER GLOBAL SECURITIES FUND/VA ------------------------------------------------------------------------------------------------------------------------ OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. BHAMAN THE FUND AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT DEATH OR REMOVAL. RAJEEV BHAMAN, Vice President of the Manager since January 1997; Assistant Vice President of the Vice President and Manager (March 1996-January 1997). An officer of 2 portfolios in the Portfolio Manager OppenheimerFunds complex. (since 2004) Age: 42 MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Vice President and Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Chief Compliance Officer Corporation and Shareholder Services, Inc. (since June 1983); Vice President and (since 2004) Director of Internal Audit of the Manager (1997-February 2004). An officer of 87 Age: 55 portfolios in the OppenheimerFunds complex. BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of Treasurer and Principal the following: HarbourView Asset Management Corporation, Shareholder Financial Financial and Accounting Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management Officer (since 1999) Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI Age: 46 Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex. ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) Vice President and of the Manager; General Counsel and Director of the Distributor (since December Secretary (since 2001) 2001); General Counsel of Centennial Asset Management Corporation (since December Age: 57 2001); Senior Vice President and General Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General Counsel and Director of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON REQUEST, BY CALLING 1.800.981.2871. 33 | OPPENHEIMER GLOBAL SECURITIES FUND/VA OPPENHEIMER HIGH INCOME FUND/VA FUND PERFORMANCE DISCUSSION -------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. Oppenheimer High Income Fund/VA produced modest total returns and underperformed its benchmark, the Merrill Lynch High Yield Master Index, for the 12-month reporting period ended December 31, 2005, which returned 2.83%. We attribute the Fund's lagging relative performance to its focus on corporate bonds with higher credit ratings during a period that benefited more aggressively positioned investors. Prior to the reporting period as the economy strengthened, lower-rated credit appeared to reach fuller valuations. In response, we increased the Fund's emphasis on higher-rated credits, shifting our focus from "triple-C" rated bonds to those with "double-B" ratings. In addition, to guard against the potentially adverse effects of higher interest rates, we generally preferred shorter-term, higher-coupon securities. While these strategies may have prevented the Fund from participating more fully in the market rally near year-end 2004, they nonetheless protected the Fund from heightened volatility in the spring of 2005. The Fund received positive contributions to performance from its relatively heavy investments in the telecommunications sector, which benefited from a surge in mergers-and-acquisitions activity. The Fund's investments in multiple acquisition targets contributed positively to its performance. In addition, the Fund also enjoyed attractive returns from its relatively heavy exposure to the gaming and leisure industry and basic materials sectors, including chemical producers and steel makers. In the utilities area, electricity producer Dynegy Holdings, Inc., was a notably positive contributor to the Fund. Although the Fund's relative performance benefited from its relatively light holdings of bonds from airlines and automobile companies, even a small amount of exposure to these troubled areas held back absolute returns. In addition, holdings that detracted from the Fund's performance included movie theater operators, which suffered from weak box-office sales. 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, 2005. In the case of non-service shares, performance is measured over a ten-year period. In the case of service shares, performance is measured from inception of the class on September 18, 2001. Performance information does not reflect charges that apply to separate accounts investing in the Fund. If these charges were taken into account, performance would be lower. The graph assumes that all dividends and capital gains distributions were reinvested in additional shares. The Fund's performance is compared to the performance of the Merrill Lynch High Yield Master Index, an unmanaged index of U.S. corporate and government bonds that is a measure of the performance of the high-yield corporate bond market. Index performance reflects the reinvestment of income but does not consider the effect of transaction costs, and none of the data in the graphs shows the effect of taxes. The Fund's performance reflects the effects of the Fund's business and operating expenses. While index comparisons may be useful to provide a benchmark for the Fund's performance, it must be noted that the Fund's investments are not limited to the investments in the index. 4 | OPPENHEIMER HIGH INCOME FUND/VA NON-SERVICE SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer High Income Fund/VA (Non-Service) Merrill Lynch High Yield Master Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] Oppenheimer High Income Merrill Lynch High Fund/VA (Non-Service) Yield Master Index 12/31/1995 10,000 10,000 03/31/1996 10,368 10,146 06/30/1996 10,630 10,285 09/30/1996 11,079 10,686 12/31/1996 11,526 11,106 03/31/1997 11,572 11,223 06/30/1997 12,070 11,755 09/30/1997 12,734 12,216 12/31/1997 12,933 12,531 03/31/1998 13,444 12,880 06/30/1998 13,550 13,096 09/30/1998 12,584 12,627 12/31/1998 12,973 12,990 03/31/1999 13,428 13,130 06/30/1999 13,466 13,218 09/30/1999 13,314 13,053 12/31/1999 13,529 13,194 03/31/2000 13,346 12,956 06/30/2000 13,444 13,037 09/30/2000 13,613 13,214 12/31/2000 13,023 12,694 03/31/2001 13,575 13,482 06/30/2001 13,279 13,311 09/30/2001 12,518 12,774 12/31/2001 13,279 13,481 03/31/2002 13,358 13,745 06/30/2002 12,806 12,901 09/30/2002 12,340 12,494 12/31/2002 12,961 13,327 03/31/2003 13,659 14,247 06/30/2003 14,872 15,625 09/30/2003 15,264 16,020 12/31/2003 16,067 16,956 03/31/2004 16,314 17,334 06/30/2004 16,333 17,182 09/30/2004 16,891 17,979 12/31/2004 17,507 18,781 03/31/2005 17,254 18,511 06/30/2005 17,594 19,010 09/30/2005 17,743 19,182 12/31/2005 17,912 19,313 AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/05 1-Year 2.31% 5-Year 6.58% 10-Year 6.00% SERVICE SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer High Income Fund/VA (Service) Merrill Lynch High Yield Master Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] Oppenheimer High Income Merrill Lynch High Fund/VA (Service) Yield Master Index 09/18/2001 10,000 10,000 09/30/2001 9,583 10,000 12/31/2001 10,167 10,554 03/31/2002 10,225 10,761 06/30/2002 9,789 10,100 09/30/2002 9,432 9,781 12/31/2002 9,895 10,433 03/31/2003 10,436 11,153 06/30/2003 11,350 12,232 09/30/2003 11,649 12,541 12/31/2003 12,249 13,274 03/31/2004 12,437 13,570 06/30/2004 12,437 13,451 09/30/2004 12,862 14,075 12/31/2004 13,319 14,703 03/31/2005 13,116 14,492 06/30/2005 13,359 14,882 09/30/2005 13,472 15,017 12/31/2005 13,586 15,119 AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/05 1-Year 2.01% 5-Year N/A Since Inception (9/18/01) 7.41% THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT. 5 | OPPENHEIMER HIGH INCOME FUND/VA FUND EXPENSES -------------------------------------------------------------------------------- FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include redemption fees, if any; and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 31, 2005. ACTUAL EXPENSES. The "actual" lines of the table provide information about actual account values and actual expenses. You may use the information on this line for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the "actual" line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio, and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the "hypothetical" lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included, your costs would have been higher. -------------------------------------------------------------------------------- BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE 6 MONTHS ENDED (7/1/05) (12/31/05) DECEMBER 31, 2005 -------------------------------------------------------------------------------- Non-Service shares Actual $ 1,000.00 $ 1,018.10 $ 3.82 -------------------------------------------------------------------------------- Non-Service shares Hypothetical 1,000.00 1,021.42 3.83 -------------------------------------------------------------------------------- Service shares Actual 1,000.00 1,017.00 5.10 -------------------------------------------------------------------------------- Service shares Hypothetical 1,000.00 1,020.16 5.10 Hypothetical assumes 5% annual return before expenses. Expenses are equal to the Fund's annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Those annualized expense ratio based on the 6-month period ended December 31, 2005 are as follows: CLASS EXPENSE RATIOS ------------------------------------ Non-Service shares 0.75% ------------------------------------ Service shares 1.00 -------------------------------------------------------------------------------- 6 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENT OF INVESTMENTS December 31, 2005 -------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ ASSET-BACKED SECURITIES--0.1% ------------------------------------------------------------------------------ Norse CBO Ltd., Collateralized Bond Obligations, Series 1A, Cl. C2, 9.342% Sub. Bonds, 8/13/10 1 (Cost $764,379) $ 764,379 $ 703,229 ------------------------------------------------------------------------------ CORPORATE BONDS AND NOTES--86.4% ------------------------------------------------------------------------------ CONSUMER DISCRETIONARY--30.3% ------------------------------------------------------------------------------ AUTO COMPONENTS--1.9% Collins & Aikman Floorcoverings, Inc., 9.75% Sr. Sub. Nts., Series B, 2/15/10 800,000 708,000 ------------------------------------------------------------------------------ Dana Corp., 10.125% Nts., 3/15/10 500,000 430,000 ------------------------------------------------------------------------------ Dura Operating Corp.: 8.625% Sr. Nts., Series B, 4/15/12 1,592,000 1,321,360 9% Sr. Unsec. Sub. Nts., Series D, 5/1/09 300,000 171,000 ------------------------------------------------------------------------------ Eagle-Picher, Inc., 9.75% Sr. Nts., 9/1/13 2 200,000 153,000 ------------------------------------------------------------------------------ Goodyear Tire & Rubber Co. (The): 7.857% Nts., 8/15/11 1,950,000 1,911,000 9% Sr. Nts., 7/1/15 3 845,000 836,550 ------------------------------------------------------------------------------ Keystone Automotive Operations, Inc., 9.75% Sr. Unsec. Sub. Nts., 11/1/13 200,000 174,000 ------------------------------------------------------------------------------ Stoneridge, Inc., 11.50% Sr. Nts., 5/1/12 900,000 920,250 ------------------------------------------------------------------------------ Tenneco Automotive, Inc.: 8.625% Sr. Unsec. Sub. Nts., 11/15/14 1,050,000 997,500 10.25% Sr. Sec. Nts., Series B, 7/15/13 900,000 987,750 ------------------------------------------------------------------------------ United Components, Inc., 9.375% Sr. Sub. Nts., 6/15/13 400,000 400,000 ------------------------------------------------------------------------------ Visteon Corp.: 7% Sr. Unsec. Nts., 3/10/14 700,000 544,250 8.25% Sr. Unsec. Nts., 8/1/10 600,000 513,000 ------------ 10,067,660 ------------------------------------------------------------------------------ AUTOMOBILES--2.7% Ford Motor Co., 7.45% Bonds, 7/16/31 1,300,000 890,500 ------------------------------------------------------------------------------ Ford Motor Credit Co.: 5.625% Nts., 10/1/08 3,700,000 3,248,548 5.80% Sr. Unsec. Nts., 1/12/09 1,200,000 1,047,502 7.25% Nts., 10/25/11 400,000 345,933 7.375% Nts., 10/28/09 1,900,000 1,686,427 ------------------------------------------------------------------------------ General Motors Acceptance Corp.: 5.125% Nts., 5/9/08 2,100,000 1,870,483 5.85% Sr. Unsec. Unsub. Nts., 1/14/09 2,013,000 1,802,086 6.875% Nts., 9/15/11 100,000 91,299 7.25% Nts., 3/2/11 500,000 460,048 8% Bonds, 11/1/31 1,600,000 1,536,670 ------------------------------------------------------------------------------ General Motors Corp., 8.375% Sr. Unsec. Debs., 7/15/33 500,000 332,500 ------------------------------------------------------------------------------ Hertz Corp.: 8.875% Sr. Nts., 1/1/14 3 790,000 808,763 10.50% Sr. Sub. Nts., 1/1/16 3 670,000 693,450 ------------ 14,814,209 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ DISTRIBUTORS--0.2% SGS International, Inc., 12% Sr. Sub. Nts., 12/15/13 3 $ 895,000 $ 900,945 ------------------------------------------------------------------------------ DIVERSIFIED CONSUMER SERVICES--0.2% Alderwoods Group, Inc., 7.75% Sr. Nts., 9/15/12 1,150,000 1,196,000 ------------------------------------------------------------------------------ HOTELS, RESTAURANTS & LEISURE--8.9% Apcoa, Inc., 9.25% Sr. Unsec. Sub. Nts., 3/15/08 1 940,000 925,900 ------------------------------------------------------------------------------ Aztar Corp., 9% Sr. Unsec. Sub. Nts., 8/15/11 450,000 478,688 ------------------------------------------------------------------------------ Boyd Gaming Corp., 8.75% Sr. Sub. Nts., 4/15/12 1,200,000 1,293,000 ------------------------------------------------------------------------------ CCM Merger, Inc., 8% Unsec. Nts., 8/1/13 3 1,840,000 1,775,600 ------------------------------------------------------------------------------ Domino's, Inc., 8.25% Sr. Unsec. Sub. Nts., 7/1/11 875,000 918,750 ------------------------------------------------------------------------------ Gaylord Entertainment Co., 8% Sr. Nts., 11/15/13 700,000 736,750 ------------------------------------------------------------------------------ Greektown Holdings, Inc., 10.75% Sr. Nts., 12/1/13 3 1,435,000 1,431,413 ------------------------------------------------------------------------------ Intrawest Corp., 7.50% Sr. Unsec. Nts., 10/15/13 1 917,000 933,048 ------------------------------------------------------------------------------ Isle of Capri Casinos, Inc.: 7% Sr. Unsec. Sub. Nts., 3/1/14 2,700,000 2,646,000 9% Sr. Sub. Nts., 3/15/12 600,000 637,500 ------------------------------------------------------------------------------ Kerzner International Ltd., 6.75% Sr. Sub. Nts., 10/1/15 3 970,000 948,175 ------------------------------------------------------------------------------ Mandalay Resort Group: 9.375% Sr. Sub. Nts., 2/15/10 41,000 45,100 10.25% Sr. Unsec. Sub. Nts., Series B, 8/1/07 800,000 857,000 ------------------------------------------------------------------------------ MGM Mirage, Inc.: 8.375% Sr. Unsec. Sub. Nts., 2/1/11 3,600,000 3,870,000 9.75% Sr. Unsec. Sub. Nts., 6/1/07 800,000 847,000 ------------------------------------------------------------------------------ Mohegan Tribal Gaming Authority: 6.125% Sr. Unsec. Sub. Nts., 2/15/13 440,000 434,500 6.375% Sr. Sub. Nts., 7/15/09 800,000 809,000 6.875% Sr. Unsec. Sub. Nts., 2/15/15 915,000 926,438 8% Sr. Sub. Nts., 4/1/12 1,700,000 1,797,750 ------------------------------------------------------------------------------ NCL Corp., 10.625% Sr. Unsub. Nts., 7/15/14 600,000 622,500 ------------------------------------------------------------------------------ Park Place Entertainment Corp.: 7.875% Sr. Sub. Nts., 3/15/10 1,500,000 1,620,000 9.375% Sr. Unsec. Sub. Nts., 2/15/07 1 1,500,000 1,565,625 ------------------------------------------------------------------------------ Penn National Gaming, Inc.: 6.75% Sr. Unsec. Sub. Nts., 3/1/15 445,000 439,438 6.875% Sr. Sub. Nts., 12/1/11 850,000 862,750 8.875% Sr. Sub. Nts., 3/15/10 600,000 633,000 ------------------------------------------------------------------------------ Pinnacle Entertainment, Inc., 8.25% Sr. Unsec. Sub. Nts., 3/15/12 2,750,000 2,856,563 7 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENT OF INVESTMENTS Continued ------------------------------------------------------------------------------ PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ HOTELS, RESTAURANTS & LEISURE Continued Six Flags, Inc.: 8.875% Sr. Unsec. Nts., 2/1/10 $ 400,000 $ 392,000 9.625% Sr. Nts., 6/1/14 157,000 153,468 9.75% Sr. Nts., 4/15/13 1,950,000 1,923,188 ------------------------------------------------------------------------------ Starwood Hotels & Resorts Worldwide, Inc., 7.875% Sr. Nts., 5/1/12 1,500,000 1,661,250 ------------------------------------------------------------------------------ Station Casinos, Inc.: 6.50% Sr. Unsec. Sub. Nts., 2/1/14 3,800,000 3,857,000 6.875% Sr. Unsec. Sub. Nts., 3/1/16 480,000 493,200 ------------------------------------------------------------------------------ Trump Entertainment Resorts, Inc., 8.50% Sec. Nts., 6/1/15 4 3,200,000 3,136,000 ------------------------------------------------------------------------------ Universal City Development Partners Ltd., 11.75% Sr. Nts., 4/1/10 1,000,000 1,126,250 ------------------------------------------------------------------------------ Vail Resorts, Inc., 6.75% Sr. Sub. Nts., 2/15/14 1,100,000 1,105,500 ------------------------------------------------------------------------------ Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., 6.625% Nts., 12/1/14 3,600,000 3,519,000 ------------ 48,278,344 ------------------------------------------------------------------------------ HOUSEHOLD DURABLES--1.5% Beazer Homes USA, Inc., 8.375% Sr. Nts., 4/15/12 500,000 522,500 ------------------------------------------------------------------------------ D.R. Horton, Inc., 9.75% Sr. Sub. Nts., 9/15/10 300,000 340,651 ------------------------------------------------------------------------------ K. Hovnanian Enterprises, Inc.: 7.75% Sr. Unsec. Sub. Nts., 5/15/13 900,000 892,904 8.875% Sr. Sub. Nts., 4/1/12 800,000 835,290 ------------------------------------------------------------------------------ KB Home: 8.625% Sr. Sub. Nts., 12/15/08 150,000 160,076 9.50% Sr. Unsec. Sub. Nts., 2/15/11 350,000 369,922 ------------------------------------------------------------------------------ Meritage Homes Corp., 6.25% Sr. Unsec. Nts., 3/15/15 330,000 301,950 ------------------------------------------------------------------------------ Sealy Mattress Co., 8.25% Sr. Sub. Nts., 6/15/14 960,000 993,600 ------------------------------------------------------------------------------ Standard Pacific Corp.: 7.75% Sr. Nts., 3/15/13 650,000 639,438 9.25% Sr. Sub. Nts., 4/15/12 700,000 723,625 ------------------------------------------------------------------------------ Toll Corp., 8.25% Sr. Sub. Nts., 12/1/11 500,000 529,375 ------------------------------------------------------------------------------ WCI Communities, Inc., 9.125% Sr. Sub. Nts., 5/1/12 800,000 800,000 ------------------------------------------------------------------------------ William Lyon Homes, Inc., 10.75% Sr. Nts., 4/1/13 800,000 830,000 ------------ 7,939,331 ------------------------------------------------------------------------------ LEISURE EQUIPMENT & PRODUCTS--0.2% Leslie's Poolmart, Inc., 7.75% Sr. Unsec. Nts., 2/1/13 445,000 448,338 ------------------------------------------------------------------------------ Rexnord Corp., 10.125% Sr. Unsec. Sub. Nts., 12/15/12 700,000 756,000 ------------ 1,204,338 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ MEDIA--11.4% Adelphia Communications Corp.: 7.875% Sr. Unsec. Nts., 5/1/09 2 $ 360,000 $ 199,800 8.125% Sr. Nts., Series B, 7/15/03 2 575,000 327,750 8.375% Sr. Nts., Series B, 2/1/08 2 1,000,000 570,000 10.25% Sr. Unsec. Sub. Nts., 6/15/11 2 1,000,000 605,000 10.875% Sr. Unsec. Nts., 10/1/10 2 1,000,000 565,000 ------------------------------------------------------------------------------ Allbritton Communications Co., 7.75% Sr. Unsec. Sub. Nts., 12/15/12 700,000 707,000 ------------------------------------------------------------------------------ AMC Entertainment, Inc.: 8% Sr. Unsec. Sub. Nts., 3/1/14 1,050,000 955,500 9.50% Sr. Unsec. Sub. Nts., 2/1/11 792,000 783,090 ------------------------------------------------------------------------------ American Media Operations, Inc.: 8.875% Sr. Unsec. Sub. Nts., 1/15/11 900,000 769,500 10.25% Sr. Unsec. Sub. Nts., Series B, 5/1/09 1,200,000 1,101,000 ------------------------------------------------------------------------------ Block Communications, Inc., 8.25% Sr. Nts., 12/15/15 3 625,000 621,875 ------------------------------------------------------------------------------ Carmike Cinemas, Inc., 7.50% Sr. Sub. Nts., 2/15/14 850,000 800,063 ------------------------------------------------------------------------------ CBD Media LLC/CBD Finance, Inc., 8.625% Sr. Sub. Nts., 6/1/11 200,000 205,000 ------------------------------------------------------------------------------ Charter Communications Holdings I LLC, 0%/11.75% Sr. Unsec. Unsub. Nts., 5/15/14 3,5 800,000 448,000 ------------------------------------------------------------------------------ Charter Communications Holdings II LLC, 10.25% Sr. Unsec. Nts., 9/15/10 700,000 700,000 ------------------------------------------------------------------------------ Charter Communications Holdings LLC/Charter Communications Holdings Capital Corp., 8.375% Sr. Nts., Second Lien, 4/30/14 3 5,950,000 5,950,000 ------------------------------------------------------------------------------ Cinemark USA, Inc., 9% Sr. Unsec. Sub. Nts., 2/1/13 400,000 425,000 ------------------------------------------------------------------------------ Cinemark, Inc., 0%/9.75% Sr. Unsec. Disc. Nts., 3/15/14 5 1,800,000 1,341,000 ------------------------------------------------------------------------------ Corus Entertainment, Inc., 8.75% Sr. Sub. Nts., 3/1/12 800,000 870,000 ------------------------------------------------------------------------------ CSC Holdings, Inc.: 7.625% Sr. Unsec. Debs., 7/15/18 1,500,000 1,432,500 7.625% Sr. Unsec. Unsub. Nts., Series B, 4/1/11 1,700,000 1,700,000 ------------------------------------------------------------------------------ Dex Media East LLC/Dex Media East Finance Co., 9.875% Sr. Unsec. Nts., 11/15/09 800,000 869,000 ------------------------------------------------------------------------------ Dex Media West LLC/Dex Media West Finance Co.: 8.50% Sr. Nts., 8/15/10 700,000 736,750 9.875% Sr. Sub. Nts., 8/15/13 1,172,000 1,306,780 ------------------------------------------------------------------------------ Dex Media, Inc.: 0%/9% Unsec. Disc. Nts., 11/15/13 5 500,000 400,000 0%/9% Unsec. Disc. Nts., 11/15/13 5 500,000 400,000 8% Unsec. Nts., 11/15/13 6,450,000 6,611,250 8 | OPPENHEIMER HIGH INCOME FUND/VA PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ MEDIA Continued EchoStar DBS Corp.: 6.625% Sr. Unsec. Nts., 10/1/14 $ 500,000 $ 481,875 9.125% Sr. Nts., 1/15/09 1,895,000 1,987,381 ------------------------------------------------------------------------------ Emmis Operating Co., 6.875% Sr. Unsec. Sub. Nts., 5/15/12 1,200,000 1,198,500 ------------------------------------------------------------------------------ Granite Broadcasting Corp., 9.75% Sr. Sec. Nts., 12/1/10 1,057,000 977,725 ------------------------------------------------------------------------------ Gray Television, Inc., 9.25% Sr. Sub. Nts., 12/15/11 500,000 536,250 ------------------------------------------------------------------------------ Lamar Media Corp.: 6.625% Sr. Unsec. Sub. Nts., 8/15/15 1,872,000 1,888,380 7.25% Sr. Unsec. Sub. Nts., 1/1/13 200,000 208,500 ------------------------------------------------------------------------------ Lin Television Corp., 6.50% Sr. Sub. Nts., 5/15/13 785,000 756,544 ------------------------------------------------------------------------------ LodgeNet Entertainment Corp., 9.50% Sr. Sub. Debs., 6/15/13 400,000 437,000 ------------------------------------------------------------------------------ Marquee Holdings, Inc., 0%/12% Sr. Disc. Nts., 8/15/14 5 800,000 514,000 ------------------------------------------------------------------------------ Mediacom Broadband LLC, 8.50% Sr. Nts., 10/15/15 3 580,000 540,125 ------------------------------------------------------------------------------ Mediacom LLC/Mediacom Capital Corp., 9.50% Sr. Unsec. Nts., 1/15/13 1,257,000 1,233,431 ------------------------------------------------------------------------------ MediaNews Group, Inc.: 6.375% Sr. Sub. Nts., 4/1/14 1,400,000 1,298,500 6.875% Sr. Unsec. Sub. Nts., 10/1/13 800,000 769,000 ------------------------------------------------------------------------------ News America Holdings, Inc., 8.875% Sr. Debs., 4/26/23 625,000 779,367 ------------------------------------------------------------------------------ Paxson Communications Corp., 10.777% Sr. Sec. Nts., 1/15/13 3,6 1,345,000 1,299,606 ------------------------------------------------------------------------------ PRIMEDIA, Inc.: 8% Sr. Nts., 5/15/13 1,100,000 936,375 8.875% Sr. Unsec. Nts., 5/15/11 1,157,000 1,073,118 ------------------------------------------------------------------------------ R.H. Donnelley Corp., 6.875% Sr. Nts., 1/15/13 2,700,000 2,500,875 ------------------------------------------------------------------------------ R.H. Donnelley Financial Corp. I, 10.875% Sr. Sub. Nts., 12/15/12 3 1,000,000 1,132,500 ------------------------------------------------------------------------------ Radio One, Inc., 8.875% Sr. Unsec. Sub. Nts., Series B, 7/1/11 800,000 848,000 ------------------------------------------------------------------------------ Rainbow National Services LLC, 8.75% Sr. Nts., 9/1/12 3 900,000 963,000 ------------------------------------------------------------------------------ Sinclair Broadcast Group, Inc., 8% Sr. Unsec. Sub. Nts., 3/15/12 4,200,000 4,347,000 ------------------------------------------------------------------------------ Vertis, Inc.: 9.75% Sr. Sec. Nts., 4/1/09 1,400,000 1,457,750 10.875% Sr. Unsec. Nts., Series B, 6/15/09 600,000 594,000 ------------------------------------------------------------------------------ WMG Holdings Corp., 0%/9.50% Sr. Disc. Nts., 12/15/14 5 2,365,000 1,667,325 ------------ 61,826,985 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ MULTILINE RETAIL--0.9% Neiman Marcus Group, Inc.: 9% Sr. Nts., 10/15/15 3 $ 2,845,000 $ 2,923,238 10.375% Sr. Sub. Nts., 10/15/15 3 1,725,000 1,761,656 ------------------------------------------------------------------------------ Saks, Inc., 8.25% Sr. Unsec. Nts., 11/15/08 185,000 193,325 ------------ 4,878,219 ------------------------------------------------------------------------------ SPECIALTY RETAIL--0.8% Asbury Automotive Group, Inc., 9% Sr. Sub. Nts., 6/15/12 600,000 603,000 ------------------------------------------------------------------------------ Atlantic Broadband Finance LLC, 9.375% Sr. Unsec. Sub. Nts., 1/15/14 500,000 448,750 ------------------------------------------------------------------------------ AutoNation, Inc., 9% Sr. Unsec. Nts., 8/1/08 900,000 970,875 ------------------------------------------------------------------------------ Boise Cascade LLC, 7.125% Sr. Unsec. Sub. Nts., 10/15/14 950,000 890,625 ------------------------------------------------------------------------------ Petco Animal Supplies, Inc., 10.75% Sr. Sub. Nts., 11/1/11 750,000 815,625 ------------------------------------------------------------------------------ Rent-A-Center, Inc., 7.50% Sr. Unsec. Sub. Nts., Series B, 5/1/10 350,000 336,000 ------------ 4,064,875 ------------------------------------------------------------------------------ TEXTILES, APPAREL & LUXURY GOODS--1.6% Invista, Inc., 9.25% Sr. Nts., 5/1/12 3 2,575,000 2,761,688 ------------------------------------------------------------------------------ Levi Strauss & Co.: 7% Unsec. Nts., 11/1/06 800,000 804,000 8.804% Sr. Unsec. Unsub. Nts., 4/1/12 6 1,400,000 1,417,500 9.75% Sr. Unsec. Unsub. Nts., 1/15/15 1,755,000 1,833,975 ------------------------------------------------------------------------------ Oxford Industries, Inc., 8.875% Sr. Nts., 6/1/11 1 500,000 511,875 ------------------------------------------------------------------------------ Quiksilver, Inc., 6.875% Sr. Nts., 4/15/15 3 975,000 943,313 ------------------------------------------------------------------------------ Russell Corp., 9.25% Sr. Nts., 5/1/10 600,000 611,250 ------------ 8,883,601 ------------------------------------------------------------------------------ CONSUMER STAPLES--3.2% ------------------------------------------------------------------------------ BEVERAGES--0.1% Constellation Brands, Inc., 8.125% Sr. Sub. Nts., 1/15/12 500,000 522,500 ------------------------------------------------------------------------------ FOOD & STAPLES RETAILING--0.5% Jean Coutu Group (PJC), Inc. (The), 8.50% Sr. Sub. Nts., 8/1/14 1,200,000 1,104,000 ------------------------------------------------------------------------------ Real Time Data Co., 11% Disc. Nts., 5/31/09 1,2 476,601 -- ------------------------------------------------------------------------------ Rite Aid Corp.: 8.125% Sr. Sec. Nts., 5/1/10 900,000 920,250 9.50% Sr. Sec. Nts., 2/15/11 450,000 477,000 ------------ 2,501,250 ------------------------------------------------------------------------------ FOOD PRODUCTS--1.9% American Seafoods Group LLC, 10.125% Sr. Sub. Nts., 4/15/10 500,000 526,875 9 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENT OF INVESTMENTS Continued ------------------------------------------------------------------------------ PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ FOOD PRODUCTS Continued Del Monte Corp.: 6.75% Sr. Unsec. Sub. Nts., 2/15/15 $ 350,000 $ 343,000 8.625% Sr. Sub. Nts., 12/15/12 1,000,000 1,067,500 ------------------------------------------------------------------------------ Doane Pet Care Co.: 10.625% Sr. Sub. Nts., 11/15/15 3 875,000 916,563 10.75% Sr. Nts., 3/1/10 1,700,000 1,857,250 ------------------------------------------------------------------------------ Dole Food Co., Inc.: 8.625% Sr. Nts., 5/1/09 687,000 707,610 8.875% Sr. Unsec. Nts., 3/15/11 146,000 150,380 ------------------------------------------------------------------------------ Hines Nurseries, Inc., 10.25% Sr. Unsec. Sub. Nts., 10/1/11 600,000 591,000 ------------------------------------------------------------------------------ Smithfield Foods, Inc.: 7.625% Sr. Unsec. Sub. Nts., 2/15/08 925,000 959,688 8% Sr. Nts., Series B, 10/15/09 900,000 954,000 ------------------------------------------------------------------------------ Swift & Co., 10.125% Sr. Nts., 10/1/09 1,000,000 1,037,500 ------------------------------------------------------------------------------ United Biscuits Finance plc, 10.625% Sr. Sub. Nts., 4/15/11 [EUR] 1,000,000 1,266,767 ------------ 10,378,133 ------------------------------------------------------------------------------ HOUSEHOLD PRODUCTS--0.6% Church & Dwight Co., Inc., 6% Sr. Unsec. Sub. Nts., 12/15/12 900,000 891,000 ------------------------------------------------------------------------------ Playtex Products, Inc.: 8% Sr. Sec. Nts., 3/1/11 1,000,000 1,070,000 9.375% Sr. Unsec. Sub. Nts., 6/1/11 1,400,000 1,473,500 ------------ 3,434,500 ------------------------------------------------------------------------------ PERSONAL PRODUCTS--0.1% Elizabeth Arden, Inc., 7.75% Sr. Unsec. Sub. Nts., 1/15/14 300,000 304,500 ------------------------------------------------------------------------------ ENERGY--7.8% ------------------------------------------------------------------------------ ENERGY EQUIPMENT & SERVICES--0.5% Dresser, Inc., 9.375% Sr. Sub. Nts., 4/15/11 400,000 423,000 ------------------------------------------------------------------------------ Hanover Compressor Co., 8.625% Sr. Unsec. Sub. Nts., 12/15/10 700,000 743,750 ------------------------------------------------------------------------------ Hanover Equipment Trust, 8.50% Sr. Sec. Nts., Series A, 9/1/08 221,000 230,116 ------------------------------------------------------------------------------ Petroleum Helicopters, Inc., 9.375% Sr. Nts., 5/1/09 600,000 635,250 ------------------------------------------------------------------------------ Universal Compression, Inc., 7.25% Sr. Unsec. Sub. Nts., 5/15/10 800,000 816,000 ------------ 2,848,116 ------------------------------------------------------------------------------ OIL & GAS--7.3% Arch Western Finance LLC, 6.75% Sr. Nts., 7/1/13 900,000 921,375 ------------------------------------------------------------------------------ Atlas Pipeline Partners LP, 8.125% Sr. Nts., 12/15/15 3 450,000 456,188 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ OIL & GAS Continued Chesapeake Energy Corp.: 6.375% Sr. Unsec. Nts., 6/15/15 $ 550,000 $ 552,750 6.875% Sr. Unsec. Nts., 1/15/16 420,000 432,600 ------------------------------------------------------------------------------ Clayton Williams Energy, Inc., 7.75% Sr. Unsec. Nts., 8/1/13 390,000 376,350 ------------------------------------------------------------------------------ Compton Petroleum Corp., 7.625% Sr. Nts., 12/1/13 3 670,000 688,425 ------------------------------------------------------------------------------ Delta Petroleum Corp., 7% Sr. Unsec. Nts., 4/1/15 265,000 245,788 ------------------------------------------------------------------------------ El Paso Corp., 7.875% Sr. Unsec. Nts., 6/15/12 3,207,000 3,319,245 ------------------------------------------------------------------------------ El Paso Energy Corp., 7.625% Nts., 7/15/11 350,000 357,875 ------------------------------------------------------------------------------ El Paso Production Holding Co., 7.75% Sr. Unsec. Nts., 6/1/13 3,000,000 3,127,500 ------------------------------------------------------------------------------ Forest Oil Corp., 7.75% Sr. Nts., 5/1/14 1,000,000 1,042,500 ------------------------------------------------------------------------------ Foundation PA Coal Co., 7.25% Sr. Unsec. Nts., 8/1/14 850,000 882,938 ------------------------------------------------------------------------------ Frontier Oil Corp., 6.625% Sr. Unsec. Nts., 10/1/11 450,000 461,250 ------------------------------------------------------------------------------ Massey Energy Co., 6.625% Sr. Nts., 11/15/10 400,000 408,500 ------------------------------------------------------------------------------ Newfield Exploration Co.: 6.625% Sr. Unsec. Sub. Nts., 9/1/14 1,300,000 1,329,250 8.375% Sr. Sub. Nts., 8/15/12 600,000 645,000 ------------------------------------------------------------------------------ Pacific Energy Partners LP/Pacific Energy Finance Corp., 6.25% Sr. Nts., 9/15/15 3 195,000 193,050 ------------------------------------------------------------------------------ Peabody Energy Corp., 6.875% Sr. Unsec. Nts., Series B, 3/15/13 1,200,000 1,254,000 ------------------------------------------------------------------------------ Plains Exploration & Production Co., 7.125% Sr. Nts., 6/15/14 600,000 624,000 ------------------------------------------------------------------------------ Premcor Refining Group, Inc., 9.50% Sr. Nts., 2/1/13 1,000,000 1,115,174 ------------------------------------------------------------------------------ Range Resources Corp.: 6.375% Sr. Sub. Nts., 3/15/15 445,000 438,325 7.375% Sr. Sub. Nts., 7/15/13 400,000 416,000 ------------------------------------------------------------------------------ Southern Natural Gas Co.: 7.35% Nts., 2/15/31 2,100,000 2,164,901 8% Sr. Unsub. Nts., 3/1/32 900,000 991,362 8.875% Sr. Nts., 3/15/10 700,000 751,601 ------------------------------------------------------------------------------ Stone Energy Corp.: 6.75% Sr. Unsec. Sub. Nts., 12/15/14 860,000 819,150 8.25% Sr. Unsec. Sub. Nts., 12/15/11 1,600,000 1,660,000 ------------------------------------------------------------------------------ Targa Resources, Inc., 8.50% Sr. Nts., 11/1/13 3 950,000 978,500 ------------------------------------------------------------------------------ Teekay Shipping Corp., 8.875% Sr. Nts., 7/15/11 575,000 652,625 ------------------------------------------------------------------------------ Tennessee Gas Pipeline Co., 7.50% Bonds, 4/1/17 4,415,000 4,749,706 10 | OPPENHEIMER HIGH INCOME FUND/VA PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ OIL & GAS Continued Tesoro Corp.: 6.25% Sr. Nts., 11/1/12 3 $ 715,000 $ 722,150 6.625% Sr. Nts., 11/1/15 3 715,000 725,725 ------------------------------------------------------------------------------ Transcontinental Gas Pipe Line Corp., 8.875% Sr. Unsub. Nts., Series B, 7/15/12 200,000 230,000 ------------------------------------------------------------------------------ Whiting Petroleum Corp., 7.25% Sr. Sub. Nts., 5/1/12 800,000 814,000 ------------------------------------------------------------------------------ Williams Cos., Inc. (The): 7.125% Nts., 9/1/11 550,000 574,063 7.625% Nts., 7/15/19 900,000 969,750 8.75% Unsec. Nts., 3/15/32 2,400,000 2,796,000 ------------------------------------------------------------------------------ Williams Holdings of Delaware, Inc., 6.50% Nts., 12/1/08 1 300,000 306,000 ------------ 39,193,616 ------------------------------------------------------------------------------ FINANCIALS--3.7% ------------------------------------------------------------------------------ CAPITAL MARKETS--0.9% Berry Plastics Corp., 10.75% Sr. Sub. Nts., 7/15/12 1,900,000 2,052,000 ------------------------------------------------------------------------------ Charter Communications Holdings I LLC, 11% Sr. Sec. Nts., 10/1/15 3 1,000,000 845,000 ------------------------------------------------------------------------------ DeCrane Aircraft Holdings, Inc., 12% Sr. Unsec. Sub. Nts., Series B, 9/30/08 1 1,550,000 860,250 ------------------------------------------------------------------------------ E*TRADE Financial Corp.: 7.375% Sr. Nts., 9/15/13 3 291,000 296,093 8% Sr. Nts., 6/15/11 3 825,000 862,125 ------------ 4,915,468 ------------------------------------------------------------------------------ COMMERCIAL BANKS--0.2% Bank Plus Corp., 12% Sr. Nts., 7/18/07 1 517,000 572,578 ------------------------------------------------------------------------------ Western Financial Bank, 9.625% Unsec. Sub. Debs., 5/15/12 400,000 450,000 ------------ 1,022,578 ------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES--1.6% Affinia Group, Inc., 9% Sr. Unsec. Sub. Nts., 11/30/14 450,000 357,750 ------------------------------------------------------------------------------ Crystal US Holdings 3 LLC/Crystal US Sub 3 Corp.: 0%/10.50% Sr. Unsec. Disc. Nts., Series B, 10/1/14 5 1,600,000 1,172,000 9.625% Sr. Sub. Nts., 6/15/14 1,560,000 1,743,300 ------------------------------------------------------------------------------ Global Cash Access LLC/Global Cash Finance Corp., 8.75% Sr. Sub. Nts., 3/15/12 373,000 398,644 ------------------------------------------------------------------------------ JSG Funding plc, 7.75% Sr. Unsec. Sub. Nts., 4/1/15 865,000 722,275 ------------------------------------------------------------------------------ Nell AF Sarl, 8.375% Sr. Nts., 8/15/15 3 3,540,000 3,522,300 ------------------------------------------------------------------------------ Universal City Florida: 8.375% Sr. Unsec. Nts., 5/1/10 270,000 265,275 9% Sr. Unsec. Nts., 5/1/10 6 270,000 272,700 ------------ 8,454,244 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ REAL ESTATE--1.0% American Casino & Entertainment Properties LLC, 7.85% Sr. Sec. Nts., 2/1/12 $ 1,300,000 $ 1,339,000 ------------------------------------------------------------------------------ Felcor Lodging LP, 9% Sr. Nts., 6/1/11 837,000 920,700 ------------------------------------------------------------------------------ HMH Properties, Inc., 7.875% Sr. Nts., Series B, 8/1/08 196,000 199,185 ------------------------------------------------------------------------------ Host Marriott LP, 6.375% Sr. Nts., Series O, 3/15/15 1,025,000 1,027,563 ------------------------------------------------------------------------------ MeriStar Hospitality Corp.: 9.125% Sr. Unsec. Nts., 1/15/11 457,000 500,415 10.50% Sr. Unsec. Nts., 6/15/09 350,000 370,563 ------------------------------------------------------------------------------ Trustreet Properties, Inc., 7.50% Sr. Unsec. Nts., 4/1/15 1,145,000 1,150,725 ------------ 5,508,151 ------------------------------------------------------------------------------ HEALTH CARE--6.2% ------------------------------------------------------------------------------ HEALTH CARE EQUIPMENT & SUPPLIES--0.4% Inverness Medical Innovations, Inc., 8.75% Sr. Sub. Nts., 2/15/12 600,000 612,000 ------------------------------------------------------------------------------ Sybron Dental Specialties, Inc., 8.125% Sr. Sub. Nts., 6/15/12 1 700,000 738,500 ------------------------------------------------------------------------------ Universal Hospital Services, Inc., 10.125% Sr. Unsec. Nts., 11/1/11 800,000 832,000 ------------ 2,182,500 ------------------------------------------------------------------------------ HEALTH CARE PROVIDERS & SERVICES--5.7% AmeriPath, Inc., 10.50% Sr. Unsec. Sub. Nts., 4/1/13 700,000 745,500 ------------------------------------------------------------------------------ Beverly Enterprises, Inc., 7.875% Sr. Sub. Nts., 6/15/14 600,000 645,000 ------------------------------------------------------------------------------ Community Health Systems, Inc., 6.50% Sr. Unsec. Sub. Nts., 12/15/12 900,000 880,875 ------------------------------------------------------------------------------ DaVita, Inc.: 6.625% Sr. Unsec. Nts., 3/15/13 890,000 910,025 7.25% Sr. Unsec. Sub. Nts., 3/15/15 1,910,000 1,943,425 ------------------------------------------------------------------------------ Extendicare Health Services, Inc.: 6.875% Sr. Sub. Nts., 5/1/14 600,000 589,500 9.50% Sr. Unsec. Sub. Nts., 7/1/10 500,000 533,125 ------------------------------------------------------------------------------ Fresenius Medical Care Capital Trust II, 7.875% Nts., 2/1/08 1,600,000 1,656,000 ------------------------------------------------------------------------------ Genesis HealthCare Corp., 8% Sr. Sub. Nts., 10/15/13 400,000 423,000 ------------------------------------------------------------------------------ HCA, Inc.: 6.30% Sr. Unsec. Nts., 10/1/12 1,400,000 1,413,990 6.375% Nts., 1/15/15 1,500,000 1,523,751 8.75% Sr. Nts., 9/1/10 2,800,000 3,110,792 ------------------------------------------------------------------------------ HealthSouth Corp.: 7.625% Nts., 6/1/12 1,700,000 1,734,000 8.375% Unsec. Nts., 10/1/11 700,000 715,750 10.75% Sr. Unsec. Sub. Nts., 10/1/08 357,000 358,785 11 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENT OF INVESTMENTS Continued ------------------------------------------------------------------------------ PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ HEALTH CARE PROVIDERS & SERVICES Continued Medquest, Inc., 11.875% Sr. Unsec. Sub. Nts., Series B, 8/15/12 $ 900,000 $ 873,000 ------------------------------------------------------------------------------ National Nephrology Assn., 9% Sr. Sub. Nts., 11/1/11 3 200,000 222,500 ------------------------------------------------------------------------------ NDCHealth Corp., 10.50% Sr. Unsec. Sub. Nts., 12/1/12 600,000 688,500 ------------------------------------------------------------------------------ Omnicare, Inc.: 6.75% Sr. Sub. Nts., 12/15/13 185,000 188,006 6.875% Sr. Sub. Nts., 12/15/15 285,000 290,700 ------------------------------------------------------------------------------ PacifiCare Health Systems, Inc., 10.75% Sr. Unsec. Unsub. Nts., 6/1/09 714,000 765,765 ------------------------------------------------------------------------------ Psychiatric Solutions, Inc., 7.75% Sr. Unsec. Sub. Nts., 7/15/15 485,000 503,188 ------------------------------------------------------------------------------ Quintiles Transnational Corp., 10% Sr. Sub. Nts., 10/1/13 600,000 672,000 ------------------------------------------------------------------------------ Rotech Healthcare, Inc., 9.50% Sr. Unsec. Sub. Nts., 4/1/12 600,000 633,000 ------------------------------------------------------------------------------ Select Medical Corp., 7.625% Sr. Unsec. Sub. Nts., 2/1/15 1,575,000 1,523,813 ------------------------------------------------------------------------------ Tenet Healthcare Corp.: 6.375% Sr. Nts., 12/1/11 1,574,000 1,444,145 7.375% Nts., 2/1/13 57,000 52,868 9.875% Sr. Nts., 7/1/14 2,300,000 2,340,250 ------------------------------------------------------------------------------ Triad Hospitals, Inc., 7% Sr. Sub. Nts., 11/15/13 920,000 926,900 ------------------------------------------------------------------------------ US Oncology, Inc.: 9% Sr. Unsec. Nts., 8/15/12 650,000 698,750 10.75% Sr. Unsec. Sub. Nts., 8/15/14 650,000 724,750 ------------------------------------------------------------------------------ Vanguard Health Holding Co. I LLC, 0%/11.25% Sr. Disc. Nts., 10/1/15 5 1,060,000 779,100 ------------ 30,510,753 ------------------------------------------------------------------------------ PHARMACEUTICALS--0.1% Valeant Pharmaceuticals International, Inc., 7% Sr. Nts., 12/15/11 1 800,000 790,000 ------------------------------------------------------------------------------ INDUSTRIALS--6.0% ------------------------------------------------------------------------------ AEROSPACE & DEFENSE--1.4% Alliant Techsystems, Inc., 8.50% Sr. Unsec. Sub. Nts., 5/15/11 1 900,000 949,500 ------------------------------------------------------------------------------ BE Aerospace, Inc.: 8% Sr. Unsec. Sub. Nts., Series B, 3/1/08 300,000 301,500 8.875% Sr. Unsec. Sub. Nts., 5/1/11 57,000 60,135 ------------------------------------------------------------------------------ L-3 Communications Corp.: 5.875% Sr. Sub. Nts., 1/15/15 684,000 666,900 6.125% Sr. Unsec. Sub. Nts., 1/15/14 1,100,000 1,094,500 6.375% Sr. Sub. Nts., 10/15/15 3 1,280,000 1,283,200 7.625% Sr. Sub. Nts., 6/15/12 500,000 528,750 ------------------------------------------------------------------------------ TD Funding Corp., 8.375% Sr. Sub. Nts., 7/15/11 1,200,000 1,269,000 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ AEROSPACE & DEFENSE Continued TRW Automotive, Inc.: 9.375% Sr. Nts., 2/15/13 $ 580,000 $ 630,750 11% Sr. Sub. Nts., 2/15/13 454,000 511,885 ------------ 7,296,120 ------------------------------------------------------------------------------ AIRLINES--0.1% AMR Corp., 9% Debs., 8/1/12 700,000 610,750 ------------------------------------------------------------------------------ ATA Holdings Corp., 13% Sr. Unsec. Nts., 2/1/09 2 1,575,000 70,875 ------------ 681,625 ------------------------------------------------------------------------------ BUILDING PRODUCTS--0.4% Associated Materials, Inc., 9.75% Sr. Sub. Nts., 4/15/12 700,000 679,000 ------------------------------------------------------------------------------ Goodman Global Holding Co., Inc., 7.875% Sr. Sub. Nts., 12/15/12 3 560,000 523,600 ------------------------------------------------------------------------------ Jacuzzi Brands, Inc., 9.625% Sr. Sec. Nts., 7/1/10 544,000 580,720 ------------------------------------------------------------------------------ Nortek, Inc., 8.50% Sr. Unsec. Unsub. Nts., 9/1/14 600,000 582,000 ------------ 2,365,320 ------------------------------------------------------------------------------ COMMERCIAL SERVICES & SUPPLIES--1.6% Allied Waste North America, Inc.: 7.25% Sr. Nts., 3/15/15 225,000 228,375 7.375% Sr. Sec. Nts., Series B, 4/15/14 2,250,000 2,199,375 8.875% Sr. Nts., Series B, 4/1/08 1,900,000 2,014,000 9.25% Sr. Sec. Debs., Series B, 9/1/12 283,000 307,763 ------------------------------------------------------------------------------ American Pad & Paper Co., 13% Sr. Sub. Nts., Series B, 11/15/05 1,2 200,000 -- ------------------------------------------------------------------------------ Cenveo Corp., 7.875% Sr. Sub. Nts., 12/1/13 1,600,000 1,552,000 ------------------------------------------------------------------------------ Comforce Operating, Inc., 12% Sr. Nts., Series B, 12/1/07 1 350,000 350,438 ------------------------------------------------------------------------------ Corrections Corp. of America: 6.25% Sr. Unsec. Sub. Nts., 3/15/13 890,000 885,550 7.50% Sr. Nts., 5/1/11 500,000 520,000 ------------------------------------------------------------------------------ Mail-Well I Corp., 9.625% Sr. Nts., 3/15/12 600,000 651,000 ------------ 8,708,501 ------------------------------------------------------------------------------ ELECTRICAL EQUIPMENT--0.3% Belden & Blake Corp., 8.75% Sec. Nts., 7/15/12 650,000 666,250 ------------------------------------------------------------------------------ Dayton Superior Corp., 13% Sr. Unsec. Sub. Nts., 6/15/09 100,000 76,000 ------------------------------------------------------------------------------ General Cable Corp., 9.50% Sr. Nts., 11/15/10 1 500,000 532,500 12 | OPPENHEIMER HIGH INCOME FUND/VA PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ ELECTRICAL EQUIPMENT Continued UCAR Finance, Inc., 10.25% Sr. Nts., 2/15/12 $ 400,000 $ 424,500 ------------ 1,699,250 ------------------------------------------------------------------------------ INDUSTRIAL CONGLOMERATES--0.1% Great Lakes Dredge & Dock Co., 7.75% Sr. Unsec. Sub. Nts., 12/15/13 250,000 226,563 ------------------------------------------------------------------------------ MACHINERY--1.0% Douglas Dynamics LLC, 7.75% Sr. Nts., 1/15/12 3 600,000 582,000 ------------------------------------------------------------------------------ Greenbrier Cos., Inc., 8.375% Sr. Unsec. Nts., 5/15/15 740,000 758,500 ------------------------------------------------------------------------------ Manitowoc Co., Inc. (The): 7.125% Sr. Nts., 11/1/13 150,000 154,875 10.50% Sr. Sub. Nts., 8/1/12 520,000 579,800 ------------------------------------------------------------------------------ Milacron Escrow Corp., 11.50% Sr. Sec. Nts., 5/15/11 1,700,000 1,462,000 ------------------------------------------------------------------------------ Navistar International Corp., 7.50% Sr. Nts., 6/15/11 200,000 191,500 ------------------------------------------------------------------------------ NMHG Holding Co., 10% Sr. Nts., 5/15/09 600,000 642,000 ------------------------------------------------------------------------------ Trinity Industries, Inc., 6.50% Sr. Nts., 3/15/14 1,000,000 990,000 ------------ 5,360,675 ------------------------------------------------------------------------------ MARINE--0.0% Navigator Gas Transport plc, 10.50% First Priority Ship Mtg. Nts., 6/30/07 1,2 191,000 216,785 ------------------------------------------------------------------------------ WPO Shipholding Co. LLC, 12% Sr. Sec. Nts., 7/15/05 1,2 700,000 3,920 ------------ 220,705 ------------------------------------------------------------------------------ ROAD & RAIL--0.5% Kansas City Southern Railway Co. (The), 7.50% Sr. Nts., 6/15/09 500,000 518,750 ------------------------------------------------------------------------------ Stena AB: 7% Sr. Unsec. Nts., 12/1/16 150,000 138,000 7.50% Sr. Unsec. Nts., 11/1/13 928,000 895,520 9.625% Sr. Nts., 12/1/12 1,100,000 1,200,375 ------------ 2,752,645 ------------------------------------------------------------------------------ TRADING COMPANIES & DISTRIBUTORS--0.5% United Rentals, Inc., 7% Sr. Sub. Nts., 2/15/14 3,100,000 2,914,000 ------------------------------------------------------------------------------ TRANSPORTATION INFRASTRUCTURE--0.1% Horizon Lines LLC, 9% Nts., 11/1/12 473,000 500,198 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ INFORMATION TECHNOLOGY--4.0% ------------------------------------------------------------------------------ COMMUNICATIONS EQUIPMENT--0.7% Lucent Technologies, Inc., 6.45% Unsec. Debs., 3/15/29 $ 4,500,000 $ 3,881,250 ------------------------------------------------------------------------------ Orion Network Systems, Inc., 12.50% Sr. Unsub. Disc. Nts., 1/15/07 2 1,150,000 11,500 ------------ 3,892,750 ------------------------------------------------------------------------------ COMPUTERS & PERIPHERALS--0.2% Seagate Technology Hdd Holdings, 8% Sr. Nts., 5/15/09 700,000 738,500 ------------------------------------------------------------------------------ ELECTRONIC EQUIPMENT & INSTRUMENTS--1.0% Flextronics International Ltd., 6.25% Sr. Sub. Nts., 11/15/14 2,700,000 2,676,375 ------------------------------------------------------------------------------ Loews Cineplex Entertainment Corp., 9% Sr. Unsec. Sub. Nts., 8/1/14 875,000 888,125 ------------------------------------------------------------------------------ Sanmina-SCI Corp., 6.75% Unsec. Sub. Nts., 3/1/13 920,000 879,750 ------------------------------------------------------------------------------ Sensus Metering System, Inc., 8.625% Sr. Unsec. Sub. Nts., 12/15/13 1,000,000 890,000 ------------ 5,334,250 ------------------------------------------------------------------------------ INTERNET SOFTWARE & SERVICES--0.0% Exodus Communications, Inc., 10.75% Sr. Nts., 12/15/09 1,2 [EUR] 846,550 2,506 ------------------------------------------------------------------------------ NorthPoint Communications Group, Inc., 12.875% Nts., 2/15/10 1,2 240,208 -- ------------------------------------------------------------------------------ PSINet, Inc., 10.50% Sr. Unsec. Nts., 12/1/06 1,2 [EUR] 1,000,000 -- ------------ 2,506 ------------------------------------------------------------------------------ IT SERVICES--1.3% DI Finance/DynCorp International LLC, 9.50% Sr. Unsec. Sub. Nts., Series B, 2/15/13 1,300,000 1,358,500 ------------------------------------------------------------------------------ Iron Mountain, Inc., 8.625% Sr. Unsec. Sub. Nts., 4/1/13 1,000,000 1,047,500 ------------------------------------------------------------------------------ SunGard Data Systems, Inc.: 9.125% Sr. Unsec. Nts., 8/15/13 3 2,130,000 2,215,200 10.25% Sr. Sub. Nts., 8/15/15 3 2,390,000 2,401,950 ------------ 7,023,150 ------------------------------------------------------------------------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.8% Advanced Micro Devices, Inc., 7.75% Sr. Unsec. Nts., 11/1/12 3,050,000 3,095,750 ------------------------------------------------------------------------------ Amkor Technology, Inc., 9.25% Sr. Unsec. Sub. Nts., 2/15/08 1,431,000 1,395,225 ------------ 4,490,975 13 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENT OF INVESTMENTS Continued ------------------------------------------------------------------------------ PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ MATERIALS--10.9% ------------------------------------------------------------------------------ CHEMICALS--3.4% ClimaChem, Inc., 10.75% Sr. Unsec. Nts., Series B, 12/1/07 1 $ 250,000 $ 200,000 ------------------------------------------------------------------------------ Crompton Corp., 9.875% Sr. Nts., 8/1/12 800,000 917,000 ------------------------------------------------------------------------------ Equistar Chemicals LP/Equistar Funding Corp.: 8.75% Sr. Unsec. Nts., 2/15/09 400,000 423,000 10.125% Sr. Unsec. Nts., 9/1/08 57,000 62,130 10.625% Sr. Unsec. Nts., 5/1/11 1,400,000 1,547,000 ------------------------------------------------------------------------------ Huntsman Corp./ICI Chemical Co. plc: 10.125% Sr. Unsec. Sub. Nts., 7/1/09 [EUR] 62,000 76,200 10.125% Sr. Unsec. Sub. Nts., 7/1/09 1,645,000 1,706,688 ------------------------------------------------------------------------------ Huntsman International LLC: 7.375% Sr. Sub. Nts., 1/1/15 3 2,200,000 2,134,000 9.875% Sr. Nts., 3/1/09 2,000,000 2,120,000 ------------------------------------------------------------------------------ Huntsman LLC: 11.50% Sr. Unsec. Nts., 7/15/12 6 332,000 377,650 11.625% Sr. Unsec. Nts., 10/15/10 37,000 42,319 ------------------------------------------------------------------------------ IMC Global, Inc.: 10.875% Sr. Unsec. Nts., 8/1/13 57,000 65,764 10.875% Sr. Unsec. Nts., Series B, 6/1/08 11,000 12,238 ------------------------------------------------------------------------------ Innophos, Inc., 9.625% Sr. Sub. Nts., 8/15/14 3,6 1,000,000 1,012,500 ------------------------------------------------------------------------------ ISP Chemco, Inc., 10.25% Sr. Unsec. Sub. Nts., 7/1/11 500,000 535,000 ------------------------------------------------------------------------------ ISP Holdings, Inc., 10.625% Sr. Sec. Nts., 12/15/09 300,000 316,500 ------------------------------------------------------------------------------ KI Holdings, Inc., 0%/9.875% Sr. Unsec. Sub. Disc. Nts., 11/15/14 5 750,000 495,000 ------------------------------------------------------------------------------ Lyondell Chemical Co.: 9.50% Sec. Nts., 12/15/08 1 34,000 35,785 9.50% Sr. Sec. Nts., 12/15/08 1 59,000 62,171 9.625% Sr. Sec. Nts., Series A, 5/1/07 1,000,000 1,048,750 10.50% Sr. Sec. Nts., 6/1/13 800,000 913,000 11.125% Sr. Sec. Nts., 7/15/12 300,000 337,125 ------------------------------------------------------------------------------ Millennium America, Inc., 9.25% Sr. Unsec. Sub. Nts., 6/15/08 711,000 770,546 ------------------------------------------------------------------------------ Resolution Performance Products LLC: 8% Sr. Sec. Nts., 12/15/09 450,000 461,250 13.50% Sr. Unsec. Sub. Nts., 11/15/10 300,000 318,750 ------------------------------------------------------------------------------ Rhodia SA, 10.25% Sr. Unsec. Nts., 6/1/10 390,000 429,000 ------------------------------------------------------------------------------ Rockwood Specialties Group, Inc.: 7.50% Sr. Sub. Nts., 11/15/14 400,000 400,500 10.625% Sr. Unsec. Sub. Nts., 5/15/11 291,000 320,464 ------------------------------------------------------------------------------ Sterling Chemicals, Inc., 10% Sr. Sec. Nts., 12/19/07 1,7 173,321 167,255 ------------------------------------------------------------------------------ Tronox Worldwide LLC/Tronox Finance Corp., 9.50% Sr. Nts., 12/1/12 3 955,000 978,875 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ CHEMICALS Continued Westlake Chemical Corp., 8.75% Sr. Nts., 7/15/11 $ 260,000 $ 279,500 ------------ 18,565,960 ------------------------------------------------------------------------------ CONSTRUCTION MATERIALS--0.2% NTK Holdings, Inc., 0%/10.75% Sr. Disc. Nts., 3/1/14 5 1,420,000 894,600 ------------------------------------------------------------------------------ CONTAINERS & PACKAGING--3.1% Crown Americas, Inc., 7.75% Sr. Nts., 11/15/15 3 760,000 790,400 ------------------------------------------------------------------------------ Graham Packaging Co., Inc.: 8.50% Sr. Unsec. Nts., 10/15/12 350,000 346,500 9.875% Sr. Unsec. Sub. Nts., 10/15/14 600,000 588,000 ------------------------------------------------------------------------------ Graphic Packaging International Corp.: 8.50% Sr. Nts., 8/15/11 1,000,000 1,007,500 9.50% Sr. Sub. Nts., 8/15/13 700,000 672,000 ------------------------------------------------------------------------------ Jefferson Smurfit Corp.: 7.50% Sr. Unsec. Unsub. Nts., 6/1/13 350,000 323,750 8.25% Sr. Unsec. Nts., 10/1/12 1,950,000 1,881,750 ------------------------------------------------------------------------------ MDP Acquisitions plc, 9.625% Sr. Nts., 10/1/12 800,000 804,000 ------------------------------------------------------------------------------ Owens-Brockway Glass Container, Inc.: 7.75% Sr. Sec. Nts., 5/15/11 500,000 524,375 8.25% Sr. Unsec. Nts., 5/15/13 557,000 577,888 8.75% Sr. Sec. Nts., 11/15/12 1,350,000 1,458,000 8.875% Sr. Sec. Nts., 2/15/09 300,000 314,625 ------------------------------------------------------------------------------ Pliant Corp.: 11.125% Sr. Sec. Nts., 9/1/09 2 600,000 537,000 11.625% Sr. Sec. Nts., 6/15/09 2,7 540,268 575,385 ------------------------------------------------------------------------------ Solo Cup Co., 8.50% Sr. Sub. Nts., 2/15/14 1,050,000 924,000 ------------------------------------------------------------------------------ Stone Container Corp.: 8.375% Sr. Nts., 7/1/12 750,000 729,375 9.25% Sr. Unsec. Nts., 2/1/08 1,000,000 1,030,000 9.75% Sr. Unsec. Nts., 2/1/11 1,000,000 1,015,000 ------------------------------------------------------------------------------ Stone Container Finance Co. of Canada II, 7.375% Sr. Unsec. Nts., 7/15/14 300,000 274,500 ------------------------------------------------------------------------------ Tekni-Plex, Inc., 10.875% Sr. Sec. Nts., 8/15/12 3 290,000 317,550 ------------------------------------------------------------------------------ TriMas Corp., 9.875% Sr. Unsec. Sub. Nts., 6/15/12 2,300,000 1,909,000 ------------ 16,600,598 ------------------------------------------------------------------------------ METALS & MINING--2.8% AK Steel Corp.: 7.75% Sr. Unsec. Nts., 6/15/12 3,007,000 2,728,853 7.875% Sr. Unsec. Nts., 2/15/09 300,000 286,500 ------------------------------------------------------------------------------ Century Aluminum Co., 7.50% Sr. Unsec. Nts., 8/15/14 1,000,000 990,000 ------------------------------------------------------------------------------ Gibraltar Industries, Inc., 8% Sr. Sub. Nts., 12/1/15 1 575,000 579,313 ------------------------------------------------------------------------------ IMCO Recycling, Inc., 10.375% Sr. Sec. Nts., 10/15/10 700,000 768,250 14 | OPPENHEIMER HIGH INCOME FUND/VA PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ METALS & MINING Continued IPSCO, Inc., 8.75% Sr. Nts., 6/1/13 $ 300,000 $ 330,000 ------------------------------------------------------------------------------ Ispat Inland ULC, 9.75% Sr. Sec. Nts., 4/1/14 1,364,000 1,551,550 ------------------------------------------------------------------------------ Jorgensen (Earle M.) Co., 9.75% Sr. Sec. Nts., 6/1/12 800,000 860,000 ------------------------------------------------------------------------------ Kaiser Aluminum & Chemical Corp., 10.875% Sr. Nts., Series B, 10/15/06 2 1,000,000 1,015,000 ------------------------------------------------------------------------------ Koppers Industry, Inc., 9.875% Sr. Sec. Nts., 10/15/13 900,000 981,000 ------------------------------------------------------------------------------ Northwest Pipeline Corp., 8.125% Sr. Nts., 3/1/10 200,000 213,000 ------------------------------------------------------------------------------ Novelis, Inc., 7.25% Sr. Nts., 2/15/15 3,6 2,215,000 2,076,563 ------------------------------------------------------------------------------ Oregon Steel Mills, Inc., 10% Sr. Nts., 7/15/09 1,300,000 1,397,500 ------------------------------------------------------------------------------ Steel Dynamics, Inc., 9.50% Sr. Nts., 3/15/09 400,000 423,000 ------------------------------------------------------------------------------ United States Steel Corp.: 9.75% Sr. Nts., 5/15/10 505,000 551,713 10.75% Sr. Nts., 8/1/08 389,000 431,790 ------------ 15,184,032 ------------------------------------------------------------------------------ PAPER & FOREST PRODUCTS--1.4% Abitibi-Consolidated, Inc., 8.55% Nts., 8/1/10 300,000 305,250 ------------------------------------------------------------------------------ Appleton Papers, Inc., 8.125% Sr. Nts., 6/15/11 600,000 586,500 ------------------------------------------------------------------------------ Buckeye Technologies, Inc., 8.50% Sr. Nts., 10/1/13 350,000 351,750 ------------------------------------------------------------------------------ Georgia-Pacific Corp.: 7.75% Sr. Unsec. Nts., 11/15/29 2,000,000 1,835,000 8.125% Sr. Unsec. Nts., 5/15/11 1,300,000 1,308,125 ------------------------------------------------------------------------------ Inland Fiber Group LLC, 9.625% Sr. Unsec. Nts., 11/15/07 1,2 1,700,000 892,500 ------------------------------------------------------------------------------ JSG Holding plc, 11.50% Sr. Nts., 10/1/15 3,7 [EUR] 291,088 318,771 ------------------------------------------------------------------------------ Mercer International, Inc., 9.25% Sr. Nts., 2/15/13 620,000 525,450 ------------------------------------------------------------------------------ Norske Skog Canada Ltd., 7.375% Sr. Unsec. Nts., 3/1/14 600,000 528,000 ------------------------------------------------------------------------------ Tembec Industries, Inc.: 7.75% Sr. Nts., 3/15/12 700,000 378,000 8.50% Sr. Unsec. Nts., 2/1/11 149,000 83,440 ------------------------------------------------------------------------------ Western Forest Products, Inc., 15% Sec. Nts., 7/28/09 3,7 432,430 464,862 ------------ 7,577,648 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ TELECOMMUNICATION SERVICES--9.8% ------------------------------------------------------------------------------ DIVERSIFIED TELECOMMUNICATION SERVICES--3.2% American Tower Corp., 7.125% Sr. Unsec. Nts., 10/15/12 $ 500,000 $ 517,500 ------------------------------------------------------------------------------ Intelsat Bermuda Ltd., 8.625% Sr. Nts., 1/15/15 3 2,580,000 2,618,700 ------------------------------------------------------------------------------ MCI, Inc., 7.688% Sr. Unsec. Nts., 5/1/09 6 600,000 621,000 ------------------------------------------------------------------------------ PanAmSat Corp., 9% Sr. Unsec. Nts., 8/15/14 1,300,000 1,368,250 ------------------------------------------------------------------------------ PanAmSat Holding Corp., 0%/10.375% Sr. Unsec. Disc. Nts., 11/1/14 5 750,000 528,750 ------------------------------------------------------------------------------ Qwest Capital Funding, Inc.: 7.25% Unsec. Unsub. Nts., 2/15/11 900,000 915,750 7.90% Unsec. Nts., 8/15/10 2,357,000 2,451,280 ------------------------------------------------------------------------------ Qwest Communications International, Inc.: 3.50% Cv. Sr. Unsec. Bonds, 11/15/25 635,000 738,981 7.25% Sr. Unsec. Sub. Nts., 2/15/11 6 600,000 615,000 ------------------------------------------------------------------------------ Qwest Corp., 8.875% Unsec. Unsub. Nts., 3/15/12 6 3,200,000 3,624,000 ------------------------------------------------------------------------------ Teligent, Inc., 11.50% Sr. Nts., 12/1/07 1,2 400,000 -- ------------------------------------------------------------------------------ Time Warner Telecom Holdings, Inc., 9.25% Sr. Unsec. Unsub. Nts., 2/15/14 1,850,000 1,961,000 ------------------------------------------------------------------------------ Time Warner Telecom, Inc., 10.125% Sr. Unsec. Sub. Nts., 2/1/11 1,100,000 1,157,750 ------------------------------------------------------------------------------ Valor Telecommunications Enterprises LLC, 7.75% Sr. Unsec. Sub. Nts., 2/15/15 445,000 467,250 ------------------------------------------------------------------------------ Winstar Communications, Inc., 12.75% Sr. Nts., 4/15/10 1,2 1,000,000 15,000 ------------ 17,600,211 ------------------------------------------------------------------------------ WIRELESS TELECOMMUNICATION SERVICES--6.6% Alamosa Delaware, Inc.: 8.50% Sr. Nts., 1/31/12 500,000 543,125 11% Sr. Unsec. Nts., 7/31/10 57,000 64,553 12.50% Sr. Unsec. Nts., 2/1/11 100,000 108,500 ------------------------------------------------------------------------------ American Cellular Corp., 10% Sr. Nts., Series B, 8/1/11 2,110,000 2,299,900 ------------------------------------------------------------------------------ American Tower Corp., 7.50% Sr. Nts., 5/1/12 1,650,000 1,732,500 ------------------------------------------------------------------------------ American Tower Escrow Corp., 12.25% Sr. Sub. Disc. Nts., 8/1/08 8 1,400,000 1,102,500 ------------------------------------------------------------------------------ AT&T Corp.: 9.05% Sr. Unsec. Nts., 11/15/11 6 1,576,000 1,746,418 9.75% Sr. Nts., 11/15/31 6 1,500,000 1,889,774 ------------------------------------------------------------------------------ CellNet Data Systems, Inc., Sr. Unsec. Disc. Nts., 10/1/07 1,2 1,834,000 -- ------------------------------------------------------------------------------ Centennial Cellular Operating Co. LLC/Centennial Communications Corp., 10.125% Sr. Nts., 6/15/13 1,700,000 1,857,250 15 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENT OF INVESTMENTS Continued ------------------------------------------------------------------------------ PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ WIRELESS TELECOMMUNICATION SERVICES Continued Dobson Cellular Systems, Inc., 8.375% Sr. Sec. Nts., 11/1/11 $ 470,000 $ 501,138 ------------------------------------------------------------------------------ Dobson Communications Corp.: 8.40% Sr. Nts., 10/15/12 3,6 290,000 290,000 8.875% Sr. Nts., 10/1/13 369,000 369,923 ------------------------------------------------------------------------------ IWO Holdings, Inc., 7.90% Sr. Sec. Nts., 1/15/12 6 220,000 229,350 ------------------------------------------------------------------------------ Loral Skynet Corp., 14% Sr. Sec. Nts., 10/15/15 7 198,000 239,580 ------------------------------------------------------------------------------ Nextel Communications, Inc., 7.375% Sr. Nts., Series D, 8/1/15 7,490,000 7,910,504 ------------------------------------------------------------------------------ Nextel Partners, Inc., 8.125% Sr. Nts., 7/1/11 700,000 751,625 ------------------------------------------------------------------------------ Rogers Wireless, Inc.: 6.375% Sec. Nts., 3/1/14 2,100,000 2,115,750 7.50% Sec. Nts., 3/15/15 900,000 976,500 8% Sr. Sub. Nts., 12/15/12 600,000 638,250 ------------------------------------------------------------------------------ Rural Cellular Corp.: 9.75% Sr. Sub. Nts., 1/15/10 1,957,000 1,986,355 9.875% Sr. Nts., 2/1/10 2,600,000 2,756,000 ------------------------------------------------------------------------------ SBA Communications Corp., 8.50% Sr. Unsec. Nts., Cl. A, 12/1/12 909,000 1,013,535 ------------------------------------------------------------------------------ SBA Telecommunications, Inc./SBA Communications Corp., 0%/9.75% Sr. Disc. Nts., 12/15/11 5 1,540,000 1,436,050 ------------------------------------------------------------------------------ Triton PCS, Inc., 8.50% Sr. Unsec. Nts., 6/1/13 1,222,000 1,142,570 ------------------------------------------------------------------------------ UbiquiTel Operating Co., 9.875% Sr. Nts., 3/1/11 1,100,000 1,223,750 ------------------------------------------------------------------------------ US Unwired, Inc., 10% Sr. Sec. Nts., 6/15/12 500,000 565,000 ------------ 35,490,400 ------------------------------------------------------------------------------ UTILITIES--4.5% ------------------------------------------------------------------------------ ELECTRIC UTILITIES--2.9% AES Corp. (The), 8.75% Sr. Sec. Nts., 5/15/13 3 1,150,000 1,257,813 ------------------------------------------------------------------------------ Calpine Corp., Sr. Sec. Nts., 7/15/07 2,3 1,393,915 1,139,526 ------------------------------------------------------------------------------ CMS Energy Corp.: 7.50% Sr. Nts., 1/15/09 357,000 369,495 7.75% Sr. Nts., 8/1/10 400,000 421,500 ------------------------------------------------------------------------------ ESI Tractebel Acquisition Corp., 7.99% Sec. Bonds, Series B, 12/30/11 842,000 887,929 ------------------------------------------------------------------------------ FPL Energy National Wind Power LLC: 5.608% Nts., 3/10/24 3 522,925 522,459 6.125% Nts., 3/25/19 3 301,909 296,069 ------------------------------------------------------------------------------ Midwest Generation LLC, 8.75% Sr. Sec. Nts., 5/1/34 3,900,000 4,314,375 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------ ELECTRIC UTILITIES Continued Mirant Americas Generation LLC, 8.30% Sr. Unsec. Nts., 5/1/11 2 $ 200,000 $ 254,000 ------------------------------------------------------------------------------ MSW Energy Holdings II LLC/MSW Energy Finance Co. II, Inc., 7.375% Sr. Sec. Nts., Series B, 9/1/10 700,000 722,750 ------------------------------------------------------------------------------ MSW Energy Holdings LLC/MSW Energy Finance Co., Inc., 8.50% Sr. Sec. Nts., 9/1/10 400,000 428,000 ------------------------------------------------------------------------------ NRG Energy, Inc., 8% Sr. Sec. Nts., 12/15/13 380,000 425,600 ------------------------------------------------------------------------------ Reliant Energy, Inc., 6.75% Sr. Sec. Nts., 12/15/14 500,000 438,750 ------------------------------------------------------------------------------ Reliant Resources, Inc.: 9.25% Sr. Sec. Nts., 7/15/10 657,000 660,285 9.50% Sr. Sec. Nts., 7/15/13 700,000 705,250 ------------------------------------------------------------------------------ Sierra Pacific Resources, 6.75% Sr. Nts., 8/15/17 3 2,081,000 2,081,000 ------------------------------------------------------------------------------ Texas Genco LLC, 6.875% Sr. Nts., 12/15/14 3 594,000 645,975 ------------ 15,570,776 ------------------------------------------------------------------------------ ENERGY TRADERS--0.1% Mirant North America LLC, 7.375% Sr. Nts., 12/31/13 3 360,000 365,850 ------------------------------------------------------------------------------ GAS UTILITIES--0.1% SEMCO Energy, Inc., 7.125% Sr. Nts., 5/15/08 400,000 408,477 ------------------------------------------------------------------------------ MULTI-UTILITIES & UNREGULATED POWER--1.4% AES Red Oak LLC: 8.54% Sr. Sec. Bonds, Series A, 11/30/19 1,9 1,007,001 1,112,736 9.20% Sr. Sec. Bonds, Series B, 11/30/29 1 500,000 565,000 ------------------------------------------------------------------------------ Dynegy Holdings, Inc.: 6.875% Sr. Unsec. Unsub. Nts., 4/1/11 901,000 891,990 8.75% Sr. Nts., 2/15/12 424,000 460,040 10.125% Sr. Sec. Nts., 7/15/13 3 3,100,000 3,518,500 ------------------------------------------------------------------------------ Mirant Mid-Atlantic LLC, 8.625% Sec. Pass-Through Certificates, Series A, 6/30/12 2 771,107 833,044 ------------------------------------------------------------------------------ NorthWestern Corp., 5.875% Sr. Sec. Nts., 11/1/14 580,000 583,990 ------------ 7,965,300 ------------ Total Corporate Bonds and Notes (Cost $468,466,952) 467,052,401 16 | OPPENHEIMER HIGH INCOME FUND/VA VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------ PREFERRED STOCKS--0.8% ------------------------------------------------------------------------------ AmeriKing, Inc., 13% Cum. Sr. Exchangeable, Non-Vtg. 1,10 13,764 $ -- ------------------------------------------------------------------------------ Dobson Communications Corp., 6% Cv., Series F (converts into Dobson Communications Corp., Cl. A common stock), Non-Vtg. 3 885 151,335 ------------------------------------------------------------------------------ e.spire Communications, Inc., 12.75% Jr. Redeemable, Non-Vtg. 1,10 498 50 ------------------------------------------------------------------------------ Eagle-Picher Holdings, Inc., 11.75% Cum. Exchangeable, Series B, Non-Vtg. 1,10 8,000 10,000 ------------------------------------------------------------------------------ ICG Holdings, Inc., 14.25% Exchangeable, Non-Vtg. 1,10 342 -- ------------------------------------------------------------------------------ Loral Skynet Corp., 12% Cum., Series A, Non Vtg. 1,10 1,634 305,967 ------------------------------------------------------------------------------ McLeodUSA, Inc., 2.50% Cv., Series A 1,10 3,258 130 ------------------------------------------------------------------------------ Pacific & Atlantic Holdings, Inc., 7.50% Cum. Cv., Series A 1,7 23,546 -- ------------------------------------------------------------------------------ Paxson Communications Corp.: 14.25% Cum. Jr. Exchangeable, Non-Vtg. 1,7 212 1,844,930 14.25% Cum. Jr. Exchangeable, Non-Vtg. 1,10 1 8,286 ------------------------------------------------------------------------------ PTV, Inc., 10% Cum., Series A, Non-Vtg. 1,10 22 46 ------------------------------------------------------------------------------ Rural Cellular Corp., 11.375% Cum., Series B, Non-Vtg. 7 245 282,363 ------------------------------------------------------------------------------ Sovereign Real Estate Investment Trust, 12% Non-Cum., Series A 1 10,000 1,442,500 ------------ Total Preferred Stocks (Cost $4,928,964) 4,045,607 ------------------------------------------------------------------------------ COMMON STOCKS--2.9% ------------------------------------------------------------------------------ Allegheny Technologies, Inc. 3,310 119,425 ------------------------------------------------------------------------------ Amerada Hess Corp. 895 113,504 ------------------------------------------------------------------------------ Aon Corp. 3,068 110,295 ------------------------------------------------------------------------------ Apache Corp. 1,649 112,989 ------------------------------------------------------------------------------ Apple Computer, Inc. 10 1,549 111,358 ------------------------------------------------------------------------------ Ashland, Inc. 1,962 113,600 ------------------------------------------------------------------------------ Avaya, Inc. 10 10,011 106,817 ------------------------------------------------------------------------------ Broadwing Corp. 10 494 2,989 ------------------------------------------------------------------------------ Burlington Northern Santa Fe Corp. 1,689 119,615 ------------------------------------------------------------------------------ Burlington Resources, Inc. 1,510 130,162 ------------------------------------------------------------------------------ Cebridge Connections Holding LLC 1,10 2,645 -- ------------------------------------------------------------------------------ Centex Corp. 1,521 108,736 ------------------------------------------------------------------------------ Charles River Laboratories International, Inc. 10 8,360 354,213 ------------------------------------------------------------------------------ Chesapeake Energy Corp. 42,000 1,332,660 ------------------------------------------------------------------------------ Chubb Corp. 1,157 112,981 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------ COMMON STOCKS Continued ------------------------------------------------------------------------------ CIGNA Corp. 976 $ 109,019 ------------------------------------------------------------------------------ Citigroup, Inc. 359 17,422 ------------------------------------------------------------------------------ Compuware Corp. 10 12,250 109,883 ------------------------------------------------------------------------------ ConocoPhillips 1,800 104,724 ------------------------------------------------------------------------------ Covad Communications Group, Inc. 10 20,660 20,247 ------------------------------------------------------------------------------ Coventry Health Care, Inc. 10 1,893 107,825 ------------------------------------------------------------------------------ Cummins, Inc. 1,250 112,163 ------------------------------------------------------------------------------ D.R. Horton, Inc. 3,083 110,156 ------------------------------------------------------------------------------ Devon Energy Corp. 1,800 112,572 ------------------------------------------------------------------------------ Dobson Communications Corp., Cl. A 10 43,391 325,433 ------------------------------------------------------------------------------ Dow Chemical Co. (The) 13,000 569,660 ------------------------------------------------------------------------------ E*TRADE Financial Corp. 10 5,617 117,171 ------------------------------------------------------------------------------ Eastman Chemical Co. 2,014 103,902 ------------------------------------------------------------------------------ Edison International, Inc. 2,458 107,193 ------------------------------------------------------------------------------ EOG Resources, Inc. 1,496 109,762 ------------------------------------------------------------------------------ Express Scripts, Inc. 10 1,283 107,515 ------------------------------------------------------------------------------ Globix Corp. 10 11,467 15,480 ------------------------------------------------------------------------------ Goodyear Tire & Rubber Co. (The) 10 6,580 114,360 ------------------------------------------------------------------------------ Gulfstream Holding, Inc. 1,10 56 -- ------------------------------------------------------------------------------ Halliburton Co. 1,711 106,014 ------------------------------------------------------------------------------ Hartford Financial Services Group, Inc. (The) 1,274 109,424 ------------------------------------------------------------------------------ Horizon Natural Resources Co. 1,10 20,000 -- ------------------------------------------------------------------------------ Huntsman Corp. 1,10 19,570 320,146 ------------------------------------------------------------------------------ ICO Global Communication Holdings Ltd. 10 42,107 263,590 ------------------------------------------------------------------------------ iPCS, Inc. 10 10,189 491,619 ------------------------------------------------------------------------------ KB Home 1,580 114,803 ------------------------------------------------------------------------------ Leap Wireless International, Inc. 10 1,913 72,464 ------------------------------------------------------------------------------ Lehman Brothers Holdings, Inc. 882 113,046 ------------------------------------------------------------------------------ Lennar Corp., Cl. A 1,902 116,060 ------------------------------------------------------------------------------ Liberty Global, Inc., Series A 8,343 187,718 ------------------------------------------------------------------------------ Liberty Global, Inc., Series C 10 8,343 176,872 ------------------------------------------------------------------------------ Loews Corp. 1,148 108,888 ------------------------------------------------------------------------------ Loral Space & Communications Ltd. 10 12,388 349,961 ------------------------------------------------------------------------------ Louisiana-Pacific Corp. 4,064 111,638 ------------------------------------------------------------------------------ Magellan Health Services, Inc. 10 10,104 317,771 ------------------------------------------------------------------------------ Manitowoc Co., Inc. (The) 1,039 52,179 ------------------------------------------------------------------------------ Marathon Oil Corp. 1,844 112,429 ------------------------------------------------------------------------------ MCI, Inc. 1,629 32,140 ------------------------------------------------------------------------------ Motorola, Inc. 4,759 107,506 ------------------------------------------------------------------------------ National Semiconductor Corp. 3,993 103,738 ------------------------------------------------------------------------------ Nordstrom, Inc. 3,063 114,556 ------------------------------------------------------------------------------ Norfolk Southern Corp. 2,545 114,092 ------------------------------------------------------------------------------ Novell, Inc. 10 13,337 117,766 17 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENT OF INVESTMENTS Continued ------------------------------------------------------------------------------ VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------ COMMON STOCKS Continued ------------------------------------------------------------------------------ NTL, Inc. 10 18,902 $ 1,286,848 ------------------------------------------------------------------------------ Nucor Corp. 1,648 109,955 ------------------------------------------------------------------------------ NVIDIA Corp. 10 3,078 112,532 ------------------------------------------------------------------------------ Occidental Petroleum Corp. 1,371 109,515 ------------------------------------------------------------------------------ Office Depot, Inc. 10 3,751 117,781 ------------------------------------------------------------------------------ Orbital Sciences Corp. 10 2,235 28,697 ------------------------------------------------------------------------------ Phelps Dodge Corp. 804 115,671 ------------------------------------------------------------------------------ Pioneer Cos., Inc. 10 10,688 320,319 ------------------------------------------------------------------------------ Polymer Group, Inc., Cl. A 10 24,040 576,720 ------------------------------------------------------------------------------ Prandium, Inc. 1,10 62,829 628 ------------------------------------------------------------------------------ Prudential Financial, Inc. 1,465 107,223 ------------------------------------------------------------------------------ Pulte Homes, Inc. 2,650 104,304 ------------------------------------------------------------------------------ Reebok International Ltd. 1,944 113,199 ------------------------------------------------------------------------------ Rowan Cos., Inc. 3,001 106,956 ------------------------------------------------------------------------------ Sterling Chemicals, Inc. 1,10 396 4,950 ------------------------------------------------------------------------------ Sunoco, Inc. 1,354 106,127 ------------------------------------------------------------------------------ Teco Energy, Inc. 20,000 343,600 ------------------------------------------------------------------------------ Telewest Global, Inc. 10 76,326 1,818,085 ------------------------------------------------------------------------------ Telus Corp. 1,079 43,441 ------------------------------------------------------------------------------ TVMAX Holdings, Inc. 1,10 7,500 7,500 ------------------------------------------------------------------------------ United States Steel Corp. 2,336 112,292 ------------------------------------------------------------------------------ UnumProvident Corp. 5,019 114,182 ------------------------------------------------------------------------------ Valero Energy Corp. 2,212 114,139 ------------------------------------------------------------------------------ Viatel Holding (Bermuda) Ltd. 1,10 2,701 88 ------------------------------------------------------------------------------ Western Forest Products, Inc. 10 85,047 133,886 ------------------------------------------------------------------------------ Williams Cos., Inc. (The) 20,000 463,400 ------------------------------------------------------------------------------ WRC Media Corp. 1,10 1,353 27 ------------------------------------------------------------------------------ XO Communications, Inc. 10 2,646 4,816 ------------ Total Common Stocks (Cost $15,081,636) 15,515,132 UNITS ------------------------------------------------------------------------------ RIGHTS, WARRANTS AND CERTIFICATES--0.1% ------------------------------------------------------------------------------ American Tower Corp. Wts., Exp. 8/1/08 3,10 1,400 535,870 ------------------------------------------------------------------------------ ASAT Finance LLC Wts., Exp. 11/1/06 10 500 -- ------------------------------------------------------------------------------ COLO.com, Inc. Wts., Exp. 3/15/10 1,10 600 -- ------------------------------------------------------------------------------ Concentric Network Corp. Wts., Exp. 12/15/07 1,10 750 -- ------------------------------------------------------------------------------ DeCrane Aircraft Holdings, Inc. Wts., Exp. 9/30/08 1,10 1,750 -- ------------------------------------------------------------------------------ Diva Systems Corp. Wts., Exp. 3/1/08 1,10 1,500 -- ------------------------------------------------------------------------------ ICO Global Communication Holdings Ltd. Wts.: Exp. 5/16/06 1,10 10,561 158 Exp. 5/16/06 1,10 16 -- VALUE UNITS SEE NOTE 1 ------------------------------------------------------------------------------ RIGHTS, WARRANTS AND CERTIFICATES Continued ------------------------------------------------------------------------------ Imperial Credit Industries, Inc. Wts., Exp. 1/31/08 1,10 5,148 $ -- ------------------------------------------------------------------------------ iPCS, Inc. Wts., Exp. 6/15/10 1,10 750 -- ------------------------------------------------------------------------------ Long Distance International, Inc. Wts., Exp. 4/13/08 3,10 800 -- ------------------------------------------------------------------------------ Loral Space & Communications Ltd. Wts., Exp. 1/15/07 1,10 800 -- ------------------------------------------------------------------------------ McLeodUSA, Inc. Wts., Exp. 4/16/07 10 7,220 43 ------------------------------------------------------------------------------ Ntelos, Inc. Wts., Exp. 8/15/10 1,10 1,000 -- ------------------------------------------------------------------------------ Pathmark Stores, Inc. Wts., Exp. 9/19/10 10 20,000 5,600 ------------------------------------------------------------------------------ Sterling Chemicals, Inc. Wts., Exp. 12/19/08 10 647 65 ------------------------------------------------------------------------------ XO Communications, Inc., Cl. A Wts., Exp. 1/16/10 10 5,300 795 ------------------------------------------------------------------------------ XO Communications, Inc., Cl. B Wts., Exp. 1/16/10 10 3,975 398 ------------------------------------------------------------------------------ XO Communications, Inc., Cl. C Wts., Exp. 1/16/10 10 3,975 358 ------------ Total Rights, Warrants and Certificates (Cost $86,502) 543,287 PRINCIPAL AMOUNT ------------------------------------------------------------------------------ STRUCTURED NOTES--3.4% ------------------------------------------------------------------------------ Dow Jones CDX High Yield Index Pass-Through Certificates: Series 3-4, 10.50%, 12/29/09 1,11 $ 1,450,000 1,421,000 Series 5-T3, 8.25%, 12/29/10 1,11 12,000,000 12,030,000 ------------------------------------------------------------------------------ Lehman Brothers Holdings, Inc., High Yield Targeted Return Index Securities, Series 2005-1, 7.651%, 6/15/15 1,11 4,478,309 4,667,652 ------------ Total Structured Notes (Cost $18,068,921) 18,118,652 ------------------------------------------------------------------------------ JOINT REPURCHASE AGREEMENTS--3.8% ------------------------------------------------------------------------------ Undivided interest of 1.46% in joint repurchase agreement (Principal Amount/Value $1,414,200,000, with a maturity value of $1,414,844,247) with UBS Warburg LLC, 4.10%, dated 12/30/05, to be repur- chased at $20,613,386 on 1/3/06, collateralized by Federal Home Loan Mortgage Corp., 5%, 1/1/35, with a value of $157,513,104 and Federal National Mortgage Assn., 5%--5.50%, 3/1/34--10/1/35, with a value of $1,301,420,187 (Cost $20,604,000) 20,604,000 20,604,000 ------------------------------------------------------------------------------ TOTAL INVESTMENTS, AT VALUE (COST $528,001,354) 97.5% 526,582,308 ------------------------------------------------------------------------------ OTHER ASSETS NET OF LIABILITIES 2.5 13,760,204 -------------------------- NET ASSETS 100.0% $540,342,512 ========================== 18 | OPPENHEIMER HIGH INCOME FUND/VA FOOTNOTES TO STATEMENT OF INVESTMENTS Principal amount is reported in U.S. Dollars, except for those denoted in the following currency: EUR Euro 1. Illiquid or restricted security. The aggregate value of illiquid or restricted securities as of December 31, 2005 was $35,656,472, which represents 6.60% of the Fund's net assets, of which $320,774 is considered restricted. See Note 7 of Notes to Financial Statements. 2. Issue is in default. Non-income producing. See Note 1 of Notes to Financial Statements. 3. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $65,691,084 or 12.16% of the Fund's net assets as of December 31, 2005. 4. Received as the result of issuer reorganization. 5. Denotes a step bond: a zero coupon bond that converts to a fixed or variable interest rate at a designated future date. 6. Represents the current interest rate for a variable or increasing rate security. 7. Interest or dividend is paid-in-kind. 8. Zero coupon bond reflects effective yield on the date of purchase. 9. All or a portion of the security is held in collateralized accounts to cover initial margin requirements on open futures sales contracts. The aggregate market value of such securities is $1,027,650. See Note 6 of Notes to Financial Statements. 10. Non-income producing security. 11. Interest rate represents a weighted average rate comprised of the interest rates of the underlying securities. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 19 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENT OF ASSETS AND LIABILITIES December 31, 2005 --------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------- ASSETS --------------------------------------------------------------------------------------------------------------- Investments, at value (cost $528,001,354)--see accompanying statement of investments $ 526,582,308 --------------------------------------------------------------------------------------------------------------- Cash 3,092,534 --------------------------------------------------------------------------------------------------------------- Cash used for collateral on futures 700,000 --------------------------------------------------------------------------------------------------------------- Receivables and other assets: Interest, dividends and principal paydowns 10,012,330 Shares of beneficial interest sold 437,725 Other 12,853 -------------- Total assets 540,837,750 --------------------------------------------------------------------------------------------------------------- LIABILITIES --------------------------------------------------------------------------------------------------------------- Payables and other liabilities: Shares of beneficial interest redeemed 301,469 Distribution and service plan fees 92,666 Shareholder communications 52,489 Legal, auditing and other professional fees 21,182 Trustees' compensation 16,620 Transfer and shareholder servicing agent fees 1,777 Futures margins 776 Other 8,259 -------------- Total liabilities 495,238 --------------------------------------------------------------------------------------------------------------- NET ASSETS $ 540,342,512 ============== --------------------------------------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS --------------------------------------------------------------------------------------------------------------- Par value of shares of beneficial interest $ 64,129 --------------------------------------------------------------------------------------------------------------- Additional paid-in capital 608,542,721 --------------------------------------------------------------------------------------------------------------- Accumulated net investment income 38,892,209 --------------------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (105,687,479) --------------------------------------------------------------------------------------------------------------- Net unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies (1,469,068) -------------- NET ASSETS $ 540,342,512 ============== --------------------------------------------------------------------------------------------------------------- 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 $384,726,106 and 45,583,621 shares of beneficial interest outstanding) $ 8.44 --------------------------------------------------------------------------------------------------------------- Service Shares: Net asset value, redemption price per share and offering price per share (based on net assets of $155,616,406 and 18,545,426 shares of beneficial interest outstanding) $ 8.39
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 20 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENT OF OPERATIONS For the Year Ended December 31, 2005 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME --------------------------------------------------------------------------------------------------------------- Interest $ 43,816,440 --------------------------------------------------------------------------------------------------------------- Dividends (net of foreign withholding taxes of $117) 332,760 --------------------------------------------------------------------------------------------------------------- Portfolio lending fees 50 -------------- Total investment income 44,149,250 --------------------------------------------------------------------------------------------------------------- EXPENSES --------------------------------------------------------------------------------------------------------------- Management fees 4,222,535 --------------------------------------------------------------------------------------------------------------- Distribution and service plan fees--Service shares 352,904 --------------------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Non-Service shares 10,583 Service shares 10,202 --------------------------------------------------------------------------------------------------------------- Shareholder communications: Non-Service shares 53,828 Service shares 17,661 --------------------------------------------------------------------------------------------------------------- Trustees' compensation 15,659 --------------------------------------------------------------------------------------------------------------- Custodian fees and expenses 12,554 --------------------------------------------------------------------------------------------------------------- Administration service fees 1,500 --------------------------------------------------------------------------------------------------------------- Other 48,023 -------------- Total expenses 4,745,449 Less reduction to custodian expenses (12,554) -------------- Net expenses 4,732,895 --------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME 39,416,355 --------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) --------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on: Investments 5,084,552 Closing and expiration of futures contracts (302,824) Foreign currency transactions (17,921) Swap contracts 29,533 -------------- Net realized gain 4,793,340 --------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on: Investments (31,141,023) Translation of assets and liabilities denominated in foreign currencies (546,869) Futures contracts (131,935) Swap contracts 90,514 -------------- Net change in unrealized depreciation (31,729,313) --------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 12,480,382 ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 21 | OPPENHEIMER HIGH INCOME FUND/VA STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005 2004 --------------------------------------------------------------------------------------------------------------- OPERATIONS --------------------------------------------------------------------------------------------------------------- Net investment income $ 39,416,355 $ 38,670,671 --------------------------------------------------------------------------------------------------------------- Net realized gain (loss) 4,793,340 (682,850) --------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) (31,729,313) 10,279,974 ------------------------------- Net increase in net assets resulting from operations 12,480,382 48,267,795 --------------------------------------------------------------------------------------------------------------- DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS --------------------------------------------------------------------------------------------------------------- Dividends from net investment income: Non-Service shares (29,392,362) (29,416,204) Service shares (8,541,230) (5,469,874) --------------------------------------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from beneficial interest transactions: Non-Service shares (74,783,236) (10,547,360) Service shares 27,161,237 54,117,983 --------------------------------------------------------------------------------------------------------------- NET ASSETS --------------------------------------------------------------------------------------------------------------- Total increase (decrease) (73,075,209) 56,952,340 --------------------------------------------------------------------------------------------------------------- Beginning of period 613,417,721 556,465,381 ------------------------------- End of period (including accumulated net investment income of $38,892,209 and $37,454,171, respectively) $ 540,342,512 $ 613,417,721 ===============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 22 | OPPENHEIMER HIGH INCOME FUND/VA FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 ------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 8.80 $ 8.61 $ 7.51 $ 8.54 $ 9.27 ------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income .57 1 .58 1 .60 .58 .84 Net realized and unrealized gain (loss) (.37) .15 1.09 (.76) (.62) --------------------------------------------------------------------- Total from investment operations .20 .73 1.69 (.18) .22 ------------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.56) (.54) (.59) (.85) (.95) ------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 8.44 $ 8.80 $ 8.61 $ 7.51 $ 8.54 ===================================================================== ------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN, AT NET ASSET VALUE 2 2.31% 8.97% 23.96% (2.40)% 1.97% ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA ------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $ 384,726 $ 479,405 $ 480,112 $ 345,670 $ 344,788 ------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $ 444,477 $ 460,877 $ 396,858 $ 335,894 $ 347,723 ------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: 3 Net investment income 6.79% 6.91% 8.31% 8.29% 9.94% Total expenses 0.75% 4 0.75% 4 0.76% 4 0.77% 4 0.79% 4 ------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 64% 51% 48% 75% 46%
1. Per share amounts calculated based on the average shares outstanding during the period. 2. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 23 | OPPENHEIMER HIGH INCOME FUND/VA FINANCIAL HIGHLIGHTS Continued --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 1 ------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 8.76 $ 8.58 $ 7.49 $ 8.54 $ 8.40 ------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income .55 2 .56 2 .61 .88 .20 Net realized and unrealized gain (loss) (.38) .15 1.06 (1.08) (.06) --------------------------------------------------------------------- Total from investment operations .17 .71 1.67 (.20) .14 ------------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.54) (.53) (.58) (.85) -- ------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 8.39 $ 8.76 $ 8.58 $ 7.49 $ 8.54 ===================================================================== ------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN, AT NET ASSET VALUE 3 2.01% 8.73% 23.79% (2.67)% 1.67% ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA ------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $ 155,617 $ 134,013 $ 76,354 $ 17,705 $ 3 ------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $ 141,287 $ 101,464 $ 41,246 $ 5,602 $ 2 ------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: 4 Net investment income 6.54% 6.63% 7.84% 8.91% 12.51% Total expenses 1.00% 5 1.01% 5 1.04% 5 1.02% 5,6 0.96% 5 ------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 64% 51% 48% 75% 46%
1. For the period from September 18, 2001 (inception of offering) to December 31, 2001. 2. Per share amounts calculated based on the average shares outstanding during the period. 3. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year. 5. Reduction to custodian expenses less than 0.01%. 6. Voluntary waiver of transfer agent fees less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 24 | OPPENHEIMER HIGH INCOME FUND/VA NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Oppenheimer High Income Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds, an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek a high level of current income from investments in high-yield fixed-income securities. The Fund'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. Both classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. The following is a summary of significant accounting policies consistently followed by the Fund. -------------------------------------------------------------------------------- SECURITIES VALUATION. The Fund calculates the net asset value of its shares as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Securities may be valued primarily using dealer-supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Securities listed or traded on National Stock Exchanges or other domestic 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. Securities traded on NASDAQ are valued based on the closing price provided by NASDAQ 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 traded on foreign exchanges are valued based on the last sale price on the principal exchange on which the security is traded, in the country that is identified by the portfolio pricing service, prior to the time when the Fund's assets are valued. In the absence of a sale, the security is valued at the official closing price on the principal exchange. Corporate, government and municipal debt instruments having a remaining maturity in excess of sixty days and all mortgage-backed securities will be valued at the mean between the "bid" and "asked" prices. Futures contracts traded on a commodities or futures exchange will be valued at the final settlement price or official closing price on the principal exchange as reported by such principal exchange at its trading session ending at, or most recently prior to, the time when the Fund's assets are valued. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value. Foreign and domestic securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund's assets are valued but after the close of their respective exchanges will be fair valued. Fair value is determined in good faith using 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 structured notes whose market values, interest rates and/or redemption prices are linked to the performance of underlying foreign currencies, interest rate spreads, stock market indices, prices of individual securities, commodities or other financial instruments or the occurrence of other specific events. The structured notes are often leveraged, increasing the volatility of each note's market value relative to the change in the underlying linked financial element or event. Fluctuations in value of these securities are recorded as unrealized gains and losses in the accompanying Statement of Operations. The Fund records a realized gain or loss when a structured note is sold or matures. As of December 31, 2005, the market value of these securities comprised 3.4% of the Fund's net assets and resulted in unrealized cumulative gains of $49,731. 25 | OPPENHEIMER HIGH INCOME FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be subject to a greater degree of credit risk, market fluctuations and 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, 2005, securities with an aggregate market value of $7,987,591, representing 1.48% of the Fund's net assets, were in default. -------------------------------------------------------------------------------- FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in U.S. dollars. The values of securities denominated in foreign currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Foreign exchange rates may be valued primarily using dealer supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in exchange rates. 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. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. 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. 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 on a daily basis 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 comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. The tax components of capital shown in the following table represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes. 26 | OPPENHEIMER HIGH INCOME FUND/VA NET UNREALIZED DEPRECIATION BASED ON COST OF SECURITIES UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED AND OTHER INVESTMENTS NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME INCOME GAIN CARRYFORWARD 1,2,3,4 TAX PURPOSES ------------------------------------------------------------------------------- $39,644,253 $ -- $104,343,697 $2,952,821 1. As of December 31, 2005, the Fund had $104,165,081 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. As of December 31, 2005, details of the capital loss carryforwards were as follows: EXPIRING ------------------------- 2006 $ 243,089 2007 4,933,260 2008 11,572,833 2009 22,696,701 2010 56,061,391 2011 8,529,303 2012 128,504 ------------- Total $ 104,165,081 ============= 2. As of December 31, 2005, the Fund had $178,616 of post-October losses available to offset future realized capital gains, if any. Such losses, if unutilized, will expire in 2014. 3. During the fiscal year ended December 31, 2005, the Fund utilized $3,158,488 of capital loss carryforward to offset capital gains realized in that fiscal year. 4. During the fiscal year ended December 31, 2004, the Fund did not utilize any capital loss carryforward. Net investment income (loss) and net realized gain (loss) may differ for financial statement and 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. Accordingly, the following amounts have been reclassified for December 31, 2005. Net assets of the Fund were unaffected by the reclassifications. REDUCTION TO REDUCTION TO ACCUMULATED NET ACCUMULATED NET REALIZED LOSS ON INVESTMENT INCOME INVESTMENTS ----------------------------------------------- $44,725 $44,725 The tax character of distributions paid during the years ended December 31, 2005 and December 31, 2004 was as follows: YEAR ENDED YEAR ENDED DECEMBER 31, 2005 DECEMBER 31, 2004 ------------------------------------------------------------------------ Distributions paid from: Ordinary income $37,933,592 $34,886,078 The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 31, 2005 are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss. Federal tax cost of securities $ 529,534,792 Federal tax cost of other investments (223,325) --------------- Total federal tax cost $ 529,311,467 =============== Gross unrealized appreciation $ 19,107,542 Gross unrealized depreciation (22,060,363) --------------- Net unrealized depreciation $ (2,952,821) =============== 27 | OPPENHEIMER HIGH INCOME FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of "Other" within the asset section of the Statement of Assets and Liabilities. Deferral of trustees' fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund's assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the Plan. -------------------------------------------------------------------------------- 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. Income and capital gain distributions, if any, are declared and paid annually. -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts to the extent they are not offset by positive cash balances maintained by the Fund. The Reduction to Custodian Expenses line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings. At December 31, 2005, the Fund had $13,062 of such earnings on cash balances available to offset future custodian fees or interest expenses incurred during the next fiscal year. -------------------------------------------------------------------------------- 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 U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 28 | OPPENHEIMER HIGH INCOME 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, 2005 YEAR ENDED DECEMBER 31, 2004 SHARES AMOUNT SHARES AMOUNT --------------------------------------------------------------------------------------------------------------------- NON-SERVICE SHARES Sold 10,721,772 $ 89,596,389 23,243,919 $ 196,620,675 Dividends and/or distributions reinvested 3,524,264 29,392,362 3,591,722 29,416,204 Redeemed (23,117,209) (193,771,987) (28,128,136) (236,584,239) ------------------------------------------------------------------ Net decrease (8,871,173) $ (74,783,236) (1,292,495) $ (10,547,360) ================================================================== --------------------------------------------------------------------------------------------------------------------- SERVICE SHARES Sold 9,211,332 $ 76,634,515 12,247,468 $ 103,415,502 Dividends and/or distributions reinvested 1,027,826 8,541,230 669,507 5,469,874 Redeemed (6,989,741) (58,014,508) (6,517,361) (54,767,393) ------------------------------------------------------------------ Net increase 3,249,417 $ 27,161,237 6,399,614 $ 54,117,983 ==================================================================
-------------------------------------------------------------------------------- 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, 2005, were as follows: PURCHASES SALES --------------------------------------------------------------------- Investment securities $ 324,215,324 $ 332,390,593 -------------------------------------------------------------------------------- 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 Fund which provides for a fee at an annual rate of 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200 million and 0.50% of average annual net assets over $1 billion. -------------------------------------------------------------------------------- ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund's tax returns. -------------------------------------------------------------------------------- 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 per account fee. For the year ended December 31, 2005, the Fund paid $20,741 to OFS for services to the Fund. Additionally, funds offered in variable annuity separate accounts are subject to minimum fees of $10,000 per class, for class level assets of $10 million or more. Each class is subject to the minimum fee in the event that the per account fee does not equal or exceed the applicable minimum fee. -------------------------------------------------------------------------------- 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, personal service and account maintenance for the Fund's Service shares. Under the plan, payments are made periodically at an annual rate of up to 0.25% of the average annual net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsor(s) of the insurance product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service shares. The impact of the service plan is to increase operating expenses of the Service shares, which results in lower performance compared to the Fund's shares that are not subject to a service fee. Fees incurred by the Fund under the plan are detailed in the Statement of Operations. 29 | OPPENHEIMER HIGH INCOME FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes to 0.35% of average annual net assets per class. This undertaking may be amended or withdrawn at any time. -------------------------------------------------------------------------------- 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 to settle specific purchases or sales of securities denominated in a foreign currency and for protection from adverse exchange rate fluctuation. 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 prevailing foreign currency exchange rates. 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 transaction. Contracts closed or settled with the same broker are recorded as net realized gains or losses. Such realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. As of December 31, 2005, the Fund had no outstanding foreign currency contracts. -------------------------------------------------------------------------------- 6. FUTURES CONTRACTS A futures contract is a commitment to buy or sell a specific amount of a commodity or financial instrument at a negotiated price on a stipulated future date. 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 protection from changes in market value of stocks 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 as a 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 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 has expired. Cash held by the broker to cover initial margin requirements on open futures contracts is noted in the Statement of Assets and Liabilities. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable and/or payable for the daily mark to market for variation margin. Realized gains and losses are reported in the Statement of Operations as the closing and expiration of futures contracts. The net change in unrealized appreciation and depreciation is reported in the Statement of Operations. 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. 30 | OPPENHEIMER HIGH INCOME FUND/VA As of December 31, 2005, the Fund had outstanding futures contracts as follows:
UNREALIZED EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION CONTRACT DESCRIPTION DATES CONTRACTS DECEMBER 31, 2005 (DEPRECIATION) -------------------------------------------------------------------------------------------------- CONTRACTS TO PURCHASE NASDAQ 100 Index 3/16/06 100 $ 1,659,000 $ (58,300) Standard & Poor's E-Mini 3/17/06 50 3,136,875 (36,125) --------------- (94,425) --------------- CONTRACTS TO SELL Standard & Poor's 500 Index 3/16/06 250 (5,019,200) 44,740 --------------- $ (49,685) ===============
-------------------------------------------------------------------------------- 7. ILLIQUID OR RESTRICTED SECURITIES As of December 31, 2005, investments in securities included issues that are illiquid or restricted. Restricted securities are 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 will not invest 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. Securities that are illiquid or restricted are marked with the applicable footnote on the Statement of Investments. Information concerning restricted securities is as follows:
UNREALIZED ACQUISITION VALUATION AS OF APPRECIATION SECURITY DATES COST DECEMBER 31, 2005 (DEPRECIATION) -------------------------------------------------------------------------------------------------- Huntsman Corp. 7/15/05 $ 132,250 $ 320,146 $ 187,896 Prandium, Inc. 3/19/99-7/19/02 738,000 628 (737,372) -------------------------------------------------- $ 870,250 $ 320,774 $ (549,476) ==================================================
-------------------------------------------------------------------------------- 8. SECURITIES LENDING The Fund lends portfolio securities from time to time in order to earn additional income. In return, the Fund receives collateral in the form of U.S. Treasury obligations or cash, against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the funds and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Fund could experience delays and cost in recovering the securities loaned or in gaining access to the collateral. Cash collateral is invested in cash equivalents. The Fund retains a portion of the interest earned from the collateral. The Fund continues to receive the economic benefit of interest or dividends paid on the securities loaned in the form of a substitute payment received from the borrower. As of December 31, 2005, the Fund had no securities on loan. 31 | OPPENHEIMER HIGH INCOME FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 9. LITIGATION A consolidated amended complaint has been filed as putative derivative and class actions against the Manager, OFS and the Distributor, as well as 51 of the Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and former Directors or Trustees and 8 present and former officers of the funds. This complaint, initially filed in the U.S. District Court for the Southern District of New York on January 10, 2005 and amended on March 4, 2005, consolidates into a single action and amends six individual previously-filed putative derivative and class action complaints. Like those prior complaints, the complaint alleges that the Manager charged excessive fees for distribution and other costs, improperly used assets of the funds in the form of directed brokerage commissions and 12b-1 fees to pay brokers to promote sales of the funds, and failed to properly disclose the use of assets of the funds to make those payments in violation of the Investment Company Act of 1940 and the Investment Advisers Act of 1940. Also, like those prior complaints, the complaint further alleges that by permitting and/or participating in those actions, the Directors/Trustees and the Officers breached their fiduciary duties to shareholders of the funds under the Investment Company Act of 1940 and at common law. The complaint seeks unspecified compensatory and punitive damages, rescission of the funds' investment advisory agreements, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. The defendants believe that the allegations contained in the Complaints are without merit and that they have meritorious defenses against the claims asserted. The defendants intend to defend these lawsuits vigorously and to contest any claimed liability. The defendants believe that it is premature to render any opinion as to the likelihood of an outcome unfavorable to them and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. 32 | OPPENHEIMER HIGH INCOME FUND/VA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER HIGH INCOME FUND/VA: We have audited the accompanying statement of assets and liabilities of Oppenheimer High Income Fund/VA, a series of Oppenheimer Variable Account Funds, including the statement of investments, as of December 31, 2005, 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 each of the five years in the periods presented. 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 the standards of the Public Company Accounting Oversight Board (United States). 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. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer High Income Fund/VA as of December 31, 2005, 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 each of the five years in the periods presented, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Denver, Colorado February 13, 2006 33 | OPPENHEIMER HIGH INCOME FUND/VA FEDERAL INCOME TAX INFORMATION Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- In early 2006, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2005. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. Dividends, if any, paid by the Fund during the fiscal year ended December 31, 2005 which are not designated as capital gain distributions should be multiplied by 0.35% 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. 34 | OPPENHEIMER HIGH INCOME FUND/VA PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities ("portfolio proxies") held by the Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund's voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at www.sec.gov. The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund's Form N-Q filings are available on the SEC's website at http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 35 | OPPENHEIMER HIGH INCOME FUND/VA BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Each year, the Board of Trustees (the "Board"), including a majority of the independent Trustees, is required to determine whether to renew the Fund's investment advisory agreement (the "Agreement"). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information, that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance. The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager's services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. Outlined below is a summary of the principal information considered by the Board as well as the Board's conclusions. NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information on the nature and extent of the services provided to the Fund and information regarding the Manager's key personnel that provide such services. The Manager's duties include providing the Fund with the services of the portfolio manager and the Manager's investment team, who provide research, analysis and other advisory services in regard to the Fund's investments; securities trading services; oversight of third party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund's investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel that are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund's operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund's shares. The Manager also provides the Fund with office space, facilities and equipment. The Board also considered the quality of the services provided and the quality of the Manager's resources that are available to the Fund. The Board took account of the fact that the Manager has had over forty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager's administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager's key personnel and the size and functions of its staff providing investment management services to the Fund. The Board also considered compliance reports from the Fund's Chief Compliance Officer. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Dimitrios Kourkoulakos and the Manager's high yield investment team and analysts. Mr. Kourkoulakos has had over 11 years of experience managing fixed income investments. The Board members also considered the totality of their experiences with the Manager, as directors or trustees of the Fund and other funds advised by the Manager. In light of the foregoing, the Board concluded that the Fund benefits from the services provided under the Agreement as a result of the Manager's experience, reputation, personnel, operations, and resources. INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the Manager provided information on the performance of the Fund and the Manager at each Board meeting, including comparative performance information. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund's historical performance to relevant market indices and to the performance of other high current yield funds (including both funds advised by the Manager and funds advised by other investment advisers). The Board noted that the Fund's ten-year performance was better than its peer group median. However its one-year, three-year, and five-year performance were below its peer group median. 36 | OPPENHEIMER HIGH INCOME FUND/VA COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board considered information regarding the Manager's costs in serving as the Fund's investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager's profitability from its relationship with the Fund. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also evaluated the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund, other high current yield funds and other funds with comparable asset levels and distribution features. The Board noted that the Fund's contractual management fees are higher than its peer group median and average and its actual management fees are equal to its peer group median but higher than its peer group average, however, its total expenses are lower than both its peer group median and average. In light of this, the Board concluded that the management fee was reasonable. ECONOMIES OF SCALE. The Board considered whether the Manager may realize economies of scale in managing and supporting the Fund, whether those economies of scale benefit the Fund's shareholders and the current level of Fund assets in relation to the Fund's management fee breakpoints, which are intended to share with shareholders economies of scale that may exist as the Fund grows. OTHER BENEFITS TO THE MANAGER. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager's affiliates. The Board also considered the nature and quality of services provided by affiliates of the Manager, which it reviews at other times during the year in connection with the renewal of the Fund's service agreements. The Board considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide services to the Fund and that maintaining the financial viability of the Manager is important in order for the Manager to continue to provide significant services to the Fund and its shareholders. CONCLUSIONS. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees' counsel are both independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules. Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the advisory agreement for another year. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the factors together. The Board judged the terms and conditions of the advisory agreement, including the management fee, in light of all of the surrounding circumstances. 37 | OPPENHEIMER HIGH INCOME FUND/VA TRUSTEES AND OFFICERS Unaudited --------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------- NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD BY THE FUNDS, LENGTH OF SERVICE, TRUSTEE; NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN BY TRUSTEE AGE INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, CO TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL. WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Mortgage Company Chairman of the Board of (since 1991), Centennial State Mortgage Company (since 1994), and The El Paso Mortgage Trustees (since 2003), Company (since 1993); Chairman of the following private companies: Ambassador Media Trustee (since 1999) Corporation (since 1984) and Broadway Ventures (since 1984); Director of the following: Age: 68 Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), Campus Crusade for Christ (since 1991) and The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (since 2002); former Chairman of the following: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (insurance agency) (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private equity Trustee (since 1993) funds) (until February 2001); Chairman, President and Chief Executive Officer of A.G. Age: 74 Edwards Capital, Inc. (until March 2000); Director of A.G. Edwards & Sons, Inc. (brokerage company) (until 2000) and A.G. Edwards Trust Company (investment adviser) (until 2000); Vice Chairman and Director of A.G. Edwards, Inc. (until March 1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March 1999); Chairman of A.G. Edwards Trust Company (until March 1999) and A.G.E. Asset Management (investment adviser) (until March 1999). Oversees 38 portfolios in the OppenheimerFunds complex. GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation (December Trustee (since 1999) 1991-April 1999); President, Treasurer and Director of Centennial Capital Corporation (June Age: 69 1989-April 1999); Chief Executive Officer and Director of MultiSource Services, Inc. (March 1996-April 1999); Mr. Bowen held several positions with the Manager and with subsidiary or affiliated companies of the Manager (September 1987-April 1999). Oversees 38 portfolios in the OppenheimerFunds complex. EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since June Trustee (since 1999) 2000); Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002); Partner at Age: 67 PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (July 1994-June 1998). Oversees 38 portfolios in the OppenheimerFunds complex. JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Northwestern Trustee (since 1990) Energy Corp. (public utility corporation) (since November 2004); Director of P.R. Age: 64 Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. ("OAC") (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 38 portfolios in the OppenheimerFunds complex. SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September 1984). Mr. Freedman Trustee (since 1996) held several positions with the Manager and with subsidiary or affiliated companies of the Age: 65 Manager (until October 1994). Oversees 38 portfolios in the OppenheimerFunds complex.
38 | OPPENHEIMER HIGH INCOME FUND/VA BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) (since Trustee (since 2002) February 2000); Director of The California Endowment (philanthropic organization) (since Age: 59 April 2002); Director of Community Hospital of Monterey Peninsula (since February 2002); Vice Chair of American Funds' Emerging Markets Growth Fund, Inc. (mutual fund) (since October 1991); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation and The University of Michigan; Advisor at Credit Suisse First Boston's Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member of the investment committee of Hartford Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT J. MALONE, Director of Jones International University (educational organization) (since August 2005); Trustee (since 2002) Chairman, Chief Executive Officer and Director of Steele Street State Bank (commercial Age: 61 banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non- profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 38 portfolios in the OppenheimerFunds complex. F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment Trustee (since 2000) company) (since 1996) and MML Series Investment Fund (investment company) (since 1996), Age: 63 Trustee and Chairman of the Investment Committee (since 1994) of the Worcester Polytech Institute (private university); President and Treasurer of the SIS Funds (private charitable fund) (since January 1999); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Member of the Investment Committee of the Community Foundation of Western Massachusetts (1998-2003); and Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999). Oversees 40 portfolios in the OppenheimerFunds complex. --------------------------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, AND OFFICER NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES. JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President (since President and Trustee September 2000) of the Manager; President and Director or Trustee of other Oppenheimer (since 2001) funds; President and Director of OAC and of Oppenheimer Partnership Holdings, Inc. (holding Age: 56 company subsidiary of the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since November 2001); Chairman and Director of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since July 2001); President and Director of OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since July 2001); Director of the following investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 2001) and Director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director of DLB Acquisition Corporation (holding company parent of Babson Capital Management LLC) (since June 1995); Member of the Investment Company Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of the Manager (September 2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual Select Funds (open-end investment companies) (November 1999-November 2001); Director of C.M. Life Insurance Company (September 1999-August 2000); President, Chief Executive Officer and Director of MML Bay State Life Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 87 portfolios in the OppenheimerFunds complex.
39 | OPPENHEIMER HIGH INCOME FUND/VA TRUSTEES AND OFFICERS Unaudited/Continued -------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. KOURKOULAKOS THE FUND AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT DEATH OR REMOVAL. DIMITRIOS KOURKOULAKOS, Vice President of the Manager since December 2001; High Yield Analyst (1998-2001) and a Vice President and Securities Analyst (1995-1998) of the Manager. An officer of 3 portfolios in the Portfolio Manager OppenheimerFunds complex. (since 2002) Age: 39 MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Vice President and Chief Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Compliance Officer Corporation and Shareholder Services, Inc. (since June 1983); Vice President and Director (since 2004) of Internal Audit of the Manager (1997-February 2004). An officer of 87 portfolios in the Age: 55 OppenheimerFunds complex. BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the Treasurer and Principal following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Financial and Accounting Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer Officer (since 1999) Partnership Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March Age: 46 2000), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex. ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the Vice President and Manager; General Counsel and Director of the Distributor (since December 2001); General Secretary (since 2001) Counsel of Centennial Asset Management Corporation (since December 2001); Senior Vice Age: 57 President and General Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General Counsel and Director of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON REQUEST, BY CALLING 1.800.981.2871. 40 | OPPENHEIMER HIGH INCOME FUND/VA OPPENHEIMER MAIN STREET FUND/ VA FUND PERFORMANCE DISCUSSION -------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. We are pleased with the Fund's performance during 2005, particularly because our security selection models helped the Fund identify many of the better-performing stocks within each of the S&P 500 Index's industry groups. The Fund's overweighted position and security selection strategy in the energy sector proved to be particularly rewarding. In addition to identifying winners among U.S.-based energy companies, the Fund received strong contributions from several Canadian energy firms. The Fund's relative performance also benefited from its relatively light exposure to consumer discretionary companies, which provided relatively disappointing results. On the other hand, the Fund's slightly overweighted exposure to information technology stocks detracted modestly from performance, due primarily to poor returns from some of the sector's larger companies. The Fund's holdings of very large telecommunications companies also held back returns. Finally, the Fund benefited during 2005 from our efforts to achieve a better balance across capitalization ranges. Early in the year, we reduced the Fund's emphasis on mega-cap stocks in favor of large-cap stocks, which helped it avoid the full brunt of relative weakness among the market's largest companies. During the second half of 2005 we began to see some significant changes in the ratings assigned by our statistical models to individual stocks. We attribute the shifts to seasonal factors, in which more growth-oriented, economically sensitive stocks historically have tended to fare better than value-oriented shares during the fourth and first quarters of the year. As a result, information technology companies replaced financial and energy stocks as the Fund's most overweighted market sector. Nonetheless, the Fund is still overweighted in energy and it is now overweighted in healthcare. All other sectors are underweighted relative to its benchmark, the S&P 500 Index, including the financial sector, which was the most overweighted sector in mid-2005. Although we do not make investment decisions based on a macroeconomic outlook, we are encouraged by signs that larger-cap stocks may finally be returning to favor. Regardless of the market's direction in 2006, however, we intend to continue to employ our quantitative models when constructing a broadly diversified, fully invested stock portfolio. Indeed, we believe that the consistency of our disciplined approach is central to what makes Oppenheimer Main Street Fund/VA part of THE RIGHT WAY TO INVEST. 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, 2005. In the case of non-service shares, performance is measured over a ten-year period. In the case of service shares, performance is measured from inception of the class on July 13, 2000. 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 S&P 500 Index, a broad-based index of equity securities widely regarded as a general measurement of the performance of the U.S. equity securities market. Index performance reflects the reinvestment of income but does not consider the effect of transaction costs, and none of the data in the graphs shows the effect of taxes. 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 MAIN STREET FUND/VA NON-SERVICE SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Main Street Fund(R)/VA (Non-Service) S&P 500 Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Main Street Fund(R)/VA Date (Service) S&P 500 Index 12/31/1995 10,000 10,000 03/31/1996 10,685 10,537 06/30/1996 11,881 11,009 09/30/1996 12,380 11,349 12/31/1996 13,251 12,295 03/31/1997 13,378 12,625 06/30/1997 15,089 14,827 09/30/1997 17,093 15,937 12/31/1997 17,555 16,395 03/31/1998 19,753 18,680 06/30/1998 19,852 19,300 09/30/1998 15,410 17,385 12/31/1998 18,380 21,084 03/31/1999 19,091 22,134 06/30/1999 21,071 23,691 09/30/1999 20,018 22,215 12/31/1999 22,370 25,518 03/31/2000 23,056 26,103 06/30/2000 22,413 25,409 09/30/2000 22,644 25,163 12/31/2000 20,407 23,196 03/31/2001 18,372 20,447 06/30/2001 19,193 21,643 09/30/2001 17,002 18,468 12/31/2001 18,334 20,441 03/31/2002 18,678 20,497 06/30/2002 17,045 17,753 09/30/2002 14,256 14,687 12/31/2002 14,888 15,925 03/31/2003 14,395 15,423 06/30/2003 16,429 17,796 09/30/2003 16,900 18,267 12/31/2003 18,865 20,490 03/31/2004 19,243 20,837 06/30/2004 19,352 21,195 09/30/2004 18,975 20,799 12/31/2004 20,650 22,718 03/31/2005 20,257 22,230 06/30/2005 20,548 22,535 09/30/2005 21,402 23,347 12/31/2005 21,884 23,833 AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/05 1-Year 5.98% 5-Year 1.41% 10-Year 8.15% SERVICE SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Main Street Fund(R)/VA (Service) S&P 500 Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Main Street Fund(R)/VA Date (Service) S&P 500 Index 07/13/2000 10,000 10,000 09/30/2000 9,813 9,903 12/31/2000 8,839 9,129 03/31/2001 7,952 8,047 06/30/2001 8,308 8,518 09/30/2001 7,353 7,268 12/31/2001 7,931 8,045 03/31/2002 8,075 8,067 06/30/2002 7,364 6,987 09/30/2002 6,151 5,780 12/31/2002 6,425 6,267 03/31/2003 6,197 6,070 06/30/2003 7,077 7,004 09/30/2003 7,277 7,189 12/31/2003 8,123 8,064 03/31/2004 8,280 8,201 06/30/2004 8,322 8,342 09/30/2004 8,155 8,186 12/31/2004 8,866 8,941 03/31/2005 8,695 8,749 06/30/2005 8,816 8,869 09/30/2005 9,176 9,188 12/31/2005 9,375 9,380 AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/05 1-Year 5.74% 5-Year 1.19% Since Inception (7/13/00) -1.17% THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT. 5 | OPPENHEIMER MAIN STREET FUND/VA FUND EXPENSES -------------------------------------------------------------------------------- FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include redemption fees, if any; and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 31, 2005. ACTUAL EXPENSES. The "actual" lines of the table provide information about actual account values and actual expenses. You may use the information on this line for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the "actual" line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio for each class of shares, and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the "hypothetical" lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included, your costs would have been higher. -------------------------------------------------------------------------------- BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE 6 MONTHS ENDED (7/1/05) (12/31/05) DECEMBER 31, 2005 -------------------------------------------------------------------------------- Non-Service shares Actual $1,000.00 $1,065.00 $3.49 -------------------------------------------------------------------------------- Non-Service shares Hypothetical 1,000.00 1,021.83 3.42 -------------------------------------------------------------------------------- Service shares Actual 1,000.00 1,063.40 4.80 -------------------------------------------------------------------------------- Service shares Hypothetical 1,000.00 1,020.57 4.70 Hypothetical assumes 5% annual return before expenses. Expenses are equal to the Fund's annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Those annualized expense ratios based on the 6-month period ended December 31, 2005 are as follows: CLASS EXPENSE RATIOS ---------------------------------- Non-Service shares 0.67% ---------------------------------- Service shares 0.92 -------------------------------------------------------------------------------- 6 |OPPENHEIMER MAIN STREET FUND/VA STATEMENT OF INVESTMENTS December 31, 2004 -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- COMMON STOCKS--99.5% -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY--10.4% -------------------------------------------------------------------------------- AUTO COMPONENTS--0.3% Dana Corp. 34,800 $ 249,864 -------------------------------------------------------------------------------- Goodyear Tire & Rubber Co. (The) 1,2 46,000 799,480 -------------------------------------------------------------------------------- Johnson Controls, Inc. 41,700 3,040,347 -------------------------------------------------------------------------------- Lear Corp. 2 2,300 65,458 -------------------------------------------------------------------------------- TRW Automotive Holdings Corp. 1,2 8,900 234,515 -------------------------------------------------------------------------------- Visteon Corp. 1,2 30,800 192,808 ----------- 4,582,472 -------------------------------------------------------------------------------- AUTOMOBILES--0.5% Ford Motor Co. 2 650,315 5,020,432 -------------------------------------------------------------------------------- Harley-Davidson, Inc. 2 77,600 3,995,624 ----------- 9,016,056 -------------------------------------------------------------------------------- DISTRIBUTORS--0.0% Genuine Parts Co. 4,700 206,424 -------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES--0.1% Career Education Corp. 1 19,100 644,052 -------------------------------------------------------------------------------- Weight Watchers International, Inc. 1,2 9,000 444,870 ----------- 1,088,922 -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE--0.6% Choice Hotels International, Inc. 2 5,800 242,208 -------------------------------------------------------------------------------- CKE Restaurants, Inc. 2 1,600 21,616 -------------------------------------------------------------------------------- International Game Technology 21,700 667,926 -------------------------------------------------------------------------------- McDonald's Corp. 157,250 5,302,470 -------------------------------------------------------------------------------- Six Flags, Inc. 1,2 7,300 56,283 -------------------------------------------------------------------------------- Yum! Brands, Inc. 73,300 3,436,304 ----------- 9,726,807 -------------------------------------------------------------------------------- HOUSEHOLD DURABLES--0.2% American Greetings Corp., Cl. A 2 11,700 257,049 -------------------------------------------------------------------------------- Beazer Homes USA, Inc. 2 11,800 859,512 -------------------------------------------------------------------------------- D.R. Horton, Inc. 44,000 1,572,120 -------------------------------------------------------------------------------- Lennar Corp., Cl. A 9,600 585,792 -------------------------------------------------------------------------------- MDC Holdings, Inc. 2 4,200 260,316 -------------------------------------------------------------------------------- Whirlpool Corp. 900 75,384 ----------- 3,610,173 -------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL--0.2% eBay, Inc. 1 95,700 4,139,025 -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS--0.0% Hasbro, Inc. 33,400 674,012 -------------------------------------------------------------------------------- MEDIA--3.7% Cablevision Systems Corp., New York Group, Cl. A 1 22,100 518,687 VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- MEDIA Continued -------------------------------------------------------------------------------- CCE Spinco, Inc. 1 16,937 $ 221,875 -------------------------------------------------------------------------------- Clear Channel Communications, Inc. 135,500 4,261,475 -------------------------------------------------------------------------------- Comcast Corp., Cl. A 1 249,315 6,472,217 -------------------------------------------------------------------------------- Gannett Co., Inc. 88,000 5,330,160 -------------------------------------------------------------------------------- Liberty Media Corp., Cl. A 1 378,100 2,975,647 -------------------------------------------------------------------------------- McGraw-Hill Cos., Inc. (The) 56,800 2,932,584 -------------------------------------------------------------------------------- News Corp., Inc., Cl. A 369,300 5,742,615 -------------------------------------------------------------------------------- Omnicom Group, Inc. 49,400 4,205,422 -------------------------------------------------------------------------------- R.H. Donnelley Corp. 1,2 4,000 246,480 -------------------------------------------------------------------------------- Time Warner, Inc. 866,500 15,111,760 -------------------------------------------------------------------------------- Tribune Co. 2 18,300 553,758 -------------------------------------------------------------------------------- Viacom, Inc., Cl. B 283,946 9,256,640 -------------------------------------------------------------------------------- Walt Disney Co. (The) 209,700 5,026,509 ----------- 62,855,829 -------------------------------------------------------------------------------- MULTILINE RETAIL--1.6% Dollar General Corp. 24,400 465,308 -------------------------------------------------------------------------------- Dollar Tree Stores, Inc. 1,2 27,500 658,350 -------------------------------------------------------------------------------- Federated Department Stores, Inc. 94,900 6,294,717 -------------------------------------------------------------------------------- J.C. Penney Co., Inc. (Holding Co.) 98,300 5,465,480 -------------------------------------------------------------------------------- Kohl's Corp. 1 27,800 1,351,080 -------------------------------------------------------------------------------- Nordstrom, Inc. 121,600 4,547,840 -------------------------------------------------------------------------------- Saks, Inc. 1,2 33,100 558,066 -------------------------------------------------------------------------------- Sears Holdings Corp. 1,2 10,200 1,178,406 -------------------------------------------------------------------------------- Target Corp. 130,600 7,179,082 ----------- 27,698,329 -------------------------------------------------------------------------------- SPECIALTY RETAIL--2.9% American Eagle Outfitters, Inc. 2 31,100 714,678 -------------------------------------------------------------------------------- AnnTaylor Stores Corp. 1,2 8,800 303,776 -------------------------------------------------------------------------------- AutoNation, Inc. 1,2 39,700 862,681 -------------------------------------------------------------------------------- Barnes & Noble, Inc. 2 18,100 772,327 -------------------------------------------------------------------------------- Bed Bath & Beyond, Inc. 1 53,700 1,941,255 -------------------------------------------------------------------------------- Best Buy Co., Inc. 110,600 4,808,888 -------------------------------------------------------------------------------- Building Materials Holding Corp. 2 3,700 252,377 -------------------------------------------------------------------------------- Chico's FAS, Inc. 1,2 12,900 566,697 -------------------------------------------------------------------------------- Children's Place Retail Stores, Inc. 1 6,100 301,462 -------------------------------------------------------------------------------- Circuit City Stores, Inc./Circuit City Group 34,000 768,060 -------------------------------------------------------------------------------- Claire's Stores, Inc. 2 15,600 455,832 -------------------------------------------------------------------------------- GameStop Corp., Cl. A 1,2 4,727 150,413 -------------------------------------------------------------------------------- Gap, Inc. (The) 254,000 4,480,560 -------------------------------------------------------------------------------- Home Depot, Inc. 357,800 14,483,744 -------------------------------------------------------------------------------- Lowe's Cos., Inc. 112,400 7,492,584 -------------------------------------------------------------------------------- Men's Wearhouse, Inc. (The) 1,2 13,500 397,440 -------------------------------------------------------------------------------- Office Depot, Inc. 1 31,900 1,001,660 7 | OPPENHEIMER MAIN STREET FUND/VA STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- SPECIALTY RETAIL Continued OfficeMax, Inc. 2 21,300 $ 540,168 -------------------------------------------------------------------------------- Payless ShoeSource, Inc. 1,2 1,100 27,610 -------------------------------------------------------------------------------- Sports Authority, Inc. (The) 1,2 8,100 252,153 -------------------------------------------------------------------------------- Staples, Inc. 290,050 6,587,036 -------------------------------------------------------------------------------- Talbots, Inc. (The) 2 8,300 230,906 -------------------------------------------------------------------------------- Tiffany & Co. 2,800 107,212 -------------------------------------------------------------------------------- TJX Cos., Inc. (The) 87,300 2,027,979 -------------------------------------------------------------------------------- Too, Inc. 1,2 8,800 248,248 -------------------------------------------------------------------------------- Zale Corp. 1,2 5,400 135,810 ----------- 49,911,556 -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS--0.3% Coach, Inc. 1 127,800 4,260,852 -------------------------------------------------------------------------------- Jones Apparel Group, Inc. 11,600 356,352 -------------------------------------------------------------------------------- Liz Claiborne, Inc. 6,400 229,248 -------------------------------------------------------------------------------- Phillips/Van Heusen Corp. 2 4,400 142,560 -------------------------------------------------------------------------------- Timberland Co., Cl. A 1,2 21,900 712,845 -------------------------------------------------------------------------------- VF Corp. 1,300 71,942 ----------- 5,773,799 -------------------------------------------------------------------------------- CONSUMER STAPLES--7.3% -------------------------------------------------------------------------------- BEVERAGES--1.1% Brown-Forman Corp., Cl. B 200 13,864 -------------------------------------------------------------------------------- Coca-Cola Co. (The) 215,100 8,670,681 -------------------------------------------------------------------------------- Pepsi Bottling Group, Inc. (The) 39,700 1,135,817 -------------------------------------------------------------------------------- PepsiCo, Inc. 154,950 9,154,446 ----------- 18,974,808 -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING--1.9% Albertson's, Inc. 24,900 531,615 -------------------------------------------------------------------------------- Costco Wholesale Corp. 32,200 1,592,934 -------------------------------------------------------------------------------- Kroger Co. (The) 1 252,800 4,772,864 -------------------------------------------------------------------------------- Performance Food Group Co. 1,2 2,100 59,577 -------------------------------------------------------------------------------- Rite Aid Corp. 1,2 71,200 247,776 -------------------------------------------------------------------------------- Safeway, Inc. 237,100 5,609,786 -------------------------------------------------------------------------------- SUPERVALU, Inc. 2 21,100 685,328 -------------------------------------------------------------------------------- Sysco Corp. 34,000 1,055,700 -------------------------------------------------------------------------------- Wal-Mart Stores, Inc. 294,600 13,787,280 -------------------------------------------------------------------------------- Walgreen Co. 33,700 1,491,562 -------------------------------------------------------------------------------- Whole Foods Market, Inc. 36,900 2,855,691 ----------- 32,690,113 -------------------------------------------------------------------------------- FOOD PRODUCTS--0.8% -------------------------------------------------------------------------------- Archer-Daniels-Midland Co. 173,900 4,288,374 -------------------------------------------------------------------------------- Campbell Soup Co. 39,000 1,161,030 -------------------------------------------------------------------------------- Chiquita Brands International, Inc. 2 1,300 26,013 -------------------------------------------------------------------------------- Dean Foods Co. 1,2 16,100 606,326 VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- FOOD PRODUCTS Continued Del Monte Foods Co. 1 8,800 $ 91,784 -------------------------------------------------------------------------------- General Mills, Inc. 59,500 2,934,540 -------------------------------------------------------------------------------- Heinz (H.J.) Co. 25,100 846,372 -------------------------------------------------------------------------------- Pilgrim's Pride Corp., Cl. B 2 19,800 656,568 -------------------------------------------------------------------------------- Sara Lee Corp. 104,200 1,969,380 -------------------------------------------------------------------------------- Tyson Foods, Inc., Cl. A 2 22,400 383,040 ----------- 12,963,427 -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS--1.6% Energizer Holdings, Inc. 1,2 8,500 423,215 -------------------------------------------------------------------------------- Kimberly-Clark Corp. 15,700 936,505 -------------------------------------------------------------------------------- Procter & Gamble Co. (The) 460,815 26,671,972 ----------- 28,031,692 -------------------------------------------------------------------------------- PERSONAL PRODUCTS--0.2% Avon Products, Inc. 135,300 3,862,815 -------------------------------------------------------------------------------- Tobacco--1.7% Altria Group, Inc. 318,500 23,798,320 -------------------------------------------------------------------------------- Loews Corp./Carolina Group 8,100 356,319 -------------------------------------------------------------------------------- Reynolds American, Inc. 2 52,600 5,014,358 ----------- 29,168,997 -------------------------------------------------------------------------------- ENERGY--11.1% -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES--0.5% Grey Wolf, Inc. 1 39,400 304,562 -------------------------------------------------------------------------------- Halliburton Co. 32,900 2,038,484 -------------------------------------------------------------------------------- Helmerich & Payne, Inc. 2 3,800 235,258 -------------------------------------------------------------------------------- Lone Star Technologies, Inc. 1 6,000 309,960 -------------------------------------------------------------------------------- NS Group, Inc. 1,2 6,700 280,127 -------------------------------------------------------------------------------- Precision Drilling Trust 15,200 501,850 -------------------------------------------------------------------------------- Pride International, Inc. 1 13,200 405,900 -------------------------------------------------------------------------------- Transocean, Inc. 1 62,800 4,376,532 -------------------------------------------------------------------------------- Universal Compression Holdings, Inc. 1,2 6,400 263,168 -------------------------------------------------------------------------------- Veritas DGC, Inc. 1,2 8,300 294,567 ----------- 9,010,408 -------------------------------------------------------------------------------- OIL & GAS--10.6% Amerada Hess Corp. 2 24,000 3,043,680 -------------------------------------------------------------------------------- Anadarko Petroleum Corp. 65,900 6,244,025 -------------------------------------------------------------------------------- Apache Corp. 75,200 5,152,704 -------------------------------------------------------------------------------- Burlington Resources, Inc. 98,200 8,464,840 -------------------------------------------------------------------------------- Canadian Natural Resources Ltd. 54,800 2,716,783 -------------------------------------------------------------------------------- Chevron Corp. 433,526 24,611,271 -------------------------------------------------------------------------------- Comstock Resources, Inc. 1,2 9,000 274,590 -------------------------------------------------------------------------------- ConocoPhillips 311,542 18,125,514 -------------------------------------------------------------------------------- Devon Energy Corp. 91,100 5,697,394 8 | OPPENHEIMER MAIN STREET FUND/VA VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- OIL & GAS Continued EOG Resources, Inc. 32,500 $ 2,384,525 -------------------------------------------------------------------------------- Exxon Mobil Corp. 1,049,816 58,968,165 -------------------------------------------------------------------------------- General Maritime Corp. 2 4,700 174,088 -------------------------------------------------------------------------------- Giant Industries, Inc. 1,2 4,300 223,428 -------------------------------------------------------------------------------- KCS Energy, Inc. 1,2 11,300 273,686 -------------------------------------------------------------------------------- Kerr-McGee Corp. 38,223 3,472,942 -------------------------------------------------------------------------------- Marathon Oil Corp. 123,000 7,499,310 -------------------------------------------------------------------------------- Occidental Petroleum Corp. 94,600 7,556,648 -------------------------------------------------------------------------------- OMI Corp. 2 8,600 156,090 -------------------------------------------------------------------------------- Overseas Shipholding Group, Inc. 2 12,900 650,031 -------------------------------------------------------------------------------- Paramount Resources Ltd., Cl. A 1 149,900 3,984,610 -------------------------------------------------------------------------------- Remington Oil & Gas Corp. 1,2 7,200 262,800 -------------------------------------------------------------------------------- Sunoco, Inc. 70,300 5,510,114 -------------------------------------------------------------------------------- Swift Energy Co. 1,2 7,300 329,011 -------------------------------------------------------------------------------- Talisman Energy, Inc. 49,800 2,638,978 -------------------------------------------------------------------------------- Tesoro Corp. 2 14,400 886,320 -------------------------------------------------------------------------------- Trilogy Energy Trust 46,400 949,994 -------------------------------------------------------------------------------- Valero Energy Corp. 138,610 7,152,276 -------------------------------------------------------------------------------- Vintage Petroleum, Inc. 10,300 549,299 -------------------------------------------------------------------------------- Whiting Petroleum Corp. 1,2 7,100 284,000 -------------------------------------------------------------------------------- XTO Energy, Inc. 71,700 3,150,498 ------------ 181,387,614 -------------------------------------------------------------------------------- FINANCIALS--20.1% -------------------------------------------------------------------------------- CAPITAL MARKETS--0.4% Ameriprise Financial, Inc. 26,400 1,082,400 -------------------------------------------------------------------------------- Bank of New York Co., Inc. (The) 70,200 2,235,870 -------------------------------------------------------------------------------- Mellon Financial Corp. 51,700 1,770,725 -------------------------------------------------------------------------------- Northern Trust Corp. 24,200 1,254,044 ------------ 6,343,039 -------------------------------------------------------------------------------- COMMERCIAL BANKS--5.3% Astoria Financial Corp. 2 22,450 660,030 -------------------------------------------------------------------------------- Bank of America Corp. 633,102 29,217,657 -------------------------------------------------------------------------------- BB&T Corp. 2 34,700 1,454,277 -------------------------------------------------------------------------------- Comerica, Inc. 34,500 1,958,220 -------------------------------------------------------------------------------- Downey Financial Corp. 2 500 34,195 -------------------------------------------------------------------------------- Golden West Financial Corp. 31,600 2,085,600 -------------------------------------------------------------------------------- KeyCorp 83,900 2,762,827 -------------------------------------------------------------------------------- M&T Bank Corp. 2 18,100 1,973,805 -------------------------------------------------------------------------------- National City Corp. 57,700 1,936,989 -------------------------------------------------------------------------------- PNC Financial Services Group, Inc. 2 23,600 1,459,188 -------------------------------------------------------------------------------- Regions Financial Corp. 2 32,805 1,120,619 -------------------------------------------------------------------------------- SunTrust Banks, Inc. 18,300 1,331,508 -------------------------------------------------------------------------------- TCF Financial Corp. 2 400 10,856 -------------------------------------------------------------------------------- U.S. Bancorp 360,370 10,771,459 VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- COMMERCIAL BANKS Continued UnionBanCal Corp. 27,300 $ 1,876,056 -------------------------------------------------------------------------------- Wachovia Corp. 268,600 14,198,196 -------------------------------------------------------------------------------- Washington Mutual, Inc. 170,529 7,418,012 -------------------------------------------------------------------------------- Wells Fargo & Co. 184,000 11,560,720 ------------ 91,830,214 -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES--8.7% American Express Co. 121,200 6,236,952 -------------------------------------------------------------------------------- AmeriCredit Corp. 1,2 40,500 1,038,015 -------------------------------------------------------------------------------- Ameritrade Holding Corp. 27,800 667,200 -------------------------------------------------------------------------------- Capital One Financial Corp. 78,977 6,823,613 -------------------------------------------------------------------------------- Chicago Mercantile Exchange (The) 10,400 3,821,896 -------------------------------------------------------------------------------- CIT Group, Inc. 66,600 3,448,548 -------------------------------------------------------------------------------- Citigroup, Inc. 800,888 38,867,095 -------------------------------------------------------------------------------- Goldman Sachs Group, Inc. (The) 96,000 12,260,160 -------------------------------------------------------------------------------- Janus Capital Group, Inc. 2 20,500 381,915 -------------------------------------------------------------------------------- JPMorgan Chase & Co. 576,644 22,887,000 -------------------------------------------------------------------------------- Lehman Brothers Holdings, Inc. 75,000 9,612,750 -------------------------------------------------------------------------------- MBNA Corp. 175,300 4,759,395 -------------------------------------------------------------------------------- Merrill Lynch & Co., Inc. 186,800 12,651,964 -------------------------------------------------------------------------------- Moody's Corp. 51,400 3,156,988 -------------------------------------------------------------------------------- Morgan Stanley 263,300 14,939,642 -------------------------------------------------------------------------------- Schwab (Charles) Corp. 296,900 4,355,523 -------------------------------------------------------------------------------- State Street Corp. 55,600 3,082,464 ------------ 148,991,120 -------------------------------------------------------------------------------- INSURANCE--4.4% -------------------------------------------------------------------------------- AFLAC, Inc. 26,200 1,216,204 -------------------------------------------------------------------------------- Allstate Corp. 97,600 5,277,232 -------------------------------------------------------------------------------- American International Group, Inc. 328,340 22,402,638 -------------------------------------------------------------------------------- AmerUs Group Co. 2 12,100 685,707 -------------------------------------------------------------------------------- Aon Corp. 110,200 3,961,690 -------------------------------------------------------------------------------- Arch Capital Group Ltd. 1 2,100 114,975 -------------------------------------------------------------------------------- Chubb Corp. 38,600 3,769,290 -------------------------------------------------------------------------------- Everest Re Group Ltd. 3,300 331,155 -------------------------------------------------------------------------------- Fidelity National Financial, Inc. 23,159 852,020 -------------------------------------------------------------------------------- Fidelity National Title Group, Inc., Cl. A 2 5,190 126,377 -------------------------------------------------------------------------------- Hartford Financial Services Group, Inc. (The) 74,100 6,364,449 -------------------------------------------------------------------------------- Jefferson-Pilot Corp. 400 22,772 -------------------------------------------------------------------------------- LandAmerica Financial Group, Inc. 2 2,600 162,240 -------------------------------------------------------------------------------- Lincoln National Corp. 5,200 275,756 -------------------------------------------------------------------------------- Loews Corp. 21,400 2,029,790 -------------------------------------------------------------------------------- MBIA, Inc. 2 16,400 986,624 -------------------------------------------------------------------------------- MetLife, Inc. 130,000 6,370,000 -------------------------------------------------------------------------------- Principal Financial Group, Inc. (The) 123,500 5,857,605 9 | OPPENHEIMER MAIN STREET FUND/VA STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- INSURANCE Continued Progressive Corp. 17,200 $ 2,008,616 -------------------------------------------------------------------------------- Prudential Financial, Inc. 85,400 6,250,426 -------------------------------------------------------------------------------- Safeco Corp. 300 16,950 -------------------------------------------------------------------------------- St. Paul Travelers Cos., Inc. (The) 157,100 7,017,657 -------------------------------------------------------------------------------- StanCorp Financial Group, Inc. 2 9,800 489,510 ------------ 76,589,683 -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE--1.3% Accredited Home Lenders Holding Co. 1,2 6,400 317,312 -------------------------------------------------------------------------------- Countrywide Financial Corp. 140,498 4,803,627 -------------------------------------------------------------------------------- Fannie Mae 183,800 8,971,278 -------------------------------------------------------------------------------- Freddie Mac 79,800 5,214,930 -------------------------------------------------------------------------------- Fremont General Corp. 2 2,700 62,721 -------------------------------------------------------------------------------- MGIC Investment Corp. 2 13,700 901,734 -------------------------------------------------------------------------------- PMI Group, Inc. (The) 2 10,400 427,128 -------------------------------------------------------------------------------- Radian Group, Inc. 2 16,100 943,299 ------------ 21,642,029 -------------------------------------------------------------------------------- HEALTH CARE--14.4% -------------------------------------------------------------------------------- BIOTECHNOLOGY--2.3% Abgenix, Inc. 1,2 18,800 404,388 -------------------------------------------------------------------------------- Alkermes, Inc. 1,2 16,600 317,392 -------------------------------------------------------------------------------- Amgen, Inc. 1,2 219,800 17,333,428 -------------------------------------------------------------------------------- Applera Corp./Applied Biosystems Group 2 35,100 932,256 -------------------------------------------------------------------------------- Genentech, Inc. 1 37,300 3,450,250 -------------------------------------------------------------------------------- Genzyme Corp. (General Division) 1 9,100 644,098 -------------------------------------------------------------------------------- Gilead Sciences, Inc. 1 63,600 3,347,268 -------------------------------------------------------------------------------- Sepracor, Inc. 1,2 2,200 113,520 -------------------------------------------------------------------------------- Techne Corp. 1,2 6,300 353,745 -------------------------------------------------------------------------------- Wyeth 260,200 11,987,414 ------------ 38,883,759 -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES--1.2% Baxter International, Inc. 89,400 3,365,910 -------------------------------------------------------------------------------- Becton, Dickinson & Co. 63,100 3,791,048 -------------------------------------------------------------------------------- Boston Scientific Corp. 1 47,800 1,170,622 -------------------------------------------------------------------------------- Guidant Corp. 32,800 2,123,800 -------------------------------------------------------------------------------- Kinetic Concepts, Inc. 1 7,000 278,320 -------------------------------------------------------------------------------- Medtronic, Inc. 129,700 7,466,829 -------------------------------------------------------------------------------- Mentor Corp. 2 12,900 594,432 -------------------------------------------------------------------------------- Millipore Corp. 1,2 5,200 343,408 -------------------------------------------------------------------------------- PerkinElmer, Inc. 5,400 127,224 -------------------------------------------------------------------------------- Stryker Corp. 7,300 324,339 -------------------------------------------------------------------------------- Waters Corp. 1 10,000 378,000 -------------------------------------------------------------------------------- Zimmer Holdings, Inc. 1 2,000 134,880 ------------ 20,098,812 VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES--5.0% Aetna, Inc. 41,600 $ 3,923,296 -------------------------------------------------------------------------------- American Healthways, Inc. 1,2 6,300 285,075 -------------------------------------------------------------------------------- AmerisourceBergen Corp. 26,600 1,101,240 -------------------------------------------------------------------------------- Beverly Enterprises, Inc. 1,2 7,200 84,024 -------------------------------------------------------------------------------- Cardinal Health, Inc. 110,600 7,603,750 -------------------------------------------------------------------------------- Caremark Rx, Inc. 1 150,400 7,789,216 -------------------------------------------------------------------------------- CIGNA Corp. 55,700 6,221,690 -------------------------------------------------------------------------------- Coventry Health Care, Inc. 1 13,550 771,808 -------------------------------------------------------------------------------- Express Scripts, Inc. 1 52,800 4,424,640 -------------------------------------------------------------------------------- Genesis HealthCare Corp. 1,2 5,100 186,252 -------------------------------------------------------------------------------- HCA, Inc. 134,000 6,767,000 -------------------------------------------------------------------------------- Health Net, Inc. 1 15,800 814,490 -------------------------------------------------------------------------------- Humana, Inc. 1 24,900 1,352,817 -------------------------------------------------------------------------------- IMS Health, Inc. 5,100 127,092 -------------------------------------------------------------------------------- Manor Care, Inc. 2 8,300 330,091 -------------------------------------------------------------------------------- McKesson Corp. 127,400 6,572,566 -------------------------------------------------------------------------------- Medco Health Solutions, Inc. 1 121,181 6,761,900 -------------------------------------------------------------------------------- Pediatrix Medical Group, Inc. 1,2 7,300 646,561 -------------------------------------------------------------------------------- Quest Diagnostics, Inc. 69,900 3,598,452 -------------------------------------------------------------------------------- Schein (Henry), Inc. 1,2 15,300 667,692 -------------------------------------------------------------------------------- Sierra Health Services, Inc. 1,2 9,000 719,640 -------------------------------------------------------------------------------- UnitedHealth Group, Inc. 212,748 13,220,161 -------------------------------------------------------------------------------- WellCare Health Plans, Inc. 1,2 6,000 245,100 -------------------------------------------------------------------------------- WellPoint, Inc. 1 150,712 12,025,310 ------------ 86,239,863 -------------------------------------------------------------------------------- PHARMACEUTICALS--5.9% Abbott Laboratories 184,600 7,278,778 -------------------------------------------------------------------------------- Allergan, Inc. 2 36,500 3,940,540 -------------------------------------------------------------------------------- Alpharma, Inc., Cl. A 2 15,300 436,203 -------------------------------------------------------------------------------- Andrx Corp. 1,2 10,900 179,523 -------------------------------------------------------------------------------- Barr Pharmaceuticals, Inc. 1 19,900 1,239,571 -------------------------------------------------------------------------------- Bristol-Myers Squibb Co. 146,400 3,364,272 -------------------------------------------------------------------------------- Eli Lilly & Co. 81,600 4,617,744 -------------------------------------------------------------------------------- Endo Pharmaceuticals Holdings, Inc. 1,2 8,300 251,158 -------------------------------------------------------------------------------- Forest Laboratories, Inc. 1 110,000 4,474,800 -------------------------------------------------------------------------------- Johnson & Johnson 484,606 29,124,821 -------------------------------------------------------------------------------- King Pharmaceuticals, Inc. 1 51,500 87 1,380 -------------------------------------------------------------------------------- Kos Pharmaceuticals, Inc. 1,2 14,000 724,220 -------------------------------------------------------------------------------- Medicis Pharmaceutical Corp., Cl. A 2 3,000 96,150 -------------------------------------------------------------------------------- Merck & Co., Inc. 429,100 13,649,671 -------------------------------------------------------------------------------- Pfizer, Inc. 1,340,800 31,267,456 -------------------------------------------------------------------------------- Watson Pharmaceuticals, Inc. 1 21,100 685,961 ------------ 102,202,248 10 | OPPENHEIMER MAIN STREET FUND/VA VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- INDUSTRIALS--10.2% -------------------------------------------------------------------------------- AEROSPACE & DEFENSE--3.0% Alliant Techsystems, Inc. 1,2 8,600 $ 655,062 -------------------------------------------------------------------------------- BE Aerospace, Inc. 1,2 11,300 248,600 -------------------------------------------------------------------------------- Boeing Co. 142,500 10,009,200 -------------------------------------------------------------------------------- General Dynamics Corp. 41,900 4,778,695 -------------------------------------------------------------------------------- Honeywell International, Inc. 179,200 6,675,200 -------------------------------------------------------------------------------- Lockheed Martin Corp. 104,600 6,655,698 -------------------------------------------------------------------------------- Northrop Grumman Corp. 125,900 7,567,849 -------------------------------------------------------------------------------- Precision Castparts Corp. 2 24,300 1,258,983 -------------------------------------------------------------------------------- Raytheon Co. 176,400 7,082,460 -------------------------------------------------------------------------------- United Technologies Corp. 118,000 6,597,380 ------------ 51,529,127 -------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS--0.0% United Parcel Service, Inc., Cl. B 10,300 774,045 -------------------------------------------------------------------------------- AIRLINES--0.1% Alaska Air Group, Inc. 1,2 10,100 360,772 -------------------------------------------------------------------------------- AMR Corp. 1,2 43,600 969,228 -------------------------------------------------------------------------------- Continental Airlines, Inc., Cl. B 1,2 17,600 374,880 ------------ 1,704,880 -------------------------------------------------------------------------------- BUILDING PRODUCTS--0.3% American Standard Cos., Inc. 25,500 1,018,725 -------------------------------------------------------------------------------- Masco Corp. 109,000 3,290,710 -------------------------------------------------------------------------------- USG Corp. 1,2 14,600 949,000 ------------ 5,258,435 -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES--0.7% Administaff, Inc. 2 5,300 222,865 -------------------------------------------------------------------------------- Cendant Corp. 350,400 6,044,400 -------------------------------------------------------------------------------- Corporate Executive Board Co. 1,600 143,520 -------------------------------------------------------------------------------- Dun & Bradstreet Corp. 1,2 6,100 408,456 -------------------------------------------------------------------------------- Manpower, Inc. 2 14,200 660,300 -------------------------------------------------------------------------------- PHH Corp. 1,2 2,180 61,084 -------------------------------------------------------------------------------- Pitney Bowes, Inc. 45,900 1,939,275 -------------------------------------------------------------------------------- Robert Half International, Inc. 2 16,900 640,341 -------------------------------------------------------------------------------- Waste Management, Inc. 43,700 1,326,295 ------------ 11,446,536 -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING--0.1% Quanta Services, Inc. 1,2 21,300 280,521 -------------------------------------------------------------------------------- URS Corp. 1,2 23,200 872,552 ------------ 1,153,073 -------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES--0.1% Apollo Group, Inc., Cl. A 1 43,600 2,636,056 VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT--0.4% Emerson Electric Co. 30,300 $ 2,263,410 -------------------------------------------------------------------------------- Rockwell Automation, Inc. 76,800 4,543,488 -------------------------------------------------------------------------------- Roper Industries, Inc. 2 11,400 450,414 ------------ 7,257,312 -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES--3.6% 3M Co. 36,800 2,852,000 -------------------------------------------------------------------------------- General Electric Co. 1,494,700 52,389,235 -------------------------------------------------------------------------------- Teleflex, Inc. 1,800 116,964 -------------------------------------------------------------------------------- Tyco International Ltd. 236,000 6,810,960 ------------ 62,169,159 -------------------------------------------------------------------------------- MACHINERY--1.2% Caterpillar, Inc. 88,000 5,083,760 -------------------------------------------------------------------------------- Danaher Corp. 27,600 1,539,528 -------------------------------------------------------------------------------- Flowserve Corp. 1,2 16,700 660,652 -------------------------------------------------------------------------------- Illinois Tool Works, Inc. 60,700 5,340,993 -------------------------------------------------------------------------------- Ingersoll-Rand Co. Ltd., Cl. A 98,800 3,988,556 -------------------------------------------------------------------------------- ITT Industries, Inc. 11,900 1,223,558 -------------------------------------------------------------------------------- JLG Industries, Inc. 2 3,000 136,980 -------------------------------------------------------------------------------- Parker-Hannifin Corp. 2 8,500 560,660 -------------------------------------------------------------------------------- SPX Corp. 2 16,800 768,936 -------------------------------------------------------------------------------- Terex Corp. 1 12,800 760,320 ------------ 20,063,943 -------------------------------------------------------------------------------- ROAD & RAIL--0.7% Burlington Northern Santa Fe Corp. 79,500 5,630,190 -------------------------------------------------------------------------------- CSX Corp. 2,200 111,694 -------------------------------------------------------------------------------- Landstar System, Inc. 2 9,300 388,182 -------------------------------------------------------------------------------- Norfolk Southern Corp. 103,300 4,630,939 -------------------------------------------------------------------------------- Union Pacific Corp. 12,000 966,120 ------------ 11,727,125 -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS--0.0% United Rentals, Inc. 1,2 12,600 294,714 -------------------------------------------------------------------------------- INFORMATION TECHNOLOGY--19.8% -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT--3.2% ADC Telecommunications, Inc. 1,2 2,100 46,914 -------------------------------------------------------------------------------- ADTRAN, Inc. 2 19,500 579,930 -------------------------------------------------------------------------------- Avaya, Inc. 1 56,500 602,855 -------------------------------------------------------------------------------- Brocade Communications Systems, Inc. 1,2 106,600 433,862 -------------------------------------------------------------------------------- Cisco Systems, Inc. 1 1,275,300 21,833,136 -------------------------------------------------------------------------------- Corning, Inc. 1 321,600 6,322,656 -------------------------------------------------------------------------------- Emulex Corp. 1,2 15,800 312,682 -------------------------------------------------------------------------------- Harris Corp. 2 2,600 111,826 -------------------------------------------------------------------------------- Juniper Networks, Inc. 1,2 116,700 2,602,410 11 | OPPENHEIMER MAIN STREET FUND/VA STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT Continued Lucent Technologies, Inc. 1 788,700 $ 2,097,942 -------------------------------------------------------------------------------- Motorola, Inc. 384,000 8,674,560 -------------------------------------------------------------------------------- Polycom, Inc. 1 9,600 146,880 -------------------------------------------------------------------------------- QLogic Corp. 1 20,300 659,953 -------------------------------------------------------------------------------- QUALCOMM, Inc. 215,900 9,300,972 -------------------------------------------------------------------------------- Scientific-Atlanta, Inc. 22,500 969,075 ------------ 54,695,653 -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS--4.9% Apple Computer, Inc. 1 139,100 9,999,899 -------------------------------------------------------------------------------- Dell, Inc. 1 627,400 18,815,726 -------------------------------------------------------------------------------- EMC Corp. 1 656,800 8,945,616 -------------------------------------------------------------------------------- Hewlett-Packard Co. 640,800 18,346,104 -------------------------------------------------------------------------------- International Business -------------------------------------------------------------------------------- Machines Corp. 276,300 22,711,860 -------------------------------------------------------------------------------- Lexmark International, Inc., Cl. A 1 21,100 945,913 -------------------------------------------------------------------------------- NCR Corp. 1 29,100 987,654 -------------------------------------------------------------------------------- Network Appliance, Inc. 1 49,600 1,339,200 -------------------------------------------------------------------------------- Palm, Inc. 1,2 9,900 314,820 -------------------------------------------------------------------------------- Sun Microsystems, Inc. 1 230,500 965,795 -------------------------------------------------------------------------------- Western Digital Corp. 1 72,100 1,341,781 ------------ 84,714,368 -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--0.6% Agilent Technologies, Inc. 1 158,000 5,259,820 -------------------------------------------------------------------------------- Arrow Electronics, Inc. 1,2 24,700 791,141 -------------------------------------------------------------------------------- Avnet, Inc. 1 33,100 792,414 -------------------------------------------------------------------------------- CDW Corp. 2 8,300 477,831 -------------------------------------------------------------------------------- Jabil Circuit, Inc. 1 26,800 994,012 -------------------------------------------------------------------------------- Komag, Inc. 1,2 10,600 367,396 -------------------------------------------------------------------------------- Mettler-Toledo International, Inc. 1,2 1,800 99,360 -------------------------------------------------------------------------------- Sanmina-SCI Corp. 1 189,600 807,696 -------------------------------------------------------------------------------- Solectron Corp. 1,2 243,900 892,674 -------------------------------------------------------------------------------- Tech Data Corp. 1 6,100 242,048 -------------------------------------------------------------------------------- UNOVA, Inc. 1,2 7,600 256,880 ------------ 10,981,272 -------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES--0.7% Check Point Software Technologies Ltd. 1,2 27,800 558,780 -------------------------------------------------------------------------------- Digital River, Inc. 1,2 9,400 279,556 -------------------------------------------------------------------------------- EarthLink, Inc. 1,2 49,500 549,945 -------------------------------------------------------------------------------- Google, Inc., Cl. A 1 13,700 5,683,582 -------------------------------------------------------------------------------- Internet Security Systems, Inc. 1,2 17,700 370,815 -------------------------------------------------------------------------------- MicroStrategy, Inc., Cl. A 1,2 3,600 297,864 -------------------------------------------------------------------------------- United Online, Inc. 2 40,100 570,222 -------------------------------------------------------------------------------- Websense, Inc. 1,2 5,000 328,200 VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES Continued Yahoo!, Inc. 1 63,400 $ 2,484,012 ------------ 11,122,976 -------------------------------------------------------------------------------- IT SERVICES--0.8% CACI International, Inc., Cl. A 1,2 7,400 424,612 -------------------------------------------------------------------------------- Ceridian Corp. 1,2 20,400 506,940 -------------------------------------------------------------------------------- CheckFree Corp. 1 11,500 527,850 -------------------------------------------------------------------------------- Computer Sciences Corp. 1 20,600 1,043,184 -------------------------------------------------------------------------------- CSG Systems International, Inc. 1,2 1,300 29,016 -------------------------------------------------------------------------------- Electronic Data Systems Corp. 41,500 997,660 -------------------------------------------------------------------------------- First Data Corp. 200,900 8,640,709 -------------------------------------------------------------------------------- Fiserv, Inc. 1,2 22,400 969,248 -------------------------------------------------------------------------------- Global Payments, Inc. 2 10,800 503,388 -------------------------------------------------------------------------------- Sabre Holdings Corp. 2 32,400 781,164 ------------ 14,423,771 -------------------------------------------------------------------------------- OFFICE ELECTRONICS--0.3% Xerox Corp. 1 340,300 4,985,395 -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--4.8% Analog Devices, Inc. 161,300 5,785,831 -------------------------------------------------------------------------------- Applied Materials, Inc. 461,600 8,281,104 -------------------------------------------------------------------------------- Broadcom Corp., Cl. A 1 128,600 6,063,490 -------------------------------------------------------------------------------- Cymer, Inc. 1,2 8,200 291,182 -------------------------------------------------------------------------------- Fairchild Semiconductor -------------------------------------------------------------------------------- International, Inc., Cl. A 1,2 42,600 720,366 -------------------------------------------------------------------------------- Freescale Semiconductor, Inc., Cl. B 1 160,443 4,038,350 -------------------------------------------------------------------------------- Genesis Microchip, Inc. 1,2 6,600 119,394 -------------------------------------------------------------------------------- Intel Corp. 1,279,100 31,926,336 -------------------------------------------------------------------------------- Intersil Corp., Cl. A 2 32,100 798,648 -------------------------------------------------------------------------------- KLA-Tencor Corp. 56,800 2,801,944 -------------------------------------------------------------------------------- Lam Research Corp. 1,2 23,700 845,616 -------------------------------------------------------------------------------- LSI Logic Corp. 1 94,600 756,800 -------------------------------------------------------------------------------- Micrel, Inc. 1,2 14,600 169,360 -------------------------------------------------------------------------------- Microchip Technology, Inc. 30,000 964,500 -------------------------------------------------------------------------------- Microsemi Corp. 1,2 9,200 254,472 -------------------------------------------------------------------------------- National Semiconductor Corp. 42,700 1,109,346 -------------------------------------------------------------------------------- Novellus Systems, Inc. 1 31,600 762,192 -------------------------------------------------------------------------------- NVIDIA Corp. 1 27,400 1,001,744 -------------------------------------------------------------------------------- OmniVision Technologies, Inc. 1,2 18,000 359,280 -------------------------------------------------------------------------------- Texas Instruments, Inc. 487,300 15,627,711 -------------------------------------------------------------------------------- Zoran Corp. 1 4,900 79,429 ------------ 82,757,095 -------------------------------------------------------------------------------- SOFTWARE--4.5% Adobe Systems, Inc. 52,200 1,929,312 -------------------------------------------------------------------------------- Autodesk, Inc. 2 112,300 4,823,285 12 | OPPENHEIMER MAIN STREET FUND/VA VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- SOFTWARE Continued BEA Systems, Inc. 1 82,300 $ 773,620 -------------------------------------------------------------------------------- BMC Software, Inc. 1 40,700 833,943 -------------------------------------------------------------------------------- Cadence Design Systems, Inc. 1 49,500 837,540 -------------------------------------------------------------------------------- Citrix Systems, Inc. 1 20,100 578,478 -------------------------------------------------------------------------------- Cognos, Inc. 1,2 5,200 180,492 -------------------------------------------------------------------------------- Computer Associates International, Inc. 2 153,000 4,313,070 -------------------------------------------------------------------------------- Compuware Corp. 1 90,800 814,476 -------------------------------------------------------------------------------- Fair Isaac Corp. 2 16,400 724,388 -------------------------------------------------------------------------------- Hyperion Solutions Corp. 1,2 20,700 741,474 -------------------------------------------------------------------------------- Intuit, Inc. 1 22,700 1,209,910 -------------------------------------------------------------------------------- McAfee, Inc. 1,2 28,700 778,631 -------------------------------------------------------------------------------- Microsoft Corp. 1,400,600 36,625,690 -------------------------------------------------------------------------------- Novell, Inc. 1,2 95,500 843,265 -------------------------------------------------------------------------------- Oracle Corp. 1 879,700 10,741,137 -------------------------------------------------------------------------------- Parametric Technology Corp. 1 53,700 327,570 -------------------------------------------------------------------------------- Red Hat, Inc. 1,2 32,900 896,196 -------------------------------------------------------------------------------- Reynolds & Reynolds Co., Cl. A 2 1,800 50,526 -------------------------------------------------------------------------------- Symantec Corp. 1 420,542 7,359,485 -------------------------------------------------------------------------------- Synopsys, Inc. 1 52,400 1,051,144 -------------------------------------------------------------------------------- Take-Two Interactive Software, Inc. 1,2 14,900 263,730 ------------ 76,697,362 -------------------------------------------------------------------------------- MATERIALS--2.5% -------------------------------------------------------------------------------- CHEMICALS--1.3% Agrium, Inc. 2 26,200 576,138 -------------------------------------------------------------------------------- Dow Chemical Co. (The) 161,000 7,055,020 -------------------------------------------------------------------------------- E.I. DuPont de Nemours & Co. 50,000 2,125,000 -------------------------------------------------------------------------------- FMC Corp. 1,2 5,800 308,386 -------------------------------------------------------------------------------- Lubrizol Corp. (The) 3,000 130,290 -------------------------------------------------------------------------------- Lyondell Chemical Co. 31,500 750,330 -------------------------------------------------------------------------------- Monsanto Co. 61,400 4,760,342 -------------------------------------------------------------------------------- PPG Industries, Inc. 61,600 3,566,640 -------------------------------------------------------------------------------- Rohm & Haas Co. 47,100 2,280,582 -------------------------------------------------------------------------------- Scotts Miracle-Gro Co. (The), Cl. A 2 9,200 416,208 ------------ 21,968,936 -------------------------------------------------------------------------------- CONSTRUCTION MATERIALS--0.0% Texas Industries, Inc. 5,200 259,168 -------------------------------------------------------------------------------- CONTAINERS & PACKAGING--0.1% Owens-Illinois, Inc. 1,2 31,100 654,344 -------------------------------------------------------------------------------- Sealed Air Corp. 1,2 10,500 589,785 ------------ 1,244,129 -------------------------------------------------------------------------------- METALS & MINING--0.9% AK Steel Holding Corp. 1,2 48,000 381,600 VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- METALS & MINING Continued Alcoa, Inc. 77,300 $ 2,285,761 -------------------------------------------------------------------------------- Carpenter Technology Corp. 2 7,300 514,431 -------------------------------------------------------------------------------- Commercial Metals Co. 2 7,700 289,058 -------------------------------------------------------------------------------- Freeport-McMoRan Copper & Gold, Inc., Cl. B 20,400 1,097,520 -------------------------------------------------------------------------------- Nucor Corp. 66,900 4,463,568 -------------------------------------------------------------------------------- Phelps Dodge Corp. 35,300 5,078,611 -------------------------------------------------------------------------------- Quanex Corp. 2 7,100 354,787 -------------------------------------------------------------------------------- Reliance Steel & Aluminum Co. 2 11,200 684,544 -------------------------------------------------------------------------------- Steel Dynamics, Inc. 2 8,200 291,182 -------------------------------------------------------------------------------- United States Steel Corp. 2 2,000 96,140 -------------------------------------------------------------------------------- Worthington Industries, Inc. 2 11,900 228,599 ------------ 15,765,801 -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS--0.2% International Paper Co. 37,300 1,253,653 -------------------------------------------------------------------------------- Louisiana-Pacific Corp. 2 11,900 326,893 -------------------------------------------------------------------------------- MeadWestvaco Corp. 23,500 658,705 -------------------------------------------------------------------------------- Weyerhaeuser Co. 2 32,500 2,156,050 ------------ 4,395,301 -------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES--2.9% -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES--2.9% American Tower Corp. 1 41,800 1,132,780 -------------------------------------------------------------------------------- AT&T, Inc. 423,878 10,380,772 -------------------------------------------------------------------------------- BellSouth Corp. 262,800 7,121,880 -------------------------------------------------------------------------------- CenturyTel, Inc. 21,400 709,624 -------------------------------------------------------------------------------- Crown Castle International Corp. 1 22,200 597,402 -------------------------------------------------------------------------------- Qwest Communications International, Inc. 1,2 140,000 791,000 -------------------------------------------------------------------------------- Sprint Nextel Corp. 658,723 15,387,769 -------------------------------------------------------------------------------- Verizon Communications, Inc. 471,356 14,197,243 ------------ 50,318,470 -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES--0.0% Dobson Communications Corp., Cl. A 1,2 36,800 276,000 -------------------------------------------------------------------------------- UTILITIES--0.8% -------------------------------------------------------------------------------- ELECTRIC UTILITIES--0.8% AES Corp. (The) 1 54,700 865,901 -------------------------------------------------------------------------------- Constellation Energy Group, Inc. 46,200 2,661,120 -------------------------------------------------------------------------------- DPL, Inc. 5,600 145,656 -------------------------------------------------------------------------------- Duke Energy Corp. 2 800 21,960 -------------------------------------------------------------------------------- Entergy Corp. 7,000 480,550 -------------------------------------------------------------------------------- FirstEnergy Corp. 12,100 592,779 -------------------------------------------------------------------------------- PG&E Corp. 2 121,500 4,510,080 -------------------------------------------------------------------------------- Pinnacle West Capital Corp. 700 28,945 13 | OPPENHEIMER MAIN STREET FUND/VA STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------- ELECTRIC UTILITIES Continued Progress Energy, Inc., Contingent Value Obligation 1,3 32,000 $ 2,080 ------------------------------------------------------------------------------------- TXU Corp. 64,600 3,242,270 --------------- 12,551,341 ------------------------------------------------------------------------------------- GAS UTILITIES--0.0% NiSource, Inc. 5,500 114,730 ------------------------------------------------------------------------------------- MULTI-UTILITIES & UNREGULATED POWER--0.0% Energy East Corp. 2 1,600 36,480 ------------------------------------------------------------------------------------- Sierra Pacific Resources 1 22,100 288,184 --------------- 324,664 --------------- Total Common Stocks (Cost $1,461,259,931) 1,711,804,882 ------------------------------------------------------------------------------------- PREFERRED STOCKS--0.0% ------------------------------------------------------------------------------------- Wachovia Corp., Dividend Equalization Preferred Shares 1,3 (Cost $0) 6,000 24 UNITS ------------------------------------------------------------------------------------- RIGHTS, WARRANTS AND CERTIFICATES--0.0% ------------------------------------------------------------------------------------- Dime Bancorp, Inc. Wts., Exp. 1/2/10 1 31,900 4,147 ------------------------------------------------------------------------------------- Lucent Technologies, Inc. Wts., Exp. 12/10/07 1 4,837 2,733 --------------- Total Rights, Warrants and Certificates (Cost $0) 6,880 PRINCIPAL AMOUNT ------------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS--0.6% ------------------------------------------------------------------------------------- Undivided interest of 0.70% in joint repurchase agreement (Principal Amount/ Value $1,414,200,000, with a maturity value of $1,414,844,247) with UBS Warburg LLC, 4.10%, dated 12/30/05, to be repurchased at $9,918,516 on 1/3/06, collateralized by Federal Home Loan Mortgage Corp., 5%, 1/1/35, with a value of $157,513,104 and Federal National Mortgage Assn., 5%--5.50%, 3/1/34--10/1/35, with a value of $1,301,420,187 (Cost $9,914,000) $ 9,914,000 9,914,000 ------------------------------------------------------------------------------------- Total Investments, at Value (excluding Investments Purchased with Cash Collateral from Securities Loaned) (Cost $1,471,173,931) 1,721,725,786 ------------------------------------------------------------------------------------- INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--4.5% ------------------------------------------------------------------------------------- ASSET BACKED FLOATING NOTE--0.3% Countrywide Asset-Backed Certificates, Series 2005-17, Cl. 4AV1, 4.49%, 1/25/06 4 2,000,000 2,000,000 ------------------------------------------------------------------------------------- GSAA Home Equity Trust, Series 2005-15, Cl. 2A1, 4.47%, 1/25/06 4 2,000,000 2,000,000 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------------- ASSET BACKED FLOATING NOTE Continued Trust Money Market Securities, Series A-2, 4.44%, 1/17/06 4 $ 1,000,000 $ 1,000,000 ---------------- 5,000,000 ------------------------------------------------------------------------------------- DOMESTIC FLOATING CERTIFICATE OF DEPOSIT--0.2% Washington Mutual Bank, 4.36%, 1/20/06 4 3,499,911 3,499,911 ------------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS--2.9% ------------------------------------------------------------------------------------- Undivided interest of 1.58% in joint repurchase agreement (Principal Amount/Value $3,150,000,000, with a maturity value of $3,151,501,500) with Nomura Securities, 4.29%, dated 12/30/05, to be repurchased at $49,767,611 on 1/3/06, collateralized by U.S. Agency Mortgages, 3.34%--9.50%, 6/1/08--5/1/38, with a value of $3,213,000,000 4 49,743,900 49,743,900 ------------------------------------------------------------------------------------- MASTER FLOATING NOTE--0.4% Bear Stearns, 4.37%, 1/3/06 4 3,500,000 3,500,000 ------------------------------------------------------------------------------------- CDC Financial Products, Inc., 4.35%, 1/3/06 4 3,000,000 3,000,000 ------------------------------------------------------------------------------------- Citigroup Global Markets, Inc., 4.32%, 1/3/06 4 1,000,000 1,000,000 --------------- 7,500,000 ------------------------------------------------------------------------------------- MEDIUM-TERM FLOATING NOTE--0.7% Countrywide Financial Corp., 4.59%, 3/21/06 4 3,999,766 3,999,766 ------------------------------------------------------------------------------------- Goldman Sachs Group, Inc., 4.41%, 1/3/06 4 4,000,000 4,000,000 ------------------------------------------------------------------------------------- Landsbanki Islands, 4.45%, 1/17/06 4 4,000,000 4,000,000 ---------------- 11,999,766 ---------------- Total Investments Purchased with Cash Collateral from Securities Loaned (Cost $77,743,577) 77,743,577 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $1,548,917,508) 104.6% 1,799,469,363 ------------------------------------------------------------------------------------- LIABILITIES IN EXCESS OF OTHER ASSETS (4.6) (79,645,145) -------------------------------- NET ASSETS 100.0% $ 1,719,824,218 ================================
FOOTNOTES TO STATEMENT OF INVESTMENTS 1. Non-income producing security. 2. Partial or fully-loaned security. See Note 7 of Notes to Financial Statements. 3. Illiquid security. The aggregate value of illiquid securities as of December 31, 2005 was $2,104, which represents less than 0.005% of the Fund's net assets. See Note 6 of Notes to Financial Statements. 4. The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Note 7 of Notes to Financial Statements. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 14 | OPPENHEIMER MAIN STREET FUND/VA STATEMENT OF ASSETS AND LIABILITIES December 31, 2005 --------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------- ASSETS ----------------------------------------------------------------------------------------------------------------------------- Investments, at value (including securities loaned of $75,611,592) (cost $1,548,917,508)--see accompanying statement of investments $1,799,469,363 ----------------------------------------------------------------------------------------------------------------------------- Cash 619,578 ----------------------------------------------------------------------------------------------------------------------------- Receivables and other assets: Investments sold 5,526,954 Interest and dividends 2,077,331 Shares of beneficial interest sold 1,991,260 Other 22,159 ------------- Total assets 1,809,706,645 ----------------------------------------------------------------------------------------------------------------------------- LIABILITIES ----------------------------------------------------------------------------------------------------------------------------- Return of collateral for securities loaned 77,743,577 ----------------------------------------------------------------------------------------------------------------------------- Payables and other liabilities: Investments purchased 10,271,989 Shares of beneficial interest redeemed 1,353,384 Distribution and service plan fees 349,050 Shareholder communications 91,107 Trustees' compensation 28,761 Transfer and shareholder servicing agent fees 1,816 Other 42,743 -------------- Total liabilities 89,882,427 ----------------------------------------------------------------------------------------------------------------------------- NET ASSETS $1,719,824,218 ============== ----------------------------------------------------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ----------------------------------------------------------------------------------------------------------------------------- Par value of shares of beneficial interest $ 79,136 ----------------------------------------------------------------------------------------------------------------------------- Additional paid-in capital 1,630,162,524 ----------------------------------------------------------------------------------------------------------------------------- Accumulated net investment income 19,275,548 ----------------------------------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (180,244,882) ----------------------------------------------------------------------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 250,551,892 --------------- Net Assets $1,719,824,218 =============== ----------------------------------------------------------------------------------------------------------------------------- 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 $1,121,476,526 and 51,472,131 shares of beneficial interest outstanding) $21.79 ----------------------------------------------------------------------------------------------------------------------------- Service Shares: Net asset value, redemption price per share and offering price per share (based on net assets of $598,347,692 and 27,663,565 shares of beneficial interest outstanding) $21.63
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 15 | OPPENHEIMER MAIN STREET FUND/VA STATEMENT OF OPERATIONS For the Year Ended December 31, 2005 --------------------------------------------------------------------------------
--------------------------------------------------------------------------------------- INVESTMENT INCOME --------------------------------------------------------------------------------------- Dividends (net of foreign withholding taxes of $28,927) $ 30,595,396 --------------------------------------------------------------------------------------- Interest 421,243 --------------------------------------------------------------------------------------- Portfolio lending fees 195,845 ------------- Total investment income 31,212,484 --------------------------------------------------------------------------------------- EXPENSES --------------------------------------------------------------------------------------- Management fees 10,549,666 --------------------------------------------------------------------------------------- Distribution and service plan fees--Service shares 1,122,003 --------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Non-Service shares 10,807 Service shares 10,342 --------------------------------------------------------------------------------------- Shareholder communications: Non-Service shares 83,076 Service shares 35,071 --------------------------------------------------------------------------------------- Trustees' compensation 28,182 --------------------------------------------------------------------------------------- Custodian fees and expenses 19,075 --------------------------------------------------------------------------------------- Administration service fees 1,500 --------------------------------------------------------------------------------------- Other 75,698 ------------- Total expenses 11,935,420 Less reduction to custodian expenses (1,463) ------------- Net expenses 11,933,957 --------------------------------------------------------------------------------------- NET INVESTMENT INCOME 19,278,527 --------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) --------------------------------------------------------------------------------------- Net realized gain on: Investments 45,928,240 Foreign currency transactions 320,762 ------------- Net realized gain 46,249,002 --------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on: Investments 29,526,879 Translation of assets and liabilities denominated in foreign currencies (248,415) ------------- Net change in unrealized appreciation 29,278,464 --------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 94,805,993 =============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 16 | OPPENHEIMER MAIN STREET FUND/VA STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005 2004 ---------------------------------------------------------------------------------------------------------------------------- OPERATIONS ---------------------------------------------------------------------------------------------------------------------------- Net investment income $ 19,278,527 $ 20,357,629 ---------------------------------------------------------------------------------------------------------------------------- Net realized gain 46,249,002 111,199,320 ---------------------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation 29,278,464 4,618,002 ----------------------------------- Net increase in net assets resulting from operations 94,805,993 136,174,951 ---------------------------------------------------------------------------------------------------------------------------- DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS ---------------------------------------------------------------------------------------------------------------------------- Dividends from net investment income: Non-Service shares (16,043,833) (10,373,133) Service shares (4,680,411) (1,403,577) ---------------------------------------------------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ---------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from beneficial interest transactions: Non-Service shares (165,951,406) (73,484,963) Service shares 199,901,024 179,202,879 ---------------------------------------------------------------------------------------------------------------------------- NET ASSETS ---------------------------------------------------------------------------------------------------------------------------- Total increase 108,031,367 230,116,157 ---------------------------------------------------------------------------------------------------------------------------- Beginning of period 1,611,792,851 1,381,676,694 ----------------------------------- End of period (including accumulated net investment income of $19,275,548 and $20,719,203, respectively) $ 1,719,824,218 $ 1,611,792,851 ===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 17 | OPPENHEIMER MAIN STREET FUND/VA FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 ---------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA ---------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 20.84 $ 19.20 $ 15.32 $ 18.99 $ 21.26 ---------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .26 1 .27 1 .18 .16 .13 Net realized and unrealized gain (loss) .97 1.53 3.86 (3.70) (2.29) -------------------------------------------------------------------------- Total from investment operations 1.23 1.80 4.04 (3.54) (2.16) ---------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.28) (.16) (.16) (.13) (.11) ---------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 21.79 $ 20.84 $ 19.20 $ 15.32 $ 18.99 ========================================================================== ---------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 2 5.98% 9.46% 26.72% (18.80)% (10.16)% ---------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA ---------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $1,121,476 $1,238,948 $1,214,960 $ 890,740 $1,074,945 ---------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $1,156,299 $1,216,081 $1,003,396 $ 999,275 $1,028,913 ---------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 1.26% 1.39% 1.10% 0.94% 0.73% Total expenses 0.67% 4 0.67% 4 0.70% 4 0.69% 4 0.73% 4 ---------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 88% 82% 85% 98% 69%
1. Per share amounts calculated based on the average shares outstanding during the period. 2. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 18 | OPPENHEIMER MAIN STREET FUND/VA
SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 ----------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA ----------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 20.70 $ 19.10 $ 15.26 $ 18.95 $ 21.24 ----------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .21 1 .25 1 .14 .13 .14 Net realized and unrealized gain (loss) .96 1.49 3.85 (3.70) (2.32) --------------------------------------------------------------- Total investment operations 1.17 1.74 3.99 (3.57) (2.18) ----------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.24) (.14) (.15) (.12) (.11) ----------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 21.63 $ 20.70 $ 19.10 $ 15.26 $ 18.95 =============================================================== ----------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 2 5.74% 9.15% 26.44% (18.99)% (10.27)% ----------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA ----------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $598,348 $372,845 $166,717 $ 51,929 $ 21,545 ----------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $462,272 $262,660 $ 98,210 $ 34,604 $ 10,306 ----------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 1.02% 1.30% 0.83% 0.87% 0.66% Total expenses 0.91% 4 0.92% 4 0.96% 4 0.84% 4 0.88% 4 ----------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 88% 82% 85% 98% 69%
1. Per share amounts calculated based on the average shares outstanding during the period. 2. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 19 | OPPENHEIMER MAIN STREET FUND/VA NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Oppenheimer Main Street Fund/VA (the Fund), is a separate series of Oppenheimer Variable Account Funds, an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's objective is to seek high total return (which includes growth in the value of its shares as well as current income) from equity and debt securities. The Fund'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. Both classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. The following is a summary of significant accounting policies consistently followed by the Fund. -------------------------------------------------------------------------------- SECURITIES VALUATION. The Fund calculates the net asset value of its shares as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Securities may be valued primarily using dealer-supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Securities listed or traded on National Stock Exchanges or other domestic 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. Securities traded on NASDAQ are valued based on the closing price provided by NASDAQ 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 traded on foreign exchanges are valued based on the last sale price on the principal exchange on which the security is traded, in the country that is identified by the portfolio pricing service, prior to the time when the Fund's assets are valued. In the absence of a sale, the security is valued at the official closing price on the principal exchange. Corporate, government and municipal debt instruments having a remaining maturity in excess of sixty days and all mortgage-backed securities will be valued at the mean between the "bid" and "asked" prices. Futures contracts traded on a commodities or futures exchange will be valued at the final settlement price or official closing price on the principal exchange as reported by such principal exchange at its trading session ending at, or most recently prior to, the time when the Fund's assets are valued. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value. Foreign and domestic securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund's assets are valued but after the close of their respective exchanges will be fair valued. Fair value is determined in good faith using 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). -------------------------------------------------------------------------------- FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in U.S. dollars. The values of securities denominated in foreign currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Foreign exchange rates may be valued primarily using dealer supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in exchange rates. 20 | OPPENHEIMER MAIN STREET FUND/VA 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. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. 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. 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 on a daily basis 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 comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. The tax components of capital shown in the table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes. NET UNREALIZED APPRECIATION BASED ON COST OF UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED SECURITIES AND OTHER NET INVESTMENT LONG-TERM LOSS INVESTMENTS FOR FEDERAL INCOME GAIN CARRYFORWARD 1,2,3,4 INCOME TAX PURPOSES ------------------------------------------------------------------------------- $19,282,490 $-- $163,795,900 $234,117,529 1. As of December 31, 2005, the Fund had $163,795,249 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. As of December 31, 2005, details of the capital loss carryforwards were as follows: EXPIRING ------------------------ 2009 $ 10,477,990 2010 126,747,906 2011 26,569,353 ------------ Total $163,795,249 ============ 2. The Fund had $651 of post-October foreign currency losses which were deferred. 3. During the fiscal year ended December 31, 2005, the Fund utilized $44,990,386 of capital loss carryforward to offset capital gains realized in that fiscal year. 4. During the fiscal year ended December 31, 2004, the Fund utilized $114,232,007 of capital loss carryforward to offset capital gains realized in that fiscal year. Net investment income (loss) and net realized gain (loss) may differ for financial statement and 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. Accordingly, the following amounts have been reclassified for December 31, 2005. Net assets of the Fund were unaffected by the reclassifications. 21 | OPPENHEIMER MAIN STREET FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED INCREASE TO INCREASE TO ACCUMULATED ACCUMULATED NET NET INVESTMENT REALIZED LOSS INCOME ON INVESTMENTS ------------------------------------------- $2,062 $2,062 The tax character of distributions paid during the years ended December 31, 2005 and December 31, 2004 was as follows: YEAR ENDED YEAR ENDED DECEMBER 31, 2005 DECEMBER 31, 2004 ------------------------------------------------------------------------ Distributions paid from: Ordinary income $20,724,244 $ 11,776,710 The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 31, 2005 are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss. Federal tax cost of securities $1,565,351,871 =============== Gross unrealized appreciation $ 257,812,745 Gross unrealized depreciation (23,695,216) --------------- Net unrealized appreciation $ 234,117,529 =============== -------------------------------------------------------------------------------- TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of "Other" within the asset section of the Statement of Assets and Liabilities. Deferral of trustees' fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund's assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the Plan. -------------------------------------------------------------------------------- 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. Income and capital gain distributions, if any, are declared and paid annually. -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts to the extent they are not offset by positive cash balances maintained by the Fund. The Reduction to Custodian Expenses line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings. 22 | OPPENHEIMER MAIN STREET FUND/VA -------------------------------------------------------------------------------- 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 U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. -------------------------------------------------------------------------------- 2. SHARES OF BENEFICIAL INTEREST The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004 SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------------------------- NON-SERVICE SHARES Sold 3,666,887 $ 75,624,029 11,955,294 $ 233,322,256 Dividends and/or distributions reinvested 783,008 16,043,833 536,356 10,373,133 Redeemed (12,430,546) (257,619,268) (16,312,427) (317,180,352) ---------------------------------------------------------------- Net decrease (7,980,651) $(165,951,406) (3,820,777) $ (73,484,963) ================================================================ ------------------------------------------------------------------------------------------------------------- SERVICE SHARES Sold 10,831,089 $ 224,276,509 10,163,617 $ 196,313,963 Dividends and/or distributions reinvested 229,657 4,680,411 72,875 1,403,577 Redeemed (1,404,971) (29,055,896) (955,303) (18,514,661) ---------------------------------------------------------------- Net increase 9,655,775 $ 199,901,024 9,281,189 $ 179,202,879 ================================================================
-------------------------------------------------------------------------------- 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, 2005, were as follows: PURCHASES SALES ----------------------------------------------------------- Investment securities $1,451,659,870 $1,407,502,229 -------------------------------------------------------------------------------- 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 Fund which provides for a fee at an annual rate of 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million and 0.60% of average annual net assets over $800 million. -------------------------------------------------------------------------------- ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund's tax returns. -------------------------------------------------------------------------------- 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 per account fee. For the year ended December 31, 2005, the Fund paid $21,081 to OFS for services to the Fund. Additionally, funds offered in variable annuity separate accounts are subject to minimum fees of $10,000 per class, for class level assets of $10 million or more. Each class is subject to the minimum fee in the event that the per account fee does not equal or exceed the applicable minimum fee. 23 | OPPENHEIMER MAIN STREET FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued 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, personal service and account maintenance for the Fund's Service shares. Under the plan, payments are made periodically at an annual rate of up to 0.25% of the average annual net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsor(s) of the insurance product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service shares. The impact of the service plan is to increase operating expenses of the Service shares, which results in lower performance compared to the Fund's shares that are not subject to a service fee. Fees incurred by the Fund under the plan are detailed in the Statement of Operations. -------------------------------------------------------------------------------- WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes to 0.35% of average annual net assets per class. This undertaking may be amended or withdrawn at any time. -------------------------------------------------------------------------------- 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 to settle specific purchases or sales of securities denominated in a foreign currency and for protection from adverse exchange rate fluctuation. 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 prevailing foreign currency exchange rates. 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 transaction. Contracts closed or settled with the same broker are recorded as net realized gains or losses. Such realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. As of December 31, 2005, the Fund had no outstanding foreign currency contracts. -------------------------------------------------------------------------------- 6. ILLIQUID SECURITIES As of December 31, 2005, investments in securities included issues that are illiquid. A security may 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 will not invest more than 15% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid securities. Securities that are illiquid are marked with the applicable footnote on the Statement of Investments. -------------------------------------------------------------------------------- 7. SECURITIES LENDING The Fund lends portfolio securities from time to time in order to earn additional income. In return, the Fund receives collateral in the form of U.S. Treasury obligations or cash, against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the funds and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Fund could experience delays and cost in recovering the securities loaned or in gaining access to the collateral. Cash collateral is invested in cash equivalents. The Fund retains a portion of the interest earned from the collateral. The Fund continues to receive the economic benefit of interest or dividends paid on the securities loaned in the form of a substitute payment received from the borrower. As of December 31, 2005, the Fund had on loan securities valued at $75,611,592. Collateral of $77,743,577 was received for the loans, all of which was received in cash and subsequently invested in approved instruments. 24 | OPPENHEIMER MAIN STREET FUND/VA -------------------------------------------------------------------------------- 8. LITIGATION A consolidated amended complaint has been filed as putative derivative and class actions against the Manager, OFS and the Distributor, as well as 51 of the Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and former Directors or Trustees and 8 present and former officers of the funds. This complaint, initially filed in the U.S. District Court for the Southern District of New York on January 10, 2005 and amended on March 4, 2005, consolidates into a single action and amends six individual previously-filed putative derivative and class action complaints. Like those prior complaints, the complaint alleges that the Manager charged excessive fees for distribution and other costs, improperly used assets of the funds in the form of directed brokerage commissions and 12b-1 fees to pay brokers to promote sales of the funds, and failed to properly disclose the use of assets of the funds to make those payments in violation of the Investment Company Act of 1940 and the Investment Advisers Act of 1940. Also, like those prior complaints, the complaint further alleges that by permitting and/or participating in those actions, the Directors/Trustees and the Officers breached their fiduciary duties to shareholders of the funds under the Investment Company Act of 1940 and at common law. The complaint seeks unspecified compensatory and punitive damages, rescission of the funds' investment advisory agreements, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. The defendants believe that the allegations contained in the Complaints are without merit and that they have meritorious defenses against the claims asserted. The defendants intend to defend these lawsuits vigorously and to contest any claimed liability. The defendants believe that it is premature to render any opinion as to the likelihood of an outcome unfavorable to them and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. 25 | OPPENHEIMER MAIN STREET FUND/VA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER MAIN STREET FUND/VA: We have audited the accompanying statement of assets and liabilities of Oppenheimer Main Street Fund/VA, a series of Oppenheimer Variable Account Funds, including the statement of investments, as of December 31, 2005, 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 each of the five years in the periods then ended. 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 the standards of the Public Company Accounting Oversight Board (United States). 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. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. 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 Main Street Fund/VA as of December 31, 2005, 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 each of the five years in the periods then ended, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Denver, Colorado February 13, 2006 26 | OPPENHEIMER MAIN STREET FUND/VA FEDERAL INCOME TAX INFORMATION Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- In early 2006, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2005. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. Dividends, if any, paid by the Fund during the fiscal year ended December 31, 2005 which are not designated as capital gain distributions should be multiplied by 100% 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. 27 | OPPENHEIMER MAIN STREET FUND/VA PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities ("portfolio proxies") held by the Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund's voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at www.sec.gov. The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund's Form N-Q filings are available on the SEC's website at http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 28 | OPPENHEIMER MAIN STREET FUND/VA BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited / Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Each year, the Board of Trustees (the "Board"), including a majority of the independent Trustees, is required to determine whether to renew the Fund's investment advisory agreement (the "Agreement"). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information, that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance. The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager's services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. Outlined below is a summary of the principal information considered by the Board as well as the Board's conclusions. NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information on the nature and extent of the services provided to the Fund and information regarding the Manager's key personnel that provide such services. The Manager's duties include providing the Fund with the services of the portfolio managers and the Manager's investment team, who provide research, analysis and other advisory services in regard to the Fund's investments; securities trading services; oversight of third party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund's investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel that are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund's operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund's shares. The Manager also provides the Fund with office space, facilities and equipment. The Board also considered the quality of the services provided and the quality of the Manager's resources that are available to the Fund. The Board took account of the fact that the Manager has had over forty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager's administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager's key personnel and the size and functions of its staff providing investment management services to the Fund. The Board also considered compliance reports from the Fund's Chief Compliance Officer. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Nikolaos D. Monoyios and Marc Reinganum and the Manager's Equity Growth investment team and analysts. Messrs. Monoyios and Reinganum have had over 28 and 26 years of experience, respectively, managing equity investments. The Board members also considered the totality of their experiences with the Manager, as directors or trustees of the Fund and other funds advised by the Manager. In light of the foregoing, the Board concluded that the Fund benefits from the services provided under the Agreement as a result of the Manager's experience, reputation, personnel, operations, and resources. INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the Manager provided information on the performance of the Fund and the Manager at each Board meeting, including comparative performance information. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund's historical performance to relevant market indices and to the performance of other large-cap core funds (including both funds advised by the Manager and funds advised by other investment advisers). The Board noted that the Fund's one-year, three-year, five-year and ten-year performance were all better than its peer group median. 29 | OPPENHEIMER MAIN STREET FUND/VA BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited/Continued -------------------------------------------------------------------------------- COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board considered information regarding the Manager's costs in serving as the Fund's investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager's profitability from its relationship with the Fund. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also evaluated the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund, other large-cap core funds and other funds with comparable asset levels and distribution features. The Board noted that the Fund's contractual and actual management fees are lower than its peer group median but higher than its peer group average and that its total expenses are lower than both its peer group median and average. In light of this and the Fund's strong performance, the Board concluded that the management fee was reasonable. ECONOMIES OF SCALE. The Board considered whether the Manager may realize economies of scale in managing and supporting the Fund, whether those economies of scale benefit the Fund's shareholders and the current level of Fund assets in relation to the Fund's management fee breakpoints, which are intended to share with shareholders economies of scale that may exist as the Fund grows. OTHER BENEFITS TO THE MANAGER. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager's affiliates and research provided to the Manager in connection with permissible brokerage arrangements (soft dollar arrangements). The Board also considered the nature and quality of services provided by affiliates of the Manager, which it reviews at other times during the year in connection with the renewal of the Fund's service agreements. The Board considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide services to the Fund and that maintaining the financial viability of the Manager is important in order for the Manager to continue to provide significant services to the Fund and its shareholders. CONCLUSIONS. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees' counsel are both independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules. Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the advisory agreement for another year. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the factors together. The Board judged the terms and conditions of the advisory agreement, including the management fee, in light of all of the surrounding circumstances. 30 | OPPENHEIMER MAIN STREET FUND/VA TRUSTEES AND OFFICERS Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------- NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD; THE FUNDS, LENGTH OF SERVICE, NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN AGE INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL. WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Mortgage Company Chairman of the Board of (since 1991), Centennial State Mortgage Company (since 1994), and The El Paso Mortgage Trustees (since 2003), Company (since 1993); Chairman of the following private companies: Ambassador Media Trustee (since 1999) Corporation (since 1984) and Broadway Ventures (since 1984); Director of the following: Age: 68 Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), Campus Crusade for Christ (since 1991) and The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (since 2002); former Chairman of the following: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (insurance agency) (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private equity Trustee (since 1995) funds) (until February 2001); Chairman, President and Chief Executive Officer of A.G. Age: 74 Edwards Capital, Inc. (until March 2000); Director of A.G. Edwards & Sons, Inc. (brokerage company) (until 2000) and A.G. Edwards Trust Company (investment adviser) (until 2000); Vice Chairman and Director of A.G. Edwards, Inc. (until March 1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March 1999); Chairman of A.G. Edwards Trust Company (until March 1999) and A.G.E. Asset Management (investment adviser) (until March 1999). Oversees 38 portfolios in the OppenheimerFunds complex. GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation (December Trustee (since 1999) 1991-April 1999); President, Treasurer and Director of Centennial Capital Corporation (June Age: 69 1989-April 1999); Chief Executive Officer and Director of MultiSource Services, Inc. (March 1996-April 1999); Mr. Bowen held several positions with the Manager and with subsidiary or affiliated companies of the Manager (September 1987-April 1999). Oversees 38 portfolios in the OppenheimerFunds complex. EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since June Trustee (since 1999) 2000); Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002); Partner at Age: 67 PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (July 1994-June 1998). Oversees 38 portfolios in the OppenheimerFunds complex. JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Northwestern Trustee (since 1995) Energy Corp. (public utility corporation) (since November 2004); Director of P.R. Age: 64 Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. ("OAC") (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 38 portfolios in the OppenheimerFunds complex. SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September 1984). Mr. Freedman Trustee (since 1996) held several positions with the Manager and with subsidiary or affiliated companies of the Age: 65 Manager (until October 1994). Oversees 38 portfolios in the OppenheimerFunds complex.
31 | OPPENHEIMER MAIN STREET FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued --------------------------------------------------------------------------------------------------------------------------------- BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) (since Trustee (since 2002) February 2000); Director of The California Endowment (philanthropic organization) (since Age: 59 April 2002); Director of Community Hospital of Monterey Peninsula (since February 2002); Vice Chair of American Funds' Emerging Markets Growth Fund, Inc. (mutual fund) (since October 1991); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation and The University of Michigan; Advisor at Credit Suisse First Boston's Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member of the investment committee of Hartford Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT J. MALONE, Director of Jones International University (educational organization) (since August 2005); Trustee (since 2002) Chairman, Chief Executive Officer and Director of Steele Street State Bank (commercial Age: 61 banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 38 portfolios in the OppenheimerFunds complex. F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment Trustee (since 2000) company) (since 1996) and MML Series Investment Fund (investment company) (since 1996), Age: 63 Trustee and Chairman of the Investment Committee (since 1994) of the Worcester Polytech Institute (private university); President and Treasurer of the SIS Funds (private charitable fund) (since January 1999); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Member of the Investment Committee of the Community Foundation of Western Massachusetts (1998-2003); and Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999). Oversees 40 portfolios in the OppenheimerFunds complex. --------------------------------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW AND OFFICER YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES. JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President (since President and Trustee September 2000) of the Manager; President and Director or Trustee of other Oppenheimer (since 2001) funds; President and Director of OAC and of Oppenheimer Partnership Holdings, Inc. (holding Age: 56 company subsidiary of the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since November 2001); Chairman and Director of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since July 2001); President and Director of OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since July 2001); Director of the following investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 2001) and Director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director of DLB Acquisition Corporation (holding company parent of Babson Capital Management LLC) (since June 1995); Member of the Investment Company Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of the Manager (September 2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual Select Funds (open-end investment companies) (November 1999-November 2001); Director of C.M. Life Insurance Company (September 1999- August 2000); President, Chief Executive Officer and Director of MML Bay State Life Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 87 portfolios in the OppenheimerFunds complex.
32 | OPPENHEIMER MAIN STREET FUND/VA --------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. MONOYIOS, THE FUND REINGANUM AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT DEATH OR REMOVAL. NIKOLAOS D. MONOYIOS, Senior Vice President of the Manager since October 2003; a Certified Financial Analyst. Vice President and Portfolio Formerly Vice President of the Manager (April 1998-September 2003). An officer of 6 Manager (since 1999) portfolios in the OppenheimerFunds complex. Age: 56 DR. MARC REINGANUM, Vice President of the Manager since September 2002; a Director of Quantitative Research and Vice President and Portfolio Portfolio Strategist for Equities; the Mary Jo Vaughn Rauscher Chair in Financial Manager (since 2003) Investments at Southern Methodist University since 1995. At Southern Methodist University he Age: 52 also served as the Director of the Finance Institute, Chairman of the Finance Department, President of the Faculty at the Cox School of Business and member of the Board of Trustee Investment Committee. An officer of 3 portfolios in the OppenheimerFunds complex. MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Vice Vice President and Chief President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Compliance Officer Shareholder Services, Inc. (since June 1983); Vice President and Director of Internal Audit (since 2004) of the Manager (1997-February 2004). An officer of 87 portfolios in the OppenheimerFunds Age: 55 complex. BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the Treasurer and Principal Financial following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., and Accounting Officer Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer (since 1999) Partnership Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March Age: 46 2000), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex. ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the Vice President and Secretary Manager; General Counsel and Director of the Distributor (since December 2001); General (since 2001) Counsel of Centennial Asset Management Corporation (since December 2001); Senior Vice Age: 57 President and General Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General Counsel and Director of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON REQUEST, BY CALLING 1.800.981.2871. 33 | OPPENHEIMER MAIN STREET FUND/ VA OPPENHEIMER MAIN STREET SMALL CAP FUND/VA FUND PERFORMANCE DISCUSSION -------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. Oppenheimer Main Street Small Cap Fund/VA produced solid results and outperformed its benchmark, the Russell 2000 Index, for the 12-month period ended December 31, 2005. 1 We attribute most of the Fund's outperformance to positive stock selection, particularly in the healthcare sector, recommended by our investment model. The Fund also benefited from emphasized positions, compared to its benchmark, in the energy, healthcare and industrials sectors as well as its underweighting of financials. Additionally, the Fund gained from its overweighting of midcap stocks, a group that performed quite well during the period. By contrast, the Fund's overweighting in consumer discretionary stocks detracted from relative performance as this group overall underperformed for the period. The period proved to be highly favorable for our model's investment process. In selecting stocks for the portfolio, we rely on a proprietary quantitative stock-selection model that favors companies with relatively inexpensive valuations that are displaying positive momentum. During the period, both energy and select healthcare companies embodied these qualities; additionally, these two areas were also greatly rewarded by the market. Energy companies benefited from rising commodity prices and both increasing cash flow and growth opportunities, overall exhibiting positive momentum at a discounted valuation. The same was true for healthcare service companies, in particular HMO's, which experienced positive momentum and were relatively inexpensive. In short, the factors that our models look for were the same factors that the market rewarded, making it a positive situation for the Fund. In terms of changes made to the portfolio, there have been several. Our models have continued to detect a shift in outperformance of small caps to larger cap stocks. As a result, we sold some of our micro-cap holdings and reinvested the proceeds into mid-cap stocks. Another change recommended by our model was to move a greater portion of the portfolio into cyclical, or economically sensitive securities in order to take advantage of the seasonal effect, a time in the market when more volatile stocks tend to outperform, which usually occurs during the fourth to first quarter of the year. Therefore, we added to the Fund's holdings in the technology, consumer discretionary and energy sectors. Thus far, these adjustments have added to results. Our model also recommended an underweighted position within the financials, healthcare and utilities sectors. Lastly, the Fund has grown rapidly over the period, and successfully absorbed the in-flows while remaining fully invested. 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, 2005. In the case of non-service shares, performance is measured from inception of the class on May 1, 1998. In the case of service shares, performance is measured from inception of the class on July 16, 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 Russell 2000 Index, an unmanaged index of equity securities of small capitalization companies that is a measure of the small company market. Index performance reflects the reinvestment of income but does not consider the effect of transaction costs, and none of the data in the graphs shows the effect of taxes. 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. 1. The Fund's performance is compared to the 4.55% return for the Russell 2000 Index for the one-year period ended 12/31/05. 4 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA NON-SERVICE SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Main Street Small Cap Fund(R)/VA (Non-Service) Russell 2000 Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Main Street Small Cap Fund(R)/VA Russell (Non-Service) 2000 Index 05/01/1998 10,000 10,000 06/30/1998 9,560 9,481 09/30/1998 8,400 7,571 12/31/1998 9,600 8,806 03/31/1999 8,880 8,328 06/30/1999 9,310 9,624 09/30/1999 9,440 9,015 12/31/1999 14,070 10,678 03/31/2000 15,364 11,434 06/30/2000 13,178 11,002 09/30/2000 13,468 11,124 12/31/2000 11,490 10,355 03/31/2001 9,376 9,682 06/30/2001 11,334 11,065 09/30/2001 9,666 8,765 12/31/2001 11,448 10,613 03/31/2002 11,821 11,036 06/30/2002 11,490 10,114 09/30/2002 9,563 7,949 12/31/2002 9,645 8,439 03/31/2003 9,262 8,060 06/30/2003 11,200 9,948 09/30/2003 12,122 10,851 12/31/2003 13,924 12,427 03/31/2004 14,629 13,205 06/30/2004 14,681 13,267 09/30/2004 14,525 12,888 12/31/2004 16,628 14,704 03/31/2005 16,161 13,919 06/30/2005 16,703 14,520 09/30/2005 17,703 15,201 12/31/2005 18,278 15,374 AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/05 1-Year 9.92% 5-Year 9.73% Since Inception (5/1/98) 8.18% SERVICE SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Main Street Small Cap Fund(R)/VA (Service) Russell 2000 Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Main Street Small Cap Fund(R)/VA Russell (Service) 2000 Index 07/16/2001 10,000 10,000 09/30/2001 8,784 8,374 12/31/2001 10,415 10,140 03/31/2002 10,763 10,544 06/30/2002 10,452 9,663 09/30/2002 8,690 7,595 12/31/2002 8,756 8,063 03/31/2003 8,417 7,701 06/30/2003 10,170 9,505 09/30/2003 10,999 10,368 12/31/2003 12,630 11,873 03/31/2004 13,261 12,617 06/30/2004 13,308 12,676 09/30/2004 13,157 12,314 12/31/2004 15,052 14,050 03/31/2005 14,626 13,299 06/30/2005 15,110 13,874 09/30/2005 16,001 14,525 12/31/2005 16,514 14,689 AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/05 1-Year 9.71% 5-Year N/A Since Inception (7/16/01) 11.91% THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT. 5 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA FUND EXPENSES -------------------------------------------------------------------------------- FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include redemption fees, if any; and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 31, 2005. ACTUAL EXPENSES. The "actual" lines of the table provide information about actual account values and actual expenses. You may use the information on this line for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the "actual" line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio, and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the "hypothetical" lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included, your costs would have been higher. -------------------------------------------------------------------------------- BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE 6 MONTHS ENDED (7/1/05) (12/31/05) DECEMBER 31, 2005 -------------------------------------------------------------------------------- Non-Service shares Actual $1,000.00 $1,094.30 $4.28 -------------------------------------------------------------------------------- Non-Service shares Hypothetical 1,000.00 1,021.12 4.13 -------------------------------------------------------------------------------- Service shares Actual 1,000.00 1,092.90 5.50 -------------------------------------------------------------------------------- Service shares Hypothetical 1,000.00 1,019.96 5.31 Hypothetical assumes 5% annual return before expenses. Expenses are equal to the Fund's annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Those annualized expense ratios based on the 6-month period ended December 31, 2005 are as follows: CLASS EXPENSE RATIOS ---------------------------------------- Non-Service shares 0.81% ---------------------------------------- Service shares 1.04 -------------------------------------------------------------------------------- 6 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA STATEMENT OF INVESTMENTS December 31, 2005 -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- COMMON STOCKS--99.1% ------------------------------------------------------------------------------- CONSUMER DISCRETIONARY--18.4% ------------------------------------------------------------------------------- AUTO COMPONENTS--1.6% Aftermarket Technology Corp. 1 11,200 $ 217,728 ------------------------------------------------------------------------------- American Axle & Manufacturing Holdings, Inc. 2 18,500 339,105 ------------------------------------------------------------------------------- ArvinMeritor, Inc. 2 41,100 591,429 ------------------------------------------------------------------------------- Autoliv, Inc. 5,300 240,726 ------------------------------------------------------------------------------- Borg-Warner Automotive, Inc. 4,600 278,898 ------------------------------------------------------------------------------- Dana Corp. 44,200 317,356 ------------------------------------------------------------------------------- Drew Industries, Inc. 1,2 2,800 78,932 ------------------------------------------------------------------------------- Goodyear Tire & Rubber Co. (The) 1,2 30,400 528,352 ------------------------------------------------------------------------------- Lear Corp. 2 12,200 347,212 ------------------------------------------------------------------------------- LKQ Corp. 1,2 600 20,772 ------------------------------------------------------------------------------- Midas, Inc. 1,2 7,600 139,536 ------------------------------------------------------------------------------- Modine Manufacturing Co. 23,200 756,088 ------------------------------------------------------------------------------- Proliance International, Inc. 1,2 1,007 5,327 ------------------------------------------------------------------------------- Sauer-Danfoss, Inc. 7,900 148,599 ------------------------------------------------------------------------------- Shiloh Industries, Inc. 1 3,100 41,106 ------------------------------------------------------------------------------- Spartan Motors, Inc. 100 1,029 ------------------------------------------------------------------------------- Tenneco, Inc. 1 49,000 960,890 ------------------------------------------------------------------------------- TRW Automotive Holdings Corp. 1 9,000 237,150 ------------------------------------------------------------------------------- Visteon Corp. 1 75,300 471,378 -------------- 5,721,613 ------------------------------------------------------------------------------- AUTOMOBILES--0.1% Fleetwood Enterprises, Inc. 1 3,500 43,225 ------------------------------------------------------------------------------- Monaco Coach Corp. 2 3,900 51,870 ------------------------------------------------------------------------------- Winnebago Industries, Inc. 2 2,700 89,856 -------------- 184,951 ------------------------------------------------------------------------------- DISTRIBUTORS--0.0% Audiovox Corp., Cl. A 1 2,000 27,720 ------------------------------------------------------------------------------- Jorgensen (Earle M.) Co. 1,2 8,900 82,147 -------------- 109,867 ------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES--1.0% Alderwoods Group, Inc. 1 8,900 141,243 ------------------------------------------------------------------------------- Bright Horizons Family Solutions, Inc. 1,2 10,600 392,730 ------------------------------------------------------------------------------- Career Education Corp. 1 10,800 364,176 ------------------------------------------------------------------------------- CPI Corp. 300 5,613 ------------------------------------------------------------------------------- Escala Group, Inc. 1,2 3,200 64,896 ------------------------------------------------------------------------------- ITT Educational Services, Inc. 1 2,000 118,220 ------------------------------------------------------------------------------- Jackson Hewitt Tax Service, Inc. 36,000 997,560 ------------------------------------------------------------------------------- Matthews International Corp., Cl. A 200 7,282 ------------------------------------------------------------------------------- Pre-Paid Legal Services, Inc. 2 7,300 278,933 ------------------------------------------------------------------------------- Service Corp. International 50,700 414,726 ------------------------------------------------------------------------------- ServiceMaster Co. (The) 16,600 198,370 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES Continued Steiner Leisure Ltd. 1 8,100 $ 288,036 ------------------------------------------------------------------------------- Stewart Enterprises, Inc. 2 28,900 156,349 ------------------------------------------------------------------------------- Vertrue, Inc. 1 1,300 45,929 ------------------------------------------------------------------------------- Weight Watchers International, Inc. 1 1,700 84,031 -------------- 3,558,094 ------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE--2.3% Ambassadors Group, Inc. 8,700 199,143 ------------------------------------------------------------------------------- Ameristar Casinos, Inc. 21,300 483,510 ------------------------------------------------------------------------------- Aztar Corp. 1,2 11,900 361,641 ------------------------------------------------------------------------------- Bluegreen Corp. 1,2 19,900 314,420 ------------------------------------------------------------------------------- Brinker International, Inc. 6,300 243,558 ------------------------------------------------------------------------------- Caribou Coffee Co., Inc. 1 900 9,036 ------------------------------------------------------------------------------- CBRL Group, Inc. 11,500 404,225 ------------------------------------------------------------------------------- CEC Entertainment, Inc. 1 2,250 76,590 ------------------------------------------------------------------------------- Checkers Drive-In Restaurants, Inc. 1 2,000 30,320 ------------------------------------------------------------------------------- Choice Hotels International, Inc. 8,600 359,136 ------------------------------------------------------------------------------- CKE Restaurants, Inc. 2 44,300 598,493 ------------------------------------------------------------------------------- Ctrip.com International Ltd., ADR 1,600 92,400 ------------------------------------------------------------------------------- Darden Restaurants, Inc. 11,300 439,344 ------------------------------------------------------------------------------- Denny's Corp. 1,2 21,400 86,242 ------------------------------------------------------------------------------- Domino's Pizza, Inc. 23,300 563,860 ------------------------------------------------------------------------------- Dover Downs Gaming & Entertainment, Inc. 6,600 93,390 ------------------------------------------------------------------------------- IHOP Corp. 2 12,600 591,066 ------------------------------------------------------------------------------- Jack in the Box, Inc. 1 20,800 726,544 ------------------------------------------------------------------------------- Krispy Kreme Doughnuts, Inc. 1,2 11,500 66,010 ------------------------------------------------------------------------------- La Quinta Corp. 1 33,600 374,304 ------------------------------------------------------------------------------- Lone Star Steakhouse & Saloon, Inc. 5,400 128,196 ------------------------------------------------------------------------------- Luby's, Inc. 1,2 16,500 219,450 ------------------------------------------------------------------------------- McCormick & Schmick's Seafood Restaurants, Inc. 1 8,700 196,707 ------------------------------------------------------------------------------- Monarch Casino & Resort, Inc. 1,2 5,400 122,040 ------------------------------------------------------------------------------- MTR Gaming Group, Inc. 1 8,900 92,649 ------------------------------------------------------------------------------- Multimedia Games, Inc. 1,2 3,000 27,750 ------------------------------------------------------------------------------- Navigant International, Inc. 1,2 4,300 46,655 ------------------------------------------------------------------------------- O'Charley's, Inc. 1 7,800 120,978 ------------------------------------------------------------------------------- Panera Bread Co., Cl. A 1 100 6,568 ------------------------------------------------------------------------------- Papa John's International, Inc. 1 1,900 112,689 ------------------------------------------------------------------------------- Six Flags, Inc. 1,2 33,100 255,201 ------------------------------------------------------------------------------- Sunterra Corp. 1 14,600 207,612 ------------------------------------------------------------------------------- Vail Resorts, Inc. 1,2 16,500 544,995 -------------- 8,194,722 ------------------------------------------------------------------------------- HOUSEHOLD DURABLES--1.6% American Greetings Corp., Cl. A 2 31,900 700,843 ------------------------------------------------------------------------------- Avatar Holdings, Inc. 1,2 300 16,476 7 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- HOUSEHOLD DURABLES Continued Beazer Homes USA, Inc. 2 4,800 $ 349,632 ------------------------------------------------------------------------------- Blount International, Inc. 1 7,800 124,254 ------------------------------------------------------------------------------- Brookfield Homes Corp. 2 9,545 474,673 ------------------------------------------------------------------------------- Champion Enterprises, Inc. 1,2 30,400 414,048 ------------------------------------------------------------------------------- CSS Industries, Inc. 2 950 29,194 ------------------------------------------------------------------------------- Ethan Allen Interiors, Inc. 2 8,200 299,546 ------------------------------------------------------------------------------- Furniture Brands International, Inc. 2 30,700 685,531 ------------------------------------------------------------------------------- Interface, Inc., Cl. A 1,2 27,300 224,406 ------------------------------------------------------------------------------- Kimball International, Inc., Cl. B 4,800 51,024 ------------------------------------------------------------------------------- La-Z-Boy, Inc. 2 29,100 394,596 ------------------------------------------------------------------------------- MDC Holdings, Inc. 1,400 86,772 ------------------------------------------------------------------------------- Mestek, Inc. 1 600 7,860 ------------------------------------------------------------------------------- Movado Group, Inc. 1,600 29,280 ------------------------------------------------------------------------------- Palm Harbor Homes, Inc. 1,2 2,000 37,600 ------------------------------------------------------------------------------- Ryland Group, Inc. (The) 2,700 194,751 ------------------------------------------------------------------------------- Snap-On, Inc. 2 7,600 285,456 ------------------------------------------------------------------------------- Stanley Furniture Co., Inc. 10,200 236,436 ------------------------------------------------------------------------------- Stanley Works (The) 5,000 240,200 ------------------------------------------------------------------------------- Tupperware Brands Corp. 28,000 627,200 ------------------------------------------------------------------------------- WCI Communities, Inc. 1,2 3,600 96,660 ------------------------------------------------------------------------------- William Lyon Homes, Inc. 1 900 90,810 -------------- 5,697,248 ------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL--0.3% Blue Nile, Inc. 1 7,900 318,449 ------------------------------------------------------------------------------- Coldwater Creek, Inc. 1,2 1,800 54,954 ------------------------------------------------------------------------------- Insight Enterprises, Inc. 1 20,300 398,083 ------------------------------------------------------------------------------- PetMed Express, Inc. 1,2 8,300 117,611 ------------------------------------------------------------------------------- Priceline.com, Inc. 1 3,400 75,888 ------------------------------------------------------------------------------- Provide Commerce, Inc. 1,2 1,700 56,287 ------------------------------------------------------------------------------- Sportsman's Guide, Inc. 1 2,200 52,470 ------------------------------------------------------------------------------- Stamps.com, Inc. 1,2 3,200 73,472 ------------------------------------------------------------------------------- ValueVision Media, Inc., Cl. A 1,2 3,800 47,880 -------------- 1,195,094 ------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS--0.5% Arctic Cat, Inc. 2 500 10,030 ------------------------------------------------------------------------------- Callaway Golf Co. 15,700 217,288 ------------------------------------------------------------------------------- Hasbro, Inc. 21,700 437,906 ------------------------------------------------------------------------------- JAKKS Pacific, Inc. 1,2 17,800 372,732 ------------------------------------------------------------------------------- Marvel Entertainment, Inc. 1,2 9,300 152,334 ------------------------------------------------------------------------------- Oakley, Inc. 2 25,800 379,002 ------------------------------------------------------------------------------- RC2 Corp. 1 5,700 202,464 ------------------------------------------------------------------------------- Steinway Musical Instruments, Inc. 1 4,800 122,448 -------------- 1,894,204 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- MEDIA--2.1% Arbitron, Inc. 2 8,000 $ 303,840 ------------------------------------------------------------------------------- Belo Corp., Cl. A 9,700 207,677 ------------------------------------------------------------------------------- Catalina Marketing Corp. 2 17,300 438,555 ------------------------------------------------------------------------------- Charter Communications, Inc., Cl. A 1,2 169,400 206,668 ------------------------------------------------------------------------------- Citadel Broadcasting Corp. 2 25,400 341,376 ------------------------------------------------------------------------------- Cox Radio, Inc., Cl. A 1,2 8,600 121,088 ------------------------------------------------------------------------------- Cumulus Media, Inc., Cl. A 1,2 19,200 238,272 ------------------------------------------------------------------------------- Emmis Communications Corp., Cl. A 1,2 21,600 430,056 ------------------------------------------------------------------------------- Entercom Communications Corp. 1 19,400 575,598 ------------------------------------------------------------------------------- Entravision Communications Corp. 1 6,400 45,568 ------------------------------------------------------------------------------- Focus Media Holding Ltd., ADR 1 5,800 195,866 ------------------------------------------------------------------------------- Interactive Data Corp. 2,400 54,504 ------------------------------------------------------------------------------- Interpublic Group of Cos., Inc. 1 8,500 82,025 ------------------------------------------------------------------------------- Journal Communications, Inc. 2 12,400 172,980 ------------------------------------------------------------------------------- Journal Register Co. 2 1,700 25,415 ------------------------------------------------------------------------------- Liberty Corp. 2 2,800 131,068 ------------------------------------------------------------------------------- Media General, Inc., Cl. A 7,400 375,180 ------------------------------------------------------------------------------- Mediacom Communications Corp. 1,2 24,800 136,152 ------------------------------------------------------------------------------- Meredith Corp. 5,800 303,572 ------------------------------------------------------------------------------- Playboy Enterprises, Inc., Cl. B 1,2 9,300 129,177 ------------------------------------------------------------------------------- PRIMEDIA, Inc. 1,2 9,600 15,456 ------------------------------------------------------------------------------- R.H. Donnelley Corp. 1 6,700 412,854 ------------------------------------------------------------------------------- Readers Digest Assn., Inc. (The), Cl. A, Non-Vtg. 42,800 651,416 ------------------------------------------------------------------------------- Scholastic Corp. 1,2 11,900 339,269 ------------------------------------------------------------------------------- Sinclair Broadcast Group, Inc., Cl. A 2 40,100 368,920 ------------------------------------------------------------------------------- TiVo, Inc. 1,2 60,500 309,760 ------------------------------------------------------------------------------- Valassis Communications, Inc. 1 1,600 46,512 ------------------------------------------------------------------------------- Westwood One, Inc. 17,900 291,770 ------------------------------------------------------------------------------- Wiley (John) & Sons, Inc., Cl. A 10,600 413,824 ------------------------------------------------------------------------------- World Wrestling Federation Entertainment, Inc. 1,900 27,892 -------------- 7,392,310 ------------------------------------------------------------------------------- MULTILINE RETAIL--0.9% 99 Cents Only Stores 1,2 17,500 183,050 ------------------------------------------------------------------------------- Big Lots, Inc. 1,2 22,100 265,421 ------------------------------------------------------------------------------- Bon-Ton Stores, Inc. 3,000 57,390 ------------------------------------------------------------------------------- Conn's, Inc. 1,2 1,200 44,244 ------------------------------------------------------------------------------- Dillard's, Inc., Cl. A 12,500 310,250 ------------------------------------------------------------------------------- Dollar Tree Stores, Inc. 1 20,000 478,800 ------------------------------------------------------------------------------- Fred's, Inc. 2 6,900 112,263 ------------------------------------------------------------------------------- Retail Ventures, Inc. 1,2 18,100 225,164 ------------------------------------------------------------------------------- Saks, Inc. 1 12,300 207,378 ------------------------------------------------------------------------------- Stage Stores, Inc. 29,050 865,109 ------------------------------------------------------------------------------- Stein Mart, Inc. 22,700 412,005 -------------- 3,161,074 8 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- SPECIALTY RETAIL--6.4% Abercrombie & Fitch Co., Cl. A 1,400 $ 91,252 ------------------------------------------------------------------------------- Advance Auto Parts, Inc. 1 5,800 252,068 ------------------------------------------------------------------------------- Aeropostale, Inc. 1 13,100 344,530 ------------------------------------------------------------------------------- American Eagle Outfitters, Inc. 14,800 340,104 ------------------------------------------------------------------------------- Asbury Automotive Group, Inc. 1 5,900 97,114 ------------------------------------------------------------------------------- AutoNation, Inc. 1 11,400 247,722 ------------------------------------------------------------------------------- Barnes & Noble, Inc. 12,800 546,176 ------------------------------------------------------------------------------- bebe stores, inc. 2 19,412 272,350 ------------------------------------------------------------------------------- Blair Corp. 967 37,655 ------------------------------------------------------------------------------- Borders Group, Inc. 6,800 147,356 ------------------------------------------------------------------------------- Buckle, Inc. (The) 2 7,800 251,472 ------------------------------------------------------------------------------- Building Materials Holding Corp. 2 10,400 709,384 ------------------------------------------------------------------------------- Burlington Coat Factory Warehouse Corp. 9,700 390,037 ------------------------------------------------------------------------------- Casual Male Retail Group, Inc. 1,2 18,100 110,953 ------------------------------------------------------------------------------- Cato Corp., Cl. A 17,750 380,738 ------------------------------------------------------------------------------- Charlotte Russe Holding, Inc. 1,2 16,700 347,861 ------------------------------------------------------------------------------- Charming Shoppes, Inc. 1,2 94,600 1,248,720 ------------------------------------------------------------------------------- Children's Place Retail Stores, Inc. 1,2 19,000 938,980 ------------------------------------------------------------------------------- Christopher & Banks Corp. 2 12,800 240,384 ------------------------------------------------------------------------------- Circuit City Stores, Inc./Circuit City Group 17,000 384,030 ------------------------------------------------------------------------------- Citi Trends, Inc. 1,2 1,000 42,690 ------------------------------------------------------------------------------- Claire's Stores, Inc. 15,200 444,144 ------------------------------------------------------------------------------- CSK Auto Corp. 1 26,200 395,096 ------------------------------------------------------------------------------- Deb Shops, Inc. 500 14,865 ------------------------------------------------------------------------------- Finish Line, Inc. (The), Cl. A 10,400 181,168 ------------------------------------------------------------------------------- GameStop Corp., Cl. A 1,2 9,633 306,522 ------------------------------------------------------------------------------- Genesco, Inc. 1 23,100 896,049 ------------------------------------------------------------------------------- Golf Galaxy, Inc. 1 300 5,745 ------------------------------------------------------------------------------- Group 1 Automotive, Inc. 1,2 6,800 213,724 ------------------------------------------------------------------------------- Guess?, Inc. 1 23,900 850,840 ------------------------------------------------------------------------------- Gymboree Corp. 1,2 14,200 332,280 ------------------------------------------------------------------------------- Hibbett Sporting Goods, Inc. 1,2 27,487 782,830 ------------------------------------------------------------------------------- Jos. A. Banks Clothiers, Inc. 1 2,200 95,502 ------------------------------------------------------------------------------- Linens `N Things, Inc. 1 7,900 210,140 ------------------------------------------------------------------------------- Lithia Motors, Inc., Cl. A 7,100 223,224 ------------------------------------------------------------------------------- Men's Wearhouse, Inc. (The) 1 28,850 849,344 ------------------------------------------------------------------------------- NetFlix.com, Inc. 1,2 16,400 443,784 ------------------------------------------------------------------------------- Office Depot, Inc. 1 2,900 91,060 ------------------------------------------------------------------------------- OfficeMax, Inc. 17,600 446,336 ------------------------------------------------------------------------------- Pacific Sunwear of California, Inc. 1 12,175 303,401 ------------------------------------------------------------------------------- Pantry, Inc. (The) 1 19,600 921,004 ------------------------------------------------------------------------------- Payless ShoeSource, Inc. 1 41,700 1,046,670 ------------------------------------------------------------------------------- RadioShack Corp. 16,000 336,480 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- SPECIALTY RETAIL Continued Rent-A-Center, Inc. 1 1,000 $ 18,860 ------------------------------------------------------------------------------- Rent-Way, Inc. 1,2 10,300 65,817 ------------------------------------------------------------------------------- Restoration Hardware, Inc. 1,2 4,100 24,682 ------------------------------------------------------------------------------- Select Comfort Corp. 1,2 22,300 609,905 ------------------------------------------------------------------------------- Shoe Carnival, Inc. 1 2,500 54,800 ------------------------------------------------------------------------------- Sonic Automotive, Inc. 17,600 392,128 ------------------------------------------------------------------------------- Sports Authority, Inc. (The) 1,2 27,400 852,962 ------------------------------------------------------------------------------- Syms Corp. 800 11,552 ------------------------------------------------------------------------------- Talbots, Inc. (The) 2 24,600 684,372 ------------------------------------------------------------------------------- Tiffany & Co. 8,700 333,123 ------------------------------------------------------------------------------- Too, Inc. 1 30,100 849,121 ------------------------------------------------------------------------------- Trans World Entertainment Corp. 1,2 11,900 67,830 ------------------------------------------------------------------------------- Tuesday Morning Corp. 2 14,300 299,156 ------------------------------------------------------------------------------- United Auto Group, Inc. 2 25,800 985,560 ------------------------------------------------------------------------------- West Marine, Inc. 1,2 2,800 39,144 ------------------------------------------------------------------------------- Wet Seal, Inc., Cl. A 1,2 33,300 147,852 ------------------------------------------------------------------------------- Wilsons The Leather Experts, Inc. 1,2 6,100 22,143 ------------------------------------------------------------------------------- Zale Corp. 1 31,900 802,285 -------------- 23,073,076 ------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS--1.6% Carter's, Inc. 1 2,500 147,125 ------------------------------------------------------------------------------- Cherokee, Inc. 4,500 154,755 ------------------------------------------------------------------------------- Columbia Sportswear Co. 1,2 4,200 200,466 ------------------------------------------------------------------------------- Hartmarx Corp. 1 7,100 55,451 ------------------------------------------------------------------------------- Iconix Brand Group, Inc. 1 9,500 96,805 ------------------------------------------------------------------------------- Jones Apparel Group, Inc. 10,700 328,704 ------------------------------------------------------------------------------- K-Swiss, Inc., Cl. A 19,400 629,336 ------------------------------------------------------------------------------- Kellwood Co. 2 900 21,492 ------------------------------------------------------------------------------- Kenneth Cole Productions, Inc., Cl. A 2 4,500 114,750 ------------------------------------------------------------------------------- Liz Claiborne, Inc. 8,900 318,798 ------------------------------------------------------------------------------- Oxford Industries, Inc. 400 21,880 ------------------------------------------------------------------------------- Phillips/Van Heusen Corp. 18,100 586,440 ------------------------------------------------------------------------------- Skechers U.S.A., Inc., Cl. A 1 13,800 211,416 ------------------------------------------------------------------------------- Steven Madden Ltd. 10,200 298,146 ------------------------------------------------------------------------------- Stride Rite Corp. 21,400 290,184 ------------------------------------------------------------------------------- Timberland Co., Cl. A 1 8,900 289,695 ------------------------------------------------------------------------------- Tommy Hilfiger Corp. 1 34,300 557,032 ------------------------------------------------------------------------------- Under Armour, Inc., Cl. A 1,2 6,000 229,860 ------------------------------------------------------------------------------- UniFirst Corp. 2,800 87,080 ------------------------------------------------------------------------------- Warnaco Group, Inc. (The) 1 13,900 371,408 ------------------------------------------------------------------------------- Wolverine World Wide, Inc. 39,850 895,031 -------------- 5,905,854 9 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- CONSUMER STAPLES--3.0% ------------------------------------------------------------------------------- BEVERAGES--0.1% Boston Beer Co., Inc., Cl. A 1 5,900 $ 147,500 ------------------------------------------------------------------------------- National Beverage Corp. 1,200 11,724 ------------------------------------------------------------------------------- PepsiAmericas, Inc. 8,900 207,014 -------------- 366,238 ------------------------------------------------------------------------------- FOOD & STAPLES RETAILING--1.0% Andersons, Inc. (The) 2 1,000 43,080 ------------------------------------------------------------------------------- Arden Group, Inc., Cl. A 2 900 81,891 ------------------------------------------------------------------------------- BJ's Wholesale Club, Inc. 1 6,700 198,052 ------------------------------------------------------------------------------- Casey's General Stores, Inc. 2 23,400 580,320 ------------------------------------------------------------------------------- Great Atlantic & Pacific Tea Co., Inc. (The) 1,2 8,900 282,842 ------------------------------------------------------------------------------- Ingles Markets, Inc., Cl. A 1,200 18,780 ------------------------------------------------------------------------------- Longs Drug Stores, Inc. 2 16,900 614,991 ------------------------------------------------------------------------------- Nash Finch Co. 2 2,500 63,700 ------------------------------------------------------------------------------- Pathmark Stores, Inc. 1 12,000 119,880 ------------------------------------------------------------------------------- Performance Food Group Co. 1,2 23,300 661,021 ------------------------------------------------------------------------------- Rite Aid Corp. 1,2 52,600 183,048 ------------------------------------------------------------------------------- Ruddick Corp. 13,300 283,024 ------------------------------------------------------------------------------- Spartan Stores, Inc. 1 5,600 58,352 ------------------------------------------------------------------------------- SUPERVALU, Inc. 14,100 457,968 ------------------------------------------------------------------------------- Weis Markets, Inc. 2 1,200 51,648 -------------- 3,698,597 ------------------------------------------------------------------------------- FOOD PRODUCTS--1.1% Chiquita Brands International, Inc. 30,800 616,308 ------------------------------------------------------------------------------- Darling International, Inc. 1,2 20,100 79,797 ------------------------------------------------------------------------------- Del Monte Foods Co. 1 31,400 327,502 ------------------------------------------------------------------------------- Flowers Foods, Inc. 28,700 790,972 ------------------------------------------------------------------------------- Gold Kist Holdings, Inc. 1,2 17,000 254,150 ------------------------------------------------------------------------------- Hain Celestial Group, Inc. 1 14,700 311,052 ------------------------------------------------------------------------------- Hormel Foods Corp. 500 16,340 ------------------------------------------------------------------------------- Imperial Sugar Co. 100 1,358 ------------------------------------------------------------------------------- J&J Snack Foods Corp. 4,500 267,345 ------------------------------------------------------------------------------- Lancaster Colony Corp. 3,300 122,265 ------------------------------------------------------------------------------- Lance, Inc. 2 2,600 48,438 ------------------------------------------------------------------------------- M&F Worldwide Corp. 1 2,600 42,432 ------------------------------------------------------------------------------- McCormick & Co., Inc., Non-Vtg. 2,500 77,300 ------------------------------------------------------------------------------- Pilgrim's Pride Corp., Cl. B 2 12,400 411,184 ------------------------------------------------------------------------------- Premium Standard Farms, Inc. 4,100 61,336 ------------------------------------------------------------------------------- Ralcorp Holdings, Inc. 1 3,800 151,658 ------------------------------------------------------------------------------- Seaboard Corp. 2 200 302,200 -------------- 3,881,637 ------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS--0.4% Chattem, Inc. 1,2 15,900 578,601 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS Continued Church & Dwight Co., Inc. 1,900 $ 62,757 ------------------------------------------------------------------------------- Energizer Holdings, Inc. 1 8,600 428,194 ------------------------------------------------------------------------------- Playtex Products, Inc. 1,2 24,500 334,915 ------------------------------------------------------------------------------- Spectrum Brands, Inc. 1 7,200 146,232 -------------- 1,550,699 ------------------------------------------------------------------------------- PERSONAL PRODUCTS--0.2% Inter Parfums, Inc. 600 10,776 ------------------------------------------------------------------------------- Mannatech, Inc. 2 4,700 64,907 ------------------------------------------------------------------------------- Nature's Sunshine Products, Inc. 10,000 180,800 ------------------------------------------------------------------------------- Parlux Fragrances, Inc. 1,2 9,800 299,194 ------------------------------------------------------------------------------- USANA Health Sciences, Inc. 1,2 6,500 249,340 -------------- 805,017 ------------------------------------------------------------------------------- TOBACCO--0.2% Loews Corp./Carolina Group 7,600 334,324 ------------------------------------------------------------------------------- Vector Group Ltd. 2 15,935 289,539 -------------- 623,863 ------------------------------------------------------------------------------- ENERGY--8.0% ------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES--3.0% Atwood Oceanics, Inc. 1,2 2,100 163,863 ------------------------------------------------------------------------------- CHC Helicopter Corp., Cl. A 1,400 32,891 ------------------------------------------------------------------------------- Cooper Cameron Corp. 1 8,500 351,900 ------------------------------------------------------------------------------- Ensign Energy Services, Inc. 13,600 548,937 ------------------------------------------------------------------------------- Global Industries Ltd. 1 45,800 519,830 ------------------------------------------------------------------------------- Grant Prideco, Inc. 1 3,200 141,184 ------------------------------------------------------------------------------- Grey Wolf, Inc. 1 133,900 1,035,047 ------------------------------------------------------------------------------- Gulf Island Fabrication, Inc. 2 900 21,879 ------------------------------------------------------------------------------- Gulfmark Offshore, Inc. 1 1,800 53,316 ------------------------------------------------------------------------------- Helmerich & Payne, Inc. 9,700 600,527 ------------------------------------------------------------------------------- Hercules Offshore, Inc. 1 12,700 360,807 ------------------------------------------------------------------------------- Hornbeck Offshore Services, Inc. 1,2 11,200 366,240 ------------------------------------------------------------------------------- Hydril Co. 1 2,200 137,720 ------------------------------------------------------------------------------- Lone Star Technologies, Inc. 1 21,300 1,100,358 ------------------------------------------------------------------------------- Maverick Tube Corp. 1,2 10,900 434,474 ------------------------------------------------------------------------------- NS Group, Inc. 1 23,000 961,630 ------------------------------------------------------------------------------- Oceaneering International, Inc. 1 2,700 134,406 ------------------------------------------------------------------------------- Offshore Logistics, Inc. 1 100 2,920 ------------------------------------------------------------------------------- Oil States International, Inc. 1 11,800 373,824 ------------------------------------------------------------------------------- Parker Drilling Co. 1 21,900 237,177 ------------------------------------------------------------------------------- Prairie Schooner Petroleum Ltd. 1,3 1,200 24,259 ------------------------------------------------------------------------------- Precision Drilling Trust 3,000 99,049 ------------------------------------------------------------------------------- Pride International, Inc. 1 6,700 206,025 ------------------------------------------------------------------------------- Technicoil Corp. 1 7,100 23,820 ------------------------------------------------------------------------------- Technicoil Corp. 1 47,900 160,704 ------------------------------------------------------------------------------- Tetra Technologies, Inc. 1,2 14,700 448,644 10 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES Continued Trican Well Service Ltd. 1 12,300 $ 592,542 ------------------------------------------------------------------------------- Universal Compression Holdings, Inc. 1 15,200 625,024 ------------------------------------------------------------------------------- Veritas DGC, Inc. 1 29,100 1,032,759 -------------- 10,791,756 ------------------------------------------------------------------------------- OIL & GAS--5.0% Alberta Clipper Energy, Inc. 1 7,887 26,122 ------------------------------------------------------------------------------- Alon USA Energy, Inc. 1 2,200 43,230 ------------------------------------------------------------------------------- Alpha Natural Resources, Inc. 1 2,700 51,867 ------------------------------------------------------------------------------- Atlas America, Inc. 1 5,568 335,305 ------------------------------------------------------------------------------- Atlas Energy Ltd. 1 92,200 380,713 ------------------------------------------------------------------------------- ATP Oil & Gas Corp. 1,2 2,700 99,927 ------------------------------------------------------------------------------- Basic Energy Services, Inc. 1 9,600 191,520 ------------------------------------------------------------------------------- Berry Petroleum Co., Cl. A 2 1,700 97,240 ------------------------------------------------------------------------------- Brigham Exploration Co. 1 12,100 143,506 ------------------------------------------------------------------------------- Callon Petroleum Co. 1 16,900 298,285 ------------------------------------------------------------------------------- Capital Energy Resources Ltd. 1 24,500 105,592 ------------------------------------------------------------------------------- Chamaelo Exploration Ltd. 1 2,080 13,688 ------------------------------------------------------------------------------- Clear Energy, Inc. 1 36,133 164,742 ------------------------------------------------------------------------------- Comstock Resources, Inc. 1,2 28,100 857,331 ------------------------------------------------------------------------------- Crew Energy, Inc. 1 2,666 42,887 ------------------------------------------------------------------------------- Cyries Energy, Inc. 1 1,940 25,050 ------------------------------------------------------------------------------- Delphi Energy Corp. 1 35,000 171,319 ------------------------------------------------------------------------------- Duvernay Oil Corp. 1 4,500 171,220 ------------------------------------------------------------------------------- Edge Petroleum Corp. 1,2 14,100 351,231 ------------------------------------------------------------------------------- Ember Resources, Inc. 1 7,887 52,582 ------------------------------------------------------------------------------- Ember Resources, Inc. 1 9,700 60,443 ------------------------------------------------------------------------------- Energy Partners Ltd. 1 18,800 409,652 ------------------------------------------------------------------------------- Find Energy Ltd. 1 4,200 33,493 ------------------------------------------------------------------------------- Find Energy Ltd. 1 28,100 224,084 ------------------------------------------------------------------------------- Forest Oil Corp. 1 8,000 364,560 ------------------------------------------------------------------------------- Foundation Coal Holdings, Inc. 1,400 53,200 ------------------------------------------------------------------------------- Frontier Oil Corp. 3,400 127,602 ------------------------------------------------------------------------------- Galleon Energy, Inc., Cl. A 1 6,900 145,426 ------------------------------------------------------------------------------- Galleon Energy, Inc., Subscription Receipts 1 7,500 158,071 ------------------------------------------------------------------------------- General Maritime Corp. 2 14,100 522,264 ------------------------------------------------------------------------------- Giant Industries, Inc. 1 15,200 789,792 ------------------------------------------------------------------------------- Highpine Oil & Gas Ltd. 1 1,700 30,272 ------------------------------------------------------------------------------- Holly Corp. 4,100 241,367 ------------------------------------------------------------------------------- Houston Exploration Co. 1 11,900 628,320 ------------------------------------------------------------------------------- KCS Energy, Inc. 1,2 37,600 910,672 ------------------------------------------------------------------------------- Mahalo Energy Ltd. 1,3 19,500 117,424 ------------------------------------------------------------------------------- Maritrans, Inc. 7,700 200,354 ------------------------------------------------------------------------------- Meridian Resource Corp. (The) 1 10,800 45,360 ------------------------------------------------------------------------------- Midnight Oil Exploration Ltd. 1 45,050 171,294 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- OIL & GAS Continued Mission Oil & Gas, Inc. 1 5,532 $ 35,264 ------------------------------------------------------------------------------- Mission Oil & Gas, Inc. 1,4 6,400 40,797 ------------------------------------------------------------------------------- OMI Corp. 2 27,100 491,865 ------------------------------------------------------------------------------- Open Range Energy Corp. 1 910 3,718 ------------------------------------------------------------------------------- Overseas Shipholding Group, Inc. 9,100 458,549 ------------------------------------------------------------------------------- Paramount Resources Ltd., Cl. A 1 25,200 669,861 ------------------------------------------------------------------------------- Penn Virginia Corp. 1,300 74,620 ------------------------------------------------------------------------------- Petrohawk Energy Corp. 1 15,700 207,554 ------------------------------------------------------------------------------- PetroQuest Energy, Inc. 1,2 42,700 353,556 ------------------------------------------------------------------------------- Pogo Producing Co. 4,700 234,107 ------------------------------------------------------------------------------- ProEx Energy Ltd. 1 1,940 27,370 ------------------------------------------------------------------------------- ProspEx Resources Ltd. 1 33,020 99,419 ------------------------------------------------------------------------------- Real Resources, Inc. 1 4,800 102,817 ------------------------------------------------------------------------------- Remington Oil & Gas Corp. 1 26,300 959,950 ------------------------------------------------------------------------------- Resource America, Inc., Cl. A 2,700 46,035 ------------------------------------------------------------------------------- Sequoia Oil & Gas Trust 275 4,795 ------------------------------------------------------------------------------- Sequoia Oil & Gas Trust 3,600 62,774 ------------------------------------------------------------------------------- St. Mary Land & Exploration Co. 5,400 198,774 ------------------------------------------------------------------------------- Stone Energy Corp. 1 12,500 569,125 ------------------------------------------------------------------------------- Swift Energy Co. 1,2 23,100 1,041,117 ------------------------------------------------------------------------------- Tesoro Corp. 8,800 541,640 ------------------------------------------------------------------------------- Thunder Energy Trust 11,833 122,152 ------------------------------------------------------------------------------- TransMontaigne, Inc. 1 10,800 71,280 ------------------------------------------------------------------------------- Trilogy Energy Trust 9,400 192,456 ------------------------------------------------------------------------------- True Energy Trust 8,750 156,566 ------------------------------------------------------------------------------- Tusk Energy Corp. 1 26,300 114,481 ------------------------------------------------------------------------------- Tusk Energy Corp. 1,4 21,300 92,716 ------------------------------------------------------------------------------- USEC, Inc. 2 32,900 393,155 ------------------------------------------------------------------------------- Vault Energy Trust 5,200 50,996 ------------------------------------------------------------------------------- Vero Energy, Inc. 1 2,482 11,338 ------------------------------------------------------------------------------- Vintage Petroleum, Inc. 15,500 826,615 ------------------------------------------------------------------------------- W&T Offshore, Inc. 2 3,500 102,900 ------------------------------------------------------------------------------- West Energy Ltd. 1 8,600 59,333 ------------------------------------------------------------------------------- White Fire Energy Ltd. 1 275 639 ------------------------------------------------------------------------------- White Fire Energy Ltd. 1 3,600 8,362 ------------------------------------------------------------------------------- Whiting Petroleum Corp. 1,2 20,200 808,000 ------------------------------------------------------------------------------- Williams (Clayton) Energy, Inc. 1 1,200 50,088 ------------------------------------------------------------------------------- Zenas Energy Corp. 17,437 78,751 -------------- 18,220,542 ------------------------------------------------------------------------------- FINANCIALS--12.2% ------------------------------------------------------------------------------- CAPITAL MARKETS--0.2% GAMCO Investors, Inc., Cl. A 2 3,500 152,355 ------------------------------------------------------------------------------- Knight Capital Group, Inc., Cl. A 1,2 24,700 244,283 ------------------------------------------------------------------------------- Stifel Financial Corp. 1,2 2,200 82,698 ------------------------------------------------------------------------------- SWS Group, Inc. 2 8,000 167,520 -------------- 646,856 11 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- COMMERCIAL BANKS--2.8% Anchor BanCorp Wisconsin, Inc. 2 2,700 $ 81,918 ------------------------------------------------------------------------------- Astoria Financial Corp. 17,350 510,090 ------------------------------------------------------------------------------- BancorpSouth, Inc. 2 1,300 28,691 ------------------------------------------------------------------------------- Bank of Hawaii Corp. 1,500 77,310 ------------------------------------------------------------------------------- BankUnited Financial Corp., Cl. A 2,800 74,396 ------------------------------------------------------------------------------- Berkshire Hills Bancorp, Inc. 2 600 20,100 ------------------------------------------------------------------------------- Capital Corp. of the West 2 620 20,119 ------------------------------------------------------------------------------- Capital Crossing Bank 1,2 100 3,340 ------------------------------------------------------------------------------- Capitol Bancorp Ltd. 1,500 56,160 ------------------------------------------------------------------------------- Center Financial Corp. 2 500 12,580 ------------------------------------------------------------------------------- Central Pacific Financial Corp. 2 700 25,144 ------------------------------------------------------------------------------- Chittenden Corp. 2 7,000 194,670 ------------------------------------------------------------------------------- Citizens First Bancorp, Inc. 2,100 49,518 ------------------------------------------------------------------------------- City Holding Co. 2 6,300 226,485 ------------------------------------------------------------------------------- Columbia Banking System, Inc. 2 5,090 145,320 ------------------------------------------------------------------------------- Commerce Bancshares, Inc. 2 3,360 175,123 ------------------------------------------------------------------------------- Community Bank System, Inc. 2 21,100 475,805 ------------------------------------------------------------------------------- Community Trust Bancorp, Inc. 2,415 74,261 ------------------------------------------------------------------------------- Corus Bankshares, Inc. 2 11,700 658,359 ------------------------------------------------------------------------------- Downey Financial Corp. 2 11,000 752,290 ------------------------------------------------------------------------------- F.N.B. Corp. 2 2,600 45,136 ------------------------------------------------------------------------------- First BanCorp 2 9,700 120,377 ------------------------------------------------------------------------------- First Citizens BancShares, Inc., Cl. A 2 1,200 209,304 ------------------------------------------------------------------------------- First Commonwealth Financial Corp. 2 24,300 314,199 ------------------------------------------------------------------------------- First Defiance Financial Corp. 1,600 43,344 ------------------------------------------------------------------------------- First Financial Holdings, Inc. 1,900 58,368 ------------------------------------------------------------------------------- First Indiana Corp. 2 2,600 89,388 ------------------------------------------------------------------------------- First Midwest Bancorp, Inc. 2 4,725 165,659 ------------------------------------------------------------------------------- First Place Financial Corp. 2 6,600 158,730 ------------------------------------------------------------------------------- First Republic Bank 3,700 136,937 ------------------------------------------------------------------------------- First Security Group, Inc. 2 24,900 242,526 ------------------------------------------------------------------------------- First South Bancorp, Inc. 2 400 14,128 ------------------------------------------------------------------------------- FirstFed Financial Corp. 1,2 10,700 583,364 ------------------------------------------------------------------------------- Flagstar Bancorp, Inc. 4,600 66,240 ------------------------------------------------------------------------------- Greater Bay Bancorp 12,200 312,564 ------------------------------------------------------------------------------- Greene County Bancshares, Inc. 2 2,400 65,664 ------------------------------------------------------------------------------- Harbor Florida Bancshares, Inc. 2 4,900 181,545 ------------------------------------------------------------------------------- Horizon Financial Corp. 2 200 4,368 ------------------------------------------------------------------------------- Hudson United Bancorp 1,000 41,680 ------------------------------------------------------------------------------- Independent Bank Corp. 7,950 216,479 ------------------------------------------------------------------------------- ITLA Capital Corp. 1 1,100 53,735 ------------------------------------------------------------------------------- MAF Bancorp, Inc. 2 6,400 264,832 ------------------------------------------------------------------------------- MainSource Financial Group, Inc. 2 2,583 46,107 ------------------------------------------------------------------------------- NASB Financial, Inc. 2 600 23,616 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- COMMERCIAL BANKS Continued National Bankshares, Inc. 400 $ 18,800 ------------------------------------------------------------------------------- Net.B@nk, Inc. 2,100 15,078 ------------------------------------------------------------------------------- Pacific Capital Bancorp 2 16,610 590,984 ------------------------------------------------------------------------------- PFF Bancorp, Inc. 10,010 305,505 ------------------------------------------------------------------------------- Provident Bankshares Corp. 14,451 488,010 ------------------------------------------------------------------------------- Provident Financial Holdings, Inc. 2 800 21,040 ------------------------------------------------------------------------------- Provident Financial Services, Inc. 2,100 38,871 ------------------------------------------------------------------------------- Republic Bancorp, Inc. 682 8,116 ------------------------------------------------------------------------------- Republic Bancorp, Inc., Cl. A 3,338 71,600 ------------------------------------------------------------------------------- Seacoast Banking Corp. of Florida 2 230 5,279 ------------------------------------------------------------------------------- Southwest Bancorp, Inc. 2 600 12,000 ------------------------------------------------------------------------------- State Bancorp, Inc. 994 16,640 ------------------------------------------------------------------------------- Sterling Bancshares, Inc. 1,200 18,528 ------------------------------------------------------------------------------- Sterling Financial Corp., Western US 9,775 244,180 ------------------------------------------------------------------------------- Susquehanna Bancshares, Inc. 2 5,000 118,400 ------------------------------------------------------------------------------- SVB Financial Group 1 1,600 74,944 ------------------------------------------------------------------------------- Taylor Capital Group, Inc. 2,000 80,800 ------------------------------------------------------------------------------- TCF Financial Corp. 6,200 168,268 ------------------------------------------------------------------------------- TierOne Corp. 2 8,000 235,280 ------------------------------------------------------------------------------- Union Bankshares Corp. 1,100 47,410 ------------------------------------------------------------------------------- W. Holding Co., Inc. 9,500 78,185 ------------------------------------------------------------------------------- WesBanco, Inc. 2 700 21,287 ------------------------------------------------------------------------------- WSFS Financial Corp. 2 4,600 281,750 -------------- 10,080,924 ------------------------------------------------------------------------------- CONSUMER FINANCE--0.1% ASTA Funding, Inc. 2 11,900 325,346 ------------------------------------------------------------------------------- Nelnet, Inc., Cl. A 1,2 5,600 227,808 -------------- 553,154 ------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES--1.3% Ace Cash Express, Inc. 1,2 1,200 28,020 ------------------------------------------------------------------------------- Advanta Corp., Cl. B 2 17,500 567,700 ------------------------------------------------------------------------------- AmeriCredit Corp. 1 19,700 504,911 ------------------------------------------------------------------------------- Apollo Investment Corp. 8,000 143,440 ------------------------------------------------------------------------------- Asset Acceptance Capital Corp. 1 16,100 361,606 ------------------------------------------------------------------------------- CompuCredit Corp. 1,2 5,600 215,488 ------------------------------------------------------------------------------- Eaton Vance Corp. 2 7,100 194,256 ------------------------------------------------------------------------------- Encore Capital Group, Inc. 1,2 8,500 147,475 ------------------------------------------------------------------------------- Investment Technology Group, Inc. 1 1,900 67,336 ------------------------------------------------------------------------------- Janus Capital Group, Inc. 21,400 398,682 ------------------------------------------------------------------------------- Jefferies Group, Inc. 3,200 143,936 ------------------------------------------------------------------------------- LaBranche & Co., Inc. 1,2 39,000 394,290 ------------------------------------------------------------------------------- Lazard Ltd., Cl. A 3,400 108,460 ------------------------------------------------------------------------------- Medallion Financial Corp. 3,800 42,788 12 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES Continued Piper Jaffray Cos., Inc. 1,2 7,000 $ 282,800 ------------------------------------------------------------------------------- Raymond James Financial, Inc. 4,100 154,447 ------------------------------------------------------------------------------- Sanders Morris Harris Group, Inc. 2 2,700 44,253 ------------------------------------------------------------------------------- SEI Investments Co. 1,200 44,400 ------------------------------------------------------------------------------- Student Loan Corp. (The) 1,200 251,076 ------------------------------------------------------------------------------- WFS Financial, Inc. 1 5,100 388,365 ------------------------------------------------------------------------------- World Acceptance Corp. 1 1,800 51,300 -------------- 4,535,029 ------------------------------------------------------------------------------- INSURANCE--5.7% 21st Century Insurance Group 300 4,854 ------------------------------------------------------------------------------- Affirmative Insurance Holdings, Inc. 4,300 62,737 ------------------------------------------------------------------------------- Alfa Corp. 2 4,800 77,280 ------------------------------------------------------------------------------- Alleghany Corp. 700 198,800 ------------------------------------------------------------------------------- American Equity Investment Life Holding Co. 21,900 285,795 ------------------------------------------------------------------------------- American Physicians Capital, Inc. 1 7,000 320,530 ------------------------------------------------------------------------------- AmerUs Group Co. 14,200 804,714 ------------------------------------------------------------------------------- Arch Capital Group Ltd. 1 13,000 711,750 ------------------------------------------------------------------------------- Argonaut Group, Inc. 1,2 18,200 596,414 ------------------------------------------------------------------------------- Aspen Insurance Holdings Ltd. 8,700 205,929 ------------------------------------------------------------------------------- Assurant, Inc. 5,100 221,799 ------------------------------------------------------------------------------- Baldwin & Lyons, Inc., Cl. B, Non-Vtg. 2 300 7,290 ------------------------------------------------------------------------------- Berkley (W.R.) Corp. 5,500 261,910 ------------------------------------------------------------------------------- Bristol West Holdings, Inc. 2 16,500 313,995 ------------------------------------------------------------------------------- Clark, Inc. 2 3,500 46,375 ------------------------------------------------------------------------------- Commerce Group, Inc. (The) 4,100 234,848 ------------------------------------------------------------------------------- Covanta Holding Corp. 1 6,500 97,890 ------------------------------------------------------------------------------- Delphi Financial Group, Inc., Cl. A 2 16,500 759,165 ------------------------------------------------------------------------------- Direct General Corp. 2 14,800 250,120 ------------------------------------------------------------------------------- Donegal Group, Inc., Cl. A 2 6,301 146,435 ------------------------------------------------------------------------------- Fidelity National Financial, Inc. 779 28,659 ------------------------------------------------------------------------------- Fidelity National Title Group, Inc., Cl. A 136 3,312 ------------------------------------------------------------------------------- FPIC Insurance Group, Inc. 1,2 8,700 301,890 ------------------------------------------------------------------------------- Great American Financial Resources, Inc. 2 3,000 59,520 ------------------------------------------------------------------------------- Harleysville Group, Inc. 200 5,300 ------------------------------------------------------------------------------- Hilb, Rogal & Hamilton Co. 2 6,800 261,868 ------------------------------------------------------------------------------- Horace Mann Educators Corp. 34,300 650,328 ------------------------------------------------------------------------------- Independence Holding Co. 2 640 12,512 ------------------------------------------------------------------------------- Infinity Property & Casualty Corp. 21,800 811,178 ------------------------------------------------------------------------------- James River Group, Inc. 1 1,500 29,775 ------------------------------------------------------------------------------- LandAmerica Financial Group, Inc. 2 11,900 742,560 ------------------------------------------------------------------------------- Mercury General Corp. 2,600 151,372 ------------------------------------------------------------------------------- National Financial Partners Corp. 21,000 1,103,550 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- INSURANCE Continued National Western Life Insurance Co., Cl. A 500 $ 103,455 ------------------------------------------------------------------------------- Navigators Group, Inc. (The) 1 6,600 287,826 ------------------------------------------------------------------------------- Odyssey Re Holdings Corp. 2 15,000 376,200 ------------------------------------------------------------------------------- Ohio Casualty Corp. 39,200 1,110,144 ------------------------------------------------------------------------------- Old Republic International Corp. 16,600 435,916 ------------------------------------------------------------------------------- Phoenix Cos., Inc. (The) 2 64,300 877,052 ------------------------------------------------------------------------------- Presidential Life Corp. 2 3,500 66,640 ------------------------------------------------------------------------------- ProAssurance Corp. 1,2 8,400 408,576 ------------------------------------------------------------------------------- ProCentury Corp. 2 10,400 111,800 ------------------------------------------------------------------------------- Protective Life Corp. 6,700 293,259 ------------------------------------------------------------------------------- Republic Cos. Group, Inc. 24,700 382,356 ------------------------------------------------------------------------------- RLI Corp. 13,800 688,206 ------------------------------------------------------------------------------- Safety Insurance Group, Inc. 2 8,800 355,256 ------------------------------------------------------------------------------- Selective Insurance Group, Inc. 2 20,600 1,093,860 ------------------------------------------------------------------------------- StanCorp Financial Group, Inc. 12,600 629,370 ------------------------------------------------------------------------------- State Auto Financial Corp. 11,100 404,706 ------------------------------------------------------------------------------- Stewart Information Services Corp. 2 10,900 530,503 ------------------------------------------------------------------------------- UICI 11,900 422,569 ------------------------------------------------------------------------------- United America Indemnity Ltd., Cl. A 1 1,206 22,142 ------------------------------------------------------------------------------- United Fire & Casualty Co. 2 11,100 448,773 ------------------------------------------------------------------------------- Unitrin, Inc. 8,800 396,440 ------------------------------------------------------------------------------- Universal American Financial Corp. 1 28,100 423,748 ------------------------------------------------------------------------------- Zenith National Insurance Corp. 19,000 876,280 -------------- 20,515,531 ------------------------------------------------------------------------------- REAL ESTATE--1.4% Acadia Realty Trust 1,100 22,055 ------------------------------------------------------------------------------- Agree Realty Corp. 2 4,600 132,940 ------------------------------------------------------------------------------- Alexandria Real Estate Equities, Inc. 1,100 88,550 ------------------------------------------------------------------------------- Amli Residential Properties Trust 800 30,440 ------------------------------------------------------------------------------- Arden Realty, Inc. 2,500 112,075 ------------------------------------------------------------------------------- Associated Estates Realty Corp. 2 2,500 22,600 ------------------------------------------------------------------------------- Brandywine Realty Trust 6,000 167,460 ------------------------------------------------------------------------------- Camden Property Trust 900 52,128 ------------------------------------------------------------------------------- CarrAmerica Realty Corp. 2,500 86,575 ------------------------------------------------------------------------------- CB Richard Ellis Group, Inc., Cl. A 1 2,800 164,780 ------------------------------------------------------------------------------- CBL & Associates Properties, Inc. 3,400 134,334 ------------------------------------------------------------------------------- CentraCore Properties Trust 1,600 42,992 ------------------------------------------------------------------------------- Colonial Properties Trust 1,954 82,029 ------------------------------------------------------------------------------- Consolidated-Tomoka Land Co. 700 49,630 ------------------------------------------------------------------------------- Corporate Office Properties Trust 4,000 142,160 ------------------------------------------------------------------------------- Entertainment Properties Trust 700 28,525 ------------------------------------------------------------------------------- Equity Inns, Inc. 12,100 163,955 ------------------------------------------------------------------------------- Federal Realty Investment Trust 1,700 103,105 ------------------------------------------------------------------------------- First Industrial Realty Trust, Inc. 2 3,500 134,750 13 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- REAL ESTATE Continued Friedman, Billings, Ramsey Group, Inc., Cl. A 2 2,300 $ 22,770 ------------------------------------------------------------------------------- Glenborough Realty Trust, Inc. 800 14,480 ------------------------------------------------------------------------------- Glimcher Realty Trust 2 2,100 51,072 ------------------------------------------------------------------------------- Health Care REIT, Inc. 4,000 135,600 ------------------------------------------------------------------------------- Healthcare Realty Trust, Inc. 4,000 133,080 ------------------------------------------------------------------------------- Heritage Property Investment Trust 2 2,700 90,180 ------------------------------------------------------------------------------- Highwoods Properties, Inc. 3,000 85,350 ------------------------------------------------------------------------------- HouseValues, Inc. 1,2 2,700 35,181 ------------------------------------------------------------------------------- HRPT Properties Trust 5,400 55,890 ------------------------------------------------------------------------------- Jones Lang LaSalle, Inc. 5,600 281,960 ------------------------------------------------------------------------------- Kilroy Realty Corp. 2,800 173,320 ------------------------------------------------------------------------------- Lexington Corporate Properties Trust 7,500 159,750 ------------------------------------------------------------------------------- LTC Properties, Inc. 2 1,300 27,339 ------------------------------------------------------------------------------- Macerich Co. (The) 600 40,284 ------------------------------------------------------------------------------- Mack-Cali Realty Corp. 1,500 64,800 ------------------------------------------------------------------------------- Maguire Properties, Inc. 1,800 55,620 ------------------------------------------------------------------------------- Mid-America Apartment Communities, Inc. 3,000 145,500 ------------------------------------------------------------------------------- Mills Corp. 1,900 79,686 ------------------------------------------------------------------------------- Nationwide Health Properties, Inc. 2 5,000 107,000 ------------------------------------------------------------------------------- Omega Healthcare Investors, Inc. 1,100 13,849 ------------------------------------------------------------------------------- Pan Pacific Retail Properties, Inc. 1,700 113,713 ------------------------------------------------------------------------------- Parkway Properties, Inc. 600 24,084 ------------------------------------------------------------------------------- Pennsylvania Real Estate Investment Trust 3,900 145,704 ------------------------------------------------------------------------------- Prentiss Properties Trust 600 24,408 ------------------------------------------------------------------------------- PS Business Parks, Inc. 500 24,600 ------------------------------------------------------------------------------- RAIT Investment Trust 800 20,736 ------------------------------------------------------------------------------- Ramco-Gershenson Properties Trust 2,100 55,965 ------------------------------------------------------------------------------- Realty Income Corp. 2,000 43,240 ------------------------------------------------------------------------------- Redwood Trust, Inc. 2 800 33,008 ------------------------------------------------------------------------------- Regency Centers Corp. 800 47,160 ------------------------------------------------------------------------------- Senior Housing Properties Trust 2 3,200 54,112 ------------------------------------------------------------------------------- Simon Property Group, Inc. 158 12,108 ------------------------------------------------------------------------------- SL Green Realty Corp. 1,500 114,585 ------------------------------------------------------------------------------- Spirit Finance Corp. 12,400 140,740 ------------------------------------------------------------------------------- Stratus Properties, Inc. 1 1,500 34,500 ------------------------------------------------------------------------------- Tanger Factory Outlet Centers, Inc. 2 4,800 137,952 ------------------------------------------------------------------------------- Town & Country Trust 2 900 30,429 ------------------------------------------------------------------------------- Trammell Crow Co. 1,2 12,000 307,800 ------------------------------------------------------------------------------- Trizec Properties, Inc. 2,000 45,840 ------------------------------------------------------------------------------- United Capital Corp. 1 400 9,868 ------------------------------------------------------------------------------- United Dominion Realty Trust, Inc. 2,400 56,256 ------------------------------------------------------------------------------- Ventas, Inc. 2,500 80,050 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- REAL ESTATE Continued Weingarten Realty Investors 1,900 $ 71,839 -------------- 5,162,491 ------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE--0.7% Accredited Home Lenders Holding Co. 1,2 10,500 520,590 ------------------------------------------------------------------------------- Bank Mutual Corp. 2 8,936 94,722 ------------------------------------------------------------------------------- Commercial Capital Bancorp, Inc. 2 10,600 181,472 ------------------------------------------------------------------------------- Federal Agricultural Mortgage Corp., Non-Vtg. 2 3,700 110,741 ------------------------------------------------------------------------------- Fremont General Corp. 2 21,800 506,414 ------------------------------------------------------------------------------- KBNT Bancorp, Inc. 2,600 42,354 ------------------------------------------------------------------------------- PMI Group, Inc. (The) 7,900 324,453 ------------------------------------------------------------------------------- Radian Group, Inc. 9,900 580,041 -------------- 2,360,787 ------------------------------------------------------------------------------- HEALTH CARE--9.2% ------------------------------------------------------------------------------- BIOTECHNOLOGY--2.0% Abgenix, Inc. 1 45,400 976,554 ------------------------------------------------------------------------------- Acadia Pharmaceuticals, Inc. 1,2 2,900 28,565 ------------------------------------------------------------------------------- Albany Molecular Research, Inc. 1,2 24,300 295,245 ------------------------------------------------------------------------------- Alkermes, Inc. 1,2 61,900 1,183,528 ------------------------------------------------------------------------------- Anadys Pharmaceuticals, Inc. 1 4,600 40,480 ------------------------------------------------------------------------------- Applera Corp./Applied Biosystems Group 23,400 621,504 ------------------------------------------------------------------------------- Arena Pharmaceuticals, Inc. 1,2 18,000 255,960 ------------------------------------------------------------------------------- ArQule, Inc. 1,2 13,800 84,456 ------------------------------------------------------------------------------- Array BioPharma, Inc. 1,2 12,800 89,728 ------------------------------------------------------------------------------- BioMarin Pharmaceutical, Inc. 1,2 16,800 181,104 ------------------------------------------------------------------------------- Cotherix, Inc. 1,2 2,100 22,302 ------------------------------------------------------------------------------- Cubist Pharmaceuticals, Inc. 1,2 23,600 501,500 ------------------------------------------------------------------------------- CV Therapeutics, Inc. 1,2 3,100 76,663 ------------------------------------------------------------------------------- deCODE genetics, Inc. 1,2 21,200 175,112 ------------------------------------------------------------------------------- Durect Corp. 1 26,600 134,862 ------------------------------------------------------------------------------- ICOS Corp. 1,2 3,800 104,994 ------------------------------------------------------------------------------- Idenix Pharmaceuticals, Inc. 1,2 1,400 23,954 ------------------------------------------------------------------------------- Illumina, Inc. 1,2 8,100 114,210 ------------------------------------------------------------------------------- Kendle International, Inc. 1,2 4,200 108,108 ------------------------------------------------------------------------------- Medarex, Inc. 1 1,700 23,545 ------------------------------------------------------------------------------- Myogen, Inc. 1 5,800 174,928 ------------------------------------------------------------------------------- Myriad Genetics, Inc. 1,2 8,500 176,800 ------------------------------------------------------------------------------- NeoPharm, Inc. 1,2 5,800 62,582 ------------------------------------------------------------------------------- Nuerocrine Biosciences, Inc. 1 1,000 62,730 ------------------------------------------------------------------------------- Onyx Pharmaceuticals, Inc. 1 1,300 37,388 ------------------------------------------------------------------------------- Pharmion Corp. 1,2 12,100 215,017 ------------------------------------------------------------------------------- Progenics Pharmaceuticals, Inc. 1 4,600 115,046 ------------------------------------------------------------------------------- Protein Design Labs, Inc. 1 1,300 36,946 ------------------------------------------------------------------------------- Regeneron Pharmaceuticals, Inc. 1 11,400 181,830 14 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- BIOTECHNOLOGY Continued Renovis, Inc. 1,2 8,000 $ 122,400 ------------------------------------------------------------------------------- Sirna Therapeutics, Inc. 1 1,100 3,333 ------------------------------------------------------------------------------- Techne Corp. 1 9,400 527,810 ------------------------------------------------------------------------------- Telik, Inc. 1 1,500 25,485 ------------------------------------------------------------------------------- Third Wave Technologies, Inc. 1 14,300 42,614 ------------------------------------------------------------------------------- United Therapeutics Corp. 1,2 4,700 324,864 ------------------------------------------------------------------------------- ViroPharma, Inc. 1 1,300 24,115 -------------- 7,176,262 ------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES--2.0% Anika Therapeutics, Inc. 1,2 6,100 71,309 ------------------------------------------------------------------------------- Aspect Medical Systems, Inc. 1,2 8,400 288,540 ------------------------------------------------------------------------------- Bausch & Lomb, Inc. 4,300 291,970 ------------------------------------------------------------------------------- Bio-Rad Laboratories, Inc., Cl. A 1 3,700 242,128 ------------------------------------------------------------------------------- Candela Corp. 1 1,900 27,436 ------------------------------------------------------------------------------- Cutera, Inc. 1,2 6,500 171,340 ------------------------------------------------------------------------------- Cynosure, Inc., Cl. A 1 9,900 207,801 ------------------------------------------------------------------------------- Dade Behring Holdings, Inc. 1,500 61,335 ------------------------------------------------------------------------------- DJ Orthopedics, Inc. 1 14,600 402,668 ------------------------------------------------------------------------------- Edwards Lifesciences Corp. 1 900 37,449 ------------------------------------------------------------------------------- Foxhollow Technologies, Inc. 1,2 1,300 38,727 ------------------------------------------------------------------------------- Haemonetics Corp. 1,2 2,600 127,036 ------------------------------------------------------------------------------- Hologic, Inc. 1,2 16,800 637,056 ------------------------------------------------------------------------------- Hospira, Inc. 1 700 29,946 ------------------------------------------------------------------------------- Idexx Laboratories, Inc. 1 3,300 237,534 ------------------------------------------------------------------------------- Inamed Corp. 1 1,150 100,832 ------------------------------------------------------------------------------- Integra LifeSciences Holdings Corp. 1 1,500 53,190 ------------------------------------------------------------------------------- Kinetic Concepts, Inc. 1 4,800 190,848 ------------------------------------------------------------------------------- Lifeline Systems, Inc. 1 1,900 69,464 ------------------------------------------------------------------------------- Medical Action Industries, Inc. 1 500 10,220 ------------------------------------------------------------------------------- Mentor Corp. 2 15,300 705,024 ------------------------------------------------------------------------------- Meridian Bioscience, Inc. 2 6,300 126,882 ------------------------------------------------------------------------------- Millipore Corp. 1 5,200 343,408 ------------------------------------------------------------------------------- Molecular Devices Corp. 1 1,900 54,967 ------------------------------------------------------------------------------- Natus Medical, Inc. 1 1,300 20,982 ------------------------------------------------------------------------------- Neurometrix, Inc. 1 400 10,912 ------------------------------------------------------------------------------- OraSure Technologies, Inc. 1,2 30,300 267,246 ------------------------------------------------------------------------------- Palomar Medical Technologies, Inc. 1,2 2,500 87,600 ------------------------------------------------------------------------------- PerkinElmer, Inc. 17,400 409,944 ------------------------------------------------------------------------------- Somanetics Corp. 1,2 2,100 67,200 ------------------------------------------------------------------------------- Syneron Medical Ltd. 1,2 1,200 38,100 ------------------------------------------------------------------------------- Thermo Electron Corp. 1 9,000 271,170 ------------------------------------------------------------------------------- Thoratec Corp. 1,2 27,400 566,906 ------------------------------------------------------------------------------- Varian, Inc. 1 13,500 537,165 ------------------------------------------------------------------------------- Ventana Medical Systems, Inc. 1 800 33,880 ------------------------------------------------------------------------------- Viasys Healthcare, Inc. 1 1,900 48,830 ------------------------------------------------------------------------------- Vital Signs, Inc. 1,200 51,384 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES Continued Waters Corp. 1 5,800 $ 219,240 -------------- 7,157,669 ------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES--3.7% Allscripts Healthcare Solutions, Inc. 1 14,100 188,940 ------------------------------------------------------------------------------- American Healthways, Inc. 1,2 19,800 895,950 ------------------------------------------------------------------------------- American Retirement Corp. 1 1,000 25,130 ------------------------------------------------------------------------------- AMERIGROUP Corp. 1 4,200 81,732 ------------------------------------------------------------------------------- AMICAS, Inc. 1,2 17,900 88,784 ------------------------------------------------------------------------------- AMN Healthcare Services, Inc. 1,2 19,000 375,820 ------------------------------------------------------------------------------- Beverly Enterprises, Inc. 1,2 50,300 587,001 ------------------------------------------------------------------------------- Cantel Medical Corp. 1,2 1,750 31,395 ------------------------------------------------------------------------------- Cerner Corp. 1 900 81,819 ------------------------------------------------------------------------------- Chemed Corp. 9,100 452,088 ------------------------------------------------------------------------------- Computer Programs & Systems, Inc. 7,100 294,153 ------------------------------------------------------------------------------- Cross Country Healthcare, Inc. 1,2 6,800 120,904 ------------------------------------------------------------------------------- Genesis HealthCare Corp. 1,2 17,200 628,144 ------------------------------------------------------------------------------- Health Net, Inc. 1 9,800 505,190 ------------------------------------------------------------------------------- Humana, Inc. 1 7,000 380,310 ------------------------------------------------------------------------------- IDX Systems Corp. 1 3,900 171,288 ------------------------------------------------------------------------------- Kindred Healthcare, Inc. 1,2 12,100 311,696 ------------------------------------------------------------------------------- LCA-Vision, Inc. 2 13,100 622,381 ------------------------------------------------------------------------------- LHC Group, Inc. 1 6,100 106,323 ------------------------------------------------------------------------------- Magellan Health Services, Inc. 1 12,400 389,980 ------------------------------------------------------------------------------- Manor Care, Inc. 7,600 302,252 ------------------------------------------------------------------------------- Matria Healthcare, Inc. 1,2 11,500 445,740 ------------------------------------------------------------------------------- MedCath Corp. 1,2 9,700 179,935 ------------------------------------------------------------------------------- Merge Technologies, Inc. 1,2 6,800 170,272 ------------------------------------------------------------------------------- National HealthCare Corp. 2 1,500 56,070 ------------------------------------------------------------------------------- National Medical Health Card Systems, Inc. 1 400 10,880 ------------------------------------------------------------------------------- NovaMed Eyecare, Inc. 1 2,900 18,935 ------------------------------------------------------------------------------- Odyssey Healthcare, Inc. 1,2 22,100 411,944 ------------------------------------------------------------------------------- Owens & Minor, Inc. 2 8,800 242,264 ------------------------------------------------------------------------------- Parexel International Corp. 1 800 16,208 ------------------------------------------------------------------------------- Pediatrix Medical Group, Inc. 1 13,300 1,177,981 ------------------------------------------------------------------------------- Per-Se Technologies, Inc. 1,2 24,700 576,992 ------------------------------------------------------------------------------- Phase Forward, Inc. 1,2 5,700 55,575 ------------------------------------------------------------------------------- PRA International 1 2,400 67,560 ------------------------------------------------------------------------------- Res-Care, Inc. 1 7,500 130,275 ------------------------------------------------------------------------------- Rural/Metro Corp. 1,2 10,900 98,427 ------------------------------------------------------------------------------- Schein (Henry), Inc. 1 9,200 401,488 ------------------------------------------------------------------------------- Sierra Health Services, Inc. 1 5,700 455,772 ------------------------------------------------------------------------------- Sunrise Senior Living, Inc. 1,2 2,200 74,162 ------------------------------------------------------------------------------- Symbion, Inc. 1,2 400 9,200 ------------------------------------------------------------------------------- Trizetto Group, Inc. 1 30,100 511,399 15 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES Continued U.S. Physical Therapy, Inc. 1,2 6,300 $ 116,361 ------------------------------------------------------------------------------- United Surgical Partners International, Inc. 1,2 11,650 374,548 ------------------------------------------------------------------------------- Universal Health Services, Inc., Cl. B 5,500 257,070 ------------------------------------------------------------------------------- VCA Antech, Inc. 1 900 25,380 ------------------------------------------------------------------------------- WebMD Health Corp., Cl. A 1,2 2,900 84,245 ------------------------------------------------------------------------------- WellCare Health Plans, Inc. 1,2 13,100 535,135 ------------------------------------------------------------------------------- WellPoint, Inc. 1 1,401 111,786 -------------- 13,256,884 ------------------------------------------------------------------------------- PHARMACEUTICALS--1.5% Alpharma, Inc., Cl. A 34,300 977,893 ------------------------------------------------------------------------------- Andrx Corp. 1 39,300 647,271 ------------------------------------------------------------------------------- Angiotech Pharmaceuticals, Inc. 1 13,300 174,895 ------------------------------------------------------------------------------- Barr Pharmaceuticals, Inc. 1 8,300 517,007 ------------------------------------------------------------------------------- CNS, Inc. 2 12,400 271,684 ------------------------------------------------------------------------------- DepoMed, Inc. 1 7,200 43,200 ------------------------------------------------------------------------------- Encysive Pharmaceuticals, Inc. 1 13,600 107,304 ------------------------------------------------------------------------------- Endo Pharmaceuticals Holdings, Inc. 1,2 13,900 420,614 ------------------------------------------------------------------------------- Hi-Tech Pharmacal Co., Inc. 1 5,200 230,308 ------------------------------------------------------------------------------- Keryx Biopharmaceuticals, Inc. 1,2 400 5,856 ------------------------------------------------------------------------------- King Pharmaceuticals, Inc. 1 36,400 615,888 ------------------------------------------------------------------------------- Kos Pharmaceuticals, Inc. 1,2 7,700 398,321 ------------------------------------------------------------------------------- Medicis Pharmaceutical Corp., Cl. A 2 11,600 371,780 ------------------------------------------------------------------------------- Salix Pharmaceuticals Ltd. 1 7,400 130,092 ------------------------------------------------------------------------------- Watson Pharmaceuticals, Inc. 1 14,900 484,399 -------------- 5,396,512 ------------------------------------------------------------------------------- INDUSTRIALS--15.6% ------------------------------------------------------------------------------- AEROSPACE & DEFENSE--1.3% AAR Corp. 1 18,700 447,865 ------------------------------------------------------------------------------- Alliant Techsystems, Inc. 1 6,300 479,871 ------------------------------------------------------------------------------- Armor Holdings, Inc. 1,2 8,200 349,730 ------------------------------------------------------------------------------- Astronics Corp., Cl. B 1 650 6,500 ------------------------------------------------------------------------------- Aviall, Inc. 1,2 3,800 109,440 ------------------------------------------------------------------------------- BE Aerospace, Inc. 1 33,300 732,600 ------------------------------------------------------------------------------- DRS Technologies, Inc. 16,200 833,004 ------------------------------------------------------------------------------- ESCO Technologies, Inc. 1 8,200 364,818 ------------------------------------------------------------------------------- HEICO Corp., Cl. A 30 616 ------------------------------------------------------------------------------- Innovative Solutions & Support, Inc. 1,2 16,302 208,340 ------------------------------------------------------------------------------- Kaman Corp., Cl. A 6,700 131,923 ------------------------------------------------------------------------------- Moog, Inc., Cl. A 1 2,300 65,274 ------------------------------------------------------------------------------- NCI, Inc., Cl. A 1 12,800 175,744 ------------------------------------------------------------------------------- Precision Castparts Corp. 3,700 191,697 ------------------------------------------------------------------------------- Teledyne Technologies, Inc. 1 20,200 587,820 ------------------------------------------------------------------------------- Triumph Group, Inc. 1,2 4,800 175,728 -------------- 4,860,970 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS--0.4% ABX Air, Inc. 1 27,700 $ 216,891 ------------------------------------------------------------------------------- Dynamex, Inc. 1 400 7,624 ------------------------------------------------------------------------------- EGL, Inc. 1 15,100 567,307 ------------------------------------------------------------------------------- Forward Air Corp. 11,150 408,648 ------------------------------------------------------------------------------- Hub Group, Inc., Cl. A 1 10,400 367,640 -------------- 1,568,110 ------------------------------------------------------------------------------- AIRLINES--1.4% Alaska Air Group, Inc. 1,2 28,600 1,021,592 ------------------------------------------------------------------------------- AMR Corp. 1,2 36,800 818,064 ------------------------------------------------------------------------------- Continental Airlines, Inc., Cl. B 1,2 54,400 1,158,720 ------------------------------------------------------------------------------- ExpressJet Holdings, Inc. 1,2 31,200 252,408 ------------------------------------------------------------------------------- Frontier Airlines, Inc. 1,2 19,400 179,256 ------------------------------------------------------------------------------- Mesa Air Group, Inc. 1,2 41,800 437,228 ------------------------------------------------------------------------------- Republic Airways Holdings, Inc. 1 9,200 139,840 ------------------------------------------------------------------------------- SkyWest, Inc. 26,800 719,848 ------------------------------------------------------------------------------- World Air Holdings, Inc. 1 17,400 167,388 -------------- 4,894,344 ------------------------------------------------------------------------------- BUILDING PRODUCTS--1.0% Apogee Enterprises, Inc. 2 10,100 163,822 ------------------------------------------------------------------------------- Builders FirstSource, Inc. 1,2 36,000 769,320 ------------------------------------------------------------------------------- Crane Co. 13,400 472,618 ------------------------------------------------------------------------------- Lennox International, Inc. 13,100 369,420 ------------------------------------------------------------------------------- NCI Building Systems, Inc. 1,2 1,400 59,472 ------------------------------------------------------------------------------- Universal Forest Products, Inc. 2 10,500 580,125 ------------------------------------------------------------------------------- USG Corp. 1 13,500 877,500 ------------------------------------------------------------------------------- Watsco, Inc. 2 4,300 257,183 -------------- 3,549,460 ------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES--3.4% Adesa, Inc. 2,200 53,724 ------------------------------------------------------------------------------- Administaff, Inc. 20,500 862,025 ------------------------------------------------------------------------------- American Reprographics Co. 1 900 22,869 ------------------------------------------------------------------------------- Banta Corp. 11,200 557,760 ------------------------------------------------------------------------------- Brady Corp., Cl. A 3,300 119,394 ------------------------------------------------------------------------------- Central Parking Corp. 2 4,200 57,624 ------------------------------------------------------------------------------- Cenveo, Inc. 1,2 18,500 243,460 ------------------------------------------------------------------------------- Clean Harbors, Inc. 1 12,400 357,244 ------------------------------------------------------------------------------- CompX International, Inc. 600 9,612 ------------------------------------------------------------------------------- Consolidated Graphics, Inc. 1 3,300 156,222 ------------------------------------------------------------------------------- Corporate Executive Board Co. 4,300 385,710 ------------------------------------------------------------------------------- Deluxe Corp. 13,900 418,946 ------------------------------------------------------------------------------- DiamondCluster International, Inc. 1 11,800 93,692 ------------------------------------------------------------------------------- Dun & Bradstreet Corp. 1 5,500 368,280 ------------------------------------------------------------------------------- Equifax, Inc. 1,900 72,238 ------------------------------------------------------------------------------- Exponent, Inc. 1,2 5,400 153,252 16 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES Continued Geo Group, Inc. (The) 1 2,600 $ 59,618 ------------------------------------------------------------------------------- Global Cash Access, Inc. 1 2,900 42,311 ------------------------------------------------------------------------------- Harland (John H.) Co. 6,300 236,880 ------------------------------------------------------------------------------- Healthcare Services Group, Inc. 2 7,674 158,929 ------------------------------------------------------------------------------- Heidrick & Struggles International, Inc. 1 2,200 70,510 ------------------------------------------------------------------------------- HNI Corp. 8,500 466,905 ------------------------------------------------------------------------------- IHS, Inc., Cl. A 1 9,000 184,680 ------------------------------------------------------------------------------- Ikon Office Solutions, Inc. 24,600 256,086 ------------------------------------------------------------------------------- Kforce, Inc. 1 1,700 18,972 ------------------------------------------------------------------------------- Knoll, Inc. 8,800 150,568 ------------------------------------------------------------------------------- Korn-Ferry International 1,2 20,300 379,407 ------------------------------------------------------------------------------- Labor Ready, Inc. 1,2 32,200 670,404 ------------------------------------------------------------------------------- Manpower, Inc. 7,600 353,400 ------------------------------------------------------------------------------- McGrath Rentcorp 2 3,200 88,960 ------------------------------------------------------------------------------- Miller (Herman), Inc. 13,500 380,565 ------------------------------------------------------------------------------- PHH Corp. 1 36,400 1,019,928 ------------------------------------------------------------------------------- Pico Holdings, Inc. 1,2 2,100 67,746 ------------------------------------------------------------------------------- Portfolio Recovery Associates, Inc. 1,2 7,900 366,876 ------------------------------------------------------------------------------- Republic Services, Inc. 2,700 101,385 ------------------------------------------------------------------------------- Resources Connection, Inc. 1,2 14,900 388,294 ------------------------------------------------------------------------------- Robert Half International, Inc. 2,200 83,358 ------------------------------------------------------------------------------- Rollins, Inc. 5,400 106,434 ------------------------------------------------------------------------------- Sirva, Inc. 1 30,000 240,000 ------------------------------------------------------------------------------- SITEL Corp. 1 2,300 7,176 ------------------------------------------------------------------------------- Sourcecorp, Inc. 1 1,400 33,572 ------------------------------------------------------------------------------- Spherion Corp. 1,2 30,500 305,305 ------------------------------------------------------------------------------- Standard Register Co. (The) 7,100 112,251 ------------------------------------------------------------------------------- Steelcase, Inc., Cl. A 6,400 101,312 ------------------------------------------------------------------------------- TeleTech Holdings, Inc. 1,2 43,800 527,790 ------------------------------------------------------------------------------- Tetra Tech, Inc. 1,2 14,000 219,380 ------------------------------------------------------------------------------- United Stationers, Inc. 1 15,300 742,050 ------------------------------------------------------------------------------- Viad Corp. 2 6,700 196,511 ------------------------------------------------------------------------------- Volt Information Sciences, Inc. 1,2 2,400 45,648 ------------------------------------------------------------------------------- Waste Connections, Inc. 1 900 31,014 -------------- 12,146,277 ------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING--1.4% Baker (Michael) Corp. 1,2 5,100 130,305 ------------------------------------------------------------------------------- Comfort Systems USA, Inc. 2 12,200 112,240 ------------------------------------------------------------------------------- EMCOR Group, Inc. 1 11,000 742,830 ------------------------------------------------------------------------------- Granite Construction, Inc. 15,700 563,787 ------------------------------------------------------------------------------- Insituform Technologies, Inc., Cl. A 1,2 2,300 44,551 ------------------------------------------------------------------------------- McDermott International, Inc. 1 6,700 298,887 ------------------------------------------------------------------------------- Perini Corp. 1,2 5,300 127,995 ------------------------------------------------------------------------------- Quanta Services, Inc. 1,2 66,400 874,488 ------------------------------------------------------------------------------- URS Corp. 1 23,400 880,074 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING Continued Washington Group International, Inc. 10,700 $ 566,779 ------------------------------------------------------------------------------- Williams Scotsman International, Inc. 1 35,600 616,236 -------------- 4,958,172 ------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT--1.3% Acuity Brands, Inc. 26,300 836,340 ------------------------------------------------------------------------------- American Power Conversion Corp. 11,200 246,400 ------------------------------------------------------------------------------- AMETEK, Inc. 400 17,016 ------------------------------------------------------------------------------- Artesyn Technologies, Inc. 1,2 2,800 28,840 ------------------------------------------------------------------------------- C&D Technologies, Inc. 2 6,500 49,530 ------------------------------------------------------------------------------- General Cable Corp. 1 26,700 525,990 ------------------------------------------------------------------------------- Genlyte Group, Inc. (The) 1,2 10,200 546,414 ------------------------------------------------------------------------------- LaBarge, Inc. 1,2 9,300 133,641 ------------------------------------------------------------------------------- LSI Industries, Inc. 10,800 169,128 ------------------------------------------------------------------------------- Power-One, Inc. 1,2 15,400 92,708 ------------------------------------------------------------------------------- Preformed Line Products Co. 2 700 29,953 ------------------------------------------------------------------------------- Roper Industries, Inc. 9,600 379,296 ------------------------------------------------------------------------------- Smith (A.O.) Corp. 2 6,300 221,130 ------------------------------------------------------------------------------- Suntech Power Holdings Co. Ltd., ADR 1,2 19,800 539,550 ------------------------------------------------------------------------------- Thomas & Betts Corp. 1 3,800 159,448 ------------------------------------------------------------------------------- Vicor Corp. 2 7,400 116,994 ------------------------------------------------------------------------------- Woodward Governor Co. 5,600 481,656 -------------- 4,574,034 ------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES--0.1% Raven Industries, Inc. 2 300 8,655 ------------------------------------------------------------------------------- Teleflex, Inc. 6,600 428,868 -------------- 437,523 ------------------------------------------------------------------------------- MACHINERY--3.1% Accuride Corp. 1 2,800 36,120 ------------------------------------------------------------------------------- AGCO Corp. 1 34,500 571,665 ------------------------------------------------------------------------------- Albany International Corp., Cl. A 25,800 932,928 ------------------------------------------------------------------------------- Ampco-Pittsburgh Corp. 900 13,059 ------------------------------------------------------------------------------- Astec Industries, Inc. 1 15,400 502,964 ------------------------------------------------------------------------------- Barnes Group, Inc. 2 10,600 349,800 ------------------------------------------------------------------------------- Briggs & Stratton Corp. 3,800 147,402 ------------------------------------------------------------------------------- Bucyrus International, Inc., Cl. A 2 1,700 89,590 ------------------------------------------------------------------------------- Cascade Corp. 2 3,400 159,494 ------------------------------------------------------------------------------- CIRCOR International, Inc. 3,500 89,810 ------------------------------------------------------------------------------- Columbus McKinnon Corp. 1 11,600 254,968 ------------------------------------------------------------------------------- Commercial Vehicle Group, Inc. 1,2 3,700 69,486 ------------------------------------------------------------------------------- Cummins, Inc. 3,800 340,974 ------------------------------------------------------------------------------- Encore Wire Corp. 1 7,100 161,596 ------------------------------------------------------------------------------- Esterline Technologies Corp. 1 13,100 487,189 ------------------------------------------------------------------------------- Flowserve Corp. 1 28,000 1,107,680 17 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- MACHINERY Continued Freightcar America, Inc. 4,700 $ 225,976 ------------------------------------------------------------------------------- Idex Corp. 4,600 189,106 ------------------------------------------------------------------------------- JLG Industries, Inc. 2 25,200 1,150,632 ------------------------------------------------------------------------------- Kaydon Corp. 2 5,200 167,128 ------------------------------------------------------------------------------- Lincoln Electric Holdings, Inc. 2,300 91,218 ------------------------------------------------------------------------------- Manitowoc Co., Inc. (The) 6,500 326,430 ------------------------------------------------------------------------------- Middleby Corp. (The) 1 100 8,650 ------------------------------------------------------------------------------- Miller Industries, Inc. 1 3,300 66,957 ------------------------------------------------------------------------------- Mueller Industries, Inc. 4,000 109,680 ------------------------------------------------------------------------------- NACCO Industries, Inc., Cl. A 4,700 550,605 ------------------------------------------------------------------------------- Navistar International Corp. 1 4,800 137,376 ------------------------------------------------------------------------------- Nordson Corp. 4,200 170,142 ------------------------------------------------------------------------------- Omega Flex, Inc. 1 300 5,217 ------------------------------------------------------------------------------- RBC Bearings, Inc. 1,2 1,400 22,750 ------------------------------------------------------------------------------- SPX Corp. 9,900 453,123 ------------------------------------------------------------------------------- Stewart & Stevenson Services, Inc. 17,100 361,323 ------------------------------------------------------------------------------- Sun Hydraulics Corp. 2 7,300 141,109 ------------------------------------------------------------------------------- Tennant Co. 2,700 140,400 ------------------------------------------------------------------------------- Terex Corp. 1 9,500 564,300 ------------------------------------------------------------------------------- Titan International, Inc. 2 8,700 150,075 ------------------------------------------------------------------------------- Toro Co. (The) 8,400 367,668 ------------------------------------------------------------------------------- Valmont Industries, Inc. 1,200 40,152 ------------------------------------------------------------------------------- Wabtec Corp. 18,100 486,890 -------------- 11,241,632 ------------------------------------------------------------------------------- MARINE--0.2% American Commercial Lines, Inc. 1 5,400 163,566 ------------------------------------------------------------------------------- Horizon Lines, Inc., Cl. A 23,400 283,842 ------------------------------------------------------------------------------- Kirby Corp. 1 2,200 114,774 -------------- 562,182 ------------------------------------------------------------------------------- ROAD & RAIL--1.1% Amerco, Inc. 6,200 446,710 ------------------------------------------------------------------------------- Arkansas Best Corp. 2 22,000 960,960 ------------------------------------------------------------------------------- Celadon Group, Inc. 1 8,300 239,040 ------------------------------------------------------------------------------- Genesee & Wyoming, Inc., Cl. A 1,2 750 28,163 ------------------------------------------------------------------------------- Laidlaw International, Inc. 13,200 306,636 ------------------------------------------------------------------------------- Landstar System, Inc. 8,100 338,094 ------------------------------------------------------------------------------- Mullen Group Income Fund 3,000 84,365 ------------------------------------------------------------------------------- Pacer International, Inc. 33,300 867,798 ------------------------------------------------------------------------------- RailAmerica, Inc. 1 7,900 86,821 ------------------------------------------------------------------------------- SCS Transportation, Inc. 1 3,700 78,625 ------------------------------------------------------------------------------- Swift Transportation Co., Inc. 1 19,300 391,790 ------------------------------------------------------------------------------- Universal Truckload Services, Inc. 1 4,100 94,300 ------------------------------------------------------------------------------- USA Truck, Inc. 1,2 4,900 142,737 -------------- 4,066,039 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS--0.9% Applied Industrial Technologies, Inc. 23,750 $ 800,138 ------------------------------------------------------------------------------- GATX Corp. 6,000 216,480 ------------------------------------------------------------------------------- MSC Industrial Direct Co., Inc., Cl. A 5,100 205,122 ------------------------------------------------------------------------------- UAP Holding Corp. 16,500 336,930 ------------------------------------------------------------------------------- United Rentals, Inc. 1,2 41,700 975,363 ------------------------------------------------------------------------------- WESCO International, Inc. 1 16,800 717,864 -------------- 3,251,897 ------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE--0.0% Interpool, Inc. 200 3,776 ------------------------------------------------------------------------------- INFORMATION TECHNOLOGY--25.2% ------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT--3.4% ADC Telecommunications, Inc. 1 17,600 393,184 ------------------------------------------------------------------------------- ADTRAN, Inc. 19,400 576,956 ------------------------------------------------------------------------------- Anaren Microwave, Inc. 1 2,700 42,201 ------------------------------------------------------------------------------- Andrew Corp. 1 15,400 165,242 ------------------------------------------------------------------------------- Arris Group, Inc. 1 43,900 415,733 ------------------------------------------------------------------------------- Avaya, Inc. 1 12,000 128,040 ------------------------------------------------------------------------------- Avocent Corp. 1 15,500 421,445 ------------------------------------------------------------------------------- Black Box Corp. 5,400 255,852 ------------------------------------------------------------------------------- Blue Coat Systems, Inc. 1,2 1,800 82,296 ------------------------------------------------------------------------------- Brocade Communications Systems, Inc. 1 164,900 671,143 ------------------------------------------------------------------------------- Ciena Corp. 1 201,900 599,643 ------------------------------------------------------------------------------- CommScope, Inc. 1 42,700 859,551 ------------------------------------------------------------------------------- Comtech Telecommunications Corp. 1 11,000 335,940 ------------------------------------------------------------------------------- Digi International, Inc. 1,2 12,600 132,174 ------------------------------------------------------------------------------- Ditech Communications Corp. 1 18,900 157,815 ------------------------------------------------------------------------------- Echelon Corp. 1 1,300 10,179 ------------------------------------------------------------------------------- Emulex Corp. 1 54,500 1,078,555 ------------------------------------------------------------------------------- Extreme Networks, Inc. 1 61,700 293,075 ------------------------------------------------------------------------------- Foundry Networks, Inc. 1 43,200 596,592 ------------------------------------------------------------------------------- Harmonic, Inc. 1 30,000 145,500 ------------------------------------------------------------------------------- Inter-Tel, Inc. 2,900 56,753 ------------------------------------------------------------------------------- MasTec, Inc. 1,2 18,900 197,883 ------------------------------------------------------------------------------- Netgear, Inc. 1,2 34,500 664,125 ------------------------------------------------------------------------------- Packeteer, Inc. 1,2 31,700 246,309 ------------------------------------------------------------------------------- Performance Technologies, Inc. 1 9,200 75,348 ------------------------------------------------------------------------------- Plantronics, Inc. 1,300 36,790 ------------------------------------------------------------------------------- Polycom, Inc. 1 69,400 1,061,820 ------------------------------------------------------------------------------- Powerwave Technologies, Inc. 1,2 24,000 301,680 ------------------------------------------------------------------------------- QLogic Corp. 1 8,600 279,586 ------------------------------------------------------------------------------- Redback Networks, Inc. 1 41,300 580,678 ------------------------------------------------------------------------------- SafeNet, Inc. 1,2 200 6,444 ------------------------------------------------------------------------------- SpectraLink Corp. 2,500 29,675 ------------------------------------------------------------------------------- Superior Essex, Inc. 1 700 14,112 18 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT Continued Sycamore Networks, Inc. 1,2 17,200 $ 74,304 ------------------------------------------------------------------------------- Symmetricom, Inc. 1,2 31,000 262,570 ------------------------------------------------------------------------------- Tekelec, Inc. 1,2 22,400 311,360 ------------------------------------------------------------------------------- Tellabs, Inc. 1 36,400 396,760 ------------------------------------------------------------------------------- Terayon Communication Systems, Inc. 1 41,500 95,865 ------------------------------------------------------------------------------- ViaSat, Inc. 1 2,400 64,152 -------------- 12,117,330 ------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS--1.7% Advanced Digital Information Corp. 1 23,800 233,002 ------------------------------------------------------------------------------- Dot Hill Systems Corp. 1 7,300 50,589 ------------------------------------------------------------------------------- Electronics for Imaging, Inc. 1 14,500 385,845 ------------------------------------------------------------------------------- Imation Corp. 25,000 1,151,750 ------------------------------------------------------------------------------- Intergraph Corp. 1,2 22,200 1,105,782 ------------------------------------------------------------------------------- M-Systems Flash Disk Pioneers Ltd. 1 8,200 271,584 ------------------------------------------------------------------------------- Maxtor Corp. 1 65,600 455,264 ------------------------------------------------------------------------------- NCR Corp. 1 4,300 145,942 ------------------------------------------------------------------------------- Palm, Inc. 1,2 34,900 1,109,820 ------------------------------------------------------------------------------- SimpleTech, Inc. 1 2,500 9,425 ------------------------------------------------------------------------------- Synaptics, Inc. 1 4,000 98,880 ------------------------------------------------------------------------------- Western Digital Corp. 1 55,100 1,025,411 -------------- 6,043,294 ------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--3.4% Aeroflex, Inc. 1 5,000 53,750 ------------------------------------------------------------------------------- Agilysys, Inc. 20,500 373,510 ------------------------------------------------------------------------------- Anixter International, Inc. 6,500 254,280 ------------------------------------------------------------------------------- Arrow Electronics, Inc. 1 15,800 506,074 ------------------------------------------------------------------------------- Avnet, Inc. 1 20,900 500,346 ------------------------------------------------------------------------------- Belden CDT, Inc. 2 8,900 217,427 ------------------------------------------------------------------------------- Bell Microproducts, Inc. 1,2 20,100 153,765 ------------------------------------------------------------------------------- Brightpoint, Inc. 1,2 26,250 727,913 ------------------------------------------------------------------------------- CalAmp Corp. 1 2,000 20,980 ------------------------------------------------------------------------------- CDW Corp. 7,000 402,990 ------------------------------------------------------------------------------- Checkpoint Systems, Inc. 1 9,000 221,850 ------------------------------------------------------------------------------- Coherent, Inc. 1 26,400 783,552 ------------------------------------------------------------------------------- CTS Corp. 2,800 30,968 ------------------------------------------------------------------------------- Electro Scientific Industries, Inc. 1,2 18,000 434,700 ------------------------------------------------------------------------------- Fargo Electronics, Inc. 1 9,400 180,950 ------------------------------------------------------------------------------- Hypercom Corp. 1 14,000 89,460 ------------------------------------------------------------------------------- Itron, Inc. 1,2 9,900 396,396 ------------------------------------------------------------------------------- Keithley Instruments, Inc. 6,500 90,870 ------------------------------------------------------------------------------- Komag, Inc. 1,2 27,900 967,014 ------------------------------------------------------------------------------- Mettler-Toledo International, Inc. 1 8,500 469,200 ------------------------------------------------------------------------------- MTS Systems Corp. 8,300 287,512 ------------------------------------------------------------------------------- Multi-Fineline Electronix, Inc. 1,2 2,400 115,608 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS Continued National Instruments Corp. 9,100 $ 291,655 ------------------------------------------------------------------------------- Newport Corp. 1 4,000 54,160 ------------------------------------------------------------------------------- Park Electrochemical Corp. 14,100 366,318 ------------------------------------------------------------------------------- PC Connection, Inc. 1 4,000 21,520 ------------------------------------------------------------------------------- Plexus Corp. 1 41,000 932,340 ------------------------------------------------------------------------------- RadiSys Corp. 1,2 13,700 237,558 ------------------------------------------------------------------------------- Rofin-Sinar Technologies, Inc. 1 3,900 169,533 ------------------------------------------------------------------------------- Sanmina-SCI Corp. 1 119,900 510,774 ------------------------------------------------------------------------------- ScanSource, Inc. 1 300 16,404 ------------------------------------------------------------------------------- Solectron Corp. 1 129,800 475,068 ------------------------------------------------------------------------------- SunPower Corp., Cl. A 1,2 5,100 173,349 ------------------------------------------------------------------------------- SYNNEX Corp. 1 1,000 15,110 ------------------------------------------------------------------------------- Tech Data Corp. 1 13,000 515,840 ------------------------------------------------------------------------------- Technitrol, Inc. 1,400 23,940 ------------------------------------------------------------------------------- TTM Technologies, Inc. 1,2 500 4,700 ------------------------------------------------------------------------------- UNOVA, Inc. 1,2 23,300 787,540 ------------------------------------------------------------------------------- Zygo Corp. 1,2 18,400 270,296 -------------- 12,145,220 ------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES--3.0% 24/7 Real Media, Inc. 1 21,000 154,140 ------------------------------------------------------------------------------- Akamai Technologies, Inc. 1 9,300 185,349 ------------------------------------------------------------------------------- AsiaInfo Holdings, Inc. 1,2 17,900 71,242 ------------------------------------------------------------------------------- Bankrate, Inc. 1,2 5,800 171,216 ------------------------------------------------------------------------------- Covansys Corp. 1 6,000 81,660 ------------------------------------------------------------------------------- CyberSource Corp. 1 11,400 75,240 ------------------------------------------------------------------------------- Digital Insight Corp. 1 26,500 848,530 ------------------------------------------------------------------------------- Digital River, Inc. 1,2 21,900 651,306 ------------------------------------------------------------------------------- EarthLink, Inc. 1 89,600 995,456 ------------------------------------------------------------------------------- HomeStore.com, Inc. 1,2 67,700 345,270 ------------------------------------------------------------------------------- InfoSpace, Inc. 1,2 30,700 792,674 ------------------------------------------------------------------------------- Internet Security Systems, Inc. 1 41,700 873,615 ------------------------------------------------------------------------------- iPass, Inc. 1,2 4,700 30,832 ------------------------------------------------------------------------------- j2 Global Communications, Inc. 1 5,500 235,070 ------------------------------------------------------------------------------- Keynote Systems, Inc. 1 900 11,565 ------------------------------------------------------------------------------- MicroStrategy, Inc., Cl. A 1,2 12,700 1,050,798 ------------------------------------------------------------------------------- Online Resources & Communications Corp. 1,2 9,000 99,450 ------------------------------------------------------------------------------- Open Text Corp. 1,2 7,300 103,003 ------------------------------------------------------------------------------- Openwave Systems, Inc. 1,2 16,300 284,761 ------------------------------------------------------------------------------- RealNetworks, Inc. 1 24,900 193,224 ------------------------------------------------------------------------------- Salesforce.com, Inc. 1,2 2,900 92,945 ------------------------------------------------------------------------------- Selectica, Inc. 1 900 2,565 ------------------------------------------------------------------------------- SonicWALL, Inc. 1,2 57,300 453,816 ------------------------------------------------------------------------------- United Online, Inc. 61,900 880,218 ------------------------------------------------------------------------------- ValueClick, Inc. 1,2 19,704 356,839 19 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES Continued Vignette Corp. 1 20,800 $ 339,248 ------------------------------------------------------------------------------- WebEx Communications, Inc. 1 4,700 101,661 ------------------------------------------------------------------------------- webMethods, Inc. 1 31,000 239,010 ------------------------------------------------------------------------------- Websense, Inc. 1,2 17,500 1,148,700 -------------- 10,869,403 ------------------------------------------------------------------------------- IT SERVICES--2.7% Acxiom Corp. 12,900 296,700 ------------------------------------------------------------------------------- Anteon International Corp. 1 300 16,305 ------------------------------------------------------------------------------- Aquantive, Inc. 1,2 3,000 75,720 ------------------------------------------------------------------------------- BearingPoint, Inc. 1 46,300 363,918 ------------------------------------------------------------------------------- BISYS Group, Inc. (The) 1 32,300 452,523 ------------------------------------------------------------------------------- CACI International, Inc., Cl. A 1 7,100 407,398 ------------------------------------------------------------------------------- Ceridian Corp. 1 20,600 511,910 ------------------------------------------------------------------------------- CheckFree Corp. 1 7,600 348,840 ------------------------------------------------------------------------------- CIBER, Inc. 1,2 19,900 131,340 ------------------------------------------------------------------------------- CSG Systems International, Inc. 1 48,300 1,078,056 ------------------------------------------------------------------------------- Forrester Research, Inc. 1 9,000 168,750 ------------------------------------------------------------------------------- Gevity HR, Inc. 2,800 72,016 ------------------------------------------------------------------------------- Global Payments, Inc. 7,500 349,575 ------------------------------------------------------------------------------- infoUSA, Inc. 19,900 217,507 ------------------------------------------------------------------------------- Intrado, Inc. 1,2 16,700 384,434 ------------------------------------------------------------------------------- Keane, Inc. 1,2 17,000 187,170 ------------------------------------------------------------------------------- Lawson Software, Inc. 1,2 71,300 524,055 ------------------------------------------------------------------------------- Manhattan Associates, Inc. 1 11,800 241,664 ------------------------------------------------------------------------------- ManTech International Corp. 1 9,400 261,884 ------------------------------------------------------------------------------- Maximus, Inc. 18,900 693,441 ------------------------------------------------------------------------------- MoneyGram International, Inc. 4,900 127,792 ------------------------------------------------------------------------------- MPS Group, Inc. 1 63,000 861,210 ------------------------------------------------------------------------------- NAVTEQ Corp. 1 3,200 140,384 ------------------------------------------------------------------------------- Perot Systems Corp., Cl. A 1,2 34,200 483,588 ------------------------------------------------------------------------------- Sabre Holdings Corp. 21,800 525,598 ------------------------------------------------------------------------------- SI International, Inc. 1 2,000 61,140 ------------------------------------------------------------------------------- Startek, Inc. 2 2,400 43,200 ------------------------------------------------------------------------------- Sykes Enterprises, Inc. 1 23,600 315,532 ------------------------------------------------------------------------------- TNS, Inc. 1 4,000 76,720 ------------------------------------------------------------------------------- Total System Services, Inc. 2,600 51,454 ------------------------------------------------------------------------------- Tyler Technologies, Inc. 1 1,400 12,292 ------------------------------------------------------------------------------- Unisys Corp. 1 18,000 104,940 ------------------------------------------------------------------------------- VeriFone Holdings, Inc. 1 6,000 151,800 -------------- 9,738,856 ------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--5.2% 02Micro International Ltd., ADR 1 2,600 26,468 ------------------------------------------------------------------------------- ADE Corp. 1,2 17,400 418,644 ------------------------------------------------------------------------------- Advanced Energy Industries, Inc. 1 29,200 345,436 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Continued Asyst Technologies, Inc. 1 3,200 $ 18,304 ------------------------------------------------------------------------------- ATMI, Inc. 1,2 10,600 296,482 ------------------------------------------------------------------------------- Axcelis Technologies, Inc. 1 58,200 277,614 ------------------------------------------------------------------------------- Brooks Automation, Inc. 1,2 23,454 293,879 ------------------------------------------------------------------------------- Cirrus Logic, Inc. 1 44,900 299,932 ------------------------------------------------------------------------------- Cohu, Inc. 16,500 377,355 ------------------------------------------------------------------------------- Conexant Systems, Inc. 1 132,300 298,998 ------------------------------------------------------------------------------- Cymer, Inc. 1,2 32,800 1,164,728 ------------------------------------------------------------------------------- Diodes, Inc. 1,2 9,024 280,195 ------------------------------------------------------------------------------- EMCORE Corp. 1,2 9,500 70,490 ------------------------------------------------------------------------------- Entegris, Inc. 1 43,275 407,651 ------------------------------------------------------------------------------- Exar Corp. 1 4,800 60,096 ------------------------------------------------------------------------------- Fairchild Semiconductor International, Inc., Cl. A 1 27,700 468,407 ------------------------------------------------------------------------------- FEI Co. 1,2 6,700 128,439 ------------------------------------------------------------------------------- Freescale Semiconductor, Inc., Cl. A 1 1,200 30,228 ------------------------------------------------------------------------------- Genesis Microchip, Inc. 1,2 32,300 584,307 ------------------------------------------------------------------------------- Hittite Microwave Corp. 1 5,200 120,328 ------------------------------------------------------------------------------- Ikanos Communications, Inc. 1 12,000 176,880 ------------------------------------------------------------------------------- Intersil Corp., Cl. A 23,100 574,728 ------------------------------------------------------------------------------- Intevac, Inc. 1 5,000 66,000 ------------------------------------------------------------------------------- IXYS Corp. 1 9,300 108,717 ------------------------------------------------------------------------------- Kopin Corp. 1,2 54,100 289,435 ------------------------------------------------------------------------------- Kulicke & Soffa Industries, Inc. 1,2 34,200 302,328 ------------------------------------------------------------------------------- Lam Research Corp. 1 13,700 488,816 ------------------------------------------------------------------------------- Lattice Semiconductor Corp. 1 15,000 64,800 ------------------------------------------------------------------------------- LSI Logic Corp. 1 57,400 459,200 ------------------------------------------------------------------------------- LTX Corp. 1 13,000 58,500 ------------------------------------------------------------------------------- Mattson Technology, Inc. 1 9,400 94,564 ------------------------------------------------------------------------------- Micrel, Inc. 1,2 74,400 863,040 ------------------------------------------------------------------------------- Microsemi Corp. 1 35,400 979,164 ------------------------------------------------------------------------------- Microtune, Inc. 1,2 6,100 25,437 ------------------------------------------------------------------------------- MIPS Technologies, Inc., Cl. A 1,2 20,500 116,440 ------------------------------------------------------------------------------- MKS Instruments, Inc. 1 13,800 246,882 ------------------------------------------------------------------------------- Netlogic Microsystems, Inc. 1,2 12,000 326,880 ------------------------------------------------------------------------------- Novellus Systems, Inc. 1 19,000 458,280 ------------------------------------------------------------------------------- NVIDIA Corp. 1 11,500 420,440 ------------------------------------------------------------------------------- OmniVision Technologies, Inc. 1,2 47,100 940,116 ------------------------------------------------------------------------------- ON Semiconductor Corp. 1 109,900 607,747 ------------------------------------------------------------------------------- PDF Solutions, Inc. 1,2 14,400 234,000 ------------------------------------------------------------------------------- Photronics, Inc. 1,2 43,700 658,122 ------------------------------------------------------------------------------- PortalPlayer, Inc. 1,2 9,400 266,208 ------------------------------------------------------------------------------- Power Integrations, Inc. 1,2 3,800 90,478 ------------------------------------------------------------------------------- Sigmatel, Inc. 1,2 18,100 237,110 ------------------------------------------------------------------------------- Silicon Image, Inc. 1 46,400 419,920 20 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Continued Silicon Laboratories, Inc. 1 18,900 $ 692,874 ------------------------------------------------------------------------------- SiRF Technology Holdings, Inc. 1,2 3,800 113,240 ------------------------------------------------------------------------------- Skyworks Solutions, Inc. 1 59,200 301,328 ------------------------------------------------------------------------------- Supertex, Inc. 1 7,100 314,175 ------------------------------------------------------------------------------- Trident Microsystems, Inc. 1,2 7,400 133,200 ------------------------------------------------------------------------------- TriQuint Semiconductor, Inc. 1 79,000 351,550 ------------------------------------------------------------------------------- Ultra Clean Holdings, Inc. 1 1,300 9,373 ------------------------------------------------------------------------------- Varian Semiconductor Equipment ------------------------------------------------------------------------------- Associates, Inc. 1 16,500 724,845 ------------------------------------------------------------------------------- Veeco Instruments, Inc. 1,2 9,800 169,834 ------------------------------------------------------------------------------- Zoran Corp. 1 31,600 512,236 -------------- 18,864,868 ------------------------------------------------------------------------------- SOFTWARE--5.8% Activision, Inc. 1 15,077 207,158 ------------------------------------------------------------------------------- Advent Software, Inc. 1 10,800 312,228 ------------------------------------------------------------------------------- Altiris, Inc. 1,2 10,900 184,101 ------------------------------------------------------------------------------- Ansoft Corp. 1 9,100 309,855 ------------------------------------------------------------------------------- Ansys, Inc. 1 14,900 636,081 ------------------------------------------------------------------------------- Aspen Technology, Inc. 1,2 27,400 215,090 ------------------------------------------------------------------------------- BEA Systems, Inc. 1 51,100 480,340 ------------------------------------------------------------------------------- Blackbaud, Inc. 24,089 411,440 ------------------------------------------------------------------------------- BMC Software, Inc. 1 26,200 536,838 ------------------------------------------------------------------------------- Borland Software Corp. 1 8,900 58,117 ------------------------------------------------------------------------------- Bottomline Technologies, Inc. 1,2 18,000 198,360 ------------------------------------------------------------------------------- Cadence Design Systems, Inc. 1 33,100 560,052 ------------------------------------------------------------------------------- Captiva Software Corp. 1 4,600 102,350 ------------------------------------------------------------------------------- Catapult Communications Corp. 1,2 9,600 141,984 ------------------------------------------------------------------------------- CCC Information Services Group, Inc. 1 4,600 120,612 ------------------------------------------------------------------------------- Citrix Systems, Inc. 1 16,400 471,992 ------------------------------------------------------------------------------- Cognos, Inc. 1 1,900 65,949 ------------------------------------------------------------------------------- Compuware Corp. 1 56,300 505,011 ------------------------------------------------------------------------------- Concur Technologies, Inc. 1,2 4,800 61,872 ------------------------------------------------------------------------------- Entrust Technologies, Inc. 1 36,800 178,112 ------------------------------------------------------------------------------- Epicor Software Corp. 1 17,500 247,275 ------------------------------------------------------------------------------- EPIQ Systems, Inc. 1,2 7,400 137,196 ------------------------------------------------------------------------------- ePlus, inc. 1 1,100 15,215 ------------------------------------------------------------------------------- Fair Isaac Corp. 10,500 463,785 ------------------------------------------------------------------------------- FileNet Corp. 1 34,500 891,825 ------------------------------------------------------------------------------- Hyperion Solutions Corp. 1 15,000 537,300 ------------------------------------------------------------------------------- Informatica Corp. 1 57,800 693,600 ------------------------------------------------------------------------------- InterVideo, Inc. 1 3,400 35,870 ------------------------------------------------------------------------------- InterVoice-Brite, Inc. 1,2 18,200 144,872 ------------------------------------------------------------------------------- JDA Software Group, Inc. 1 22,700 386,127 ------------------------------------------------------------------------------- Macrovision Corp. 1 13,200 220,836 ------------------------------------------------------------------------------- Magma Design Automation, Inc. 1,2 14,100 118,581 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- SOFTWARE Continued MapInfo Corp. 1 2,400 $ 30,264 ------------------------------------------------------------------------------- McAfee, Inc. 1 22,000 596,860 ------------------------------------------------------------------------------- Micromuse, Inc. 1 51,400 508,346 ------------------------------------------------------------------------------- MICROS Systems, Inc. 1 7,100 343,072 ------------------------------------------------------------------------------- MRO Software, Inc. 1 19,400 272,376 ------------------------------------------------------------------------------- MSC.Software Corp. 1,2 9,900 168,300 ------------------------------------------------------------------------------- Net 1 UEPS Technologies, Inc. 1 2,100 60,585 ------------------------------------------------------------------------------- NetIQ Corp. 1,2 7,600 93,404 ------------------------------------------------------------------------------- Novell, Inc. 1,2 61,500 543,045 ------------------------------------------------------------------------------- Nuance Communications, Inc. 1 5,700 43,491 ------------------------------------------------------------------------------- Parametric Technology Corp. 1 179,500 1,094,950 ------------------------------------------------------------------------------- Progress Software Corp. 1 18,900 536,382 ------------------------------------------------------------------------------- Quest Software, Inc. 1 13,900 202,801 ------------------------------------------------------------------------------- Radiant Systems, Inc. 1,2 13,700 166,592 ------------------------------------------------------------------------------- Red Hat, Inc. 1 21,800 593,832 ------------------------------------------------------------------------------- Reynolds & Reynolds Co., Cl. A 16,100 451,927 ------------------------------------------------------------------------------- RSA Security, Inc. 1 45,600 512,088 ------------------------------------------------------------------------------- SERENA Software, Inc. 1 16,300 382,072 ------------------------------------------------------------------------------- SPSS, Inc. 1,2 5,700 176,301 ------------------------------------------------------------------------------- Sybase, Inc. 1 23,300 509,338 ------------------------------------------------------------------------------- Synopsys, Inc. 1 35,400 710,124 ------------------------------------------------------------------------------- Take-Two Interactive Software, Inc. 1,2 40,600 718,620 ------------------------------------------------------------------------------- THQ, Inc. 1 17,550 418,568 ------------------------------------------------------------------------------- TIBCO Software, Inc. 1 22,800 170,316 ------------------------------------------------------------------------------- Transaction Systems Architects, Inc., Cl. A 1 35,500 1,022,045 ------------------------------------------------------------------------------- Ultimate Software Group, Inc. (The) 1,2 5,200 99,164 ------------------------------------------------------------------------------- Verint Systems, Inc. 1 4,300 148,221 ------------------------------------------------------------------------------- Wind River Systems, Inc. 1 38,600 570,122 ------------------------------------------------------------------------------- Witness Systems, Inc. 1,2 3,500 68,845 -------------- 20,862,075 ------------------------------------------------------------------------------- MATERIALS--5.2% ------------------------------------------------------------------------------- CHEMICALS--1.3% Agrium, Inc. 2 25,200 554,148 ------------------------------------------------------------------------------- Celanese Corp., Series A 2,300 43,976 ------------------------------------------------------------------------------- Compass Minerals International, Inc. 8,100 198,774 ------------------------------------------------------------------------------- Engelhard Corp. 2,400 72,360 ------------------------------------------------------------------------------- Ferro Corp. 3,800 71,288 ------------------------------------------------------------------------------- FMC Corp. 1 11,500 611,455 ------------------------------------------------------------------------------- Fuller (H.B.) Co. 21,100 676,677 ------------------------------------------------------------------------------- Headwaters, Inc. 1,2 11,200 396,928 ------------------------------------------------------------------------------- Lubrizol Corp. (The) 4,600 199,778 ------------------------------------------------------------------------------- MacDermid, Inc. 1,000 27,900 ------------------------------------------------------------------------------- Pioneer Cos., Inc. 1,2 8,700 260,739 ------------------------------------------------------------------------------- PolyOne Corp. 1 24,900 160,107 21 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- CHEMICALS Continued Rockwood Holdings, Inc. 1 1,500 $ 29,595 ------------------------------------------------------------------------------- Schulman (A.), Inc. 800 17,216 ------------------------------------------------------------------------------- Scotts Miracle-Gro Co. (The), Cl. A 8,700 393,588 ------------------------------------------------------------------------------- Stepan Co. 1,700 45,713 ------------------------------------------------------------------------------- Tronox, Inc., Cl. A 1,2 29,500 385,565 ------------------------------------------------------------------------------- Valhi, Inc. 500 9,250 ------------------------------------------------------------------------------- W.R. Grace & Co. 1,2 14,600 137,240 ------------------------------------------------------------------------------- Wellman, Inc. 500 3,390 ------------------------------------------------------------------------------- Westlake Chemical Corp. 2 9,600 276,576 -------------- 4,572,263 ------------------------------------------------------------------------------- CONSTRUCTION MATERIALS--0.2% Eagle Materials, Inc. 2 600 73,416 ------------------------------------------------------------------------------- Eagle Materials, Inc., Cl. B 2 100 11,777 ------------------------------------------------------------------------------- Texas Industries, Inc. 2 14,000 697,760 ------------------------------------------------------------------------------- U.S. Concrete, Inc. 1,600 15,168 -------------- 798,121 ------------------------------------------------------------------------------- CONTAINERS & PACKAGING--1.1% AptarGroup, Inc. 1,300 67,860 ------------------------------------------------------------------------------- Caraustar Industries, Inc. 2 12,500 108,625 ------------------------------------------------------------------------------- Crown Holdings, Inc. 1 24,400 476,532 ------------------------------------------------------------------------------- Greif, Inc., Cl. A 12,200 808,616 ------------------------------------------------------------------------------- Longview Fibre Co. 15,200 316,312 ------------------------------------------------------------------------------- Myers Industries, Inc. 1,000 14,580 ------------------------------------------------------------------------------- Owens-Illinois, Inc. 1 17,100 359,784 ------------------------------------------------------------------------------- Rock-Tenn Co., Cl. A 2 9,600 131,040 ------------------------------------------------------------------------------- Sealed Air Corp. 1 8,900 499,913 ------------------------------------------------------------------------------- Silgan Holdings, Inc. 25,200 910,224 ------------------------------------------------------------------------------- Temple-Inland, Inc. 3,300 148,005 -------------- 3,841,491 ------------------------------------------------------------------------------- METALS & MINING--2.5% AK Steel Holding Corp. 1,2 110,200 876,090 ------------------------------------------------------------------------------- Aleris International, Inc. 1 12,400 399,776 ------------------------------------------------------------------------------- Allegheny Technologies, Inc. 4,600 165,968 ------------------------------------------------------------------------------- Amerigo Resources Ltd. 66,000 132,857 ------------------------------------------------------------------------------- Brush Engineered Materials, Inc. 1 1,000 15,900 ------------------------------------------------------------------------------- Carpenter Technology Corp. 2 17,100 1,205,037 ------------------------------------------------------------------------------- Castle (A.M.) & Co. 1,2 4,900 107,016 ------------------------------------------------------------------------------- Century Aluminum Co. 2 14,800 387,908 ------------------------------------------------------------------------------- Commercial Metals Co. 9,900 371,646 ------------------------------------------------------------------------------- Desert Sun Mining Corp. 1 15,700 38,627 ------------------------------------------------------------------------------- Dynatec Corp. 1 73,900 76,923 ------------------------------------------------------------------------------- FNX Mining Co., Inc. 1 3,100 36,242 ------------------------------------------------------------------------------- Goldcorp, Inc. 2,425 54,030 ------------------------------------------------------------------------------- HudBay Minerals, Inc. 1 26,100 132,246 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- METALS & MINING Continued Inmet Mining Corp. 8,800 $ 223,321 ------------------------------------------------------------------------------- LionOre Mining International Ltd. 1 24,300 103,475 ------------------------------------------------------------------------------- Meridian Gold, Inc. 1 900 19,727 ------------------------------------------------------------------------------- Metal Management, Inc. 14,300 332,618 ------------------------------------------------------------------------------- Olympic Steel, Inc. 1 1,200 29,820 ------------------------------------------------------------------------------- Quanex Corp. 2 18,750 936,938 ------------------------------------------------------------------------------- Reliance Steel & Aluminum Co. 2 19,200 1,173,504 ------------------------------------------------------------------------------- Ryerson Tull, Inc. 2 17,100 415,872 ------------------------------------------------------------------------------- Steel Dynamics, Inc. 2 24,100 855,791 ------------------------------------------------------------------------------- Steel Technologies, Inc. 2 2,700 75,573 ------------------------------------------------------------------------------- Stillwater Mining Co. 1,2 20,900 241,813 ------------------------------------------------------------------------------- United States Steel Corp. 3,900 187,473 ------------------------------------------------------------------------------- Worthington Industries, Inc. 2 14,700 282,387 -------------- 8,878,578 ------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS--0.1% Bowater, Inc. 6,900 211,968 ------------------------------------------------------------------------------- Buckeye Technologies, Inc. 1 11,100 89,355 ------------------------------------------------------------------------------- Louisiana-Pacific Corp. 10,500 288,435 -------------- 589,758 ------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES--1.2% ------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES--0.5% Alaska Communications Systems Group, Inc. 2 24,700 250,952 ------------------------------------------------------------------------------- Broadwing Corp. 1,2 22,500 136,125 ------------------------------------------------------------------------------- CenturyTel, Inc. 7,700 255,332 ------------------------------------------------------------------------------- Citizens Communications Co. 10,700 130,861 ------------------------------------------------------------------------------- Commonwealth Telephone Enterprises, Inc. 4,800 162,096 ------------------------------------------------------------------------------- CT Communications, Inc. 2,900 35,206 ------------------------------------------------------------------------------- FairPoint Communications, Inc. 13,000 134,680 ------------------------------------------------------------------------------- Golden Telecom, Inc. 2,900 75,284 ------------------------------------------------------------------------------- Iowa Telecommunications Services, Inc. 4,900 75,901 ------------------------------------------------------------------------------- North Pittsburgh Systems, Inc. 2 4,900 92,463 ------------------------------------------------------------------------------- Shenandoah Telecommunications Co. 2 100 3,984 ------------------------------------------------------------------------------- Talk America Holdings, Inc. 1 19,200 165,696 ------------------------------------------------------------------------------- Time Warner Telecom, Inc., Cl. A 1,2 17,000 167,450 ------------------------------------------------------------------------------- Valor Communications Group, Inc. 2 100 1,140 -------------- 1,687,170 ------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES--0.7% Centennial Communications Corp. 2 17,800 276,256 ------------------------------------------------------------------------------- Cincinnati Bell, Inc. 1 74,800 262,548 ------------------------------------------------------------------------------- Dobson Communications Corp., Cl. A 1,2 94,300 707,250 ------------------------------------------------------------------------------- Linktone Ltd., ADR 1 3,400 35,360 ------------------------------------------------------------------------------- SBA Communications Corp. 1,2 33,600 601,440 22 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES Continued Syniverse Holdings, Inc. 1 2,800 $ 58,520 ------------------------------------------------------------------------------- UbiquiTel, Inc. 2 62,900 622,081 ------------------------------------------------------------------------------- Wireless Facilities, Inc. 1,2 3,000 15,300 -------------- 2,578,755 ------------------------------------------------------------------------------- UTILITIES--1.1% ------------------------------------------------------------------------------- ELECTRIC UTILITIES--0.5% ALLETE, Inc. 2 2,300 101,200 ------------------------------------------------------------------------------- Aquila, Inc. 1 21,200 76,320 ------------------------------------------------------------------------------- Black Hills Corp. 1,800 62,298 ------------------------------------------------------------------------------- Canadian Hydro Developers, Inc. 1 14,000 70,214 ------------------------------------------------------------------------------- CenterPoint Energy, Inc. 2 8,400 107,940 ------------------------------------------------------------------------------- CH Energy Group, Inc. 6,100 279,990 ------------------------------------------------------------------------------- CMS Energy Corp. 1 12,200 177,022 ------------------------------------------------------------------------------- DPL, Inc. 7,900 205,479 ------------------------------------------------------------------------------- Green Mountain Power Corp. 900 25,893 ------------------------------------------------------------------------------- Ormat Technologies, Inc. 2 17,800 465,292 ------------------------------------------------------------------------------- Pinnacle West Capital Corp. 3,800 157,130 ------------------------------------------------------------------------------- Reliant Energy, Inc. 1 9,000 92,880 -------------- 1,821,658 ------------------------------------------------------------------------------- GAS UTILITIES--0.2% Chesapeake Utilities Corp. 2 100 3,080 ------------------------------------------------------------------------------- ONEOK, Inc. 4,900 130,487 ------------------------------------------------------------------------------- Peoples Energy Corp. 2 2,400 84,168 ------------------------------------------------------------------------------- Southwest Gas Corp. 4,900 129,360 ------------------------------------------------------------------------------- UGI Corp. 5,300 109,180 ------------------------------------------------------------------------------- WGL Holdings, Inc. 6,100 183,366 -------------- 639,641 ------------------------------------------------------------------------------- MULTI-UTILITIES & UNREGULATED POWER--0.4% Avista Corp. 2 16,000 283,360 ------------------------------------------------------------------------------- Dynegy, Inc. 1,2 35,800 173,272 ------------------------------------------------------------------------------- Energy East Corp. 11,400 259,913 ------------------------------------------------------------------------------- Sierra Pacific Resources 1 61,000 795,440 -------------- 1,511,985 -------------- Total Common Stocks (Cost $307,256,727) 356,543,437 ------------------------------------------------------------------------------- PREFERRED STOCKS--0.0% ------------------------------------------------------------------------------- Simon Property Group, Inc., 6% Cv., Non-Vtg. (Cost $3,213) 60 3,858 VALUE UNITS SEE NOTE 1 ------------------------------------------------------------------------------- RIGHTS, WARRANTS AND CERTIFICATES--0.1% ------------------------------------------------------------------------------- Chamaelo Exploration Ltd. Rts., Exp. 1/16/06 1,3 55,500 $ 352,199 ------------------------------------------------------------------------------- Redstar Oil & Gas, Inc. Wts., Exp. 3/15/05 1,4 35,955 84,949 -------------- Total Rights, Warrants and Certificates (Cost $405,085) 437,148 PRINCIPAL AMOUNT ------------------------------------------------------------------------------- NON-CONVERTIBLE CORPORATE BONDS AND NOTES--0.0% ------------------------------------------------------------------------------- Mueller Industries, Inc., 6% Sub. Nts., 11/1/14 2,4 (Cost $51,000) $ 51,000 49,215 ------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS--2.6% ------------------------------------------------------------------------------- Undivided interest of 0.65% in joint repurchase agreement (Principal Amount/Value $1,414,200,000, with a maturity value of $1,414,844,247) with UBS Warburg LLC, 4.10%, dated 12/30/05, to be repurchased at $9,266,219 on 1/3/06, collateralized by Federal Home Loan Mortgage Corp., 5%, 1/1/35, with a value of $157,513,104 and Federal National Mortgage Assn., 5%--5.50%, 3/1/34--10/1/35, with a value of $1,301,420,187 (Cost $9,262,000) 9,262,000 9,262,000 ------------------------------------------------------------------------------- Total Investments, at Value (excluding Investments Purchased with Cash Collateral from Securities Loaned) (Cost $316,978,025) 366,295,658 ------------------------------------------------------------------------------- INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--22.3% ------------------------------------------------------------------------------- ASSET BACKED FLOATING NOTE--2.3% Countrywide Asset-Backed Certificates, Series 2005-17, Cl. 4AV1, 4.49%, 1/25/06 5 2,000,000 2,000,000 ------------------------------------------------------------------------------- GSAA Home Equity Trust, Series 2005-15, Cl. 2A1, 4.47%, 1/25/06 5 2,000,000 2,000,000 ------------------------------------------------------------------------------- Structured Asset Investment Loan Trust, Series 2005-11, Cl. A4, 4.47%, 1/25/06 5 2,000,745 2,000,745 ------------------------------------------------------------------------------- Whitehawk CDO Funding Corp., 4.56%, 3/15/06 5 2,250,000 2,250,000 -------------- 8,250,745 ------------------------------------------------------------------------------- DOMESTIC FLOATING CERTIFICATE OF DEPOSIT--0.3% Washington Mutual Bank, 4.36%, 1/20/06 5 999,974 999,974 ------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS--17.1% Undivided interest of 1.95% in joint repurchase agreement (Principal Amount/Value $3,150,000,000, with a maturity value of $3,151,501,500) with Nomura Securities, 4.29%, dated 12/30/05, to be repurchased at $61,596,901 on 1/3/06, collateralized by U.S. Agency Mortgages, 3.34%--9.50%, 6/1/08--5/1/38, with a value of $3,213,000,000 5,6 61,567,554 61,567,554 23 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- PRINICIPAL VALUE AMOUNT SEE NOTE 1 ------------------------------------------------------------------------------- MASTER FLOATING NOTE--0.9% Bear Stearns, 4.37%, 1/3/06 5 $ 250,000 $ 250,000 ------------------------------------------------------------------------------- CDC Financial Products, Inc., 4.35%, 1/3/06 5 3,000,000 3,000,000 -------------- 3,250,000 ------------------------------------------------------------------------------- MEDIUM-TERM FLOATING NOTE--1.7% Countrywide Financial Corp., 4.59%, 3/21/06 5 2,999,825 2,999,825 ------------------------------------------------------------------------------- Goldman Sachs Group, Inc., 4.41%, 1/3/06 5 3,000,000 3,000,000 -------------- 5,999,825 -------------- Total Investments Purchased with Cash Collateral from Securities Loaned (Cost $80,068,098) 80,068,098 ------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $397,046,123) 124.1% 446,363,756 ------------------------------------------------------------------------------- LIABILITIES IN EXCESS OF OTHER ASSETS (24.1) (86,675,844) ------------------------------- NET ASSETS 100.0% $ 359,687,912 =============================== FOOTNOTES TO STATEMENT OF INVESTMENTS 1. Non-income producing security. 2. Partial or fully-loaned security. See Note 6 of Notes to Financial Statements. 3. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $493,882 or 0.14% of the Fund's net assets as of December 31, 2005. 4. Illiquid or restricted security. The aggregate value of illiquid or restricted securities as of December 31, 2005 was $267,677, which represents 0.07% of the Fund's net assets, of which $133,513 is considered restricted. See Note 5 of Notes to Financial Statements. 5. The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Note 6 of Notes to Financial Statements. 6. The Fund may have elements of risk due to concentrated investments. Such concentrations may subject the Fund to additional risks. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 24 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA STATEMENT OF ASSETS AND LIABILITIES December 31, 2005 -------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------------- ASSETS ---------------------------------------------------------------------------------------------------------------------------------- Investments, at value (including cost and market value of $61,567,554 in repurchase agreements) (including securities loaned of $77,660,389) (cost $397,046,123)--see accompanying statement of investments $ 446,363,756 ---------------------------------------------------------------------------------------------------------------------------------- Cash 334,683 ---------------------------------------------------------------------------------------------------------------------------------- Receivables and other assets: Shares of beneficial interest sold 1,836,407 Investments sold 939,183 Interest and dividends 217,557 Other 5,353 ---------------- Total assets 449,696,939 ---------------------------------------------------------------------------------------------------------------------------------- LIABILITIES ---------------------------------------------------------------------------------------------------------------------------------- Return of collateral for securities loaned 80,068,098 ---------------------------------------------------------------------------------------------------------------------------------- Payables and other liabilities: Investments purchased 9,584,302 Distribution and service plan fees 178,081 Shares of beneficial interest redeemed 118,186 Shareholder communications 16,006 Trustees' compensation 7,066 Transfer and shareholder servicing agent fees 1,809 Other 35,479 ---------------- Total liabilities 90,009,027 ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS $ 359,687,912 ================ ---------------------------------------------------------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ---------------------------------------------------------------------------------------------------------------------------------- Par value of shares of beneficial interest $ 21,066 ---------------------------------------------------------------------------------------------------------------------------------- Additional paid-in capital 297,586,172 ---------------------------------------------------------------------------------------------------------------------------------- Accumulated net investment income 126,247 ---------------------------------------------------------------------------------------------------------------------------------- Accumulated net realized gain on investments and foreign currency transactions 12,636,776 ---------------------------------------------------------------------------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 49,317,651 ---------------- NET ASSETS $ 359,687,912 ================ ---------------------------------------------------------------------------------------------------------------------------------- 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 $44,819,794 and 2,608,321 shares of beneficial interest outstanding) $ 17.18 ---------------------------------------------------------------------------------------------------------------------------------- Service Shares: Net asset value, redemption price per share and offering price per share (based on net assets of $314,868,118 and 18,458,009 shares of beneficial interest outstanding) $ 17.06
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 25 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA STATEMENT OF OPERATIONS For the Year Ended December 31, 2005 -------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME ---------------------------------------------------------------------------------------------------------------------------------- Dividends (net of foreign withholding taxes of $17,332) $ 2,344,581 ---------------------------------------------------------------------------------------------------------------------------------- Portfolio lending fees 219,065 ---------------------------------------------------------------------------------------------------------------------------------- Interest 177,279 ---------------- Total investment income 2,740,925 ---------------------------------------------------------------------------------------------------------------------------------- EXPENSES ---------------------------------------------------------------------------------------------------------------------------------- Management fees 1,936,534 ---------------------------------------------------------------------------------------------------------------------------------- Distribution and service plan fees--Service shares 550,413 ---------------------------------------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Non-Service shares 10,153 Service shares 10,742 ---------------------------------------------------------------------------------------------------------------------------------- Shareholder communications: Non-Service shares 4,799 Service shares 28,803 ---------------------------------------------------------------------------------------------------------------------------------- Trustees' compensation 7,761 ---------------------------------------------------------------------------------------------------------------------------------- Custodian fees and expenses 4,233 ---------------------------------------------------------------------------------------------------------------------------------- Administration service fees 1,500 ---------------------------------------------------------------------------------------------------------------------------------- Other 58,911 ---------------- Total expenses 2,613,849 Less reduction to custodian expenses (986) ---------------- Net expenses 2,612,863 ---------------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME 128,062 ---------------------------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN ---------------------------------------------------------------------------------------------------------------------------------- Net realized gain on: Investments 13,508,109 Foreign currency transactions 84,502 ---------------- Net realized gain 13,592,611 ---------------------------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation on: Investments 14,085,958 Translation of assets and liabilities denominated in foreign currencies 39,133 ---------------- Net change in unrealized appreciation 14,125,091 ---------------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 27,845,764 ================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 26 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005 2004 ---------------------------------------------------------------------------------------------------------------------------------- OPERATIONS ---------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) $ 128,062 $ (134,635) ---------------------------------------------------------------------------------------------------------------------------------- Net realized gain 13,592,611 9,579,604 ---------------------------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation 14,125,091 20,104,091 ------------------------------------ Net increase in net assets resulting from operations 27,845,764 29,549,060 ---------------------------------------------------------------------------------------------------------------------------------- DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS ---------------------------------------------------------------------------------------------------------------------------------- Distributions from net realized gain: Non-Service shares (1,015,976) -- Service shares (4,826,305) -- ---------------------------------------------------------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ---------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from beneficial interest transactions: Non-Service shares 3,420,313 5,097,638 Service shares 122,016,957 87,389,394 ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS ---------------------------------------------------------------------------------------------------------------------------------- Total increase 147,440,753 122,036,092 ---------------------------------------------------------------------------------------------------------------------------------- Beginning of period 212,247,159 90,211,067 ------------------------------------ End of period (including accumulated net investment income (loss) of $126,247 and $(52,556), respectively) $ 359,687,912 $ 212,247,159 ====================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 27 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 --------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA --------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 16.05 $ 13.44 $ 9.31 $ 11.05 $ 11.09 --------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) .04 1 .01 1 (.03) (.01) -- 2 Net realized and unrealized gain (loss) 1.51 2.60 4.16 (1.73) (.04) ------------------------------------------------------------------------- Total from investment operations 1.55 2.61 4.13 (1.74) (.04) --------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Distributions from net realized gain (.42) -- -- -- -- --------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 17.18 $ 16.05 $ 13.44 $ 9.31 $ 11.05 ========================================================================= --------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 9.92% 19.42% 44.36% (15.75)% (0.36)% --------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA --------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 44,820 $ 38,636 $ 27,551 $ 19,577 $ 18,514 --------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 39,708 $ 30,871 $ 20,271 $ 20,505 $ 15,307 --------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income (loss) 0.23% 0.06% (0.30)% (0.09)% (0.01)% Total expenses 0.81% 5 0.83% 5 1.01% 5 1.00% 5 1.05% 5 --------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 110% 147% 130% 121% 213%
1. Per share amounts calculated based on the average shares outstanding during the period. 2. Less than $0.005 per share. 3. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year. 5. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 28 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 1 -------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 15.97 $ 13.40 $ 9.29 $ 11.05 $ 10.61 -------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) -- 2,3 (.02) 2 (.02) (.01) -- 3 Net realized and unrealized gain (loss) 1.51 2.59 4.13 (1.75) .44 ------------------------------------------------------------------------ Total from investment operations 1.51 2.57 4.11 (1.76) .44 -------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Distributions from net realized gain (.42) -- -- -- -- -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 17.06 $ 15.97 $ 13.40 $ 9.29 $ 11.05 ======================================================================== -------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 4 9.71% 19.18% 44.24% (15.93)% 4.15% -------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA -------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 314,868 $ 173,612 $ 62,660 $ 6,111 $ 108 -------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 221,324 $ 112,279 $ 25,018 $ 2,228 $ 26 -------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 5 Net investment income (loss) 0.02% (0.14)% (0.43)% (0.26)% (0.34)% Total expenses 1.04% 1.06% 1.23% 1.21% 1.19% Expenses after payments and waivers and reduction to custodian expenses 1.04% 1.06% 1.23% 1.19% 1.19% -------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 110% 147% 130% 121% 213%
1. For the period from July 16, 2001 (inception of offering) to December 31, 2001. 2. Per share amounts calculated based on the average shares outstanding during the period. 3. Less than $0.005 per share. 4. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 5. Annualized for periods of less than one full year. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 29 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Oppenheimer Main Street Small Cap Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds, an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek capital appreciation. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The 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. Both classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. The following is a summary of significant accounting policies consistently followed by the Fund. -------------------------------------------------------------------------------- SECURITIES VALUATION. The Fund calculates the net asset value of its shares as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Securities may be valued primarily using dealer-supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Securities listed or traded on National Stock Exchanges or other domestic 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. Securities traded on NASDAQ are valued based on the closing price provided by NASDAQ 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 traded on foreign exchanges are valued based on the last sale price on the principal exchange on which the security is traded, in the country that is identified by the portfolio pricing service, prior to the time when the Fund's assets are valued. In the absence of a sale, the security is valued at the official closing price on the principal exchange. Corporate, government and municipal debt instruments having a remaining maturity in excess of sixty days and all mortgage-backed securities will be valued at the mean between the "bid" and "asked" prices. Futures contracts traded on a commodities or futures exchange will be valued at the final settlement price or official closing price on the principal exchange as reported by such principal exchange at its trading session ending at, or most recently prior to, the time when the Fund's assets are valued. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value. Foreign and domestic securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund's assets are valued but after the close of their respective exchanges will be fair valued. Fair value is determined in good faith using 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). -------------------------------------------------------------------------------- FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in U.S. dollars. The values of securities denominated in foreign currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Foreign exchange rates may be valued primarily using dealer supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in exchange rates. 30 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA 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. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. 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. 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 on a daily basis 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 comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. The tax components of capital shown in the table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes. NET UNREALIZED APPRECIATION BASED ON COST OF SECURITIES AND UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME INCOME GAIN CARRYFORWARD 1,2,3 TAX PURPOSES --------------------------------------------------------------------------- $ 845,412 $ 12,270,904 $2,735 $ 48,972,067 1. The Fund had $2,735 of post-October passive foreign investment company losses which were deferred. 2. During the fiscal year ended December 31, 2005, the Fund did not utilize any capital loss carryforward. 3. During the fiscal year ended December 31, 2004, the Fund utilized $3,233,886 of capital loss carryforward to offset capital gains realized in that fiscal year. Net investment income (loss) and net realized gain (loss) may differ for financial statement and 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. Accordingly, the following amounts have been reclassified for December 31, 2005. Net assets of the Fund were unaffected by the reclassifications. REDUCTION INCREASE TO ACCUMULATED NET INCREASE TO ACCUMULATED NET REALIZED GAIN TO PAID-IN CAPITAL INVESTMENT INCOME ON INVESTMENTS 4 ---------------------------------------------------------------- $ 802,069 $ 50,741 $ 852,810 4. $802,069, including $760,121 of long-term capital gain, was distributed in connection with Fund share redemptions. 31 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued The tax character of distributions paid during the years ended December 31, 2005 and December 31, 2004 was as follows: YEAR ENDED YEAR ENDED DECEMBER 31, 2005 DECEMBER 31, 2004 -------------------------------------------------------------------- Distributions paid from: Long-term capital gain $ 5,842,281 $ -- The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 31, 2005 are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss. Federal tax cost of securities $ 397,391,707 ============== Gross unrealized appreciation $ 54,693,243 Gross unrealized depreciation (5,721,176) -------------- Net unrealized appreciation $ 48,972,067 ============== -------------------------------------------------------------------------------- TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of "Other" within the asset section of the Statement of Assets and Liabilities. Deferral of trustees' fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund's assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the Plan. -------------------------------------------------------------------------------- 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. Income and capital gain distributions, if any, are declared and paid annually. -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts to the extent they are not offset by positive cash balances maintained by the Fund. The Reduction to Custodian Expenses line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings. At December 31, 2005, the Fund had $109 of such earnings on cash balances available to offset future custodian fees or interest expenses incurred during the next fiscal year. -------------------------------------------------------------------------------- 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. 32 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA -------------------------------------------------------------------------------- OTHER. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. -------------------------------------------------------------------------------- 2. SHARES OF BENEFICIAL INTEREST The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004 SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------------------------- NON-SERVICE SHARES Sold 951,013 $ 15,158,198 989,664 $ 13,869,116 Dividends and/or distributions reinvested 65,759 1,015,976 -- -- Redeemed (815,388) (12,753,861) (632,898) (8,771,478) -------------------------------------------------------------- Net increase 201,384 $ 3,420,313 356,766 $ 5,097,638 ============================================================== ------------------------------------------------------------------------------------------------------------- SERVICE SHARES Sold 9,011,249 $ 144,257,571 7,817,367 $ 110,026,860 Dividends and/or distributions reinvested 313,963 4,826,305 -- -- Redeemed (1,735,515) (27,066,919) (1,624,349) (22,637,466) -------------------------------------------------------------- Net increase 7,589,697 $ 122,016,957 6,193,018 $ 87,389,394 ==============================================================
-------------------------------------------------------------------------------- 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, 2005, were as follows: PURCHASES SALES ---------------------------------------------------------------------- Investment securities $405,815,181 $285,544,711 -------------------------------------------------------------------------------- 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 Fund which provides for a fee at an annual rate of 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million and 0.60% of average annual net assets over $800 million. -------------------------------------------------------------------------------- ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund's tax returns. -------------------------------------------------------------------------------- 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 per account fee. For the year ended December 31, 2005, the Fund paid $20,809 to OFS for services to the Fund. Additionally, funds offered in variable annuity separate accounts are subject to minimum fees of $10,000 per class, for class level assets of $10 million or more. Each class is subject to the minimum fee in the event that the per account fee does not equal or exceed the applicable minimum fee. -------------------------------------------------------------------------------- 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, personal service 33 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued and account maintenance for the Fund's Service shares. Under the plan, payments are made periodically at an annual rate of up to 0.25% of the average annual net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsor(s) of the insurance product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service shares. The impact of the service plan is to increase operating expenses of the Service shares, which results in lower performance compared to the Fund's shares that are not subject to a service fee. Fees incurred by the Fund under the plan are detailed in the Statement of Operations. -------------------------------------------------------------------------------- WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes to 0.35% of average annual net assets per class. This undertaking may be amended or withdrawn at any time. -------------------------------------------------------------------------------- 5. ILLIQUID OR RESTRICTED SECURITIES As of December 31, 2005, investments in securities included issues that are illiquid or restricted. Restricted securities are 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 will not invest more than 10% 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. Securities that are illiquid or restricted are marked with the applicable footnote on the Statement of Investments. Information concerning restricted securities is as follows:
ACQUISITION VALUATION AS OF UNREALIZED SECURITY DATES COST DECEMBER 31, 2005 APPRECIATION ------------------------------------------------------------------------------------------- Mission Oil & Gas, Inc. 1/18/05 $ 34,507 $ 40,797 $ 6,290 Tusk Energy Corp. 11/15/04 38,148 92,716 54,568 ---------------------------------------------- $ 72,655 $ 133,513 $ 60,858 ==============================================
-------------------------------------------------------------------------------- 6. SECURITIES LENDING The Fund lends portfolio securities from time to time in order to earn additional income. In return, the Fund receives collateral in the form of U.S. Treasury obligations or cash, against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the funds and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Fund could experience delays and cost in recovering the securities loaned or in gaining access to the collateral. Cash collateral is invested in cash equivalents. The Fund retains a portion of the interest earned from the collateral. The Fund continues to receive the economic benefit of interest or dividends paid on the securities loaned in the form of a substitute payment received from the borrower. As of December 31, 2005, the Fund had on loan securities valued at $77,660,389. Collateral of $80,068,098 was received for the loans, all of which was received in cash and subsequently invested in approved instruments. -------------------------------------------------------------------------------- 7. LITIGATION A consolidated amended complaint has been filed as putative derivative and class actions against the Manager, OFS and the Distributor, as well as 51 of the Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 pre- 34 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA sent and former Directors or Trustees and 8 present and former officers of the funds. This complaint, initially filed in the U.S. District Court for the Southern District of New York on January 10, 2005 and amended on March 4, 2005, consolidates into a single action and amends six individual previously-filed putative derivative and class action complaints. Like those prior complaints, the complaint alleges that the Manager charged excessive fees for distribution and other costs, improperly used assets of the funds in the form of directed brokerage commissions and 12b-1 fees to pay brokers to promote sales of the funds, and failed to properly disclose the use of assets of the funds to make those payments in violation of the Investment Company Act of 1940 and the Investment Advisers Act of 1940. Also, like those prior complaints, the complaint further alleges that by permitting and/or participating in those actions, the Directors/Trustees and the Officers breached their fiduciary duties to shareholders of the funds under the Investment Company Act of 1940 and at common law. The complaint seeks unspecified compensatory and punitive damages, rescission of the funds' investment advisory agreements, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. The defendants believe that the allegations contained in the Complaints are without merit and that they have meritorious defenses against the claims asserted. The defendants intend to defend these lawsuits vigorously and to contest any claimed liability. The defendants believe that it is premature to render any opinion as to the likelihood of an outcome unfavorable to them and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. 35 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER MAIN STREET SMALL CAP FUND/VA: We have audited the accompanying statement of assets and liabilities of Oppenheimer Main Street Small Cap Fund/VA, a series of Oppenheimer Variable Account Funds, including the statement of investments, as of December 31, 2005, 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 each of the five years in the periods presented. 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 the standards of the Public Company Accounting Oversight Board (United States). 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. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. 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 Main Street Small Cap Fund/VA as of December 31, 2005, 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 each of the five years in the periods presented, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Denver, Colorado February 13, 2006 36 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA FEDERAL INCOME TAX INFORMATION Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- In early 2006, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2005. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. Capital gain distributions of $0.4156 per share were paid to Non-Service and Service shareholders, respectively, on March 14, 2005. Whether received in stock or in cash, the capital gain distribution should be treated by shareholders as a gain from the sale of the capital assets held for more than one year (long-term capital gains). Dividends, if any, paid by the Fund during the fiscal year ended December 31, 2005 which are not designated as capital gain distributions should be multiplied by 100% 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. 37 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities ("portfolio proxies") held by the Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund's voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at www.sec.gov. The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund's Form N-Q filings are available on the SEC's website at http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 38 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Each year, the Board of Trustees (the "Board"), including a majority of the independent Trustees, is required to determine whether to renew the Fund's investment advisory agreement (the "Agreement"). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information, that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance. The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager's services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. Outlined below is a summary of the principal information considered by the Board as well as the Board's conclusions. NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information on the nature and extent of the services provided to the Fund and information regarding the Manager's key personnel that provide such services. The Manager's duties include providing the Fund with the services of the portfolio managers and the Manager's investment team, who provide research, analysis and other advisory services in regard to the Fund's investments; securities trading services; oversight of third party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund's investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel that are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund's operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund's shares. The Manager also provides the Fund with office space, facilities and equipment. The Board also considered the quality of the services provided and the quality of the Manager's resources that are available to the Fund. The Board took account of the fact that the Manager has had over forty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager's administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager's key personnel and the size and functions of its staff providing investment management services to the Fund. The Board also considered compliance reports from the Fund's Chief Compliance Officer. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Nikolaos D. Monoyios and Mark Zavanelli and the Manager's Equity Growth investment team and analysts. Messrs. Monoyios and Zavanelli have had over 28 and 14 years of experience, respectively, managing equity investments. The Board members also considered the totality of their experiences with the Manager, as directors or trustees of the Fund and other funds advised by the Manager. In light of the foregoing, the Board concluded that the Fund benefits from the services provided under the Agreement as a result of the Manager's experience, reputation, personnel, operations, and resources. 39 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited/Continued -------------------------------------------------------------------------------- INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the Manager provided information on the performance of the Fund and the Manager at each Board meeting, including comparative performance information. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund's historical performance to relevant market indices and to the performance of other small-cap core funds (including both funds advised by the Manager and funds advised by other investment advisers). The Board noted that the Fund's one-year performance was better than its peer group median and its three-year performance was at its peer group median. However, its five-year performance was below its peer group median. COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board considered information regarding the Manager's costs in serving as the Fund's investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager's profitability from its relationship with the Fund. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also evaluated the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund, other small-cap core funds and other funds with comparable asset levels and distribution features. The Board noted that the Fund's contractual and actual management fees and total expenses are all lower than its peer group median and average. In light of this and of the Fund's strong recent performance record, the Board concluded that the management fee was reasonable. ECONOMIES OF SCALE. The Board considered whether the Manager may realize economies of scale in managing and supporting the Fund, whether those economies of scale benefit the Fund's shareholders and the current level of Fund assets in relation to the Fund's management fee breakpoints, which are intended to share with shareholders economies of scale that may exist as the Fund grows. OTHER BENEFITS TO THE MANAGER. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager's affiliates and research provided to the Manager in connection with permissible brokerage arrangements (soft dollar arrangements). The Board also considered the nature and quality of services provided by affiliates of the Manager, which it reviews at other times during the year in connection with the renewal of the Fund's service agreements. The Board considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide services to the Fund and that maintaining the financial viability of the Manager is important in order for the Manager to continue to provide significant services to the Fund and its shareholders. CONCLUSIONS. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees' counsel are both independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules. Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the advisory agreement for another year. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the factors together. The Board judged the terms and conditions of the advisory agreement, including the management fee, in light of all of the surrounding circumstances. 40 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA TRUSTEES AND OFFICERS Unaudited --------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------ NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS THE FUNDS, LENGTH OF SERVICE, HELD; NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN AGE INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, TRUSTEES COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL. WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Mortgage Chairman of the Board of Company (since 1991), Centennial State Mortgage Company (since 1994), and The El Paso Trustees (since 2003), Mortgage Company (since 1993); Chairman of the following private companies: Ambassador Trustee (since 1999) Media Corporation (since 1984) and Broadway Ventures (since 1984); Director of the Age: 68 following: Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), Campus Crusade for Christ (since 1991) and The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (since 2002); former Chairman of the following: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (insurance agency) (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private Trustee (since 1998) equity funds) (until February 2001); Chairman, President and Chief Executive Officer Age: 74 of A.G. Edwards Capital, Inc. (until March 2000); Director of A.G. Edwards & Sons, Inc. (brokerage company) (until 2000) and A.G. Edwards Trust Company (investment adviser) (until 2000); Vice Chairman and Director of A.G. Edwards, Inc. (until March 1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March 1999); Chairman of A.G. Edwards Trust Company (until March 1999) and A.G.E. Asset Management (investment adviser) (until March 1999). Oversees 38 portfolios in the OppenheimerFunds complex. GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation (December Trustee (since 1999) 1991-April 1999); President, Treasurer and Director of Centennial Capital Corporation Age: 69 (June 1989-April 1999); Chief Executive Officer and Director of MultiSource Services, Inc. (March 1996-April 1999); Mr. Bowen held several positions with the Manager and with subsidiary or affiliated companies of the Manager (September 1987-April 1999). Oversees 38 portfolios in the OppenheimerFunds complex. EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since Trustee (since 1999) June 2000); Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002); Age: 67 Partner at PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (July 1994-June 1998). Oversees 38 portfolios in the OppenheimerFunds complex. JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Trustee (since 1998) Northwestern Energy Corp. (public utility corporation) (since November 2004); Director Age: 64 of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. ("OAC") (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 38 portfolios in the OppenheimerFunds complex. SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September 1984). Mr. Trustee (since 1998) Freedman held several positions with the Manager and with subsidiary or affiliated Age: 65 companies of the Manager (until October 1994). Oversees 38 portfolios in the OppenheimerFunds complex.
41 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA TRUSTEES AND OFFICERS Unaudited / Continued --------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------- BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational Trustee (since 2002) organization) (since February 2000); Director of The California Endowment Age: 59 (philanthropic organization) (since April 2002); Director of Community Hospital of Monterey Peninsula (since February 2002); Vice Chair of American Funds' Emerging Markets Growth Fund, Inc. (mutual fund) (since October 1991); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation and The University of Michigan; Advisor at Credit Suisse First Boston's Sprout venture capital unit (venture capital fund) (1994- January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member of the investment committee of Hartford Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund (2000- 2003). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT J. MALONE, Director of Jones International University (educational organization) (since Trustee (since 2002) August 2005); Chairman, Chief Executive Officer and Director of Steele Street Age: 61 State Bank (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank- Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc.(real estate investment trust)(1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 38 portfolios in the OppenheimerFunds complex. F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) Trustee (since 2000) (investment company) (since 1996) and MML Series Investment Fund (investment Age: 63 company) (since 1996), Trustee and Chairman of the Investment Committee (since 1994) of the Worcester Polytech Institute (private university); President and Treasurer of the SIS Funds (private charitable fund) (since January 1999); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Member of the Investment Committee of the Community Foundation of Western Massachusetts (1998-2003); and Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999). Oversees 38 portfolios in the OppenheimerFunds complex. ------------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, AND OFFICER 11TH FLOOR, NEW YORK, NY 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES. JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President and Trustee President (since September 2000) of the Manager; President and Director or (since 2001) Trustee of other Oppenheimer funds; President and Director of OAC and of Age: 56 Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since November 2001); Chairman and Director of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since July 2001); President and Director of OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since July 2001); Director of the following investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 2001) and Director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director of DLB Acquisition Corporation (holding company parent of Babson Capital Management LLC) (since June 1995); Member of the Investment Company Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of the Manager (September 2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual Select Funds (open-end investment companies) (November 1999-November 2001); Director of C.M. Life Insurance Company (September 1999-August 2000); President, Chief Executive Officer and Director of MML Bay State Life Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 66 portfolios as a trustee or director and 20 additional portfolios as officer in the OppenheimerFunds complex.
42 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
--------------------------------------------------------------------------------------------------------------- OTHER OFFICERS OF THE ADDRESS OF THE OFFICERS IN THE CHART BELOW IS AS FOLLOWS: FOR MESSRS. MONOYIOS, THE FUND ZACK AND ZAVANELLI, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW YORK, NY 10281-1008, FOR MESSRS. VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE OR UNTIL HIS OR HER RESIGNATION, RETIREMENT DEATH OR REMOVAL. NIKOLAOS D.MONOYIOS, Senior Vice President of the Manager since October 2003; a Certified Financial Analyst. Vice President and Formerly Vice President of the Manager (April 1998-September 2003). Portfolio Manager An officer of 6 portfolios in the OppenheimerFunds complex. (since 2003) Age: 56 MARK ZAVANELLI, Vice President of the Manager since November 2000; a Chartered Financial Vice President and Analyst; an officer of 3 portfolios in the OppenheimerFunds complex. Prior Portfolio Manager to joining the Manager in May 1998 he was President of Waterside Capital (since 2001) Management, a registered investment advisor (August 1995 - April 1998). Age: 35 MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since Vice President and March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Chief Compliance Officer Asset Management Corporation and Shareholder Services, Inc. (since June 1983); (since 2004) Vice President and Director of Internal Audit of the Manager (1997-February Age: 55 2004). An officer of 87 portfolios in the OppenheimerFunds complex. BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the Treasurer and Principal following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Financial and Accounting Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer Officer (since 1999) Partnership Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March Age: 46 2000), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex. ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the Vice President and Manager; General Counsel and Director of the Distributor (since December 2001); General Secretary (since 2001) Counsel of Centennial Asset Management Corporation (since December 2001); Senior Vice Age: 57 President and General Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General Counsel and Director of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON REQUEST, BY CALLING 1.800.981.2871. 43 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA OPPENHEIMER MONEY FUND/VA FUND EXPENSES -------------------------------------------------------------------------------- FUND EXPENSES. As a shareholder of the Fund, you incur ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 31, 2005. ACTUAL EXPENSES. The "actual" lines of the table provide information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the "actual" line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio, and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. -------------------------------------------------------------------------------- BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE 6 MONTHS ENDED (7/1/05) (12/31/05) DECEMBER 31, 2005 -------------------------------------------------------------------------------- Actual $1,000.00 $1,016.90 $2.47 -------------------------------------------------------------------------------- Hypothetical 1,000.00 1,022.76 2.48 Hypothetical assumes 5% annual return before expenses. Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). The annualized expense ratio based on the 6-month period ended December 31, 2005 is as follows: EXPENSE RATIO ------------- 0.49% -------------------------------------------------------------------------------- 5 | OPPENHEIMER MONEY FUND/VA STATEMENT OF INVESTMENTS December 31, 2005 -------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT SEE NOTE 1 -------------------------------------------------------------------------------- CERTIFICATES OF DEPOSIT--8.8% -------------------------------------------------------------------------------- Barclays Bank plc, New York, 4.32%, 2/17/06 $1,800,000 $ 1,800,000 -------------------------------------------------------------------------------- Calyon, New York, 4.26%, 2/3/06 1,500,000 1,500,000 -------------------------------------------------------------------------------- Citibank NA, 4.29%, 2/14/06 2,000,000 2,000,000 -------------------------------------------------------------------------------- Fortis Bank SA/NV, New York, 4.16%, 1/9/06 1,000,000 1,000,000 -------------------------------------------------------------------------------- HBOS Treasury Services, New York, 4.02%, 1/3/06 2,000,000 2,000,000 -------------------------------------------------------------------------------- M & I Marshall & Ilsley Bank, 4.43%, 3/17/06 1,000,000 1,000,000 -------------------------------------------------------------------------------- Royal Bank of Canada, New York Branch, 4.27%, 1/31/06 2,000,000 2,000,000 -------------------------------------------------------------------------------- Skandinaviska Enskilda Banken, New York, 4.31%, 10/3/06 1 2,000,000 1,999,700 -------------------------------------------------------------------------------- Toronto Dominion Bank, New York, 4.45%, 3/22/06 2,000,000 2,000,000 ------------- Total Certificates of Deposit (Cost $15,299,700) 15,299,700 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- DIRECT BANK OBLIGATIONS--22.3% -------------------------------------------------------------------------------- AB SPINTAB, 4.16%, 1/31/06 3,200,000 3,188,880 -------------------------------------------------------------------------------- DnB NOR Bank ASA: 4.20%, 1/19/06 1,000,000 997,900 4.36%, 2/16/06 1,300,000 1,292,758 -------------------------------------------------------------------------------- Governor & Co. of the Bank of Ireland: 4%, 1/5/06 2 2,000,000 1,999,111 4.185%, 2/3/06 2 2,000,000 1,992,328 4.22%, 2/6/06 2 1,500,000 1,493,670 -------------------------------------------------------------------------------- HBOS Treasury Services: 4.165%, 2/2/06 2,000,000 1,992,596 4.42%, 3/9/06 1,000,000 991,774 -------------------------------------------------------------------------------- Nationwide Building Society: 4.26%, 2/17/06 2 1,500,000 1,491,658 4.38%, 3/9/06 2 2,000,000 1,983,697 -------------------------------------------------------------------------------- Nordea North America, Inc.: 4.09%, 1/19/06 3,700,000 3,692,434 4.35%, 2/14/06 1,500,000 1,492,025 -------------------------------------------------------------------------------- Royal Bank of Scotland plc, 4.18%, 1/17/06 1,000,000 998,144 -------------------------------------------------------------------------------- Skandinaviska Enskilda Banken AB, 4.35%, 2/9/06 2 3,000,000 2,985,895 -------------------------------------------------------------------------------- Societe Generale North America, 4.29%, 2/1/06 2,000,000 1,992,612 -------------------------------------------------------------------------------- St. George Bank Ltd.: 4.11%, 1/4/06 2 2,000,000 1,999,315 4.395%, 3/13/06 2 2,000,000 1,982,664 -------------------------------------------------------------------------------- Stadshypotek Delaware, Inc., 4.28%, 2/21/06 2 2,000,000 1,987,873 -------------------------------------------------------------------------------- Westpac Trust Securities NZ Ltd.: 4.15%, 1/31/06 3,000,000 2,989,625 4.40%, 3/21/06 2 1,000,000 990,301 ------------- Total Direct Bank Obligations (Cost $38,535,260) 38,535,260 PRINCIPAL VALUE AMOUNT SEE NOTE 1 -------------------------------------------------------------------------------- LETTERS OF CREDIT--2.9% -------------------------------------------------------------------------------- Chase Manhattan Bank, guaranteeing commercial paper of NATC California LLC, 4.12%, 1/13/06 (Cost $4,993,133) $5,000,000 $ 4,993,133 -------------------------------------------------------------------------------- SHORT-TERM NOTES--65.8% -------------------------------------------------------------------------------- ASSET-BACKED SECURITIES--22.9% Barton Capital Corp.: 4.035%, 1/9/06 2 2,000,000 1,998,207 4.07%, 1/11/06 2 1,800,000 1,797,965 -------------------------------------------------------------------------------- Cable Beach LP, 4.12%, 1/13/06 2 3,000,000 2,995,884 -------------------------------------------------------------------------------- Chesham Finance LLC, 4.36%, 1/23/06 2,250,000 2,244,005 -------------------------------------------------------------------------------- Crown Point Capital Co., 4.18%, 1/12/06 2 2,000,000 1,997,446 -------------------------------------------------------------------------------- Eiffel Funding LLC, 4.23%, 1/24/06 2 1,500,000 1,495,946 -------------------------------------------------------------------------------- FCAR Owner Trust I, 4.22%, 1/20/06 1,500,000 1,496,659 -------------------------------------------------------------------------------- Gemini Securitization Corp., 4.28%, 2/17/06 2 1,500,000 1,491,618 -------------------------------------------------------------------------------- Gotham Funding Corp., 4.44%, 3/27/06 2 1,065,000 1,053,835 -------------------------------------------------------------------------------- GOVCO, Inc., 4.09%, 1/18/06 2 3,250,000 3,243,735 -------------------------------------------------------------------------------- Grampian Funding LLC, 4.39%, 3/28/06 2 1,000,000 989,608 -------------------------------------------------------------------------------- Legacy Capital Co. LLC: 4.16%, 1/9/06 2,000,000 1,998,151 4.44%, 3/23/06 2,000,000 1,980,020 -------------------------------------------------------------------------------- Lexington Parker Capital Co. LLC, 4.03%, 1/6/06 2 2,000,000 1,998,881 -------------------------------------------------------------------------------- Neptune Funding Corp., 4.09%, 1/12/06 2 1,500,000 1,498,125 -------------------------------------------------------------------------------- Old Line Funding Corp., 4.18%, 1/10/06 2 1,500,000 1,498,433 -------------------------------------------------------------------------------- Perry Global Funding LLC, Series A, 4.06%, 1/9/06 2 2,000,000 1,998,198 -------------------------------------------------------------------------------- Sheffield Receivables Corp., 4.25%, 1/4/06 2 2,000,000 1,999,292 -------------------------------------------------------------------------------- Solitaire Funding LLC, 4.25%, 2/10/06 2 1,500,000 1,492,917 -------------------------------------------------------------------------------- Victory Receivables Corp., 4.31%, 1/20/06 2 1,910,000 1,905,655 -------------------------------------------------------------------------------- Windmill Funding Corp., 4.22%, 1/4/06 2 1,500,000 1,499,473 -------------------------------------------------------------------------------- Yorktown Capital LLC, 4.25%, 1/5/06 2 1,000,000 999,528 ------------- 39,673,581 -------------------------------------------------------------------------------- AUTOMOBILES--1.2% Ande Chevrolet Olds, Inc., 4.54%, 1/1/06 1 2,000,000 2,000,000 -------------------------------------------------------------------------------- CAPITAL MARKETS--8.8% Banc of America Securities LLC, 4.26%, 1/2/06 1 5,000,000 5,000,000 6 | OPPENHEIMER MONEY FUND/VA PRINCIPAL VALUE AMOUNT SEE NOTE 1 -------------------------------------------------------------------------------- CAPITAL MARKETS Continued Bear Stearns Cos., Inc.: 4.22%, 2/6/06 $2,000,000 $ 1,991,590 4.42%, 3/20/06 2,300,000 2,277,974 -------------------------------------------------------------------------------- First Clearing LLC, 4.35%, 3/6/06 1 1,000,000 1,000,000 -------------------------------------------------------------------------------- Lehman Brothers, Inc., 4.13%, 1/2/06 1 5,000,000 5,000,000 ------------- 15,269,564 -------------------------------------------------------------------------------- COMMERCIAL BANKS--2.0% Bank of America Corp., 4.26%, 2/15/06 1,700,000 1,690,958 -------------------------------------------------------------------------------- National City Credit Corp., 4.35%, 2/13/06 1,800,000 1,790,658 ------------- 3,481,616 -------------------------------------------------------------------------------- COMMERCIAL FINANCE--0.6% Countrywide Financial Corp., 4.30%, 1/5/06 1,000,000 999,522 -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES--2.3% General Electric Capital Corp., 4.01%, 1/5/06 2,000,000 1,999,109 -------------------------------------------------------------------------------- HSBC Finance Corp., 4.04%, 1/10/06 2,000,000 1,997,980 ------------- 3,997,089 -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES--1.3% Alta Mira LLC, Series 2004, 4.48%, 2/1/06 1 2,250,000 2,250,000 -------------------------------------------------------------------------------- INSURANCE--10.1% ING America Insurance Holdings, Inc.: 4.01%, 1/6/06 2,000,000 1,998,886 4.39%, 3/13/06 1,000,000 991,342 -------------------------------------------------------------------------------- Jackson National Life Global Funding, 4.41%, 1/17/06 1,3 2,500,000 2,500,000 -------------------------------------------------------------------------------- Metropolitan Life Global Funding I, Series 2003-5, 4.43%, 1/17/06 1,3 4,000,000 4,000,000 -------------------------------------------------------------------------------- Prudential Insurance Co. of America, 4.32%, 1/1/06 1 3,000,000 3,000,000 -------------------------------------------------------------------------------- Security Life of Denver Insurance Co., 4.49%, 1/23/06 1 5,000,000 5,000,000 ------------- 17,490,228 -------------------------------------------------------------------------------- LEASING & FACTORING--1.1% Toyota Motor Credit Corp., 4.18%, 2/3/06 2,000,000 1,992,337 -------------------------------------------------------------------------------- MUNICIPAL--0.4% Hayward, CA Multifamily Housing Revenue Bonds, Lord Tennyson Apts., 4.71%, 1/3/06 1 710,000 710,000 -------------------------------------------------------------------------------- PHARMACEUTICALS--0.6% Pfizer Investment Capital plc, 4.25%, 1/19/06 2 1,000,000 997,875 PRINCIPAL VALUE AMOUNT SEE NOTE 1 -------------------------------------------------------------------------------- SPECIAL PURPOSE FINANCIAL--14.5% Blue Spice LLC, 4.41%, 3/13/06 2 $2,000,000 $ 1,982,625 -------------------------------------------------------------------------------- Cooperative Assn. of Tractor Dealers, Inc., Series A: 4.18%, 1/5/06 1,100,000 1,099,489 4.35%, 1/11/06 2,220,000 2,217,318 4.46%, 3/10/06 1,303,000 1,292,023 -------------------------------------------------------------------------------- Cooperative Assn. of Tractor Dealers, Inc., Series B: 4.07%, 1/5/06 1,000,000 999,548 4.48%, 3/28/06 1,010,000 999,191 -------------------------------------------------------------------------------- K2 (USA) LLC, 4.37%, 3/6/06 1,000,000 992,231 -------------------------------------------------------------------------------- LINKS Finance LLC, 3.13%, 1/10/06 2,000,000 1,999,422 -------------------------------------------------------------------------------- Parkland (USA) LLC: 4.34%, 12/12/06 1,4 2,000,000 1,999,811 4.35%, 1/18/06 1,4 3,000,000 2,999,986 -------------------------------------------------------------------------------- RACERS Trust, Series 2004-6-MM, 4.37%, 1/23/06 1 1,000,000 1,000,000 -------------------------------------------------------------------------------- Sigma Finance, Inc.: 4.27%, 2/17/06 2 1,000,000 994,425 4.385%, 3/8/06 1,000,000 991,961 4.42%, 3/21/06 2,000,000 1,980,601 -------------------------------------------------------------------------------- Union Hamilton Special Purpose Funding LLC, 4.52%, 3/28/06 1 2,000,000 2,000,000 -------------------------------------------------------------------------------- Wind Master Trust Nts., Series 2005-18A, 4.38%, 4/25/06 1,3 1,500,000 1,500,000 ------------- 25,048,631 ------------- Total Short-Term Notes (Cost $113,910,443) 113,910,443 -------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $172,738,536) 99.8% 172,738,536 -------------------------------------------------------------------------------- OTHER ASSETS NET OF LIABILITIES 0.2 422,982 ---------------------------- NET ASSETS 100.0% $173,161,518 ============================ FOOTNOTES TO STATEMENT OF INVESTMENTS SHORT-TERM NOTES, DIRECT BANK OBLIGATIONS AND LETTERS OF CREDIT ARE GENERALLY TRADED ON A DISCOUNT BASIS; THE INTEREST RATE SHOWN IS THE DISCOUNT RATE RECEIVED BY THE FUND AT THE TIME OF PURCHASE. OTHER SECURITIES NORMALLY BEAR INTEREST AT THE RATES SHOWN. 1. Represents the current interest rate for a variable or increasing rate security. 2. Security issued in an exempt transaction without registration under the Securities Act of 1933. Such securities amount to $54,836,183, or 31.67% of the Fund's net assets, and have been determined to be liquid pursuant to guidelines adopted by the Board of Trustees. 3. Illiquid security. The aggregate value of illiquid securities as of December 31, 2005 was $8,000,000, which represents 4.62% of the Fund's net assets. See Note 4 of Notes to Financial Statements. 4. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $4,999,797 or 2.89% of the Fund's net assets as of December 31, 2005. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 7 | OPPENHEIMER MONEY FUND/VA STATEMENT OF ASSETS AND LIABILITIES December 31, 2005 -------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------- ASSETS ----------------------------------------------------------------------------------------------------- Investments, at value (cost $172,738,536)--see accompanying statement of investments $172,738,536 ----------------------------------------------------------------------------------------------------- Cash 136,013 ----------------------------------------------------------------------------------------------------- Receivables and other assets: Shares of beneficial interest sold 498,442 Interest 229,222 Other 4,619 ------------- Total assets 173,606,832 ----------------------------------------------------------------------------------------------------- LIABILITIES ----------------------------------------------------------------------------------------------------- Payables and other liabilities: Dividends 237,676 Shares of beneficial interest redeemed 169,959 Shareholder communications 15,112 Trustees' compensation 5,821 Transfer and shareholder servicing agent fees 869 Other 15,877 ------------- Total liabilities 445,314 ----------------------------------------------------------------------------------------------------- NET ASSETS $173,161,518 ============= ----------------------------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ----------------------------------------------------------------------------------------------------- Par value of shares of beneficial interest $ 173,129 ----------------------------------------------------------------------------------------------------- Additional paid-in capital 172,982,457 ----------------------------------------------------------------------------------------------------- Accumulated net investment income 98 ----------------------------------------------------------------------------------------------------- Accumulated net realized gain on investments 5,834 ------------- NET ASSETS--applicable to 173,129,498 shares of beneficial interest outstanding $173,161,518 ============= ----------------------------------------------------------------------------------------------------- NET ASSET VALUE, REDEMPTION PRICE PER SHARE AND OFFERING PRICE PER SHARE $ 1.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 8 | OPPENHEIMER MONEY FUND/VA STATEMENT OF OPERATIONS For the Year Ended December 31, 2005 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- INVESTMENT INCOME -------------------------------------------------------------------------------- Interest $ 6,129,328 -------------------------------------------------------------------------------- EXPENSES -------------------------------------------------------------------------------- Management fees 839,327 -------------------------------------------------------------------------------- Shareholder communications 16,626 -------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees 10,137 -------------------------------------------------------------------------------- Trustees' compensation 5,244 -------------------------------------------------------------------------------- Custodian fees and expenses 4,335 -------------------------------------------------------------------------------- Administration service fees 1,500 -------------------------------------------------------------------------------- Other 25,131 ------------ Total expenses 902,300 Less reduction to custodian expenses (1,347) ------------ Net expenses 900,953 -------------------------------------------------------------------------------- NET INVESTMENT INCOME 5,228,375 -------------------------------------------------------------------------------- NET REALIZED GAIN ON INVESTMENTS 6,036 -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 5,234,411 ============ SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 9 | OPPENHEIMER MONEY FUND/VA STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005 2004 ------------------------------------------------------------------------------------------------------------ OPERATIONS ------------------------------------------------------------------------------------------------------------ Net investment income $ 5,228,375 $ 2,111,137 ------------------------------------------------------------------------------------------------------------ Net realized gain 6,036 481 ------------------------------ Net increase in net assets resulting from operations 5,234,411 2,111,618 ------------------------------------------------------------------------------------------------------------ DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------ Dividends from net investment income (5,228,277) (2,111,137) ------------------------------------------------------------------------------------------------------------ BENEFICIAL INTEREST TRANSACTIONS ------------------------------------------------------------------------------------------------------------ Net decrease in net assets resulting from beneficial interest transactions (23,347,439) (41,110,557) ------------------------------------------------------------------------------------------------------------ NET ASSETS ------------------------------------------------------------------------------------------------------------ Total decrease (23,341,305) (41,110,076) ------------------------------------------------------------------------------------------------------------ Beginning of period 196,502,823 237,612,899 ------------------------------ End of period (including accumulated net investment income of $98 for the year ended December 31, 2005) $173,161,518 $196,502,823 ==============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 10 | OPPENHEIMER MONEY FUND/VA FINANCIAL HIGHLIGHTS
YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA ------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------------------------------------------------------------------------------------------------------------------------------ Income from investment operations--net investment income and net realized gain .03 1 .01 1 .01 .01 .04 ------------------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.03) (.01) (.01) (.01) (.04) Dividends from net realized gain -- -- -- -- 2 -- ------------------------------------------------------------------------------------------------------------------------------ Total dividends and/or distributions to shareholders (.03) (.01) (.01) (.01) (.04) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======================================================================= ------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN 3 2.86% 0.98% 0.79% 1.47% 3.85% ------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $173,162 $196,503 $237,613 $379,969 $370,229 ------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $186,453 $218,243 $316,096 $386,457 $288,106 ------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: 4 Net investment income 2.80% 0.97% 0.80% 1.46% 3.59% Total expenses 0.48% 5 0.48% 5 0.47% 5 0.47% 5 0.52% 5
1. Per share amounts calculated based on the average shares outstanding during the period. 2. Less than $0.005 per share. 3. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year. 5. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 11 | OPPENHEIMER MONEY FUND/VA NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Oppenheimer Money Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds, an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek maximum current income from investments in "money market" securities consistent with low capital risk and the maintenance of liquidity. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). Shares of the Fund are only sold 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 following is a summary of significant accounting policies consistently followed by the Fund. -------------------------------------------------------------------------------- SECURITIES VALUATION. Portfolio securities are valued on the basis of amortized cost, which approximates market value. -------------------------------------------------------------------------------- FEDERAL TAXES. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income to shareholders. The tax components of capital shown in the table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years for federal income tax purposes. UNDISTRIBUTED NET UNDISTRIBUTED ACCUMULATED INVESTMENT INCOME LONG-TERM GAINS LOSS CARRYFORWARD 1,2,3 -------------------------------------------------------------------- $295,366 $-- $115 1. As of December 31, 2005, the Fund had $115 of post-October losses available to offset future realized capital gains, if any. Such losses, if unutilized, will expire in 2014. 2. During the fiscal year ended December 31, 2005, the Fund utilized $202 of capital loss carryforward to offset capital gains realized in that fiscal year. 3. During the fiscal year ended December 31, 2004, the Fund utilized $481 of capital loss carryforward to offset capital gains realized in that fiscal year. Net investment income (loss) and net realized gain (loss) may differ for financial statement and 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 tax character of distributions paid during the years ended December 31, 2005 and December 31, 2004 was as follows: YEAR ENDED YEAR ENDED DECEMBER 31, 2005 DECEMBER 31, 2004 -------------------------------------------------------------------- Distributions paid from: Ordinary income $5,228,277 $2,111,137 -------------------------------------------------------------------------------- TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of "Other" within the asset section of the Statement of Assets and Liabilities. Deferral of trustees' fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund's assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the Plan. 12 | OPPENHEIMER MONEY FUND/VA -------------------------------------------------------------------------------- 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. Income distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually but may be paid at other times to maintain the net asset value per share at $1.00. -------------------------------------------------------------------------------- CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts to the extent they are not offset by positive cash balances maintained by the Fund. The Reduction to Custodian Expenses line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings. At December 31, 2005, the Fund had $13 of such earnings on cash balances available to offset future custodian fees or interest expenses incurred during the next fiscal year. -------------------------------------------------------------------------------- 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 U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. -------------------------------------------------------------------------------- 2. SHARES OF BENEFICIAL INTEREST The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004 SHARES AMOUNT SHARES AMOUNT -------------------------------------------------------------------------------------------------------------- Sold 126,305,556 $ 126,305,556 135,559,970 $ 135,559,970 Dividends and/or distributions reinvested 5,103,537 5,103,537 2,042,069 2,042,069 Redeemed (154,754,850) (154,756,532) (178,712,596) (178,712,596) ----------------------------------------------------------------- Net decrease (23,345,757) $ (23,347,439) (41,110,557) $ (41,110,557) =================================================================
-------------------------------------------------------------------------------- 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund which provides for a fee at an annual rate of 0.45% of the first $500 million of average annual net assets, 0.425% of the next $500 million, 0.40% of the next $500 million and 0.375% of average annual net assets in excess of $1.5 billion. -------------------------------------------------------------------------------- ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund's tax returns. -------------------------------------------------------------------------------- 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 per account fee. For the year ended December 31, 2005, the Fund paid $10,112 to OFS for services to the Fund. Additionally, funds offered in variable annuity separate accounts are subject to minimum fees of $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. 13 | OPPENHEIMER MONEY FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes to 0.35% of average annual net assets of the Fund. This undertaking may be amended or withdrawn at any time. -------------------------------------------------------------------------------- 4. ILLIQUID SECURITIES As of December 31, 2005, investments in securities included issues that are illiquid. A security may 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 will not invest more than 10% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid securities. Securities that are illiquid are marked with the applicable footnote on the Statement of Investments. -------------------------------------------------------------------------------- 5. LITIGATION A consolidated amended complaint has been filed as putative derivative and class actions against the Manager, OFS and the Distributor, as well as 51 of the Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and former Directors or Trustees and 8 present and former officers of the funds. This complaint, initially filed in the U.S. District Court for the Southern District of New York on January 10, 2005 and amended on March 4, 2005, consolidates into a single action and amends six individual previously-filed putative derivative and class action complaints. Like those prior complaints, the complaint alleges that the Manager charged excessive fees for distribution and other costs, improperly used assets of the funds in the form of directed brokerage commissions and 12b-1 fees to pay brokers to promote sales of the funds, and failed to properly disclose the use of assets of the funds to make those payments in violation of the Investment Company Act of 1940 and the Investment Advisers Act of 1940. Also, like those prior complaints, the complaint further alleges that by permitting and/or participating in those actions, the Directors/Trustees and the Officers breached their fiduciary duties to shareholders of the funds under the Investment Company Act of 1940 and at common law. The complaint seeks unspecified compensatory and punitive damages, rescission of the funds' investment advisory agreements, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. The defendants believe that the allegations contained in the Complaints are without merit and that they have meritorious defenses against the claims asserted. The defendants intend to defend these lawsuits vigorously and to contest any claimed liability. The defendants believe that it is premature to render any opinion as to the likelihood of an outcome unfavorable to them and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. 14 | OPPENHEIMER MONEY FUND/VA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER MONEY FUND/VA: We have audited the accompanying statement of assets and liabilities of Oppenheimer Money Fund/VA, a series of Oppenheimer Variable Account Funds, including the statement of investments, as of December 31, 2005, 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 each of the five years in the periods then ended. 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 the standards of the Public Company Accounting Oversight Board (United States). 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. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. 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 Money Fund/VA as of December 31, 2005, 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 each of the five years in the periods then ended, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Denver, Colorado February 13, 2006 15 | OPPENHEIMER MONEY FUND/VA FEDERAL INCOME TAX INFORMATION Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- In early 2006, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2005. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. 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. 16 | OPPENHEIMER MONEY FUND/VA PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities ("portfolio proxies") held by the Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund's voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at www.sec.gov. The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund's Form N-Q filings are available on the SEC's website at http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 17 | OPPENHEIMER MONEY FUND/VA BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Each year, the Board of Trustees (the "Board"), including a majority of the independent Trustees, is required to determine whether to renew the Fund's investment advisory agreement (the "Agreement"). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information, that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance. The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager's services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. Outlined below is a summary of the principal information considered by the Board as well as the Board's conclusions. NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information on the nature and extent of the services provided to the Fund and information regarding the Manager's key personnel that provide such services. The Manager's duties include providing the Fund with the services of the portfolio managers and the Manager's investment team, who provide research, analysis and other advisory services in regard to the Fund's investments; securities trading services; oversight of third party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund's investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel that are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund's operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund's shares. The Manager also provides the Fund with office space, facilities and equipment. The Board also considered the quality of the services provided and the quality of the Manager's resources that are available to the Fund. The Board took account of the fact that the Manager has had over forty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager's administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager's key personnel and the size and functions of its staff providing investment management services to the Fund. The Board also considered compliance reports from the Fund's Chief Compliance Officer. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Carol E. Wolf and Barry D. Weiss and the Manager's money market investment team and analysts. Ms. Wolf and Mr. Weiss have had over 22 and six years of experience, respectively, managing money market investments. The Board members also considered the totality of their experiences with the Manager, as directors or trustees of the Fund and other funds advised by the Manager. In light of the foregoing, the Board concluded that the Fund benefits from the services provided under the Agreement as a result of the Manager's experience, reputation, personnel, operations, and resources. 18 | OPPENHEIMER MONEY FUND/VA INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the Manager provided information on the performance of the Fund and the Manager at each Board meeting, including comparative performance information. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund's historical performance to relevant market indices and to the performance of other money market funds (including both funds advised by the Manager and funds advised by other investment advisers). The Board noted that the Fund's one-year, three-year, five-year and ten-year performance were all better than its peer group median. COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board considered information regarding the Manager's costs in serving as the Fund's investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager's profitability from its relationship with the Fund. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also evaluated the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund, other money market funds and other funds with comparable asset levels and distribution features. The Board noted that the Fund's contractual management fees are equal to its peer group median but higher than its peer group average and its actual management fees are higher than its peer group median and average, however, its total expenses are lower than both its peer group median and average. In light of this and of the Fund's strong performance, the Board concluded that the management fee was reasonable. ECONOMIES OF SCALE. The Board considered whether the Manager may realize economies of scale in managing and supporting the Fund, whether those economies of scale benefit the Fund's shareholders and the current level of Fund assets in relation to the Fund's management fee breakpoints, which are intended to share with shareholders economies of scale that may exist as the Fund grows. OTHER BENEFITS TO THE MANAGER. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager's affiliates. The Board also considered the nature and quality of services provided by affiliates of the Manager, which it reviews at other times during the year in connection with the renewal of the Fund's service agreements. The Board considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide services to the Fund and that maintaining the financial viability of the Manager is important in order for the Manager to continue to provide significant services to the Fund and its shareholders. CONCLUSIONS. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees' counsel are both independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules. Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the advisory agreement for another year. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the factors together. The Board judged the terms and conditions of the advisory agreement, including the management fee, in light of all of the surrounding circumstances. 19 | OPPENHEIMER MONEY FUND/VA TRUSTEES AND OFFICERS Unaudited --------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------- NAME, POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD; WITH THE FUNDS, LENGTH NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN OF SERVICE, AGE INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL. WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Mortgage Company Chairman of the Board (since 1991), Centennial State Mortgage Company (since 1994), and The El Paso Mortgage Company of Trustees (since 2003); (since 1993); Chairman of the following private companies: Ambassador Media Corporation (since Trustee (since 1999) 1984) and Broadway Ventures (since 1984); Director of the following: Helmerich & Payne, Inc. Age: 68 (oil and gas drilling/production company) (since 1992), Campus Crusade for Christ (since 1991) and The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (since 2002); former Chairman of the following: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (insurance agency) (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private equity funds) Trustee (since 1995) (until February 2001); Chairman, President and Chief Executive Officer of A.G. Edwards Capital, Age: 74 Inc. (until March 2000); Director of A.G. Edwards & Sons, Inc. (brokerage company) (until 2000) and A.G. Edwards Trust Company (investment adviser) (until 2000); Vice Chairman and Director of A.G. Edwards, Inc. (until March 1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March 1999); Chairman of A.G. Edwards Trust Company (until March 1999) and A.G.E. Asset Management (investment adviser) (until March 1999). Oversees 38 portfolios in the OppenheimerFunds complex. GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation (December Trustee (since 1999) 1991-April 1999); President, Treasurer and Director of Centennial Capital Corporation (June Age: 69 1989-April 1999); Chief Executive Officer and Director of MultiSource Services, Inc. (March 1996-April 1999); Mr. Bowen held several positions with the Manager and with subsidiary or affiliated companies of the Manager (September 1987-April 1999). Oversees 38 portfolios in the OppenheimerFunds complex. EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since June 2000); Trustee (since 1999) Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002); Partner at Age: 67 PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (July 1994-June 1998). Oversees 38 portfolios in the OppenheimerFunds complex. JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Northwestern Trustee (since 1990) Energy Corp. (public utility corporation) (since November 2004); Director of P.R. Age: 64 Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. ("OAC") (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 38 portfolios in the OppenheimerFunds complex. SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September 1984). Mr. Freedman held Trustee (since 1996) several positions with the Manager and with subsidiary or affiliated companies of the Manager Age: 65 (until October 1994). Oversees 38 portfolios in the OppenheimerFunds complex. BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) (since Trustee (since 2002) February 2000); Director of The California Endowment (philanthropic organization) (since April Age: 59 2002); Director of Community Hospital of Monterey Peninsula (since February 2002); Vice Chair of American Funds' Emerging Markets Growth Fund, Inc. (mutual fund) (since October 1991); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation and The University of Michigan; Advisor at Credit Suisse First Boston's Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004);
20 | OPPENHEIMER MONEY FUND/VA BEVERLY L. HAMILTON, Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member of Continued the investment committee of Hartford Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT J. MALONE, Director of Jones International University (educational organization) (since August 2005); Trustee (since 2002) Chairman, Chief Executive Officer and Director of Steele Street State Bank (commercial banking) Age: 61 (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (nonprofit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 38 portfolios in the OppenheimerFunds complex. F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment Trustee (since 2000) company) (since 1996) and MML Series Investment Fund (investment company) (since 1996), Trustee Age: 63 and Chairman of the Investment Committee (since 1994) of the Worcester Polytech Institute (private university); President and Treasurer of the SIS Funds (private charitable fund) (since January 1999); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Member of the Investment Committee of the Community Foundation of Western Massachusetts (1998-2003); and Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999). Oversees 40 portfolios in the OppenheimerFunds complex. -------------------------------------------------------------------------------------------------------------------------------- THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW INTERESTED TRUSTEE YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS AND OFFICER RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES. JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President (since September President and Trustee 2000) of the Manager; President and Director or Trustee of other Oppenheimer funds; President (since 2001) and Director of OAC and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary Age: 56 of the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since November 2001); Chairman and Director of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since July 2001); President and Director of OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since July 2001); Director of the following investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 2001) and Director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director of DLB Acquisition Corporation (holding company parent of Babson Capital Management LLC) (since June 1995); Member of the Investment Company Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of the Manager (September 2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual Select Funds (open-end investment companies) (November 1999-November 2001); Director of C.M. Life Insurance Company (September 1999-August 2000); President, Chief Executive Officer and Director of MML Bay State Life Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 87 portfolios in the OppenheimerFunds complex.
21 | OPPENHEIMER MONEY FUND/VA TRUSTEES AND OFFICERS Unaudited/Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MR. ZACK, TWO WORLD OF THE FUND FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. WEISS, VANDEHEY, WIXTED AND MS. WOLF, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT DEATH OR REMOVAL. BARRY D. WEISS, Vice President of the Manager (since July 2001) and of HarbourView Asset Management Corporation Vice President and (since June 2003); an officer of 6 portfolios in the OppenheimerFunds complex. Formerly Portfolio Manager Assistant Vice President and Senior Credit Analyst of the Manager (February 2000-June 2001). (since 2001) Prior to joining the Manager in February 2000, he was Associate Director, Structured Finance, Age: 41 Fitch IBCA Inc. (April 1998-February 2000). CAROL E. WOLF, Senior Vice President of the Manager (since June 2000) and of HarbourView Asset Management Vice President and Corporation (since June 2003); an officer of 6 portfolios in the OppenheimerFunds complex. Portfolio Manager Formerly Vice President of the Manager (June 1990-June 2000). (since 1998) Age: 54 MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Vice Vice President and President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Chief Compliance Officer Shareholder Services, Inc. (since June 1983); Vice President and Director of Internal Audit of (since 2004) the Manager (1997-February 2004). An officer of 87 portfolios in the OppenheimerFunds complex. Age: 55 BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the Treasurer and following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Principal Financial Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer and Accounting Officer Partnership Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March (since 1999) 2000), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Age: 46 Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex. ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the Vice President and Secretary Manager; General Counsel and Director of the Distributor (since December 2001); General Counsel (since 2001) of Centennial Asset Management Corporation (since December 2001); Senior Vice President and Age: 57 General Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General Counsel and Director of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON REQUEST, BY CALLING 1.800.981.2871. 22 | OPPENHEIMER MONEY FUND/VA OPPENHEIMER STRATEGIC BOND FUND/VA FUND PERFORMANCE DISCUSSION -------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. During the spring of 2005, we shifted the Fund's emphasis in its international portfolio from bonds of developed nations to the emerging markets. We focused on unhedged positions in countries where we expected fiscal improvements to attract more investment capital. This strategy proved to be especially successful in Brazil, Mexico, Turkey and oil producing nations, such as Russia, where favorable movements in currency exchange rates relative to the U.S. dollar helped support returns. Despite a mildly underweighted position, the Fund also achieved relatively strong results through its investments in U.S. dollar-denominated bonds from the emerging markets. We maintained relatively light exposure to the high yield corporate bond market due to historically narrow yield differences between high yield securities and U.S. Treasuries. The Fund added value through our emphasis on higher quality securities from issuers with strong cash flows, such as cell tower operators and energy companies. Finally, we maintained a generally neutral posture with regard to U.S. government securities. We set the Fund's average duration in a range we considered to be in line with industry averages, and we placed a modest emphasis on mortgage-backed securities that we believed would be less sensitive to prepayment risks. This strategy enabled the Fund to capture higher yields while effectively managing the risks of higher short-term interest rates. When the Fed raised interest rates in mid-December 2005, the language in its accompanying statement indicated that it may be approaching the end of the current credit-tightening cycle. While this could prove to be a positive influence on U.S. government securities and high yield corporate bonds, rich valuations and unexpected changes in the rate of economic growth could forestall potential rallies. In international markets, we have maintained the Fund's emphasis on nations, such as Brazil and Turkey, where falling interest rates and lower inflation may create further opportunities. In contrast, interest rates are already low in Europe and Japan, leaving little room for further cuts. As always, we intend to monitor economic and market developments, and to adjust our strategies accordingly. Indeed, our ability to find opportunities and manage risks across multiple market sectors is central to what makes Oppenheimer Strategic Bond Fund/VA part of THE RIGHT WAY TO INVEST. 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, 2005. In the case of non-service shares, performance is measured over a ten fiscal year period. 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 Citigroup 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, and none of the data in the graphs shows the effect of taxes. 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: Oppenheimer Strategic Bond Fund/VA (Non-Service) Lehman Brothers Aggregate Bond Index Citigroup World Government Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Lehman Citigroup Strategic Brothers World Bond Fund/VA Aggregate Government Date (Non-Service) Bond Index Bond Index 12/31/1995 10,000 10,000 10,000 03/31/1996 10,163 9,823 9,812 06/30/1996 10,414 9,879 9,852 09/30/1996 10,818 10,061 10,121 12/31/1996 11,207 10,363 10,362 03/31/1997 11,202 10,305 9,933 06/30/1997 11,651 10,684 10,235 09/30/1997 12,042 11,039 10,365 12/31/1997 12,183 11,364 10,386 03/31/1998 12,487 11,540 10,468 06/30/1998 12,585 11,810 10,676 09/30/1998 12,315 12,309 11,565 12/31/1998 12,536 12,351 11,976 03/31/1999 12,553 12,289 11,513 06/30/1999 12,553 12,181 11,117 09/30/1999 12,579 12,264 11,620 12/31/1999 12,890 12,249 11,465 03/31/2000 13,032 12,519 11,485 06/30/2000 13,117 12,737 11,468 09/30/2000 13,258 13,121 11,167 12/31/2000 13,230 13,673 11,647 03/31/2001 13,498 14,088 11,292 06/30/2001 13,390 14,168 11,116 09/30/2001 13,300 14,821 11,911 12/31/2001 13,871 14,828 11,532 03/31/2002 14,088 14,842 11,346 06/30/2002 14,153 15,390 12,668 09/30/2002 14,218 16,095 13,158 12/31/2002 14,903 16,348 13,780 03/31/2003 15,436 16,576 14,208 06/30/2003 16,377 16,991 14,759 09/30/2003 16,865 16,966 15,051 12/31/2003 17,596 17,019 15,834 03/31/2004 17,948 17,472 16,130 06/30/2004 17,618 17,045 15,593 09/30/2004 18,242 17,590 16,104 12/31/2004 19,123 17,758 17,473 03/31/2005 18,864 17,673 17,023 06/30/2005 19,440 18,204 16,779 09/30/2005 19,594 18,082 16,591 12/31/2005 19,633 18,189 16,272 AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/05 1-Year 2.67% 5-Year 8.21% 10-Year 6.98% SERVICE SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Strategic Bond Fund/VA (Service) Lehman Brothers Aggregate Bond Index Citigroup World Government Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Lehman Citigroup Strategic Brothers World Bond Fund/VA Aggregate Government Date (Service) Bond Index 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 03/31/2003 11,287 11,766 12,582 06/30/2003 11,960 12,060 13,070 09/30/2003 12,284 12,043 13,328 12/31/2003 12,782 12,081 14,022 03/31/2004 13,022 12,402 14,284 06/30/2004 12,786 12,099 13,808 09/30/2004 13,231 12,485 14,261 12/31/2004 13,860 12,605 15,473 03/31/2005 13,656 12,544 15,074 06/30/2005 14,067 12,922 14,859 09/30/2005 14,204 12,835 14,692 12/31/2005 14,204 12,911 14,410 AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/05 1-Year 2.48% 5-Year N/A Since Inception (3/19/01) 7.61% THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT. 5 | OPPENHEIMER STRATEGIC BOND FUND/VA FUND EXPENSES -------------------------------------------------------------------------------- FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include redemption fees, if any; and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 31, 2005. ACTUAL EXPENSES. The "actual" lines of the table provide information about actual account values and actual expenses. You may use the information on this line for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the "actual" line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio, and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the "hypothetical" lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included, your costs would have been higher. -------------------------------------------------------------------------------- BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE 6 MONTHS ENDED (7/1/05) (12/31/05) (12/31/05) -------------------------------------------------------------------------------- Non-Service shares Actual $1,000.00 $1,009.90 $3.55 -------------------------------------------------------------------------------- Non-Service shares Hypothetical 1,000.00 1,021.68 3.57 -------------------------------------------------------------------------------- Service shares Actual 1,000.00 1,009.70 4.82 -------------------------------------------------------------------------------- Service shares Hypothetical 1,000.00 1,020.42 4.85 Hypothetical assumes 5% annual return before expenses. Expenses are equal to the Fund's annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Those annualized expense ratios based on the 6-month period ended December 31, 2005 are as follows: CLASS EXPENSE RATIOS ------------------------------------ Non-Service shares 0.70% ------------------------------------ Service shares 0.95 -------------------------------------------------------------------------------- 6 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS December 31, 2005 --------------------------------------------------------------------------------
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES--2.1% ----------------------------------------------------------------------------------------- Ace Securities Corp., Home Equity Loan Pass-Through Certificates, Series 2002-HE7, Cl. A2B, 4.559%, 11/25/35 1 $ 420,000 $ 420,259 ----------------------------------------------------------------------------------------- Aesop Funding II LLC, Automobile Asset-Backed Certificates, Series 2005-1A, Cl. A2, 4.43%, 4/20/08 1 200,000 200,143 ----------------------------------------------------------------------------------------- BMW Vehicle Owner Trust, Automobile Loan Certificates, Series 2005-A, Cl. A2, 3.66%, 12/26/07 1,445,116 1,440,681 ----------------------------------------------------------------------------------------- Capital Auto Receivables Asset Trust, Automobile Mtg.-Backed Nts.: Series 2004-2, Cl. A3, 3.58%, 1/15/09 740,000 726,428 Series 2005-1, Cl. A2B, 3.73%, 7/16/07 281,460 281,096 ----------------------------------------------------------------------------------------- Capital One Prime Auto Receivables Trust, Automobile Loan Asset- Backed Securities, Series 2005-1, Cl. A2, 4.24%, 11/15/07 970,000 967,828 ----------------------------------------------------------------------------------------- Centex Home Equity Co. LLC, Home Equity Loan Asset-Backed Certificates: Series 2004-D, Cl. AF1, 2.98%, 4/25/20 56,939 56,779 Series 2005-B, Cl. AF1, 4.02%, 3/26/35 124,969 124,325 Series 2005-C, Cl. AF1, 4.196%, 6/25/35 372,516 370,551 Series 2005-D, Cl. AF1, 5.04%, 10/25/35 1,316,900 1,313,427 ----------------------------------------------------------------------------------------- Chase Manhattan Auto Owner Trust, Automobile Loan Pass-Through Certificates, Series 2005-A, Cl. A2, 3.72%, 12/15/07 650,000 647,210 ----------------------------------------------------------------------------------------- CIT Equipment Collateral, Equipment Receivable-Backed Nts., Series 2004-DFS, Cl. A2, 2.66%, 11/20/06 270,523 269,750 ----------------------------------------------------------------------------------------- Consumer Credit Reference Index Securities Program, Credit Card Asset-Backed Certificates, Series 2002-B, Cl. FX, 10.421%, 3/22/07 2 500,000 499,563 ----------------------------------------------------------------------------------------- Countrywide Asset-Backed Certificates, Inc., Home Equity Asset-Backed Certificates: Series 2005-7, Cl. AF1B, 4.317%, 11/25/35 1 464,360 461,940 Series 2005-16, Cl. 2AF2, 5.382%, 5/25/36 1 300,000 300,000 Series 2005-17, Cl. 1AF1, 4.58%, 12/27/35 1 640,000 639,980 Series 2005-17, Cl. 1AF2, 5.363%, 12/27/35 1 200,000 200,049 ----------------------------------------------------------------------------------------- DaimlerChrysler Auto Trust, Automobile Loan Pass-Through Certificates: Series 2004-B, Cl. A2, 2.48%, 2/8/07 14,666 14,668 Series 2004-C, Cl. A2, 2.62%, 6/8/07 324,204 323,403 Series 2005-A, Cl. A2, 3.17%, 9/8/07 516,655 515,134 Series 2005-B, Cl. A2, 3.75%, 12/8/07 512,266 511,071 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES Continued ----------------------------------------------------------------------------------------- Embarcadero Aircraft Securitization Trust, Airplane Receivable Nts., Series 2000-A, Cl. B, 8/15/25 3,4 $ 1,820,063 $ 18,201 ----------------------------------------------------------------------------------------- Equity One ABS, Inc., Home Equity Asset-Backed Security, Series 2004-3, Cl. AF2, 3.80%, 7/25/34 1 700,000 697,223 ----------------------------------------------------------------------------------------- First Franklin Mortgage Loan Asset-Backed Certificates, Home Equity Receivables, Series 2005-FF10, Cl. A3, 4.589%, 11/25/35 1 1,170,000 1,170,723 ----------------------------------------------------------------------------------------- Ford Credit Auto Owner Trust, Automobile Loan Pass-Through Certificates: Series 2005-A, Cl. A3, 3.48%, 11/17/08 550,000 543,391 Series 2005-B, Cl. A2, 3.78%, 9/15/07 466,176 465,206 ----------------------------------------------------------------------------------------- GS Auto Loan Trust, Automobile Loan Asset-Backed Securities, Series 2005-1, Cl. A2, 4.32%, 5/15/08 1,840,000 1,835,166 ----------------------------------------------------------------------------------------- Honda Auto Receivables Owner Trust, Automobile Receivable Obligations: Series 2005-1, Cl. A2, 3.21%, 5/21/07 220,429 219,827 Series 2005-3, Cl. A2, 3.73%, 10/18/07 610,000 607,086 ----------------------------------------------------------------------------------------- Household Home Equity Loan Trust, Home Equity Loan Pass- Through Certificates, Series 2005-3, Cl. A1, 4.63%, 1/20/35 1 590,476 590,898 ----------------------------------------------------------------------------------------- Lehman XS Trust, Home Equity Mtg. Pass-Through Certificates: Series 2005-2, Cl. 2A1B, 3.63%, 8/25/35 1 790,747 791,864 Series 2005-4, Cl. 2A1B, 5.17%, 10/25/35 585,054 585,420 Series 2005-10, Cl. 2-A3B, 5.55%, 12/25/06 570,000 569,911 ----------------------------------------------------------------------------------------- NC Finance Trust, CMO, Series 1999-I, Cl. ECFD, 1.079%, 1/25/29 4 66,744 15,351 ----------------------------------------------------------------------------------------- Nissan Auto Lease Trust, Automobile Lease Obligations, Series 2004-A, Cl. A2, 2.55%, 1/15/07 44,932 44,920 ----------------------------------------------------------------------------------------- Nissan Auto Receivables Owner Trust, Automobile Receivable Nts.: Series 2003-B, Cl. A3, 1.51%, 8/15/07 23,101 23,013 Series 2005-C, Cl. A2, 3.99%, 1/15/08 1,160,000 1,155,327 ----------------------------------------------------------------------------------------- Onyx Acceptance Owner Trust, Automobile Receivable Obligations, Series 2005-B, Cl. A2, 4.03%, 4/15/08 710,000 707,818
7 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES Continued ----------------------------------------------------------------------------------------- Popular ABS Mortgage Pass- Through Trust, Home Equity Pass- Through Certificates: Series 2004-5, Cl. A F2, 3.735%, 11/10/34 1 $ 200,000 $ 197,606 Series 2005-1, Cl. A F2, 3.914%, 5/25/35 1 150,000 147,934 Series 2005-2, Cl. A F2, 4.415%, 4/25/35 1 240,000 237,649 Series 2005-6, Cl. A3, 5.68%, 1/25/36 1 320,000 320,000 ----------------------------------------------------------------------------------------- Residential Asset Mortgage Products, Inc., Home Equity Asset- Backed Pass-Through Certificates, Series 2004-RS7, Cl. AI3, 4.45%, 7/25/28 670,000 666,634 ----------------------------------------------------------------------------------------- Structured Asset Securities Corp., CMO Pass-Through Certificates, Series 2005-4XS, Cl. 3A1, 5.18%, 3/26/35 737,050 737,328 ----------------------------------------------------------------------------------------- Structured Asset Securities Corp., Home Equity Obligations, Series 2003-25XS, Cl. A4, 4.51%, 8/25/33 217,585 216,911 ----------------------------------------------------------------------------------------- USAA Auto Owner Trust, Automobile Loan Asset-Backed Nts.: Series 2004-2, Cl. A2, 2.41%, 2/15/07 14,868 14,863 Series 2004-3, Cl. A2, 2.79%, 6/15/07 159,110 158,857 ----------------------------------------------------------------------------------------- Volkswagen Auto Lease Trust, Automobile Lease Asset-Backed Securities: Series 2004-A, Cl. A2, 2.47%, 1/22/07 154,709 154,453 Series 2005-A, Cl. A2, 3.52%, 4/20/07 737,424 735,164 ----------------------------------------------------------------------------------------- Wachovia Auto Owner Trust, Automobile Receivable Nts., Series 2004-B, Cl. A2, 2.40%, 5/21/07 73,750 73,647 ----------------------------------------------------------------------------------------- Wells Fargo Home Equity Trust, Home Equity Asset-Backed Certificates, Series 2004-2, Cl. AI1B, 2.94%, 9/25/18 1 302,437 300,304 ----------------------------------------------------------------------------------------- WFS Financial Owner Trust, Automobile Receivable Obligations, Series 2002-2, Cl. A4, 4.50%, 2/20/10 155,555 155,632 ----------------------------------------------------------------------------------------- Whole Auto Loan Trust, Automobile Loan Receivable Certificates: Series 2003-1, Cl. A3B, 1.99%, 5/15/07 84,646 84,225 Series 2004-1, Cl. A2A, 2.59%, 5/15/07 246,804 245,894 --------------- Total Asset-Backed Securities (Cost $26,702,071) 24,772,731 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- MORTGAGE-BACKED OBLIGATIONS--14.1% ----------------------------------------------------------------------------------------- Banc of America Commercial Mortgage, Inc., Commercial Mtg. Pass-Through Certificates: Series 2004-6, Cl. A3, 4.512%, 12/10/42 $ 560,000 $ 542,571 Series 2005-2, Cl. A4, 4.783%, 7/10/43 1 820,000 805,089 Series 2005-3, Cl. A2, 4.501%, 7/10/43 690,000 673,701 ----------------------------------------------------------------------------------------- Banc of America Funding Corp., CMO Pass-Through Certificates, Series 2004-2, Cl. 2A1, 6.50%, 7/20/32 595,219 595,865 ----------------------------------------------------------------------------------------- Banc of America Mortgage Securities, Inc., CMO Pass-Through Certificates: Series 2004-8, Cl. 5A1, 6.50%, 5/25/32 477,693 485,157 Series 2004-E, Cl. 2A9, 3.712%, 6/25/34 1 11,340 11,337 Series 2005-E, Cl. 2A2, 4.983%, 6/25/35 1 136,290 135,671 ----------------------------------------------------------------------------------------- Bear Stearns Commercial Mortgage Securities, Inc., Commercial Mtg. Obligations, Series 2005-PWR7, Cl. A2, 4.945%, 2/11/41 280,000 276,921 ----------------------------------------------------------------------------------------- Citigroup/Deutsche Bank Commercial Mortgage Trust, Commercial Mtg. Obligations, Series 2005-CD1, Cl. A4, 5.225%, 7/15/44 930,000 940,274 ----------------------------------------------------------------------------------------- Countrywide Alternative Loan Trust, CMO: Series 2004-J9, Cl. 1A1, 4.559%, 10/25/34 1 169,529 169,660 Series 2005-J1, Cl. 3A1, 6.50%, 8/25/32 1,434,712 1,460,269 ----------------------------------------------------------------------------------------- Countrywide Asset-Backed Certificates, Inc., Home Equity Asset-Backed Certificates, Series 2005-10, Cl. AF1, 4.539%, 2/25/36 1 1,241,633 1,242,450 ----------------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp.: 4.50%, 5/1/19 992,147 967,066 5%, 1/1/36 5 3,491,000 3,379,724 6%, 5/1/18-10/1/34 5,717,933 5,806,064 6.50%, 4/1/18-6/1/35 3,287,397 3,372,460 7%, 3/1/31-10/1/31 791,334 824,690 11%, 11/1/14 48,835 52,223
8 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- MORTGAGE-BACKED OBLIGATIONS Continued ----------------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., CMO Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates: Series 1669, Cl. G, 6.50%, 2/15/23 $ 4,079 $ 4,074 Series 2055, Cl. ZM, 6.50%, 5/15/28 255,274 262,027 Series 2080, Cl. Z, 6.50%, 8/15/28 159,031 163,009 Series 2106, Cl. FG, 4.819%, 12/15/28 1 3,588,508 3,623,468 Series 2116, Cl. ZA, 6%, 1/15/29 1,330,994 1,361,830 Series 2326, Cl. ZP, 6.50%, 6/15/31 273,842 282,143 Series 2368, Cl. PR, 6.50%, 10/15/31 1,046,247 1,079,512 Series 2387, Cl. PD, 6%, 4/15/30 194,660 196,511 Series 2456, Cl. BD, 6%, 3/15/30 78,387 78,549 Series 2500, Cl. FD, 4.869%, 3/15/32 1 87,115 88,074 Series 2526, Cl. FE, 4.769%, 6/15/29 1 115,553 116,386 Series 2551, Cl. FD, 4.769%, 1/15/33 1 89,701 90,539 Series 2583, Cl. KA, 5.50%, 3/15/22 453,262 454,127 ----------------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., CMO Pass-Through Participation Certificates, Series 151, Cl. F, 9%, 5/15/21 75,878 75,762 ----------------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates: Series 2195, Cl. LH, 6.50%, 10/15/29 1,547,983 1,573,498 Series 3017, Cl. CF, 4.669%, 8/15/25 1 868,463 865,809 ----------------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security: Series 177, Cl. B, 13.58%, 7/1/26 6 307,824 65,587 Series 192, Cl. IO, 15.329%, 2/1/28 6 78,405 16,027 Series 200, Cl. IO, 13.915%, 1/1/29 6 93,375 20,299 Series 205, Cl. IO, 11.518%, 9/1/29 6 419,834 98,689 Series 208, Cl. IO, (16.354)%, 6/1/30 6 472,869 91,069 Series 2003-118, Cl. S, 20.029%, 12/25/33 6 1,799,083 196,534 Series 2074, Cl. S, 7.416%, 7/17/28 6 104,089 9,939 Series 2079, Cl. S, 7.334%, 7/17/28 6 164,142 16,214 Series 2526, Cl. SE, 10.353%, 6/15/29 6 216,034 14,800 Series 2920, Cl. S, 14.191%, 1/15/35 6 1,909,478 92,305 Series 3000, Cl. SE, 19.592%, 7/15/25 6 1,965,537 71,833 ----------------------------------------------------------------------------------------- Federal National Mortgage Assn.: 5%, 2/1/18-6/1/18 2,568,386 2,545,666 5%, 1/1/36 5 15,032,000 14,566,940 5.50%, 3/1/33-1/1/34 14,341,274 14,240,585 5.50%, 1/1/21-1/1/36 5 49,013,093 48,771,702 6%, 7/1/16-1/1/33 10,376,021 10,560,573 6.50%, 5/1/29-10/1/30 248,012 255,517 6.50%, 1/1/36 5 7,350,000 7,540,644 7%, 11/1/17 721,949 750,653 7.50%, 8/1/25-3/1/33 3,209,659 3,370,473 8.50%, 7/1/32 17,921 19,405 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- MORTGAGE-BACKED OBLIGATIONS Continued ----------------------------------------------------------------------------------------- Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates: Trust 1998-63, Cl. PG, 6%, 3/25/27 $ 14,142 $ 14,108 Trust 2001-50, Cl. NE, 6%, 8/25/30 104,203 104,815 Trust 2001-51, Cl. OD, 6.50%, 10/25/31 762,132 784,955 Trust 2001-70, Cl. LR, 6%, 9/25/30 125,219 126,419 Trust 2001-72, Cl. NH, 6%, 4/25/30 74,674 75,253 Trust 2001-74, Cl. PD, 6%, 5/25/30 30,090 30,166 Trust 2002-77, Cl. WF, 4.77%, 12/18/32 1 139,323 140,388 Trust 2003-17, Cl. EQ, 5.50%, 3/25/23 1,265,000 1,274,603 Trust 2003-23, Cl. EQ, 5.50%, 4/25/23 890,000 896,486 Trust 2004-101, Cl. BG, 5%, 1/25/20 630,000 621,743 Trust 2005-67, Cl. BF, 4.729%, 8/25/35 1 1,588,672 1,592,711 Trust 2005-71, Cl. DB, 4.50%, 8/25/25 480,000 450,840 Trust 2005-100, Cl. BQ, 5.50%, 11/25/25 520,000 512,871 Trust 2005-109, Cl. AH, 5.50%, 12/25/25 2,160,000 2,149,399 ----------------------------------------------------------------------------------------- Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Interest-Only Stripped Mtg.-Backed Security: Trust 2002-38, Cl. SO, 8.585%, 4/25/32 6 597,505 34,900 Trust 2002-48, Cl. S, 10.408%, 7/25/32 6 179,349 15,334 Trust 2002-52, Cl. SL, 10.759%, 9/25/32 6 113,104 12,450 Trust 2002-56, Cl. SN, 11.83%, 7/25/32 6 246,449 21,135 Trust 2002-77, Cl. IS, 11.079%, 12/18/32 6 1,017,971 85,597 ----------------------------------------------------------------------------------------- Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Interest-Only Stripped Mtg.-Backed Security, Trust 2002-28, Cl. SA, 10.896%, 4/25/32 6 112,560 9,565 ----------------------------------------------------------------------------------------- Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: Trust 214, Cl. 2, 13.703%, 3/1/23 6 1,273,060 294,209 Trust 221, Cl. 2, 9.76%, 5/1/23 6 140,174 30,582 Trust 240, Cl. 2, 20.285%, 9/1/23 6 250,162 52,095 Trust 301, Cl. 2, 7.628%, 4/1/29 6 562,508 122,072 Trust 313, Cl. 2, (12.079)%, 6/1/31 6 605,902 134,905 Trust 319, Cl. 2, 13.317%, 2/1/32 6 182,184 41,307 Trust 321, Cl. 2, 13.248%, 3/1/32 6 814,006 183,716 Trust 324, Cl. 2, 6.975%, 6/1/32 6 1,409,509 312,154 Trust 329, Cl. 2, 10.882%, 1/1/33 6 4,044,873 896,438 Trust 333, Cl. 2, 12.952%, 3/1/33 6 2,086,301 467,503
9 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- MORTGAGE-BACKED OBLIGATIONS Continued ----------------------------------------------------------------------------------------- Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: Continued Trust 338, Cl. 2, 10.604%, 6/1/33 6 $ 4,332,765 $ 968,258 Trust 346, Cl. 2, 12.156%, 12/1/33 6 5,189,940 1,150,831 Trust 350, Cl. 2, 12.194%, 2/1/34 6 2,226,315 493,725 Trust 2001-61, Cl. SH, 21.053%, 11/18/31 6 973,287 89,584 Trust 2001-63, Cl. SD, 10.177%, 12/18/31 6 215,770 17,915 Trust 2001-68, Cl. SC, 10.741%, 11/25/31 6 153,568 14,096 Trust 2001-81, Cl. S, 11.605%, 1/25/32 6 193,489 16,847 Trust 2002-9, Cl. MS, 10.333%, 3/25/32 6 238,820 20,878 Trust 2002-77, Cl. SH, 12.545%, 12/18/32 6 248,285 23,387 Trust 2003-4, Cl. S, 20.563%, 2/25/33 6 477,815 50,726 Trust 2005-40, Cl. SA, 13.682%, 5/25/35 6 5,583,134 297,482 Trust 2005-40, Cl. SB, 17.295%, 5/25/35 6 1,260,731 71,782 Trust 2005-71, Cl. SA, 19.968%, 8/25/25 6 1,265,880 75,647 ----------------------------------------------------------------------------------------- First Union National Bank/Lehman Brothers/Bank of America Commercial Mtg. Trust, Pass- Through Certificates, Series 1998-C2, Cl. A2, 6.56%, 11/18/35 326,040 335,300 ----------------------------------------------------------------------------------------- Ford Credit Auto Owner Trust, Automobile Loan Pass-Through Certificates, Series 2005-C, Cl. A2, 4.24%, 3/15/08 1,020,000 1,016,450 ----------------------------------------------------------------------------------------- GE Capital Commercial Mortgage Corp., Commercial Mtg. Obligations: Series 2004-C3, Cl. A2, 4.433%, 7/10/39 390,000 383,404 Series 2005-C3, Cl. A2, 4.853%, 7/10/45 430,000 427,149 Series 2005-CA, Cl. A3, 4.578%, 6/10/48 220,000 214,139 ----------------------------------------------------------------------------------------- GMAC Commercial Mortgage Securities, Inc., Commercial Mtg. Pass-Through Certificates: Series 1997-C1, Cl. A3, 6.869%, 7/15/29 215,353 220,258 Series 1998-C1, Cl. F, 7.097%, 5/15/30 1 1,567,000 1,613,902 Series 2004-C3, Cl. A4, 4.547%, 12/10/41 360,000 348,695 ----------------------------------------------------------------------------------------- Government National Mortgage Assn.: 4.125%, 11/20/25 1 13,375 13,509 7%, 3/15/28-7/15/28 667,869 702,103 7.50%, 2/15/27 87,134 91,823 8%, 11/15/25-5/15/26 134,933 144,662 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- MORTGAGE-BACKED OBLIGATIONS Continued ----------------------------------------------------------------------------------------- Government National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: Series 1998-6, Cl. SA, 7.002%, 3/16/28 6 $ 198,268 $ 10,992 Series 1998-19, Cl. SB, 5.943%, 7/16/28 6 326,849 31,027 Series 2001-21, Cl. SB, 3.873%, 1/16/27 6 1,592,265 109,642 ----------------------------------------------------------------------------------------- Greenwich Capital Commercial Funding Corp., Commercial Mtg. Pass-Through Certificates: Series 2005-GG3, Cl. A2, 4.305%, 8/10/42 500,000 487,191 Series 2005-GG5, Cl. A2, 5.117%, 4/10/37 550,000 551,679 ----------------------------------------------------------------------------------------- GS Mortgage Securities Corp. II, Commercial Mtg. Pass-Through Certificates: Series 2004-C1, Cl. A1, 3.659%, 10/10/28 402,716 390,282 Series 2004-GG2, Cl. A3, 4.602%, 8/10/38 250,000 246,939 ----------------------------------------------------------------------------------------- JP Morgan Chase Mortgage Trust, CMO Pass-Through Certificates, Series 2005-S2, Cl. 3A1, 6.754%, 9/25/32 1 2,751,748 2,802,021 ----------------------------------------------------------------------------------------- JPMorgan Chase Commercial Mortgage Securities Corp., Commercial Mtg. Pass-Through Certificates: Series 2005-LDP2, Cl. A2, 4.575%, 7/15/42 160,000 156,834 Series 2005-LDP4, Cl. A2, 4.79%, 10/15/42 670,000 661,472 ----------------------------------------------------------------------------------------- LB-UBS Commercial Mortgage Trust, Commercial Mtg. Pass-Through Certificates, Series 2005-C5, Cl. A2, 4.885%, 9/15/30 520,000 516,594 ----------------------------------------------------------------------------------------- Mastr Alternative Loan Trust, CMO Pass-Through Certificates: Series 2004-6, Cl. 10A1, 6%, 7/25/34 725,372 729,351 Series 2004-9, Cl. A3, 4.70%, 8/25/34 1 780,000 776,443 ----------------------------------------------------------------------------------------- Morgan Stanley Capital I Trust, Commercial Mtg. Pass-Through Certificates: Series 1996-C1, Cl. F, 7.346%, 2/15/28 1,2 162,744 162,487 Series 1997-XL1, Cl. G, 7.695%, 10/3/30 390,000 296,061 ----------------------------------------------------------------------------------------- Nomura Asset Securities Corp., Commercial Mtg. Pass-Through Certificates, Series 1998-D6, Cl. A1B, 6.59%, 3/15/30 420,000 434,343
10 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- MORTGAGE-BACKED OBLIGATIONS Continued ----------------------------------------------------------------------------------------- Prudential Mortgage Capital Co. II LLC, Commercial Mtg. Pass- Through Certificates, Series PRU-HTG 2000-C1, Cl. A2, 7.306%, 10/6/15 $ 556,000 $ 608,266 ----------------------------------------------------------------------------------------- Salomon Brothers Mortgage Securities VII, Inc., Commercial Mtg. Pass-Through Certificates, Series 1996-C1, Cl. F, 8.301%, 1/20/28 1,4 1,000,000 820,000 ----------------------------------------------------------------------------------------- Wachovia Bank Commercial Mortgage Trust, Commercial Mtg. Obligations: Series 2005-C17, Cl. A2, 4.782%, 3/15/42 820,000 810,955 Series 2005-C20, Cl. A5, 5.087%, 7/15/42 1 520,000 516,590 ----------------------------------------------------------------------------------------- Washington Mutual Mortgage Securities Corp., CMO Pass-Through Certificates: Series 2005-AR5, Cl. A1, 4.681%, 5/25/35 1 606,505 606,069 Series 2005-AR8, Cl. 2AB1, 4.629%, 7/25/45 1 887,320 887,181 ----------------------------------------------------------------------------------------- Wells Fargo Mortgage-Backed Securities Trust, CMO, Series 2004-DD, Cl. 2A1, 4.522%, 1/25/35 1 425,472 424,171 --------------- Total Mortgage-Backed Obligations (Cost $169,696,773) 168,699,825 ----------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS--10.1% ----------------------------------------------------------------------------------------- Fannie Mae Unsec. Nts., 3.58%, 1/31/07 7 3,482,000 3,311,716 ----------------------------------------------------------------------------------------- Federal Home Loan Bank Unsec. Bonds: 3.50%, 11/15/07 425,000 415,581 Series S906, 3.50%, 8/15/06 1,715,000 1,703,395 ----------------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp. Unsec. Nts.: 2.75%, 8/15/06 280,000 276,845 3.625%, 9/15/06 8 3,459,000 3,434,676 4.125%, 7/12/10 4,376,000 4,271,611 5.50%, 9/15/11 9 3,350,000 3,471,669 ----------------------------------------------------------------------------------------- Federal National Mortgage Assn. Unsec. Nts.: 3.01%, 6/2/06 1,219,000 1,211,189 3.25%, 7/31/06 9 1,335,000 1,324,447 4%, 2/28/07 965,000 956,905 4.25%, 7/15/07 2,198,000 2,182,427 4.75%, 12/15/10 2,245,000 2,247,478 6%, 5/15/11 12,690,000 13,436,794 6.625%, 9/15/09 8 2,625,000 2,793,559 7.25%, 1/15/10-5/15/30 3,262,000 3,725,740 ----------------------------------------------------------------------------------------- Resolution Funding Corp. STRIPS, 5.16%, 1/15/21 7,9 5,667,000 2,777,907 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS Continued ----------------------------------------------------------------------------------------- Tennessee Valley Authority Bonds: 4.65%, 6/15/35 $ 455,000 $ 431,853 5.88%, 4/1/36 670,000 764,026 Series A, 6.79%, 5/23/12 8,412,000 9,321,489 ----------------------------------------------------------------------------------------- U.S. Treasury Bills, 3.83%, 3/9/06 9 42,440,000 42,142,368 ----------------------------------------------------------------------------------------- U.S. Treasury Bonds: 5.50%, 8/15/28 9,10 900,000 1,012,254 6.875%, 8/15/25 9 2,000,000 2,576,250 7.25%, 5/15/16 9,11 4,454,000 5,470,421 8.875%, 8/15/17 8,9 1,419,000 1,972,299 9.25%, 2/15/16 9 208,000 288,316 STRIPS, 4.20%, 2/15/11 7 900,000 722,406 STRIPS, 4.81%, 2/15/16 7,9 4,491,000 2,851,340 ----------------------------------------------------------------------------------------- U.S. Treasury Nts.: 4.875%, 2/15/12 9 2,000,000 2,053,986 6.50%, 2/15/10 9 3,900,000 4,208,194 --------------- Total U.S. Government Obligations (Cost $121,454,498) 121,357,141 ----------------------------------------------------------------------------------------- FOREIGN GOVERNMENT OBLIGATIONS--24.5% ----------------------------------------------------------------------------------------- ARGENTINA--1.2% Argentina (Republic of) Bonds: 1.20%, 12/31/38 1 [EUR] 1,390,000 537,704 1.33%, 12/31/38 1 1,485,000 493,763 2%, 9/30/14 4 [ARP] 1,802,000 592,939 4.005%, 8/3/12 1 11,769,625 10,298,769 5.83%, 12/31/33 4 [ARP] 2,416,338 703,501 ----------------------------------------------------------------------------------------- Argentina (Republic of) Unsec. Unsub. Bonds, 12/15/35 (linked to Argentina Gross Domestic Product) 4 [ARP] 6,934,172 113,225 ----------------------------------------------------------------------------------------- Buenos Aires (Province of) Bonds, Bonos de Consolidacion de Deudas, Series PBA1, 4/1/07 3,4 [ARP] 33,261 14,149 ----------------------------------------------------------------------------------------- Central Bank of Argentina Bonds, 2%, 2/4/18 4 [ARP] 2,380,800 1,154,470 --------------- 13,908,520 ----------------------------------------------------------------------------------------- AUSTRALIA--1.0% Queensland Treasury Corp. Unsec. Nts., Series 09G, 6%, 7/14/09 [AUD] 15,220,000 11,388,060 ----------------------------------------------------------------------------------------- AUSTRIA--1.0% Austria (Republic of) Nts., 3.80%, 10/20/13 2 [EUR] 10,140,000 12,482,751 ----------------------------------------------------------------------------------------- BRAZIL--1.6% Brazil (Federal Republic of) Bonds: 8%, 1/15/18 6,043,000 6,535,505 8.25%, 1/20/34 2,100,000 2,234,400 8.75%, 2/4/25 6,320,000 6,999,400 12.50%, 1/5/16 [BRR] 8,340,000 3,575,610 Series 15 yr., 5.25%, 4/15/09 1 10,295 10,282 ----------------------------------------------------------------------------------------- Brazil (Federal Republic of) Nts., 7.875%, 3/7/15 130,000 138,775 --------------- 19,493,972
11 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- BULGARIA--0.2% Bulgaria (Republic of) Bonds: 8.25%, 1/15/15 $ 740,000 $ 895,400 8.25%, 1/15/15 2 710,000 859,100 --------------- 1,754,500 ----------------------------------------------------------------------------------------- COLOMBIA--1.0% Colombia (Republic of) Bonds: 10.75%, 1/15/13 1,390,000 1,730,550 12%, 10/22/15 [COP] 8,993,000,000 4,656,584 ----------------------------------------------------------------------------------------- Colombia (Republic of) Nts.: 8.25%, 12/22/14 933,000 1,040,295 11.75%, 3/1/10 [COP] 2,617,240,000 1,286,654 ----------------------------------------------------------------------------------------- Colombia (Republic of) Unsec. Bonds, 8.125%, 5/21/24 3,375,000 3,661,875 --------------- 12,375,958 ----------------------------------------------------------------------------------------- DOMINICAN REPUBLIC--0.1% Dominican Republic Unsec. Unsub. Bonds, Series REG S, 9.04%, 1/23/18 425,396 449,325 ----------------------------------------------------------------------------------------- Dominican Republic Unsec. Unsub. Nts., 9.50%, 9/27/11 2 838,000 888,280 --------------- 1,337,605 ----------------------------------------------------------------------------------------- EL SALVADOR--0.1% El Salvador (Republic of) Bonds, 7.625%, 9/21/34 2 590,000 641,625 ----------------------------------------------------------------------------------------- FRANCE--0.5% France (Government of) Obligations Assimilables du Tresor Bonds, 5.50%, 10/25/10 [EUR] 4,260,000 5,588,974 ----------------------------------------------------------------------------------------- GERMANY--1.6% Germany (Republic of) Bonds: Series 03, 3.75% 7/4/13 [EUR] 14,820,000 18,180,454 Series 99, 4%, 7/4/09 [EUR] 935,000 1,144,024 --------------- 19,324,478 ----------------------------------------------------------------------------------------- GUATEMALA--0.0% Guatemala (Republic of) Nts.: 10.25%, 11/8/11 2 250,000 298,750 10.25%, 11/8/11 95,000 113,525 --------------- 412,275 ----------------------------------------------------------------------------------------- INDONESIA--0.2% Indonesia (Republic of) Nts.: 6.75%, 3/10/14 2 120,000 120,000 7.25%, 4/20/15 2 200,000 206,250 ----------------------------------------------------------------------------------------- Indonesia (Republic of) Unsec. Nts., 8.50%, 10/12/35 4 2,370,000 2,579,271 --------------- 2,905,521 ----------------------------------------------------------------------------------------- ISRAEL--0.3% Israel (State of) Bonds, Series 2682, 7.50%, 3/31/14 [ILS] 16,093,000 3,788,455 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- ITALY--0.4% Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali, 4.25%, 2/1/19 [EUR] 3,800,000 $ 4,799,318 ----------------------------------------------------------------------------------------- JAPAN--4.6% Japan (Government of) Bonds: 2 yr., Series 237, 0.20%, 10/15/07 [JPY] 4,154,000,000 35,204,124 10 yr., Series 239, 1.40%, 6/20/12 [JPY] 1,062,000,000 9,178,486 20 yr., Series 81, 2%, 9/20/25 [JPY] 1,223,000,000 10,414,192 --------------- 54,796,802 ----------------------------------------------------------------------------------------- MALAYSIA--0.3% Johor Corp. Malaysia (Government of) Bonds, Series P3, 1%, 7/31/12 4 [MYR] 7,980,000 2,290,859 ----------------------------------------------------------------------------------------- Malaysia (Government of) Bonds, Series 2/05, 4.72%, 9/30/15 [MYR] 3,490,000 960,800 --------------- 3,251,659 ----------------------------------------------------------------------------------------- MEXICO--1.5% United Mexican States Bonds: 7.50%, 4/8/33 863,000 1,023,950 8.30%, 8/15/31 400,000 515,000 Series B1, 8.99%, 4/12/06 7 [MXN] 7,940,000 728,098 Series M10, 10.50%, 7/14/11 1 [MXN] 55,490,000 5,985,869 Series M20, 8%, 12/7/23 1 [MXN] 20,056,000 1,782,301 Series M20, 10%, 12/5/24 1 [MXN] 14,345,000 1,528,241 Series MI10, 8%, 12/19/13 [MXN] 16,100,000 1,494,162 Series MI10, 9.50%, 12/18/14 1 [MXN] 20,590,800 2,088,220 ----------------------------------------------------------------------------------------- United Mexican States Nts., 7.50%, 1/14/12 1,132,000 1,265,010 ----------------------------------------------------------------------------------------- United Mexican States Unsec. Unsub. Nts., Series 6 BR, 6.75%, 6/6/06 [JPY] 135,000,000 1,175,033 --------------- 17,585,884 ----------------------------------------------------------------------------------------- NEW ZEALAND--0.9% New Zealand (Government of) Bonds, Series 70B, 6%, 7/15/08 [NZD] 15,210,000 10,397,940 ----------------------------------------------------------------------------------------- NIGERIA--0.1% Central Bank of Nigeria Gtd. Bonds, Series WW, 6.25%, 11/15/20 960,000 964,800 ----------------------------------------------------------------------------------------- Nigeria (Federal Republic of) Promissory Nts., Series RC, 5.092%, 1/5/10 194,562 180,067 --------------- 1,144,867 ----------------------------------------------------------------------------------------- PANAMA--0.7% Panama (Republic of) Bonds: 8.125%, 4/28/34 6,635,000 7,431,200 9.375%, 4/1/29 655,000 826,938 --------------- 8,258,138
12 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- PERU--1.3% Peru (Republic of) Bonds: 7.35%, 7/21/25 $ 820,000 $ 811,800 7.84%, 8/12/20 [PEN] 19,410,000 5,450,812 8.375%, 5/3/16 290,000 319,725 9.91%, 5/5/15 [PEN] 6,840,000 2,247,116 Series 2, 9%, 1/31/12 [PEN] 1,340,000 425,617 Series 7, 8.60%, 8/12/17 [PEN] 3,450,000 1,034,849 Series 8-1, 12.25%, 8/10/11 [PEN] 1,427,000 514,739 ----------------------------------------------------------------------------------------- Peru (Republic of) Past Due Interest Bonds, Series 20 yr., 5%, 3/7/17 1 1,427,620 1,352,670 ----------------------------------------------------------------------------------------- Peru (Republic of) Sr. Nts., 4.53%, 2/28/16 7 1,297,529 773,781 ----------------------------------------------------------------------------------------- Peru (Republic of) Unsec. Unsub. Bonds, 8.75%, 11/21/33 2,680,000 3,028,400 --------------- 15,959,509 ----------------------------------------------------------------------------------------- PHILIPPINES--0.2% Philippines (Republic of) Bonds: 8%, 1/15/16 700,000 735,000 8.375%, 2/15/11 438,000 473,151 9.50%, 2/2/30 809,000 952,598 ----------------------------------------------------------------------------------------- Philippines (Republic of) Nts., 8.25%, 1/15/14 441,000 471,319 --------------- 2,632,068 ----------------------------------------------------------------------------------------- POLAND--0.1% Poland (Republic of) Bonds: Series DS1013, 5%, 10/24/13 [PLZ] 4,640,000 1,421,097 Series WS0922, 5.75%, 9/23/22 [PLZ] 1,000,000 324,839 --------------- 1,745,936 ----------------------------------------------------------------------------------------- RUSSIA--0.5% Aries Vermoegensverwaltungs GmbH Unsub. Nts.: Series B, 7.75%, 10/25/09 2 [EUR] 700,000 949,658 Series C, 9.60%, 10/25/14 810,000 1,046,875 Ministry Finance of Russia Debs., Series VII, 3%, 5/14/11 1,170,000 1,043,535 ----------------------------------------------------------------------------------------- Russian Federation Ministry of Finance Unsec. Debs., Series V, 3%, 5/14/08 3,277,000 3,107,514 --------------- 6,147,582 ----------------------------------------------------------------------------------------- SOUTH AFRICA--0.7% South Africa (Republic of) Bonds: Series 153, 13%, 8/31/10 [ZAR] 13,100,000 2,527,939 Series R157, 13.50%, 9/15/15 [ZAR] 6,355,000 1,417,683 Series R186, 10.50%, 12/21/26 [ZAR] 17,528,000 3,791,047 Series R203, 8.25%, 9/15/17 [ZAR] 3,000,000 503,970 Series R204, 8%, 12/21/18 [ZAR] 3,175,000 526,146 --------------- 8,766,785 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- SPAIN--0.5% Spain (Kingdom of) Bonds: Bonos y Obligacion del Estado, 5.35%, 10/31/11 [EUR] 3,216,000 $ 4,251,557 Bonos y Obligacion del Estado, 5.75%, 7/30/32 [EUR] 903,000 1,458,958 --------------- 5,710,515 ----------------------------------------------------------------------------------------- THE NETHERLANDS--0.1% Netherlands (Kingdom of the) Bonds, 5.50%, 1/15/28 [EUR] 740,000 1,133,650 ----------------------------------------------------------------------------------------- TURKEY--0.6% Turkey (Republic of) Bonds, 8%, 2/14/34 955,000 1,056,469 ----------------------------------------------------------------------------------------- Turkey (Republic of) Nts., 7.25%, 3/15/15 5,901,000 6,240,308 --------------- 7,296,777 ----------------------------------------------------------------------------------------- UNITED KINGDOM--2.3% United Kingdom Treasury Nts., 4%, 3/7/09 [GBP] 16,185,000 27,692,966 ----------------------------------------------------------------------------------------- URUGUAY--0.1% Uruguay (Republic of) Unsec. Bonds, 8%, 11/18/22 1,545,000 1,587,488 ----------------------------------------------------------------------------------------- VENEZUELA--0.8% Venezuela (Republic of) Bonds: 9.25%, 9/15/27 5,965,000 7,083,438 13.625%, 8/15/18 500,000 728,750 ----------------------------------------------------------------------------------------- Venezuela (Republic of) Nts., 7%, 3/16/15 [EUR] 1,097,000 1,373,409 --------------- 9,185,597 --------------- Total Foreign Government Obligations (Cost $289,884,310) 293,496,175 ----------------------------------------------------------------------------------------- LOAN PARTICIPATIONS--0.2% ----------------------------------------------------------------------------------------- Algeria (Republic of) Loan Participation Nts., 4.809%, 3/4/10 1,4 349,500 347,753 ----------------------------------------------------------------------------------------- Deutsche Bank AG, Indonesia (Republic of) Rupiah Loan Participation Nts., 3.938%, 1/25/06 1 1,490,000 1,478,825 --------------- Total Loan Participations (Cost $1,813,488) 1,826,578 ----------------------------------------------------------------------------------------- CORPORATE BONDS AND NOTES--26.9% ----------------------------------------------------------------------------------------- CONSUMER DISCRETIONARY--7.9% ----------------------------------------------------------------------------------------- AUTO COMPONENTS--0.4% Collins & Aikman Floorcoverings, Inc., 9.75% Sr. Sub. Nts., Series B, 2/15/10 200,000 177,000 ----------------------------------------------------------------------------------------- Dana Corp., 10.125% Nts., 3/15/10 200,000 172,000
13 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- AUTO COMPONENTS Continued Dura Operating Corp.: 8.625% Sr. Nts., Series B, 4/15/12 $ 200,000 $ 166,000 9% Sr. Unsec. Sub. Nts., Series D, 5/1/09 500,000 285,000 ----------------------------------------------------------------------------------------- Eagle-Picher, Inc., 9.75% Sr. Nts., 9/1/13 3 60,000 45,900 ----------------------------------------------------------------------------------------- Goodyear Tire & Rubber Co. (The): 7.857% Nts., 8/15/11 825,000 808,500 9% Sr. Nts., 7/1/15 2 1,045,000 1,034,550 ----------------------------------------------------------------------------------------- Stoneridge, Inc., 11.50% Sr. Nts., 5/1/12 500,000 511,250 ----------------------------------------------------------------------------------------- Tenneco Automotive, Inc.: 8.625% Sr. Unsec. Sub. Nts., 11/15/14 900,000 855,000 10.25% Sr. Sec. Nts., Series B, 7/15/13 150,000 164,625 ----------------------------------------------------------------------------------------- United Components, Inc., 9.375% Sr. Sub. Nts., 6/15/13 200,000 200,000 ----------------------------------------------------------------------------------------- Visteon Corp.: 7% Sr. Unsec. Nts., 3/10/14 425,000 330,438 8.25% Sr. Unsec. Nts., 8/1/10 100,000 85,500 --------------- 4,835,763 ----------------------------------------------------------------------------------------- AUTOMOBILES--0.7% Ford Motor Co., 7.45% Bonds, 7/16/31 800,000 548,000 ----------------------------------------------------------------------------------------- Ford Motor Credit Co.: 5.625% Nts., 10/1/08 1,700,000 1,492,576 5.80% Sr. Unsec. Nts., 1/12/09 300,000 261,875 7.25% Nts., 10/25/11 400,000 345,933 7.375% Nts., 10/28/09 900,000 798,834 ----------------------------------------------------------------------------------------- General Motors Acceptance Corp.: 5.125% Nts., 5/9/08 300,000 267,212 5.85% Sr. Unsec. Unsub. Nts., 1/14/09 900,000 805,702 6.875% Nts., 9/15/11 300,000 273,896 7.25% Nts., 3/2/11 400,000 368,038 8% Bonds, 11/1/31 1,200,000 1,152,503 ----------------------------------------------------------------------------------------- General Motors Corp., 8.375% Sr. Unsec. Debs., 7/15/33 400,000 266,000 ----------------------------------------------------------------------------------------- Hertz Corp.: 8.875% Sr. Nts., 1/1/14 2 1,160,000 1,187,550 10.50% Sr. Sub. Nts., 1/1/16 2 435,000 450,225 --------------- 8,218,344 ----------------------------------------------------------------------------------------- DISTRIBUTORS--0.0% SGS International, Inc., 12% Sr. Sub. Nts., 12/15/13 2 580,000 583,853 ----------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES--0.1% Alderwoods Group, Inc., 7.75% Sr. Nts., 9/15/12 650,000 676,000 ----------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE--2.3% Apcoa, Inc., 9.25% Sr. Unsec. Sub. Nts., 3/15/08 4 100,000 98,500 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE Continued Aztar Corp., 9% Sr. Unsec. Sub. Nts., 8/15/11 $ 850,000 $ 904,188 ----------------------------------------------------------------------------------------- Boyd Gaming Corp., 8.75% Sr. Sub. Nts., 4/15/12 500,000 538,750 ----------------------------------------------------------------------------------------- CCM Merger, Inc., 8% Unsec. Nts., 8/1/13 2 1,040,000 1,003,600 ----------------------------------------------------------------------------------------- Domino's, Inc., 8.25% Sr. Unsec. Sub. Nts., 7/1/11 547,000 574,350 ----------------------------------------------------------------------------------------- Gaylord Entertainment Co., 8% Sr. Nts., 11/15/13 400,000 421,000 ----------------------------------------------------------------------------------------- Greektown Holdings, Inc., 10.75% Sr. Nts., 12/1/13 2 835,000 832,913 ----------------------------------------------------------------------------------------- Intrawest Corp., 7.50% Sr. Unsec. Nts., 10/15/13 4 625,000 635,938 ----------------------------------------------------------------------------------------- Isle of Capri Casinos, Inc.: 7% Sr. Unsec. Sub. Nts., 3/1/14 2,100,000 2,058,000 9% Sr. Sub. Nts., 3/15/12 500,000 531,250 ----------------------------------------------------------------------------------------- Kerzner International Ltd., 6.75% Sr. Sub. Nts., 10/1/15 2 490,000 478,975 ----------------------------------------------------------------------------------------- Mandalay Resort Group, 10.25% Sr. Unsec. Sub. Nts., Series B, 8/1/07 650,000 696,313 ----------------------------------------------------------------------------------------- MGM Mirage, Inc.: 8.375% Sr. Unsec. Sub. Nts., 2/1/11 1,800,000 1,935,000 9.75% Sr. Unsec. Sub. Nts., 6/1/07 350,000 370,563 ----------------------------------------------------------------------------------------- Mohegan Tribal Gaming Authority: 6.125% Sr. Unsec. Sub. Nts., 2/15/13 225,000 222,188 6.375% Sr. Sub. Nts., 7/15/09 250,000 252,813 6.875% Sr. Unsec. Sub. Nts., 2/15/15 515,000 521,438 8% Sr. Sub. Nts., 4/1/12 1,000,000 1,057,500 ----------------------------------------------------------------------------------------- NCL Corp., 10.625% Sr. Unsub. Nts., 7/15/14 300,000 311,250 ----------------------------------------------------------------------------------------- Park Place Entertainment Corp.: 7.875% Sr. Sub. Nts., 3/15/10 200,000 216,000 9.375% Sr. Unsec. Sub. Nts., 2/15/07 4 800,000 835,000 ----------------------------------------------------------------------------------------- Penn National Gaming, Inc.: 6.75% Sr. Unsec. Sub. Nts., 3/1/15 230,000 227,125 6.875% Sr. Sub. Nts., 12/1/11 500,000 507,500 ----------------------------------------------------------------------------------------- Pinnacle Entertainment, Inc., 8.25% Sr. Unsec. Sub. Nts., 3/15/12 1,800,000 1,869,750 ----------------------------------------------------------------------------------------- Premier Cruise Ltd., 11% Sr. Nts., 3/15/08 2,3 250,000 -- ----------------------------------------------------------------------------------------- Six Flags, Inc.: 8.875% Sr. Unsec. Nts., 2/1/10 874,000 856,520 9.625% Sr. Nts., 6/1/14 19,000 18,573 9.75% Sr. Nts., 4/15/13 700,000 690,375 ----------------------------------------------------------------------------------------- Starwood Hotels & Resorts Worldwide, Inc., 7.875% Sr. Nts., 5/1/12 835,000 924,763 ----------------------------------------------------------------------------------------- Station Casinos, Inc.: 6.50% Sr. Unsec. Sub. Nts., 2/1/14 2,203,000 2,236,045 6.875% Sr. Unsec. Sub. Nts., 3/1/16 235,000 241,463 ----------------------------------------------------------------------------------------- Trump Entertainment Resorts, Inc., 8.50% Sec. Nts., 6/1/15 12 2,650,000 2,597,000
14 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE Continued Universal City Development Partners Ltd., 11.75% Sr. Nts., 4/1/10 $ 500,000 $ 563,125 ----------------------------------------------------------------------------------------- Vail Resorts, Inc., 6.75% Sr. Sub. Nts., 2/15/14 600,000 603,000 ----------------------------------------------------------------------------------------- Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., 6.625% Nts., 12/1/14 2,274,000 2,222,835 --------------- 28,053,603 ----------------------------------------------------------------------------------------- HOUSEHOLD DURABLES--0.3% Beazer Homes USA, Inc., 8.375% Sr. Nts., 4/15/12 400,000 418,000 ----------------------------------------------------------------------------------------- D.R. Horton, Inc.: 9.375% Sr. Unsec. Sub. Nts., 3/15/11 400,000 422,864 9.75% Sr. Sub. Nts., 9/15/10 400,000 454,201 ----------------------------------------------------------------------------------------- K. Hovnanian Enterprises, Inc., 7.75% Sr. Unsec. Sub. Nts., 5/15/13 300,000 297,635 ----------------------------------------------------------------------------------------- KB Home: 8.625% Sr. Sub. Nts., 12/15/08 250,000 266,793 9.50% Sr. Unsec. Sub. Nts., 2/15/11 400,000 422,768 ----------------------------------------------------------------------------------------- Meritage Homes Corp., 6.25% Sr. Unsec. Nts., 3/15/15 320,000 292,800 ----------------------------------------------------------------------------------------- Sealy Mattress Co., 8.25% Sr. Sub. Nts., 6/15/14 450,000 465,750 ----------------------------------------------------------------------------------------- Standard Pacific Corp., 9.25% Sr. Sub. Nts., 4/15/12 200,000 206,750 ----------------------------------------------------------------------------------------- WCI Communities, Inc., 9.125% Sr. Sub. Nts., 5/1/12 300,000 300,000 ----------------------------------------------------------------------------------------- William Lyon Homes, Inc., 10.75% Sr. Nts., 4/1/13 400,000 415,000 --------------- 3,962,561 ----------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS--0.1% Leslie's Poolmart, Inc., 7.75% Sr. Unsec. Nts., 2/1/13 225,000 226,688 ----------------------------------------------------------------------------------------- Rexnord Corp., 10.125% Sr. Unsec. Sub. Nts., 12/15/12 350,000 378,000 --------------- 604,688 ----------------------------------------------------------------------------------------- MEDIA--3.1% Adelphia Communications Corp.: 7.875% Sr. Unsec. Nts., 5/1/09 3 350,000 194,250 10.25% Sr. Unsec. Sub. Nts., 6/15/11 3 200,000 121,000 10.875% Sr. Unsec. Nts., 10/1/10 3 400,000 226,000 ----------------------------------------------------------------------------------------- Allbritton Communications Co., 7.75% Sr. Unsec. Sub. Nts., 12/15/12 700,000 707,000 ----------------------------------------------------------------------------------------- AMC Entertainment, Inc.: 8% Sr. Unsec. Sub. Nts., 3/1/14 650,000 591,500 9.50% Sr. Unsec. Sub. Nts., 2/1/11 360,000 355,950 ----------------------------------------------------------------------------------------- American Media Operations, Inc.: 8.875% Sr. Unsec. Sub. Nts., 1/15/11 150,000 128,250 10.25% Sr. Unsec. Sub. Nts., Series B, 5/1/09 700,000 642,250 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- MEDIA Continued Block Communications, Inc., 8.25% Sr. Nts., 12/15/15 2 $ 405,000 $ 402,975 ----------------------------------------------------------------------------------------- Cablevision Systems Corp., New York Group, 8% Sr. Unsec. Nts., Series B, 4/15/12 700,000 658,000 ----------------------------------------------------------------------------------------- Carmike Cinemas, Inc., 7.50% Sr. Sub. Nts., 2/15/14 500,000 470,625 ----------------------------------------------------------------------------------------- Charter Communications Holdings I LLC, 0%/11.75% Sr. Unsec. Unsub. Nts., 5/15/14 2,13 875,000 490,000 ----------------------------------------------------------------------------------------- Charter Communications Holdings II LLC, 10.25% Sr. Unsec. Nts., 9/15/10 500,000 500,000 ----------------------------------------------------------------------------------------- Charter Communications Holdings LLC/Charter Communications Holdings Capital Corp., 8.375% Sr. Nts., Second Lien, 4/30/14 2 3,703,000 3,703,000 ----------------------------------------------------------------------------------------- Cinemark USA, Inc., 9% Sr. Unsec. Sub. Nts., 2/1/13 400,000 425,000 ----------------------------------------------------------------------------------------- Cinemark, Inc., 0%/9.75% Sr. Unsec. Disc. Nts., 3/15/14 13 500,000 372,500 ----------------------------------------------------------------------------------------- Corus Entertainment, Inc., 8.75% Sr. Sub. Nts., 3/1/12 300,000 326,250 ----------------------------------------------------------------------------------------- CSC Holdings, Inc.: 7.625% Sr. Unsec. Debs., 7/15/18 300,000 286,500 7.625% Sr. Unsec. Unsub. Nts., Series B, 4/1/11 1,106,000 1,106,000 ----------------------------------------------------------------------------------------- Dex Media East LLC/Dex Media East Finance Co., 9.875% Sr. Unsec. Nts., 11/15/09 200,000 217,250 ----------------------------------------------------------------------------------------- Dex Media West LLC/Dex Media West Finance Co.: 8.50% Sr. Nts., 8/15/10 300,000 315,750 9.875% Sr. Sub. Nts., 8/15/13 586,000 653,390 ----------------------------------------------------------------------------------------- Dex Media, Inc.: 0%/9% Unsec. Disc. Nts., 11/15/13 13 300,000 240,000 0%/9% Unsec. Disc. Nts., 11/15/13 13 400,000 320,000 8% Unsec. Nts., 11/15/13 4,775,000 4,894,375 ----------------------------------------------------------------------------------------- EchoStar DBS Corp.: 6.625% Sr. Unsec. Nts., 10/1/14 927,000 893,396 9.125% Sr. Nts., 1/15/09 936,000 981,630 ----------------------------------------------------------------------------------------- Emmis Operating Co., 6.875% Sr. Unsec. Sub. Nts., 5/15/12 600,000 599,250 ----------------------------------------------------------------------------------------- Granite Broadcasting Corp., 9.75% Sr. Sec. Nts., 12/1/10 619,000 572,575 ----------------------------------------------------------------------------------------- Lamar Media Corp., 6.625% Sr. Unsec. Sub. Nts., 8/15/15 960,000 968,400 ----------------------------------------------------------------------------------------- Lin Television Corp., 6.50% Sr. Sub. Nts., 5/15/13 550,000 530,063 ----------------------------------------------------------------------------------------- LodgeNet Entertainment Corp., 9.50% Sr. Sub. Debs., 6/15/13 200,000 218,500 ----------------------------------------------------------------------------------------- Mediacom Broadband LLC, 8.50% Sr. Nts., 10/15/15 2 280,000 260,750
15 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- MEDIA Continued Mediacom LLC/Mediacom Capital Corp., 9.50% Sr. Unsec. Nts., 1/15/13 $ 969,000 $ 950,831 ----------------------------------------------------------------------------------------- MediaNews Group, Inc.: 6.375% Sr. Sub. Nts., 4/1/14 800,000 742,000 6.875% Sr. Unsec. Sub. Nts., 10/1/13 700,000 672,875 ----------------------------------------------------------------------------------------- News America Holdings, Inc., 8.875% Sr. Debs., 4/26/23 625,000 779,367 ----------------------------------------------------------------------------------------- Paxson Communications Corp., 10.777% Sr. Sec. Nts., 1/15/13 1,2 875,000 845,469 ----------------------------------------------------------------------------------------- PRIMEDIA, Inc.: 8% Sr. Nts., 5/15/13 900,000 766,125 8.875% Sr. Unsec. Nts., 5/15/11 319,000 295,873 ----------------------------------------------------------------------------------------- R.H. Donnelley Corp., 6.875% Sr. Nts., 1/15/13 1,000,000 926,250 ----------------------------------------------------------------------------------------- R.H. Donnelley Financial Corp. I, 10.875% Sr. Sub. Nts., 12/15/12 2 400,000 453,000 ----------------------------------------------------------------------------------------- Radio One, Inc., 8.875% Sr. Unsec. Sub. Nts., Series B, 7/1/11 600,000 636,000 ----------------------------------------------------------------------------------------- Rainbow National Services LLC, 8.75% Sr. Nts., 9/1/12 2 900,000 963,000 ----------------------------------------------------------------------------------------- Shaw Communications, Inc., 8.54% Debs., 9/30/27 [CAD] 340,000 314,372 ----------------------------------------------------------------------------------------- Sinclair Broadcast Group, Inc.: 8% Sr. Unsec. Sub. Nts., 3/15/12 2,775,000 2,872,125 8.75% Sr. Sub. Nts., 12/15/11 300,000 317,250 ----------------------------------------------------------------------------------------- Vertis, Inc.: 9.75% Sr. Sec. Nts., 4/1/09 700,000 728,875 10.875% Sr. Unsec. Nts., Series B, 6/15/09 300,000 297,000 ----------------------------------------------------------------------------------------- WMG Holdings Corp., 0%/9.50% Sr. Disc. Nts., 12/15/14 13 1,757,000 1,238,685 --------------- 37,171,476 ----------------------------------------------------------------------------------------- MULTILINE RETAIL--0.3% Neiman Marcus Group, Inc.: 9% Sr. Nts., 10/15/15 2 2,320,000 2,383,800 10.375% Sr. Sub. Nts., 10/15/15 2 1,060,000 1,082,525 ----------------------------------------------------------------------------------------- Saks, Inc., 8.25% Sr. Unsec. Nts., 11/15/08 520,000 543,400 --------------- 4,009,725 ----------------------------------------------------------------------------------------- SPECIALTY RETAIL--0.2% Asbury Automotive Group, Inc., 9% Sr. Sub. Nts., 6/15/12 300,000 301,500 ----------------------------------------------------------------------------------------- Atlantic Broadband Finance LLC, 9.375% Sr. Unsec. Sub. Nts., 1/15/14 250,000 224,375 ----------------------------------------------------------------------------------------- AutoNation, Inc., 9% Sr. Unsec. Nts., 8/1/08 500,000 539,375 ----------------------------------------------------------------------------------------- Boise Cascade LLC, 7.125% Sr. Unsec. Sub. Nts., 10/15/14 950,000 890,625 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- SPECIALTY RETAIL Continued Petco Animal Supplies, Inc., 10.75% Sr. Sub. Nts., 11/1/11 $ 200,000 $ 217,500 ----------------------------------------------------------------------------------------- Rent-A-Center, Inc., 7.50% Sr. Unsec. Sub. Nts., Series B, 5/1/10 150,000 144,000 --------------- 2,317,375 ----------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS--0.4% Invista, Inc., 9.25% Sr. Nts., 5/1/12 2 1,067,000 1,144,358 ----------------------------------------------------------------------------------------- Levi Strauss & Co.: 8.804% Sr. Unsec. Unsub. Nts., 4/1/12 1 940,000 951,750 9.75% Sr. Unsec. Unsub. Nts., 1/15/15 1,059,000 1,106,655 ----------------------------------------------------------------------------------------- Oxford Industries, Inc., 8.875% Sr. Nts., 6/1/11 4 250,000 255,938 ----------------------------------------------------------------------------------------- Quiksilver, Inc., 6.875% Sr. Nts., 4/15/15 2 610,000 590,175 ----------------------------------------------------------------------------------------- Russell Corp., 9.25% Sr. Nts., 5/1/10 200,000 203,750 --------------- 4,252,626 ----------------------------------------------------------------------------------------- CONSUMER STAPLES--0.6% ----------------------------------------------------------------------------------------- BEVERAGES--0.0% Constellation Brands, Inc., 8.125% Sr. Sub. Nts., 1/15/12 300,000 313,500 ----------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING--0.1% Jean Coutu Group (PJC), Inc. (The), 8.50% Sr. Sub. Nts., 8/1/14 600,000 552,000 ----------------------------------------------------------------------------------------- Real Time Data Co., 11% Disc. Nts., 5/31/09 3,4 142,981 -- ----------------------------------------------------------------------------------------- Rite Aid Corp.: 8.125% Sr. Sec. Nts., 5/1/10 450,000 460,125 9.50% Sr. Sec. Nts., 2/15/11 200,000 212,000 --------------- 1,224,125 ----------------------------------------------------------------------------------------- FOOD PRODUCTS--0.3% American Seafoods Group LLC, 10.125% Sr. Sub. Nts., 4/15/10 200,000 210,750 ----------------------------------------------------------------------------------------- Del Monte Corp.: 6.75% Sr. Unsec. Sub. Nts., 2/15/15 180,000 176,400 8.625% Sr. Sub. Nts., 12/15/12 400,000 427,000 ----------------------------------------------------------------------------------------- Doane Pet Care Co.: 10.625% Sr. Sub. Nts., 11/15/15 2 610,000 638,975 10.75% Sr. Nts., 3/1/10 610,000 666,425 ----------------------------------------------------------------------------------------- Dole Food Co., Inc.: 8.625% Sr. Nts., 5/1/09 306,000 315,180 8.875% Sr. Unsec. Nts., 3/15/11 71,000 73,130 ----------------------------------------------------------------------------------------- Hines Nurseries, Inc., 10.25% Sr. Unsec. Sub. Nts., 10/1/11 200,000 197,000 ----------------------------------------------------------------------------------------- Smithfield Foods, Inc., 7.625% Sr. Unsec. Sub. Nts., 2/15/08 400,000 415,000 ----------------------------------------------------------------------------------------- United Biscuits Finance plc, 10.75% Sr. Sub. Nts., 4/15/11 [GBP] 400,000 731,208 --------------- 3,851,068
16 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS--0.2% Church & Dwight Co., Inc., 6% Sr. Unsec. Sub. Nts., 12/15/12 $ 350,000 $ 346,500 ----------------------------------------------------------------------------------------- Playtex Products, Inc.: 8% Sr. Sec. Nts., 3/1/11 500,000 535,000 9.375% Sr. Unsec. Sub. Nts., 6/1/11 800,000 842,000 --------------- 1,723,500 ----------------------------------------------------------------------------------------- PERSONAL PRODUCTS--0.0% Elizabeth Arden, Inc., 7.75% Sr. Unsec. Sub. Nts., 1/15/14 175,000 177,625 ----------------------------------------------------------------------------------------- ENERGY--3.5% ----------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES--0.1% Dresser, Inc., 9.375% Sr. Sub. Nts., 4/15/11 300,000 317,250 ----------------------------------------------------------------------------------------- Hanover Compressor Co., 8.625% Sr. Unsec. Sub. Nts., 12/15/10 300,000 318,750 ----------------------------------------------------------------------------------------- Hanover Equipment Trust, 8.50% Sr. Sec. Nts., Series A, 9/1/08 221,000 230,116 ----------------------------------------------------------------------------------------- Petroleum Helicopters, Inc., 9.375% Sr. Nts., 5/1/09 200,000 211,750 ----------------------------------------------------------------------------------------- Universal Compression, Inc., 7.25% Sr. Unsec. Sub. Nts., 5/15/10 400,000 408,000 --------------- 1,485,866 ----------------------------------------------------------------------------------------- OIL & GAS--3.4% Arch Western Finance LLC, 6.75% Sr. Nts., 7/1/13 700,000 716,625 ----------------------------------------------------------------------------------------- Atlas Pipeline Partners LP, 8.125% Sr. Nts., 12/15/15 2 290,000 293,988 ----------------------------------------------------------------------------------------- Chesapeake Energy Corp.: 6.375% Sr. Unsec. Nts., 6/15/15 250,000 251,250 6.875% Sr. Unsec. Nts., 1/15/16 1,322,000 1,361,660 ----------------------------------------------------------------------------------------- Clayton Williams Energy, Inc., 7.75% Sr. Unsec. Nts., 8/1/13 175,000 168,875 ----------------------------------------------------------------------------------------- Compton Petroleum Corp., 7.625% Sr. Nts., 12/1/13 2 385,000 395,588 ----------------------------------------------------------------------------------------- Delta Petroleum Corp., 7% Sr. Unsec. Nts., 4/1/15 140,000 129,850 ----------------------------------------------------------------------------------------- El Paso Corp., 7.875% Sr. Unsec. Nts., 6/15/12 2,784,000 2,881,440 ----------------------------------------------------------------------------------------- El Paso Energy Corp., 7.625% Nts., 7/15/11 200,000 204,500 ----------------------------------------------------------------------------------------- El Paso Production Holding Co., 7.75% Sr. Unsec. Nts., 6/1/13 1,319,000 1,375,058 ----------------------------------------------------------------------------------------- Forest Oil Corp., 7.75% Sr. Nts., 5/1/14 300,000 312,750 ----------------------------------------------------------------------------------------- Foundation PA Coal Co., 7.25% Sr. Unsec. Nts., 8/1/14 550,000 571,313 ----------------------------------------------------------------------------------------- Frontier Oil Corp., 6.625% Sr. Unsec. Nts., 10/1/11 200,000 205,000 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- OIL & GAS Continued Gazprom International SA, 7.201% Sr. Unsec. Bonds, 2/1/20 $ 9,074,000 $ 9,701,059 ----------------------------------------------------------------------------------------- Massey Energy Co.: 6.625% Sr. Nts., 11/15/10 200,000 204,250 6.875% Sr. Nts., 12/15/13 2 285,000 288,919 ----------------------------------------------------------------------------------------- Newfield Exploration Co.: 6.625% Sr. Unsec. Sub. Nts., 9/1/14 600,000 613,500 8.375% Sr. Sub. Nts., 8/15/12 500,000 537,500 ----------------------------------------------------------------------------------------- Pacific Energy Partners LP/Pacific Energy Finance Corp., 6.25% Sr. Nts., 9/15/15 2 100,000 99,000 ----------------------------------------------------------------------------------------- Peabody Energy Corp., 6.875% Sr. Unsec. Nts., Series B, 3/15/13 700,000 731,500 ----------------------------------------------------------------------------------------- Pemex Project Funding Master Trust: 7.375% Unsec. Unsub. Nts., 12/15/14 740,000 823,990 8.50% Unsub. Nts., 2/15/08 420,000 447,825 9.125% Unsec. Unsub. Nts., 10/13/10 610,000 703,635 ----------------------------------------------------------------------------------------- Petroleum Export Ltd. Cayman SPV, 5.265% Sr. Nts., Cl. A3, 6/15/11 2 3,960,000 3,926,958 ----------------------------------------------------------------------------------------- Plains Exploration & Production Co., 7.125% Sr. Nts., 6/15/14 300,000 312,000 ----------------------------------------------------------------------------------------- Premcor Refining Group, Inc., 9.50% Sr. Nts., 2/1/13 835,000 931,170 ----------------------------------------------------------------------------------------- Range Resources Corp.: 6.375% Sr. Sub. Nts., 3/15/15 230,000 226,550 7.375% Sr. Sub. Nts., 7/15/13 200,000 208,000 ----------------------------------------------------------------------------------------- Southern Natural Gas Co.: 7.35% Nts., 2/15/31 500,000 515,453 8% Sr. Unsub. Nts., 3/1/32 300,000 330,454 ----------------------------------------------------------------------------------------- Stone Energy Corp., 6.75% Sr. Unsec. Sub. Nts., 12/15/14 1,020,000 971,550 ----------------------------------------------------------------------------------------- Targa Resources, Inc., 8.50% Sr. Nts., 11/1/13 2 525,000 540,750 ----------------------------------------------------------------------------------------- Tengizchevroil LLP, 6.124% Nts., 11/15/14 2 2,123,000 2,169,706 ----------------------------------------------------------------------------------------- Tennessee Gas Pipeline Co., 7.50% Bonds, 4/1/17 1,567,000 1,685,796 ----------------------------------------------------------------------------------------- Tesoro Corp.: 6.25% Sr. Nts., 11/1/12 2 405,000 409,050 6.625% Sr. Nts., 11/1/15 2 405,000 411,075 ----------------------------------------------------------------------------------------- Titan Petrochemicals Group Ltd., 8.50% Sr. Unsec. Nts., 3/18/12 2 846,000 816,390 ----------------------------------------------------------------------------------------- Whiting Petroleum Corp., 7.25% Sr. Sub. Nts., 5/1/12 500,000 508,750 ----------------------------------------------------------------------------------------- Williams Cos., Inc. (The): 7.125% Nts., 9/1/11 500,000 521,875 7.625% Nts., 7/15/19 928,000 999,920 8.75% Unsec. Nts., 3/15/32 1,619,000 1,886,135 --------------- 40,390,657
17 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- FINANCIALS--2.0% ----------------------------------------------------------------------------------------- CAPITAL MARKETS--0.1% Berry Plastics Corp., 10.75% Sr. Sub. Nts., 7/15/12 $ 750,000 $ 810,000 ----------------------------------------------------------------------------------------- E*TRADE Financial Corp.: 7.375% Sr. Nts., 9/15/13 2 646,000 657,305 8% Sr. Nts., 6/15/11 2 410,000 428,450 --------------- 1,895,755 ----------------------------------------------------------------------------------------- COMMERCIAL BANKS--1.2% Banco BMG SA, 9.15% Nts., 1/15/16 4 2,310,000 2,277,660 ----------------------------------------------------------------------------------------- Bank Plus Corp., 12% Sr. Nts., 7/18/07 4 7,000 7,753 ----------------------------------------------------------------------------------------- Bankunited Capital Trust, 10.25% Capital Securities, 12/31/26 4 100,000 109,250 ----------------------------------------------------------------------------------------- Credit Suisse First Boston International, Export-Import Bank of Ukraine Loan Participation Nts., 6.80% 10/4/12 450,000 443,581 ----------------------------------------------------------------------------------------- Dresdner Bank AG (Ukreximbank), 8.75% Bonds, 2/10/10 760,000 789,450 ----------------------------------------------------------------------------------------- HSBC Bank plc: 9.75% Sr. Unsec. Nts., 7/8/09 7 1,960,000 1,473,998 11.60% Sr. Unsec. Nts., 1/12/10 7 2,510,000 1,653,764 12.28% Sr. Unsec. Nts., 3/9/09 7 1,960,000 1,365,846 ----------------------------------------------------------------------------------------- Inter-American Development Bank: 6.26% Nts., 12/8/09 1 [BRR] 920,000 367,374 8.81% Nts., 1/25/12 1 [COP] 1,148,642,859 534,518 ----------------------------------------------------------------------------------------- Ongko International Finance Co. BV, 10.50% Sec. Nts., 3/29/10 3,4 90,000 -- ----------------------------------------------------------------------------------------- UBS Luxembourg SA, 6.23% Sub. Nts., 2/11/15 1 2,500,000 2,526,400 ----------------------------------------------------------------------------------------- VTB Capital SA, 6.25% Bonds, 7/2/35 2 1,870,000 1,907,400 ----------------------------------------------------------------------------------------- Western Financial Bank, 9.625% Unsec. Sub. Debs., 5/15/12 500,000 562,500 --------------- 14,019,494 ----------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES--0.4% Affinia Group, Inc., 9% Sr. Unsec. Sub. Nts., 11/30/14 200,000 159,000 ----------------------------------------------------------------------------------------- Argentine Beverages Financial Trust, 7.375% Bonds, 3/22/12 4 490,000 494,900 ----------------------------------------------------------------------------------------- Cloverie plc, 8.741% Sec. Nts., Series 2005-93, 12/20/10 1,4 1,100,000 1,100,000 ----------------------------------------------------------------------------------------- Crystal US Holdings 3 LLC/Crystal US Sub 3 Corp.: 0%/10.50% Sr. Unsec. Disc. Nts., Series B, 10/1/14 13 570,000 417,525 9.625% Sr. Sub. Nts., 6/15/14 813,000 908,528 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES Continued Global Cash Access LLC/Global Cash Finance Corp., 8.75% Sr. Sub. Nts., 3/15/12 $ 179,000 $ 191,306 ----------------------------------------------------------------------------------------- JSG Funding plc, 7.75% Sr. Unsec. Sub. Nts., 4/1/15 330,000 275,550 ----------------------------------------------------------------------------------------- Nell AF Sarl, 8.375% Sr. Nts., 8/15/15 2 1,510,000 1,502,450 ----------------------------------------------------------------------------------------- Universal City Florida: 8.375% Sr. Unsec. Nts., 5/1/10 130,000 127,725 9% Sr. Unsec. Nts., 5/1/10 1 130,000 131,300 --------------- 5,308,284 ----------------------------------------------------------------------------------------- REAL ESTATE--0.3% American Casino & Entertainment Properties LLC, 7.85% Sr. Sec. Nts., 2/1/12 500,000 515,000 ----------------------------------------------------------------------------------------- Felcor Lodging LP, 9% Sr. Nts., 6/1/11 425,000 467,500 ----------------------------------------------------------------------------------------- HMH Properties, Inc., 7.875% Sr. Nts., Series B, 8/1/08 89,000 90,446 ----------------------------------------------------------------------------------------- Host Marriott LP, 6.375% Sr. Nts., Series O, 3/15/15 530,000 531,325 ----------------------------------------------------------------------------------------- MeriStar Hospitality Corp., 9.125% Sr. Unsec. Nts., 1/15/11 946,000 1,035,870 ----------------------------------------------------------------------------------------- Trustreet Properties, Inc., 7.50% Sr. Unsec. Nts., 4/1/15 595,000 597,975 --------------- 3,238,116 ----------------------------------------------------------------------------------------- HEALTH CARE--1.7% ----------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES--0.1% Inverness Medical Innovations, Inc., 8.75% Sr. Sub. Nts., 2/15/12 350,000 357,000 ----------------------------------------------------------------------------------------- Sybron Dental Specialties, Inc., 8.125% Sr. Sub. Nts., 6/15/12 4 300,000 316,500 ----------------------------------------------------------------------------------------- Universal Hospital Services, Inc., 10.125% Sr. Unsec. Nts., 11/1/11 300,000 312,000 --------------- 985,500 ----------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES--1.6% AmeriPath, Inc., 10.50% Sr. Unsec. Sub. Nts., 4/1/13 300,000 319,500 ----------------------------------------------------------------------------------------- Beverly Enterprises, Inc., 7.875% Sr. Sub. Nts., 6/15/14 300,000 322,500 ----------------------------------------------------------------------------------------- Community Health Systems, Inc., 6.50% Sr. Unsec. Sub. Nts., 12/15/12 400,000 391,500 ----------------------------------------------------------------------------------------- DaVita, Inc.: 6.625% Sr. Unsec. Nts., 3/15/13 465,000 475,463 7.25% Sr. Unsec. Sub. Nts., 3/15/15 1,075,000 1,093,813 ----------------------------------------------------------------------------------------- Extendicare Health Services, Inc.: 6.875% Sr. Sub. Nts., 5/1/14 300,000 294,750 9.50% Sr. Unsec. Sub. Nts., 7/1/10 300,000 319,875 ----------------------------------------------------------------------------------------- Fresenius Medical Care Capital Trust II, 7.875% Nts., 2/1/08 900,000 931,500
18 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES Continued Fresenius Medical Care Capital Trust III, 7.375% Nts., 2/1/08 [DEM] 25,000 $ 16,079 ----------------------------------------------------------------------------------------- Fresenius Medical Care Capital Trust IV, 7.875% Trust Preferred Nts., 6/15/11 600,000 642,000 ----------------------------------------------------------------------------------------- Genesis HealthCare Corp., 8% Sr. Sub. Nts., 10/15/13 200,000 211,500 ----------------------------------------------------------------------------------------- HCA, Inc.: 6.30% Sr. Unsec. Nts., 10/1/12 1,219,000 1,231,181 6.375% Nts., 1/15/15 1,871,000 1,900,625 8.75% Sr. Nts., 9/1/10 200,000 222,199 ----------------------------------------------------------------------------------------- HealthSouth Corp.: 7.625% Nts., 6/1/12 2,017,000 2,057,340 10.75% Sr. Unsec. Sub. Nts., 10/1/08 19,000 19,095 ----------------------------------------------------------------------------------------- Medquest, Inc., 11.875% Sr. Unsec. Sub. Nts., Series B, 8/15/12 600,000 582,000 ----------------------------------------------------------------------------------------- NDCHealth Corp., 10.50% Sr. Unsec. Sub. Nts., 12/1/12 250,000 286,875 ----------------------------------------------------------------------------------------- Omnicare, Inc.: 6.75% Sr. Sub. Nts., 12/15/13 230,000 233,738 6.875% Sr. Sub. Nts., 12/15/15 285,000 290,700 ----------------------------------------------------------------------------------------- PacifiCare Health Systems, Inc., 10.75% Sr. Unsec. Unsub. Nts., 6/1/09 585,000 627,413 ----------------------------------------------------------------------------------------- Psychiatric Solutions, Inc., 7.75% Sr. Unsec. Sub. Nts., 7/15/15 220,000 228,250 ----------------------------------------------------------------------------------------- Quintiles Transnational Corp., 10% Sr. Sub. Nts., 10/1/13 300,000 336,000 ----------------------------------------------------------------------------------------- Select Medical Corp., 7.625% Sr. Unsec. Sub. Nts., 2/1/15 1,050,000 1,015,875 ----------------------------------------------------------------------------------------- Tenet Healthcare Corp.: 6.375% Sr. Nts., 12/1/11 1,482,000 1,359,735 7.375% Nts., 2/1/13 19,000 17,623 9.875% Sr. Nts., 7/1/14 1,682,000 1,711,435 ----------------------------------------------------------------------------------------- Triad Hospitals, Inc., 7% Sr. Sub. Nts., 11/15/13 925,000 931,938 ----------------------------------------------------------------------------------------- US Oncology, Inc.: 9% Sr. Unsec. Nts., 8/15/12 300,000 322,500 10.75% Sr. Unsec. Sub. Nts., 8/15/14 300,000 334,500 ----------------------------------------------------------------------------------------- Vanguard Health Holding Co. I LLC, 0%/11.25% Sr. Disc. Nts., 10/1/15 13 500,000 367,500 --------------- 19,095,002 ----------------------------------------------------------------------------------------- PHARMACEUTICALS--0.0% Valeant Pharmaceuticals International, Inc., 7% Sr. Nts., 12/15/11 4 350,000 345,625 ----------------------------------------------------------------------------------------- INDUSTRIALS--3.1% ----------------------------------------------------------------------------------------- AEROSPACE & DEFENSE--0.3% Alliant Techsystems, Inc., 8.50% Sr. Unsec. Sub. Nts., 5/15/11 4 300,000 316,500 ----------------------------------------------------------------------------------------- BE Aerospace, Inc.: 8.50% Sr. Unsec. Nts., 10/1/10 200,000 214,500 8.875% Sr. Unsec. Sub. Nts., 5/1/11 219,000 231,045 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- AEROSPACE & DEFENSE Continued L-3 Communications Corp.: 5.875% Sr. Sub. Nts., 1/15/15 $ 583,000 $ 568,425 6.125% Sr. Unsec. Sub. Nts., 1/15/14 400,000 398,000 6.375% Sr. Sub. Nts., 10/15/15 2 515,000 516,288 ----------------------------------------------------------------------------------------- TD Funding Corp., 8.375% Sr. Sub. Nts., 7/15/11 500,000 528,750 ----------------------------------------------------------------------------------------- TRW Automotive, Inc.: 9.375% Sr. Nts., 2/15/13 223,000 242,513 11% Sr. Sub. Nts., 2/15/13 194,000 218,735 --------------- 3,234,756 ----------------------------------------------------------------------------------------- AIRLINES--0.0% AMR Corp., 9% Debs., 8/1/12 50,000 43,625 ----------------------------------------------------------------------------------------- ATA Holdings Corp., 13% Sr. Unsec. Nts., 2/1/09 3 735,000 33,075 --------------- 76,700 ----------------------------------------------------------------------------------------- BUILDING PRODUCTS--0.1% Associated Materials, Inc., 9.75% Sr. Sub. Nts., 4/15/12 200,000 194,000 ----------------------------------------------------------------------------------------- Goodman Global Holding Co., Inc., 7.875% Sr. Sub. Nts., 12/15/12 2 270,000 252,450 ----------------------------------------------------------------------------------------- Jacuzzi Brands, Inc., 9.625% Sr. Sec. Nts., 7/1/10 311,000 331,993 ----------------------------------------------------------------------------------------- Nortek, Inc., 8.50% Sr. Unsec. Unsub. Nts., 9/1/14 250,000 242,500 --------------- 1,020,943 ----------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES--0.5% Allied Waste North America, Inc.: 7.25% Sr. Nts., 3/15/15 180,000 182,700 7.375% Sr. Sec. Nts., Series B, 4/15/14 700,000 684,250 8.875% Sr. Nts., Series B, 4/1/08 1,900,000 2,014,000 9.25% Sr. Sec. Debs., Series B, 9/1/12 434,000 471,975 ----------------------------------------------------------------------------------------- Cenveo Corp., 7.875% Sr. Sub. Nts., 12/1/13 1,000,000 970,000 ----------------------------------------------------------------------------------------- Corrections Corp. of America: 6.25% Sr. Unsec. Sub. Nts., 3/15/13 460,000 457,700 7.50% Sr. Nts., 5/1/11 200,000 208,000 ----------------------------------------------------------------------------------------- Mail-Well I Corp., 9.625% Sr. Nts., 3/15/12 400,000 434,000 --------------- 5,422,625 ----------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT--0.1% Belden & Blake Corp., 8.75% Sec. Nts., 7/15/12 325,000 333,125 ----------------------------------------------------------------------------------------- Dayton Superior Corp., 13% Sr. Unsec. Sub. Nts., 6/15/09 200,000 152,000 ----------------------------------------------------------------------------------------- Eletropaulo Metropolitana SA, 19.125% Nts., 6/28/10 4 [BRR] 1,115,000 507,837 ----------------------------------------------------------------------------------------- General Cable Corp., 9.50% Sr. Nts., 11/15/10 4 200,000 213,000
19 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT Continued UCAR Finance, Inc., 10.25% Sr. Nts., 2/15/12 $ 300,000 $ 318,375 --------------- 1,524,337 ----------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES--0.0% Great Lakes Dredge & Dock Co., 7.75% Sr. Unsec. Sub. Nts., 12/15/13 120,000 108,750 ----------------------------------------------------------------------------------------- MACHINERY--0.2% Douglas Dynamics LLC, 7.75% Sr. Nts., 1/15/12 2 300,000 291,000 ----------------------------------------------------------------------------------------- Greenbrier Cos., Inc., 8.375% Sr. Unsec. Nts., 5/15/15 380,000 389,500 ----------------------------------------------------------------------------------------- Manitowoc Co., Inc. (The), 10.50% Sr. Sub. Nts., 8/1/12 325,000 362,375 ----------------------------------------------------------------------------------------- Milacron Escrow Corp., 11.50% Sr. Sec. Nts., 5/15/11 700,000 602,000 ----------------------------------------------------------------------------------------- Navistar International Corp.: 6.25% Sr. Unsec. Nts., 3/1/12 230,000 207,000 7.50% Sr. Nts., 6/15/11 400,000 383,000 ----------------------------------------------------------------------------------------- NMHG Holding Co., 10% Sr. Nts., 5/15/09 300,000 321,000 ----------------------------------------------------------------------------------------- Trinity Industries, Inc., 6.50% Sr. Nts., 3/15/14 300,000 297,000 --------------- 2,852,875 ----------------------------------------------------------------------------------------- MARINE--1.7% Grupo TMM SA, 10.50% Sr. Sec. Nts., 8/1/07 14 20,000,000 19,751,360 ----------------------------------------------------------------------------------------- Navigator Gas Transport plc, 10.50% First Priority Ship Mtg. Nts., 6/30/07 3,4 43,000 48,805 ----------------------------------------------------------------------------------------- WPO Shipholding Co. LLC, 12% Sr. Sec. Nts., 7/15/05 3,4 250,000 1,400 --------------- 19,801,565 ----------------------------------------------------------------------------------------- ROAD & RAIL--0.1% Kansas City Southern Railway Co. (The), 7.50% Sr. Nts., 6/15/09 400,000 415,000 ----------------------------------------------------------------------------------------- Stena AB: 7% Sr. Unsec. Nts., 12/1/16 150,000 138,000 7.50% Sr. Unsec. Nts., 11/1/13 387,000 373,455 9.625% Sr. Nts., 12/1/12 750,000 818,438 --------------- 1,744,893 ----------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS--0.1% United Rentals, Inc., 7% Sr. Sub. Nts., 2/15/14 1,400,000 1,316,000 ----------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE--0.0% Horizon Lines LLC, 9% Nts., 11/1/12 236,000 249,570 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- INFORMATION TECHNOLOGY--1.1% ----------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT--0.2% Lucent Technologies, Inc., 6.45% Unsec. Debs., 3/15/29 $ 2,760,000 $ 2,380,500 ----------------------------------------------------------------------------------------- Orion Network Systems, Inc., 12.50% Sr. Unsub. Disc. Nts., 1/15/07 3 675,000 6,750 --------------- 2,387,250 ----------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS--0.0% Seagate Technology Hdd Holdings, 8% Sr. Nts., 5/15/09 200,000 211,000 ----------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--0.3% Flextronics International Ltd., 6.25% Sr. Sub. Nts., 11/15/14 2,021,000 2,003,316 ----------------------------------------------------------------------------------------- Loews Cineplex Entertainment Corp., 9% Sr. Unsec. Sub. Nts., 8/1/14 425,000 431,375 ----------------------------------------------------------------------------------------- Sanmina-SCI Corp., 6.75% Unsec. Sub. Nts., 3/1/13 520,000 497,250 ----------------------------------------------------------------------------------------- Sensus Metering System, Inc., 8.625% Sr. Unsec. Sub. Nts., 12/15/13 850,000 756,500 --------------- 3,688,441 ----------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES--0.0% Exodus Communications, Inc., 10.75% Sr. Nts., 12/15/09 3,4 [EUR] 338,620 1,002 ----------------------------------------------------------------------------------------- NorthPoint Communications Group, Inc., 12.875% Nts., 2/15/10 3,4 200,173 -- ----------------------------------------------------------------------------------------- PSINet, Inc., 10.50% Sr. Unsec. Nts., 12/1/06 3,4 [EUR] 100,000 -- --------------- 1,002 ----------------------------------------------------------------------------------------- IT SERVICES--0.4% DI Finance/DynCorp International LLC, 9.50% Sr. Unsec. Sub. Nts., Series B, 2/15/13 665,000 694,925 ----------------------------------------------------------------------------------------- Iron Mountain, Inc., 7.75% Sr. Sub. Nts., 1/15/15 400,000 405,000 ----------------------------------------------------------------------------------------- SunGard Data Systems, Inc.: 9.125% Sr. Unsec. Nts., 8/15/13 2 2,035,000 2,116,400 10.25% Sr. Sub. Nts., 8/15/15 2 835,000 839,175 --------------- 4,055,500 ----------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.2% Advanced Micro Devices, Inc., 7.75% Sr. Unsec. Nts., 11/1/12 1,475,000 1,497,125 ----------------------------------------------------------------------------------------- Amkor Technology, Inc., 9.25% Sr. Unsec. Sub. Nts., 2/15/08 887,000 864,825 --------------- 2,361,950
20 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- MATERIALS--3.3% ----------------------------------------------------------------------------------------- CHEMICALS--0.8% Crompton Corp., 9.875% Sr. Nts., 8/1/12 $ 350,000 $ 401,188 ----------------------------------------------------------------------------------------- Equistar Chemicals LP/Equistar Funding Corp.: 8.75% Sr. Unsec. Nts., 2/15/09 550,000 581,625 10.125% Sr. Unsec. Nts., 9/1/08 19,000 20,710 10.625% Sr. Unsec. Nts., 5/1/11 600,000 663,000 ----------------------------------------------------------------------------------------- Huntsman Corp./ICI Chemical Co. plc: 10.125% Sr. Unsec. Sub. Nts., 7/1/09 [EUR] 123,000 151,171 10.125% Sr. Unsec. Sub. Nts., 7/1/09 853,000 884,988 ----------------------------------------------------------------------------------------- Huntsman International LLC: 7.375% Sr. Sub. Nts., 1/1/15 2 1,710,000 1,658,700 9.875% Sr. Nts., 3/1/09 850,000 901,000 ----------------------------------------------------------------------------------------- Huntsman LLC: 11.50% Sr. Unsec. Nts., 7/15/12 1 198,000 225,225 11.625% Sr. Unsec. Nts., 10/15/10 13,000 14,869 ----------------------------------------------------------------------------------------- IMC Global, Inc., 10.875% Sr. Unsec. Nts., 8/1/13 19,000 21,921 ----------------------------------------------------------------------------------------- Innophos, Inc., 9.625% Sr. Sub. Nts., 8/15/14 1,2 550,000 556,875 ----------------------------------------------------------------------------------------- ISP Holdings, Inc., 10.625% Sr. Sec. Nts., 12/15/09 200,000 211,000 ----------------------------------------------------------------------------------------- KI Holdings, Inc., 0%/9.875% Sr. Unsec. Sub. Disc. Nts., 11/15/14 13 350,000 231,000 ----------------------------------------------------------------------------------------- Lyondell Chemical Co.: 9.50% Sec. Nts., 12/15/08 4 11,000 11,578 9.625% Sr. Sec. Nts., Series A, 5/1/07 200,000 209,750 10.50% Sr. Sec. Nts., 6/1/13 600,000 684,750 ----------------------------------------------------------------------------------------- Millennium America, Inc., 9.25% Sr. Unsec. Sub. Nts., 6/15/08 100,000 108,375 ----------------------------------------------------------------------------------------- Resolution Performance Products LLC: 8% Sr. Sec. Nts., 12/15/09 250,000 256,250 13.50% Sr. Unsec. Sub. Nts., 11/15/10 100,000 106,250 ----------------------------------------------------------------------------------------- Rhodia SA, 10.25% Sr. Unsec. Nts., 6/1/10 430,000 473,000 ----------------------------------------------------------------------------------------- Rockwood Specialties Group, Inc., 7.50% Sr. Sub. Nts., 11/15/14 200,000 200,250 ----------------------------------------------------------------------------------------- Sterling Chemicals, Inc., 10% Sr. Sec. Nts., 12/19/07 4,14 72,217 69,689 ----------------------------------------------------------------------------------------- Tronox Worldwide LLC/Tronox Finance Corp., 9.50% Sr. Nts., 12/1/12 2 555,000 568,875 ----------------------------------------------------------------------------------------- Westlake Chemical Corp., 8.75% Sr. Nts., 7/15/11 260,000 279,500 --------------- 9,491,539 ----------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS--0.0% NTK Holdings, Inc., 0%/10.75% Sr. Disc. Nts., 3/1/14 13 725,000 456,750 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- CONTAINERS & PACKAGING--1.0% Crown Americas, Inc., 7.75% Sr. Nts., 11/15/15 2 $ 935,000 $ 972,400 ----------------------------------------------------------------------------------------- Graham Packaging Co., Inc.: 8.50% Sr. Unsec. Nts., 10/15/12 200,000 198,000 9.875% Sr. Unsec. Sub. Nts., 10/15/14 300,000 294,000 ----------------------------------------------------------------------------------------- Graphic Packaging International Corp.: 8.50% Sr. Nts., 8/15/11 800,000 806,000 9.50% Sr. Sub. Nts., 8/15/13 350,000 336,000 ----------------------------------------------------------------------------------------- Jefferson Smurfit Corp.: 7.50% Sr. Unsec. Unsub. Nts., 6/1/13 300,000 277,500 8.25% Sr. Unsec. Nts., 10/1/12 950,000 916,750 ----------------------------------------------------------------------------------------- MDP Acquisitions plc, 9.625% Sr. Nts., 10/1/12 400,000 402,000 ----------------------------------------------------------------------------------------- Owens-Brockway Glass Container, Inc.: 7.75% Sr. Sec. Nts., 5/15/11 450,000 471,938 8.25% Sr. Unsec. Nts., 5/15/13 419,000 434,713 8.75% Sr. Sec. Nts., 11/15/12 928,000 1,002,240 8.875% Sr. Sec. Nts., 2/15/09 200,000 209,750 ----------------------------------------------------------------------------------------- Pliant Corp., 11.625% Sr. Sec. Nts., 6/15/09 3,14 360,178 383,590 ----------------------------------------------------------------------------------------- Solo Cup Co., 8.50% Sr. Sub. Nts., 2/15/14 500,000 440,000 ----------------------------------------------------------------------------------------- Stone Container Corp.: 8.375% Sr. Nts., 7/1/12 850,000 826,625 9.25% Sr. Unsec. Nts., 2/1/08 1,200,000 1,236,000 9.75% Sr. Unsec. Nts., 2/1/11 600,000 609,000 ----------------------------------------------------------------------------------------- Stone Container Finance Co. of Canada II, 7.375% Sr. Unsec. Nts., 7/15/14 300,000 274,500 ----------------------------------------------------------------------------------------- Tekni-Plex, Inc., 10.875% Sr. Sec. Nts., 8/15/12 2 125,000 136,875 ----------------------------------------------------------------------------------------- TriMas Corp., 9.875% Sr. Unsec. Sub. Nts., 6/15/12 1,300,000 1,079,000 --------------- 11,306,881 ----------------------------------------------------------------------------------------- METALS & MINING--1.3% AK Steel Corp.: 7.75% Sr. Unsec. Nts., 6/15/12 1,219,000 1,106,243 7.875% Sr. Unsec. Nts., 2/15/09 500,000 477,500 ----------------------------------------------------------------------------------------- Alrosa Finance SA, 8.875% Nts., 11/17/14 2 6,880,000 7,902,368 ----------------------------------------------------------------------------------------- Century Aluminum Co., 7.50% Sr. Unsec. Nts., 8/15/14 600,000 594,000 ----------------------------------------------------------------------------------------- Gibraltar Industries, Inc., 8% Sr. Sub. Nts., 12/1/15 4 335,000 337,513 ----------------------------------------------------------------------------------------- IMCO Recycling, Inc., 10.375% Sr. Sec. Nts., 10/15/10 300,000 329,250 ----------------------------------------------------------------------------------------- International Utility Structures, Inc., 13% Unsec. Sub. Nts., 2/1/08 3,4 71,000 -- ----------------------------------------------------------------------------------------- Ispat Inland ULC, 9.75% Sr. Sec. Nts., 4/1/14 585,000 665,438 ----------------------------------------------------------------------------------------- Jorgensen (Earle M.) Co., 9.75% Sr. Sec. Nts., 6/1/12 500,000 537,500
21 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- METALS & MINING Continued Kaiser Aluminum & Chemical Corp., 10.875% Sr. Nts., Series B, 10/15/06 3 $ 500,000 $ 507,500 ----------------------------------------------------------------------------------------- Koppers Industry, Inc., 9.875% Sr. Sec. Nts., 10/15/13 300,000 327,000 ----------------------------------------------------------------------------------------- Novelis, Inc., 7.25% Sr. Nts., 2/15/15 1,2 1,575,000 1,476,563 ----------------------------------------------------------------------------------------- Oregon Steel Mills, Inc., 10% Sr. Nts., 7/15/09 400,000 430,000 ----------------------------------------------------------------------------------------- Steel Dynamics, Inc., 9.50% Sr. Nts., 3/15/09 200,000 211,500 ----------------------------------------------------------------------------------------- United States Steel Corp.: 9.75% Sr. Nts., 5/15/10 336,000 367,080 10.75% Sr. Nts., 8/1/08 519,000 576,090 --------------- 15,845,545 ----------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS--0.2% Abitibi-Consolidated, Inc., 8.55% Nts., 8/1/10 200,000 203,500 ----------------------------------------------------------------------------------------- Appleton Papers, Inc., 8.125% Sr. Nts., 6/15/11 300,000 293,250 ----------------------------------------------------------------------------------------- Buckeye Technologies, Inc., 8.50% Sr. Nts., 10/1/13 100,000 100,500 ----------------------------------------------------------------------------------------- Georgia-Pacific Corp., 8.125% Sr. Unsec. Nts., 5/15/11 914,000 919,713 ----------------------------------------------------------------------------------------- Inland Fiber Group LLC, 9.625% Sr. Unsec. Nts., 11/15/07 3,4 600,000 315,000 ----------------------------------------------------------------------------------------- JSG Holding plc, 11.50% Sr. Nts., 10/1/15 2,14 [EUR] 150,934 165,288 ----------------------------------------------------------------------------------------- Mercer International, Inc., 9.25% Sr. Nts., 2/15/13 315,000 266,963 ----------------------------------------------------------------------------------------- Norske Skog Canada Ltd., 7.375% Sr. Unsec. Nts., 3/1/14 300,000 264,000 ----------------------------------------------------------------------------------------- Tekni-Plex, Inc., 12.75% Sr. Unsec. Sub. Nts., Series B, 6/15/10 200,000 110,000 ----------------------------------------------------------------------------------------- Tembec Industries, Inc., 8.50% Sr. Unsec. Nts., 2/1/11 19,000 10,640 ----------------------------------------------------------------------------------------- Western Forest Products, Inc., 15% Sec. Nts., 7/28/09 2,14 193,919 208,463 --------------- 2,857,317 ----------------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES--2.6% ----------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES--1.0% American Tower Corp., 7.125% Sr. Unsec. Nts., 10/15/12 250,000 258,750 ----------------------------------------------------------------------------------------- Intelsat Bermuda Ltd., 8.625% Sr. Nts., 1/15/15 2 1,000,000 1,015,000 ----------------------------------------------------------------------------------------- MCI, Inc., 7.688% Sr. Unsec. Nts., 5/1/09 1 1,550,000 1,604,250 ----------------------------------------------------------------------------------------- PanAmSat Corp., 9% Sr. Unsec. Nts., 8/15/14 650,000 684,125 ----------------------------------------------------------------------------------------- PanAmSat Holding Corp., 0%/10.375% Sr. Unsec. Disc. Nts., 11/1/14 13 225,000 158,625 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES Continued Qwest Capital Funding, Inc.: 7.25% Unsec. Unsub. Nts., 2/15/11 $ 1,700,000 $ 1,729,750 7.90% Unsec. Nts., 8/15/10 1,519,000 1,579,760 ----------------------------------------------------------------------------------------- Qwest Communications International, Inc.: 3.50% Cv. Sr. Unsec. Bonds, 11/15/25 360,000 418,950 7.25% Sr. Unsec. Sub. Nts., 2/15/11 1 300,000 307,500 ----------------------------------------------------------------------------------------- Qwest Corp., 8.875% Unsec. Unsub. Nts., 3/15/12 1 800,000 906,000 ----------------------------------------------------------------------------------------- Telefonica del Peru SA, 8% Sr. Unsec. Bonds, 4/11/16 4 [PEN] 3,290,100 947,175 ----------------------------------------------------------------------------------------- Teligent, Inc., 11.50% Sr. Nts., 12/1/07 3,4 500,000 -- ----------------------------------------------------------------------------------------- Time Warner Telecom Holdings, Inc., 9.25% Sr. Unsec. Unsub. Nts., 2/15/14 1,100,000 1,166,000 ----------------------------------------------------------------------------------------- Time Warner Telecom, Inc., 10.125% Sr. Unsec. Sub. Nts., 2/1/11 450,000 473,625 ----------------------------------------------------------------------------------------- Valor Telecommunications Enterprises LLC, 7.75% Sr. Unsec. Sub. Nts., 2/15/15 225,000 236,250 ----------------------------------------------------------------------------------------- Winstar Communications, Inc., 12.75% Sr. Nts., 4/15/10 3,4 250,000 3,750 --------------- 11,489,510 ----------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES--1.6% Alamosa Delaware, Inc.: 8.50% Sr. Nts., 1/31/12 700,000 760,375 11% Sr. Unsec. Nts., 7/31/10 19,000 21,518 12.50% Sr. Unsec. Nts., 2/1/11 50,000 54,250 ----------------------------------------------------------------------------------------- American Cellular Corp., 10% Sr. Nts., Series B, 8/1/11 1,120,000 1,220,800 ----------------------------------------------------------------------------------------- American Tower Corp., 7.50% Sr. Nts., 5/1/12 400,000 420,000 ----------------------------------------------------------------------------------------- American Tower Escrow Corp., 12.25% Sr. Sub. Disc. Nts., 8/1/08 7 800,000 630,000 ----------------------------------------------------------------------------------------- AT&T Corp.: 9.05% Sr. Unsec. Nts., 11/15/11 1 592,000 656,015 9.75% Sr. Nts., 11/15/31 1 1,300,000 1,637,804 ----------------------------------------------------------------------------------------- CellNet Data Systems, Inc., Sr. Unsec. Disc. Nts., 10/1/07 3,4 400,000 -- ----------------------------------------------------------------------------------------- Centennial Cellular Operating Co. LLC/Centennial Communications Corp., 10.125% Sr. Nts., 6/15/13 1,114,000 1,217,045 ----------------------------------------------------------------------------------------- Dobson Cellular Systems, Inc., 8.375% Sr. Sec. Nts., 11/1/11 280,000 298,550 ----------------------------------------------------------------------------------------- Dobson Communications Corp.: 8.40% Sr. Nts., 10/15/12 1,2 145,000 145,000 8.875% Sr. Nts., 10/1/13 459,000 460,148 ----------------------------------------------------------------------------------------- IWO Holdings, Inc., 7.90% Sr. Sec. Nts., 1/15/12 1 110,000 114,675 ----------------------------------------------------------------------------------------- Loral Skynet Corp., 14% Sr. Sec. Nts., 10/15/15 14 116,000 140,360
22 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES Continued Nextel Communications, Inc., 7.375% Sr. Nts., Series D, 8/1/15 $ 3,378,000 $ 3,567,648 ----------------------------------------------------------------------------------------- Nextel Partners, Inc., 8.125% Sr. Nts., 7/1/11 500,000 536,875 ----------------------------------------------------------------------------------------- Rogers Wireless, Inc.: 7.50% Sec. Nts., 3/15/15 882,000 956,970 8% Sr. Sub. Nts., 12/15/12 800,000 851,000 ----------------------------------------------------------------------------------------- Rural Cellular Corp.: 9.75% Sr. Sub. Nts., 1/15/10 1,219,000 1,237,285 9.875% Sr. Nts., 2/1/10 1,400,000 1,484,000 ----------------------------------------------------------------------------------------- SBA Communications Corp., 8.50% Sr. Unsec. Nts., Cl. A, 12/1/12 552,000 615,480 ----------------------------------------------------------------------------------------- SBA Telecommunications, Inc./SBA Communications Corp., 0%/9.75% Sr. Disc. Nts., 12/15/11 13 708,000 660,210 ----------------------------------------------------------------------------------------- Triton PCS, Inc., 8.50% Sr. Unsec. Nts., 6/1/13 574,000 536,690 ----------------------------------------------------------------------------------------- UbiquiTel Operating Co., 9.875% Sr. Nts., 3/1/11 600,000 667,500 ----------------------------------------------------------------------------------------- US Unwired, Inc., 10% Sr. Sec. Nts., 6/15/12 250,000 282,500 --------------- 19,172,698 ----------------------------------------------------------------------------------------- UTILITIES--1.1% ----------------------------------------------------------------------------------------- ELECTRIC UTILITIES--0.8% AES Corp. (The), 8.75% Sr. Sec. Nts., 5/15/13 2 700,000 765,625 ----------------------------------------------------------------------------------------- Calpine Corp., Sr. Sec. Nts., 7/15/07 2,3 597,253 488,254 ----------------------------------------------------------------------------------------- CMS Energy Corp.: 7.50% Sr. Nts., 1/15/09 19,000 19,665 7.75% Sr. Nts., 8/1/10 200,000 210,750 8.50% Sr. Nts., 4/15/11 250,000 273,438 ----------------------------------------------------------------------------------------- FPL Energy National Wind Power LLC: 5.608% Nts., 3/10/24 2 263,906 263,671 6.125% Nts., 3/25/19 2 155,824 152,810 ----------------------------------------------------------------------------------------- Midwest Generation LLC, 8.75% Sr. Sec. Nts., 5/1/34 1,610,000 1,781,063 ----------------------------------------------------------------------------------------- Mirant Americas Generation LLC, 7.625% Sr. Unsec. Nts., 5/1/06 3 200,000 245,000 ----------------------------------------------------------------------------------------- MSW Energy Holdings II LLC/MSW Energy Finance Co. II, Inc., 7.375% Sr. Sec. Nts., Series B, 9/1/10 350,000 361,375 ----------------------------------------------------------------------------------------- MSW Energy Holdings LLC/MSW Energy Finance Co., Inc., 8.50% Sr. Sec. Nts., 9/1/10 200,000 214,000 ----------------------------------------------------------------------------------------- NRG Energy, Inc., 8% Sr. Sec. Nts., 12/15/13 1,175,000 1,316,000 ----------------------------------------------------------------------------------------- Reliant Energy, Inc., 6.75% Sr. Sec. Nts., 12/15/14 400,000 351,000 ----------------------------------------------------------------------------------------- Reliant Resources, Inc.: 9.25% Sr. Sec. Nts., 7/15/10 669,000 672,345 9.50% Sr. Sec. Nts., 7/15/13 900,000 906,750 ----------------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- ELECTRIC UTILITIES Continued Sierra Pacific Resources, 6.75% Sr. Nts., 8/15/17 2 $ 577,000 $ 577,000 ----------------------------------------------------------------------------------------- Texas Genco LLC, 6.875% Sr. Nts., 12/15/14 2 366,000 398,025 --------------- 8,996,771 ----------------------------------------------------------------------------------------- ENERGY TRADERS--0.0% Mirant North America LLC, 7.375% Sr. Nts., 12/31/13 2 230,000 233,738 ----------------------------------------------------------------------------------------- GAS UTILITIES--0.0% SEMCO Energy, Inc., 7.125% Sr. Nts., 5/15/08 150,000 153,190 ----------------------------------------------------------------------------------------- MULTI-UTILITIES & UNREGULATED POWER--0.3% AES Red Oak LLC, 8.54% Sr. Sec. Bonds, Series A, 11/30/19 4 549,273 606,947 ----------------------------------------------------------------------------------------- Dynegy Holdings, Inc.: 6.875% Sr. Unsec. Unsub. Nts., 4/1/11 121,000 119,790 8.75% Sr. Nts., 2/15/12 292,000 316,820 10.125% Sr. Sec. Nts., 7/15/13 2 1,400,000 1,589,000 ----------------------------------------------------------------------------------------- Mirant Mid-Atlantic LLC, 8.625% Sec. Pass-Through Certificates, Series A, 6/30/12 3 415,211 448,562 ----------------------------------------------------------------------------------------- NorthWestern Corp., 5.875% Sr. Sec. Nts., 11/1/14 90,000 90,619 --------------- 3,171,738 --------------- Total Corporate Bonds and Notes (Cost $321,459,480) 321,973,965 --------------- SHARES ----------------------------------------------------------------------------------------- PREFERRED STOCKS--0.2% ----------------------------------------------------------------------------------------- AmeriKing, Inc., 13% Cum. Sr. Exchangeable, Non-Vtg. 4,15 4,253 -- ----------------------------------------------------------------------------------------- Dobson Communications Corp., 6% Cv., Series F (converts into Dobson Communications Corp., Cl. A common stock), Non-Vtg. 2 608 103,968 ----------------------------------------------------------------------------------------- e.spire Communications, Inc., 12.75% Jr. Redeemable, Non-Vtg. 4,15 216 22 ----------------------------------------------------------------------------------------- Eagle-Picher Holdings, Inc., 11.75% Cum. Exchangeable, Series B, Non-Vtg. 4,15 5,000 6,250 ----------------------------------------------------------------------------------------- ICG Holdings, Inc., 14.25% Exchangeable, Non-Vtg. 4,15 151 -- ----------------------------------------------------------------------------------------- Loral Skynet Corp., 12% Cum., Series A, Non-Vtg. 4,15 959 179,573 ----------------------------------------------------------------------------------------- Paxson Communications Corp.: 14.25% Cum. Jr. Exchangeable, Non-Vtg. 4,14 115 1,000,788 14.25% Cum. Jr. Exchangeable, Non-Vtg. 4,14,15 1 5,172
23 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 ----------------------------------------------------------------------------------------- PREFERRED STOCKS Continued ----------------------------------------------------------------------------------------- Pennsylvania Real Estate Investment Trust, 11% 2,000 $ 111,800 ----------------------------------------------------------------------------------------- PTV, Inc., 10% Cum., Series A, Non-Vtg. 4,15 7 15 ----------------------------------------------------------------------------------------- Rural Cellular Corp., 11.375% Cum., Series B, Non-Vtg. 14 228 262,770 ----------------------------------------------------------------------------------------- Sovereign Real Estate Investment Trust, 12% Non-Cum., Series A 4 4,600 663,550 --------------- Total Preferred Stocks (Cost $2,635,478) 2,333,908 ----------------------------------------------------------------------------------------- COMMON STOCKS--2.6% ----------------------------------------------------------------------------------------- Aggreko plc 51,600 240,808 ----------------------------------------------------------------------------------------- Allegheny Technologies, Inc. 6,700 241,736 ----------------------------------------------------------------------------------------- Amada Co. Ltd. 28,000 248,121 ----------------------------------------------------------------------------------------- Amerada Hess Corp. 1,800 228,276 ----------------------------------------------------------------------------------------- Aon Corp. 6,200 222,890 ----------------------------------------------------------------------------------------- Apache Corp. 3,300 226,116 ----------------------------------------------------------------------------------------- Apple Computer, Inc. 15 3,100 222,859 ----------------------------------------------------------------------------------------- Arcelor 9,550 236,865 ----------------------------------------------------------------------------------------- Ashland, Inc. 4,000 231,600 ----------------------------------------------------------------------------------------- Avaya, Inc. 15 20,300 216,601 ----------------------------------------------------------------------------------------- Aviva plc 19,300 234,098 ----------------------------------------------------------------------------------------- Axa SA 7,600 245,274 ----------------------------------------------------------------------------------------- Barratt Developments plc 14,640 248,353 ----------------------------------------------------------------------------------------- Beverly Hills Bancorp, Inc. 6,273 65,051 ----------------------------------------------------------------------------------------- BNP Paribas SA 2,900 234,666 ----------------------------------------------------------------------------------------- BPB plc 17,110 227,405 ----------------------------------------------------------------------------------------- British American Tobacco plc 10,460 233,952 ----------------------------------------------------------------------------------------- Broadwing Corp. 15 739 4,471 ----------------------------------------------------------------------------------------- Burlington Northern Santa Fe Corp. 3,400 240,788 ----------------------------------------------------------------------------------------- Burlington Resources, Inc. 3,100 267,220 ----------------------------------------------------------------------------------------- Cebridge Connections Holding LLC 4,15 529 -- ----------------------------------------------------------------------------------------- Centex Corp. 3,100 221,619 ----------------------------------------------------------------------------------------- Charles River Laboratories International, Inc. 15 2,660 112,704 ----------------------------------------------------------------------------------------- Chesapeake Energy Corp. 91 2,887 ----------------------------------------------------------------------------------------- Chubb Corp. 2,300 224,595 ----------------------------------------------------------------------------------------- CIGNA Corp. 2,000 223,400 ----------------------------------------------------------------------------------------- Citigroup, Inc. 55 2,669 ----------------------------------------------------------------------------------------- Compuware Corp. 15 24,800 222,456 ----------------------------------------------------------------------------------------- ConocoPhillips 3,700 215,266 ----------------------------------------------------------------------------------------- Conseco, Inc. 15 13,986 324,056 ----------------------------------------------------------------------------------------- Covad Communications Group, Inc. 15 16,528 16,197 ----------------------------------------------------------------------------------------- Coventry Health Care, Inc. 15 3,900 222,144 ----------------------------------------------------------------------------------------- VALUE SHRARES SEE NOTE 1 ----------------------------------------------------------------------------------------- COMMON STOCKS Continued ----------------------------------------------------------------------------------------- Criimi MAE, Inc. 15 62,047 $ 1,228,531 ----------------------------------------------------------------------------------------- Cummins, Inc. 2,500 224,325 ----------------------------------------------------------------------------------------- D.R. Horton, Inc. 6,200 221,526 ----------------------------------------------------------------------------------------- Daido Steel Co. Ltd. 31,000 292,387 ----------------------------------------------------------------------------------------- Deutsche Boerse AG 2,309 236,239 ----------------------------------------------------------------------------------------- Deutsche Telekom AG 13,706 228,144 ----------------------------------------------------------------------------------------- Devon Energy Corp. 3,700 231,398 ----------------------------------------------------------------------------------------- Dobson Communications Corp., Cl. A 15 24,300 182,250 ----------------------------------------------------------------------------------------- E*TRADE Financial Corp. 15 11,400 237,804 ----------------------------------------------------------------------------------------- E.ON AG 2,392 247,676 ----------------------------------------------------------------------------------------- Eastman Chemical Co. 4,100 211,519 ----------------------------------------------------------------------------------------- Edison International, Inc. 5,000 218,050 ----------------------------------------------------------------------------------------- Energy Select Sector SPDR Fund 18,500 930,735 ----------------------------------------------------------------------------------------- EOG Resources, Inc. 3,000 220,110 ----------------------------------------------------------------------------------------- Equinix, Inc. 15 1,887 76,914 ----------------------------------------------------------------------------------------- Express Scripts, Inc. 15 2,600 217,880 ----------------------------------------------------------------------------------------- Financial Select Sector SPDR Fund 29,400 931,098 ----------------------------------------------------------------------------------------- Friends Provident plc 69,430 226,365 ----------------------------------------------------------------------------------------- Gecina SA 2,030 233,121 ----------------------------------------------------------------------------------------- Geotek Communications, Inc., Series B, Escrow Shares 4,12,15 210 -- ----------------------------------------------------------------------------------------- Globix Corp. 15 6,880 9,288 ----------------------------------------------------------------------------------------- Goodyear Tire & Rubber Co. (The) 15 13,300 231,154 ----------------------------------------------------------------------------------------- Halliburton Co. 3,500 216,860 ----------------------------------------------------------------------------------------- Hanson plc 22,240 244,505 ----------------------------------------------------------------------------------------- Hartford Financial Services Group, Inc. (The) 2,600 223,314 ----------------------------------------------------------------------------------------- Hochtief AG 5,620 251,968 ----------------------------------------------------------------------------------------- Horizon Natural Resources Co. 4,15 6,667 -- ----------------------------------------------------------------------------------------- Huntsman Corp. 4,15 5,871 96,044 ----------------------------------------------------------------------------------------- ICO Global Communication Holdings Ltd. 15 6,016 37,660 ----------------------------------------------------------------------------------------- iPCS, Inc. 15 8,733 421,367 ----------------------------------------------------------------------------------------- IVG Immobilien AG 11,785 248,210 ----------------------------------------------------------------------------------------- KB Home 3,200 232,512 ----------------------------------------------------------------------------------------- Keisei Electric Railway Co. Ltd. 34,035 233,759 ----------------------------------------------------------------------------------------- Kubota Corp. 29,000 245,249 ----------------------------------------------------------------------------------------- Leap Wireless International, Inc. 15 1,714 64,926 ----------------------------------------------------------------------------------------- Lehman Brothers Holdings, Inc. 1,800 230,706 ----------------------------------------------------------------------------------------- Lennar Corp., Cl. A 3,900 237,978 ----------------------------------------------------------------------------------------- Liberty Global, Inc., Series A 3,368 75,780 ----------------------------------------------------------------------------------------- Liberty Global, Inc., Series C 15 3,368 71,402 ----------------------------------------------------------------------------------------- Lloyds TSB Group plc 28,020 235,497 ----------------------------------------------------------------------------------------- Loews Corp. 2,300 218,155 ----------------------------------------------------------------------------------------- Loral Space & Communications Ltd. 15 7,271 205,406
24 | OPPENHEIMER STRATEGIC BOND FUND/VA
VALUE SHARES SEE NOTE 1 ----------------------------------------------------------------------------------------- COMMON STOCKS Continued ----------------------------------------------------------------------------------------- Louisiana-Pacific Corp. 8,200 $ 225,254 ----------------------------------------------------------------------------------------- MAN AG 4,587 244,808 ----------------------------------------------------------------------------------------- Marathon Oil Corp. 3,791 231,137 ----------------------------------------------------------------------------------------- Matsui Securities Co. Ltd. 23,100 319,488 ----------------------------------------------------------------------------------------- MCI, Inc. 1,629 32,140 ----------------------------------------------------------------------------------------- Motorola, Inc. 9,700 219,123 ----------------------------------------------------------------------------------------- National Semiconductor Corp. 8,100 210,438 ----------------------------------------------------------------------------------------- Nikon Corp. 15,000 235,750 ----------------------------------------------------------------------------------------- Nippon Mining Holdings, Inc. 35,000 250,407 ----------------------------------------------------------------------------------------- Nippon Steel Corp. 67,311 237,288 ----------------------------------------------------------------------------------------- Nordstrom, Inc. 6,200 231,880 ----------------------------------------------------------------------------------------- Norfolk Southern Corp. 5,200 233,116 ----------------------------------------------------------------------------------------- Novell, Inc. 15 27,000 238,410 ----------------------------------------------------------------------------------------- NTL, Inc. 15 7,842 533,883 ----------------------------------------------------------------------------------------- Nucor Corp. 3,300 220,176 ----------------------------------------------------------------------------------------- NVIDIA Corp. 15 6,200 226,672 ----------------------------------------------------------------------------------------- Occidental Petroleum Corp. 2,800 223,664 ----------------------------------------------------------------------------------------- Office Depot, Inc. 15 7,600 238,640 ----------------------------------------------------------------------------------------- OKI Electric Industry Co. 69,000 254,903 ----------------------------------------------------------------------------------------- Orbital Sciences Corp. 15 745 9,566 ----------------------------------------------------------------------------------------- PagesJaunes Groupe SA 9,360 243,677 ----------------------------------------------------------------------------------------- Peninsular & Oriental Steam Navigation Co. 29,920 239,883 ----------------------------------------------------------------------------------------- Persimmon plc 12,000 259,725 ----------------------------------------------------------------------------------------- Phelps Dodge Corp. 1,600 230,192 ----------------------------------------------------------------------------------------- Pilkington plc 88,770 227,564 ----------------------------------------------------------------------------------------- Pioneer Cos., Inc. 15 7,312 219,141 ----------------------------------------------------------------------------------------- Prandium, Inc. 4,15 24,165 242 ----------------------------------------------------------------------------------------- Premier Holdings Ltd. 4 18,514 -- ----------------------------------------------------------------------------------------- Prudential Financial, Inc. 3,000 219,570 ----------------------------------------------------------------------------------------- Pulte Homes, Inc. 5,320 209,395 ----------------------------------------------------------------------------------------- Reebok International Ltd. 3,900 227,097 ----------------------------------------------------------------------------------------- Resolution plc 20,640 230,111 ----------------------------------------------------------------------------------------- Rolls-Royce Group plc, B Shares 1,041,412 1,837 ----------------------------------------------------------------------------------------- Rowan Cos., Inc. 6,100 217,404 ----------------------------------------------------------------------------------------- RWE AG, Non-Vtg., Preference 3,759 241,916 ----------------------------------------------------------------------------------------- Shionogi & Co. Ltd. 19,000 267,597 ----------------------------------------------------------------------------------------- Societe Generale, Cl. A 1,920 236,173 ----------------------------------------------------------------------------------------- Sodexho Alliance SA 5,730 236,073 ----------------------------------------------------------------------------------------- Star Gas Partners LP 15 187 348 ----------------------------------------------------------------------------------------- Sterling Chemicals, Inc. 4,15 716 8,950 ----------------------------------------------------------------------------------------- Suedzucker AG 10,314 241,772 ----------------------------------------------------------------------------------------- Suez SA 8,010 249,403 ----------------------------------------------------------------------------------------- Sumitomo Metal Industries 66,000 251,473 ----------------------------------------------------------------------------------------- Sunoco, Inc. 2,800 219,464 ----------------------------------------------------------------------------------------- Taylor Woodrow plc 38,960 255,050 VALUE SHARES SEE NOTE 1 ----------------------------------------------------------------------------------------- COMMON STOCKS Continued ----------------------------------------------------------------------------------------- Technip SA 4,030 $ 244,456 ----------------------------------------------------------------------------------------- Telewest Global, Inc. 15 31,828 758,143 ----------------------------------------------------------------------------------------- Telus Corp. 269 10,830 ----------------------------------------------------------------------------------------- ThyssenKrupp AG 11,322 236,447 ----------------------------------------------------------------------------------------- Tokyo Electron Ltd. 3,758 234,842 ----------------------------------------------------------------------------------------- Tokyo Steel Manufacturing Co. Ltd. 17,563 253,476 ----------------------------------------------------------------------------------------- TonenGeneral Sekiyu K.K. 21,000 225,785 ----------------------------------------------------------------------------------------- Tosoh Corp. 51,000 225,311 ----------------------------------------------------------------------------------------- TUI AG 11,813 241,107 ----------------------------------------------------------------------------------------- TVMAX Holdings, Inc. 4,15 1,000 1,000 ----------------------------------------------------------------------------------------- Unibail 1,830 243,518 ----------------------------------------------------------------------------------------- United States Steel Corp. 4,700 225,929 ----------------------------------------------------------------------------------------- United Utilities plc 20,480 236,431 ----------------------------------------------------------------------------------------- UnumProvident Corp. 10,180 231,595 ----------------------------------------------------------------------------------------- Utilities Select Sector SPDR Fund 30,000 941,700 ----------------------------------------------------------------------------------------- Valero Energy Corp. 4,400 227,040 ----------------------------------------------------------------------------------------- Viatel Holding (Bermuda) Ltd. 4,15 2,251 73 ----------------------------------------------------------------------------------------- Western Forest Products, Inc. 15 38,252 60,219 ----------------------------------------------------------------------------------------- WRC Media Corp. 4,15 1,082 22 ----------------------------------------------------------------------------------------- XO Communications, Inc. 15 1,100 2,002 --------------- Total Common Stocks (Cost $26,567,281) 30,683,681 UNITS ----------------------------------------------------------------------------------------- RIGHTS, WARRANTS AND CERTIFICATES--0.0% ----------------------------------------------------------------------------------------- American Tower Corp. Wts., Exp. 8/1/08 2,15 800 306,212 ----------------------------------------------------------------------------------------- ASAT Finance LLC Wts., Exp. 11/1/06 15 250 -- ----------------------------------------------------------------------------------------- COLO.com, Inc. Wts., Exp. 3/15/10 4,15 400 -- ----------------------------------------------------------------------------------------- Concentric Network Corp. Wts., Exp. 12/15/07 4,15 100 -- ----------------------------------------------------------------------------------------- HF Holdings, Inc. Wts., Exp. 9/27/09 4,15 530 -- ----------------------------------------------------------------------------------------- ICO Global Communication Holdings Ltd. Wts.: Exp. 5/16/06 4,15 1,509 23 Exp. 5/16/06 4,15 2 -- ----------------------------------------------------------------------------------------- Imperial Credit Industries, Inc. Wts., Exp. 1/31/08 4,15 2,135 -- ----------------------------------------------------------------------------------------- iPCS, Inc. Wts., Exp. 6/15/10 4,15 300 -- ----------------------------------------------------------------------------------------- Long Distance International, Inc. Wts., Exp. 4/13/08 2,15 200 -- ----------------------------------------------------------------------------------------- Loral Space & Communications Ltd. Wts., Exp. 1/15/07 4,15 150 -- ----------------------------------------------------------------------------------------- Ntelos, Inc. Wts., Exp. 8/15/10 4,15 450 -- ----------------------------------------------------------------------------------------- Pathmark Stores, Inc. Wts., Exp. 9/19/10 15 5,710 1,599
25 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------
VALUE UNITS SEE NOTE 1 ----------------------------------------------------------------------------------------- RIGHTS, WARRANTS AND CERTIFICATES Continued ----------------------------------------------------------------------------------------- PLD Telekom, Inc. Wts., Exp. 6/1/06 4,15 300 $ 3 ----------------------------------------------------------------------------------------- Sterling Chemicals, Inc. Wts., Exp. 12/19/08 15 1,165 117 ----------------------------------------------------------------------------------------- Venezuela (Republic of) Oil Linked Payment Obligation Wts., Exp. 4/15/20 4,15 2,300 66,700 ----------------------------------------------------------------------------------------- Verado Holdings, Inc., Cl. B Wts., Exp. 4/15/08 15 175 119 ----------------------------------------------------------------------------------------- XO Communications, Inc., Cl. A Wts., Exp. 1/16/10 15 2,204 331 ----------------------------------------------------------------------------------------- XO Communications, Inc., Cl. B Wts., Exp. 1/16/10 15 1,653 165 ----------------------------------------------------------------------------------------- XO Communications, Inc., Cl. C Wts., Exp. 1/16/10 15 1,653 149 --------------- Total Rights, Warrants and Certificates (Cost $35,300) 375,418 PRINCIPAL AMOUNT ----------------------------------------------------------------------------------------- STRUCTURED NOTES--14.9% ----------------------------------------------------------------------------------------- Aiolos Ltd., Catastrophe Linked Nts., 11.938%, 4/8/09 1,4 [EUR] 400,000 472,137 ----------------------------------------------------------------------------------------- Aon Capital Markets/Helix 04 Ltd. Catastrophe Linked Nts., 9.927%, 6/30/09 1 600,000 595,596 ----------------------------------------------------------------------------------------- Arbor I Ltd. Catastrophe Linked Nts.: 19.991%, 6/15/06 1,4 100,000 100,285 Series IV, 18.491%, 3/15/06 1 250,000 248,925 ----------------------------------------------------------------------------------------- Atlantic & Western Re Ltd., Catastrophe Linked Nts., Series B, 14.30%, 11/15/10 1,4 1,050,000 1,050,000 ----------------------------------------------------------------------------------------- Barclays Capital, Russia (Government of) Credit Linked Nts., 5.16%, 8/18/08 7 [RUR] 270,000,000 8,067,665 ----------------------------------------------------------------------------------------- Cascadia Ltd., 7.582% Nts., 6/13/08 1,4 500,000 498,500 ----------------------------------------------------------------------------------------- Champlain Ltd., Catastrophe Linked Nts., Series A, 17.296%, 1/7/09 1 940,000 940,000 ----------------------------------------------------------------------------------------- Citigroup Global Markets Holdings, Inc.: Argentina (Republic of) Unsec. Credit Linked Nts., 4%, 4/16/10 17 [ARP] 3,850,000 2,591,432 Brazil (Federal Republic of) Credit Linked Nts., 16.69%, 7/3/07 7 [BRR] 4,660,000 1,593,444 Brazil (Federal Republic of) Unsec. Credit Linked Nts., 10%, 1/5/10 [BRR] 2,927,000 1,119,515 Brazil (Federal Republic of) Unsec. Credit Linked Nts., 10%, 1/5/10 [BRR] 4,619,000 1,766,669 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------------- STRUCTURED NOTES Continued ----------------------------------------------------------------------------------------- Citigroup Global Markets Holdings, Inc.: Continued Brazil (Federal Republic of) Unsec. Credit Linked Nts., 14.81%, 1/5/10 7 [BRR] 2,480,096 $ 595,454 Brazil (Federal Republic of) Unsec. Credit Linked Nts., 15.43%, 1/2/09 7 [BRR] 2,231,957 616,038 Brazil (Federal Republic of) Unsec. Credit Linked Nts., 15.73%, 1/3/08 7 [BRR] 1,948,615 620,443 Colombia (Republic of) Credit Linked Bonds, 11%, 7/24/20 [COP] 1,060,000,000 533,825 Colombia (Republic of) Credit Linked Nts., Series II, 15%, 4/27/12 [COP] 552,359,546 339,972 Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 3/15/07 (linked to Colombian Treasury Bills) [COP] 3,860,150,000 2,057,081 Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 4/27/12 [COP] 1,800,000,000 1,107,884 Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 4/27/12 [COP] 1,200,000,000 738,589 Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 4/27/12 [COP] 1,034,000,000 636,418 Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 4/27/12 [COP] 927,000,000 570,560 Dominican Republic Credit Linked Nts., 14.11%, 7/10/06 (linked to Dominican Republic Treasury Bills) 7 [DOP] 23,200,000 625,614 Dominican Republic Credit Linked Nts., 15.64%, 5/2/06 (linked to Dominican Republic Treasury Bills) 7 [DOP] 19,490,000 541,566 Dominican Republic Credit Linked Nts., 17%, 3/12/07 [DOP] 21,900,000 656,872 Dominican Republic Credit Linked Nts., 17.06%, 11/6/06 (linked to Dominican Republic Treasury Bills) 7 [DOP] 59,600,000 1,521,740 Dominican Republic Credit Linked Nts., 19.69%, 3/31/06 (linked to Dominican Republic Treasury Bills) 7 [DOP] 17,740,000 498,787 Dominican Republic Credit Linked Nts., 22.41%, 3/10/06 (linked to Dominican Republic Treasury Bills) 7 [DOP] 22,703,730 644,991 Dominican Republic Unsec. Credit Linked Nts., 14.67%, 5/15/06 (linked to Dominican Republic Treasury Bills) 7 [DOP] 16,070,000 443,893
26 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------- STRUCTURED NOTES Continued ----------------------------------------------------------------------------------- Citigroup Global Markets Holdings, Inc.: Continued Dominican Republic Unsec. Credit Linked Nts., 16.18%, 4/24/06 (linked to Dominican Republic Treasury Bills) 7 [DOP] 6,560,000 $ 182,822 Dominican Republic Unsec. Credit Linked Nts., 23.07%, 3/3/06 (linked to Dominican Republic Treasury Bills) 7 [DOP] 42,662,900 1,215,961 Egypt (The Arab Republic of) Unsec. Credit Linked Nts., 8.21%, 9/19/06 (linked to Egyptian Treasury Bills) 7 [EGP] 5,000,000 818,488 Egypt (The Arab Republic of) Unsec. Credit Linked Nts., 8.36%, 2/9/06 (linked to Egyptian Treasury Bills) 7 [EGP] 5,773,000 996,593 Egypt (The Arab Republic of) Unsec. Credit Linked Nts., 8.76%, 1/12/06 (linked to Egyptian Treasury Bills) 7 [EGP] 4,530,000 787,279 Egypt (The Arab Republic of) Unsec. Credit Linked Nts., 9.21%, 2/2/06 (linked to Egyptian Treasury Bills) 7 [EGP] 5,400,000 933,764 Russian Federation Credit Linked Nts., 5.315%, 1/20/11 5 10,000,000 9,962,600 Ukraine Hryvnia Unsec. Credit Linked Nts., 11.94%, 1/4/10 [UAH] 880,000 204,367 ----------------------------------------------------------------------------------- Credit Suisse First Boston Corp. (Cayman), Turkey (Republic of) Credit Linked Nts., Series EMG 7, 15%, 2/10/10 [TRY] 3,014,000 2,564,299 ----------------------------------------------------------------------------------- Credit Suisse First Boston International: OAO Gazprom Credit Linked Nts., 8.11%, 1/21/07 [RUR] 28,065,000 1,025,944 South African Rand Interest Bearing Linked Nts., Series FBi 43, 4.59%, 5/23/22 1 825,000 800,333 Ukraine (Republic of) Credit Linked Nts., Series EMG 13, 11.94%, 12/30/09 [UAH] 2,195,000 505,609 ----------------------------------------------------------------------------------- Credit Suisse First Boston, Inc. (Nassau Branch): Turkey (Republic of) Credit Linked Nts., 20%, 10/18/07 352,000 396,567 Turkey (Republic of) Credit Linked Nts., Series EM 880, 20%, 10/18/07 1,190,000 1,484,132 Turkey (Republic of) Credit Linked Nts., Series EMG 19, 16.90%, 7/5/06 7 [TRY] 1,440,000 995,514 Turkey (Republic of) Credit Linked Nts., Series EMG 4, 17.20%, 7/6/06 7 [TRY] 1,909,191 1,319,879 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------- STRUCTURED NOTES Continued ----------------------------------------------------------------------------------- Credit Suisse First Boston, Inc. (Nassau Branch): Continued Turkey (Republic of) Credit Linked Nts., Series NAS 316, 22.66%, 2/23/06 7 $ 607,000 $ 816,373 Ukraine (Republic of) Credit Linked Nts., 11.94%, 12/30/09 [UAH] 5,650,000 1,301,453 Ukraine (Republic of) Credit Linked Nts., Series EMG 11, 11.94%, 12/30/09 [UAH] 661,000 152,258 Ukraine (Republic of) Credit Linked Nts., Series NPC 12, 11.94%, 12/30/09 [UAH] 4,170,000 960,541 ----------------------------------------------------------------------------------- Deutsche Bank AG: Argentina (Republic of) Credit Linked Nts., 4%, 12/21/11 [ARP] 2,990,000 2,374,049 Brazil Real Credit Linked Nts., 13.88%, 3/3/10 7 [BRR] 4,580,760 1,226,146 Campania Total Return Linked Nts., 2.862%, 7/30/10 1 [EUR] 5,050,000 5,960,730 Campania Total Return Linked Nts., 2.869%, 7/30/10 1 [EUR] 5,200,000 6,194,419 Egypt (The Arab Republic of) Total Return Linked Nts., 8.52%, 1/17/06 (linked to Egyptian Treasury Bills) 7 [EGP] 4,280,000 742,749 Egypt (The Arab Republic of) Total Return Linked Nts., 8.78%, 12/12/06 (linked to Egyptian Treasury Bills) 7 [EGP] 8,170,000 1,317,166 Egypt (The Arab Republic of) Total Return Linked Nts., 9.63%, 3/9/06 (linked to Egyptian Treasury Bills) 7 [EGP] 2,120,000 363,397 European Investment Bank, Russian Federation Credit Linked Nts., 6.23%, 1/19/10 1 705,000 566,115 Indonesia (Republic of) Credit Linked Nts., 9.50%, 6/22/15 820,000 647,308 Indonesia (Republic of) Credit Linked Nts., Series III, 14.25%, 6/15/13 873,600 913,261 Moscow (City of) Credit Linked Nts., 10%, 3/30/10 [RUR] 17,056,500 660,340 OAO Gazprom I Credit Nts., 8.36%, 10/20/07 790,000 844,944 OAO Gazprom II Credit Nts., 8.11%, 4/20/07 790,000 831,541 Romania (The State of) Credit Linked Nts., 11.49%, 12/7/06 [RON] 788,640 260,726 Russian Federation Credit Linked Nts., 12/2/09 7 [RUR] 19,221,000 700,884 Ukraine (Republic of) 5 yr. Credit Linked Nts., 4.05%, 8/25/10 5 885,000 889,425 Ukraine (Republic of) 5.5 yr. Credit Linked Nts., 4.05%, 2/25/11 5 885,000 889,425 Ukraine (Republic of) 6 yr. Credit Linked Nts., 4.05%, 8/25/11 5 885,000 889,425
27 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------- STRUCTURED NOTES Continued ----------------------------------------------------------------------------------- Deutsche Bank AG: Continued: Ukraine (Republic of) 6.5 yr. Credit Linked Nts., 4.05%, 2/27/12 5 $ 885,000 $ 889,425 Ukraine (Republic of) 7 yr. Credit Linked Nts., 4.05%, 8/28/12 5 885,000 889,425 Ukraine (Republic of) Credit Linked Nts., 11.70%, 5/31/06 [UAH] 1,727,000 350,801 Ukraine (Republic of) Credit Linked Nts., 11.94%, 12/30/09 [UAH] 269,000 63,650 Ukraine (Republic of) Credit Linked Nts., 11.94%, 12/30/09 [UAH] 955,000 225,969 Ukraine (Republic of) Credit Linked Nts., 5.592%, 5/16/07 [UAH] 2,390,000 472,317 Ukraine (Republic of) Credit Linked Nts., Series A, 5.592%, 5/16/07 [UAH] 2,390,000 472,317 Videocon International Ltd. Credit Linked Nts., 6.26%, 12/29/09 1,630,000 1,625,110 Volga Investments Ltd. Credit Linked Nts., Series III, 6.01%, 4/2/08 10,000,000 10,142,000 ----------------------------------------------------------------------------------- Dow Jones CDX High Yield Index Pass-Through Certificates: Series 4-T1, 8.25%, 6/29/10 4,16 15,872,080 16,050,641 Series 5-T1, 8.75%, 12/29/10 2,16 6,286,500 6,311,058 ----------------------------------------------------------------------------------- Goldman Sachs Group, Inc. (The)/ Residential Reinsurance Ltd., Catastrophe Linked Nts., Series B, 12.86%, 6/6/08 1,4 800,000 748,000 ----------------------------------------------------------------------------------- ING Bank NV, Ukraine (Republic of) Credit Linked Nts., Series 725, 11.89%, 12/30/09 4 [UAH] 4,689,000 1,085,816 ----------------------------------------------------------------------------------- JPMorgan Chase Bank: Brazil (Federal Republic of) Credit Linked Nts., 12.08%, 1/2/15 7 [BRR] 3,693,700 476,044 Brazil (Federal Republic of) Credit Linked Nts., 12.68%, 6/1/13 7 [BRR] 5,490,000 854,973 Brazil (Federal Republic of) Credit Linked Nts., 15.33%, 1/2/15 7 [BRR] 10,948,600 1,411,055 Brazil (Federal Republic of) Credit Linked Nts., 2.73%, 11/30/12 7 [ARP] 4,550,000 1,071,107 Brazil (Federal Republic of) Credit Linked Nts., Series II, 13.55%, 1/2/15 7 [BRR] 8,035,000 1,035,550 Brazil (Federal Republic of) Credit Linked Nts., Series III, 12.18%, 1/2/15 7 [BRR] 8,500,000 1,095,480 Colombia (Republic of) Credit Linked Bonds, 10.19%, 1/5/16 5,7 [COP] 20,100,000,000 3,191,913 Colombia (Republic of) Credit Linked Bonds, 13.50%, 8/3/20 [COP] 11,160,000,000 1,256,299 Peru (Republic of) Credit Linked Nts., 8.12%, 9/2/15 7 [PEN] 3,470,000 403,488 Swaziland (Kingdom of) Credit Linked Nts., 7.25%, 6/20/10 1,120,000 1,076,880 PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------- STRUCTURED NOTES Continued ----------------------------------------------------------------------------------- Lehman Brothers Holdings, Inc., High Yield Targeted Return Index Securities, Series 2005-1, 7.651%, 6/15/15 4,16 $ 4,390,244 $ 4,575,863 ----------------------------------------------------------------------------------- Lehman Brothers International: Romania (The State of) Total Return Linked Nts., 7.90%, 2/8/10 (linked to Romanian Treasury Bills) [RON] 821,400 288,395 Turkey (Republic of) Total Return Linked Nts., 15%, 2/11/10 (linked to Turkish Treasury Bills) [TRY] 1,635,000 1,398,437 Turkey (Republic of) Total Return Linked Nts., 20%, 10/17/07 (linked to Turkish Treasury Bills) 410,938 507,508 ----------------------------------------------------------------------------------- Lehman Brothers Special Financing, Inc.: Romania (The State of) Total Return Linked Nts., 6.50%, 3/8/10 (linked to Romanian Treasury Bills) [RON] 2,228,300 734,924 Romania (The State of) Total Return Linked Nts., 6.75%, 3/10/08 (linked to Romanian Treasury Bills) [RON] 2,600,000 863,783 Romania (The State of) Total Return Linked Nts., 7.25%, 4/18/10 (linked to Romanian Treasury Bills) [RON] 213,000 71,884 Romania (The State of) Total Return Linked Nts., 7.50%, 3/5/07 (linked to Romanian Treasury Bills) [RON] 354,000 120,046 Romania (The State of) Total Return Linked Nts., 7.75%, 4/18/08 (linked to Romanian Treasury Bills) [RON] 512,000 173,356 Romania (The State of) Total Return Linked Nts., 7.75%, 4/18/08 (linked to Romanian Treasury Bills) [RON] 199,000 67,379 Romania (The State of) Total Return Linked Nts., 7.90%, 2/11/08 (linked to Romanian Treasury Bills) [RON] 1,885,100 649,061 Turkey (Republic of) Total Return Linked Nts., 15%, 2/10/10 [TRY] 4,490,000 3,866,952 ----------------------------------------------------------------------------------- Morgan Stanley Capital Services, Inc.: Brazil (Federal Republic of) Sr. Sub. Linked Nts., 15.45%, 1/2/14 [BRR] 3,400,000 1,361,425 Philippines (Republic of) Credit Linked Nts., 8.619%, 9/20/15 1,230,000 1,264,231 Philippines (Republic of) Credit Linked Nts., 8.652%, 9/20/15 1 10,300,000 11,061,582
28 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------- STRUCTURED NOTES Continued ----------------------------------------------------------------------------------- Morgan Stanley Capital Services, Inc.: Continued United Mexican States Credit Linked Nts., 5.64%, 11/20/15 $ 2,000,000 $ 2,019,720 Venezuela (Republic of) 10 yr. Credit Linked Nts., 7.85%, 11/20/15 1,885,000 1,931,880 Venezuela (Republic of) Credit Linked Nts., 6.49%, 5/20/10 1,480,000 1,477,765 Venezuela (Republic of) Credit Linked Nts., 7.382%, 5/20/10 1,900,000 2,043,013 ----------------------------------------------------------------------------------- Redwood Capital VI Ltd., 8.165% Nts., 1/9/07 1,4 250,000 245,488 ----------------------------------------------------------------------------------- Swiss Re Capital Markets Corp./ Foundation RE Ltd. Catastrophe Linked Nts., 8.45%, 11/24/08 1,2 500,000 501,263 ----------------------------------------------------------------------------------- Swiss Re Capital Markets Corp./ Oak Capital Ltd. Catastrophe Linked Nts., 9.241%, 6/15/07 1,4 250,000 247,738 ----------------------------------------------------------------------------------- Swiss Re Capital Markets Corp./ Pioneer 2002 Ltd. Sec. Catastrophe Linked Nts.: Series 2002, Cl. A-A, 10.491%, 6/15/06 1,2 250,000 254,200 Series 2002-1, Cl. E-A, 8.741%, 6/15/06 1 500,000 500,950 Series 2003-II, Cl. A-A, 10.491%, 6/15/06 1,4 500,000 508,475 ----------------------------------------------------------------------------------- Swiss Re Capital Markets Corp./ Redwood Capital V Catastrophe Linked Nts., 8.265%, 1/9/07 1,4 1,250,000 1,228,750 ----------------------------------------------------------------------------------- UBS AG: Israel (State of) Credit Linked Nts., 7.50%, 4/5/14 [ILS] 4,792,700 1,181,389 OAO Gazprom III Credit Nts., 6.81%, 7/5/06 1,980,000 2,072,803 --------------- Total Structured Notes (Cost $174,975,131) 177,908,299 DATE STRIKE CONTRACTS ----------------------------------------------------------------------------------- OPTIONS PURCHASED--0.0% ----------------------------------------------------------------------------------- Japanese Yen Put 4,15 3/2/06 122.50JPY 2,223,000,000 28,588 ----------------------------------------------------------------------------------- Mexican Neuvo Peso Call 15 3/15/06 9.13MXN 61,205,000 93,706 ----------------------------------------------------------------------------------- Mexican Nuevo Peso Call 15 10/12/06 11.40MXN 12,312,000 14,695 ----------------------------------------------------------------------------------- Mexican Nuevo Peso Put 15 10/12/06 11.40MXN 12,312,000 60,473 --------------- Total Options Purchased (Cost $275,033) 197,462 NOTIONAL VALUE DATE STRIKE AMOUNT SEE NOTE 1 ----------------------------------------------------------------------------------- SWAPTIONS PURCHASED--0.0% ----------------------------------------------------------------------------------- Australian Dollar Call 15 (Cost $36,939) 2/9/06 5.67AUD $ 12,000,000 $ 15,820
PRINCIPAL AMOUNT ----------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS--10.5% 18 ----------------------------------------------------------------------------------- Undivided interest of 8.86% in joint repurchase agreement (Principal Amount/Value $1,414,200,000, with a maturity value of $1,414,844,247) with UBS Warburg LLC, 4.10%, dated 12/30/05, to be repurchased at $125,359,082 on 1/3/06, collateralized by Federal Home Loan Mortgage Corp., 5%, 1/1/35, with a value of $157,513,104 and Federal National Mortgage Assn., 5%--5.50%, 3/1/34--10/1/35, with a value of $1,301,420,187 (Cost $125,302,000) $ 125,302,000 125,302,000 ----------------------------------------------------------------------------------- Total Investments, at Value (excluding Investments Purchased with Cash Collateral from Securities Loaned) (Cost $1,260,837,782) 1,268,943,003 ----------------------------------------------------------------------------------- INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--2.3% ----------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS--2.3% Undivided interest of 0.87% in joint repurchase agreement (Principal Amount/Value $3,150,000,000, with a maturity value of $3,151,501,500) with Nomura Securities, 4.29%, dated 12/30/05, to be repurchased at $27,483,173 on 1/3/06, collateralized by U.S. Agency Mortgages, 3.34%--9.50%, 6/1/08--5/1/38, with a value of $3,213,000,000 19 (Cost $27,470,079) 27,470,079 27,470,079 ----------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $1,288,307,861) 108.4% 1,296,413,082 ----------------------------------------------------------------------------------- LIABILITIES IN EXCESS OF OTHER ASSETS (8.4) (100,164,823) --------------------------------- NET ASSETS 100.0% $ 1,196,248,259 =================================
29 | 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 AUD Australian Dollar BRR Brazilian Real CAD Canadian Dollar COP Colombian Peso DEM German Mark DOP Dominican Republic Peso EGP Egyptian Pounds EUR Euro GBP British Pound Sterling ILS Israeli Shekel JPY Japanese Yen MXN Mexican Nuevo Peso MYR Malayasian Ringget NZD New Zealand Dollar PEN Peruvian New Sol PLZ Polish Zloty RON New Romanian Leu RUR Russian Ruble TRY New Turkish Lira UAH Ukraine Hryvnia ZAR South African Rand 1. Represents the current interest rate for a variable or increasing rate security. 2. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $80,251,730 or 6.71% of the Fund's net assets as of December 31, 2005. 3. Issue is in default. Non-income producing. See Note 1 of Notes to Financial Statements. 4. Illiquid or restricted security. The aggregate value of illiquid or restricted securities as of December 31, 2005 was $47,375,687, which represents 3.96% of the Fund's net assets, of which $96,286 is considered restricted. In addition, the Fund has restricted currency of $371,241, which represents 0.03% of the Fund's net assets. See Note 12 of Notes to Financial Statements. 5. When-issued security or forward commitment to be delivered and settled after December 31, 2005. See Note 1 of Notes to Financial Statements. 6. 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 $6,850,077 or 0.57% of the Fund's net assets as of December 31, 2005. 7. Zero coupon bond reflects effective yield on the date of purchase. 8. All or a portion of the security is held in collateralized accounts to cover initial margin requirements on open futures sales contracts. The aggregate market value of such securities is $3,956,813. See Note 6 of Notes to Financial Statements. 9. Partial or fully-loaned security. See Note 13 of Notes to Financial Statements. 10. A sufficient amount of liquid assets has been designated to cover outstanding written swaptions. See Note 11 of Notes to Financial Statements. 11. A sufficient amount of securities has been designated to cover outstanding foreign currency contracts. See Note 5 of Notes to Financial Statements. 12. Received as the result of issuer reorganization. 13. Denotes a step bond: a zero coupon bond that converts to a fixed or variable interest rate at a designated future date. 14. Interest or dividend is paid-in-kind. 15. Non-income producing security. 16. Interest rate represents a weighted average rate comprised of the interest rates of the underlying securities. 17. Denotes an inflation indexed security: coupon and principal are indexed to the consumer price index. 18. The Fund may have elements of risk due to concentrated investments. Such concentrations may subject the Fund to additional risks. 19. The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Note 13 of Notes to Financial Statements. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 30 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF ASSETS AND LIABILITIES December 31, 2005 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------- ASSETS -------------------------------------------------------------------------------------------------------------------------------- Investments, at value (including cost and market value of $125,302,000 in repurchase agreements) (including securities loaned of $66,657,680) (cost $1,288,307,861)--see accompanying statement of investments $ 1,296,413,082 -------------------------------------------------------------------------------------------------------------------------------- Cash 3,035,063 -------------------------------------------------------------------------------------------------------------------------------- Cash--foreign currencies (cost $358,193) 371,241 -------------------------------------------------------------------------------------------------------------------------------- Unrealized appreciation on foreign currency contracts 3,986,156 -------------------------------------------------------------------------------------------------------------------------------- Unrealized appreciation on swap contracts 2,788,117 -------------------------------------------------------------------------------------------------------------------------------- Receivables and other assets: Interest, dividends and principal paydowns 12,978,868 Investments sold (including $9,779,621 sold on a when-issued basis or forward commitment) 9,795,720 Shares of beneficial interest sold 5,750,231 Other 17,044 ---------------- Total assets 1,335,135,522 -------------------------------------------------------------------------------------------------------------------------------- LIABILITIES -------------------------------------------------------------------------------------------------------------------------------- Swaptions written, at value (premiums received $36,900) 8,630 -------------------------------------------------------------------------------------------------------------------------------- Return of collateral for securities loaned 27,470,079 -------------------------------------------------------------------------------------------------------------------------------- Unrealized depreciation on foreign currency contracts 1,371,300 -------------------------------------------------------------------------------------------------------------------------------- Unrealized depreciation on swap contracts 1,992,458 -------------------------------------------------------------------------------------------------------------------------------- Payables and other liabilities: Investments purchased (including $95,060,388 purchased on a when-issued basis or forward commitment) 106,524,898 Closed foreign currency contracts 563,050 Distribution and service plan fees 362,732 Shares of beneficial interest redeemed 249,036 Futures margins 178,191 Shareholder communications 44,829 Trustees' compensation 20,457 Transfer and shareholder servicing agent fees 1,753 Other 99,850 ---------------- Total liabilities 138,887,263 -------------------------------------------------------------------------------------------------------------------------------- NET ASSETS $ 1,196,248,259 ================ -------------------------------------------------------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS -------------------------------------------------------------------------------------------------------------------------------- Par value of shares of beneficial interest $ 231,943 -------------------------------------------------------------------------------------------------------------------------------- Additional paid-in capital 1,150,832,286 -------------------------------------------------------------------------------------------------------------------------------- Accumulated net investment income 53,188,525 -------------------------------------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (20,030,738) -------------------------------------------------------------------------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 12,026,243 ---------------- NET ASSETS $1,196,248,259 ================ -------------------------------------------------------------------------------------------------------------------------------- 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 $538,141,288 and 105,224,169 shares of beneficial interest outstanding) $ 5.11 -------------------------------------------------------------------------------------------------------------------------------- Service Shares: Net asset value, redemption price per share and offering price per share (based on net assets of $658,106,971 and 126,719,264 shares of beneficial interest outstanding) $ 5.19
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 31 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENT OF OPERATIONS For the Year Ended December 31, 2005 -------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- INVESTMENT INCOME ---------------------------------------------------------------------------------------- Interest $ 50,322,310 ---------------------------------------------------------------------------------------- Fee income 937,626 ---------------------------------------------------------------------------------------- Dividends (net of foreign withholding taxes of $22,009) 590,854 ---------------------------------------------------------------------------------------- Portfolio lending fees 39,168 -------------- Total investment income 51,889,958 ---------------------------------------------------------------------------------------- EXPENSES ---------------------------------------------------------------------------------------- Management fees 6,559,031 ---------------------------------------------------------------------------------------- Distribution and service plan fees--Service shares 1,018,455 ---------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Non-Service shares 10,290 Service shares 10,207 ---------------------------------------------------------------------------------------- Shareholder communications: Non-Service shares 52,041 Service shares 40,045 ---------------------------------------------------------------------------------------- Custodian fees and expenses 108,800 ---------------------------------------------------------------------------------------- Trustees' compensation 20,514 ---------------------------------------------------------------------------------------- Administration service fees 1,500 ---------------------------------------------------------------------------------------- Other 90,400 -------------- Total expenses 7,911,283 Less reduction to custodian expenses (53,565) -------------- Net expenses 7,857,718 ---------------------------------------------------------------------------------------- NET INVESTMENT INCOME 44,032,240 ---------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ---------------------------------------------------------------------------------------- Net realized gain (loss) on: Investments 14,709,707 Closing and expiration of option contracts written 8,952 Closing and expiration of swaption contracts (266,649) Closing and expiration of futures contracts (3,002,682) Foreign currency transactions 6,837,067 Swap contracts (3,522,835) -------------- Net realized gain 14,763,560 ---------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on: Investments (11,011,988) Translation of assets and liabilities denominated in foreign currencies (25,607,465) Futures contracts 920,452 Option contracts 12,121 Swaption contracts 4,677 Swap contracts 2,254,162 -------------- Net change in unrealized appreciation (33,428,041) ---------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 25,367,759 ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 32 | OPPENHEIMER STRATEGIC BOND FUND/VA STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005 2004 ------------------------------------------------------------------------------------------------------------------------- OPERATIONS ------------------------------------------------------------------------------------------------------------------------- Net investment income $ 44,032,240 $ 32,017,472 ------------------------------------------------------------------------------------------------------------------------- Net realized gain 14,763,560 7,611,909 ------------------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (33,428,041) 25,007,424 -------------------------------- Net increase in net assets resulting from operations 25,367,759 64,636,805 ------------------------------------------------------------------------------------------------------------------------- DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------- Dividends from net investment income: Non-Service shares (28,059,108) (29,467,620) Service shares (12,131,395) (5,049,740) ------------------------------------------------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from beneficial interest transactions: Non-Service shares (62,203,962) 23,501,705 Service shares 415,654,659 152,771,336 ------------------------------------------------------------------------------------------------------------------------- NET ASSETS ------------------------------------------------------------------------------------------------------------------------- Total increase 338,627,953 206,392,486 ------------------------------------------------------------------------------------------------------------------------- Beginning of period 857,620,306 651,227,820 -------------------------------- End of period (including accumulated net investment income of $53,188,525 and $39,051,911, respectively) $ 1,196,248,259 $ 857,620,306 ================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 33 | OPPENHEIMER STRATEGIC BOND FUND/VA FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 ---------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA ---------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 5.21 $ 5.05 $ 4.57 $ 4.62 $ 4.69 ---------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .25 1 .22 1 .22 .29 .41 Net realized and unrealized gain (loss) (.12) .20 .56 .03 (.19) -------------------------------------------------------------- Total from investment operations .13 .42 .78 .32 .22 ---------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.23) (.26) (.30) (.37) (.29) ---------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 5.11 $ 5.21 $ 5.05 $ 4.57 $ 4.62 ============================================================== ---------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 2 2.67% 8.67% 18.07% 7.44% 4.85% ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA ---------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 538,141 $ 614,915 $ 571,445 $ 406,126 $ 351,686 ---------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 550,201 $ 584,878 $ 472,213 $ 374,519 $ 330,711 ---------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 4.91% 4.50% 5.61% 6.89% 8.78% Total expenses 0.71% 0.74% 0.75% 0.79% 0.79% Expenses after payments and waivers and reduction to custodian expenses 0.71% 0.74% 0.75% 0.78% 0.79% ---------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 98% 4 88% 4 117% 65% 104%
1. Per share amounts calculated based on the average shares outstanding during the period. 2. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. The portfolio turnover rate excludes purchases and sales of To Be Announced (TBA) mortgage-related securities as follows: PURCHASE TRANSACTIONS SALE TRANSACTIONS -------------------------------------------------------------------------------- Year Ended December 31, 2005 $ 890,029,144 $ 873,786,459 Year Ended December 31, 2004 959,649,113 973,488,511 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 34 | OPPENHEIMER STRATEGIC BOND FUND/VA
SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 1 ---------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA ---------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 5.29 $ 5.13 $ 4.67 $ 4.73 $ 4.64 ---------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .21 2 .19 2 .27 .03 .15 Net realized and unrealized gain (loss) (.08) .22 .49 .28 (.06) -------------------------------------------------------------- Total from investment operations .13 .41 .76 .31 .09 ---------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.23) (.25) (.30) (.37) -- ---------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 5.19 $ 5.29 $ 5.13 $ 4.67 $ 4.73 ============================================================== ---------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 2.48% 8.43% 17.16% 7.03% 1.94% ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA ---------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 658,107 $ 242,705 $ 79,782 $ 8,138 $ 4 ---------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 408,515 $ 150,040 $ 34,744 $ 2,307 $ 2 ---------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 4.20% 3.82% 4.57% 5.40% 8.17% Total expenses 0.96% 0.99% 1.02% 1.06% 0.92% Expenses after payments and waivers and reduction to custodian expenses 0.96% 0.99% 1.02% 1.03% 0.92% ---------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 98% 5 88% 5 117% 65% 104%
1. For the period from March 19, 2001 (inception of offering) to December 31, 2001. 2. Per share amounts calculated based on the average shares outstanding during the period. 3. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year. 5. The portfolio turnover rate excludes purchases and sales of To Be Announced (TBA) mortgage-related securities as follows: PURCHASE TRANSACTIONS SALE TRANSACTIONS -------------------------------------------------------------------------------- Year Ended December 31, 2005 $ 890,029,144 $ 873,786,459 Year Ended December 31, 2004 959,649,113 973,488,511 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 35 | 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, 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 Fund'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. Both classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. The following is a summary of significant accounting policies consistently followed by the Fund. -------------------------------------------------------------------------------- SECURITIES VALUATION. The Fund calculates the net asset value of its shares as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Securities may be valued primarily using dealer-supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Securities listed or traded on National Stock Exchanges or other domestic 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. Securities traded on NASDAQ are valued based on the closing price provided by NASDAQ 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 traded on foreign exchanges are valued based on the last sale price on the principal exchange on which the security is traded, in the country that is identified by the portfolio pricing service, prior to the time when the Fund's assets are valued. In the absence of a sale, the security is valued at the official closing price on the principal exchange. Corporate, government and municipal debt instruments having a remaining maturity in excess of sixty days and all mortgage-backed securities will be valued at the mean between the "bid" and "asked" prices. Futures contracts traded on a commodities or futures exchange will be valued at the final settlement price or official closing price on the principal exchange as reported by such principal exchange at its trading session ending at, or most recently prior to, the time when the Fund's assets are valued. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value. Foreign and domestic securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund's assets are valued but after the close of their respective exchanges will be fair valued. Fair value is determined in good faith using 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 structured notes whose market values, interest rates and/or redemption prices are linked to the performance of underlying foreign currencies, interest rate spreads, stock market indices, prices of individual securities, commodities or other financial instruments or the occurrence of other specific events. The structured notes are often leveraged, increasing the volatility of each note's market value relative to the change in the underlying linked financial element or event. Fluctuations in value of these securities are recorded as unrealized gains and losses in the accompanying Statement of Operations. The Fund records a realized gain or loss when a structured note is sold or matures. As of December 31, 2005, the market value of these securities comprised 14.9% of the Fund's net assets and resulted in unrealized cumulative gains of $2,933,168. -------------------------------------------------------------------------------- SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment for securities that have been purchased by the Fund on a when-issued basis or forward commitment can take place up to ten days or more after the trade date. Normally the settlement date occurs within six months after the trade date; however, the Fund may, 36 | OPPENHEIMER STRATEGIC BOND FUND/VA from time to time, purchase securities whose settlement date extends 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 internally designated 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 or forward commitment may increase the volatility of the Fund's net asset value to the extent the Fund executes such transactions while remaining substantially fully invested. The Fund may also sell securities that it purchased on a when-issued basis or forward commitment prior to settlement of the original purchase. As of December 31, 2005, the Fund had purchased $95,060,388 of securities issued on a when-issued basis or forward commitment and sold $9,779,621 of securities issued on a when-issued basis or forward commitment. In connection with its ability to purchase or sell 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 Fund records the incremental difference between the forward purchase and sale of each forward roll as realized gain (loss) on investments or as fee income in the case of such transactions that have an associated fee in lieu of a difference in the forward purchase and sale price. Risks 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 at redelivery as compared to the securities sold to the counterparty; 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, market fluctuations and 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, 2005, securities with an aggregate market value of $3,102,188, representing 0.26% of the Fund's net assets, were in default. -------------------------------------------------------------------------------- FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in U.S. dollars. The values of securities denominated in foreign currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Foreign exchange rates may be valued primarily using dealer supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in exchange rates. 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. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. 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. In the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings. 37 | OPPENHEIMER STRATEGIC BOND FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis 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 comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. The tax components of capital shown in the table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes.
NET UNREALIZED APPRECIATION BASED ON COST OF SECURITIES UNDISTRIBUTED UNDISTRIBUTED AND OTHER INVESTMENTS NET INVESTMENT LONG-TERM ACCUMULATED LOSS FOR FEDERAL INCOME INCOME GAIN CARRYFORWARD 1,2,3,4,5 TAX PURPOSES ---------------------------------------------------------------------------------------- $ 55,828,861 $ -- $18,517,354 $8,288,247
1. As of December 31, 2005, the Fund had $17,223,723 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. As of December 31, 2005, details of the capital loss carryforwards were as follows: EXPIRING ------------------------------ 2007 $ 203,423 2008 253,735 2009 9,904,928 2010 6,861,637 -------------- Total $ 17,223,723 ============== 2. As of December 31, 2005, the Fund had $878,699 of post-October losses available to offset future realized capital gains, if any. Such losses, if unutilized, will expire in 2014. 3. The Fund had $414,932 of straddle losses which were deferred. 4. During the fiscal year ended December 31, 2005, the Fund utilized $4,343,176 of capital loss carryforward to offset capital gains realized in that fiscal year. 5. During the fiscal year ended December 31, 2004, the Fund utilized $1,200,449 of capital loss carryforward to offset capital gains realized in that fiscal year. Net investment income (loss) and net realized gain (loss) may differ for financial statement and 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. Accordingly, the following amounts have been reclassified for December 31, 2005. Net assets of the Fund were unaffected by the reclassifications. INCREASE TO INCREASE TO ACCUMULATED ACCUMULATED NET NET REALIZED LOSS INVESTMENT INCOME ON INVESTMENTS ------------------------------------------- $10,294,877 $10,294,877 The tax character of distributions paid during the years ended December 31, 2005 and December 31, 2004 was as follows: YEAR ENDED YEAR ENDED DECEMBER 31, 2005 DECEMBER 31, 2004 -------------------------------------------------------------------- Distributions paid from: Ordinary income $ 40,190,503 $ 34,517,360 38 | OPPENHEIMER STRATEGIC BOND FUND/VA The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 31, 2005 are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss. Federal tax cost of securities $ 1,287,851,686 Federal tax cost of other investments (31,303,462) ----------------- Total federal tax cost $ 1,256,548,224 ================= Gross unrealized appreciation $ 32,240,903 Gross unrealized depreciation (23,952,656) ----------------- Net unrealized appreciation $ 8,288,247 ================= -------------------------------------------------------------------------------- TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of "Other" within the asset section of the Statement of Assets and Liabilities. Deferral of trustees' fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund's assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the Plan. -------------------------------------------------------------------------------- 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. Income and capital gain distributions, if any, are declared and paid annually. -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts to the extent they are not offset by positive cash balances maintained by the Fund. The Reduction to Custodian Expenses line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings. -------------------------------------------------------------------------------- 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 U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 39 | OPPENHEIMER STRATEGIC BOND FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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, 2005 YEAR ENDED DECEMBER 31, 2004 SHARES AMOUNT SHARES AMOUNT --------------------------------------------------------------------------------------------------------- NON-SERVICE SHARES Sold 23,774,819 $ 120,696,837 24,003,073 $ 119,433,508 Dividends and/or distributions reinvested 5,623,068 28,059,108 6,088,351 29,467,620 Redeemed (42,307,482) (210,959,907) (25,208,632) (125,399,423) ------------------------------------------------------------- Net increase (decrease) (12,909,595) $ (62,203,962) 4,882,792 $ 23,501,705 ============================================================= --------------------------------------------------------------------------------------------------------- SERVICE SHARES Sold 80,659,335 $ 414,986,342 31,450,838 $ 158,302,695 Dividends and/or distributions reinvested 2,388,070 12,131,395 1,026,369 5,049,740 Redeemed (2,226,542) (11,463,078) (2,125,979) (10,581,099) ------------------------------------------------------------- Net increase 80,820,863 $ 415,654,659 30,351,228 $ 152,771,336 =============================================================
-------------------------------------------------------------------------------- 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, 2005, were as follows:
PURCHASES SALES ----------------------------------------------------------------------------------------- Investment securities $ 760,393,218 $ 681,724,411 U.S. government and government agency obligations 238,376,693 52,518,620 To Be Announced (TBA) mortgage-related securities 890,029,144 873,786,459
-------------------------------------------------------------------------------- 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 which provides for a fee at an annual rate of 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% on the next $200 million and 0.50% of average annual net assets over $1 billion. -------------------------------------------------------------------------------- ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund's tax returns. -------------------------------------------------------------------------------- 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 per account fee. For the year ended December 31, 2005, the Fund paid $20,449 to OFS for services to the Fund. Additionally, funds offered in variable annuity separate accounts are subject to minimum fees of $10,000 per class, for class level assets of $10 million or more. Each class is subject to the minimum fee in the event that the per account fee does not equal or exceed the applicable minimum fee. -------------------------------------------------------------------------------- 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, personal service and account maintenance for the Fund's Service shares. Under the plan, payments are made periodically at an annual rate of up to 0.25% of the average annual net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsor(s) of the insurance product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service shares. The impact of the service plan is to increase operating expenses of the Service shares, which results in lower performance compared to the Fund's shares that are not subject to a service fee. Fees incurred by the Fund under the plan are detailed in the Statement of Operations. 40 | OPPENHEIMER STRATEGIC BOND FUND/VA -------------------------------------------------------------------------------- WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes to 0.35% of average annual net assets per class. This undertaking may be amended or withdrawn at any time. -------------------------------------------------------------------------------- 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 to settle specific purchases or sales of securities denominated in a foreign currency and for protection from adverse exchange rate fluctuation. 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 prevailing foreign currency exchange rates. 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 transaction. Contracts closed or settled with the same broker are recorded as net realized gains or losses. Such realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. As of December 31, 2005, the Fund had outstanding foreign currency contracts as follows:
CONTRACT EXPIRATION AMOUNT VALUATION AS OF UNREALIZED UNREALIZED CONTRACT DESCRIPTION DATES (000S) DEC. 31, 2005 APPRECIATION DEPRECIATION -------------------------------------------------------------------------------------------------------------------------- CONTRACTS TO PURCHASE Argentine Peso [ARP] 1/5/06-2/2/06 16,875 ARP $ 5,537,498 $ -- $ 75,625 Brazilian Real [BRR] 1/17/06-1/5/10 41,189 BRR 18,998,814 1,172,694 152,194 British Pound Sterling [GBP] 3/9/06 600 GBP 1,032,215 -- 10,723 Canadian Dollar [CAD] 1/23/06 6,120 CAD 5,268,392 38,912 -- Chiliean Peso [CLP] 1/6/06 530,000 CLP 1,030,467 27,154 -- Colombian Peso [COP] 1/5/06 7,439,412 COP 3,253,389 -- 18,306 Euro [EUR] 1/17/06-2/14/06 37,000 EUR 43,876,406 10,306 174,681 Indonesian Rupiah [IDR] 4/3/06 29,080,000 IDR 2,927,018 -- 5,912 Indian Rupee [INR] 1/5/06 207,900 INR 4,618,721 122,996 -- Japanese Yen [JPY] 1/6/06 484,000 JPY 4,107,120 -- 134,215 Mexican Nuevo Peso [MXN] 1/17/06-4/25/06 81,140 MXN 7,584,773 120,083 -- Swedish Krone [SEK] 2/13/06 82,490 SEK 10,417,607 20,723 6,689 Swiss Franc [CHF] 2/2/06 6,800 CHF 5,192,699 -- 14,849 Thailand Baht [THB] 1/17/06 158,000 THB 3,849,981 -- 1,799 Turkish Lira [TRY] 1/17/06-2/1/08 12,284 TRY 10,613,182 423,589 1,755 ---------------------------- 1,936,457 596,748 ---------------------------- CONTRACTS TO SELL Australian Dollar [AUD] 3/6/06 9,920 AUD 7,257,953 75,134 -- Brazilian Real [BRR] 2/2/06 30,410 BRR 12,869,918 80,152 -- British Pound Sterling [GBP] 1/17/06-3/8/06 10,340 GBP 17,788,468 593,667 -- Canadian Dollar [CAD] 2/17/06 355 CAD 305,824 -- 8,005 Chinese Renminbi (Yuan) [CNY] 1/17/06 36,600 CNY 4,547,201 -- 391 Euro [EUR] 1/24/06-5/18/06 38,850 EUR 46,091,367 538,185 49,549 Japanese Yen [JPY] 1/10/06-4/5/06 7,558,000 JPY 64,342,685 491,826 438,432 New Zealand Dollar [NZD] 2/21/06 15,240 NZD 10,360,117 137,457 523 Swedish Krone [SEK] 1/17/06 36,600 SEK 4,613,051 60,741 -- Swiss Franc [CHF] 1/17/06 5,950 CHF 4,536,115 72,537 -- Taiwan Dollar [TWD] 1/17/06 151,600 TWD 4,627,822 -- 92,295 South African Rand [ZAR] 1/11/06-1/12/06 21,320 ZAR 3,366,318 -- 185,357 ---------------------------- 2,049,699 774,552 ---------------------------- Total unrealized appreciation and depreciation $ 3,986,156 $ 1,371,300 ============================
41 | OPPENHEIMER STRATEGIC BOND FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 6. FUTURES CONTRACTS A futures contract is a commitment to buy or sell a specific amount of a commodity or financial instrument at a negotiated price on a stipulated future date. 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 protection from changes in market value of stocks 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 as a 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 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 has expired. Cash held by the broker to cover initial margin requirements on open futures contracts is noted in the Statement of Assets and Liabilities. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable and/or payable for the daily mark to market for variation margin. Realized gains and losses are reported in the Statement of Operations as the closing and expiration of futures contracts. The net change in unrealized appreciation and depreciation is reported in the Statement of Operations. 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, 2005, the Fund had outstanding futures contracts as follows:
UNREALIZED EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION CONTRACT DESCRIPTION DATES CONTRACTS DECEMBER 31, 2005 (DEPRECIATION) ----------------------------------------------------------------------------------------------------------- CONTRACTS TO PURCHASE Amsterdam Exchange Index 1/20/06 19 $ 1,966,200 $ 18,046 DAX Index 3/17/06 12 1,931,405 36,529 Euro-Bundesobligation, 10 yr. 3/8/06 90 12,982,111 88,871 FTSE 100 Index 3/17/06 4 386,491 5,892 Nikkei 225 Index 3/9/06 3 408,276 22,627 Standard & Poor's ASX 200 Index 3/16/06 22 1,905,951 52,759 Standard & Poor's/MIB Index, 10 yr. 3/17/06 9 1,906,987 38,454 U.S. Long Bonds 3/22/06 387 44,190,563 633,438 U.S. Treasury Nts., 2 yr. 3/31/06 200 41,037,500 34,878 U.S. Treasury Nts., 10 yr. 3/22/06 329 35,994,656 177,443 --------- 1,108,937 ---------
42 | OPPENHEIMER STRATEGIC BOND FUND/VA
UNREALIZED EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION CONTRACT DESCRIPTION DATES CONTRACTS DECEMBER 31, 2005 (DEPRECIATION) ------------------------------------------------------------------------------------------------------------ CONTRACTS TO SELL CAC-40 10 Index 1/20/06 38 $ 2,122,758 $ (11,191) DAX Index 3/17/06 12 1,931,405 (37,701) Euro-Bundesobligation, 10 yr. 3/8/06 22 3,173,405 (22,238) FTSE 100 Index 3/17/06 41 3,961,530 (61,634) Japan (Government of) Mini Bonds, 10 yr. 3/8/06 20 2,329,249 (7,971) NASDAQ 100 E-Mini Index 3/17/06 112 3,716,160 2,043 Nikkei 225 Index 3/9/06 42 5,715,860 (193,395) OMXS 30 Index 1/27/06 179 2,167,512 (45,452) Standard & Poor's 500 Index 3/16/06 77 24,154,900 215,311 United Kingdom Long Gilt 3/29/06 3 590,730 (7,123) U.S. Treasury Nts., 2 yr. 3/31/06 49 10,054,188 (6,066) U.S. Treasury Nts., 5 yr. 3/22/06 222 23,608,313 (43,285) U.S. Treasury Nts., 10 yr. 3/22/06 359 39,276,844 (179,572) ---------- (398,274) ---------- $ 710,663 ==========
-------------------------------------------------------------------------------- 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. Contracts 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, 2005 was as follows:
CALL OPTIONS PUT OPTIONS ---------------------- ----------------------- PRINCIPAL/ PRINCIPAL/ NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF CONTRACTS PREMIUMS CONTRACTS PREMIUMS ----------------------------------------------------------------------------------------------------------- Options outstanding as of December 31, 2004 945 $ 2,661 2,325,000 $ 5,357 Options written 3,570 3,188 -- -- Options closed or expired (4,515) (5,849) (2,325,000) (5,357) -------------------------------------------------- Options outstanding as of December 31, 2005 -- $ -- -- $ -- ==================================================
43 | OPPENHEIMER STRATEGIC BOND FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 8. CREDIT SWAP CONTRACTS The Fund may enter into a credit default swap contract to seek to maintain a total return on a particular investment or portion of its portfolio, or for other non-speculative purposes. Credit default swap contracts are subject to credit risks (for example if the counterparty fails to meet its obligations). As a purchaser of a credit default swap contract, the Fund pays a periodic interest fee on the notional amount to the counterparty. This interest fee is accrued daily as a component of unrealized appreciation (depreciation) and is recorded as realized loss upon payment. Upon occurrence of a specific credit event with respect to the underlying referenced debt obligation, the Fund is obligated to deliver that security to the counterparty in exchange for receipt of the notional amount from the counterparty. The difference between the value of the security delivered and the notional amount received is recorded as realized gain. Information regarding such credit swaps as of December 31, 2005 is as follows:
NOTIONAL AMOUNT ANNUAL RECEIVED BY INTEREST UNREALIZED THE FUND UPON RATE PAID APPRECIATION COUNTERPARTY REFERENCED DEBT OBLIGATION CREDIT EVENT BY THE FUND (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------------------ Citigroup Global Markets Limited London, UK Republic of Hungary 4.50% Bond $ 2,300,000 0.40% $ 1,088 ------------------------------------------------------------------------------------------------------------------------------ Deutsche Bank Philippine Government Bond 2,000,000 3.69 35,000 ------------------------------------------------------------------------------------------------------------------------------ JPMorgan Chase New York, NY: Kingdom of Jordan 6% Step-up Bond 250,000 2.00 (873) Russian Federation 2.50% Step-up Bond 730,000 2.40 (77,615) ------------------------------------------------------------------------------------------------------------------------------ Lehman Brothers Special Financing, Inc.: Brazil 12.25% Global Bond 3,000,000 6.15 (497,594) General Motors 7.125% Bond 700,000 5.45 35,000 General Motors 7.125% Bond 1,300,000 4.40 71,500 ------------------------------------------------------------------------------------------------------------------------------ Morgan Stanley Capital Services, Inc.: Republic of Colombia 10.375% Bond 1,080,000 3.70 (109,602) Turkey Government 11.875% International Bond 1,560,000 3.22 (134,409) Ukrainian Government Bond 346,000 1.65 (1,946) ------------------------------------------------------------------------------------------------------------------------------ UBS AG, London Branch Federal Republic of Brazil 12.25% Bond 900,000 4.50 (93,368) --------------- $ (772,819) ===============
As a seller of a credit default swap contract, the Fund receives a periodic interest fee on the notional amount from the counterparty. This interest fee is accrued daily as a component of unrealized appreciation (depreciation) and is recorded as realized gain upon receipt. Upon occurrence of a specific credit event with respect to the underlying referenced debt obligation, the Fund receives that security from the counterparty in exchange for payment of the notional amount to the counterparty. The difference between the value of the security received and the notional amount paid is recorded as realized loss. Information regarding such credit swaps as of December 31, 2005 is as follows:
NOTIONAL ANNUAL AMOUNT PAID INTEREST RATE UNREALIZED BY THE FUND RECEIVED BY APPRECIATION COUNTERPARTY REFERENCED DEBT OBLIGATION UPON CREDIT EVENT THE FUND (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------------------ Lehman Brothers Special Financing, Inc.: General Motors 7.125% Bond $ 700,000 9.80% $ (78,015) General Motors 7.125% Bond 1,300,000 5.55 (282,815) ------------------------------------------------------------------------------------------------------------------------------ UBS AG, London Branch Federal Republic of Brazil 12.25% Bond 3,055,000 3.80 239,903 --------------- $ (120,927) ===============
44 | OPPENHEIMER STRATEGIC BOND FUND/VA -------------------------------------------------------------------------------- 9.INTEREST RATE SWAP CONTRACTS The Fund may enter into an interest rate swap transaction to maintain a total return or yield spread on a particular investment, or portion of its portfolio, or for other non-speculative purposes. Interest rate swaps involve the exchange of commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments. The coupon payments are based on an agreed upon principal amount and a specified index. Because the principal amount is not exchanged, it represents neither an asset nor a liability to either counterparty, and is referred to as notional. The unrealized gain (loss) related to the valuation of such contracts as well as the amount due to (owed by) the Fund at termination or settlement is combined and separately disclosed as an asset (liability) on the Statement of Assets and Liabilities. The Fund also records any periodic payments received from (paid to) the counterparty under such contracts as realized gain (loss) on the Statement of Operations. Interest rate swaps are subject to credit risk (if the counterparty fails to meet its obligations) and interest rate risk. The Fund could be obligated to pay more under its swap agreements than it receives under them, as a result of interest rate changes. As of December 31, 2005, the Fund had entered into the following interest rate swap agreements:
FIXED RATE FLOATING RATE PAID BY RECEIVED BY UNREALIZED NOTIONAL THE FUND AT THE FUND AT FLOATING TERMINATION APPRECIATION SWAP COUNTERPARTY AMOUNT DEC. 31, 2005 DEC. 31, 2005 RATE INDEX DATES (DEPRECIATION) ----------------------------------------------------------------------------------------------------------------------------------- Citigroup Global Markets Six-Month Holdings, Inc.: 1,260,000 PLZ 5.900% 5.520% WIBO 3/24/10 $ 21,463 Six-Month 2,016,000 PLZ 4.350 5.550 WIBO 3/24/10 35,109 ----------------------------------------------------------------------------------------------------------------------------------- Credit Suisse First Boston 28-Day MXN International 9,530,000 MXN 8.900 10.000 TIIE 7/9/15 58,910 ----------------------------------------------------------------------------------------------------------------------------------- Credit Suisse First Boston, Inc. Six-Month (Nassau Branch) 3,640,000 PLZ 4.910 4.480 WIBO 7/1/10 (22,674) ----------------------------------------------------------------------------------------------------------------------------------- Six-Month Deutsche Bank AG 930,000 3.660 5.250 LIBOR 6/23/15 74,003 ----------------------------------------------------------------------------------------------------------------------------------- Deutsche Bank AG, 5 yr.: 90-Day 55,240,000 TWD 2.585 1.360 CPTW 8/19/09 (39,818) 74,350,000 INR 4.880 5.012 IRS 1/15/09 57,230 ----------------------------------------------------------------------------------------------------------------------------------- Three-Month Deutsche Bank AG, 10 yr. 10,000,000 3.780 5.320 BBA LIBOR 5/12/14 304,662 ----------------------------------------------------------------------------------------------------------------------------------- Goldman Sachs Capital Markets LP: 15,887,992 BRR 19.730 17.180 BZDI 1/2/08 116,505 1,682,090 BRR 18.250 17.720 BZDI 1/2/07 -- 2,744,000 BRR 19.200 18.160 BZDI 1/2/08 46,558 4,710,000 MXN 8.615 10.000 MXN TIIE 6/24/15 29,995 9,160,000 MXN 9.155 10.220 MXN TIIE 1/30/15 70,396 7,875,000 MXN 9.110 10.430 MXN TIIE 5/29/15 70,924 7,875,000 MXN 9.053 10.300 MXN TIIE 6/1/15 64,522 7,990,000 MXN 9.000 10.290 MXN TIIE 6/14/15 64,885
45 | OPPENHEIMER STRATEGIC BOND FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 9. INTEREST RATE SWAP CONTRACTS Continued
FIXED RATE FLOATING RATE PAID BY RECEIVED BY UNREALIZED NOTIONAL THE FUND AT THE FUND AT FLOATING TERMINATION APPRECIATION SWAP COUNTERPARTY AMOUNT DEC. 31, 2005 DEC. 31, 2005 RATE INDEX DATES (DEPRECIATION) ----------------------------------------------------------------------------------------------------------------------------------- Goldman Sachs Group, Inc. (The): 3,307,000 BRR 18.630% 18.000% BZDI 1/2/07 $ 8,113 1,314,230 BRR 18.250 17.170 BZDI 1/2/08 6,036 1,606,280 BRR 18.250 17.170 BZDI 1/2/08 7,377 9,100,000 MXN 8.565 10.700 MXN TIIE 5/8/15 96,552 6,090,000 MXN 8.650 9.410 MXN TIIE 8/31/20 10,680 12,220,000 MXN 8.625 9.500 MXN TIIE 8/28/25 20,576 18,300,000 MXN 8.650 9.510 MXN TIIE 8/26/25 32,541 11,510,000 MXN 8.650 9.740 MXN TIIE 1/5/10 48,889 23,010,000 MXN 8.900 9.840 MXN TIIE 12/31/09 105,173 4,100,000 MXN 8.588 10.850 MXN TIIE 3/5/15 47,142 ----------------------------------------------------------------------------------------------------------------------------------- JPMorgan Chase Bank: Six-Month 245,400,000 HUF 6.630 7.000 LIBOR flat 7/14/08 3,093 28-Day MXN 14,620,000 MXN 8.650 10.880 TIIE 11/16/14 166,418 9,700,000 MXN 9.140 9.760 MXN TIIE 8/17/15 46,099 Three-Month 100,000,000 3.870 4.430 LIBOR 9/1/10 (629,723) Three-Month 1,820,000 3.680 4.940 BBA LIBOR 4/30/14 8,170 ----------------------------------------------------------------------------------------------------------------------------------- Three-Month JPMorgan Chase Bank, 10 yr. 35,000,000 4.290 4.985 BBA LIBOR 5/6/14 255,049 ----------------------------------------------------------------------------------------------------------------------------------- Lehman Brothers Special Financing, Inc.: 28-Day MXN 9,440,000 MXN 8.900 9.990 TIIE 7/19/15 56,597 Six-Month 4,680,000 PLZ 4.470 4.530 WIBO 7/5/10 (23,020) ----------------------------------------------------------------------------------------------------------------------------------- Morgan Stanley Capital Services, Inc.: 1,760,273 BRR 18.680 16.880 BZDI 1/2/08 2,417 3,540,000 BRR 19.720 17.590 BZDI 1/2/07 6,120 Six-Month 178,000,000 JPY 1.522 0.406 BBA LIBOR 10/5/13 (986) Six-Month 603,000,000 JPY 0.376 0.670 BBA LIBOR 10/5/08 189 Three-Month 4,940,000 ZAR 7.000 8.140 JIBA 5/18/10 21,996 --------------- $ 1,248,168 ===============
Notional amount is reported in U.S. Dollars, except for those denoted in the following currencies: BRR Brazilian Real HUF Hungary Forints INR Indian Rupee JPY Japanese Yen MXN Mexican Nuevo Peso PLZ Polish Zloty TWD New Taiwan Dollar ZAR South African Rand Index abbreviations are as follows: BBA LIBOR British Bankers' Association London-Interbank Offered Rate BZDI Brazil Cetip Interbank Deposit Rate CPTW Bloomberg Taiwan Secondary Commercial Papers IRS India Swap Composites JIBA South Africa Johannesburg Interbank Agreed Rate LIBOR London-Interbank Offered Rate MXN TIIE Mexican Peso-Interbank Equilibrium Interest Rate WIBO Poland Warsaw Interbank Offer Bid Rate 46 | OPPENHEIMER STRATEGIC BOND FUND/VA -------------------------------------------------------------------------------- 10. TOTAL RETURN SWAP CONTRACTS The Fund may enter into a total return swap transaction 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 notional. The unrealized gain (loss) related to the valuation of such contracts as well as the amount due to (owed by) the Fund at termination or settlement is combined and separately disclosed as an asset (liability) on the Statement of Assets and Liabilities. The Fund also records any periodic payments received from (paid to) the counterparty under such contracts as realized gain (loss) on the Statement of Operations. Total return swaps are subject to risks (if the counterparty fails to meet its obligations). As of December 31, 2005, the Fund had entered into the following total return swap agreements:
NOTIONAL TERMINATION UNREALIZED COUNTERPARTY SWAP DESCRIPTION AMOUNT DATES APPRECIATION ----------------------------------------------------------------------------------------------------------------------------- Deutsche Bank AG Six-Month BBA LIBOR $ 1,620,000 5/13/15 $ 186,249 ----------------------------------------------------------------------------------------------------------------------------- Goldman Sachs Group, Inc. (The): Six-Month BBA LIBOR 920,000 1/14/15 115,603 Six-Month BBA LIBOR 920,000 1/20/15 126,533 Received or paid monthly. If the sum of the Lehman Brothers CMBS Index Payer Payment Amount and the Floating Rate Payer Payment Amount is positive, the Counterparty will pay such amount to the Fund. If the sums are negative, then the Fund shall pay the absolute value of such amount to the Counterparty. 4,550,000 6/1/06 12,852 ------------ $ 441,237 ============
Abbreviations are as follows: BBA LIBOR British Bankers' Association London-Interbank Offered Rate CMBS Commercial Mortgage Backed Securities -------------------------------------------------------------------------------- 11. SWAPTION TRANSACTIONS The Fund may enter into a swaption transaction, whereby a contract that grants the holder, in return for payment of the purchase price (the "premium") of the option, the right, but not the obligation, to enter into an interest rate swap at a preset rate within a specified period of time, with the writer of the contract. The writer receives premiums and bears the risk of unfavorable changes in the preset rate on the underlying interest rate swap. Swaption contracts written by the Fund do not give rise to counterparty credit risk as they obligate the Fund, not its counterparty, to perform. Swaptions written are reported as a liability in the Statement of Assets and Liabilities. Written swaption activity for the year ended December 31, 2005 was as follows:
CALL SWAPTIONS PUT SWAPTIONS ---------------------------- ------------------------- NOTIONAL AMOUNT OF NOTIONAL AMOUNT OF AMOUNT PREMIUMS AMOUNT PREMIUMS --------------------------------------------------------------------------------------------------------- Swaptions outstanding as of December 31, 2004 $ 6,670,000 $ 66,002 $ 8,240,000 $ 28,460 Swaptions written 48,315,000 284,045 -- -- Swaptions closed or expired (45,985,000) (313,147) (8,240,000) (28,460) -------------------------------------------------------- Swaptions outstanding as of December 31, 2005 $ 9,000,000 $ 36,900 $ -- $ -- ========================================================
As of December 31, 2005, the Fund had entered into the following swaption contracts:
NOTIONAL EXPIRATION EXERCISE PREMIUM VALUE SWAPTIONS AMOUNT DATE PRICE RECEIVED SEE NOTE 1 -------------------------------------------------------------------------------------------------------- U.S. Dollar $9,000,000 2/9/06 $ 4.74 $ 36,900 $ 8,630
47 | OPPENHEIMER STRATEGIC BOND FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 12. ILLIQUID OR RESTRICTED SECURITIES AND CURRENCY As of December 31, 2005, investments in securities included issues that are illiquid or restricted. Restricted securities are 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 will not invest 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. Securities that are illiquid or restricted are marked with the applicable footnote on the Statement of Investments. Information concerning restricted securities and currency is as follows:
UNREALIZED ACQUISITION VALUATION AS OF APPRECIATION SECURITY DATES COST DECEMBER 31, 2005 (DEPRECIATION) -------------------------------------------------------------------------------------------------------------------------- Geotek Communications, Inc., Series B, Escrow Shares 1/4/01 $ 840 $ -- $ (840) Huntsman Corp. 7/15/04 39,675 96,044 56,369 Prandium, Inc. 3/19/99-9/25/02 284,000 242 (283,758) CURRENCY Argentine Peso 11/30/05-12/29/05 358,193 371,241 13,048 ----------------------------------------------- $ 682,708 $ 467,527 $ (215,181) ===============================================
-------------------------------------------------------------------------------- 13. SECURITIES LENDING The Fund lends portfolio securities from time to time in order to earn additional income. In return, the Fund receives collateral in the form of U.S. Treasury obligations or cash, against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the funds and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Fund could experience delays and cost in recovering the securities loaned or in gaining access to the collateral. Cash collateral is invested in cash equivalents. The Fund retains a portion of the interest earned from the collateral. The Fund continues to receive the economic benefit of interest or dividends paid on the securities loaned in the form of a substitute payment received from the borrower. As of December 31, 2005, the Fund had on loan securities valued at $66,657,680. Collateral of $67,772,157 was received for the loans, of which $27,470,079 was received in cash and subsequently invested in approved instruments. -------------------------------------------------------------------------------- 14. LITIGATION A consolidated amended complaint has been filed as putative derivative and class actions against the Manager, OFS and the Distributor, as well as 51 of the Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and former Directors or Trustees and 8 present and former officers of the funds. This complaint, initially filed in the U.S. District Court for the Southern District of New York on January 10, 2005 and amended on March 4, 2005, consolidates into a single action and amends six individual previously-filed putative derivative and class action complaints. Like those prior complaints, the complaint alleges that the Manager charged excessive fees for distribution and other costs, improperly used assets of the funds in the form of directed brokerage commissions and 12b-1 fees to pay brokers to promote sales of the funds, and failed to properly disclose the use of assets of the funds to make those payments in violation of the Investment Company Act of 1940 and the Investment Advisers Act of 1940. Also, like those prior complaints, the complaint further alleges that by permitting and/or participating in those actions, the Directors/Trustees and the Officers breached their fiduciary duties to shareholders of the funds under the Investment Company Act of 1940 and at common law. The complaint seeks unspecified compensatory and punitive damages, rescission of the funds' investment advisory agreements, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. 48 | OPPENHEIMER STRATEGIC BOND FUND/VA The defendants believe that the allegations contained in the Complaints are without merit and that they have meritorious defenses against the claims asserted. The defendants intend to defend these lawsuits vigorously and to contest any claimed liability. The defendants believe that it is premature to render any opinion as to the likelihood of an outcome unfavorable to them and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. 49 | OPPENHEIMER STRATEGIC BOND FUND/VA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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, a series of Oppenheimer Variable Account Funds, including the statement of investments, as of December 31, 2005, 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 each of the five years in the periods presented. 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 the standards of the Public Company Accounting Oversight Board (United States). 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. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. 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, 2005, 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 each of the five years in the periods presented, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Denver, Colorado February 13, 2006 50 | OPPENHEIMER STRATEGIC BOND FUND/VA FEDERAL INCOME TAX INFORMATION Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- In early 2006, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2005. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. Dividends, if any, paid by the Fund during the fiscal year ended December 31, 2005 which are not designated as capital gain distributions should be multiplied by 0.32% 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. 51 | OPPENHEIMER STRATEGIC BOND FUND/VA PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities ("portfolio proxies") held by the Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund's voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at www.sec.gov. The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund's Form N-Q filings are available on the SEC's website at http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 52 | OPPENHEIMER STRATEGIC BOND FUND/VA BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Each year, the Board of Trustees (the "Board"), including a majority of the independent Trustees, is required to determine whether to renew the Fund's investment advisory agreement (the "Agreement"). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information, that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance. The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager's services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. Outlined below is a summary of the principal information considered by the Board as well as the Board's conclusions. NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information on the nature and extent of the services provided to the Fund and information regarding the Manager's key personnel that provide such services. The Manager's duties include providing the Fund with the services of the portfolio managers and the Manager's investment team, who provide research, analysis and other advisory services in regard to the Fund's investments; securities trading services; oversight of third party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund's investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel that are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund's operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund's shares. The Manager also provides the Fund with office space, facilities and equipment. The Board also considered the quality of the services provided and the quality of the Manager's resources that are available to the Fund. The Board took account of the fact that the Manager has had over forty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager's administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager's key personnel and the size and functions of its staff providing investment management services to the Fund. The Board also considered compliance reports from the Fund's Chief Compliance Officer. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Arthur P. Steinmetz and the Manager's international and quantitative fixed income investment team and analysts. Mr. Steinmetz has had over 23 years of experience managing fixed income investments. The Board members also considered the totality of their experiences with the Manager, as directors or trustees of the Fund and other funds advised by the Manager. In light of the foregoing, the Board concluded that the Fund benefits from the services provided under the Agreement as a result of the Manager's experience, reputation, personnel, operations, and resources. INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the Manager provided information on the performance of the Fund and the Manager at each Board meeting, including comparative performance information. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund's historical performance to relevant market indices and to the performance of other general bond funds (including both funds advised by the Manager and funds advised by other investment advisers). The Board noted that the Fund's one-year, three-year, five-year and ten-year performance were all better than its peer group median. 53 | OPPENHEIMER STRATEGIC BOND FUND/VA BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited/Continued -------------------------------------------------------------------------------- COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board considered information regarding the Manager's costs in serving as the Fund's investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager's profitability from its relationship with the Fund. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also evaluated the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund, other flexible income, multi-sector income and general bond funds and other funds with comparable asset levels and distribution features. The Board noted that the Fund's contractual and actual management fees are higher than its peer group median and average, however, its total expenses are lower than both its peer group median and average. In light of this and of the Fund's strong performance, the Board concluded that the management fee was reasonable. ECONOMIES OF SCALE. The Board considered whether the Manager may realize economies of scale in managing and supporting the Fund, whether those economies of scale benefit the Fund's shareholders and the current level of Fund assets in relation to the Fund's management fee breakpoints, which are intended to share with shareholders economies of scale that may exist as the Fund grows. OTHER BENEFITS TO THE MANAGER. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager's affiliates. The Board also considered the nature and quality of services provided by affiliates of the Manager, which it reviews at other times during the year in connection with the renewal of the Fund's service agreements. The Board considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide services to the Fund and that maintaining the financial viability of the Manager is important in order for the Manager to continue to provide significant services to the Fund and its shareholders. CONCLUSIONS. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees' counsel are both independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules. Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the advisory agreement for another year. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the factors together. The Board judged the terms and conditions of the advisory agreement, including the management fee, in light of all of the surrounding circumstances. 54 | OPPENHEIMER STRATEGIC BOND FUND/VA TRUSTEES AND OFFICERS Unaudited --------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------ NAME, POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD; WITH THE FUNDS, LENGTH OF NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN SERVICE, AGE INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL. WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Mortgage Company (since Chairman of the Board of 1991), Centennial State Mortgage Company (since 1994), and The El Paso Mortgage Company (since 1993); Trustees (since 2003), Chairman of the following private companies: Ambassador Media Corporation (since 1984) and Broadway Trustee (since 1999) Ventures (since 1984); Director of the following: Helmerich & Payne, Inc. (oil and gas Age: 68 drilling/production company) (since 1992), Campus Crusade for Christ (since 1991) and The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (since 2002); former Chairman of the following: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (insurance agency) (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private equity funds) (until Trustee (since 1993) February 2001); Chairman, President and Chief Executive Officer of A.G. Edwards Capital, Inc. (until Age: 74 March 2000); Director of A.G. Edwards & Sons, Inc. (brokerage company) (until 2000) and A.G. Edwards Trust Company (investment adviser) (until 2000); Vice Chairman and Director of A.G. Edwards, Inc. (until March 1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March 1999); Chairman of A.G. Edwards Trust Company (until March 1999) and A.G.E. Asset Management (investment adviser) (until March 1999). Oversees 38 portfolios in the OppenheimerFunds complex. GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation (December 1991-April Trustee (since 1999) 1999); President, Treasurer and Director of Centennial Capital Corporation (June 1989-April 1999); Age: 69 Chief Executive Officer and Director of MultiSource Services, Inc. (March 1996-April 1999); Mr. Bowen held several positions with the Manager and with subsidiary or affiliated companies of the Manager (September 1987-April 1999). Oversees 38 portfolios in the OppenheimerFunds complex. EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since June 2000); Trustee (since 1999) Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002); Partner at Age: 67 PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (July 1994-June 1998). Oversees 38 portfolios in the OppenheimerFunds complex. JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Northwestern Energy Trustee (since 1990) Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals (October Age: 64 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. ("OAC") (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 38 portfolios in the OppenheimerFunds complex. SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September 1984). Mr. Freedman held Trustee (since 1996) several positions with the Manager and with subsidiary or affiliated companies of the Manager Age: 65 (until October 1994). Oversees 38 portfolios in the OppenheimerFunds complex.
55 | OPPENHEIMER STRATEGIC BOND FUND/VA TRUSTEES AND OFFICERS Unaudited/Continued -------------------------------------------------------------------------------- BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) (since February Trustee (since 2002) 2000); Director of The California Endowment (philanthropic organization) (since April 2002); Director Age: 59 of Community Hospital of Monterey Peninsula (since February 2002); Vice Chair of American Funds' Emerging Markets Growth Fund, Inc. (mutual fund) (since October 1991); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation and The University of Michigan; Advisor at Credit Suisse First Boston's Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member of the investment committee of Hartford Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT J. MALONE, Director of Jones International University (educational organization) (since August 2005); Chairman, Trustee (since 2002) Chief Executive Officer and Director of Steele Street State Bank (commercial banking) (since August Age: 61 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 38 portfolios in the OppenheimerFunds complex. F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment company) Trustee (since 2000) (since 1996) and MML Series Investment Fund (investment company) (since 1996); Trustee and Chairman Age: 63 of the Investment Committee (since 1994) of the Worcester Polytech Institute (private university); President and Treasurer of the SIS Funds (private charitable fund) (since January 1999); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Member of the Investment Committee of the Community Foundation of Western Massachusetts (1998-2003); and Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999). Oversees 40 portfolios in the OppenheimerFunds complex. ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW YORK, AND OFFICER NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES. JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President (since September 2000) President and Trustee of the Manager; President and Director or Trustee of other Oppenheimer funds; President and Director (since 2001) of OAC and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager) Age: 56 (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since November 2001); Chairman and Director of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since July 2001); President and Director of OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since July 2001); Director of the following investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 2001) and Director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director of DLB Acquisition Corporation (holding company parent of Babson Capital Management LLC) (since June 1995); Member of the Investment Company Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of the Manager (September 2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual Select Funds (open-end investment companies) (November 1999-November 2001); Director of C.M. Life Insurance Company (September 1999-August 2000); President, Chief Executive Officer and Director of MML Bay State Life Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 87 portfolios in the OppenheimerFunds complex.
56 | OPPENHEIMER STRATEGIC BOND FUND/VA ------------------------------------------------------------------------------------------------------------------------------------ OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. STEINMETZ AND ZACK, TWO THE FUND WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT DEATH OR REMOVAL. ARTHUR P. STEINMETZ, Senior Vice President of the Manager (since March 1993) and of HarbourView Asset Management Vice President and Portfolio Corporation (since March 2000). An officer of 4 portfolios in the OppenheimerFunds complex. Manager (since 1993) Age: 47 MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Vice President Vice President and Chief of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Shareholder Compliance Officer Services, Inc. (since June 1983); Vice President and Director of Internal Audit of the Manager (since 2004) (1997-February 2004). An officer of 87 portfolios in the OppenheimerFunds complex. Age: 55 BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the following: Treasurer and Principal HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder Services, Financial and Accounting Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer Partnership Holdings, Inc. Officer (since 1999) (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International Age: 46 Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex. ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the Manager; Vice President and Secretary General Counsel and Director of the Distributor (since December 2001); General Counsel of Centennial (since 2001) Asset Management Corporation (since December 2001); Senior Vice President and General Counsel of Age: 57 HarbourView Asset Management Corporation (since December 2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General Counsel and Director of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON REQUEST, BY CALLING 1.800.981.2871. 57 | OPPENHEIMER STRATEGIC BOND FUND/VA OPPENHEIMER VALUE FUND/VA FUND PERFORMANCE DISCUSSION -------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. The Fund withstood a volatile market environment to deliver an attractive 12-month total return. Strong relative total returns for the Fund's financials and consumer staples stocks helped overcome relative weakness in the portfolio's technology and industrial holdings. The Fund's strong performance can be attributed to our bottom-up stock selection discipline. Our investment strategy centers around finding stocks whose prices are, in our view, inexpensive relative to the underlying companies' long-term earnings power and potential to generate cash flow. During this period, we found relatively few financial services companies that met our investment parameters. We believe many financial services companies were overly exposed to a flat yield curve (i.e., a relatively small gap or difference between short- and long-term fixed-income yields). Due to these concerns, the portfolio was underweighted (vs. the index) in financial services. Despite the variance, this sector was an area of relative strength for the Fund. Among the largest contributors to performance were Lehman Brothers, Inc., Franklin Resources, Inc. and Genworth, Inc. The Fund was also underweighted in the energy sector, which detracted from results as energy stocks outperformed. The Fund's financial services holdings benefited primarily from company-specific developments. The stock of brokerage firm Lehman Brothers was relatively inexpensive when we purchased it, despite its strong profitability and improvements in its franchises and returns. Since then, the stock has appreciated. Asset manager Franklin Resources benefited from robust mutual fund inflows that helped to boost earnings and, its stock price. Stock selection in consumer staples, lead by our holding in Altria, also contributed to relative performance. The underweight in the energy sector detracted from relative performance. The Fund's energy-related holdings involve companies whose individual merits and unique industry positioning may enable them to outperform the energy sector. The Fund's primary area of weakness was technology, a sector in which the portfolio was overweighted. The single largest detractors from results were Take Two Interactive Software, Inc., and IBM Corp. Take Two, a manufacturer of mature-rated and sports-related game software and video game accessories, suffered primarily due a weaker than expected environment during the current platform transition period as well as company specific execution issues. In the first half of the period, IBM experienced difficulty with execution. Although the situation has improved, the stock still has not recovered fully. Stock selection in industrials also detracted from performance due primarily to weakness in Cendant Corp. COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graph that follows shows the performance of a hypothetical $10,000 investment in the Fund held until December 31, 2005. In the case of non-service shares, performance is measured from inception of the class on January 2, 2003. 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 graph assumes that all dividends and capital gains distributions were reinvested in additional shares. The Fund's performance is compared to the performance of the Russell 1000 Value Index, an unmanaged index of equity securities of small capitalization companies that is a measure of the small company market. Index performance reflects the reinvestment of income but does not consider the effect of transaction costs, and none of the data in the graph shows the effect of taxes. 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 VALUE FUND/VA NON-SERVICE SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Value Fund/VA (Non-Service) Russell 1000 Value Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] Value of Investment Russell 1000 Value Date In Fund Index 01/02/2003 10,000 10,000 03/31/2003 9,230 9,514 06/30/2003 10,800 11,157 09/30/2003 11,250 11,387 12/31/2003 12,900 13,003 03/31/2004 13,152 13,397 06/30/2004 13,100 13,515 09/30/2004 13,194 13,723 12/31/2004 14,771 15,148 03/31/2005 14,795 15,161 06/30/2005 15,048 15,415 09/30/2005 15,759 16,014 12/31/2005 15,640 16,216 AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/05 1-Year 5.88% 5-Year N/A Since Inception (1/2/03) 16.09% THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT. 5 | OPPENHEIMER VALUE FUND/VA FUND EXPENSES -------------------------------------------------------------------------------- FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include redemption fees, if any; and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 31, 2005. ACTUAL EXPENSES. The "actual" lines of the table provide information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the "actual" line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio, and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the "hypothetical" lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included, your costs would have been higher. -------------------------------------------------------------------------------- BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE 6 MONTHS ENDED (7/1/05) (12/31/05) DECEMBER 31, 2005 -------------------------------------------------------------------------------- Non-Service shares Actual $1,000.00 $1,039.30 $10.54 -------------------------------------------------------------------------------- Non-Service shares Hypothetical 1,000.00 1,014.92 10.41 Hypothetical assumes 5% annual return before expenses. Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). The annualized expense ratio based on the 6-month period ended December 31, 2005 is as follows: CLASS EXPENSE RATIO --------------------------------- Non-Service shares 2.04% -------------------------------------------------------------------------------- 6 | OPPENHEIMER VALUE FUND/VA STATEMENT OF INVESTMENTS December 31, 2005 -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------- COMMON STOCKS--114.4% ------------------------------------------------------------------------- CONSUMER DISCRETIONARY--10.3% ------------------------------------------------------------------------- MEDIA--10.3% Comcast Corp., Cl. A Special, Non-Vtg. 1 2,300 $ 59,087 ------------------------------------------------------------------------- Liberty Global, Inc., Series A 2,943 66,218 ------------------------------------------------------------------------- Liberty Global, Inc., Series C 1 4,343 92,072 ------------------------------------------------------------------------- News Corp., Inc., Cl. A 3,000 46,650 ------------- 264,027 CONSUMER STAPLES--6.4% ------------------------------------------------------------------------- BEVERAGES--0.7% Diageo plc, Sponsored ADR 300 17,490 ------------------------------------------------------------------------- TOBACCO--5.7% Altria Group, Inc. 1,950 145,704 ------------------------------------------------------------------------- ENERGY--13.8% ------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES--1.1% Halliburton Co. 470 29,121 ------------------------------------------------------------------------- OIL & GAS--12.7% BP plc, ADR 2,070 132,935 ------------------------------------------------------------------------- Exxon Mobil Corp. 2,500 140,425 ------------------------------------------------------------------------- TotalFinaElf SA, Sponsored ADR 400 50,560 ------------- 323,920 ------------------------------------------------------------------------- FINANCIALS--35.5% ------------------------------------------------------------------------- CAPITAL MARKETS--5.9% UBS AG 1,600 152,240 ------------------------------------------------------------------------- COMMERCIAL BANKS--12.0% Bank of America Corp. 1,288 59,441 ------------------------------------------------------------------------- Wachovia Corp. 2,000 105,720 ------------------------------------------------------------------------- Wells Fargo & Co. 2,280 143,252 ------------- 308,413 ------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES--8.5% Capital One Financial Corp. 870 75,168 ------------------------------------------------------------------------- Citigroup, Inc. 600 29,118 ------------------------------------------------------------------------- JPMorgan Chase & Co. 2,650 105,179 ------------------------------------------------------------------------- Lehman Brothers Holdings, Inc. 60 7,690 ------------- 217,155 ------------------------------------------------------------------------- INSURANCE--5.7% Everest Re Group Ltd. 300 30,105 ------------------------------------------------------------------------- Genworth Financial, Inc., Cl. A 2,140 74,001 ------------------------------------------------------------------------- Platinum Underwriters Holdings Ltd. 1,360 42,255 ------------- 146,361 ------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE--3.4% Countrywide Financial Corp. 1,330 45,473 ------------------------------------------------------------------------- Freddie Mac 620 40,517 ------------- 85,990 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------- HEALTH CARE--5.2% ------------------------------------------------------------------------- BIOTECHNOLOGY--1.1% Wyeth 600 $ 27,642 ------------------------------------------------------------------------- PHARMACEUTICALS--4.1% Pfizer, Inc. 1,300 30,316 ------------------------------------------------------------------------- Sanofi-Aventis SA, ADR 1,720 75,508 ------------- 105,824 ------------------------------------------------------------------------- INDUSTRIALS--11.0% ------------------------------------------------------------------------- AEROSPACE & DEFENSE--7.6% Honeywell International, Inc. 830 30,918 ------------------------------------------------------------------------- Raytheon Co. 340 13,651 ------------------------------------------------------------------------- United Technologies Corp. 2,700 150,957 ------------- 195,526 ------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES--3.4% Cendant Corp. 4,990 86,078 ------------------------------------------------------------------------- INFORMATION TECHNOLOGY--17.4% ------------------------------------------------------------------------- COMPUTERS & PERIPHERALS--3.7% Hutchinson Technology, Inc. 1 1,200 34,140 ------------------------------------------------------------------------- International Business Machines Corp. 730 60,006 ------------- 94,146 ------------------------------------------------------------------------- SOFTWARE--13.7% Microsoft Corp. 4,860 127,089 ------------------------------------------------------------------------- Novell, Inc. 1 4,470 39,470 ------------------------------------------------------------------------- Synopsys, Inc. 1 4,060 81,444 ------------------------------------------------------------------------- Take-Two Interactive Software, Inc. 1 5,890 104,253 ------------- 352,256 ------------------------------------------------------------------------- MATERIALS--4.5% ------------------------------------------------------------------------- CHEMICALS--2.9% Praxair, Inc. 1,370 72,555 ------------------------------------------------------------------------- METALS & MINING--1.6% Phelps Dodge Corp. 290 41,722 ------------------------------------------------------------------------- TELECOMMUNICATION SERVICES--2.3% ------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES--2.3% IDT Corp., Cl. B 1 2,730 31,941 ------------------------------------------------------------------------- Sprint Nextel Corp. 1,200 28,032 ------------- 59,973 ------------------------------------------------------------------------- UTILITIES--8.0% ------------------------------------------------------------------------- ELECTRIC UTILITIES--6.7% AES Corp. (The) 1 5,210 82,474 ------------------------------------------------------------------------- CMS Energy Corp. 1 2,480 35,985 ------------------------------------------------------------------------- PG&E Corp. 540 20,045 ------------------------------------------------------------------------- Reliant Energy, Inc. 1 3,300 34,056 ------------- 172,560 7 | OPPENHEIMER VALUE FUND/VA STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------- GAS UTILITIES--1.3% Sempra Energy 730 $ 32,732 ------------- Total Common Stocks (Cost $2,530,488) 2,931,435 PRINCIPAL AMOUNT ------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS--2.1% ------------------------------------------------------------------------- Undivided interest of 0.004% in joint repurchase agreement (Principal Amount/Value $1,414,200,000, with a maturity value of $1,414,844,247) with UBS Warburg LLC, 4.10%, dated 12/30/05, to be repurchased at $54,025 on 1/3/06, collateralized by Federal Home Loan Mortgage Corp., 5%, 1/1/35, with a value of $157,513,104 and Federal National Mortgage Assn., 5%--5.50%, 3/1/34--10/1/35, with a value of $1,301,420,187 (Cost $54,000) $ 54,000 54,000 VALUE SEE NOTE 1 ------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $2,584,488) 116.5% $ 2,985,435 ------------------------------------------------------------------------- LIABILITIES IN EXCESS OF OTHER ASSETS (16.5) (423,175) ------------------------------- NET ASSETS 100.0% $ 2,562,260 =============================== FOOTNOTE TO STATEMENT OF INVESTMENTS 1. Non-income producing security. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 8 | OPPENHEIMER VALUE FUND/VA STATEMENT OF ASSETS AND LIABILITIES December 31, 2005 --------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------- ASSETS ------------------------------------------------------------------------------------------------- Investments, at value (cost $2,584,488)--see accompanying statement of investments $ 2,985,435 ------------------------------------------------------------------------------------------------- Cash 10,326 ------------------------------------------------------------------------------------------------- Receivables and other assets: Investments sold 39,875 Interest and dividends 2,783 Other 2,668 ------------ Total assets 3,041,087 ------------------------------------------------------------------------------------------------- LIABILITIES ------------------------------------------------------------------------------------------------- Payables and other liabilities: Dividends 419,624 Investments purchased 40,239 Trustees' compensation 3,819 Shareholder communications 2,406 Other 12,739 ------------ Total liabilities 478,827 ------------------------------------------------------------------------------------------------- NET ASSETS $ 2,562,260 ============ ------------------------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ------------------------------------------------------------------------------------------------- Par value of shares of beneficial interest $ 230 ------------------------------------------------------------------------------------------------- Additional paid-in capital 2,132,982 ------------------------------------------------------------------------------------------------- Accumulated net investment loss (1,456) ------------------------------------------------------------------------------------------------- Accumulated net realized gain on investments 29,557 ------------------------------------------------------------------------------------------------- Net unrealized appreciation on investments 400,947 ------------ NET ASSETS--applicable to 229,559 shares of beneficial interest outstanding $ 2,562,260 ============ ------------------------------------------------------------------------------------------------- NET ASSET VALUE, REDEMPTION PRICE PER SHARE AND OFFERING PRICE PER SHARE $ 11.16
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 9 | OPPENHEIMER VALUE FUND/VA STATEMENT OF OPERATIONS For the Year Ended December 31, 2005 --------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------- INVESTMENT INCOME ------------------------------------------------------------------------------------------------- Dividends (net of foreign withholding taxes of $487) $ 53,424 ------------------------------------------------------------------------------------------------- Interest 2,021 ------------ Total investment income 55,445 ------------------------------------------------------------------------------------------------- EXPENSES ------------------------------------------------------------------------------------------------- Management fees 21,587 ------------------------------------------------------------------------------------------------- Legal, auditing and other professional fees 14,923 ------------------------------------------------------------------------------------------------- Shareholder communications 4,981 ------------------------------------------------------------------------------------------------- Trustees' compensation 4,627 ------------------------------------------------------------------------------------------------- Administration service fees 1,500 ------------------------------------------------------------------------------------------------- Insurance expenses 888 ------------------------------------------------------------------------------------------------- Custodian fees and expenses 132 ------------------------------------------------------------------------------------------------- Other 2,507 ------------ Total expenses 51,145 Less reduction to custodian expenses (32) ------------ Net expenses 51,113 ------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME 4,332 ------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN ------------------------------------------------------------------------------------------------- Net realized gain on investments 444,863 ------------------------------------------------------------------------------------------------- Net change in unrealized appreciation on investments (281,841) ------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 167,354 ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 10 | OPPENHEIMER VALUE FUND/VA STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005 2004 ---------------------------------------------------------------------------------------------------------------- OPERATIONS ---------------------------------------------------------------------------------------------------------------- Net investment income (loss) $ 4,332 $ (2,747) ---------------------------------------------------------------------------------------------------------------- Net realized gain 444,863 462,480 ---------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (281,841) (56,226) --------------------------- Net increase in net assets resulting from operations 167,354 403,507 ---------------------------------------------------------------------------------------------------------------- DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS ---------------------------------------------------------------------------------------------------------------- Dividends from net investment income (4,318) (10,068) ---------------------------------------------------------------------------------------------------------------- Distributions from net realized gain (415,306) (584,853) ---------------------------------------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ---------------------------------------------------------------------------------------------------------------- Net decrease in net assets resulting from beneficial interest transactions -- (864,862) ---------------------------------------------------------------------------------------------------------------- NET ASSETS ---------------------------------------------------------------------------------------------------------------- Total decrease (252,270) (1,056,276) ---------------------------------------------------------------------------------------------------------------- Beginning of period 2,814,530 3,870,806 --------------------------- End of period (including accumulated net investment loss of $1,456 and $1,470, respectively) $ 2,562,260 $ 2,814,530 ===========================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 11 | OPPENHEIMER VALUE FUND/VA FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 1 ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA ------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 12.26 $ 12.90 $ 10.00 ------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income (loss) .02 2 (.01) 2 .03 Net realized and unrealized gain .71 1.82 2.87 ----------------------------------------- Total from investment operations .73 1.81 2.90 ------------------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.02) (.03) -- Distributions from net realized gain (1.81) (2.42) -- ----------------------------------------- Total dividends and/or distributions to shareholders (1.83) (2.45) -- ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 11.16 $ 12.26 $ 12.90 ========================================= ------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN, AT NET ASSET VALUE 3 5.88% 14.50% 29.00% ------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA ------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $ 2,562 $ 2,815 $ 3,871 ------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $ 2,878 $ 3,370 $ 3,205 ------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: 4 Net investment income (loss) 0.15% (0.08)% 0.27% Total expenses 1.78% 5 1.82% 5 1.39% 5 ------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 86% 100% 120%
1. For the period from January 2, 2003 (commencement of operations) to December 31, 2003. 2. Per share amounts calculated based on the average shares outstanding during the period. 3. 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year. 5. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 12 | OPPENHEIMER VALUE FUND/VA NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Oppenheimer Value Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds, an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek long-term growth of capital by investing primarily in common stocks with low price-earnings ratios and better-than-anticipated earnings. Realization of current income is a secondary consideration. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). As of December 31, 2005, all of the Non-Service shares were owned by the Manager. The Fund currently offers Non-Service shares only. The shares 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 following is a summary of significant accounting policies consistently followed by the Fund. -------------------------------------------------------------------------------- SECURITIES VALUATION. The Fund calculates the net asset value of its shares as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Securities may be valued primarily using dealer-supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Securities listed or traded on National Stock Exchanges or other domestic 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. Securities traded on NASDAQ are valued based on the closing price provided by NASDAQ 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 traded on foreign exchanges are valued based on the last sale price on the principal exchange on which the security is traded, in the country that is identified by the portfolio pricing service, prior to the time when the Fund's assets are valued. In the absence of a sale, the security is valued at the official closing price on the principal exchange. Corporate, government and municipal debt instruments having a remaining maturity in excess of sixty days and all mortgage-backed securities will be valued at the mean between the "bid" and "asked" prices. Futures contracts traded on a commodities or futures exchange will be valued at the final settlement price or official closing price on the principal exchange as reported by such principal exchange at its trading session ending at, or most recently prior to, the time when the Fund's assets are valued. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value. Foreign and domestic securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund's assets are valued but after the close of their respective exchanges will be fair valued. Fair value is determined in good faith using 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). -------------------------------------------------------------------------------- FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in U.S. dollars. The values of securities denominated in foreign currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Foreign exchange rates may be valued primarily using dealer supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in exchange rates. 13 | OPPENHEIMER VALUE FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued 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. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. 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. In the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings. -------------------------------------------------------------------------------- FEDERAL TAXES. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. The tax components of capital shown in the table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes. NET UNREALIZED APPRECIATION BASED ON COST OF SECURITIES AND UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME INCOME GAIN CARRYFORWARD 1,2 TAX PURPOSES ------------------------------------------------------------------------- $14,670 $16,079 $-- $400,947 1. During the fiscal year ended December 31, 2005, the Fund did not utilize any capital loss carryforward. 2. During the fiscal year ended December 31, 2004, the Fund did not utilize any capital loss carryforward. Net investment income (loss) and net realized gain (loss) may differ for financial statement and 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 tax character of distributions paid during the years ended December 31, 2005 and December 31, 2004 was as follows: YEAR ENDED YEAR ENDED DECEMBER 31, 2005 DECEMBER 31, 2004 ------------------------------------------------------------------ Distributions paid from: Ordinary income $ 103,467 $ 305,198 Long-term capital gain 316,157 289,723 ------------------------------- TOTAL $ 419,624 $ 594,921 =============================== The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 31, 2005 are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss. Federal tax cost of securities $2,584,488 =========== Gross unrealized appreciation $ 465,790 Gross unrealized depreciation (64,843) ----------- Net unrealized appreciation (depreciation) $ 400,947 =========== 14 | OPPENHEIMER VALUE FUND/VA -------------------------------------------------------------------------------- TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of "Other" within the asset section of the Statement of Assets and Liabilities. Deferral of trustees' fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund's assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the Plan. -------------------------------------------------------------------------------- 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. Income and capital gain distributions, if any, are declared and paid annually. -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts to the extent they are not offset by positive cash balances maintained by the Fund. The Reduction to Custodian Expenses line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings. At December 31, 2005, the Fund had $13 of such earnings on cash balances available to offset future custodian fees or interest expenses incurred during the next fiscal year. -------------------------------------------------------------------------------- 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 U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. -------------------------------------------------------------------------------- 2. SHARES OF BENEFICIAL INTEREST The Trust has authorized an unlimited number of $0.001 par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004 SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------------------------- NON-SERVICE SHARES Dividends and/or distributions reinvested -- $ -- 10,679 $ 135,090 Redeemed -- -- (81,120) (999,952) ----------------------------------------------------------- Net decrease -- $ -- (70,441) $(864,862) ===========================================================
15 | OPPENHEIMER VALUE FUND/VA NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 3. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the year ended December 31, 2005, were as follows: PURCHASES SALES --------------------------------------------------------- Investment securities $ 2,478,228 $ 2,906,942 -------------------------------------------------------------------------------- 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 Fund which provides for a fee at an annual rate of 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million and 0.60% of average annual net assets over $800 million. -------------------------------------------------------------------------------- ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund's tax returns. -------------------------------------------------------------------------------- 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 per account fee. Additionally, funds offered in variable annuity separate accounts are subject to minimum fees of $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. -------------------------------------------------------------------------------- WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees to 0.35% of average annual net assets of the Fund. This undertaking may be amended or withdrawn at any time. -------------------------------------------------------------------------------- 5. LITIGATION A consolidated amended complaint has been filed as putative derivative and class actions against the Manager, OFS and the Distributor, as well as 51 of the Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and former Directors or Trustees and 8 present and former officers of the funds. This complaint, initially filed in the U.S. District Court for the Southern District of New York on January 10, 2005 and amended on March 4, 2005, consolidates into a single action and amends six individual previously-filed putative derivative and class action complaints. Like those prior complaints, the complaint alleges that the Manager charged excessive fees for distribution and other costs, improperly used assets of the funds in the form of directed brokerage commissions and 12b-1 fees to pay brokers to promote sales of the funds, and failed to properly disclose the use of assets of the funds to make those payments in violation of the Investment Company Act of 1940 and the Investment Advisers Act of 1940. Also, like those prior complaints, the complaint further alleges that by permitting and/or participating in those actions, the Directors/Trustees and the Officers breached their fiduciary duties to shareholders of the funds under the Investment Company Act of 1940 and at common law. The complaint seeks unspecified compensatory and punitive damages, rescission of the funds' investment advisory agreements, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. The defendants believe that the allegations contained in the Complaints are without merit and that they have meritorious defenses against the claims asserted. The defendants intend to defend these lawsuits vigorously and to contest any claimed liability. The defendants believe that it is premature to render any opinion as to the likelihood of an outcome unfavorable to them and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. 16 | OPPENHEIMER VALUE FUND/VA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER VALUE FUND/VA: We have audited the accompanying statement of assets and liabilities of Oppenheimer Value Fund/VA, a series of Oppenheimer Variable Account Funds, including the statement of investments, as of December 31, 2005, 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 each of the five years in the periods presented. 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 the standards of the Public Company Accounting Oversight Board (United States). 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. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. 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 Value Fund/VA as of December 31, 2005, 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 each of the five years in the periods presented, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Denver, Colorado February 13, 2006 17 | OPPENHEIMER VALUE FUND/VA FEDERAL INCOME TAX INFORMATION Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- In early 2006, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2005. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. Capital gain distributions of $1.3772 per share were paid to Non-Service shareholders, respectively, on December 30, 2005. Whether received in stock or in cash, the capital gain distribution should be treated by shareholders as a gain from the sale of the capital assets held for more than one year (long-term capital gains). Dividends, if any, paid by the Fund during the fiscal year ended December 31, 2005 which are not designated as capital gain distributions should be multiplied by 37.48% 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. 18 | OPPENHEIMER VALUE FUND/VA PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities ("portfolio proxies") held by the Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund's voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at www.sec.gov. The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund's Form N-Q filings are available on the SEC's website at http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 19 | OPPENHEIMER VALUE FUND/VA BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Each year, the Board of Trustees (the "Board"), including a majority of the independent Trustees, is required to determine whether to renew the Fund's investment advisory agreement (the "Agreement"). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information, that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance. The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager's services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. Outlined below is a summary of the principal information considered by the Board as well as the Board's conclusions. NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information on the nature and extent of the services provided to the Fund and information regarding the Manager's key personnel that provide such services. The Manager's duties include providing the Fund with the services of the portfolio managers and the Manager's investment team, who provide research, analysis and other advisory services in regard to the Fund's investments; securities trading services; oversight of third party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund's investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel that are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund's operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund's shares. The Manager also provides the Fund with office space, facilities and equipment. The Board also considered the quality of the services provided and the quality of the Manager's resources that are available to the Fund. The Board took account of the fact that the Manager has had over forty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager's administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager's key personnel and the size and functions of its staff providing investment management services to the Fund. The Board also considered compliance reports from the Fund's Chief Compliance Officer. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Christopher Leavy and the Manager's Equity Value investment team and analysts. Mr. Leavy has had over 13 years of experience managing equity investments. The Board members also considered the totality of their experiences with the Manager, as directors or trustees of the Fund and other funds advised by the Manager. In light of the foregoing, the Board concluded that the Fund benefits from the services provided under the Agreement as a result of the Manager's experience, reputation, personnel, operations, and resources. INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the Manager provided information on the performance of the Fund and the Manager at each Board meeting, including comparative performance information. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund's historical performance to relevant market indices and to the performance of other large-cap value funds (including both funds advised by the Manager and funds advised by other investment advisers). The Board noted that the Fund's one-year performance was better than its peer group median. The Fund did not have three-year performance yet since its inception date was January 1, 2003. 20 | OPPENHEIMER VALUE FUND/VA COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board considered information regarding the Manager's costs in serving as the Fund's investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager's profitability from its relationship with the Fund. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also evaluated the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund, other large-cap value and large-cap core funds and other funds with comparable asset levels and distribution features. The Board noted that the Fund's contractual and actual management fees are both lower than its peer group median and average, although its total expenses are higher than its peer group median and average. The Board concluded that, in light of the Fund's strong performance, the management fee was reasonable. ECONOMIES OF SCALE. The Board considered whether the Manager may realize economies of scale in managing and supporting the Fund, whether those economies of scale benefit the Fund's shareholders and the current level of Fund assets in relation to the Fund's management fee breakpoints, which are intended to share with shareholders economies of scale that may exist as the Fund grows. OTHER BENEFITS TO THE MANAGER. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager's affiliates and research provided to the Manager in connection with permissible brokerage arrangements (soft dollar arrangements). The Board also considered the nature and quality of services provided by affiliates of the Manager, which it reviews at other times during the year in connection with the renewal of the Fund's service agreements. The Board considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide services to the Fund and that maintaining the financial viability of the Manager is important in order for the Manager to continue to provide significant services to the Fund and its shareholders. CONCLUSIONS. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees' counsel are both independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules. Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the advisory agreement for another year. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the factors together. The Board judged the terms and conditions of the advisory agreement, including the management fee, in light of all of the surrounding circumstances. 21 | OPPENHEIMER VALUE FUND/VA TRUSTEES AND OFFICERS Unaudited
-------------------------------------------------------------------------------------------------------------------- NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS THE FUNDS, LENGTH OF HELD; NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN SERVICE, AGE INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, TRUSTEES COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL. WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Mortgage Chairman of the Board Company (since 1991), Centennial State Mortgage Company (since 1994), and The El of Trustees (since 2003), Paso Mortgage Company (since 1993); Chairman of the following private companies: Trustee (since 2003) Ambassador Media Corporation (since 1984) and Broadway Ventures (since 1984); Age: 68 Director of the following: Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), Campus Crusade for Christ (since 1991) and The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (since 2002); former Chairman of the following: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (insurance agency) (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private Trustee (since 2003) equity funds) (until February 2001); Chairman, President and Chief Executive Officer Age: 74 of A.G. Edwards Capital, Inc. (until March 2000); Director of A.G. Edwards & Sons, Inc. (brokerage company) (until 2000) and A.G. Edwards Trust Company (investment adviser) (until 2000); Vice Chairman and Director of A.G. Edwards, Inc. (until March 1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March 1999); Chairman of A.G. Edwards Trust Company (until March 1999) and A.G.E. Asset Management (investment adviser) (until March 1999). Oversees 38 portfolios in the OppenheimerFunds complex. GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation Trustee (since 2003) (December 1991-April 1999); President, Treasurer and Director of Centennial Capital Age: 69 Corporation (June 1989-April 1999); Chief Executive Officer and Director of MultiSource Services, Inc. (March 1996-April 1999); Mr. Bowen held several positions with the Manager and with subsidiary or affiliated companies of the Manager (September 1987-April 1999). Oversees 38 portfolios in the OppenheimerFunds complex. EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since Trustee (since 2003) June 2000); Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002); Age: 67 Partner at PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (July 1994-June 1998). Oversees 38 portfolios in the OppenheimerFunds complex. JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Trustee (since 2003) Northwestern Energy Corp. (public utility corporation) (since November 2004); Age: 64 Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. ("OAC") (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 38 portfolios in the OppenheimerFunds complex. SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September 1984). Mr. Trustee (since 2003) Freedman held several positions with the Manager and with subsidiary or affiliated Age: 65 companies of the Manager (until October 1994). Oversees 38 portfolios in the OppenheimerFunds complex.
22 | OPPENHEIMER VALUE FUND/VA BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) Trustee (since 2003) (since February 2000); Director of The California Endowment (philanthropic Age: 59 organization) (since April 2002); Director of Community Hospital of Monterey Peninsula (since February 2002); Vice Chair of American Funds' Emerging Markets Growth Fund, Inc. (mutual fund) (since October 1991); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation and The University of Michigan; Advisor at Credit Suisse First Boston's Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member of the investment committee of Hartford Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT J. MALONE, Director of Jones International University (educational organization) (since August Trustee (since 2003) 2005); Chairman, Chief Executive Officer and Director of Steele Street State Bank Age: 61 (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 38 portfolios in the OppenheimerFunds complex. F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) Trustee (since 2003) (investment company) (since 1996) and MML Series Investment Fund (investment Age: 63 company) (since 1996), Trustee and Chairman of the Investment Committee (since 1994) of the Worcester Polytech Institute (private university); President and Treasurer of the SIS Funds (private charitable fund) (since January 1999); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Member of the Investment Committee of the Community Foundation of Western Massachusetts (1998-2003); and Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999). Oversees 40 portfolios in the OppenheimerFunds complex. -------------------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH AND OFFICER FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES. JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President President and Principal (since September 2000) of the Manager; President and Director or Trustee of other Executive Officer Oppenheimer funds; President and Director of OAC and of Oppenheimer Partnership (since 2001) and Holdings, Inc. (holding company subsidiary of the Manager) (since July 2001); Trustee (since 2003) Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since Age: 56 November 2001); Chairman and Director of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since July 2001); President and Director of OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since July 2001); Director of the following investment advisory sub-sidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 2001) and Director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director of DLB Acquisition Corporation (holding company parent of Babson Capital Management LLC) (since June 1995); Member of the Investment Company Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of the Manager (September 2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual Select Funds (open-end investment companies) (November 1999-November 2001); Director of C.M. Life Insurance Company (September 1999-August 2000); President, Chief Executive Officer and Director of MML Bay State Life Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 87 portfolios in the OppenheimerFunds complex.
23 | OPPENHEIMER VALUE FUND/VA TRUSTEES AND OFFICERS Unaudited / Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. LEAVY THE FUND AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT DEATH OR REMOVAL. CHRISTOPHER LEAVY, Senior Vice President of the Manager since September 2000; portfolio manager of Vice President and Morgan Stanley Dean Witter Investment Management (1997-September 2000). An officer Portfolio Manager of 8 portfolios in the OppenheimerFunds complex. (since 2002) Age: 34 MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March Vice President and Chief 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Compliance Officer Management Corporation and Shareholder Services, Inc. (since June 1983); Vice (since 2004) President and Director of Internal Audit of the Manager (1997-February 2004). An Age: 55 officer of 87 portfolios in the OppenheimerFunds complex. BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of Treasurer and Principal the following: HarbourView Asset Management Corporation, Shareholder Financial Financial and Accounting Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management Officer (since 2003) Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI Age: 46 Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex. ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) Vice President and Secretary of the Manager; General Counsel and Director of the Distributor (since December (since 2003) 2001); General Counsel of Centennial Asset Management Corporation (since December Age: 57 2001); Senior Vice President and General Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General Counsel and Director of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON REQUEST, BY CALLING 1.800.981.2871. 24 | OPPENHEIMER VALUE FUND/VA ITEM 2. CODE OF ETHICS. The registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Board of Trustees of the registrant has determined that Edward L. Cameron, the Chairman of the Board's Audit Committee, and George C. Bowen, a member of the Board's Audit Committee, possess the technical attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as "audit committee financial experts," and has designated Messrs. Cameron and Bowen as the Audit Committee's financial experts. Messrs. Cameron and Bowen are "independent" Trustees pursuant to paragraph (a)(2) of Item 3 to Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Audit Fees The principal accountant for the audit of the registrant's annual financial statements billed $216,250 in fiscal 2005 and $201,500 in fiscal 2004. (b) Audit-Related Fees The principal accountant for the audit of the registrant's annual financial statements billed no such fees during the last two fiscal years. The principal accountant for the audit of the registrant's annual financial statements billed $5,000 in fiscal 2005 and no such fees in fiscal 2004 to the registrant's investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant. Such services: seed money audit. (c) Tax Fees The principal accountant for the audit of the registrant's annual financial statements billed no such fees to the registrant during the last two fiscal years. The principal accountant for the audit of the registrant's annual financial statements billed no such fees to the registrant during the last two fiscal years to the registrant's investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant. (d) All Other Fees The principal accountant for the audit of the registrant's annual financial statements billed no such fees during the last two fiscal years. The principal accountant for the audit of the registrant's annual financial statements billed no such fees during the last two fiscal years to the registrant's investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant. (e) (1) During its regularly scheduled periodic meetings, the registrant's audit committee will pre-approve all audit, audit-related, tax and other services to be provided by the principal accountants of the registrant. The audit committee has delegated pre-approval authority to its Chairman for any subsequent new engagements that arise between regularly scheduled meeting dates provided that any fees such pre-approved are presented to the audit committee at its next regularly scheduled meeting. Under applicable laws, pre-approval of non-audit services maybe waived provided that: 1) the aggregate amount of all such services provided constitutes no more than five percent of the total amount of fees paid by the registrant to it principal accountant during the fiscal year in which services are provided 2) such services were not recognized by the registrant at the time of engagement as non-audit services and 3) such services are promptly brought to the attention of the audit committee of the registrant and approved prior to the completion of the audit. (2) 100% (f) Not applicable as less than 50%. (g) The principal accountant for the audit of the registrant's annual financial statements billed $5,000 in fiscal 2005 and no such fees in fiscal 2004 to the registrant and the registrant's investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant related to non-audit fees. Those billings did not include any prohibited non-audit services as defined by the Securities Exchange Act of 1934. (h) The registrant's audit committee of the board of trustees has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. THE FUND'S GOVERNANCE COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS 1. The Fund's Governance Committee (the "Committee") will evaluate potential Board candidates to assess their qualifications. The Committee shall have the authority, upon approval of the Board, to retain an executive search firm to assist in this effort. The Committee may consider recommendations by business and personal contacts of current Board members and by executive search firms which the Committee may engage from time to time and may also consider shareholder recommendations. The Committee may consider the advice and recommendation of the Funds' investment manager and its affiliates in making the selection. 2. The Committee shall screen candidates for Board membership. The Committee has not established specific qualifications that it believes must be met by a trustee nominee. In evaluating trustee nominees, the Committee considers, among other things, an individual's background, skills, and experience; whether the individual is an "interested person" as defined in the Investment Company Act of 1940; and whether the individual would be deemed an "audit committee financial expert" within the meaning of applicable SEC rules. The Committee also considers whether the individual's background, skills, and experience will complement the background, skills, and experience of other nominees and will contribute to the Board. There are no differences in the manner in which the Committee evaluates nominees for trustees based on whether the nominee is recommended by a shareholder. 3. The Committee may consider nominations from shareholders for the Board at such times as the Committee meets to consider new nominees for the Board. The Committee shall have the sole discretion to determine the candidates to present to the Board and, in such cases where required, to shareholders. Recommendations for trustee nominees should, at a minimum, be accompanied by the following: o the name, address, and business, educational, and/or other pertinent background of the person being recommended; o a statement concerning whether the person is an "interested person" as defined in the Investment Company Act of 1940; o any other information that the Funds would be required to include in a proxy statement concerning the person if he or she was nominated; and o the name and address of the person submitting the recommendation and, if that person is a shareholder, the period for which that person held Fund shares. The recommendation also can include any additional information which the person submitting it believes would assist the Committee in evaluating the recommendation. 4. Shareholders should note that a person who owns securities issued by Massachusetts Mutual Life Insurance Company (the parent company of the Funds' investment adviser) would be deemed an "interested person" under the Investment Company Act of 1940. In addition, certain other relationships with Massachusetts Mutual Life Insurance Company or its subsidiaries, with registered broker-dealers, or with the Funds' outside legal counsel may cause a person to be deemed an "interested person." 5. Before the Committee decides to nominate an individual as a trustee, Committee members and other directors customarily interview the individual in person. In addition, the individual customarily is asked to complete a detailed questionnaire which is designed to elicit information which must be disclosed under SEC and stock exchange rules and to determine whether the individual is subject to any statutory disqualification from serving as a trustee of a registered investment company. ITEM 11. CONTROLS AND PROCEDURES. Based on their evaluation of the registrant's disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR 270.30a-3(c)) as of December 31, 2005, the registrant's principal executive officer and principal financial officer found the registrant's disclosure controls and procedures to provide reasonable assurances that information required to be disclosed by the registrant in the reports that it files under the Securities Exchange Act of 1934 (a) is accumulated and communicated to registrant's management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure, and (b) is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the U.S. Securities and Exchange Commission. There have been no changes in the registrant's internal controls over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a) (1) Exhibit attached hereto. (2) Exhibits attached hereto. (3) Not applicable. (b) Exhibit attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Oppenheimer Variable Account Funds By: /s/ John V. Murphy ------------------- John V. Murphy Principal Executive Officer Date: February 14, 2006 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ John V. Murphy ------------------- John V. Murphy Principal Executive Officer Date: February 14, 2006 By: /s/ Brian W. Wixted ------------------- Brian W. Wixted Principal Financial Officer Date: February 14, 2006