-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PXcY00YIO2+pFUXd42CCU/7pN/+rtB4pD0YrvvkikCo7ih8o/NWjxf4wImAM4vjv EIFFrzCsKXng9nAeAczY8g== 0001086144-00-000019.txt : 20000307 0001086144-00-000019.hdr.sgml : 20000307 ACCESSION NUMBER: 0001086144-00-000019 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000303 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPPENHEIMER VARIABLE ACCOUNT FUNDS CENTRAL INDEX KEY: 0000752737 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 840974272 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04108 FILM NUMBER: 560248 BUSINESS ADDRESS: STREET 1: 3410 S GALENA ST CITY: DENVER STATE: CO ZIP: 80231 BUSINESS PHONE: 3036713200 MAIL ADDRESS: STREET 2: 3410 S GALENA ST CITY: DENVER STATE: CO ZIP: 80231 FORMER COMPANY: FORMER CONFORMED NAME: OPPENHEIMER VARIABLE LIFE FUNDS DATE OF NAME CHANGE: 19860609 N-30D 1 HIGH INCOME FUND/VA Annual Report December 31, 1999 ================================================================================ Oppenheimer High Income Fund/VA A Series of Oppenheimer Variable Account Funds [logo] OppenheimerFunds(R) The Right Way to Invest - -------------------------------------------------------------------------------- Oppenheimer Variable Account Funds--Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- ================================================================================ Objective Oppenheimer High Income Fund/VA, a series of Oppenheimer Variable Account Funds, seeks a high level of current income by investing in high yield, high risk fixed income securities, including unrated securities ("junk" bonds) or securities in the lower rating categories. These securities may be considered to be speculative. Investing in foreign securities entails additional expenses and risks including foreign currency fluctuations while investing in junk bonds carries a greater risk of default. ================================================================================ Narrative by David Negri and Tom Reedy, Co-Portfolio Managers Over the past fiscal year that ended December 31, 1999, Oppenheimer High Income Fund/VA performed in line with the high yield market as a whole, which has been weak due to a rising interest rate environment. During 1999, the Federal Reserve Board gradually raised its key interest rates to curb borrowing by business and consumers. Long-term interest rates drifted upward, while bond prices, which move inversely to interest rates, fell, because investors were concerned that the booming U.S. economy would lead to an acceleration of inflation. However, high yield bond prices did not decline as much as those of U.S. Treasury bonds during the period. One reason that high yield bonds have held up better than Treasury securities is an unusually high yield "spread" compared to Treasuries. High yield bonds have paid as much as six percentage points more in yield in recent months. Historically, the average spread is about four and a half percentage points. In addition to maintaining a broadly diversified portfolio, we have kept credit quality relatively high and have been rewarded for doing so. Higher quality bonds have outperformed lower quality bonds over the past few months as the money supply has tightened. That's because a slowing economy could adversely affect a lower quality company's ability to pay its debts. And, as a result, we've also seen higher than normal default rates in the marketplace. Why would defaults increase in such a strong economy? While the high yield market has experienced explosive growth over the past three years, we believe that credit quality standards in the marketplace have deteriorated. When interest rates were falling in 1998, investors were willing to reach further down the credit spectrum to earn extra yield, much to their regret today. During that period, we made a decision to maintain high credit standards, which has been a plus for the portfolio, although we have tiptoed back into some lower quality bonds in recent weeks. We have also focused on "new economy" companies engaged in high technology industries such as the Internet or telecommunications. At the same time, we have reduced our exposure to economically sensitive old-line industries that made up a large part of the economy several years ago. Just as technology has led the stock market in recent years, it has also benefited high yield bonds issued by these companies. Surging stock prices have created an environment where mergers proliferate. For example, Omnipoint Corp., a CCC-rated cellular telephone company in the portfolio was acquired by Voicestream Wireless Corp., which carries a BB rating.(1) When a higher rated company acquires a lower rated company, the lower rated bond typically increases in price to reflect the higher credit rating of the combined entity. In addition to stressing the technology sector and maintaining a relatively high credit quality in the portfolio, we continue to anticipate certain seasonal effects in the high yield market. For instance, high yield bonds have historically performed the best during the first quarter of the year. During this period, issuance tends to be slow, while demand for bonds tends to remain constant or increases. Therefore, we believe a smart strategy for taking advantage of this effect is to enter into January fully invested. 1. The Fund's portfolio is subject to change. 2 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Oppenheimer Variable Account Funds--Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- ================================================================================ Another important aspect of our investment strategy is an increasing interest in the European high yield bond market. Since the advent of Europe's single currency, government bonds issued by individual countries no longer offer very attractive yields. Instead, a Pan-European high yield corporate bond market has emerged, and our goal is to increase the portfolio's weighting in this area. Although 1999 has been a difficult year for the bond market, we look favorably to the future. We believe that the U.S. economy should continue to perform well without significant inflation. We also believe that investor sentiment regarding high yield bonds will improve if default rates decline. Bond prices should then rebound accordingly. In the meantime, we will continue to use thorough research and analysis to take advantage of opportunities in the high yield market, which is one of the reasons why Oppenheimer High Income Fund/VA remains an important part of The Right Way to Invest. - -------------------------------------------------------------------------------- Management's discussion of performance. During the fiscal year that ended December 31, 1999, bond markets in all investment categories were volatile. That's because interest rates generally rose throughout the period, and bond prices move inversely to changes in interest rates. Although high yield bonds also offered mediocre returns, prices held up better than U.S. Treasury bonds. The Fund benefited from its relatively high credit quality as well as its emphasis on technology and telecommunications. The Fund's portfolio holdings, allocations and strategies are subject to change. Oppenheimer High Income Fund/VA 3 - -------------------------------------------------------------------------------- Oppenheimer Variable Account Funds--Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- ================================================================================ 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, 1999. 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 fixed rate, coupon bearing bonds with an outstanding par, which is greater than or equal to $100 million, a maturity range greater than or equal to one year and a credit rating which must be rated lower than BBB/Baa3 (by Standard & Poor's or Moody's, respectively) but higher than C/D (bonds in default). This index is used as a measure of the performance of the high yield corporate bond market--the market in which Oppenheimer High Income Fund/VA principally invests. 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, and the index excludes bonds in default. Comparison of Change in Value of $10,000 Hypothetical Investments in: OVAF/Oppenheimer High Income Fund/VA and Merrill Lynch High Yield Master Index [line graph]
OVAF/Oppenheimer High Income Fund/VA Merrill Lynch High Yield Master Index 12.31.89 10000 10000 12.31.90 10465 9565 12.31.91 14014 12873 12.31.92 16525 15210 12.31.93 20877 17824 12.31.94 20213 17616 12.31.95 24331 21124 12.31.96 28043 23461 12.31.97 31468 26470 12.31.98 31564 27440 12.31.99 32917 27871
Average Annual Total Return of the Fund at 12/31/99 1-Year 4.29% 5-Year 10.24% 10-Year 12.65% The Fund's performance may from time to time be subject to substantial short-term changes, particularly during periods of market or interest rate volatility. For updates on the Fund's performance, please call us at 1.800.981.2871. The performance information in the graph for the Merrill Lynch High Yield Master Index begins on 12/31/89. The inception date of the Fund is 4/30/86. Total returns include changes in net asset value per share and do not include the charges associated with the separate account products, which offer this fund. Such performance would have been lower if such charges were taken into account. Total returns and the ending account value in the graph show change in share value and include reinvestment of all dividends and capital gains distributions. Past performance is not predictive of future performance. 4 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments December 31, 1999 - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 ================================================================================================================================ Mortgage-Backed Obligations--1.9% AMRESCO Commercial Mortgage Funding I Corp., Multiclass Mtg. Pass-Through Certificates, Series 1997-C1, Cl. H, 7%, 6/17/29(2) $ 200,000 $ 131,750 - -------------------------------------------------------------------------------------------------------------------------------- Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates: Series 1997-D4, Cl. B1, 7.525%, 4/14/29(3) 167,000 119,092 Series 1997-D4, Cl. B2, 7.525%, 4/14/29(3) 167,000 115,856 Series 1997-D4, Cl. B3, 7.525%, 4/14/29(3) 166,000 104,580 - -------------------------------------------------------------------------------------------------------------------------------- CBA Mortgage Corp., Mtg. Pass-Through Certificates: Series 1993-C1, Cl. E, 6.72%, 12/25/03(2)(3) 250,000 214,922 Series 1993-C1, Cl. F, 6.72%, 12/25/03(2)(3) 700,000 584,500 - -------------------------------------------------------------------------------------------------------------------------------- First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates: Series 1997, Cl. D, 8.126%, 5/25/08(2)(3) 300,000 234,000 Series 1997, Cl. E, 8.126%, 2/25/11(2)(3) 1,500,000 1,005,000 - -------------------------------------------------------------------------------------------------------------------------------- Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates, Series 1996-C1, Cl. E, 7.421%, 3/15/06(2)(3) 835,342 684,850 - -------------------------------------------------------------------------------------------------------------------------------- Mortgage Capital Funding, Inc., Commercial Mtg. Pass-Through Certificates, Series 1997-MC1, Cl. F, 7.452%, 5/20/07(2) 254,890 192,840 - -------------------------------------------------------------------------------------------------------------------------------- Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates: Series 1994-C1, Cl. E, 8%, 6/25/26 619,807 595,742 Series 1994-C2, Cl. G, 8%, 4/25/25 672,810 639,591 Series 1995-C1, Cl. F, 6.90%, 2/25/27 458,833 412,735 - -------------------------------------------------------------------------------------------------------------------------------- Salomon Brothers Mortgage Securities VII, Series 1996-B, Cl. 1, 6.581%, 4/25/26(2) 1,420,875 937,334 - -------------------------------------------------------------------------------------------------------------------------------- Structured Asset Securities Corp., Multiclass Pass-Through Certificates, Series 1996-C3, Cl. E, 8.256%, 6/25/30(4) 650,000 645,937 ---------- Total Mortgage-Backed Obligations (Cost $7,051,518) 6,618,729 ================================================================================================================================ Foreign Government Obligations--0.8% - -------------------------------------------------------------------------------------------------------------------------------- Argentina (Republic of) Bonds, Bonos de Consolidacion de Deudas, Series I, 2.868%, 4/1/07(3)ARP 1,417,740 992,552 - -------------------------------------------------------------------------------------------------------------------------------- Bulgaria (Republic of) Interest Arrears Bonds, 6.50%, 7/28/11(3) 1,450,000 1,147,312 - -------------------------------------------------------------------------------------------------------------------------------- Panama (Republic of) Interest Reduction Bonds, 4.25%, 7/17/14(3) 275,000 215,875 - -------------------------------------------------------------------------------------------------------------------------------- Peru (Republic of) Past Due Interest Bonds, Series 20 yr., 4.25%, 3/7/17(3) 400,000 277,000 - -------------------------------------------------------------------------------------------------------------------------------- PT Hutama Karya Promissory Nts., Zero Coupon, 2/10/98(2)(5)(8)IDR 1,000,000,000 39,356 ---------- Total Foreign Government Obligations (Cost $2,588,032) 2,672,095 ================================================================================================================================ Loan Participations--1.8% - -------------------------------------------------------------------------------------------------------------------------------- Central Bank of Indonesia Gtd. Nts., Series 2 yr., 8.906%, 8/25/00(2)(3) 1,000,000 970,000 - -------------------------------------------------------------------------------------------------------------------------------- Shoshone Partners Loan Trust Sr. Nts., 7.955%, 4/28/02 (representing a basket of reference loans and a total return swap between Chase Manhattan Bank and the Trust)(2)(3) 5,360,000 5,266,377 ---------- Total Loan Participations (Cost $6,313,570) 6,236,377
Oppenheimer High Income Fund/VA 5 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 ================================================================================================================================ Corporate Bonds and Notes--83.1% - -------------------------------------------------------------------------------------------------------------------------------- Aerospace/Defense--2.6% Amtran, Inc.: 9.625% Nts., 12/15/05 $ 800,000 $ 772,000 10.50% Sr. Nts., 8/1/04 700,000 703,500 10.75% Sr. Nts., 8/1/05 700,000 717,500 - -------------------------------------------------------------------------------------------------------------------------------- Atlas Air, Inc.: 9.25% Sr. Nts., 4/15/08 1,325,000 1,272,000 9.375% Sr. Unsec. Nts., 11/15/06 1,000,000 970,000 - -------------------------------------------------------------------------------------------------------------------------------- BE Aerospace, Inc., 9.50% Sr. Unsec. Sub. Nts., 11/1/08 900,000 850,500 - -------------------------------------------------------------------------------------------------------------------------------- Constellation Finance LLC, 9.80% Airline Receivable Asset-Backed Nts., Series 1997-1, 1/1/01(2) 800,000 744,000 - -------------------------------------------------------------------------------------------------------------------------------- Decrane Aircraft Holdings, Inc., 12% Sr. Unsec. Sub. Nts., Series B, 9/30/08 1,750,000 1,618,750 - -------------------------------------------------------------------------------------------------------------------------------- Fairchild Corp., 10.75% Sr. Unsec. Sub. Nts., 4/15/09 1,000,000 853,750 - -------------------------------------------------------------------------------------------------------------------------------- Pegasus Aircraft Lease Securitization Trust, 11.76% Sr. Nts., Series 1997-A, Cl. B, 6/15/04(2) 288,566 294,886 ---------- 8,796,886 - -------------------------------------------------------------------------------------------------------------------------------- Chemicals--2.7% ClimaChem, Inc., 10.75% Sr. Unsec. Nts., Series B, 12/1/07 500,000 127,500 - -------------------------------------------------------------------------------------------------------------------------------- Georgia Gulf Corp., 10.375% Sr. Sub. Nts., 11/1/07(4) 300,000 314,625 - -------------------------------------------------------------------------------------------------------------------------------- Huntsman Corp./ICI Chemical Co. plc: 10.125% Sr. Unsec. Sub. Nts., 7/1/09(4) 800,000 832,000 10.125% Sr. Unsec. Sub. Nts., 7/1/09EUR 500,000 534,650 Zero Coupon Sr. Disc. Nts., 13.09%, 12/31/09(4)(6) 1,500,000 459,375 - -------------------------------------------------------------------------------------------------------------------------------- Lyondell Chemical Co.: 9.875% Sec. Nts., Series B, 5/1/07 500,000 512,500 10.875% Sr. Sub. Nts., 5/1/09 100,000 103,500 - -------------------------------------------------------------------------------------------------------------------------------- PCI Chemicals Canada, Inc., 9.25% Sec. Nts., 10/15/07 500,000 387,500 - -------------------------------------------------------------------------------------------------------------------------------- Pioneer Americas Acquisition Corp., 9.25% Sr. Nts., 6/15/07 400,000 318,000 - -------------------------------------------------------------------------------------------------------------------------------- Polymer Group, Inc.: 8.75% Sr. Sub. Nts., 3/1/08 1,500,000 1,447,500 9% Sr. Sub. Nts., 7/1/07 250,000 243,750 - -------------------------------------------------------------------------------------------------------------------------------- Royster-Clark, Inc., 10.25% First Mtg. Nts., 4/1/09(4) 650,000 591,500 - -------------------------------------------------------------------------------------------------------------------------------- Sovereign Specialty Chemicals, Inc., 9.50% Sr. Unsec. Sub. Nts., Series B, 8/1/07 795,000 802,950 - -------------------------------------------------------------------------------------------------------------------------------- Sterling Chemicals Holdings, Inc., 0%/13.50% Sr. Disc. Nts., 8/15/08(7) 650,000 167,375 - -------------------------------------------------------------------------------------------------------------------------------- Sterling Chemicals, Inc.: 11.25% Sr. Sub. Nts., 4/1/07 250,000 185,000 11.75% Sr. Unsec. Sub. Nts., 8/15/06 750,000 566,250 12.375% Sr. Sec. Nts., Series B, 7/15/06 600,000 624,000 - -------------------------------------------------------------------------------------------------------------------------------- ZSC Specialty Chemical plc, 11% Sr. Nts., 7/1/09(4) 800,000 834,000 ---------- 9,051,975 - -------------------------------------------------------------------------------------------------------------------------------- Consumer Durables--0.2% Holmes Products Corp., 9.875% Sr. Unsec. Sub. Nts., Series B, 11/15/07 425,000 312,375 - -------------------------------------------------------------------------------------------------------------------------------- TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(2) 350,000 383,803 ---------- 696,178
6 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Consumer Non-Durables--1.8% AKI Holdings, Inc.: 0%/13.50% Sr. Disc. Debs., 7/1/09(7) $1,080,000 $ 515,700 10.50% Sr. Unsec. Nts., 7/1/08 1,000,000 895,000 - -------------------------------------------------------------------------------------------------------------------------------- Bell Sports, Inc., 11% Sr. Unsec. Sub. Nts., Series B, 8/15/08 1,100,000 1,105,500 - -------------------------------------------------------------------------------------------------------------------------------- Fruit of the Loom, Inc., 8.875% Sr. Unsec. Nts., 4/15/06(8) 600,000 33,000 - -------------------------------------------------------------------------------------------------------------------------------- Globe Manufacturing Corp., 10% Sr. Unsec. Sub. Nts., Series B, 8/1/08 900,000 436,500 - -------------------------------------------------------------------------------------------------------------------------------- Phillips-Van Heusen Corp., 9.50% Sr. Unsec. Sub. Nts., 5/1/08 620,000 579,700 - -------------------------------------------------------------------------------------------------------------------------------- Revlon Consumer Products Corp.: 8.625% Sr. Unsec. Sub. Nts., 2/1/08 250,000 126,250 9% Sr. Nts., 11/1/06 1,185,000 894,675 - -------------------------------------------------------------------------------------------------------------------------------- Salton, Inc., 10.75% Sr. Unsec. Sub. Nts., 12/15/05 1,200,000 1,233,000 - -------------------------------------------------------------------------------------------------------------------------------- Styling Technology Corp., 10.875% Sr. Unsec. Sub. Nts., 7/1/08(2) 600,000 213,000 - -------------------------------------------------------------------------------------------------------------------------------- William Carter Co., 10.375% Sr. Sub. Nts., Series A, 12/1/06 235,000 212,675 ----------- 6,245,000 - -------------------------------------------------------------------------------------------------------------------------------- Energy--4.5% Chesapeake Energy Corp.: 9.125% Sr. Unsec. Nts., 4/15/06 1,000,000 917,500 9.625% Sr. Unsec. Nts., Series B, 5/1/05 1,000,000 947,500 - -------------------------------------------------------------------------------------------------------------------------------- Clark Refinancing & Marketing, Inc., 8.875% Sr. Sub. Nts., 11/15/07 1,040,000 546,000 - -------------------------------------------------------------------------------------------------------------------------------- Clark USA, Inc., 10.875% Sr. Nts., Series B, 12/1/05 275,000 111,375 - -------------------------------------------------------------------------------------------------------------------------------- Denbury Management, Inc., 9% Sr. Sub. Nts., 3/1/08 800,000 732,000 - -------------------------------------------------------------------------------------------------------------------------------- Empresa Electric Del Norte, 10.50% Sr. Debs., 6/15/05(2) 1,000,000 470,933 - -------------------------------------------------------------------------------------------------------------------------------- Forcenergy, Inc., 8.50% Sr. Sub. Nts., Series B, 2/15/07(5)(8) 700,000 573,125 - -------------------------------------------------------------------------------------------------------------------------------- Frontier Oil Corp., 11.75% Sr. Nts., 11/15/09 400,000 396,000 - -------------------------------------------------------------------------------------------------------------------------------- Gothic Production Corp., 11.125% Sr. Sec. Nts., Series B, 5/1/05(4) 2,000,000 1,710,000 - -------------------------------------------------------------------------------------------------------------------------------- Grant Geophysical, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/15/08 1,025,000 650,875 - -------------------------------------------------------------------------------------------------------------------------------- Leviathan Gas Pipeline Partners, LP/Leviathan Finance Corp., 10.375% Sr. Unsec. Sub. Nts., Series B, 6/1/09 500,000 517,500 - -------------------------------------------------------------------------------------------------------------------------------- National Energy Group, Inc., 10.75% Sr. Nts., Series D, 11/1/06(5)(8) 810,000 425,250 - -------------------------------------------------------------------------------------------------------------------------------- Ocean Rig Norway AS, 10.25% Sr. Sec. Nts., 6/1/08 1,420,000 1,185,700 - -------------------------------------------------------------------------------------------------------------------------------- Pogo Producing Co., 8.75% Sr. Sub. Nts., Series B, 5/15/07 800,000 764,000 - -------------------------------------------------------------------------------------------------------------------------------- R&B Falcon Corp., 12.25% Sr. Unsec. Nts., 3/15/06 1,000,000 1,095,000 - -------------------------------------------------------------------------------------------------------------------------------- RAM Energy, Inc., 11.50% Sr. Unsec. Nts., 2/15/08 1,060,000 492,900 - -------------------------------------------------------------------------------------------------------------------------------- RBF Finance Co.: 11% Sr. Sec. Nts., 3/15/06 1,000,000 1,070,000 11.375% Sr. Sec. Nts., 3/15/09 500,000 537,500 - -------------------------------------------------------------------------------------------------------------------------------- Statia Terminals International/Statia Terminals (Canada), Inc., 11.75% First Mtg. Nts., Series B, 11/15/03 225,000 230,344 - -------------------------------------------------------------------------------------------------------------------------------- Stone Energy Corp., 8.75% Sr. Sub. Nts., 9/15/07 735,000 720,300 - -------------------------------------------------------------------------------------------------------------------------------- Universal Compression Holdings, Inc.: 0%/9.875% Sr. Disc. Nts., 2/15/08(7) 1,325,000 828,125 0%/11.375% Sr. Disc. Nts., 2/15/09(7) 720,000 385,200 ----------- 15,307,127
Oppenheimer High Income Fund/VA 7 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Financial--1.7% AMRESCO, Inc., 9.875% Sr. Sub. Nts., Series 98-A, 3/15/05 $ 700,000 $ 444,500 - -------------------------------------------------------------------------------------------------------------------------------- ASAT Finance LLC, Units (each unit consists of $1,000 principal amount of 12.50% sr. nts., 11/1/06 and one warrant to purchase shares of common stock)(4)(9) 500,000 540,000 - -------------------------------------------------------------------------------------------------------------------------------- Bakrie Investindo, Zero Coupon Promissory Nts., 3/26/98(2)(5)(8)IDR 1,000,000,000 21,467 - -------------------------------------------------------------------------------------------------------------------------------- Bank Plus Corp., 12% Sr. Nts., 7/18/07 517,000 411,015 - -------------------------------------------------------------------------------------------------------------------------------- Local Financial Corp., 11% Sr. Nts., 9/8/04(4) 800,000 836,000 - -------------------------------------------------------------------------------------------------------------------------------- Ocwen Capital Trust I, 10.875% Capital Nts., 8/1/27(2) 450,000 290,250 - -------------------------------------------------------------------------------------------------------------------------------- PT Polysindo Eka Perkasa, 24% Nts., 6/19/03(5)(8)IDR 657,200,000 12,227 - -------------------------------------------------------------------------------------------------------------------------------- Saul (B.F.) Real Estate Investment Trust, 9.75% Sr. Sec. Nts., Series B, 4/1/08 2,165,000 1,989,094 - -------------------------------------------------------------------------------------------------------------------------------- Southern Pacific Funding Corp., 11.50% Sr. Nts., 11/1/04(5)(8) 240,000 114,000 - -------------------------------------------------------------------------------------------------------------------------------- Sovereign Bankcorp, 10.50% Sr. Unsec. Nts., 11/15/06 600,000 615,000 - -------------------------------------------------------------------------------------------------------------------------------- Veritas Capital Trust, 10% Nts., 1/1/28 550,000 413,875 ---------- 5,687,428 - -------------------------------------------------------------------------------------------------------------------------------- Food & Drug--0.7% Family Restaurants, Inc.: 9.75% Sr. Nts., 2/1/02 1,300,000 617,500 10.875% Sr. Sub. Disc. Nts., 2/1/04 100,000 45,500 - -------------------------------------------------------------------------------------------------------------------------------- Fleming Cos., Inc., 10.625% Sr. Sub. Nts., Series B, 7/31/07 1,135,000 1,030,012 - -------------------------------------------------------------------------------------------------------------------------------- Pathmark Stores, Inc.: 10.75% Jr. Sub. Deferred Coupon Nts., 11/1/03 2,710,000 338,750 12.625% Sub. Nts., 6/15/02 900,000 301,500 ---------- 2,333,262 - -------------------------------------------------------------------------------------------------------------------------------- Food/Tobacco--1.8% Aurora Foods, Inc., 8.75% Sr. Sub. Nts., Series B, 7/1/08 520,000 497,900 - -------------------------------------------------------------------------------------------------------------------------------- Del Monte Foods Co., 0%/12.50% Sr. Disc. Nts., Series B, 12/15/07(7) 501,000 388,275 - -------------------------------------------------------------------------------------------------------------------------------- New World Pasta Co., 9.25% Sr. Nts., 2/15/09 1,200,000 1,086,000 - -------------------------------------------------------------------------------------------------------------------------------- Packaged Ice, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/1/05 1,600,000 1,472,000 - -------------------------------------------------------------------------------------------------------------------------------- Purina Mills, Inc., 9% Sr. Unsec. Sub. Nts., 3/15/10(8) 400,000 102,000 - -------------------------------------------------------------------------------------------------------------------------------- SmithField Foods, Inc., 7.625% Sr. Unsec. Sub. Nts., 2/15/08 925,000 837,125 - -------------------------------------------------------------------------------------------------------------------------------- Sparkling Spring Water Group Ltd., 11.50% Sr. Sec. Sub. Nts., 11/15/07 1,175,000 957,625 - -------------------------------------------------------------------------------------------------------------------------------- Triarc Consumer Products Group LLC, 10.25% Sr. Sub. Nts., 2/15/09(4) 750,000 731,250 ---------- 6,072,175
8 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Forest Products/Containers--2.3% American Pad & Paper Co., 13% Sr. Sub. Nts., Series B, 11/15/05(8) $ 400,000 $ 46,000 - -------------------------------------------------------------------------------------------------------------------------------- Ball Corp.: 7.75% Sr. Unsec. Nts., 8/1/06 700,000 686,000 8.25% Sr. Unsec. Sub. Nts., 8/1/08 800,000 772,000 - -------------------------------------------------------------------------------------------------------------------------------- Gaylord Container Corp., 9.75% Sr. Nts., 6/15/07 500,000 473,750 - -------------------------------------------------------------------------------------------------------------------------------- Packaging Corp. of America, 9.625% Sr. Unsec. Sub. Nts., 4/1/09 750,000 769,687 - -------------------------------------------------------------------------------------------------------------------------------- Repap New Brunswick, Inc.: 9% First Priority Sr. Sec. Nts., 6/1/04 250,000 246,250 10.625% Second Priority Sr. Sec. Nts., 4/15/05 700,000 654,500 - -------------------------------------------------------------------------------------------------------------------------------- Riverwood International Corp.: 10.625% Sr. Unsec. Nts., 8/1/07 1,130,000 1,169,550 10.875% Sr. Sub. Nts., 4/1/08 750,000 742,500 - -------------------------------------------------------------------------------------------------------------------------------- SD Warren Co., 14% Unsec. Nts., 12/15/06(10) 1,158,749 1,303,593 - -------------------------------------------------------------------------------------------------------------------------------- Tembec Industries, Inc., 8.625% Sr. Nts., 6/30/09 800,000 802,000 ----------- 7,665,830 - -------------------------------------------------------------------------------------------------------------------------------- Gaming/Leisure--5.0% AP Holdings, Inc., 0%/11.25% Sr. Disc. Nts., 3/15/08(7) 450,000 182,250 - -------------------------------------------------------------------------------------------------------------------------------- Apcoa, Inc., 9.25% Sr. Unsec. Sub. Nts., 3/15/08 940,000 662,700 - -------------------------------------------------------------------------------------------------------------------------------- Aztar Corp., 8.875% Sr. Unsec. Sub. Nts., 5/15/07 550,000 530,750 - -------------------------------------------------------------------------------------------------------------------------------- Capital Gaming International, Inc., 11.50% Promissory Nts., 8/1/95(5) 9,500 --- - -------------------------------------------------------------------------------------------------------------------------------- Capstar Hotel Co., 8.75% Sr. Sub. Nts., 8/15/07 840,000 778,050 - -------------------------------------------------------------------------------------------------------------------------------- Coast Hotel & Casinos, Inc., 9.50% Sr. Unsec. Sub. Nts., 4/1/09 500,000 480,000 - -------------------------------------------------------------------------------------------------------------------------------- Empress Entertainment, Inc., 8.125% Sr. Sub. Nts., 7/1/06 500,000 507,500 - -------------------------------------------------------------------------------------------------------------------------------- Florida Panthers Holdings, Inc., 9.875% Sr. Sub. Nts., 4/15/09 800,000 780,000 - -------------------------------------------------------------------------------------------------------------------------------- Hard Rock Hotel, Inc., 9.25% Sr. Sub. Nts., 4/1/05 700,000 500,500 - -------------------------------------------------------------------------------------------------------------------------------- Harveys Casino Resorts, 10.625% Sr. Unsec. Sub. Nts., 6/1/06 120,000 124,500 - -------------------------------------------------------------------------------------------------------------------------------- Hollywood Casino Corp., 11.25% Sr. Sec. Nts., 5/1/07 500,000 525,000 - -------------------------------------------------------------------------------------------------------------------------------- Hollywood Park, Inc., 9.25% Sr. Unsec. Sub. Nts., Series B, 2/15/07 1,000,000 996,250 - -------------------------------------------------------------------------------------------------------------------------------- Horseshoe Gaming LLC, 9.375% Sr. Sub. Nts., 6/15/07 1,300,000 1,300,000 - -------------------------------------------------------------------------------------------------------------------------------- Intrawest Corp., 9.75% Sr. Nts., 8/15/08 1,500,000 1,477,500 - -------------------------------------------------------------------------------------------------------------------------------- Isle of Capri Casinos, Inc., 8.75% Sr. Unsec. Nts., 4/15/09 1,200,000 1,110,000 - -------------------------------------------------------------------------------------------------------------------------------- Jupiters Ltd., 8.50% Sr. Unsec. Nts., 3/1/06 1,000,000 960,000 - -------------------------------------------------------------------------------------------------------------------------------- Mohegan Tribal Gaming Authority, 8.75% Sr. Unsec. Sub. Nts., 1/1/09 1,500,000 1,485,000 - -------------------------------------------------------------------------------------------------------------------------------- Premier Parks, Inc.: 0%/10% Sr. Disc. Nts., 4/1/08(7) 1,200,000 834,000 9.25% Sr. Nts., 4/1/06 600,000 592,500 9.75% Sr. Nts., 6/15/07 750,000 750,000 - -------------------------------------------------------------------------------------------------------------------------------- Six Flags Entertainment Corp., 8.875% Sr. Nts., 4/1/06 1,000,000 981,250 - -------------------------------------------------------------------------------------------------------------------------------- Station Casinos, Inc.: 9.75% Sr. Sub. Nts., 4/15/07 800,000 808,000 10.125% Sr. Sub. Nts., 3/15/06 800,000 820,000 ----------- 17,185,750
Oppenheimer High Income Fund/VA 9 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Healthcare--2.5% Charles River Labs ONC, Units (each unit consists of $1,000 principal amount of 13.50% sr. sub. nts., 10/1/09 and one warrant to purchase 3.942 shares of common stock)(4)(9) $1,100,000 $1,149,500 - -------------------------------------------------------------------------------------------------------------------------------- Fresenius Medical Care Capital Trust II, 7.875% Nts., 2/1/08 2,525,000 2,335,625 - -------------------------------------------------------------------------------------------------------------------------------- ICN Pharmaceutical, Inc., 8.75% Sr. Nts., 11/15/08(4) 1,365,000 1,310,400 - -------------------------------------------------------------------------------------------------------------------------------- King Pharmaceuticals, Inc., 10.75% Sr. Unsec. Sub. Nts., 2/15/09 1,250,000 1,331,250 - -------------------------------------------------------------------------------------------------------------------------------- Magellan Health Services, Inc., 9% Sr. Sub. Nts., 2/15/08 1,000,000 815,000 - -------------------------------------------------------------------------------------------------------------------------------- Oxford Health Plans, Inc., 11% Sr. Unsec. Nts., 5/15/05 450,000 434,250 - -------------------------------------------------------------------------------------------------------------------------------- Tenet Healthcare Corp.: 8.125% Sr. Unsec. Sub. Nts., Series B, 12/1/08 250,000 233,750 8.625% Sr. Sub. Nts., 1/15/07 300,000 291,000 - -------------------------------------------------------------------------------------------------------------------------------- Unilab Finance Corp., 12.75% Sr. Sub. Nts., 10/1/09(4) 450,000 468,000 ---------- 8,368,775 - -------------------------------------------------------------------------------------------------------------------------------- Housing--2.1% CB Richard Ellis Services, Inc., 8.875% Sr. Unsec. Sub. Nts., 6/1/06 900,000 805,500 - -------------------------------------------------------------------------------------------------------------------------------- D.R. Horton, Inc., 8% Sr. Nts., 2/1/09 500,000 460,000 - -------------------------------------------------------------------------------------------------------------------------------- Del Webb Corp., 10.25% Sr. Unsec. Sub. Nts., 2/15/10 600,000 586,500 - -------------------------------------------------------------------------------------------------------------------------------- Engle Homes, Inc., 9.25% Sr. Unsec. Nts., Series C, 2/1/08 1,300,000 1,176,500 - -------------------------------------------------------------------------------------------------------------------------------- Formica Corp., 10.875% Sr. Unsec. Sub. Nts., Series B, 3/1/09 1,000,000 925,000 - -------------------------------------------------------------------------------------------------------------------------------- Nortek, Inc.: 8.875% Sr. Unsec. Nts., Series B, 8/1/08 250,000 238,750 9.125% Sr. Nts., Series B, 9/1/07 1,400,000 1,361,500 9.25% Sr. Nts., Series B, 3/15/07 625,000 612,500 - -------------------------------------------------------------------------------------------------------------------------------- Panolam Industries International, Inc., 11.50% Sr. Sub. Nts., 2/15/09(4) 1,000,000 1,022,500 ---------- 7,188,750 - -------------------------------------------------------------------------------------------------------------------------------- Information Technology--1.8% Amkor Technologies, Inc.: 9.25% Sr. Nts., 5/1/06(4) 800,000 784,000 10.50% Sr. Sub. Nts., 5/1/09(4) 500,000 500,000 - -------------------------------------------------------------------------------------------------------------------------------- Cherokee International LLC, 10.50% Sr. Sub. Nts., 5/1/09 1,000,000 885,000 - -------------------------------------------------------------------------------------------------------------------------------- Chippac International Ltd., 12.75% Sr. Sub. Nts., 8/1/09(4) 250,000 262,500 - -------------------------------------------------------------------------------------------------------------------------------- Details, Inc., 10% Sr. Sub. Nts., Series B, 11/15/05 500,000 462,500 - -------------------------------------------------------------------------------------------------------------------------------- Dyncorp, Inc., 9.50% Sr. Sub. Nts., 3/1/07 625,000 552,344 - -------------------------------------------------------------------------------------------------------------------------------- Fairchild Semiconductor International, Inc., 10.375% Sr. Unsec. Nts., 10/1/07 850,000 877,625 - -------------------------------------------------------------------------------------------------------------------------------- Fisher Scientific International, Inc., 9% Sr. Unsec. Sub. Nts., 2/1/08 1,115,000 1,074,581 - -------------------------------------------------------------------------------------------------------------------------------- Unisys Corp., 11.75% Sr. Nts., 10/15/04 275,000 301,812 - -------------------------------------------------------------------------------------------------------------------------------- Wavetek Corp., 10.125% Sr. Sub. Nts., 6/15/07 500,000 413,125 ---------- 6,113,487
10 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Manufacturing--2.2% American Standard Cos., Inc., 7.625% Sr. Nts., 2/15/10 $1,500,000 $1,376,250 - -------------------------------------------------------------------------------------------------------------------------------- Applied Power, Inc., 8.75% Sr. Sub. Nts., 4/1/09 350,000 344,312 - -------------------------------------------------------------------------------------------------------------------------------- Axia, Inc., 10.75% Sr. Sub. Nts., 7/15/08 420,000 386,925 - -------------------------------------------------------------------------------------------------------------------------------- Blount, Inc., 13% Sr. Sub. Nts., 8/1/09(4) 800,000 848,000 - -------------------------------------------------------------------------------------------------------------------------------- Burke Industries, Inc., 10% Sr. Sub. Nts., 8/15/07 400,000 166,000 - -------------------------------------------------------------------------------------------------------------------------------- Eagle-Picher Industries, Inc., 9.375% Sr. Unsec. Sub. Nts., 3/1/08 850,000 743,750 - -------------------------------------------------------------------------------------------------------------------------------- Grove Worldwide LLC, 9.25% Sr. Sub. Nts., 5/1/08 800,000 228,000 - -------------------------------------------------------------------------------------------------------------------------------- Hydrochem Industrial Services, Inc., 10.375% Sr. Sub. Nts., 8/1/07 250,000 215,625 - -------------------------------------------------------------------------------------------------------------------------------- Insilco Corp., 12% Sr. Sub. Nts., 8/15/07 765,000 757,350 - -------------------------------------------------------------------------------------------------------------------------------- International Wire Group, Inc., 11.75% Sr. Sub. Nts., Series B, 6/1/05 500,000 518,750 - -------------------------------------------------------------------------------------------------------------------------------- Jordan Industries, Inc., 10.375% Sr. Unsec. Nts., Series D, 8/1/07 700,000 703,500 - -------------------------------------------------------------------------------------------------------------------------------- Moll Industries, Inc., 10.50% Sr. Unsec. Sub. Nts., 7/1/08 560,000 226,800 - -------------------------------------------------------------------------------------------------------------------------------- Roller Bearing Co. of America, Inc., 9.625% Sr. Sub. Nts., Series B, 6/15/07 560,000 509,600 - -------------------------------------------------------------------------------------------------------------------------------- Terex Corp., 8.875% Sr. Unsec. Sub. Nts., 4/1/08 630,000 598,500 ---------- 7,623,362 - -------------------------------------------------------------------------------------------------------------------------------- Media/Entertainment: Broadcasting--2.1% AMFM Operating, Inc., 12.625% Debs., 10/31/06(10) 148,500 169,290 - -------------------------------------------------------------------------------------------------------------------------------- Chancellor Media Corp.: 8.75% Sr. Unsec. Sub. Nts., Series B, 6/15/07 975,000 987,187 9% Sr. Unsec. Sub. Nts., 10/1/08 1,700,000 1,776,500 10.50% Sr. Sub. Nts., Series B, 1/15/07 450,000 490,500 - -------------------------------------------------------------------------------------------------------------------------------- Emmis Communications Corp., 8.125% Sr. Unsec. Sub. Nts., Series B, 3/15/09 1,500,000 1,432,500 - -------------------------------------------------------------------------------------------------------------------------------- Radio One, Inc., 7% Sr. Sub. Nts., Series B, 5/15/04(3) 400,000 428,000 - -------------------------------------------------------------------------------------------------------------------------------- RCN Corp., 10.125% Sr. Unsec. Nts., 1/15/10 1,250,000 1,250,000 - -------------------------------------------------------------------------------------------------------------------------------- Spanish Broadcasting System, Inc., 9.625% Sr. Sub. Nts., 11/1/09 600,000 606,000 ---------- 7,139,977
Oppenheimer High Income Fund/VA 11 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Media/Entertainment: Cable/Wireless Video--4.9% Adelphia Communications Corp.: 7.875% Sr. Unsec. Nts., 5/1/09 $ 360,000 $ 324,900 8.125% Sr. Nts., Series B, 7/15/03 1,000,000 965,000 8.375% Sr. Nts., Series B, 2/1/08 1,000,000 932,500 9.25% Sr. Nts., 10/1/02 390,000 390,000 9.875% Sr. Nts., Series B, 3/1/07 140,000 142,800 10.50% Sr. Unsec. Nts., Series B, 7/15/04 340,000 354,450 - -------------------------------------------------------------------------------------------------------------------------------- Bresnan Communications, Inc.: 0%/9.25% Sr. Disc. Nts., 2/1/09(7) 810,000 562,950 8% Sr. Nts., 2/1/09 250,000 252,812 - -------------------------------------------------------------------------------------------------------------------------------- Charter Communication Holdings LLC/Charter Communication Holdings Capital Corp.: 0%/9.92% Sr. Unsec. Disc. Nts., 4/1/11(7) 2,200,000 1,300,750 8.25% Sr. Unsec. Nts., 4/1/07 350,000 324,625 8.625% Sr. Unsec. Nts., 4/1/09 250,000 232,187 - -------------------------------------------------------------------------------------------------------------------------------- CSC Holdings, Inc.: 7.875% Sr. Unsec. Debs., 2/15/18 1,000,000 957,500 9.875% Sr. Sub. Nts., 5/15/06 350,000 371,000 10.50% Sr. Sub. Debs., 5/15/16 250,000 278,750 - -------------------------------------------------------------------------------------------------------------------------------- Diva Systems Corp., 0%/12.625% Sr. Disc. Nts., Series B, 3/1/08(7) 500,000 197,500 - -------------------------------------------------------------------------------------------------------------------------------- EchoStar DBS Corp., 9.375% Sr. Unsec. Nts., 2/1/09 3,500,000 3,535,000 - -------------------------------------------------------------------------------------------------------------------------------- Falcon Holding Group LP: 0%/9.285% Sr. Disc. Debs., Series B, 4/15/10(7) 1,300,000 979,875 8.375% Sr. Unsec. Debs., Series B, 4/15/10 2,200,000 2,230,250 - -------------------------------------------------------------------------------------------------------------------------------- Insight Midwest LP/Insight Capital, Inc., 9.75% Sr. Nts., 10/1/09(4) 700,000 726,250 - -------------------------------------------------------------------------------------------------------------------------------- NTL Communications Corp., 9.875% Sr. Nts., 11/15/09(4)EUR 600,000 608,369 - -------------------------------------------------------------------------------------------------------------------------------- Rogers Communications, Inc., 8.75% Sr. Nts., 7/15/07CAD 500,000 348,062 - -------------------------------------------------------------------------------------------------------------------------------- United International Holdings, Inc., 0%/10.75% Sr. Disc. Nts., Series B, 2/15/08(7) 1,040,000 670,800 ----------- 16,686,330 - -------------------------------------------------------------------------------------------------------------------------------- Media/Entertainment: Diversified Media--3.1% Ackerley Group, Inc., 9% Sr. Unsec. Sub. Nts., Series B, 1/15/09 1,250,000 1,225,000 - -------------------------------------------------------------------------------------------------------------------------------- AMC Entertainment, Inc., 9.50% Sr. Unsec. Sub. Nts., 2/1/11 1,100,000 979,000 - -------------------------------------------------------------------------------------------------------------------------------- GSP I Corp., 10.15% First Mtg. Bonds, 6/24/10(4) 446,433 415,335 - -------------------------------------------------------------------------------------------------------------------------------- IPC Magazines Group plc, 0%/10.75% Bonds, 3/15/08(7)GBP 1,200,000 751,208 - -------------------------------------------------------------------------------------------------------------------------------- Lamar Media Corp., 9.625% Sr. Unsec. Sub. Nts., 12/1/06 815,000 835,375 - -------------------------------------------------------------------------------------------------------------------------------- Metromedia International Group, Inc., 0%/10.50% Sr. Unsec. Disc. Nts., 9/30/07(2)(7) 214,074 101,685 - -------------------------------------------------------------------------------------------------------------------------------- Premier Graphics, Inc., 11.50% Sr. Unsec. Nts., 12/1/05 700,000 493,500 - -------------------------------------------------------------------------------------------------------------------------------- Regal Cinemas, Inc.: 8.875% Sr. Unsec. Sub. Nts., 12/15/10 750,000 532,500 9.50% Sr. Unsec. Sub. Nts., 6/1/08 800,000 608,000
12 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Media/Entertainment: Diversified Media (continued) SFX Entertainment, Inc.: 9.125% Sr. Unsec. Sub. Nts., 12/1/08 $ 900,000 $ 859,500 9.125% Sr. Unsec. Sub. Nts., Series B, 2/1/08 1,800,000 1,705,500 - -------------------------------------------------------------------------------------------------------------------------------- TV Guide, Inc., 8.125% Sr. Unsec. Sub. Nts., 3/1/09 250,000 250,625 - -------------------------------------------------------------------------------------------------------------------------------- World Color Press, Inc., 7.75% Sr. Unsec. Sub. Nts., 2/15/09 1,000,000 955,000 - -------------------------------------------------------------------------------------------------------------------------------- WRC Media Corp., Units (each unit consists of $1,000 principal amount of 12.75% sr. sub. nts., 11/15/09 and one warrant to purchase 1.353 shares of common stock)(4)(9) 1,000,000 997,500 ----------- 10,709,728 - -------------------------------------------------------------------------------------------------------------------------------- Media/Entertainment: Telecommunications--20.1% Adelphia Business Solutions, Inc., 12% Sr. Sub. Nts., 11/1/07 1,200,000 1,284,000 - -------------------------------------------------------------------------------------------------------------------------------- Amazon.com, Inc., 0%/10% Sr. Unsec. Disc. Nts., 5/1/08(7) 3,200,000 2,048,000 - -------------------------------------------------------------------------------------------------------------------------------- COLT Telecom Group plc: 0%/12% Sr. Unsec. Disc. Nts., 12/15/06(7) 225,000 194,625 7.625% Bonds, 7/31/08DEM 1,925,000 991,774 8.875% Sr. Nts., 11/30/07DEM 250,000 134,430 10.125% Sr. Nts., 11/30/07GBP 400,000 678,510 Units (each unit consists of $1,000 principal amount of 0%/12% sr. disc. nts., 12/15/06 and one warrant to purchase 7.8 ordinary shares)(7)(9) 1,775,000 1,801,625 - -------------------------------------------------------------------------------------------------------------------------------- Concentric Network Corp., 12.75% Sr. Unsec. Nts., 12/15/07 800,000 846,000 - -------------------------------------------------------------------------------------------------------------------------------- Convergent Communications, Inc., 13% Sr. Nts., 4/1/08 200,000 141,500 - -------------------------------------------------------------------------------------------------------------------------------- Covad Communications Group, Inc., 0%/13.50% Sr. Disc. Nts., 3/15/08(7) 1,500,000 952,500 - -------------------------------------------------------------------------------------------------------------------------------- Diamond Cable Communications plc, 0%/11.75% Sr. Disc. Nts., 12/15/05(7) 2,350,000 2,232,500 - -------------------------------------------------------------------------------------------------------------------------------- Diamond Holdings plc, 9.125% Sr. Nts., 2/1/08 400,000 398,000 - -------------------------------------------------------------------------------------------------------------------------------- Equinix, Inc., Units (each unit consists of $1,000 principal amount of 13% sr. nts., 12/1/07 and one warrant to purchase 11.255 shares of common stock)(4)(9) 1,000,000 1,025,000 - -------------------------------------------------------------------------------------------------------------------------------- ESAT Telecom Group plc, 11.875% Sr. Unsec. Unsub. Nts., 11/1/09EUR 500,000 568,264 - -------------------------------------------------------------------------------------------------------------------------------- Exodus Communications, Inc.: 10.75% Sr. Nts., 12/15/09(4) 250,000 255,625 10.75% Sr. Nts., 12/15/09(4)EUR 1,000,000 1,025,270 11.25% Sr. Nts., 7/1/08 1,900,000 1,971,250 - -------------------------------------------------------------------------------------------------------------------------------- FirstWorld Communications, Inc., 0%/13% Sr. Disc. Nts., 4/15/08(7) 500,000 277,500 - -------------------------------------------------------------------------------------------------------------------------------- Focal Communications Corp., 0%/12.125% Sr. Unsec. Disc. Nts., 2/15/08(7) 500,000 327,500 - -------------------------------------------------------------------------------------------------------------------------------- Global Crossing Ltd., 9.625% Sr. Nts., 5/15/08 950,000 954,750 - -------------------------------------------------------------------------------------------------------------------------------- Global Telesystems Group, Inc., 10.50% Sr. Unsec. Bonds, 12/1/06(4)EUR 350,000 356,643 - -------------------------------------------------------------------------------------------------------------------------------- GST Telecommunications, Inc.: 0%/12.75% Sr. Sub. Nts., 11/15/07(7) 1,250,000 1,192,187 0%/13.875% Cv. Sr. Sub. Disc. Nts., 12/15/05(4)(7) 178,000 199,360 - -------------------------------------------------------------------------------------------------------------------------------- ICG Holdings, Inc., 0%/12.50% Sr. Sec. Disc. Nts., 5/1/06(7) 115,000 86,537 - -------------------------------------------------------------------------------------------------------------------------------- ICG Services, Inc., 0%/10% Sr. Exchangeable Unsec. Disc. Nts., 2/15/08(7) 1,220,000 649,650 - -------------------------------------------------------------------------------------------------------------------------------- Intermedia Communications, Inc.: 0%/12.25% Sr. Disc. Nts., Series B, 3/1/09(7) 800,000 481,000 8.50% Sr. Nts., Series B, 1/15/08 660,000 607,200 8.60% Sr. Unsec. Nts., Series B, 6/1/08 300,000 276,000 8.875% Sr. Nts., 11/1/07 460,000 430,100
Oppenheimer High Income Fund/VA 13 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Media/Entertainment: Telecommunications (continued) ITC Deltacom, Inc.: 8.875% Sr. Nts., 3/1/08 $1,000,000 $ 962,500 11% Sr. Nts., 6/1/07 750,000 795,000 - -------------------------------------------------------------------------------------------------------------------------------- Jazztel plc, 13.25% Sr. Nts., 12/15/09(4)EUR 2,000,000 2,026,637 - -------------------------------------------------------------------------------------------------------------------------------- KMC Telecom Holdings, Inc.: 0%/12.50% Sr. Unsec. Disc. Nts., 2/15/08(7) 1,250,000 718,750 13.50% Sr. Nts., 5/15/09(4) 200,000 201,000 - -------------------------------------------------------------------------------------------------------------------------------- Level 3 Communications, Inc.: 0%/10.50% Sr. Disc. Nts., 12/1/08(7) 900,000 549,000 9.125% Sr. Unsec. Nts., 5/1/08 700,000 663,250 - -------------------------------------------------------------------------------------------------------------------------------- McLeodUSA, Inc., 8.125% Sr. Unsec. Nts., 2/15/09 300,000 281,250 - -------------------------------------------------------------------------------------------------------------------------------- Metromedia Fiber Network, Inc.: 10% Sr. Nts., 12/15/09 750,000 772,500 10% Sr. Nts., 12/15/09EUR 500,000 525,215 10% Sr. Unsec. Nts., Series B, 11/15/08 1,600,000 1,644,000 - -------------------------------------------------------------------------------------------------------------------------------- Netia Holdings BV, 0%/11% Sr. Disc. Nts., 11/1/07(7)DEM 700,000 235,928 - -------------------------------------------------------------------------------------------------------------------------------- Netia Holdings II BV, 13.125% Sr. Nts., 6/15/09 1,350,000 1,360,125 - -------------------------------------------------------------------------------------------------------------------------------- NEXTLINK Communications, Inc.: 9% Sr. Nts., 3/15/08 800,000 756,000 9.625% Sr. Nts., 10/1/07 1,210,000 1,185,800 10.75% Sr. Unsec. Nts., 6/1/09 200,000 206,500 10.75% Sr. Unsec. Nts., 11/15/08 1,200,000 1,242,000 - -------------------------------------------------------------------------------------------------------------------------------- NTL Communications Corp.: 0%/9.78% Sr. Nts., 11/15/09(4)(7)EUR 500,000 296,259 0%/12.375% Sr. Unsec. Nts., Series B, 10/1/08(7) 1,000,000 712,500 11.50% Sr. Unsec. Nts., Series B, 10/1/08 1,600,000 1,744,000 - -------------------------------------------------------------------------------------------------------------------------------- NTL, Inc.: 0%/9.75% Sr. Deferred Coupon Nts., Series B, 4/1/08(7) 350,000 243,250 0%/9.75% Sr. Nts., Series B, 4/15/09(7)GBP 3,225,000 3,012,026 7% Cv. Unsec. Sub. Nts., 12/15/08 550,000 1,454,750 10% Sr. Nts., Series B, 2/15/07 1,055,000 1,089,287 - -------------------------------------------------------------------------------------------------------------------------------- Optel, Inc., 13% Sr. Nts., Series B, 2/15/05(8) 1,000,000 745,000 - -------------------------------------------------------------------------------------------------------------------------------- PSINet, Inc.: 10% Sr. Unsec. Nts., Series B, 2/15/05 750,000 745,312 10.50% Sr. Nts., 12/1/06(4)EUR 1,250,000 1,273,725 - -------------------------------------------------------------------------------------------------------------------------------- Qwest Communications International, Inc., 0%/9.47% Sr. Disc. Nts., 10/15/07(7) 1,000,000 815,000 - -------------------------------------------------------------------------------------------------------------------------------- RSL Communications plc: 9.125% Sr. Unsec. Nts., 3/1/08 500,000 440,000 10.50% Gtd. Sr. Nts., 11/15/08 1,450,000 1,370,250 - -------------------------------------------------------------------------------------------------------------------------------- Tele1 Europe BV, 11.875% Sr. Nts., 12/1/09(4)EUR 1,200,000 1,218,247 - -------------------------------------------------------------------------------------------------------------------------------- Telewest Communications plc: 0%/9.25% Sr. Nts., 4/15/09(4)(7) 1,500,000 952,500 0%/9.875% Sr. Nts., 4/15/09(4)(7)GBP 1,300,000 1,333,596 0%/11% Sr. Disc. Debs., 10/1/07(7) 990,000 928,125 11.25% Sr. Nts., 11/1/08 1,990,000 2,169,100 - -------------------------------------------------------------------------------------------------------------------------------- Teligent, Inc., 11.50% Sr. Nts., 12/1/07 400,000 388,000 - -------------------------------------------------------------------------------------------------------------------------------- Time Warner Telecom LLC, 9.75% Sr. Nts., 7/15/08 700,000 724,500
14 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Media/Entertainment: Telecommunications (continued) United Pan-Europe Communications NV: 0%/13.375% Sr. Disc. Nts., 11/1/09(4)(7) $1,000,000 $ 565,000 0%/13.375% Sr. Disc. Nts., 11/1/09(4)(7)EUR 500,000 288,711 10.875% Sr. Nts., 8/1/09EUR 250,000 255,059 10.875% Sr. Nts., 8/1/09 2,500,000 2,543,750 11.25% Sr. Nts., 11/1/09(4)EUR 500,000 514,522 - -------------------------------------------------------------------------------------------------------------------------------- Verio, Inc.: 10.375% Sr. Unsec. Nts., 4/1/05 1,480,000 1,517,000 10.625% Sr. Nts., 11/15/09(4) 500,000 515,000 11.25% Sr. Unsec. Nts., 12/1/08 700,000 738,500 13.50% Sr. Unsec. Nts., 6/15/04 385,000 424,463 - -------------------------------------------------------------------------------------------------------------------------------- Versatel Telecom International BV: 11.875% Sr. Nts., 7/15/09 800,000 816,000 11.875% Sr. Nts., 7/15/09EUR 150,000 160,772 - -------------------------------------------------------------------------------------------------------------------------------- Viatel, Inc., 11.25% Sr. Sec. Nts., 4/15/08 830,000 827,925 - -------------------------------------------------------------------------------------------------------------------------------- WAM!NET, Inc., 0%/13.25% Sr. Unsec. Disc. Nts., Series B, 3/1/05(7) 1,750,000 1,023,750 - -------------------------------------------------------------------------------------------------------------------------------- Worldwide Fiber, Inc., 12% Sr. Nts., 8/1/09(4) 200,000 207,000 ----------- 68,565,634 - -------------------------------------------------------------------------------------------------------------------------------- Media/Entertainment: Wireless Communications--8.7% Arch Communications, Inc., 12.75% Sr. Nts., 7/1/07 200,000 159,250 - -------------------------------------------------------------------------------------------------------------------------------- CellNet Data Systems, Inc., 0%/14% Sr. Disc. Nts., 10/1/07(7) 1,834,000 199,448 - -------------------------------------------------------------------------------------------------------------------------------- Centennial Cellular Corp., 10.75% Sr. Sub. Nts., 12/15/08 800,000 860,000 - -------------------------------------------------------------------------------------------------------------------------------- Crown Castle International Corp.: 0%/10.375% Sr. Disc. Nts., 5/15/11(7) 700,000 441,000 0%/10.625% Sr. Unsec. Disc. Nts., 11/15/07(7) 940,000 710,875 9% Sr. Nts., 5/15/11 750,000 735,938 - -------------------------------------------------------------------------------------------------------------------------------- CTI Holdings SA, 0%/11.50% Sr. Deferred Coupon Nts., 4/15/08(7) 1,000,000 577,500 - -------------------------------------------------------------------------------------------------------------------------------- Dobson Communications Corp., 11.75% Sr. Nts., 4/15/07 240,000 272,400 - -------------------------------------------------------------------------------------------------------------------------------- Geotek Communications, Inc., 0%/15% Sr. Sec. Disc. Nts., Series B, 7/15/05(5)(7)(8) 226,000 91,530 - -------------------------------------------------------------------------------------------------------------------------------- ICO Global Communications (Holdings) Ltd., Units (each unit consists of $1,000 principal amount of 15% sr. nts., 8/1/05 and one warrant to purchase 19.85 shares of common stock)(8)(9) 700,000 325,500 - -------------------------------------------------------------------------------------------------------------------------------- Loral Space & Communications Ltd., 9.50% Sr. Nts., 1/15/06 700,000 633,500 - -------------------------------------------------------------------------------------------------------------------------------- Microcell Telecommunications, Inc.: 0%/12% Sr. Unsec. Disc. Nts., 6/1/09(7) 1,000,000 648,750 0%/14% Sr. Disc. Nts., Series B, 6/1/06(7) 700,000 621,250 - -------------------------------------------------------------------------------------------------------------------------------- Millicom International Cellular SA, 0%/13.50% Sr. Disc. Nts., 6/1/06(7) 300,000 241,500 - -------------------------------------------------------------------------------------------------------------------------------- Nextel Communications, Inc.: 0%/9.75% Sr. Disc. Nts., 10/31/07(7) 250,000 180,000 0%/10.65% Sr. Disc. Nts., 9/15/07(7) 1,000,000 750,000 9.375% Sr. Nts., 11/15/09(4) 1,000,000 985,000 - -------------------------------------------------------------------------------------------------------------------------------- Omnipoint Corp.: 11.50% Sr. Nts., 9/15/09(4) 2,200,000 2,376,000 11.625% Sr. Nts., 8/15/06 1,000,000 1,065,000 11.625% Sr. Nts., Series A, 8/15/06 1,900,000 2,023,500 - -------------------------------------------------------------------------------------------------------------------------------- Orange plc, 8% Sr. Nts., 8/1/08 2,600,000 2,635,750
Oppenheimer High Income Fund/VA 15 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Media/Entertainment: Wireless Communications (continued) ORBCOMM Global LP/ORBCOMM Capital Corp., 14% Sr. Nts., 8/15/04 $ 600,000 $ 435,000 - -------------------------------------------------------------------------------------------------------------------------------- Orion Network Systems, Inc., 0%/12.50% Sr. Disc. Nts., 1/15/07(7) 1,150,000 534,750 - -------------------------------------------------------------------------------------------------------------------------------- Pinnacle Holdings, Inc., 0%/10% Sr. Unsec. Disc. Nts., 3/15/08(7) 2,400,000 1,584,000 - -------------------------------------------------------------------------------------------------------------------------------- Polska Telefoniz Cyfrowa International Financial II SA, 11.25% Sr. Sub. Nts., 12/1/09(4)EUR 400,000 407,592 - -------------------------------------------------------------------------------------------------------------------------------- Price Communications Wireless, Inc.: 9.125% Sr. Sec. Nts., Series B, 12/15/06 800,000 814,000 11.75% Sr. Sub. Nts., 7/15/07 425,000 465,375 - -------------------------------------------------------------------------------------------------------------------------------- Real Time Data Co., 11% Disc. Nts., 5/31/09(4)(10) 394,554 379,419 - -------------------------------------------------------------------------------------------------------------------------------- Rural Cellular Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 1,900,000 1,952,250 - -------------------------------------------------------------------------------------------------------------------------------- SBA Communications Corp., 0%/12% Sr. Unsec. Disc. Nts., 3/1/08(7) 2,720,000 1,618,400 - -------------------------------------------------------------------------------------------------------------------------------- Spectrasite Holdings, Inc.: 0%/11.25% Sr. Unsec. Disc. Nts., 4/15/09(7) 675,000 362,813 0%/12% Sr. Disc. Nts., 7/15/08(7) 1,640,000 988,100 - -------------------------------------------------------------------------------------------------------------------------------- Voicestream Wireless Corp., 10.375% Sr. Nts., 11/15/09(4) 3,500,000 3,622,500 ----------- 29,697,890 - -------------------------------------------------------------------------------------------------------------------------------- Metals/Minerals--2.3% AEI Resources, Inc., 11.50% Sr. Sub. Nts., 12/15/06(4) 750,000 489,375 - -------------------------------------------------------------------------------------------------------------------------------- AK Steel Corp.: 7.875% Sr. Unsec. Nts., 2/15/09 500,000 475,000 9.125% Sr. Nts., 12/15/06 1,200,000 1,227,000 - -------------------------------------------------------------------------------------------------------------------------------- California Steel Industries Corp., 8.50% Sr. Unsec. Nts., Series B, 4/1/09 500,000 482,500 - -------------------------------------------------------------------------------------------------------------------------------- Great Lakes Carbon Corp., 10.25% Sr. Sub. Nts., Series B, 5/15/08 1,500,000 1,432,500 - -------------------------------------------------------------------------------------------------------------------------------- International Utility Structures, Inc., 10.75% Sr. Sub. Nts., 2/1/08 400,000 338,000 - -------------------------------------------------------------------------------------------------------------------------------- Kaiser Aluminum & Chemical Corp., 12.75% Sr. Sub. Nts., 2/1/03 410,000 412,050 - -------------------------------------------------------------------------------------------------------------------------------- Metallurg Holdings, Inc., 0%/12.75% Sr. Disc. Nts., 7/15/08(7) 2,000,000 650,000 - -------------------------------------------------------------------------------------------------------------------------------- Metallurg, Inc., 11% Sr. Nts., 12/1/07 540,000 488,700 - -------------------------------------------------------------------------------------------------------------------------------- National Steel Corp., 9.875% First Mtg. Bonds, Series D, 3/1/09 600,000 621,000 - -------------------------------------------------------------------------------------------------------------------------------- P&L Coal Holdings Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 800,000 792,000 - -------------------------------------------------------------------------------------------------------------------------------- Republic Technologies International Holdings LLC/RTI Capital Corp., Units (each unit consists of $1,000 principal amount of 13.75% sr. nts., 7/15/09 and one warrant to purchase Cl. D common stock at $0.01 per share)(9) 800,000 532,000 ----------- 7,940,125 - -------------------------------------------------------------------------------------------------------------------------------- Retail--1.5% Boyds Collection Ltd. (The), 9% Sr. Unsec. Sub. Nts., Series B, 5/15/08 752,000 718,160 - -------------------------------------------------------------------------------------------------------------------------------- Dura Operating Corp., 9% Sr. Sub. Nts., Series B, 5/1/09 1,300,000 1,231,750 - -------------------------------------------------------------------------------------------------------------------------------- Eye Care Centers of America, Inc., 9.125% Sr. Unsec. Sub. Nts., 5/1/08 1,100,000 775,500 - -------------------------------------------------------------------------------------------------------------------------------- Finlay Enterprises, Inc., 9% Debs., 5/1/08 900,000 823,500 - -------------------------------------------------------------------------------------------------------------------------------- Finlay Fine Jewelry Corp., 8.375% Sr. Nts., 5/1/08 600,000 558,000 - -------------------------------------------------------------------------------------------------------------------------------- Home Interiors & Gifts, Inc., 10.125% Sr. Sub. Nts., 6/1/08 700,000 602,000 - -------------------------------------------------------------------------------------------------------------------------------- Pantry, Inc. (The), 10.25% Sr. Sub. Nts., 10/15/07 325,000 316,875 ----------- 5,025,785
16 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Service--3.3% Allied Waste North America, Inc.: 7.875% Sr. Unsec. Nts., Series B, 1/1/09 $1,000,000 $ 888,750 10% Sr. Sub. Nts., 8/1/09(4) 1,300,000 1,170,000 - -------------------------------------------------------------------------------------------------------------------------------- American Plumbing & Mechanical, Inc., 11.625% Gtd. Sr. Sub. Nts., 10/15/08(4) 500,000 478,750 - -------------------------------------------------------------------------------------------------------------------------------- Comforce Operating, Inc., 12% Sr. Nts., Series B, 12/1/07 750,000 463,125 - -------------------------------------------------------------------------------------------------------------------------------- Dura Operating Corp., 9% Sr. Sub. Nts., Series B, 5/1/09EUR 300,000 284,560 - -------------------------------------------------------------------------------------------------------------------------------- Integrated Electric Services, Inc., 9.375% Sr. Sub. Nts., Series B, 2/1/09 600,000 591,750 - -------------------------------------------------------------------------------------------------------------------------------- IT Group, Inc., 11.25% Sr. Unsec. Sub. Nts., Series B, 4/1/09 650,000 633,750 - -------------------------------------------------------------------------------------------------------------------------------- Norse CBO Ltd., 9.342% Sub. Bonds, Series 1A, Cl. C2, 8/13/10(2) 1,500,000 1,177,500 - -------------------------------------------------------------------------------------------------------------------------------- Protection One Alarm Monitoring, Inc.: 6.75% Cv. Sr. Sub. Nts., 9/15/03 950,000 456,000 7.375% Gtd. Sr. Unsec. Nts., 8/15/05 1,800,000 1,440,000 - -------------------------------------------------------------------------------------------------------------------------------- Stericycle, Inc., 12.375% Sr. Sub. Nts., 11/15/09(4) 700,000 720,125 - -------------------------------------------------------------------------------------------------------------------------------- United Rentals, Inc.: 9% Sr. Unsec. Sub. Nts., Series B, 4/1/09 350,000 332,500 9.25% Sr. Unsec. Sub. Nts., Series B, 1/15/09 1,700,000 1,640,500 - -------------------------------------------------------------------------------------------------------------------------------- US Unwired, Inc., 0%/13.375% Sr. Disc. Nts., 11/1/09(4)(7) 1,750,000 1,032,500 ----------- 11,309,810 - -------------------------------------------------------------------------------------------------------------------------------- Transportation--4.6% America West Airlines, Inc., 10.75% Sr. Nts., 9/1/05 1,000,000 976,250 - -------------------------------------------------------------------------------------------------------------------------------- Amtran, Inc., 10.50% Sr. Nts., 8/1/04(4) 500,000 502,500 - -------------------------------------------------------------------------------------------------------------------------------- Budget Group, Inc., 9.125% Sr. Unsec. Nts., 4/1/06 600,000 561,000 - -------------------------------------------------------------------------------------------------------------------------------- Great Lakes Dredge & Dock Corp., 11.25% Sr. Unsec. Sub. Nts., 8/15/08 915,000 960,750 - -------------------------------------------------------------------------------------------------------------------------------- Hayes Wheels International, Inc., 11% Sr. Sub. Nts., 7/15/06 600,000 630,000 - -------------------------------------------------------------------------------------------------------------------------------- HDA Parts System, Inc., 12% Sr. Sub. Nts., 8/1/05 950,000 869,250 - -------------------------------------------------------------------------------------------------------------------------------- Key Plastics, Inc., 10.25% Sr. Sub. Nts., Series B, 3/15/07 25,000 9,625 - -------------------------------------------------------------------------------------------------------------------------------- Millenium Seacarriers, Inc., Units (each unit consists of $1,000 principal amount of 11.63% first priority ship mtg. sr. sec. nts., 7/15/05 and one warrant to purchase five shares of common stock)(2)(3)(9) 700,000 402,500 - -------------------------------------------------------------------------------------------------------------------------------- Navigator Gas Transport plc: 10.50% First Priority Ship Mtg. Nts., 6/30/07(4) 1,175,000 546,375 Units (each unit consists of $1,000 principal amount of 12% second priority ship mtg. nts., 6/30/07 and 7.66 warrants)(4)(9) 500,000 37,500 - -------------------------------------------------------------------------------------------------------------------------------- Newcor, Inc., 9.875% Sr. Unsec. Sub. Nts., Series B, 3/1/08 1,500,000 787,500 - -------------------------------------------------------------------------------------------------------------------------------- Oxford Automotive, Inc., 10.125% Sr. Unsec. Sub. Nts., Series D, 6/15/07(2) 2,125,000 2,008,125 - -------------------------------------------------------------------------------------------------------------------------------- Pacific & Atlantic Holdings, Inc., 11.50% First Preferred Ship Mtg. Nts., 5/30/08(8) 700,000 269,500 - -------------------------------------------------------------------------------------------------------------------------------- Sea Containers Ltd., 7.875% Sr. Nts., 2/15/08 1,500,000 1,301,250 - -------------------------------------------------------------------------------------------------------------------------------- Tenneco, Inc., 11.625% Sr. Sub. Nts., 10/15/09(4) 1,000,000 1,025,000 - -------------------------------------------------------------------------------------------------------------------------------- Terex Corp., 8.875% Sr. Unsec. Sub. Nts., Series C, 4/1/08 400,000 380,000 - -------------------------------------------------------------------------------------------------------------------------------- Trans World Airlines Lease, 14% Equipment Trust, 7/2/08(2) 818,437 736,594 - -------------------------------------------------------------------------------------------------------------------------------- Trans World Airlines, Inc., 11.50% Sr. Sec. Nts., 12/15/04 1,700,000 1,102,875 - -------------------------------------------------------------------------------------------------------------------------------- Transtar Holdings LP/Transtar Capital Corp., 13.375% Sr. Disc. Nts., Series B, 12/15/03 2,600,000 2,665,000 ----------- 15,771,594
Oppenheimer High Income Fund/VA 17 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Principal Market Value Amount(1) Note 1 - -------------------------------------------------------------------------------------------------------------------------------- Utility--0.6% Calpine Corp.: 8.75% Sr. Nts., 7/15/07 $ 545,000 $ 549,088 10.50% Sr. Nts., 5/15/06 25,000 26,500 - -------------------------------------------------------------------------------------------------------------------------------- El Paso Electric Co., 9.40% First Mtg. Sec. Nts., Series E, 5/1/11(11) 555,000 594,266 - -------------------------------------------------------------------------------------------------------------------------------- ESI Tractebel Acquisition Corp., 7.99% Sec. Bonds, Series B, 12/30/11 1,000,000 894,694 ------------ 2,064,548 ------------ Total Corporate Bonds and Notes (Cost $308,366,702) 283,247,406 Shares ================================================================================================================================ Preferred Stocks--5.1% - -------------------------------------------------------------------------------------------------------------------------------- AmeriKing, Inc., 13% Cum. Sr. Exchangeable, Non-Vtg.(10) 16,509 301,289 - -------------------------------------------------------------------------------------------------------------------------------- CGA Group Ltd., Series A(2)(10) 76,590 1,914,750 - -------------------------------------------------------------------------------------------------------------------------------- Clark USA, Inc., 11.50% Cum. Sr. Exchangeable, Non-Vtg.(10) 480 130,800 - -------------------------------------------------------------------------------------------------------------------------------- Concentric Network Corp., 13.50% Sr. Redeemable Exchangeable, Series B, Non-Vtg.(10) 607 602,447 - -------------------------------------------------------------------------------------------------------------------------------- Dobson Communications Corp.: 12.25% Sr. Exchangeable, Non-Vtg.(10) 1,272 1,281,540 13% Sr. Exchangeable, Non-Vtg.(10) 1,065 1,163,512 - -------------------------------------------------------------------------------------------------------------------------------- e.spire Communications, Inc., 12.75% Jr. Redeemable, Non-Vtg.(10) 425 86,062 - -------------------------------------------------------------------------------------------------------------------------------- Eagle-Picher Holdings, Inc., 11.75% Cum. Exchangeable, Series B, Non-Vtg.(2)(5) 8,000 370,000 - -------------------------------------------------------------------------------------------------------------------------------- Fidelity Federal Bank FSB Glendale California, l2% Non-Cum. Exchangeable Perpetual, Series A(2) 20 300 - -------------------------------------------------------------------------------------------------------------------------------- Global Crossing Ltd., 10.50% Sr. Exchangeable(10) 7,500 755,625 - -------------------------------------------------------------------------------------------------------------------------------- ICG Holdings, Inc., 14.25% Exchangeable, Non-Vtg.(10) 307 280,138 - -------------------------------------------------------------------------------------------------------------------------------- Intermedia Communications, Inc., 13.50% Exchangeable, Series B(10) 905 889,163 - -------------------------------------------------------------------------------------------------------------------------------- Nebco Evans Holdings, Inc., 11.25% Sr. Redeemable Exchangeable Preferred Stock, Non-Vtg.(10) 7,274 81,833 - -------------------------------------------------------------------------------------------------------------------------------- Nextel Communications, Inc., 11.125% Exchangeable, Series E, Non-Vtg.(10) 1,285 1,288,213 - -------------------------------------------------------------------------------------------------------------------------------- NEXTLINK Communications, Inc., 14% Cum., Non-Vtg.(10) 32,136 1,727,310 - -------------------------------------------------------------------------------------------------------------------------------- Packaging Corp. of America, 12.375%(5)(10) 2,116 232,231 - -------------------------------------------------------------------------------------------------------------------------------- Paxson Communications Corp., 13.25% Cum. Jr. Exchangeable, Non-Vtg.(10) 48 492,000 - -------------------------------------------------------------------------------------------------------------------------------- PRIMEDIA, Inc.: 8.625% Exchangeable, Series H, Non-Vtg. 10,000 872,500 9.20% Exchangeable, Series F, Non-Vtg. 2,500 229,375 - -------------------------------------------------------------------------------------------------------------------------------- R&B Falcon Corp., 13.875% Cum., Non-Vtg.(10) 1,288 1,362,060 - -------------------------------------------------------------------------------------------------------------------------------- Rural Cellular Corp., 11.375% Cum. Sr., Series B, Non-Vtg.(10) 1,182 1,214,505 - -------------------------------------------------------------------------------------------------------------------------------- SF Holdings Group, Inc.: 13.75% Cum. Nts., Series B, 3/15/09, Non-Vtg.(10) 196 984,900 13.75% Exchangeable(4) 46 231,150 - -------------------------------------------------------------------------------------------------------------------------------- Star Gas Partners, LP 517 6,850 - -------------------------------------------------------------------------------------------------------------------------------- Walden Residential Properties, Inc.: 9.16% Cv., Series B, Non-Vtg. 30,000 723,750 9.20% Sr. 8,950 139,284 ------------ Total Preferred Stocks (Cost $20,061,434) 17,361,587
18 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares Note 1 ================================================================================================================================ Common Stocks--0.3% - -------------------------------------------------------------------------------------------------------------------------------- Celcaribe SA(4)(5) 121,950 $198,169 - -------------------------------------------------------------------------------------------------------------------------------- ECM Fund, LPI(2) 150 131,438 - -------------------------------------------------------------------------------------------------------------------------------- Equitable Bag, Inc.(2)(5) 3,723 3,723 - -------------------------------------------------------------------------------------------------------------------------------- Gulfstream Holding, Inc.(5) 56 -- - -------------------------------------------------------------------------------------------------------------------------------- Horizon Group Properties, Inc.(5) 851 2,872 - -------------------------------------------------------------------------------------------------------------------------------- Optel, Inc.(5) 945 9 - -------------------------------------------------------------------------------------------------------------------------------- Price Communications Corp. 15,000 417,199 - -------------------------------------------------------------------------------------------------------------------------------- SF Holdings Group, Inc., Cl. C(5) 7,252 73 - -------------------------------------------------------------------------------------------------------------------------------- Weatherford International, Inc. 5,000 199,687 -------- Total Common Stocks (Cost $501,343) 953,170 Units ================================================================================================================================ Rights, Warrants and Certificates--0.7% - -------------------------------------------------------------------------------------------------------------------------------- Ames Department Stores, Inc., Litigation Trust Wts., Exp. 1/31/00(2) 39,658 397 - -------------------------------------------------------------------------------------------------------------------------------- Australis Holdings PTY Ltd./Australia Media Ltd. Wts., Exp. 5/15/00(2) 125 1 - -------------------------------------------------------------------------------------------------------------------------------- CellNet Data Systems, Inc. Wts., Exp. 10/1/07(4) 1,434 5,557 - -------------------------------------------------------------------------------------------------------------------------------- CGA Group Ltd. Wts., Exp. 6/16/07(2) 62,000 18,600 - -------------------------------------------------------------------------------------------------------------------------------- Clearnet Communications, Inc. Wts., Exp. 9/15/05 660 14,824 - -------------------------------------------------------------------------------------------------------------------------------- Concentric Network Corp. Wts., Exp. 12/15/07(2) 750 198,844 - -------------------------------------------------------------------------------------------------------------------------------- Covergent Communications, Inc. Wts., Exp. 4/1/08 2,000 24,500 - -------------------------------------------------------------------------------------------------------------------------------- Decrane Aircraft Holdings, Inc. Wts., Exp. 9/30/08 1,750 -- - -------------------------------------------------------------------------------------------------------------------------------- Diva Systems Corp. Wts., Exp. 3/1/08(2) 1,500 12,000 - -------------------------------------------------------------------------------------------------------------------------------- e.spire Communications, Inc. Wts., Exp. 11/1/05 475 2,583 - -------------------------------------------------------------------------------------------------------------------------------- FirstWorld Communications, Inc. Wts., Exp. 4/15/08(2) 500 75,062 - -------------------------------------------------------------------------------------------------------------------------------- Geotek Communications, Inc. Wts., Exp. 7/15/05(2) 52,500 525 - -------------------------------------------------------------------------------------------------------------------------------- Globix Corp. Wts., Exp. 5/1/05 1,800 432,000 - -------------------------------------------------------------------------------------------------------------------------------- Golden State Bancorp, Inc. Wts., Exp. 1/1/01 15,626 13,673 - -------------------------------------------------------------------------------------------------------------------------------- Gothic Energy Corp. Wts.: Exp. 1/23/03 8,351 -- Exp. 1/23/03(2) 4,766 48 Exp. 9/1/04(2) 14,000 14,882 - -------------------------------------------------------------------------------------------------------------------------------- ICG Communications, Inc. Wts., Exp. 9/15/05 5,940 73,300 - -------------------------------------------------------------------------------------------------------------------------------- In-Flight Phone Corp. Wts., Exp. 8/31/02 950 -- - -------------------------------------------------------------------------------------------------------------------------------- Insilco Corp. Wts., Exp. 8/15/07(2) 765 -- - -------------------------------------------------------------------------------------------------------------------------------- KMC Telecom Holdings, Inc. Wts., Exp. 4/15/08(2) 2,455 7,520 - -------------------------------------------------------------------------------------------------------------------------------- Long Distance International, Inc. Wts., Exp. 4/13/08(2) 800 400 - -------------------------------------------------------------------------------------------------------------------------------- Loral Space & Communications Ltd. Wts., Exp. 1/15/07(2) 800 9,700 - -------------------------------------------------------------------------------------------------------------------------------- Microcell Telecommunications, Inc. Wts., Exp. 6/1/06(2) 3,200 213,424 - -------------------------------------------------------------------------------------------------------------------------------- Millenium Seacarriers, Inc. Wts., Exp. 7/15/05(2) 1,500 1,687 - -------------------------------------------------------------------------------------------------------------------------------- Omnipoint Corp. Wts., Exp. 11/29/00(2) 7,500 904,687
Oppenheimer High Income Fund/VA 19 - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Units Note 1 ================================================================================================================================ Rights, Warrants and Certificates (continued) PLD Telekom, Inc., 9% Cv. Sub. Nts. Wts., Exp. 3/31/03(2) 170 $ 8 - -------------------------------------------------------------------------------------------------------------------------------- Protection One Alarm Monitoring, Inc. Wts.: Exp. 11/1/03(2) 28,000 49,000 Exp. 6/30/05(2) 1,600 160 - -------------------------------------------------------------------------------------------------------------------------------- R&B Falcon Corp. Wts., Exp. 5/1/09(2) 1,200 300,000 - -------------------------------------------------------------------------------------------------------------------------------- Real Time Data Co. Wts., Exp. 5/31/04(2) 121,440 1,214 - -------------------------------------------------------------------------------------------------------------------------------- WAM!NET, Inc. Wts., Exp. 3/1/05(4) 5,250 117,469 ------------ Total Rights, Warrants and Certificates (Cost $198,136) 2,492,065 Principal Amount(1) ================================================================================================================================ Structured Instruments--0.5% - -------------------------------------------------------------------------------------------------------------------------------- Deutsche Morgan Grenfell, Lehman High Yield Index Linked Nts., 8.75%, 5/5/00 (Cost $1,500,000) $ 1,500,000 1,514,867 ================================================================================================================================ Repurchase Agreements--3.7% - -------------------------------------------------------------------------------------------------------------------------------- Repurchase agreement with Banc One Capital Markets, Inc., 2.75%, dated 12/31/99, to be repurchased at $12,702,910 on 1/3/00, collateralized by U.S. Treasury Bonds, 5.25%-12%, 2/15/01-11/15/28, with a value of $4,984,619 and U.S. Treasury Nts., 5%-7.50%, 12/31/00-2/15/07, with a value of $7,976,752 (Cost $12,700,000) 12,700,000 12,700,000 - -------------------------------------------------------------------------------------------------------------------------------- Total Investments, at Value (Cost $359,280,735) 97.9% 333,796,296 - -------------------------------------------------------------------------------------------------------------------------------- Other Assets Net of Liabilities 2.1 7,032,302 ----------- ------------ Net Assets 100.0% $340,828,598 =========== ============
1. Principal amount is reported in U.S. Dollars, except for those denoted in the following currencies: ARP -- Argentine Peso EUR -- Euro CAD -- Canadian Dollar GBP -- British Pound Sterling DEM -- German Mark IDR -- Indonesian Rupiah 2. Identifies issues considered to be illiquid or restricted--See Note 7 of Notes to Financial Statements. 3. Represents the current interest rate for a variable or increasing rate security. 4. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $43,166,117 or 12.67% of the Fund's net assets as of December 31, 1999. 5. Non-income producing security. 6. For zero coupon bonds, the interest rate shown is the effective yield on the date of purchase. 7. Denotes a step bond: a zero coupon bond that converts to a fixed or variable interest rate at a designated future date. 8. Issuer is in default. 9. Units may be comprised of several components, such as debt and equity and/or warrants to purchase equity at some point in the future. For units which represent debt securities, principal amount disclosed represents total underlying principal. 10. Interest or dividend is paid in kind. 11. A sufficient amount of securities has been designated to cover outstanding foreign currency contracts. See Note 5 of Notes to Financial Statements. See accompanying Notes to Financial Statements. 20 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Statement of Assets and Liabilities December 31, 1999 - -------------------------------------------------------------------------------- ================================================================================================== Assets Investments, at value (cost $359,280,735)--see accompanying statement $333,796,296 - -------------------------------------------------------------------------------------------------- Cash 1,071,946 - -------------------------------------------------------------------------------------------------- Receivables and other assets: Interest, dividends and principal paydowns 6,544,568 Shares of beneficial interest sold 178,609 Other 5,047 ------------ Total assets 341,596,466 ================================================================================================== Liabilities Unrealized depreciation on foreign currency contracts 85,050 - -------------------------------------------------------------------------------------------------- Payables and other liabilities: Shares of beneficial interest redeemed 604,732 Investments purchased 38,914 Trustees' compensation 210 Transfer and shareholder servicing agent fees 184 Other 38,778 ------------ Total liabilities 767,868 ================================================================================================== Net Assets $340,828,598 ============ ================================================================================================== Composition of Net Assets Paid-in capital $344,149,980 - -------------------------------------------------------------------------------------------------- Undistributed net investment income 32,932,864 - -------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (10,681,554) - -------------------------------------------------------------------------------------------------- Net unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies (25,572,692) ------------ Net assets--applicable to 31,781,566 shares of beneficial interest outstanding $340,828,598 ============ ================================================================================================== Net Asset Value, Redemption Price Per Share and Offering Price Per Share $10.72
See accompanying Notes to Financial Statements. Oppenheimer High Income Fund/VA 21 - -------------------------------------------------------------------------------- Statement of Operations For the Year ended December 31, 1999 - -------------------------------------------------------------------------------- ================================================================================================== Investment Income Interest $ 33,187,927 - -------------------------------------------------------------------------------------------------- Dividends (net of foreign withholding taxes of $61) 2,090,889 ------------ Total income 35,278,816 ================================================================================================== Expenses Management fees 2,511,521 - -------------------------------------------------------------------------------------------------- Custodian fees and expenses 8,866 - -------------------------------------------------------------------------------------------------- Trustees' compensation 3,792 - -------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees 2,104 - -------------------------------------------------------------------------------------------------- Other 26,642 ------------ Total expenses 2,552,925 Less expenses paid indirectly (12,847) ------------ Net expenses 2,540,078 ================================================================================================== Net Investment Income 32,738,738 ================================================================================================== Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments (6,397,480) Closing of futures contracts 138,192 Foreign currency transactions 262,847 ------------ Net realized loss (5,996,441) - -------------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation on: Investments (11,265,255) Translation of assets and liabilities denominated in foreign currencies (840,842) ------------ Net change (12,106,097) ------------ Net realized and unrealized loss (18,102,538) ================================================================================================== Net Increase in Net Assets Resulting from Operations $ 14,636,200 ============
See accompanying Notes to Financial Statements. 22 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 ================================================================================================================== Operations Net investment income $ 32,738,738 $ 27,929,383 - ------------------------------------------------------------------------------------------------------------------ Net realized loss (5,996,441) (2,889,367) - ------------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation or depreciation (12,106,097) (24,125,468) ------------ ------------ Net increase in net assets resulting from operations 14,636,200 914,548 ================================================================================================================== Dividends and/or Distributions to Shareholders Dividends from net investment income (23,246,834) (6,694,100) - ------------------------------------------------------------------------------------------------------------------ Distributions from net realized gain (8,113,249) ================================================================================================================== Beneficial Interest Transactions Net increase in net assets resulting from beneficial interest transactions 20,876,575 51,132,667 ================================================================================================================== Net Assets Total increase 12,265,941 37,239,866 - ------------------------------------------------------------------------------------------------------------------ Beginning of period 328,562,657 291,322,791 ------------ ------------ End of period (including undistributed net investment income of $32,932,864 and $23,046,774, respectively) $340,828,598 $328,562,657 ============ ============
See accompanying Notes to Financial Statements. Oppenheimer High Income Fund/VA 23 - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995 =========================================================================================================================== Per Share Operating Data Net asset value, beginning of period $11.02 $11.52 $11.13 $10.63 $ 9.79 - --------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 1.01 .95 .94 .97 .98 Net realized and unrealized gain (loss) (.55) (.90) .37 .58 .94 - --------------------------------------------------------------------------------------------------------------------------- Total income from investment operations .46 .05 1.31 1.55 1.92 - --------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.76) (.25) (.91) (1.05) (1.08) Distributions from net realized gain -- (.30) (.01) -- -- - --------------------------------------------------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (.76) (.55) (.92) (1.05) (1.08) - --------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.72 $11.02 $11.52 $11.13 $10.63 ====== ====== ====== ====== ====== =========================================================================================================================== Total Return, at Net Asset Value(1) 4.29% 0.31% 12.21% 15.26% 20.37% =========================================================================================================================== Ratios/Supplemental Data Net assets, end of period (in thousands) $340,829 $328,563 $291,323 $191,293 $133,451 - --------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $340,519 $322,748 $223,617 $157,203 $115,600 - --------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:(2) Net investment income 9.61% 8.65% 8.88% 9.18% 9.81% Expenses 0.75% 0.78%(3) 0.82%(3) 0.81%(3) 0.81%(3) - --------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(4) 33% 161% 168% 125% 107%
1. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 2. Annualized for periods less than one full year. 3. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. 4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended December 31, 1999, were $147,560,583 and $101,280,643, respectively. See accompanying Notes to Financial Statements. 24 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Notes to Financial Statements - -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies Oppenheimer High Income Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds (the Trust), a diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek a high level of current income from investment in high yield fixed income securities. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The following is a summary of significant accounting policies consistently followed by the Fund. - -------------------------------------------------------------------------------- Securities Valuation. Portfolio securities are valued at the close of the New York Stock Exchange on each trading day. Listed and unlisted securities for which such information is regularly reported are valued at the last sale price of the day or, in the absence of sales, at values based on the closing bid or the last sale price on the prior trading day. Long-term and short-term "non-money market" debt securities are valued by a portfolio pricing service approved by the Board of Trustees. Such securities which cannot be valued by an approved portfolio pricing service are valued using dealer-supplied valuations provided the Manager is satisfied that the firm rendering the quotes is reliable and that the quotes reflect current market value, or are valued under consistently applied procedures established by the Board of Trustees to determine fair value in good faith. Short-term "money market type" debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Foreign currency exchange contracts are valued based on the closing prices of the foreign currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. Options are valued based upon the last sale price on the principal exchange on which the option is traded or, in the absence of any transactions that day, the value is based upon the last sale price on the prior trading date if it is within the spread between the closing bid and asked prices. If the last sale price is outside the spread, the closing bid is used. - -------------------------------------------------------------------------------- Structured Notes. The Fund invests in foreign currency-linked structured notes whose market value and redemption price are linked to foreign currency exchange rates. The structured notes may be leveraged, which increases the notes' volatility relative to the face of the security. Fluctuations in value of these securities are recorded as unrealized gains and losses in the accompanying financial statements. As of December 31, 1999, the market value of these securities comprised 1.99% of the Fund's net assets and resulted in realized and unrealized losses of $1,583,690. The Fund also hedges a portion of the foreign currency exposure generated by these securities, as discussed in Note 5. - -------------------------------------------------------------------------------- Security Credit Risk. The Fund invests in high yield securities, which may be subject to a greater degree of credit risk, greater market fluctuations and risk of loss of income and principal, and may be more sensitive to economic conditions than lower yielding, higher rated fixed income securities. The Fund may acquire securities in default, and is not obligated to dispose of securities whose issuers subsequently default. As of December 31, 1999, securities with an aggregate market value of $2,797,955, representing 0.82% of the Fund's net assets, were in default. - -------------------------------------------------------------------------------- Foreign Currency Translation. The accounting records of the Fund are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange. Amounts related to the purchase and sale of foreign securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund's Statement of Operations. - -------------------------------------------------------------------------------- Repurchase Agreements. The Fund requires the custodian to take possession, to have legally segregated in the Federal Reserve Book Entry System or to have segregated within the custodian's vault, all securities held as collateral for repurchase agreements. The market value of the underlying securities is required to be at least 102% of the resale price at the time of purchase. If the seller of the agreement defaults and the value of the collateral declines, or if the seller enters an insolvency proceeding, realization of the value of the collateral by the Fund may be delayed or limited. Oppenheimer High Income Fund/VA 25 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies (continued) Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by loss carryovers to shareholders. As of December 31, 1999, the Fund had available for federal income tax purposes an unused capital loss carryover of approximately $8,335,000, which expires between 2006 and 2007. - -------------------------------------------------------------------------------- Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. - -------------------------------------------------------------------------------- Classification of Distributions to Shareholders. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes primarily because of paydown gains and losses and the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes. The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund. The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, during the year ended December 31, 1999, amounts have been reclassified to reflect an increase in undistributed net investment income of $394,186. Accumulated net realized loss on investments was increased by the same amount. - -------------------------------------------------------------------------------- Expense Offset Arrangements. Expenses paid indirectly represent a reduction of custodian fees for earnings on cash balances maintained by the Fund. - -------------------------------------------------------------------------------- Other. Investment transactions are accounted for as of trade date and dividend income is recorded on the ex-dividend date. Discount on securities purchased is amortized over the life of the respective securities, in accordance with federal income tax requirements. Realized gains and losses on investments and options written and unrealized appreciation and depreciation are determined on an identified cost basis, which is the same basis used for federal income tax purposes. Dividends-in-kind are recognized as income on the ex-dividend date, at the current market value of the underlying security. Interest on payment-in-kind debt instruments is accrued as income at the coupon rate and a market adjustment is made periodically. The preparation of financial statements in conformity with 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 no par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:
Year Ended December 31, 1999 Year Ended December 31, 1998 ----------------------------- ---------------------------- Shares Amount Shares Amount - ------------------------------------------------------------------------------------------------------------------- Sold 13,810,332 $ 149,141,858 15,303,847 $ 171,699,925 Dividends and/or distributions reinvested 2,201,405 23,246,834 1,300,031 14,807,349 Redeemed (14,037,090) (151,512,117) (12,094,532) (135,374,607) ----------- ------------- ----------- ------------- Net increase 1,974,647 $ 20,876,575 4,509,346 $ 51,132,667 =========== ============= =========== =============
================================================================================ 3. Unrealized Gains and Losses on Securities As of December 31, 1999, net unrealized depreciation on securities of $25,484,439 was composed of gross appreciation of $8,906,207, and gross depreciation of $34,390,646. 26 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 4. Management Fees and Other Transactions with Affiliates Management Fees. Management Fees paid to the Manager were in accordance with the investment advisory agreement with the Trust. The annual fees are 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200 million and 0.50% of average annual net assets over $1 billion. The Fund's management fee for the year ended December 31, 1999, was 0.74% of average annual net assets. - -------------------------------------------------------------------------------- Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, is the transfer agent for the Fund and is responsible for maintaining the shareholder registry and shareholder accounting records for the Fund. OFS provides these services for cost. ================================================================================ 5. Foreign Currency Contracts A foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. The Fund may enter into foreign currency contracts for operational purposes and to seek to protect against adverse exchange rate fluctuations. Risks to the Fund include the potential inability of the counterparty to meet the terms of the contract. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates as provided by a reliable bank, dealer or pricing service. Unrealized appreciation and depreciation on foreign currency contracts are reported in the Statement of Assets and Liabilities. The Fund may realize a gain or loss upon the closing or settlement of the foreign currency transactions. Realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. Securities denominated in foreign currency to cover net exposure on outstanding foreign currency contracts are noted in the Statement of Investments where applicable. As of December 31, 1999, the Fund had outstanding foreign currency contracts as follows:
Expiration Contract Valuation as of Unrealized Contract Description Date Amount (000s) December 31, 1999 Depreciation - ------------------------------------------------------------------------------------------------------------ Contracts to Sell - ----------------- British Pound Sterling (GBP) 6/2/00-6/5/00 3,545 GBP $5,725,037 $78,449 Canadian Dollar (CAD) 6/1/00 540 CAD 374,449 6,601 ------- Total Unrealized Depreciation $85,050 =======
================================================================================ 6. Futures Contracts The Fund may buy and sell futures contracts in order to gain exposure to or to seek to protect against changes in interest rates. The Fund may also buy or write put or call options on these futures contracts. The Fund generally sells futures contracts to hedge against increases in interest rates and the resulting negative effect on the value of fixed rate portfolio securities. The Fund may also purchase futures contracts to gain exposure to changes in interest rates as it may be more efficient or cost effective than actually buying fixed income securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund may recognize a realized gain or loss when the contract is closed or expires. Oppenheimer High Income Fund/VA 27 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 6. Futures Contracts (continued) 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. 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. ================================================================================ 7. Illiquid or Restricted Securities As of December 31, 1999, investments in securities included issues that are illiquid or restricted. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may also be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund intends to invest no more than 15% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid or restricted securities. Certain restricted securities, eligible for resale to qualified institutional investors, are not subject to that limitation. The aggregate value of illiquid or restricted securities subject to this limitation as of December 31, 1999, was $21,334,042, which represents 6.26% of the Fund's net assets, of which $4,091,086 is considered restricted. Information concerning restricted securities is as follows:
Valuation Per Acquisition Cost Per Unit as of Security Date Unit December 31, 1999 - --------------------------------------------------------------------------------------------------------------------------- Bonds - ----- TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05 12/8/95-8/13/96 100.00%-105.75% 109.66% - --------------------------------------------------------------------------------------------------------------------------- Trans World Airlines Lease, 14% Equipment Trust, 7/2/08 3/19/98 101.00 90.00 Stocks and Warrants - ------------------- CGA Group Ltd. Wts., Exp. 6/16/07 6/17/97 $ -- $ 0.30 - --------------------------------------------------------------------------------------------------------------------------- CGA Group Ltd., Preferred Stock, Series A 6/17/98-12/29/98 24.97-25.03 25.00 - --------------------------------------------------------------------------------------------------------------------------- ECM Fund, LPI 4/14/92 1,000.00 876.25 - --------------------------------------------------------------------------------------------------------------------------- Omnipoint Corp. Wts., Exp. 11/29/00 11/29/95 -- 120.63 - --------------------------------------------------------------------------------------------------------------------------- Real Time Data Wts., Exp. 5/31/04 6/30/99 0.01 0.01
28 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Independent Auditors' Report - -------------------------------------------------------------------------------- ================================================================================ To the Board of Trustees and Shareholders of Oppenheimer High Income Fund/VA: We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Oppenheimer High Income Fund/VA (which is a series of Oppenheimer Variable Account Funds) as of December 31, 1999, the related statement of operations for the year then ended, the statements of changes in net assets for the years ended December 31, 1999 and 1998 and the financial highlights for the period January 1, 1995, to December 31, 1999. 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 generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Oppenheimer High Income Fund/VA as of December 31, 1999, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods, in conformity with generally accepted accounting principles. Deloitte & Touche LLP Denver, Colorado January 24, 2000 Oppenheimer High Income Fund/VA 29 - -------------------------------------------------------------------------------- Federal Income Tax Information (Unaudited) - -------------------------------------------------------------------------------- ================================================================================ In early 2000 shareholders will receive information regarding all dividends and distributions paid to them by the Fund during calendar year 1999. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. Dividends paid by the Fund during the fiscal year ended December 31, 1999 which are not designated as capital gain distributions should be multiplied by 6.28% to arrive at the net 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. 30 Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- Oppenheimer High Income Fund/VA - -------------------------------------------------------------------------------- A Series of Oppenheimer Variable Account Funds ================================================================================ Officers and Trustees James C. Swain, Trustee and Chairman of the Board Bridget A. Macaskill, President William H. Armstrong, Trustee Robert G. Avis, Trustee William A. Baker, Trustee Edward L. Cameron, Trustee Jon S. Fossel, Trustee Sam Freedman, Trustee Raymond J. Kalinowski, Trustee C. Howard Kast, Trustee Robert M. Kirchner, Trustee Ned M. Steel, Trustee David P. Negri, Vice President Thomas P. Reedy, Vice President Andrew J. Donohue, Vice President and Secretary Brian W. Wixted, Treasurer Robert G. Zack, Assistant Secretary Robert J. Bishop, Assistant Treasurer Scott T. Farrar, Assistant Treasurer ================================================================================ Investment Advisor OppenheimerFunds, Inc. ================================================================================ Transfer Agent OppenheimerFunds Services ================================================================================ Custodian of Portfolio Securities The Bank of New York ================================================================================ Independent Auditors Deloitte & Touche LLP ================================================================================ Legal Counsel Myer, Swanson, Adams & Wolf, P.C. This is a copy of a report to shareholders of Oppenheimer High Income Fund/VA. This report must be preceded or accompanied by a Prospectus of Oppenheimer High Income Fund/VA. For material information concerning the Fund, see the Prospectus. Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested. Oppenheimer High Income Fund/VA 31 -----END PRIVACY-ENHANCED MESSAGE-----