UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number 811-4108
Oppenheimer Variable Account Funds
(Exact name of registrant as specified in charter)
6803 South Tucson Way, Centennial, Colorado 80112-3924
(Address of principal executive offices) (Zip code)
Cynthia Lo Bessette
OFI Global Asset Management, Inc.
225 Liberty Street, New York, New York 10281-1008
(Name and address of agent for service)
Registrant’s telephone number, including area code: (303) 768-3200
Date of fiscal year end: December 31
Date of reporting period: 9/30/2016
Item 1. Schedule of Investments.
STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1 OPPENHEIMER DISCOVERY MID CAP GROWTH FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
Footnotes to Statement of Investments
1. Non-income producing security.
2. Rate shown is the 7-day yield at period end.
3. Is or was an affiliate, as defined in the Investment Company Act of 1940, as amended, at or during the reporting period, by virtue of the Fund owning at least 5% of the voting securities of the issuer or as a result of the Fund and the issuer having the same investment adviser. Transactions during the reporting period in which the issuer was an affiliate are as follows:
| Shares December 31, 2015 |
Gross Additions |
Gross Reductions |
Shares September 30, 2016 |
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| Oppenheimer Institutional Government Money Market Fund, Cl. Ea |
20,396,181 | 245,847,445 | 251,130,054 | 15,113,572 | ||||||||||||
| Value | Income | |||||||||||||||
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| Oppenheimer Institutional Government Money Market Fund, Cl. Ea |
$ | 15,113,572 | $ | 63,549 | ||||||||||||
a. Prior to September 28, 2016 this fund was named Oppenheimer Institutional Money Market Fund.
2 OPPENHEIMER DISCOVERY MID CAP GROWTH FUND/VA
NOTES TO STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1. Organization
Oppenheimer Discovery Mid Cap Growth Fund/VA (the “Fund”), a separate series of Oppenheimer Variable Account Funds, is a diversified open-end management investment company registered under the Investment Company Act of 1940 (“1940 Act”), as amended. The Fund’s investment objective is to seek capital appreciation. The Fund’s investment adviser is OFI Global Asset Management, Inc. (“OFI Global” or the “Manager”), a wholly-owned subsidiary of OppenheimerFunds Inc. (“OFI” or the “Sub-Adviser”). The Manager has entered into a sub-advisory agreement with OFI. Shares of the Fund are sold only to separate accounts of life insurance companies.
2. Securities Valuation
The Fund calculates the net asset value of its shares as of 4:00 P.M. Eastern time, on each day the New York Stock Exchange (the “Exchange”) is open for trading, except in the case of a scheduled early closing of the Exchange, in which case the Fund will calculate net asset value of the shares as of the scheduled early closing time of the Exchange.
The Fund’s Board has adopted procedures for the valuation of the Fund’s securities and has delegated the day-to-day responsibility for valuation determinations under those procedures to the Manager. The Manager has established a Valuation Committee which is responsible for determining a “fair valuation” for any security for which market quotations are not “readily available.” The Valuation Committee’s fair valuation determinations are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined.
Valuation Methods and Inputs
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by third party pricing services or dealers.
The following methodologies are used to determine the market value or the fair value of the types of securities described below:
Securities traded on a registered U.S. securities exchange (including exchange-traded derivatives other than futures and futures options) are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the mean between the bid and asked price on the principal exchange or, if not available from the principal exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the principal exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer. A security of a foreign issuer traded on a foreign exchange, but not listed on a registered U.S. securities exchange, is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the third party pricing service used by the Manager, prior to the time when the Fund’s assets are valued. If the last sale price is unavailable, the security is valued at the most recent official closing price on the principal exchange on which it is traded. If the last sales price or official closing price for a foreign security is not available, the security is valued at the mean between the bid and asked price per the exchange or, if not available from the exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer.
Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.
Corporate and government debt securities (of U.S. or foreign issuers) and municipal debt securities, event-linked bonds, loans, mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers who may use matrix pricing methods to determine the evaluated prices.
Short-term money market type debt securities with a remaining maturity of sixty days or less are valued at cost adjusted by the amortization of discount or premium to maturity (amortized cost), which approximates market value. Short-term debt securities with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers.
A description of the standard inputs that may generally be considered by the third party pricing vendors in determining their evaluated prices is provided below.
| Security Type | Standard inputs generally considered by third-party pricing vendors | |||
| Corporate debt, government debt, municipal, mortgage-backed and asset-backed securities | Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, the credit quality, yield, maturity, and other appropriate factors. | |||
| Loans | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. | |||
| Event-linked bonds | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. |
If a market value or price cannot be determined for a security using the methodologies described above, or if, in the “good faith” opinion of the Manager, the market value or price obtained does not constitute a “readily available market quotation,” or a significant event has occurred that would materially affect the value of the security, the security is fair valued either (i) by a standardized fair valuation methodology applicable to the security type or the significant event as previously approved by the Valuation Committee and the Fund’s Board or (ii) as determined in good faith by the Manager’s Valuation Committee. The Valuation Committee considers all relevant facts that are reasonably available, through either public information
3 OPPENHEIMER DISCOVERY MID CAP GROWTH FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
2. Securities Valuation (Continued)
or information available to the Manager, when determining the fair value of a security. Fair value determinations by the Manager are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined. Those fair valuation standardized methodologies include, but are not limited to, valuing securities at the last sale price or initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be further adjusted for any discounts related to security-specific resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities nor can it be assured that the Fund can obtain the fair value assigned to a security if it were to sell the security.
To assess the continuing appropriateness of security valuations, the Manager, or its third party service provider who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and sale prices to the current day prices and challenges those prices exceeding certain tolerance levels with the third party pricing service or broker source. For those securities valued by fair valuations, whether through a standardized fair valuation methodology or a fair valuation determination, the Valuation Committee reviews and affirms the reasonableness of the valuations based on such methodologies and fair valuation determinations on a regular basis after considering all relevant information that is reasonably available.
Classifications
Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:
1) Level 1-unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
2) Level 2-inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)
3) Level 3-significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).
The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.
The Fund classifies each of its investments in investment companies which are publicly offered as Level 1. Investment companies that are not publicly offered are measured using net asset value as a practical expedient, and are not classified in the fair value hierarchy.
The table below categorizes amounts at period end based on valuation input level:
| Level 1— Unadjusted Quoted Prices |
Level 2— Other Significant Observable Inputs |
Level 3— Significant Unobservable Inputs |
Value | |||||||||||||
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| Assets Table |
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| Investments, at Value: |
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| Common Stocks |
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| Consumer Discretionary |
$ | 105,637,782 | $ | — | $ | — | $ | 105,637,782 | ||||||||
| Consumer Staples |
42,683,173 | — | — | 42,683,173 | ||||||||||||
| Energy |
21,567,522 | — | — | 21,567,522 | ||||||||||||
| Financials |
61,879,056 | — | — | 61,879,056 | ||||||||||||
| Health Care |
105,513,969 | — | — | 105,513,969 | ||||||||||||
| Industrials |
130,625,189 | — | — | 130,625,189 | ||||||||||||
| Information Technology |
159,865,394 | — | — | 159,865,394 | ||||||||||||
| Materials |
26,598,070 | — | — | 26,598,070 | ||||||||||||
| Investment Company |
15,113,572 | — | — | 15,113,572 | ||||||||||||
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|
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| Total Assets |
$ | 669,483,727 | $ | — | $ | — | $ | 669,483,727 | ||||||||
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Forward currency exchange contracts and futures contracts, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
3. Investments and Risks
Investments in Affiliated Funds. The Fund is permitted to invest in other mutual funds advised by the Manager (“Affiliated Funds”). Affiliated Funds are open-end management investment companies registered under the 1940 Act, as amended. The Manager is the investment adviser of, and the Sub-Adviser provides investment and related advisory services to, the Affiliated Funds. When applicable, the Fund’s investments in Affiliated Funds are included in the Statement of Investments. Shares of Affiliated Funds are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of the Affiliated Funds’ expenses, including their management fee. The Manager will waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Fund’s investment in the Affiliated Funds.
Each of the Affiliated Funds in which the Fund invests has its own investment risks, and those risks can affect the value of the Fund’s investments and
4 OPPENHEIMER DISCOVERY MID CAP GROWTH FUND/VA
3. Investments and Risks (Continued)
therefore the value of the Fund’s shares. To the extent that the Fund invests more of its assets in one Affiliated Fund than in another, the Fund will have greater exposure to the risks of that Affiliated Fund.
Investments in Money Market Instruments. The Fund is permitted to invest its free cash balances in money market instruments to provide liquidity or for defensive purposes. The Fund may invest in money market instruments by investing in Class E shares of Oppenheimer Institutional Government Money Market Fund (“IGMMF”), formerly known as Oppenheimer Institutional Money Market Fund, which is an Affiliated Fund. IGMMF is regulated as a money market fund under the 1940 Act, as amended. The Fund may also invest in money market instruments directly or in other affiliated or unaffiliated money market funds.
Equity Security Risk. Stocks and other equity securities fluctuate in price. The value of the Fund’s portfolio may be affected by changes in the equity markets generally. Equity markets may experience significant short-term volatility and may fall sharply at times. Different markets may behave differently from each other and U.S. equity markets may move in the opposite direction from one or more foreign stock markets. Adverse events in any part of the equity or fixed-income markets may have unexpected negative effects on other market segments.
The prices of individual equity securities generally do not all move in the same direction at the same time and a variety of factors can affect the price of a particular company’s securities. These factors may include, but are not limited to, poor earnings reports, a loss of customers, litigation against the company, general unfavorable performance of the company’s sector or industry, or changes in government regulations affecting the company or its industry.
4. Market Risk Factors
The Fund’s investments in securities and/or financial derivatives may expose the Fund to various market risk factors:
Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.
Credit Risk. Credit risk relates to the ability of the issuer of debt to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield debt securities are subject to credit risk to a greater extent than lower-yield, higher-quality securities.
Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.
Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.
Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.
Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.
5. Federal Taxes
The approximate aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes at period end are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses.
| Federal tax cost of securities |
$ | 526,782,913 | ||
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|||
| Gross unrealized appreciation |
$ | 144,894,752 | ||
| Gross unrealized depreciation |
(2,193,938) | |||
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| Net unrealized appreciation |
$ | 142,700,814 | ||
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5 OPPENHEIMER DISCOVERY MID CAP GROWTH FUND/VA
STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
2 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
3 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
4 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
5 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
6 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
7 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
8 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
9 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
10 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
| Counterparty | Exercise Price | Expiration Date | Contracts | |||||||||||||||||||||||||||||
| Over-the-Counter Option Purchased—0.0% |
| |||||||||||||||||||||||||||||||
| United States Treasury Bonds, 1.50%, 8/26 Put1 (Cost $72,450) | BOA | USD | 98.184 | 3/23/17 | USD | 4,140,000 | 57,896 | |||||||||||||||||||||||||
| Counterparty | Buy /Sell Protection |
Reference Asset | Fixed Rate | Expiration Date |
Notional Amount (000’s) |
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| Over-the-Counter Credit Default Swaptions Purchased—0.0% |
| |||||||||||||||||||||||||||||||
| Credit Default Swap maturing 12/21/16 Call1 | JPM | Buy | CDX.NA.HY.26 | 5.000% | 12/21/16 | USD | 2,093 | 17,236 | ||||||||||||||||||||||||
| Credit Default Swap maturing 12/21/16 Call1 | JPM | Buy | CDX.NA.HY.26 | 5.000 | 12/21/16 | USD | 2,433 | 20,037 | ||||||||||||||||||||||||
| Credit Default Swap maturing 12/21/16 Call1 | JPM | Buy | CDX.NA.HY.26 | 5.000 | 12/21/16 | USD | 2,432 | 20,028 | ||||||||||||||||||||||||
| Total Over-the-Counter Credit Default Swaptions Purchased (Cost $110,842) |
|
57,301
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| Total Investments, at Value (Cost $236,447,412) | 107.8 | % | 250,146,086 | |||||||||||||||||||||||||||||
| Net Other Assets (Liabilities) | (7.8 | ) | (18,091,610) | |||||||||||||||||||||||||||||
| Net Assets | 100.0 | % | $ | 232,054,476 | ||||||||||||||||||||||||||||
Footnotes to Statement of Investments
1. Non-income producing security.
2. Security is a Master Limited Partnership.
3. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $29,556,539 or 12.74% of the Fund’s net assets at period end.
4. All or a portion of the security position is when-issued or delayed delivery to be delivered and settled after period end. See Note 4 of the accompanying Notes.
5. Represents the current interest rate for a variable or increasing rate security.
6. Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of mortgage loans. These securities typically decline in price as interest rates decline. Most other fixed income securities increase in price when interest rates decline. The principal amount of the underlying pool represents the notional amount on which current interest is calculated. The price of these securities is typically more sensitive to changes in prepayment rates than traditional mortgage-backed securities (for example, GNMA pass-throughs). Interest rates disclosed represent current yields based upon the current cost basis and estimated timing and amount of future cash flows. These securities amount to $1,522,147 or 0.66% of the Fund’s net assets at period end.
11 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
Footnotes to Statement of Investments (Continued)
7. Principal-Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. The value of these securities generally increases as interest rates decline and prepayment rates rise. The price of these securities is typically more volatile than that of coupon-bearing bonds of the same maturity. Interest rates disclosed represent current yields based upon the current cost basis and estimated timing of future cash flows. These securities amount to $69,978 or 0.03% of the Fund’s net assets at period end.
8. Interest rate is less than 0.0005%.
9. This bond has no contractual maturity date, is not redeemable and contractually pays an indefinite stream of interest. Rate reported represents the current interest rate for this variable rate security.
| 10. | Rate shown is the 7-day yield at period end. |
11. Is or was an affiliate, as defined in the Investment Company Act of 1940, as amended, at or during the reporting period, by virtue of the Fund owning at least 5% of the voting securities of the issuer or as a result of the Fund and the issuer having the same investment adviser. Transactions during the reporting period in which the issuer was an affiliate are as follows:
| Shares December 31, 2015 |
Gross Additions |
Gross Reductions |
Shares September 30, 2016 |
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| Oppenheimer Institutional Government Money Market Fund, Cl. Ea | 5,367,607 | — | — | 5,367,607 | ||||||||||||
| Value | Income | |||||||||||||||
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| Oppenheimer Institutional Government Money Market Fund, Cl. Ea | $ | 5,367,607 | $ | 17,008 | ||||||||||||
a. Prior to September 28, 2016, this fund was named Oppenheimer Institutional Money Market Fund.
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| Futures Contracts as of September 30, 2016 | ||||||||||||||||||||||||
| Description | Exchange | Buy/Sell | Expiration Date | Number of Contracts | Value | Unrealized Appreciation (Depreciation) |
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| United States Treasury Long Bonds |
CBT | Sell | 12/20/16 | 4 | $ | 672,625 | $ | 9,165 | ||||||||||||||||
| United States Treasury Nts., 2 yr. |
CBT | Buy | 12/30/16 | 85 | 18,569,844 | 15,853 | ||||||||||||||||||
| United States Treasury Nts., 5 yr. |
CBT | Sell | 12/30/16 | 4 | 486,063 | 549 | ||||||||||||||||||
| United States Treasury Nts., 10 yr. |
CBT | Sell | 12/20/16 | 38 | 4,982,750 | 9,730 | ||||||||||||||||||
| United States Ultra Bonds |
CBT | Buy | 12/20/16 | 50 | 9,193,750 | (182,589) | ||||||||||||||||||
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| $ | (147,292) | |||||||||||||||||||||||
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| Over-the-Counter Options Written at September 30, 2016 | ||||||||||||||||||||||||||||||||
| Description | Counterparty | Exercise Price | Expiration Date | Number of Contracts | Premiums Received | Value | ||||||||||||||||||||||||||
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| United States Treasury Bonds, | ||||||||||||||||||||||||||||||||
| 1.50%, 8/26 Put |
BOA | USD | 95.734 | 3/23/17 | USD | (4,140,000 | ) | $ | 31,050 | $ | (25,802) | |||||||||||||||||||||
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| Over-the-Counter Credit Default Swaptions Written at September 30, 2016 | ||||||||||||||||||||||||||||||||
| Description | Counterparty | Buy/Sell Protection |
Reference Asset |
Fixed Rate | Expiration Date | Notional Amount (000’s) | Premiums Received | Value | ||||||||||||||||||||||||
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| Credit Default Swap maturing | ||||||||||||||||||||||||||||||||
| 6/20/21 Call | JPM | Buy | CDX.NA.HY.26 | 5.000% | 12/21/16 | USD 2,432 | $ | 13,133 | $ | (5,882) | ||||||||||||||||||||||
| Credit Default Swap maturing | ||||||||||||||||||||||||||||||||
| 6/20/21 Call | JPM | Buy | CDX.NA.HY.26 | 5.000 | 12/21/16 | USD 2,433 | 13,138 | (5,885) | ||||||||||||||||||||||||
| Credit Default Swap maturing | ||||||||||||||||||||||||||||||||
| 6/20/21 Call | JPM | Buy | CDX.NA.HY.26 | 5.000 | 12/21/16 | USD 2,093 | 10,884 | (5,062) | ||||||||||||||||||||||||
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| Total of Over-the-Counter Credit Default Swaptions Written | $ | 37,155 | $ | (16,829) | ||||||||||||||||||||||||||||
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| Glossary: Counterparty Abbreviations |
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| BOA | Bank of America NA | |
| JPM | JPMorgan Chase Bank NA | |
| Definitions | ||
| CDX.NA.HY.26 | Markit CDX North American High Yield | |
| Exchange Abbreviations | ||
| CBT | Chicago Board of Trade | |
12 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
NOTES TO STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1. Organization
Oppenheimer Conservative Balanced Fund/VA (the “Fund”), a separate series of Oppenheimer Variable Account Funds, is a diversified open-end management investment company registered under the Investment Company Act of 1940 (“1940 Act”), as amended. The Fund’s investment objective is to seek total return. The Fund’s investment adviser is OFI Global Asset Management, Inc. (“OFI Global” or the “Manager”), a wholly-owned subsidiary of OppenheimerFunds, Inc. (“OFI” or the “Sub-Adviser”). The Manager has entered into a sub-advisory agreement with OFI. Shares of the Fund are sold only to separate accounts of life insurance companies.
2. Significant Accounting Policies
Security Valuation. All investments in securities are recorded at their estimated fair value, as described in Note 3.
Foreign Currency Translation. The Fund’s accounting records are maintained in U.S. dollars. The values of securities denominated in foreign currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading. Foreign exchange rates may be valued primarily using a reliable bank, dealer or service authorized by the Board of Trustees.
3. Securities Valuation
The Fund calculates the net asset value of its shares as of 4:00 P.M. Eastern time, on each day the New York Stock Exchange (the “Exchange”) is open for trading, except in the case of a scheduled early closing of the Exchange, in which case the Fund will calculate net asset value of the shares as of the scheduled early closing time of the Exchange.
The Fund’s Board has adopted procedures for the valuation of the Fund’s securities and has delegated the day-to-day responsibility for valuation determinations under those procedures to the Manager. The Manager has established a Valuation Committee which is responsible for determining a “fair valuation” for any security for which market quotations are not “readily available.” The Valuation Committee’s fair valuation determinations are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined.
Valuation Methods and Inputs
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by third party pricing services or dealers.
The following methodologies are used to determine the market value or the fair value of the types of securities described below:
Securities traded on a registered U.S. securities exchange (including exchange-traded derivatives other than futures and futures options) are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the mean between the bid and asked price on the principal exchange or, if not available from the principal exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the principal exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer. A security of a foreign issuer traded on a foreign exchange, but not listed on a registered U.S. securities exchange, is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the third party pricing service used by the Manager, prior to the time when the Fund’s assets are valued. If the last sale price is unavailable, the security is valued at the most recent official closing price on the principal exchange on which it is traded. If the last sales price or official closing price for a foreign security is not available, the security is valued at the mean between the bid and asked price per the exchange or, if not available from the exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer.
Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.
Corporate and government debt securities (of U.S. or foreign issuers) and municipal debt securities, event-linked bonds, loans, mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers who may use matrix pricing methods to determine the evaluated prices.
Short-term money market type debt securities with a remaining maturity of sixty days or less are valued at cost adjusted by the amortization of discount or premium to maturity (amortized cost), which approximates market value. Short-term debt securities with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers.
Structured securities, swaps, swaptions, and other over-the-counter derivatives are valued utilizing evaluated prices obtained from third party pricing services or broker-dealers.
Futures contracts and futures options traded on a commodities or futures exchange will be valued at the final settlement price or official closing price on the principal exchange as reported by such principal exchange at its trading session ending at, or most recently prior to, the time when the Fund’s assets are valued.
A description of the standard inputs that may generally be considered by the third party pricing vendors in determining their evaluated prices is provided below.
13 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
3. Securities Valuation (Continued)
| Security Type |
Standard inputs generally considered by third-party pricing vendors | |
| Corporate debt, government debt, municipal, mortgage-backed and asset-backed securities | Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, the credit quality, yield, maturity, and other appropriate factors. | |
| Loans | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. | |
| Event-linked bonds | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. | |
| Structured securities | Relevant market information such as the price of underlying financial instruments, stock market indices, foreign currencies, interest rate spreads, commodities, or the occurrence of other specific events. | |
| Swaps | Relevant market information, including underlying reference assets such as credit spreads, credit event probabilities, index values, individual security values, forward interest rates, variable interest rates, volatility measures, and forward currency rates. |
If a market value or price cannot be determined for a security using the methodologies described above, or if, in the “good faith” opinion of the Manager, the market value or price obtained does not constitute a “readily available market quotation,” or a significant event has occurred that would materially affect the value of the security, the security is fair valued either (i) by a standardized fair valuation methodology applicable to the security type or the significant event as previously approved by the Valuation Committee and the Fund’s Board or (ii) as determined in good faith by the Manager’s Valuation Committee. The Valuation Committee considers all relevant facts that are reasonably available, through either public information or information available to the Manager, when determining the fair value of a security. Fair value determinations by the Manager are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined. Those fair valuation standardized methodologies include, but are not limited to, valuing securities at the last sale price or initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be further adjusted for any discounts related to security-specific resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities nor can it be assured that the Fund can obtain the fair value assigned to a security if it were to sell the security.
To assess the continuing appropriateness of security valuations, the Manager, or its third party service provider who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and sale prices to the current day prices and challenges those prices exceeding certain tolerance levels with the third party pricing service or broker source. For those securities valued by fair valuations, whether through a standardized fair valuation methodology or a fair valuation determination, the Valuation Committee reviews and affirms the reasonableness of the valuations based on such methodologies and fair valuation determinations on a regular basis after considering all relevant information that is reasonably available.
Classifications
Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:
1) Level 1-unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
2) Level 2-inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)
3) Level 3-significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).
The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.
The Fund classifies each of its investments in investment companies which are publicly offered as Level 1. Investment companies that are not publicly offered are measured using net asset value as a practical expedient, and are not classified in the fair value hierarchy.
The table below categorizes amounts at period end based on valuation input level:
| Level 1— Unadjusted |
Level 2— Other Significant Observable Inputs |
Level 3— Significant Unobservable Inputs |
Value | |||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Assets Table |
||||||||||||||||||||||||
| Investments, at Value: |
||||||||||||||||||||||||
| Common Stocks | ||||||||||||||||||||||||
| Consumer Discretionary |
$ | 10,550,640 | $ | — | $ | — | $ | 10,550,640 | ||||||||||||||||
| Consumer Staples |
6,422,993 | — | — | 6,422,993 | ||||||||||||||||||||
| Energy |
5,234,011 | — | — | 5,234,011 | ||||||||||||||||||||
14 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
3. Securities Valuation (Continued)
| Level 1— Unadjusted Quoted Prices |
Level 2— Other Significant Observable Inputs |
Level 3— Significant Unobservable Inputs |
Value | |||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Common Stocks (Continued) | ||||||||||||||||||||||||
| Financials |
$ | 11,431,885 | $ | — | $ | — | $ | 11,431,885 | ||||||||||||||||
| Health Care |
11,666,018 | — | — | 11,666,018 | ||||||||||||||||||||
| Industrials |
10,126,886 | — | — | 10,126,886 | ||||||||||||||||||||
| Information Technology |
16,105,267 | — | — | 16,105,267 | ||||||||||||||||||||
| Materials |
2,759,733 | — | — | 2,759,733 | ||||||||||||||||||||
| Telecommunication Services |
1,522,180 | — | — | 1,522,180 | ||||||||||||||||||||
| Utilities |
2,885,834 | — | — | 2,885,834 | ||||||||||||||||||||
| Asset-Backed Securities | — | 16,634,016 | — | 16,634,016 | ||||||||||||||||||||
| Mortgage-Backed Obligations | — | 75,669,600 | — | 75,669,600 | ||||||||||||||||||||
| U.S. Government Obligations | — | 1,283,455 | — | 1,283,455 | ||||||||||||||||||||
| Non-Convertible Corporate Bonds and Notes | — | 72,370,764 | — | 72,370,764 | ||||||||||||||||||||
| Investment Company | 5,367,607 | — | — | 5,367,607 | ||||||||||||||||||||
| Over-the-Counter Option Purchased | — | 57,896 | — | 57,896 | ||||||||||||||||||||
| Over-the-Counter Credit Default Swaptions Purchased | — | 57,301 | — | 57,301 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Total Investments, at Value | 84,073,054 | 166,073,032 | — | 250,146,086 | ||||||||||||||||||||
| Other Financial Instruments: | ||||||||||||||||||||||||
| Futures contracts | 35,297 | — | — | 35,297 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Total Assets | $ | 84,108,351 | $ | 166,073,032 | $ | — | $ | 250,181,383 | ||||||||||||||||
|
|
||||||||||||||||||||||||
| Liabilities Table | ||||||||||||||||||||||||
| Other Financial Instruments: | ||||||||||||||||||||||||
| Futures contracts | $ | (182,589 | ) | $ | — | $ | — | $ | (182,589) | |||||||||||||||
| Options written, at value | — | (25,802 | ) | — | (25,802) | |||||||||||||||||||
| Swaptions written, at value | — | (16,829 | ) | — | (16,829) | |||||||||||||||||||
|
|
||||||||||||||||||||||||
| Total Liabilities | $ | (182,589 | ) | $ | (42,631 | ) | $ | — | $ | (225,220) | ||||||||||||||
|
|
||||||||||||||||||||||||
Forward currency exchange contracts and futures contracts, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
4. Investments and Risks
Investments in Affiliated Funds. The Fund is permitted to invest in other mutual funds advised by the Manager (“Affiliated Funds”). Affiliated Funds are open-end management investment companies registered under the 1940 Act, as amended. The Manager is the investment adviser of, and the Sub-Adviser provides investment and related advisory services to, the Affiliated Funds. When applicable, the Fund’s investments in Affiliated Funds are included in the Statement of Investments. Shares of Affiliated Funds are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of the Affiliated Funds’ expenses, including their management fee. The Manager will waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Fund’s investment in the Affiliated Funds.
Each of the Affiliated Funds in which the Fund invests has its own investment risks, and those risks can affect the value of the Fund’s investments and therefore the value of the Fund’s shares. To the extent that the Fund invests more of its assets in one Affiliated Fund than in another, the Fund will have greater exposure to the risks of that Affiliated Fund.
Investments in Money Market Instruments. The Fund is permitted to invest its free cash balances in money market instruments to provide liquidity or for defensive purposes. The Fund may invest in money market instruments by investing in Class E shares of Oppenheimer Institutional Government Money Market Fund (“IGMMF”), formerly known as Oppenheimer Institutional Money Market Fund, which is an Affiliated Fund. IGMMF is regulated as a money market fund under the 1940 Act, as amended. The Fund may also invest in money market instruments directly or in other affiliated or unaffiliated money market funds.
Master Limited Partnerships (“MLPs”). MLPs issue common units that represent an equity ownership interest in a partnership and provide limited voting rights. MLP common units are registered with the Securities and Exchange Commission (“SEC”), and are freely tradable on securities exchanges such as the NYSE and the NASDAQ Stock Market (“NASDAQ”), or in the over-the-counter (“OTC”) market. An MLP consists of one or more general partners, who conduct the business, and one or more limited partners, who contribute capital. MLP common unit holders have a limited role in the partnership’s operations and management. The Fund, as a limited partner, normally would not be liable for the debts of the MLP beyond the amounts the Fund has contributed, but would not be shielded to the same extent that a shareholder of a corporation would be. In certain circumstances creditors of an MLP would have the right to seek return of capital distributed to a limited partner. This right of an MLP’s creditors would continue after the Fund sold its investment in the MLP.
Securities on a When-Issued or Delayed Delivery Basis. The Fund may purchase securities on a “when-issued” basis, and may purchase or sell
15 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
4. Investments and Risks (Continued)
securities on a “delayed delivery” basis. “When-issued” or “delayed delivery” refers to securities whose terms and indenture are available and for which a market exists, but which are not available for immediate delivery. Delivery and payment for securities that have been purchased by the Fund on a when-issued basis normally takes place within six months and possibly as long as two years or more after the trade date. During this period, such securities do not earn interest, are subject to market fluctuation and may increase or decrease in value prior to their delivery. The purchase of securities on a when-issued basis may increase the volatility of the Fund’s net asset value to the extent the Fund executes such transactions while remaining substantially fully invested. When the Fund engages in when-issued or delayed delivery transactions, it relies on the buyer or seller, as the case may be, to complete the transaction. Their failure to do so may cause the Fund to lose the opportunity to obtain or dispose of the security at a price and yield it considers advantageous. The Fund may also sell securities that it purchased on a when-issued basis or forward commitment prior to settlement of the original purchase.
At period end, the Fund had purchased securities issued on a when-issued or delayed delivery basis and sold securities issued on a delayed delivery basis as follows:
| When-Issued or Delayed Delivery Basis Transactions |
||||
| Purchased securities | $60,499,981 | |||
| Sold securities | 11,174,873 | |||
The Fund may enter into “forward roll” transactions with respect to mortgage-related securities. In this type of transaction, the Fund sells a mortgage-related security to a buyer and simultaneously agrees to repurchase a similar security (same type, coupon and maturity) at a later date at a set price. During the period between the sale and the repurchase, the Fund will not be entitled to receive interest and principal payments on the securities that have been sold. The Fund records the incremental difference between the forward purchase and sale of each forward roll as realized gain (loss) on investments or as fee income in the case of such transactions that have an associated fee in lieu of a difference in the forward purchase and sale price.
Forward roll transactions may be deemed to entail embedded leverage since the Fund purchases mortgage-related securities with extended settlement dates rather than paying for the securities under a normal settlement cycle. This embedded leverage increases the Fund’s market value of investments relative to its net assets which can incrementally increase the volatility of the Fund’s performance. Forward roll transactions can be replicated over multiple settlement periods.
Risks of entering into forward roll transactions include the potential inability of the counterparty to meet the terms of the agreement; the potential of the Fund to receive inferior securities at redelivery as compared to the securities sold to the counterparty; and counterparty credit risk.
Equity Security Risk. Stocks and other equity securities fluctuate in price. The value of the Fund’s portfolio may be affected by changes in the equity markets generally. Equity markets may experience significant short-term volatility and may fall sharply at times. Different markets may behave differently from each other and U.S. equity markets may move in the opposite direction from one or more foreign stock markets. Adverse events in any part of the equity or fixed-income markets may have unexpected negative effects on other market segments.
The prices of individual equity securities generally do not all move in the same direction at the same time and a variety of factors can affect the price of a particular company’s securities. These factors may include, but are not limited to, poor earnings reports, a loss of customers, litigation against the company, general unfavorable performance of the company’s sector or industry, or changes in government regulations affecting the company or its industry.
5. Market Risk Factors
The Fund’s investments in securities and/or financial derivatives may expose the Fund to various market risk factors:
Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.
Credit Risk. Credit risk relates to the ability of the issuer of debt to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield debt securities are subject to credit risk to a greater extent than lower-yield, higher-quality securities.
Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.
Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.
Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.
Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.
16 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
6. Use of Derivatives
The Fund’s investment objective not only permits the Fund to purchase investment securities, it also allows the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward currency exchange contracts, credit default swaps, interest rate swaps, total return swaps, variance swaps and purchased and written options. In doing so, the Fund will employ strategies in differing combinations to permit it to increase, decrease, or change the level or types of exposure to market risk factors. These instruments may allow the Fund to pursue its objectives more quickly and efficiently than if it were to make direct purchases or sales of securities capable of effecting a similar response to market factors. Such contracts may be entered into through a bilateral over-the-counter (“OTC”) transaction, or through a securities or futures exchange and cleared through a clearinghouse.
Derivatives may have little or no initial cash investment relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost due to unanticipated changes in the market risk factors and the overall market. This use of embedded leverage allows the Fund to increase its market value exposure relative to its net assets and can substantially increase the volatility of the Fund’s performance. In instances where the Fund is using derivatives to decrease, or hedge, exposures to market risk factors for securities held by the Fund, there are also risks that those derivatives may not perform as expected resulting in losses for the combined or hedged positions. Some derivatives have the potential for unlimited loss, regardless of the size of the Fund’s initial investment.
Additional associated risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the derivative and the Fund. Typically, the associated risks are not the risks that the Fund is attempting to increase or decrease exposure to, per its investment objectives, but are the additional risks from investing in derivatives. Examples of these associated risks are liquidity risk, which is the risk that the Fund will not be able to sell the derivative in the open market in a timely manner, and counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund.
The Fund’s actual exposures to these market risk factors and associated risks during the period are discussed in further detail, by derivative type, below.
Futures Contracts
A futures contract is a commitment to buy or sell a specific amount of a commodity, financial instrument or currency at a negotiated price on a stipulated future date. The Fund may buy and sell futures contracts and may also buy or write put or call options on these futures contracts. Futures contracts and options thereon are generally entered into on a regulated futures exchange and cleared through a clearinghouse associated with the exchange.
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 in an account registered in the futures commission merchant’s name. Subsequent payments (variation margin) are paid to or from the futures commission merchant each day equal to the daily changes in the contract value. Such payments are recorded as unrealized gains and losses. Should the Fund fail to make requested variation margin payments, the futures commission merchant can gain access to the initial margin to satisfy the Fund’s payment obligations.
Futures contracts are reported on a schedule following the Statement of Investments. Securities held by a futures commission merchant to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. Cash held by a futures commission merchant to cover initial margin requirements on open futures contracts and the receivable and/or payable for the daily mark to market for the variation margin are noted in the Statement of Assets and Liabilities in the annual and semiannual reports. The net change in unrealized appreciation and depreciation is reported in the Statement of Operations in the annual and semiannual reports. Realized gains (losses) are reported in the Statement of Operations in the annual and semiannual reports at the closing or expiration of futures contracts.
The Fund has purchased futures contracts on various bonds and notes to increase exposure to interest rate risk.
The Fund has sold futures contracts on various bonds and notes to decrease exposure to interest rate risk.
During the reporting period, the Fund had an ending monthly average market value of $19,472,408 and $10,423,528 on futures contracts purchased and sold, respectively.
Additional associated risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market where the Fund is unable to liquidate the contract or enter into an offsetting position and, if used for hedging purposes, the risk that the price of the contract will correlate imperfectly with the prices of the Fund’s securities.
Option Activity
The Fund may buy and sell put and call options, or write put and call options. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security, currency or other underlying financial instrument at a fixed price, upon exercise of the option.
Options can be traded through an exchange or through a privately negotiated arrangement with a dealer in an OTC transaction. Options traded through an exchange are generally cleared through a clearinghouse (such as The Options Clearing Corporation). The difference between the premium received or paid, and market value of the option, is recorded as unrealized appreciation or depreciation. The net change in unrealized appreciation or depreciation is reported in the Statement of Operations in the annual and semiannual reports. When an option is exercised, the cost of the security purchased or the proceeds of the security sale are adjusted by the amount of premium received or paid. Upon the expiration or closing of the option transaction, a gain or loss is reported in the Statement of Operations in the annual and semiannual reports.
The Fund has purchased call options on treasury and/or euro futures to increase exposure to interest rate risk. A purchased call option becomes more valuable as the price of the underlying financial instrument appreciates relative to the strike price.
The Fund has purchased put options on treasury and/or euro futures to decrease exposure to interest rate risk. A purchased put option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.
17 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
6. Use of Derivatives (Continued)
During the reporting period, the Fund had an ending monthly average market value of $74,363 and $6,028 on purchased call options and purchased put options, respectively.
Options written, if any, are reported in a schedule following the Statement of Investments and as a liability in the Statement of Assets and Liabilities in the annual and semiannual reports. Securities held in collateral accounts to cover potential obligations with respect to outstanding written options are noted in the Statement of Investments.
The risk in writing a call option is that the market price of the security increases and if the option is exercised, the Fund must either purchase the security at a higher price for delivery or, if the Fund owns the underlying security, give up the opportunity for profit. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk that there may be an illiquid market where the Fund is unable to close the contract.
The Fund has written put options on treasury and/or euro futures to increase exposure to interest rate risk. A written put option becomes more valuable as the price of the underlying financial instrument appreciates relative to the strike price.
During the reporting period, the Fund had an ending monthly average market value of $4,886 on written put options.
Additional associated risks to the Fund include counterparty credit risk and liquidity risk.
Written option activity for the reporting period was as follows:
| Number of Contracts |
Amount of Premiums |
|||||||
| Options outstanding as of December 31, 2015 | — | $ | — | |||||
| Options written | 4,140,924 | 66,162 | ||||||
| Options exercised | (924) | (35,112) | ||||||
|
|
|
|||||||
| Options outstanding as of September 30, 2016 | 4,140,000 | $ | 31,050 | |||||
|
|
|
|||||||
Swaption Transactions
The Fund may enter into a swaption contract which grants the purchaser the right, but not the obligation, to enter into a swap transaction at preset terms detailed in the underlying agreement within a specified period of time. The purchaser pays a premium to the swaption writer who bears the risk of unfavorable changes in the preset terms on the underlying swap.
Purchased swaptions are reported as a component of investments in the Statement of Investments and the Statement of Assets and Liabilities in the annual and semiannual reports. Written swaptions are reported on a schedule following the Statement of Investments and their value is reported as a separate asset or liability line item in the Statement of Assets and Liabilities in the annual and semiannual reports. The net change in unrealized appreciation or depreciation on written swaptions is separately reported in the Statement of Operations in the annual and semiannual reports. When a swaption is exercised, the cost of the swap is adjusted by the amount of premium paid or received. Upon the expiration or closing of an unexercised swaption contract, a gain or loss is reported in the Statement of Operations in the annual and semiannual reports for the amount of the premium paid or received.
The Fund generally will incur a greater risk when it writes a swaption than when it purchases a swaption. When the Fund writes a swaption it will become obligated, upon exercise of the swaption, according to the terms of the underlying agreement. Swaption contracts written by the Fund do not give rise to counterparty credit risk prior to exercise as they obligate the Fund, not its counterparty, to perform. When the Fund purchases a swaption it only risks losing the amount of the premium it paid if the swaption expires unexercised. However, when the Fund exercises a purchased swaption there is a risk that the counterparty will fail to perform or otherwise default on its obligations under the swaption contract.
The Fund has purchased swaptions which gives it the option to buy credit protection through credit default swaps in order to decrease exposure to the credit risk of individual issuers and/or indexes of issuers. A purchased swaption of this type becomes more valuable as the likelihood of a credit event on the reference asset increases.
The Fund has written swaptions which give it the obligation, if exercised by the purchaser, to buy credit protection through credit default swaps in order to decrease exposure to the credit risk of individual issuers and/or, indexes of issuers. A written swaption of this type becomes more valuable as the likelihood of a credit event on the reference asset increases.
During the reporting period, the Fund had an ending monthly average market value of $13,549 and $4,388 on purchased and written swaptions, respectively.
Written swaption activity for the reporting period was as follows:
| Notional Amount |
Amount of Premiums |
|||||||
| Swaptions outstanding as of December 31, 2015 | — | $ | — | |||||
| Swaptions written | 6,958,000 | 37,155 | ||||||
|
|
|
|||||||
| Swaptions outstanding as of September 30, 2016 | 6,958,000 | $ | 37,155 | |||||
|
|
|
|||||||
Counterparty Credit Risk. Derivative positions are subject to the risk that the counterparty will not fulfill its obligation to the Fund. The Fund intends
18 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
6. Use of Derivatives (Continued)
to enter into derivative transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction.
The Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by the Fund. For OTC options purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the contracts. Options written by the Fund do not typically give rise to counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform.
To reduce counterparty risk with respect to OTC transactions, the Fund has entered into master netting arrangements, established within the Fund’s International Swap and Derivatives Association, Inc. (“ISDA”) master agreements, which allow the Fund to make (or to have an entitlement to receive) a single net payment in the event of default (close-out netting) for outstanding payables and receivables with respect to certain OTC positions in swaps, options, swaptions, and forward currency exchange contracts for each individual counterparty. In addition, the Fund may require that certain counterparties post cash and/or securities in collateral accounts to cover their net payment obligations for those derivative contracts subject to ISDA master agreements. If the counterparty fails to perform under these contracts and agreements, the cash and/or securities will be made available to the Fund.
ISDA master agreements include credit related contingent features which allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event that, for example, the Fund’s net assets decline by a stated percentage or the Fund fails to meet the terms of its ISDA master agreements, which would cause the Fund to accelerate payment of any net liability owed to the counterparty.
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities in the annual and semiannual reports. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events.
The Fund’s risk of loss from counterparty credit risk on exchange-traded derivatives cleared through a clearinghouse and for centrally cleared swaps is generally considered lower than as compared to OTC derivatives. However, counterparty credit risk exists with respect to initial and variation margin deposited/paid by the Fund that is held in futures commission merchant, broker and/or clearinghouse accounts for such exchange-traded derivatives and for centrally cleared swaps.
With respect to centrally cleared swaps, such transactions will be submitted for clearing, and if cleared, will be held in accounts at futures commission merchants or brokers that are members of clearinghouses. While brokers, futures commission merchants and clearinghouses are required to segregate customer margin from their own assets, in the event that a broker, futures commission merchant or clearinghouse becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the broker, futures commission merchant or clearinghouse for all its customers, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the broker’s, futures commission merchant’s or clearinghouse’s customers, potentially resulting in losses to the Fund.
There is the risk that a broker, futures commission merchant or clearinghouse will decline to clear a transaction on the Fund’s behalf, and the Fund may be required to pay a termination fee to the executing broker with whom the Fund initially enters into the transaction. Clearinghouses may also be permitted to terminate centrally cleared swaps at any time. The Fund is also subject to the risk that the broker or futures commission merchant will improperly use the Fund’s assets deposited/paid as initial or variation margin to satisfy payment obligations of another customer. In the event of a default by another customer of the broker or futures commission merchant, the Fund might not receive its variation margin payments from the clearinghouse, due to the manner in which variation margin payments are aggregated for all customers of the broker/futures commission merchant.
Collateral and margin requirements differ by type of derivative. Margin requirements are established by the broker, futures commission merchant or clearinghouse for exchange-traded and cleared derivatives, including centrally cleared swaps. Brokers, futures commission merchants and clearinghouses can ask for margin in excess of the regulatory minimum, or increase the margin amount, in certain circumstances.
Collateral terms are contract specific for OTC derivatives. For derivatives traded under an ISDA master agreement, the collateral requirements are typically calculated by netting the mark to market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund or the counterparty.
For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Fund, if any, is reported separately on the Statement of Assets and Liabilities in the annual and semiannual reports as cash pledged as collateral. Non-cash collateral pledged by the Fund, if any, is noted in the Statement of Investments. Generally, the amount of collateral due from or to a party must exceed a minimum transfer amount threshold (e.g. $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty nonperformance.
7. Federal Taxes
The approximate aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes at period end are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses.
19 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
7. Federal Taxes (Continued)
| Federal tax cost of securities | $ | 236,662,763 | ||
| Federal tax cost of other investments | 21,701,243 | |||
|
|
|
|||
| Total federal tax cost | $ | 258,364,006 | ||
|
|
|
|||
| Gross unrealized appreciation | $ | 16,494,660 | ||
| Gross unrealized depreciation | (3,135,165) | |||
|
|
|
|||
| Net unrealized appreciation | $ | 13,359,495 | ||
|
|
|
20 OPPENHEIMER CONSERVATIVE BALANCED FUND/VA
STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1 OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
Footnotes to Statement of Investments
1. Non-income producing security.
2. Rate shown is the 7-day yield at period end.
3. Is or was an affiliate, as defined in the Investment Company Act of 1940, as amended, at or during the reporting period, by virtue of the Fund owning at least 5% of the voting securities of the issuer or as a result of the Fund and the issuer having the same investment adviser. Transactions during the reporting period in which the issuer was an affiliate are as follows:
| Shares | Gross | Gross | Shares | |||||||||||||
| December 31, 2015 | Additions | Reductions | September 30, 2016 | |||||||||||||
| Oppenheimer Institutional Government Money Market Fund, Cl. Ea |
8,225,463 | 231,783,915 | 214,330,796 | 25,678,582 | ||||||||||||
| Value | Income | |||||||||||||||
| Oppenheimer Institutional Government Money Market Fund, Cl. Ea |
$ | 25,678,582 | $ | 48,777 | ||||||||||||
a. Prior to September 28, 2016, this fund was named Oppenheimer Institutional Money Market Fund.
2 OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NOTES TO STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1. Organization
Oppenheimer Capital Appreciation Fund/VA (the “Fund”), a separate series of Oppenheimer Variable Account Funds, is a diversified open-end management investment company registered under the Investment Company Act of 1940 (“1940 Act”), as amended. The Fund’s investment objective is to seek capital appreciation. The Fund’s investment adviser is OFI Global Asset Management, Inc. (“OFI Global” or the “Manager”), a wholly-owned subsidiary of OppenheimerFunds, Inc. (“OFI” or the “Sub-Adviser”). The Manager has entered into a sub-advisory agreement with OFI. Shares of the Fund are sold only to separate accounts of life insurance companies.
2. Significant Accounting Policies
Security Valuation. All investments in securities are recorded at their estimated fair value, as described in Note 3.
Foreign Currency Translation. The Fund’s accounting records are maintained in U.S. dollars. The values of securities denominated in foreign currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading. Foreign exchange rates may be valued primarily using a reliable bank, dealer or service authorized by the Board of Trustees.
3. Securities Valuation
The Fund calculates the net asset value of its shares as of 4:00 P.M. Eastern time, on each day the New York Stock Exchange (the “Exchange”) is open for trading, except in the case of a scheduled early closing of the Exchange, in which case the Fund will calculate net asset value of the shares as of the scheduled early closing time of the Exchange.
The Fund’s Board has adopted procedures for the valuation of the Fund’s securities and has delegated the day-to-day responsibility for valuation determinations under those procedures to the Manager. The Manager has established a Valuation Committee which is responsible for determining a “fair valuation” for any security for which market quotations are not “readily available.” The Valuation Committee’s fair valuation determinations are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined.
Valuation Methods and Inputs
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by third party pricing services or dealers.
The following methodologies are used to determine the market value or the fair value of the types of securities described below:
Securities traded on a registered U.S. securities exchange (including exchange-traded derivatives other than futures and futures options) are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the mean between the bid and asked price on the principal exchange or, if not available from the principal exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the principal exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer. A security of a foreign issuer traded on a foreign exchange, but not listed on a registered U.S. securities exchange, is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the third party pricing service used by the Manager, prior to the time when the Fund’s assets are valued. If the last sale price is unavailable, the security is valued at the most recent official closing price on the principal exchange on which it is traded. If the last sales price or official closing price for a foreign security is not available, the security is valued at the mean between the bid and asked price per the exchange or, if not available from the exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer.
Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.
Corporate and government debt securities (of U.S. or foreign issuers) and municipal debt securities, event-linked bonds, loans, mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers who may use matrix pricing methods to determine the evaluated prices.
Short-term money market type debt securities with a remaining maturity of sixty days or less are valued at cost adjusted by the amortization of discount or premium to maturity (amortized cost), which approximates market value. Short-term debt securities with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers.
A description of the standard inputs that may generally be considered by the third party pricing vendors in determining their evaluated prices is provided below.
3 OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
3. Securities Valuation (Continued)
| Security Type | Standard inputs generally considered by third-party pricing vendors | |
| Corporate debt, government debt, municipal, mortgage- backed and asset-backed securities | Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, the credit quality, yield, maturity, and other appropriate factors. | |
| Loans | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. | |
| Event-linked bonds | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. |
If a market value or price cannot be determined for a security using the methodologies described above, or if, in the “good faith” opinion of the Manager, the market value or price obtained does not constitute a “readily available market quotation,” or a significant event has occurred that would materially affect the value of the security, the security is fair valued either (i) by a standardized fair valuation methodology applicable to the security type or the significant event as previously approved by the Valuation Committee and the Fund’s Board or (ii) as determined in good faith by the Manager’s Valuation Committee. The Valuation Committee considers all relevant facts that are reasonably available, through either public information or information available to the Manager, when determining the fair value of a security. Fair value determinations by the Manager are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined. Those fair valuation standardized methodologies include, but are not limited to, valuing securities at the last sale price or initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be further adjusted for any discounts related to security-specific resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities nor can it be assured that the Fund can obtain the fair value assigned to a security if it were to sell the security.
To assess the continuing appropriateness of security valuations, the Manager, or its third party service provider who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and sale prices to the current day prices and challenges those prices exceeding certain tolerance levels with the third party pricing service or broker source. For those securities valued by fair valuations, whether through a standardized fair valuation methodology or a fair valuation determination, the Valuation Committee reviews and affirms the reasonableness of the valuations based on such methodologies and fair valuation determinations on a regular basis after considering all relevant information that is reasonably available.
Classifications
Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:
1) Level 1-unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
2) Level 2-inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)
3) Level 3-significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).
The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.
The Fund classifies each of its investments in investment companies which are publicly offered as Level 1. Investment companies that are not publicly offered are measured using net asset value as a practical expedient, and are not classified in the fair value hierarchy.
The table below categorizes amounts at period end based on valuation input level:
| Level 3— | ||||||||||||||||
| Level 1— | Level 2— | Significant | ||||||||||||||
| Unadjusted | Other Significant | Unobservable | ||||||||||||||
| Quoted Prices | Observable Inputs | Inputs | Value | |||||||||||||
| Assets Table |
||||||||||||||||
| Investments, at Value: |
||||||||||||||||
| Common Stocks |
||||||||||||||||
| Consumer Discretionary |
$ 142,615,358 | $ | — | $ | — | $ | 142,615,358 | |||||||||
| Consumer Staples |
46,211,651 | — | — | 46,211,651 | ||||||||||||
| Energy |
9,238,408 | — | — | 9,238,408 | ||||||||||||
| Financials |
29,391,426 | — | — | 29,391,426 | ||||||||||||
| Health Care |
165,910,766 | — | — | 165,910,766 | ||||||||||||
| Industrials |
52,693,565 | — | — | 52,693,565 | ||||||||||||
| Information Technology |
352,069,250 | — | — | 352,069,250 | ||||||||||||
4 OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
3. Securities Valuation (Continued)
| Level 3— | ||||||||||||||||
| Level 1— | Level 2— | Significant | ||||||||||||||
| Unadjusted | Other Significant | Unobservable | ||||||||||||||
| Quoted Prices | Observable Inputs | Inputs | Value | |||||||||||||
| Common Stocks (Continued) |
||||||||||||||||
| Materials |
$ 11,069,847 | $ — | $ — | $ 11,069,847 | ||||||||||||
| Investment Company |
25,678,582 | — | — | 25,678,582 | ||||||||||||
| Total Assets |
$ 834,878,853 | $ — | $ — | $ 834,878,853 | ||||||||||||
Forward currency exchange contracts and futures contracts, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
4. Investments and Risks
Investments in Affiliated Funds. The Fund is permitted to invest in other mutual funds advised by the Manager (“Affiliated Funds”). Affiliated Funds are open-end management investment companies registered under the 1940 Act, as amended. The Manager is the investment adviser of, and the Sub-Adviser provides investment and related advisory services to, the Affiliated Funds. When applicable, the Fund’s investments in Affiliated Funds are included in the Statement of Investments. Shares of Affiliated Funds are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of the Affiliated Funds’ expenses, including their management fee. The Manager will waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Fund’s investment in the Affiliated Funds.
Each of the Affiliated Funds in which the Fund invests has its own investment risks, and those risks can affect the value of the Fund’s investments and therefore the value of the Fund’s shares. To the extent that the Fund invests more of its assets in one Affiliated Fund than in another, the Fund will have greater exposure to the risks of that Affiliated Fund.
Investments in Money Market Instruments. The Fund is permitted to invest its free cash balances in money market instruments to provide liquidity or for defensive purposes. The Fund may invest in money market instruments by investing in Class E shares of Oppenheimer Institutional Government Money Market Fund (“IGMMF”), formerly known as Oppenheimer Institutional Money Market Fund, which is an Affiliated Fund. IGMMF is regulated as a money market fund under the 1940 Act, as amended. The Fund may also invest in money market instruments directly or in other affiliated or unaffiliated money market funds.
Equity Security Risk. Stocks and other equity securities fluctuate in price. The value of the Fund’s portfolio may be affected by changes in the equity markets generally. Equity markets may experience significant short-term volatility and may fall sharply at times. Different markets may behave differently from each other and U.S. equity markets may move in the opposite direction from one or more foreign stock markets. Adverse events in any part of the equity or fixed-income markets may have unexpected negative effects on other market segments.
The prices of individual equity securities generally do not all move in the same direction at the same time and a variety of factors can affect the price of a particular company’s securities. These factors may include, but are not limited to, poor earnings reports, a loss of customers, litigation against the company, general unfavorable performance of the company’s sector or industry, or changes in government regulations affecting the company or its industry.
5. Market Risk Factors
The Fund’s investments in securities and/or financial derivatives may expose the Fund to various market risk factors:
Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.
Credit Risk. Credit risk relates to the ability of the issuer of debt to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield debt securities are subject to credit risk to a greater extent than lower-yield, higher-quality securities.
Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.
Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.
Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.
Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.
5 OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
6. Federal Taxes
The approximate aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes at period end are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses.
| Federal tax cost of securities |
$ | 687,253,675 | ||
|
|
|
|||
| Gross unrealized appreciation |
$ | 153,461,034 | ||
| Gross unrealized depreciation |
(5,835,856) | |||
|
|
|
|||
| Net unrealized appreciation |
$ | 147,625,178 | ||
|
|
|
6 OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1 OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
| 2 OPPENHEIMER CORE BOND FUND/VA |
3 OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
4 OPPENHEIMER CORE BOND FUND/VA
5 OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
6 OPPENHEIMER CORE BOND FUND/VA
7 OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
8 OPPENHEIMER CORE BOND FUND/VA
9 OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
10 OPPENHEIMER CORE BOND FUND/VA
| Counterparty | Exercise Price | Expiration Date | Contracts | |||||||||||||||||||||||||||||
| Over-the-Counter Option Purchased—0.0% |
|
|||||||||||||||||||||||||||||||
| United States Treasury Bonds, 1.50%, 8/26 Put12 |
|
BOA |
|
|
USD |
|
|
98.184 |
|
|
3/23/17 |
|
|
USD |
|
|
3,880,000 |
|
|
54,260 |
| |||||||||||
| Counterparty | Buy /Sell Protection |
Reference Asset | Fixed Rate | Expiration Date |
Notional Amount (000’s) | |||||||||||||||||||||||||||
| Over-the-Counter Credit Default Swaptions Purchased—0.0% |
|
|||||||||||||||||||||||||||||||
| Credit Default Swap maturing 12/21/16 Call12 |
JPM | Buy | CDX.NA.HY.26 | 5.000% | 12/21/16 | USD | 1,961 | 16,149 | ||||||||||||||||||||||||
| Credit Default Swap | ||||||||||||||||||||||||||||||||
| maturing 12/21/16 Call12 | JPM | Buy | CDX.NA.HY.26 | 5.000 | 12/21/16 | USD | 2,278 | 18,760 | ||||||||||||||||||||||||
| Credit Default Swap | ||||||||||||||||||||||||||||||||
| maturing 12/21/16 Call12 | JPM | Buy | CDX.NA.HY.26 | 5.000 | 12/21/16 | USD | 2,278 | 18,760 | ||||||||||||||||||||||||
| Total Over-the-Counter Credit Default Swaptions Purchased (Cost $103,816)
|
|
|
53,669
|
| ||||||||||||||||||||||||||||
| Total Investments, at Value (Cost $183,949,758) |
|
131.1% | 185,895,554 | |||||||||||||||||||||||||||||
| Net Other Assets (Liabilities) |
|
(31.1) | (44,058,416 | ) | ||||||||||||||||||||||||||||
| Net Assets |
100.0% | $ | 141,837,138 | |||||||||||||||||||||||||||||
Footnotes to Statement of Investments
1. 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 $30,164,268 or 21.27% of the Fund’s net assets at period end.
2. All or a portion of the security position is when-issued or delayed delivery to be delivered and settled after period end. See Note 3 of the accompanying Notes.
3. Represents the current interest rate for a variable or increasing rate security.
4. Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of mortgage loans. These securities typically decline in price as interest rates decline. Most other fixed income securities increase in price when interest rates decline. The principal amount of the underlying pool represents the notional amount on which current interest is calculated. The price of these securities is typically more sensitive to changes in prepayment rates than traditional mortgage-backed securities (for example, GNMA pass-throughs). Interest rates disclosed represent current yields based upon the current cost basis and estimated timing and amount of future cash flows. These securities amount to $1,846,590 or 1.30% of the Fund’s net assets at period end.
5. Interest rate is less than 0.0005%.
6. Principal-Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. The value of these securities generally increases as interest rates decline and prepayment rates rise. The price of these securities is typically more volatile than that of coupon-bearing bonds of the same maturity. Interest rates disclosed represent current yields based upon the current cost basis and estimated timing of future cash flows. These securities amount to $104,940 or 0.07% of the Fund’s net assets at period end.
7. All or a portion of the security position is held in accounts at a futures clearing merchant and pledged to cover margin requirements on open futures contracts and written options on futures, if applicable. The aggregate market value of such securities is $35,587. See Note 5 of the accompanying Notes.
8. This bond has no contractual maturity date, is not redeemable and contractually pays an indefinite stream of interest. Rate reported represents the current interest rate for this variable rate security.
9. Security issued in an exempt transaction without registration under the Securities Act of 1933. Such securities amount to $21,097,528 or 14.87% of the Fund’s net assets, and have been determined to be liquid pursuant to guidelines adopted by the Board of Trustees.
10. Rate shown is the 7-day yield at period end.
11. Is or was an affiliate, as defined in the Investment Company Act of 1940, as amended, at or during the reporting period, by virtue of the Fund owning at least 5% of the voting securities of the issuer or as a result of the Fund and the issuer having the same investment adviser. Transactions during the reporting period in which the issuer was an affiliate are as follows:
| Shares | Gross | Gross | Shares | |||||||||||||
| December 31, 2015 | Additions | Reductions | September 30, 2016 | |||||||||||||
| Oppenheimer Institutional Government Money Market Fund, Cl. Ea |
24,144,526 | 139,982,169 | 161,599,568 | 2,527,127 | ||||||||||||
| Value | Income | |||||||||||||||
| Oppenheimer Institutional Government Money Market Fund, Cl. Ea |
$ | 2,527,127 | $ | 54,076 | ||||||||||||
a. Prior to September 28, 2016, this Fund was named Oppenheimer Institutional Money Market Fund.
12. Non-income producing security.
| Futures Contracts as of September 30, 2016 |
|
|||||||||||||||||||||||
| Description |
Exchange |
Buy/Sell |
Expiration Date |
Number of |
Value |
Unrealized Appreciation (Depreciation) |
||||||||||||||||||
| United States Treasury Long Bonds |
CBT | Sell | 12/20/16 | 33 | $ | 5,549,156 | $ | 95,419 | ||||||||||||||||
| United States Treasury Nts., 10 yr. |
CBT | Sell | 12/20/16 | 11 | 1,442,375 | 4,326 | ||||||||||||||||||
| United States Treasury Nts., 2 yr. |
CBT | Buy | 12/30/16 | 53 | 11,578,844 | 9,918 | ||||||||||||||||||
| United States Treasury Nts., 5 yr. |
CBT | Sell | 12/30/16 | 4 | 486,063 | 549 | ||||||||||||||||||
| United States Ultra Bonds |
CBT | Buy | 12/20/16 | 67 | 12,319,625 | (244,975 | ) | |||||||||||||||||
| $ | (134,763 | ) | ||||||||||||||||||||||
11 OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
| Over-the-Counter Options Written at September 30, 2016 |
|
|||||||||||||||||||||||||||||||
| Description | Counterparty | Exercise Price | Expiration Date | Number of Contracts | Premiums Received | Value | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| United States Treasury Bonds, 1.50%, 8/26 Put |
BOA | USD | 95.734 | 3/23/17 | USD | (3,880,000) | $ | 29,100 | $ | (24,181) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| Over-the-Counter Credit Default Swaptions Written at September 30, 2016 |
|
|||||||||||||||||||||||||||||||
| Description | Counterparty | Buy/Sell Protection |
Reference Asset | Fixed Rate | Expiration Date | Notional Amount (000’s) |
Premiums Received | Value | ||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
| Credit Default Swap maturing 6/20/21 Call |
|
JPM |
|
|
Buy |
|
|
CDX.NA.HY.26 |
|
|
5.000 |
% |
|
12/21/16 |
|
|
USD |
|
|
2,278 |
|
$ |
12,302 |
|
$ |
(5,510) |
| |||||||||
|
|
||||||||||||||||||||||||||||||||||||
| Credit Default Swap maturing 6/20/21 Call |
|
JPM |
|
|
Buy |
|
|
CDX.NA.HY.26 |
|
|
5.000 |
|
|
12/21/16 |
|
|
USD |
|
|
2,278 |
|
|
12,301 |
|
|
(5,510) |
| |||||||||
|
|
||||||||||||||||||||||||||||||||||||
| Credit Default Swap maturing 6/20/21 Call |
|
JPM |
|
|
Buy |
|
|
CDX.NA.HY.26 |
|
|
5.000 |
|
|
12/21/16 |
|
|
USD |
|
|
1,961 |
|
|
10,197 |
|
|
(4,743) |
| |||||||||
|
|
|
|||||||||||||||||||||||||||||||||||
| Total of Over-the-Counter Credit Default Swaptions Written |
|
$ | 34,800 | $ | (15,763) | |||||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||||||||
| Glossary: | ||
| Counterparty Abbreviations | ||
| BOA | Bank of America NA | |
| JPM | JPMorgan Chase Bank NA | |
| Definitions | ||
| CDX.NA.HY.26 | Markit CDX North American High Yield | |
| Exchange Abbreviations | ||
| CBT | Chicago Board of Trade | |
12 OPPENHEIMER CORE BOND FUND/VA
NOTES TO STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1. Organization
Oppenheimer Core Bond Fund/VA (the “Fund”), a separate series of Oppenheimer Variable Account Funds, is a diversified open-end management investment company registered under the Investment Company Act of 1940 (“1940 Act”), as amended. The Fund’s investment objective is to seek total return. The Fund’s investment adviser is OFI Global Asset Management, Inc. (“OFI Global” or the “Manager”), a wholly-owned subsidiary of OppenheimerFunds, Inc. (“OFI” or the “Sub-Adviser”). The Manager has entered into a sub-advisory agreement with OFI. Shares of the Fund are sold only to separate accounts of life insurance companies.
2. Securities Valuation
The Fund calculates the net asset value of its shares as of 4:00 P.M. Eastern time, on each day the New York Stock Exchange (the “Exchange”) is open for trading, except in the case of a scheduled early closing of the Exchange, in which case the Fund will calculate net asset value of the shares as of the scheduled early closing time of the Exchange.
The Fund’s Board has adopted procedures for the valuation of the Fund’s securities and has delegated the day-to-day responsibility for valuation determinations under those procedures to the Manager. The Manager has established a Valuation Committee which is responsible for determining a “fair valuation” for any security for which market quotations are not “readily available.” The Valuation Committee’s fair valuation determinations are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined.
Valuation Methods and Inputs
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by third party pricing services or dealers.
The following methodologies are used to determine the market value or the fair value of the types of securities described below:
Securities traded on a registered U.S. securities exchange (including exchange-traded derivatives other than futures and futures options) are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the mean between the bid and asked price on the principal exchange or, if not available from the principal exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the principal exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer. A security of a foreign issuer traded on a foreign exchange, but not listed on a registered U.S. securities exchange, is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the third party pricing service used by the Manager, prior to the time when the Fund’s assets are valued. If the last sale price is unavailable, the security is valued at the most recent official closing price on the principal exchange on which it is traded. If the last sales price or official closing price for a foreign security is not available, the security is valued at the mean between the bid and asked price per the exchange or, if not available from the exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer.
Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.
Corporate and government debt securities (of U.S. or foreign issuers) and municipal debt securities, event-linked bonds, loans, mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers who may use matrix pricing methods to determine the evaluated prices.
Short-term money market type debt securities with a remaining maturity of sixty days or less are valued at cost adjusted by the amortization of discount or premium to maturity (amortized cost), which approximates market value. Short-term debt securities with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers.
Structured securities, swaps, swaptions, and other over-the-counter derivatives are valued utilizing evaluated prices obtained from third party pricing services or broker-dealers.
Futures contracts and futures options traded on a commodities or futures exchange will be valued at the final settlement price or official closing price on the principal exchange as reported by such principal exchange at its trading session ending at, or most recently prior to, the time when the Fund’s assets are valued.
13 OPPENHEIMER CORE BOND FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
2. Securities Valuation (Continued)
A description of the standard inputs that may generally be considered by the third party pricing vendors in determining their evaluated prices is provided below.
| Security Type | Standard inputs generally considered by third-party pricing vendors | |
| Corporate debt, government debt, municipal, mortgage- backed and asset-backed securities | Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, the credit quality, yield, maturity, and other appropriate factors. | |
| Loans | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. | |
| Event-linked bonds | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. | |
| Structured securities | Relevant market information such as the price of underlying financial instruments, stock market indices, foreign currencies, interest rate spreads, commodities, or the occurrence of other specific events. | |
| Swaps | Relevant market information, including underlying reference assets such as credit spreads, credit event probabilities, index values, individual security values, forward interest rates, variable interest rates, volatility measures, and forward currency rates. |
If a market value or price cannot be determined for a security using the methodologies described above, or if, in the “good faith” opinion of the Manager, the market value or price obtained does not constitute a “readily available market quotation,” or a significant event has occurred that would materially affect the value of the security, the security is fair valued either (i) by a standardized fair valuation methodology applicable to the security type or the significant event as previously approved by the Valuation Committee and the Fund’s Board or (ii) as determined in good faith by the Manager’s Valuation Committee. The Valuation Committee considers all relevant facts that are reasonably available, through either public information or information available to the Manager, when determining the fair value of a security. Fair value determinations by the Manager are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined. Those fair valuation standardized methodologies include, but are not limited to, valuing securities at the last sale price or initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be further adjusted for any discounts related to security-specific resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities nor can it be assured that the Fund can obtain the fair value assigned to a security if it were to sell the security.
To assess the continuing appropriateness of security valuations, the Manager, or its third party service provider who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and sale prices to the current day prices and challenges those prices exceeding certain tolerance levels with the third party pricing service or broker source. For those securities valued by fair valuations, whether through a standardized fair valuation methodology or a fair valuation determination, the Valuation Committee reviews and affirms the reasonableness of the valuations based on such methodologies and fair valuation determinations on a regular basis after considering all relevant information that is reasonably available.
Classifications
Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:
1) Level 1-unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
2) Level 2-inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)
3) Level 3-significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).
The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.
The Fund classifies each of its investments in investment companies which are publicly offered as Level 1. Investment companies that are not publicly offered are measured using net asset value as a practical expedient, and are not classified in the fair value hierarchy.
The table below categorizes amounts at period end based on valuation input level:
| Level 1— Unadjusted |
Level 2— Other Significant |
Level 3— Significant Unobservable Inputs |
Value | |||||||||||||
| Assets Table |
||||||||||||||||
| Investments, at Value: |
||||||||||||||||
| Asset-Backed Securities |
$ | — | $ | 15,280,281 | $ | — | $ | 15,280,281 | ||||||||
| Mortgage-Backed Obligations |
— | 70,530,368 | 47,456 | 70,577,824 | ||||||||||||
14 OPPENHEIMER CORE BOND FUND/VA
2. Securities Valuation (Continued)
| Level 1— Unadjusted |
Level 2— Other Significant |
Level 3— Significant Unobservable Inputs |
Value | |||||||||||||
|
|
||||||||||||||||
| Investments, at Value: (Continued) |
||||||||||||||||
| U.S. Government Obligations |
$ | — | $ | 2,216,316 | $ | — | $ | 2,216,316 | ||||||||
| Corporate Bonds and Notes |
— | 66,143,603 | — | 66,143,603 | ||||||||||||
| Short-Term Notes |
— | 28,402,586 | — | 28,402,586 | ||||||||||||
| Certificate of Deposit |
— | 639,888 | — | 639,888 | ||||||||||||
| Investment Company |
2,527,127 | — | — | 2,527,127 | ||||||||||||
| Over-the-Counter Option Purchased |
— | 54,260 | — | 54,260 | ||||||||||||
| Over-the-Counter Credit Default Swaptions Purchased |
— | 53,669 | — | 53,669 | ||||||||||||
|
|
|
|||||||||||||||
| Total Investments, at Value |
2,527,127 | 183,320,971 | 47,456 | 185,895,554 | ||||||||||||
| Other Financial Instruments: |
||||||||||||||||
| Futures contracts |
110,212 | — | — | 110,212 | ||||||||||||
|
|
|
|||||||||||||||
| Total Assets |
$ | 2,637,339 | $ | 183,320,971 | $ | 47,456 | $ | 186,005,766 | ||||||||
|
|
|
|||||||||||||||
| Liabilities Table |
||||||||||||||||
| Other Financial Instruments: |
||||||||||||||||
| Futures contracts |
$ | (244,975 | ) | $ | — | $ | — | $ | (244,975) | |||||||
| Options written, at value |
— | (24,181) | — | (24,181) | ||||||||||||
| Swaptions written, at value |
— | (15,763) | — | (15,763) | ||||||||||||
|
|
|
|||||||||||||||
| Total Liabilities |
$ | (244,975 | ) | $ | (39,944) | $ | — | $ | (284,919) | |||||||
|
|
|
|||||||||||||||
Forward currency exchange contracts and futures contracts, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
3. Investments and Risks
Investments in Affiliated Funds. The Fund is permitted to invest in other mutual funds advised by the Manager (“Affiliated Funds”). Affiliated Funds are open-end management investment companies registered under the 1940 Act, as amended. The Manager is the investment adviser of, and the Sub-Adviser provides investment and related advisory services to, the Affiliated Funds. When applicable, the Fund’s investments in Affiliated Funds are included in the Statement of Investments. Shares of Affiliated Funds are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of the Affiliated Funds’ expenses, including their management fee. The Manager will waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Fund’s investment in the Affiliated Funds.
Each of the Affiliated Funds in which the Fund invests has its own investment risks, and those risks can affect the value of the Fund’s investments and therefore the value of the Fund’s shares. To the extent that the Fund invests more of its assets in one Affiliated Fund than in another, the Fund will have greater exposure to the risks of that Affiliated Fund.
Investments in Money Market Instruments. The Fund is permitted to invest its free cash balances in money market instruments to provide liquidity or for defensive purposes. The Fund may invest in money market instruments by investing in Class E shares of Oppenheimer Institutional Government Money Market Fund (“IGMMF”), formerly known as Oppenheimer Institutional Money Market Fund, which is an Affiliated Fund. IGMMF is regulated as a money market fund under the 1940 Act, as amended. The Fund may also invest in money market instruments directly or in other affiliated or unaffiliated money market funds.
Securities on a When-Issued or Delayed Delivery Basis. The Fund may purchase securities on a “when-issued” basis, and may purchase or sell securities on a “delayed delivery” basis. “When-issued” or “delayed delivery” refers to securities whose terms and indenture are available and for which a market exists, but which are not available for immediate delivery. Delivery and payment for securities that have been purchased by the Fund on a when-issued basis normally takes place within six months and possibly as long as two years or more after the trade date. During this period, such securities do not earn interest, are subject to market fluctuation and may increase or decrease in value prior to their delivery. The purchase of securities on a when-issued basis may increase the volatility of the Fund’s net asset value to the extent the Fund executes such transactions while remaining substantially fully invested. When the Fund engages in when-issued or delayed delivery transactions, it relies on the buyer or seller, as the case may be, to complete the transaction. Their failure to do so may cause the Fund to lose the opportunity to obtain or dispose of the security at a price and yield it considers advantageous. The Fund may also sell securities that it purchased on a when-issued basis or forward commitment prior to settlement of the original purchase.
At period end, the Fund had purchased securities issued on a when-issued or delayed delivery basis and sold securities issued on a delayed delivery basis as follows:
15 OPPENHEIMER CORE BOND FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
3. Investments and Risks (Continued)
|
|
When-Issued or Delayed Delivery Basis Transactions |
| ||
| Purchased securities |
$ | 55,664,034 | ||
| Sold securities |
10,082,775 |
The Fund may enter into “forward roll” transactions with respect to mortgage-related securities. In this type of transaction, the Fund sells a mortgage-related security to a buyer and simultaneously agrees to repurchase a similar security (same type, coupon and maturity) at a later date at a set price. During the period between the sale and the repurchase, the Fund will not be entitled to receive interest and principal payments on the securities that have been sold. The Fund records the incremental difference between the forward purchase and sale of each forward roll as realized gain (loss) on investments or as fee income in the case of such transactions that have an associated fee in lieu of a difference in the forward purchase and sale price.
Forward roll transactions may be deemed to entail embedded leverage since the Fund purchases mortgage-related securities with extended settlement dates rather than paying for the securities under a normal settlement cycle. This embedded leverage increases the Fund’s market value of investments relative to its net assets which can incrementally increase the volatility of the Fund’s performance. Forward roll transactions can be replicated over multiple settlement periods.
Risks of entering into forward roll transactions include the potential inability of the counterparty to meet the terms of the agreement; the potential of the Fund to receive inferior securities at redelivery as compared to the securities sold to the counterparty; and counterparty credit risk.
4. Market Risk Factors
The Fund’s investments in securities and/or financial derivatives may expose the Fund to various market risk factors:
Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.
Credit Risk. Credit risk relates to the ability of the issuer of debt to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield debt securities are subject to credit risk to a greater extent than lower-yield, higher-quality securities.
Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.
Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.
Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.
Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.
5. Use of Derivatives
The Fund’s investment objective not only permits the Fund to purchase investment securities, it also allows the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward currency exchange contracts, credit default swaps, interest rate swaps, total return swaps, variance swaps and purchased and written options. In doing so, the Fund will employ strategies in differing combinations to permit it to increase, decrease, or change the level or types of exposure to market risk factors. These instruments may allow the Fund to pursue its objectives more quickly and efficiently than if it were to make direct purchases or sales of securities capable of effecting a similar response to market factors. Such contracts may be entered into through a bilateral over-the-counter (“OTC”) transaction, or through a securities or futures exchange and cleared through a clearinghouse.
Derivatives may have little or no initial cash investment relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost due to unanticipated changes in the market risk factors and the overall market. This use of embedded leverage allows the Fund to increase its market value exposure relative to its net assets and can substantially increase the volatility of the Fund’s performance. In instances where the Fund is using derivatives to decrease, or hedge, exposures to market risk factors for securities held by the Fund, there are also risks that those derivatives may not perform as expected resulting in losses for the combined or hedged positions. Some derivatives have the potential for unlimited loss, regardless of the size of the Fund’s initial investment.
Additional associated risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the derivative and the Fund. Typically, the associated risks are not the risks that the Fund is attempting to increase or decrease exposure to, per its investment objectives, but are the additional risks from investing in derivatives. Examples of these associated risks are liquidity risk, which is the risk that the Fund will not be able to sell the derivative in the open market in a timely manner, and counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund.
The Fund’s actual exposures to these market risk factors and associated risks during the period are discussed in further detail, by derivative type,
16 OPPENHEIMER CORE BOND FUND/VA
5. Use of Derivatives (Continued)
below.
Futures Contracts
A futures contract is a commitment to buy or sell a specific amount of a commodity, financial instrument or currency at a negotiated price on a stipulated future date. The Fund may buy and sell futures contracts and may also buy or write put or call options on these futures contracts. Futures contracts and options thereon are generally entered into on a regulated futures exchange and cleared through a clearinghouse associated with the exchange.
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 in an account registered in the futures commission merchant’s name. Subsequent payments (variation margin) are paid to or from the futures commission merchant each day equal to the daily changes in the contract value. Such payments are recorded as unrealized gains and losses. Should the Fund fail to make requested variation margin payments, the futures commission merchant can gain access to the initial margin to satisfy the Fund’s payment obligations.
Futures contracts are reported on a schedule following the Statement of Investments. Securities held by a futures commission merchant to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. Cash held by a futures commission merchant to cover initial margin requirements on open futures contracts and the receivable and/or payable for the daily mark to market for the variation margin are noted in the Statement of Assets and Liabilities in the annual and semiannual reports. The net change in unrealized appreciation and depreciation is reported in the Statement of Operations in the annual and semiannual reports. Realized gains (losses) are reported in the Statement of Operations in the annual and semiannual reports at the closing or expiration of futures contracts.
The Fund has purchased futures contracts on various bonds and notes to increase exposure to interest rate risk.
The Fund has sold futures contracts on various bonds and notes to decrease exposure to interest rate risk.
During the reporting period, the Fund had an ending monthly average market value of $17,804,633 and $13,034,913 on futures contracts purchased and sold, respectively.
Additional associated risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market where the Fund is unable to liquidate the contract or enter into an offsetting position and, if used for hedging purposes, the risk that the price of the contract will correlate imperfectly with the prices of the Fund’s securities.
Option Activity
The Fund may buy and sell put and call options, or write put and call options. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security, currency or other underlying financial instrument at a fixed price, upon exercise of the option.
Options can be traded through an exchange or through a privately negotiated arrangement with a dealer in an OTC transaction. Options traded through an exchange are generally cleared through a clearinghouse (such as The Options Clearing Corporation). The difference between the premium received or paid, and market value of the option, is recorded as unrealized appreciation or depreciation. The net change in unrealized appreciation or depreciation is reported in the Statement of Operations in the annual and semiannual reports. When an option is exercised, the cost of the security purchased or the proceeds of the security sale are adjusted by the amount of premium received or paid. Upon the expiration or closing of the option transaction, a gain or loss is reported in the Statement of Operations in the annual and semiannual reports.
The Fund has purchased call options on treasury and/or euro futures to increase exposure to interest rate risk. A purchased call option becomes more valuable as the price of the underlying financial instrument appreciates relative to the strike price.
The Fund has purchased put options on treasury and/or euro futures to decrease exposure to interest rate risk. A purchased put option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.
During the reporting period, the Fund had an ending monthly average market value of $47,561 and $5,665 on purchased call options and purchased put options, respectively.
Options written, if any, are reported in a schedule following the Statement of Investments and as a liability in the Statement of Assets and Liabilities in the annual and semiannual reports. Securities held in collateral accounts to cover potential obligations with respect to outstanding written options are noted in the Statement of Investments.
The risk in writing a call option is that the market price of the security increases and if the option is exercised, the Fund must either purchase the security at a higher price for delivery or, if the Fund owns the underlying security, give up the opportunity for profit. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk that there may be an illiquid market where the Fund is unable to close the contract.
The Fund has written put options on treasury and/or euro futures to increase exposure to interest rate risk. A written put option becomes more valuable as the price of the underlying financial instrument appreciates relative to the strike price.
During the reporting period, the Fund had an ending monthly average market value of $4,555 on written put options.
Additional associated risks to the Fund include counterparty credit risk and liquidity risk.
Written option activity for the reporting period was as follows:
17 OPPENHEIMER CORE BOND FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
5. Use of Derivatives (Continued)
| Number of Contracts |
Amount of Premiums |
|||||||
|
|
||||||||
| Options outstanding as of December 31, 2015 |
— | $ | — | |||||
| Options written |
3,880,856 | 61,628 | ||||||
| Options exercised |
(856 | ) | (32,528) | |||||
|
|
|
|||||||
| Options outstanding as of September 30, 2016 |
3,880,000 | $ | 29,100 | |||||
|
|
|
|||||||
Swaption Transactions
The Fund may enter into a swaption contract which grants the purchaser the right, but not the obligation, to enter into a swap transaction at preset terms detailed in the underlying agreement within a specified period of time. The purchaser pays a premium to the swaption writer who bears the risk of unfavorable changes in the preset terms on the underlying swap.
Purchased swaptions are reported as a component of investments in the Statement of Investments and the Statement of Assets and Liabilities in the annual and semiannual reports. Written swaptions are reported on a schedule following the Statement of Investments and their value is reported as a separate asset or liability line item in the Statement of Assets and Liabilities in the annual and semiannual reports. The net change in unrealized appreciation or depreciation on written swaptions is separately reported in the Statement of Operations in the annual and semiannual reports. When a swaption is exercised, the cost of the swap is adjusted by the amount of premium paid or received. Upon the expiration or closing of an unexercised swaption contract, a gain or loss is reported in the Statement of Operations in the annual and semiannual reports for the amount of the premium paid or received.
The Fund generally will incur a greater risk when it writes a swaption than when it purchases a swaption. When the Fund writes a swaption it will become obligated, upon exercise of the swaption, according to the terms of the underlying agreement. Swaption contracts written by the Fund do not give rise to counterparty credit risk prior to exercise as they obligate the Fund, not its counterparty, to perform. When the Fund purchases a swaption it only risks losing the amount of the premium it paid if the swaption expires unexercised. However, when the Fund exercises a purchased swaption there is a risk that the counterparty will fail to perform or otherwise default on its obligations under the swaption contract.
The Fund has purchased swaptions which gives it the option to buy credit protection through credit default swaps in order to decrease exposure to the credit risk of individual issuers and/or indexes of issuers. A purchased swaption of this type becomes more valuable as the likelihood of a credit event on the reference asset increases.
The Fund has written swaptions which give it the obligation, if exercised by the purchaser, to buy credit protection through credit default swaps in order to decrease exposure to the credit risk of individual issuers and/or, indexes of issuers. A written swaption of this type becomes more valuable as the likelihood of a credit event on the reference asset increases.
During the reporting period, the Fund had an ending monthly average market value of $12,689 and $4,110 on purchased and written swaptions, respectively.
Written swaption activity for the reporting period was as follows:
| Number of Contracts |
Amount of Premiums |
|||||||
|
|
||||||||
| Swaptions outstanding as of December 31, 2015 |
— | $ | — | |||||
| Swaptions written | 6,517,000 | 34,800 | ||||||
|
|
|
|||||||
| Swaptions outstanding as of September 30, 2016 |
6,517,000 | $ | 34,800 | |||||
|
|
|
|||||||
Counterparty Credit Risk. Derivative positions are subject to the risk that the counterparty will not fulfill its obligation to the Fund. The Fund intends to enter into derivative transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction.
The Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by the Fund. For OTC options purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the contracts. Options written by the Fund do not typically give rise to counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform.
To reduce counterparty risk with respect to OTC transactions, the Fund has entered into master netting arrangements, established within the Fund’s International Swap and Derivatives Association, Inc. (“ISDA”) master agreements, which allow the Fund to make (or to have an entitlement to receive) a single net payment in the event of default (close-out netting) for outstanding payables and receivables with respect to certain OTC positions in swaps, options, swaptions, and forward currency exchange contracts for each individual counterparty. In addition, the Fund may require that certain counterparties post cash and/or securities in collateral accounts to cover their net payment obligations for those derivative contracts subject to ISDA master agreements. If the counterparty fails to perform under these contracts and agreements, the cash and/or securities will be made available to the Fund.
ISDA master agreements include credit related contingent features which allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event that, for example, the Fund’s net assets decline by a stated percentage or the Fund fails to meet the terms of its ISDA master agreements, which would cause the Fund to accelerate payment of any net liability owed to the counterparty.
18 OPPENHEIMER CORE BOND FUND/VA
5. Use of Derivatives (Continued)
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities in the annual and semiannual reports. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events.
The Fund’s risk of loss from counterparty credit risk on exchange-traded derivatives cleared through a clearinghouse and for centrally cleared swaps is generally considered lower than as compared to OTC derivatives. However, counterparty credit risk exists with respect to initial and variation margin deposited/paid by the Fund that is held in futures commission merchant, broker and/or clearinghouse accounts for such exchange-traded derivatives and for centrally cleared swaps.
With respect to centrally cleared swaps, such transactions will be submitted for clearing, and if cleared, will be held in accounts at futures commission merchants or brokers that are members of clearinghouses. While brokers, futures commission merchants and clearinghouses are required to segregate customer margin from their own assets, in the event that a broker, futures commission merchant or clearinghouse becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the broker, futures commission merchant or clearinghouse for all its customers, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the broker’s, futures commission merchant’s or clearinghouse’s customers, potentially resulting in losses to the Fund.
There is the risk that a broker, futures commission merchant or clearinghouse will decline to clear a transaction on the Fund’s behalf, and the Fund may be required to pay a termination fee to the executing broker with whom the Fund initially enters into the transaction. Clearinghouses may also be permitted to terminate centrally cleared swaps at any time. The Fund is also subject to the risk that the broker or futures commission merchant will improperly use the Fund’s assets deposited/paid as initial or variation margin to satisfy payment obligations of another customer. In the event of a default by another customer of the broker or futures commission merchant, the Fund might not receive its variation margin payments from the clearinghouse, due to the manner in which variation margin payments are aggregated for all customers of the broker/futures commission merchant.
Collateral and margin requirements differ by type of derivative. Margin requirements are established by the broker, futures commission merchant or clearinghouse for exchange-traded and cleared derivatives, including centrally cleared swaps. Brokers, futures commission merchants and clearinghouses can ask for margin in excess of the regulatory minimum, or increase the margin amount, in certain circumstances.
Collateral terms are contract specific for OTC derivatives. For derivatives traded under an ISDA master agreement, the collateral requirements are typically calculated by netting the mark to market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund or the counterparty.
For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Fund, if any, is reported separately on the Statement of Assets and Liabilities in the annual and semiannual reports as cash pledged as collateral. Non-cash collateral pledged by the Fund, if any, is noted in the Statement of Investments. Generally, the amount of collateral due from or to a party must exceed a minimum transfer amount threshold (e.g. $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty nonperformance.
6. Federal Taxes
The approximate aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes at period end are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses.
| Federal tax cost of securities |
$ | 183,950,565 | ||
| Federal tax cost of other investments |
(7,406,731) | |||
|
|
|
|||
| Total federal tax cost |
$ | 176,543,834 | ||
|
|
|
|||
| Gross unrealized appreciation |
$ | 4,770,913 | ||
| Gross unrealized depreciation |
(2,936,731) | |||
|
|
|
|||
| Net unrealized appreciation |
$ | 1,834,182 | ||
|
|
|
19 OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1 OPPENHEIMER GLOBAL FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
Footnotes to Statement of Investments
1. Non-income producing security.
2. Rate shown is the 7-day yield at period end.
3. Is or was an affiliate, as defined in the Investment Company Act of 1940, as amended, at or during the reporting period, by virtue of the Fund owning at least 5% of the voting securities of the issuer or as a result of the Fund and the issuer having the same investment adviser. Transactions during the reporting period in which the issuer was an affiliate are as follows:
| Shares December 31, 2015 |
Gross Additions |
Gross Reductions |
Shares September 30, 2016 | |||||
| Oppenheimer Institutional Government Money Market Fund, Cl. Ea |
20,379,539 | 283,160,254 | 294,052,166 | 9,487,627 | ||||
|
Value |
Income | |||||||
| Oppenheimer Institutional Government Money Market Fund, Cl. Ea |
$ 9,487,627 | $ 82,728 |
a. Prior to September 28, 2016, this fund was named Oppenheimer Institutional Money Market Fund.
| Distribution of investments representing geographic holdings, as a percentage of total investments at value, is as follows: | ||||||||||
| Geographic Holdings Unaudited | Value | Percent | ||||||||
|
| ||||||||||
| United States |
$ | 1,127,880,899 | 47.0 | % | ||||||
| Japan |
346,923,825 | 14.5 | ||||||||
| Germany |
212,758,601 | 8.9 | ||||||||
| France |
194,729,087 | 8.1 | ||||||||
| United Kingdom |
113,301,945 | 4.7 | ||||||||
| Switzerland |
96,411,665 | 4.0 | ||||||||
| India |
92,590,452 | 3.9 | ||||||||
| Spain |
87,584,867 | 3.6 | ||||||||
| Sweden |
38,688,424 | 1.6 | ||||||||
| China |
30,133,454 | 1.3 | ||||||||
| Italy |
29,342,685 | 1.2 | ||||||||
| Ireland |
15,980,965 | 0.7 | ||||||||
| Denmark |
7,941,225 | 0.3 | ||||||||
| Brazil |
4,893,089 | 0.2 | ||||||||
|
|
| |||||||||
| Total |
$ | 2,399,161,183 | 100.0 | % | ||||||
|
|
| |||||||||
2 OPPENHEIMER GLOBAL FUND/VA
NOTES TO STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1. Organization
Oppenheimer Global Fund/VA (the “Fund”), a separate series of Oppenheimer Variable Account Funds, is a diversified open-end management investment company registered under the Investment Company Act of 1940 (“1940 Act”), as amended. The Fund’s investment objective is to seek capital appreciation. The Fund’s investment adviser is OFI Global Asset Management, Inc. (“OFI Global” or the “Manager”), a wholly-owned subsidiary of OppenheimerFunds, Inc. (“OFI” or the “Sub-Adviser”). The Manager has entered into a sub-advisory agreement with OFI. Shares of the Fund are sold only to separate accounts of life insurance companies.
2. Significant Accounting Policies
Security Valuation. All investments in securities are recorded at their estimated fair value, as described in Note 3.
Foreign Currency Translation. The Fund’s accounting records are maintained in U.S. dollars. The values of securities denominated in foreign currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading. Foreign exchange rates may be valued primarily using a reliable bank, dealer or service authorized by the Board of Trustees.
3. Securities Valuation
The Fund calculates the net asset value of its shares as of 4:00 P.M. Eastern time, on each day the New York Stock Exchange (the “Exchange”) is open for trading, except in the case of a scheduled early closing of the Exchange, in which case the Fund will calculate net asset value of the shares as of the scheduled early closing time of the Exchange.
The Fund’s Board has adopted procedures for the valuation of the Fund’s securities and has delegated the day-to-day responsibility for valuation determinations under those procedures to the Manager. The Manager has established a Valuation Committee which is responsible for determining a “fair valuation” for any security for which market quotations are not “readily available.” The Valuation Committee’s fair valuation determinations are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined.
Valuation Methods and Inputs
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by third party pricing services or dealers.
The following methodologies are used to determine the market value or the fair value of the types of securities described below:
Securities traded on a registered U.S. securities exchange (including exchange-traded derivatives other than futures and futures options) are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the mean between the bid and asked price on the principal exchange or, if not available from the principal exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the principal exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer. A security of a foreign issuer traded on a foreign exchange, but not listed on a registered U.S. securities exchange, is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the third party pricing service used by the Manager, prior to the time when the Fund’s assets are valued. If the last sale price is unavailable, the security is valued at the most recent official closing price on the principal exchange on which it is traded. If the last sales price or official closing price for a foreign security is not available, the security is valued at the mean between the bid and asked price per the exchange or, if not available from the exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer.
Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.
Corporate and government debt securities (of U.S. or foreign issuers) and municipal debt securities, event-linked bonds, loans, mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers who may use matrix pricing methods to determine the evaluated prices.
Short-term money market type debt securities with a remaining maturity of sixty days or less are valued at cost adjusted by the amortization of discount or premium to maturity (amortized cost), which approximates market value. Short-term debt securities with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers.
A description of the standard inputs that may generally be considered by the third party pricing vendors in determining their evaluated prices is provided below.
3 OPPENHEIMER GLOBAL FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
3. Securities Valuation (Continued)
| Security Type | Standard inputs generally considered by third-party pricing vendors | |
| Corporate debt, government debt, municipal, mortgage-backed and asset-backed securities | Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, the credit quality, yield, maturity, and other appropriate factors. | |
| Loans | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. | |
| Event-linked bonds | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. |
If a market value or price cannot be determined for a security using the methodologies described above, or if, in the “good faith” opinion of the Manager, the market value or price obtained does not constitute a “readily available market quotation,” or a significant event has occurred that would materially affect the value of the security, the security is fair valued either (i) by a standardized fair valuation methodology applicable to the security type or the significant event as previously approved by the Valuation Committee and the Fund’s Board or (ii) as determined in good faith by the Manager’s Valuation Committee. The Valuation Committee considers all relevant facts that are reasonably available, through either public information or information available to the Manager, when determining the fair value of a security. Fair value determinations by the Manager are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined. Those fair valuation standardized methodologies include, but are not limited to, valuing securities at the last sale price or initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be further adjusted for any discounts related to security-specific resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities nor can it be assured that the Fund can obtain the fair value assigned to a security if it were to sell the security.
To assess the continuing appropriateness of security valuations, the Manager, or its third party service provider who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and sale prices to the current day prices and challenges those prices exceeding certain tolerance levels with the third party pricing service or broker source. For those securities valued by fair valuations, whether through a standardized fair valuation methodology or a fair valuation determination, the Valuation Committee reviews and affirms the reasonableness of the valuations based on such methodologies and fair valuation determinations on a regular basis after considering all relevant information that is reasonably available.
Classifications
Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:
1) Level 1-unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
2) Level 2-inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)
3) Level 3-significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).
The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.
The Fund classifies each of its investments in investment companies which are publicly offered as Level 1. Investment companies that are not publicly offered are measured using net asset value as a practical expedient, and are not classified in the fair value hierarchy.
The table below categorizes amounts at period end based on valuation input level:
| Level 1— Unadjusted Quoted Prices |
Level 2— Other Significant Observable Inputs |
Level 3— Significant Unobservable Inputs |
Value | |||||||
| Assets Table |
||||||||||
| Investments, at Value: |
||||||||||
| Common Stocks |
||||||||||
| Consumer Discretionary |
$ | 122,990,077 | $ 225,540,332 | $ — | $ 348,530,409 | |||||
| Consumer Staples |
62,817,339 | 68,174,436 | — | 130,991,775 | ||||||
| Energy |
— | 37,929,153 | — | 37,929,153 | ||||||
| Financials |
227,745,415 | 260,380,142 | — | 488,125,557 | ||||||
| Health Care |
288,081,661 | 74,901,818 | — | 362,983,479 | ||||||
| Industrials |
103,139,271 | 199,312,861 | — | 302,452,132 | ||||||
| Information Technology |
398,041,358 | 209,430,828 | — | 607,472,186 | ||||||
| Materials |
— | 24,670,261 | — | 24,670,261 | ||||||
4 OPPENHEIMER GLOBAL FUND/VA
3. Securities Valuation (Continued)
| Level 1— Unadjusted Quoted Prices |
Level 2— Other Significant Observable Inputs |
Level 3— Significant Unobservable Inputs |
Value | |||||||||
| Common Stocks (Continued) |
||||||||||||
| Telecommunication Services |
$ | — | $ 43,333,923 | $ — | $ | 43,333,923 | ||||||
| Preferred Stocks |
1,126,073 | 42,058,608 | — | 43,184,681 | ||||||||
| Investment Company |
9,487,627 | — | — | 9,487,627 | ||||||||
| Total Assets |
$ | 1,213,428,821 | $ 1,185,732,362 | $ — | $ | 2,399,161,183 | ||||||
Forward currency exchange contracts and futures contracts, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
4. Investments and Risks
Risks of Foreign Investing. The Fund may invest in foreign securities which are subject to special risks. Securities traded in foreign markets may be less liquid and more volatile than those traded in U.S. markets. Foreign issuers are usually not subject to the same accounting and disclosure requirements that U.S. companies are subject to, which may make it difficult for the Fund to evaluate a foreign company’s operations or financial condition. A change in the value of a foreign currency against the U.S. dollar will result in a change in the U.S. dollar value of investments denominated in that foreign currency and in the value of any income or distributions the Fund may receive on those investments. The value of foreign investments may be affected by exchange control regulations, foreign taxes, higher transaction and other costs, delays in the settlement of transactions, changes in economic or monetary policy in the United States or abroad, expropriation or nationalization of a company’s assets, or other political and economic factors. In addition, due to the inter-relationship of global economies and financial markets, changes in political and economic factors in one country or region could adversely affect conditions in another country or region. Investments in foreign securities may also expose the Fund to time-zone arbitrage risk. Foreign securities may trade on weekends or other days when the Fund does not price its shares. At times, the Fund may emphasize investments in a particular country or region and may be subject to greater risks from adverse events that occur in that country or region. Foreign securities and foreign currencies held in foreign banks and securities depositories may be subject to limited or no regulatory oversight.
Investments in Affiliated Funds. The Fund is permitted to invest in other mutual funds advised by the Manager (“Affiliated Funds”). Affiliated Funds are open-end management investment companies registered under the 1940 Act, as amended. The Manager is the investment adviser of, and the Sub-Adviser provides investment and related advisory services to, the Affiliated Funds. When applicable, the Fund’s investments in Affiliated Funds are included in the Statement of Investments. Shares of Affiliated Funds are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of the Affiliated Funds’ expenses, including their management fee. The Manager will waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Fund’s investment in the Affiliated Funds.
Each of the Affiliated Funds in which the Fund invests has its own investment risks, and those risks can affect the value of the Fund’s investments and therefore the value of the Fund’s shares. To the extent that the Fund invests more of its assets in one Affiliated Fund than in another, the Fund will have greater exposure to the risks of that Affiliated Fund.
Investments in Money Market Instruments. The Fund is permitted to invest its free cash balances in money market instruments to provide liquidity or for defensive purposes. The Fund may invest in money market instruments by investing in Class E shares of Oppenheimer Institutional Government Money Market Fund (“IGMMF”), formerly known as Oppenheimer Institutional Money Market Fund, which is an Affiliated Fund. IGMMF is regulated as a money market fund under the 1940 Act, as amended. The Fund may also invest in money market instruments directly or in other affiliated or unaffiliated money market funds.
Equity Security Risk. Stocks and other equity securities fluctuate in price. The value of the Fund’s portfolio may be affected by changes in the equity markets generally. Equity markets may experience significant short-term volatility and may fall sharply at times. Different markets may behave differently from each other and U.S. equity markets may move in the opposite direction from one or more foreign stock markets. Adverse events in any part of the equity or fixed-income markets may have unexpected negative effects on other market segments.
The prices of individual equity securities generally do not all move in the same direction at the same time and a variety of factors can affect the price of a particular company’s securities. These factors may include, but are not limited to, poor earnings reports, a loss of customers, litigation against the company, general unfavorable performance of the company’s sector or industry, or changes in government regulations affecting the company or its industry.
5. Market Risk Factors
The Fund’s investments in securities and/or financial derivatives may expose the Fund to various market risk factors:
Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.
5 OPPENHEIMER GLOBAL FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
5. Market Risk Factors (Continued)
Credit Risk. Credit risk relates to the ability of the issuer of debt to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield debt securities are subject to credit risk to a greater extent than lower-yield, higher-quality securities.
Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.
Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.
Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.
Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.
6. Federal Taxes
The approximate aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes at period end are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses.
| Federal tax cost of securities |
$ | 1,352,618,021 | ||
| Federal tax cost of other investments |
318,166 | |||
|
|
|
|||
| Total federal tax cost |
$ | 1,352,936,187 | ||
|
|
|
|||
| Gross unrealized appreciation |
$ | 1,135,241,646 | ||
| Gross unrealized depreciation |
(89,354,724) | |||
|
|
|
|||
| Net unrealized appreciation |
$ | 1,045,886,922 | ||
|
|
|
6 OPPENHEIMER GLOBAL FUND/VA
STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1 OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
Footnotes to Statement of Investments
1. Non-income producing security.
2. Security is a Master Limited Partnership.
3. Rate shown is the 7-day yield at period end.
4. Is or was an affiliate, as defined in the Investment Company Act of 1940, as amended, at or during the reporting period, by virtue of the Fund owning at least 5% of the voting securities of the issuer or as a result of the Fund and the issuer having the same investment adviser. Transactions during the reporting period in which the issuer was an affiliate are as follows:
| Shares December 31, 2015 |
Gross Additions |
Gross Reductions |
Shares September 30, 2016 | |||||
| Oppenheimer Institutional Government Money Market Fund, Cl. Ea |
18,174,708 | 221,093,722 | 221,428,408 | 17,840,022 | ||||
| Value | Income | |||||||
| Oppenheimer Institutional Government Money Market Fund, Cl. Ea |
$ 17,840,022 | $ 82,006 | ||||||
a. Prior to September 28, 2016, this fund was named Oppenheimer Institutional Money Market Fund.
2 OPPENHEIMER MAIN STREET FUND/VA
NOTES TO STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1. Organization
Oppenheimer Main Street Fund/VA (the “Fund”), a separate series of Oppenheimer Variable Account Funds, is a diversified open-end management investment company registered under the Investment Company Act of 1940 (“1940 Act”), as amended. The Fund’s investment objective is to seek capital appreciation. The Fund’s investment adviser is OFI Global Asset Management, Inc. (“OFI Global” or the “Manager”), a wholly-owned subsidiary of OppenheimerFunds, Inc. (“OFI” or the “Sub-Adviser”). The Manager has entered into a sub-advisory agreement with OFI. Shares of the Fund are sold only to separate accounts of life insurance companies.
2. Significant Accounting Policies
Security Valuation. All investments in securities are recorded at their estimated fair value, as described in Note 3.
Foreign Currency Translation. The Fund’s accounting records are maintained in U.S. dollars. The values of securities denominated in foreign currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading. Foreign exchange rates may be valued primarily using a reliable bank, dealer or service authorized by the Board of Trustees.
3. Securities Valuation
The Fund calculates the net asset value of its shares as of 4:00 P.M. Eastern time, on each day the New York Stock Exchange (the “Exchange”) is open for trading, except in the case of a scheduled early closing of the Exchange, in which case the Fund will calculate net asset value of the shares as of the scheduled early closing time of the Exchange.
The Fund’s Board has adopted procedures for the valuation of the Fund’s securities and has delegated the day-to-day responsibility for valuation determinations under those procedures to the Manager. The Manager has established a Valuation Committee which is responsible for determining a “fair valuation” for any security for which market quotations are not “readily available.” The Valuation Committee’s fair valuation determinations are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined.
Valuation Methods and Inputs
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by third party pricing services or dealers.
The following methodologies are used to determine the market value or the fair value of the types of securities described below:
Securities traded on a registered U.S. securities exchange (including exchange-traded derivatives other than futures and futures options) are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the mean between the bid and asked price on the principal exchange or, if not available from the principal exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the principal exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer. A security of a foreign issuer traded on a foreign exchange, but not listed on a registered U.S. securities exchange, is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the third party pricing service used by the Manager, prior to the time when the Fund’s assets are valued. If the last sale price is unavailable, the security is valued at the most recent official closing price on the principal exchange on which it is traded. If the last sales price or official closing price for a foreign security is not available, the security is valued at the mean between the bid and asked price per the exchange or, if not available from the exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer.
Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.
Corporate and government debt securities (of U.S. or foreign issuers) and municipal debt securities, event-linked bonds, loans, mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers who may use matrix pricing methods to determine the evaluated prices.
Short-term money market type debt securities with a remaining maturity of sixty days or less are valued at cost adjusted by the amortization of discount or premium to maturity (amortized cost), which approximates market value. Short-term debt securities with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers.
3 OPPENHEIMER MAIN STREET FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
3. Securities Valuation (Continued)
A description of the standard inputs that may generally be considered by the third party pricing vendors in determining their evaluated prices is provided below.
| Security Type | Standard inputs generally considered by third-party pricing vendors | |
| Corporate debt, government debt, municipal, mortgage-backed and asset-backed securities | Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, the credit quality, yield, maturity, and other appropriate factors. | |
| Loans |
Information obtained from market participants regarding reported trade data and broker-dealer price quotations. | |
| Event-linked bonds |
Information obtained from market participants regarding reported trade data and broker-dealer price quotations. |
If a market value or price cannot be determined for a security using the methodologies described above, or if, in the “good faith” opinion of the Manager, the market value or price obtained does not constitute a “readily available market quotation,” or a significant event has occurred that would materially affect the value of the security, the security is fair valued either (i) by a standardized fair valuation methodology applicable to the security type or the significant event as previously approved by the Valuation Committee and the Fund’s Board or (ii) as determined in good faith by the Manager’s Valuation Committee. The Valuation Committee considers all relevant facts that are reasonably available, through either public information or information available to the Manager, when determining the fair value of a security. Fair value determinations by the Manager are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined. Those fair valuation standardized methodologies include, but are not limited to, valuing securities at the last sale price or initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be further adjusted for any discounts related to security-specific resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities nor can it be assured that the Fund can obtain the fair value assigned to a security if it were to sell the security.
To assess the continuing appropriateness of security valuations, the Manager, or its third party service provider who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and sale prices to the current day prices and challenges those prices exceeding certain tolerance levels with the third party pricing service or broker source. For those securities valued by fair valuations, whether through a standardized fair valuation methodology or a fair valuation determination, the Valuation Committee reviews and affirms the reasonableness of the valuations based on such methodologies and fair valuation determinations on a regular basis after considering all relevant information that is reasonably available.
Classifications
Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:
1) Level 1-unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
2) Level 2-inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)
3) Level 3-significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).
The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.
The Fund classifies each of its investments in investment companies which are publicly offered as Level 1. Investment companies that are not publicly offered are measured using net asset value as a practical expedient, and are not classified in the fair value hierarchy.
The table below categorizes amounts at period end based on valuation input level:
| Level 1— Unadjusted |
Level 2— Other Significant Observable Inputs |
Level 3— Significant Unobservable Inputs |
Value | |||||||||||||
| Assets Table |
||||||||||||||||
| Investments, at Value: |
||||||||||||||||
| Common Stocks |
||||||||||||||||
| Consumer Discretionary |
$ | 134,567,707 | $ | — | $ | — | $ | 134,567,707 | ||||||||
| Consumer Staples |
137,055,814 | — | — | 137,055,814 | ||||||||||||
| Energy |
83,651,871 | — | — | 83,651,871 | ||||||||||||
| Financials |
243,569,098 | — | — | 243,569,098 | ||||||||||||
| Health Care |
187,904,552 | — | — | 187,904,552 | ||||||||||||
| Industrials |
158,765,276 | — | — | 158,765,276 | ||||||||||||
| Information Technology |
239,139,143 | — | — | 239,139,143 | ||||||||||||
4 OPPENHEIMER MAIN STREET FUND/VA
3. Securities Valuation (Continued)
| Level 1— Unadjusted |
Level 2— Other Significant Observable Inputs |
Level 3— Significant Unobservable Inputs |
Value | |||||||||||||
| Common Stocks (Continued) |
||||||||||||||||
| Materials |
$ | 28,250,599 | $ | — | $ | — | $ | 28,250,599 | ||||||||
| Telecommunication Services |
26,758,784 | — | — | 26,758,784 | ||||||||||||
| Utilities |
36,276,900 | — | — | 36,276,900 | ||||||||||||
| Investment Company |
17,840,022 | — | — | 17,840,022 | ||||||||||||
| Total Assets |
$ | 1,293,779,766 | $ | — | $ | — | $ | 1,293,779,766 | ||||||||
Forward currency exchange contracts and futures contracts, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
4. Investments and Risks
Investments in Affiliated Funds. The Fund is permitted to invest in other mutual funds advised by the Manager (“Affiliated Funds”). Affiliated Funds are open-end management investment companies registered under the 1940 Act, as amended. The Manager is the investment adviser of, and the Sub-Adviser provides investment and related advisory services to, the Affiliated Funds. When applicable, the Fund’s investments in Affiliated Funds are included in the Statement of Investments. Shares of Affiliated Funds are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of the Affiliated Funds’ expenses, including their management fee. The Manager will waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Fund’s investment in the Affiliated Funds.
Each of the Affiliated Funds in which the Fund invests has its own investment risks, and those risks can affect the value of the Fund’s investments and therefore the value of the Fund’s shares. To the extent that the Fund invests more of its assets in one Affiliated Fund than in another, the Fund will have greater exposure to the risks of that Affiliated Fund.
Investments in Money Market Instruments. The Fund is permitted to invest its free cash balances in money market instruments to provide liquidity or for defensive purposes. The Fund may invest in money market instruments by investing in Class E shares of Oppenheimer Institutional Government Money Market Fund (“IGMMF”), formerly known as Oppenheimer Institutional Money Market Fund, which is an Affiliated Fund. IGMMF is regulated as a money market fund under the 1940 Act, as amended. The Fund may also invest in money market instruments directly or in other affiliated or unaffiliated money market funds.
Master Limited Partnerships (“MLPs”). MLPs issue common units that represent an equity ownership interest in a partnership and provide limited voting rights. MLP common units are registered with the Securities and Exchange Commission (“SEC”), and are freely tradable on securities exchanges such as the NYSE and the NASDAQ Stock Market (“NASDAQ”), or in the over-the-counter (“OTC”) market. An MLP consists of one or more general partners, who conduct the business, and one or more limited partners, who contribute capital. MLP common unit holders have a limited role in the partnership’s operations and management. The Fund, as a limited partner, normally would not be liable for the debts of the MLP beyond the amounts the Fund has contributed, but would not be shielded to the same extent that a shareholder of a corporation would be. In certain circumstances creditors of an MLP would have the right to seek return of capital distributed to a limited partner. This right of an MLP’s creditors would continue after the Fund sold its investment in the MLP.
Equity Security Risk. Stocks and other equity securities fluctuate in price. The value of the Fund’s portfolio may be affected by changes in the equity markets generally. Equity markets may experience significant short-term volatility and may fall sharply at times. Different markets may behave differently from each other and U.S. equity markets may move in the opposite direction from one or more foreign stock markets. Adverse events in any part of the equity or fixed-income markets may have unexpected negative effects on other market segments.
The prices of individual equity securities generally do not all move in the same direction at the same time and a variety of factors can affect the price of a particular company’s securities. These factors may include, but are not limited to, poor earnings reports, a loss of customers, litigation against the company, general unfavorable performance of the company’s sector or industry, or changes in government regulations affecting the company or its industry.
5. Market Risk Factors
The Fund’s investments in securities and/or financial derivatives may expose the Fund to various market risk factors:
Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.
Credit Risk. Credit risk relates to the ability of the issuer of debt to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield debt securities are subject to credit risk to a greater extent than lower-yield, higher-quality securities.
Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.
Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a
5 OPPENHEIMER MAIN STREET FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
5. Market Risk Factors (Continued)
foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.
Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.
Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.
6. Federal Taxes
The approximate aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes at period end are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses.
| Federal tax cost of securities |
$ | 981,302,594 | ||
|
|
|
|||
| Gross unrealized appreciation |
$ | 326,099,792 | ||
| Gross unrealized depreciation |
(13,622,620) | |||
|
|
|
|||
| Net unrealized appreciation |
$ | 312,477,172 | ||
|
|
|
6 OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
| 1 OPPENHEIMER MAIN STREET SMALL CAP FUND/VA |
STATEMENT OF INVESTMENTS Unaudited / Continued
Footnotes to Statement of Investments
1. Non-income producing security.
2. Security is a Master Limited Partnership.
3. Rate shown is the 7-day yield at period end.
4. Is or was an affiliate, as defined in the Investment Company Act of 1940, as amended, at or during the reporting period, by virtue of the Fund owning at least 5% of the voting securities of the issuer or as a result of the Fund and the issuer having the same investment adviser. Transactions during the reporting period in which the issuer was an affiliate are as follows:
| Shares December 31, 2015 |
Gross Additions |
Gross Reductions |
Shares September 30, 2016 |
|||||||||||||
| Oppenheimer Institutional Government Money Market Fund, Cl. Ea | 14,384,001 | 218,634,668 | 225,469,724 | 7,548,945 | ||||||||||||
| Value | Income | |||||||||||||||
| Oppenheimer Institutional Government Money Market Fund, Cl. Ea | $ | 7,548,945 | $ | 64,484 | ||||||||||||
a. Prior to September 28, 2016, this fund was named Oppenheimer Institutional Money Market Fund.
| 2 OPPENHEIMER MAIN STREET SMALL CAP FUND/VA |
NOTES TO STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1. Organization
Oppenheimer Main Street Small Cap Fund/VA (the “Fund”) is a separate series of Oppenheimer Variable Account Funds, a diversified open-end management investment company registered under the Investment Company Act of 1940 (“1940 Act”), as amended. The Fund’s investment objective is to seek capital appreciation. The Fund’s investment adviser is OFI Global Asset Management, Inc. (“OFI Global” or the “Manager”), a wholly-owned subsidiary of OppenheimerFunds, Inc. (“OFI” or the “Sub-Adviser”). The Manager has entered into a sub-advisory agreement with OFI. Shares of the Fund are sold only to separate accounts of life insurance companies.
2. Significant Accounting Policies
Security Valuation. All investments in securities are recorded at their estimated fair value, as described in Note 3.
Foreign Currency Translation. The Fund’s accounting records are maintained in U.S. dollars. The values of securities denominated in foreign currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading. Foreign exchange rates may be valued primarily using a reliable bank, dealer or service authorized by the Board of Trustees.
3. Securities Valuation
The Fund calculates the net asset value of its shares as of 4:00 P.M. Eastern time, on each day the New York Stock Exchange (the “Exchange”) is open for trading, except in the case of a scheduled early closing of the Exchange, in which case the Fund will calculate net asset value of the shares as of the scheduled early closing time of the Exchange.
The Fund’s Board has adopted procedures for the valuation of the Fund’s securities and has delegated the day-to-day responsibility for valuation determinations under those procedures to the Manager. The Manager has established a Valuation Committee which is responsible for determining a “fair valuation” for any security for which market quotations are not “readily available.” The Valuation Committee’s fair valuation determinations are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined.
Valuation Methods and Inputs
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by third party pricing services or dealers.
The following methodologies are used to determine the market value or the fair value of the types of securities described below:
Securities traded on a registered U.S. securities exchange (including exchange-traded derivatives other than futures and futures options) are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the mean between the bid and asked price on the principal exchange or, if not available from the principal exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the principal exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer. A security of a foreign issuer traded on a foreign exchange, but not listed on a registered U.S. securities exchange, is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the third party pricing service used by the Manager, prior to the time when the Fund’s assets are valued. If the last sale price is unavailable, the security is valued at the most recent official closing price on the principal exchange on which it is traded. If the last sales price or official closing price for a foreign security is not available, the security is valued at the mean between the bid and asked price per the exchange or, if not available from the exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer.
Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.
Corporate and government debt securities (of U.S. or foreign issuers) and municipal debt securities, event-linked bonds, loans, mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers who may use matrix pricing methods to determine the evaluated prices.
Short-term money market type debt securities with a remaining maturity of sixty days or less are valued at cost adjusted by the amortization of discount or premium to maturity (amortized cost), which approximates market value. Short-term debt securities with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers.
A description of the standard inputs that may generally be considered by the third party pricing vendors in determining their evaluated prices is provided below.
| 3 OPPENHEIMER MAIN STREET SMALL CAP FUND/VA |
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
3. Securities Valuation (Continued)
| Security Type | Standard inputs generally considered by third-party pricing vendors | |
|
| ||
| Corporate debt, government debt, municipal, mortgage-backed and asset-backed securities | Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, the credit quality, yield, maturity, and other appropriate factors. | |
|
| ||
| Loans | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. | |
|
| ||
| Event-linked bonds | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. | |
If a market value or price cannot be determined for a security using the methodologies described above, or if, in the “good faith” opinion of the Manager, the market value or price obtained does not constitute a “readily available market quotation,” or a significant event has occurred that would materially affect the value of the security, the security is fair valued either (i) by a standardized fair valuation methodology applicable to the security type or the significant event as previously approved by the Valuation Committee and the Fund’s Board or (ii) as determined in good faith by the Manager’s Valuation Committee. The Valuation Committee considers all relevant facts that are reasonably available, through either public information or information available to the Manager, when determining the fair value of a security. Fair value determinations by the Manager are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined. Those fair valuation standardized methodologies include, but are not limited to, valuing securities at the last sale price or initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be further adjusted for any discounts related to security-specific resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities nor can it be assured that the Fund can obtain the fair value assigned to a security if it were to sell the security.
To assess the continuing appropriateness of security valuations, the Manager, or its third party service provider who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and sale prices to the current day prices and challenges those prices exceeding certain tolerance levels with the third party pricing service or broker source. For those securities valued by fair valuations, whether through a standardized fair valuation methodology or a fair valuation determination, the Valuation Committee reviews and affirms the reasonableness of the valuations based on such methodologies and fair valuation determinations on a regular basis after considering all relevant information that is reasonably available.
Classifications
Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:
1) Level 1-unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
2) Level 2-inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)
3) Level 3-significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).
The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.
The Fund classifies each of its investments in investment companies which are publicly offered as Level 1. Investment companies that are not publicly offered are measured using net asset value as a practical expedient, and are not classified in the fair value hierarchy.
The table below categorizes amounts at period end based on valuation input level:
| Level 1— Unadjusted Quoted Prices |
Level 2— Other Significant Observable Inputs |
Level 3— Significant Unobservable Inputs |
Value | |||||||||||||
|
|
||||||||||||||||
| Assets Table |
||||||||||||||||
| Investments, at Value: |
||||||||||||||||
| Common Stocks |
||||||||||||||||
| Consumer Discretionary |
$ | 105,623,522 | $ | — | $ | — | $ | 105,623,522 | ||||||||
| Consumer Staples |
40,724,891 | — | — | 40,724,891 | ||||||||||||
| Energy |
33,025,893 | — | — | 33,025,893 | ||||||||||||
| Financials |
196,902,413 | — | — | 196,902,413 | ||||||||||||
| Health Care |
141,007,212 | — | — | 141,007,212 | ||||||||||||
| Industrials |
185,300,461 | — | — | 185,300,461 | ||||||||||||
| Information Technology |
172,872,827 | — | — | 172,872,827 | ||||||||||||
| Materials |
57,378,584 | — | — | 57,378,584 | ||||||||||||
| 4 OPPENHEIMER MAIN STREET SMALL CAP FUND/VA |
3. Securities Valuation (Continued)
| Level 1— Unadjusted Quoted Prices |
Level 2— Other Significant Observable Inputs |
Level 3— Significant Unobservable Inputs |
Value | |||||||||||||
|
|
||||||||||||||||
| Common Stocks (Continued) |
||||||||||||||||
| Utilities |
$ | 46,079,486 | $ | — | $ | — | $ | 46,079,486 | ||||||||
| Investment Company |
7,548,945 | — | — | 7,548,945 | ||||||||||||
|
|
|
|||||||||||||||
| Total Assets |
$ | 986,464,234 | $ | — | $ | — | $ | 986,464,234 | ||||||||
|
|
|
|||||||||||||||
Forward currency exchange contracts and futures contracts, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
4. Investments and Risks
Investments in Affiliated Funds. The Fund is permitted to invest in other mutual funds advised by the Manager (“Affiliated Funds”). Affiliated Funds are open-end management investment companies registered under the 1940 Act, as amended. The Manager is the investment adviser of, and the Sub-Adviser provides investment and related advisory services to, the Affiliated Funds. When applicable, the Fund’s investments in Affiliated Funds are included in the Statement of Investments. Shares of Affiliated Funds are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of the Affiliated Funds’ expenses, including their management fee. The Manager will waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Fund’s investment in the Affiliated Funds.
Each of the Affiliated Funds in which the Fund invests has its own investment risks, and those risks can affect the value of the Fund’s investments and therefore the value of the Fund’s shares. To the extent that the Fund invests more of its assets in one Affiliated Fund than in another, the Fund will have greater exposure to the risks of that Affiliated Fund.
Investments in Money Market Instruments. The Fund is permitted to invest its free cash balances in money market instruments to provide liquidity or for defensive purposes. The Fund may invest in money market instruments by investing in Class E shares of Oppenheimer Institutional Government Money Market Fund (“IGMMF”), formerly known as Oppenheimer Institutional Money Market Fund, which is an Affiliated Fund. IGMMF is regulated as a money market fund under the 1940 Act, as amended. The Fund may also invest in money market instruments directly or in other affiliated or unaffiliated money market funds.
Master Limited Partnerships (“MLPs”). MLPs issue common units that represent an equity ownership interest in a partnership and provide limited voting rights. MLP common units are registered with the Securities and Exchange Commission (“SEC”), and are freely tradable on securities exchanges such as the NYSE and the NASDAQ Stock Market (“NASDAQ”), or in the over-the-counter (“OTC”) market. An MLP consists of one or more general partners, who conduct the business, and one or more limited partners, who contribute capital. MLP common unit holders have a limited role in the partnership’s operations and management. The Fund, as a limited partner, normally would not be liable for the debts of the MLP beyond the amounts the Fund has contributed, but would not be shielded to the same extent that a shareholder of a corporation would be. In certain circumstances creditors of an MLP would have the right to seek return of capital distributed to a limited partner. This right of an MLP’s creditors would continue after the Fund sold its investment in the MLP.
Equity Security Risk. Stocks and other equity securities fluctuate in price. The value of the Fund’s portfolio may be affected by changes in the equity markets generally. Equity markets may experience significant short-term volatility and may fall sharply at times. Different markets may behave differently from each other and U.S. equity markets may move in the opposite direction from one or more foreign stock markets. Adverse events in any part of the equity or fixed-income markets may have unexpected negative effects on other market segments.
The prices of individual equity securities generally do not all move in the same direction at the same time and a variety of factors can affect the price of a particular company’s securities. These factors may include, but are not limited to, poor earnings reports, a loss of customers, litigation against the company, general unfavorable performance of the company’s sector or industry, or changes in government regulations affecting the company or its industry.
5. Market Risk Factors
The Fund’s investments in securities and/or financial derivatives may expose the Fund to various market risk factors:
Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.
Credit Risk. Credit risk relates to the ability of the issuer of debt to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield debt securities are subject to credit risk to a greater extent than lower-yield, higher-quality securities.
Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.
Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.
| 5 OPPENHEIMER MAIN STREET SMALL CAP FUND/VA |
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
5. Market Risk Factors (Continued)
Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.
Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.
6. Federal Taxes
The approximate aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes at period end are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses.
| Federal tax cost of securities |
$ | 805,341,450 | ||
|
|
|
|||
| Gross unrealized appreciation |
$ | 209,155,132 | ||
| Gross unrealized depreciation |
(28,032,348) | |||
|
|
|
|||
| Net unrealized appreciation |
$ | 181,122,784 | ||
|
|
|
| 6 OPPENHEIMER MAIN STREET SMALL CAP FUND/VA |
STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
| Maturity Date* | Final Legal Maturity Date** |
Principal Amount |
Value | |||||||||||||
|
|
||||||||||||||||
| U.S. Government Agencies—66.3% |
||||||||||||||||
|
|
||||||||||||||||
| Fannie Mae, 0.26% |
10/17/16 | 10/17/16 | $ | 4,605,000 | $ | 4,604,468 | ||||||||||
|
|
||||||||||||||||
| Federal Agricultural Mortgage Corp.: |
||||||||||||||||
| 0.20% |
10/3/16 | 10/3/16 | 4,000,000 | 3,999,956 | ||||||||||||
| 0.21% |
10/31/16 | 10/31/16 | 10,000,000 | 9,998,250 | ||||||||||||
|
|
||||||||||||||||
| Federal Farm Credit Bank, 0.49%1 |
10/11/16 | 3/22/17 | 1,000,000 | 999,476 | ||||||||||||
|
|
||||||||||||||||
| Federal Home Loan Bank: |
||||||||||||||||
| 0.15% |
10/26/16 | 10/26/16 | 15,000,000 | 14,998,437 | ||||||||||||
| 0.195% |
10/7/16 | 10/7/16 | 30,500,000 | 30,499,007 | ||||||||||||
| 0.20% |
10/28/16 | 10/28/16 | 10,000,000 | 9,998,500 | ||||||||||||
| 0.203% |
10/21/16 | 10/21/16 | 15,702,000 | 15,700,226 | ||||||||||||
| 0.22% |
10/25/16 | 10/25/16 | 15,000,000 | 14,997,800 | ||||||||||||
| 0.226% |
10/18/16 | 10/18/16 | 20,300,000 | 20,297,834 | ||||||||||||
| 0.23% |
10/20/16 | 10/20/16 | 1,300,000 | 1,299,842 | ||||||||||||
| 0.234% |
10/19/16 | 10/19/16 | 21,600,000 | 21,597,472 | ||||||||||||
| 0.25% |
10/3/16 | 10/3/16 | 20,000,000 | 19,999,722 | ||||||||||||
| 0.251% |
10/13/16 | 10/13/16 | 15,222,000 | 15,220,728 | ||||||||||||
| 0.254% |
10/17/16 | 10/17/16 | 4,566,000 | 4,565,484 | ||||||||||||
| 0.255% |
10/14/16 | 10/14/16 | 21,000,000 | 20,998,065 | ||||||||||||
| 0.26% |
10/12/16 | 10/12/16 | 20,500,000 | 20,498,371 | ||||||||||||
| 0.26% |
10/4/16 | 10/4/16 | 20,000,000 | 19,999,567 | ||||||||||||
| 0.267% |
10/6/16 | 10/6/16 | 20,081,000 | 20,080,256 | ||||||||||||
| 0.274% |
10/5/16 | 10/5/16 | 18,500,000 | 18,499,437 | ||||||||||||
| 0.426%1 |
10/24/16 | 4/24/17 | 3,000,000 | 3,000,000 | ||||||||||||
|
|
||||||||||||||||
| Freddie Mac: |
||||||||||||||||
| 0.172% |
10/3/16 | 10/3/16 | 5,500,000 | 5,499,947 | ||||||||||||
| 0.225% |
10/11/16 | 10/11/16 | 15,000,000 | 14,999,062 | ||||||||||||
|
|
||||||||||||||||
| Tennessee Valley Authority, 0.16% |
10/11/16 | 10/11/16 | 3,000,000 | 2,999,867 | ||||||||||||
|
|
|
|||||||||||||||
| Total U.S. Government Agencies (Cost $315,351,774) |
|
315,351,774 | ||||||||||||||
|
|
||||||||||||||||
| Repurchase Agreements—33.6% |
||||||||||||||||
|
|
||||||||||||||||
| Repurchase Agreements2 (Cost $160,000,000)
|
|
160,000,000
|
|
|
160,000,000
|
| ||||||||||
|
|
||||||||||||||||
| Total Investments, at Value (Cost $475,351,774) |
99.9% | 475,351,774 | ||||||||||||||
|
|
||||||||||||||||
| Net Other Assets (Liabilities) |
0.1 | 252,094 | ||||||||||||||
|
|
|
|||||||||||||||
| Net Assets |
100.0% | $ | 475,603,868 | |||||||||||||
|
|
|
|||||||||||||||
Footnotes to Statement of Investments
Short-term notes and direct bank obligations are generally traded on a discount basis; the interest rate shown is the discount rate received by the Fund at the time of purchase. Other securities normally bear interest at the rates shown.
* The Maturity Date represents the date used to calculate the Fund’s weighted average maturity as determined under Rule 2a-7.
** If different from the Maturity Date, the Final Legal Maturity Date includes any maturity date extensions which may be affected at the option of the issuer or unconditional payments of principal by the issuer which may be affected at the option of the Fund, and represents the date used to calculate the Fund’s weighted average life as determined under Rule 2a-7.
1. Represents the current interest rate for a variable or increasing rate security.
2. Repurchase agreements:
| Counterparty | Lending Rate |
Settlement Date |
Maturity Date |
Principal Amount |
Collateralized By | Collateral Received, at Valuea |
Repurchase Agreements, at Value |
Repurchase Agreement Proceeds to be Receiveda |
||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||
| Royal Bank of Canada | 0.42% | 9/30/2016 | 10/3/2016 | $15,000,000 | U.S. Government Agency Mortgages, 3%-6%, 9/1/29-9/1/46 | $(15,300,536) | $15,000,000 | $15,000,525 | ||||||||||||||||||||||
| South Street Securities LLC | 0.70 | 9/30/2016 | 10/3/2016 | 100,000,000 | U.S. Government Agency Mortgages, 0.875%- 5.921%, 12/1/16-1/1/45 and U.S. Government Obligations, 1.50%-1.625%, 11/30/20-8/15/26 | (102,005,950) | 100,000,000 | 100,005,833 | ||||||||||||||||||||||
| Toronto Dominion Bank | 0.36 | 9/27/2016 | 10/4/2016 | 35,000,000 | U.S. Government Obligations, 0%-4.50%, 1/26/17-2/15/36 | (35,702,200) | 35,000,000 | 35,002,157 | ||||||||||||||||||||||
| Toronto Dominion Bank | 0.49 | 9/30/2016 | 10/3/2016 | 10,000,000 | U.S. Government Obligations, 2%-3%, 2/28/21-11/15/45 | (10,200,503) | 10,000,000 | 10,000,493 | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||
| (163,209,189) | 160,000,000 | 160,009,008 | ||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||
a. Includes accrued interest.
The following issuer is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the reporting period by virtue of the Fund owning at least 5% of the voting securities of the issuer or as a result of the Fund and the issuer having the same investment adviser. There were no affiliate securities held by the Fund at period end. Transactions during the period in which the issuer was an affiliate are as follows:
1 OPPENHEIMER GOVERNMENT MONEY FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
Footnotes to Statement of Investments (Continued)
| Shares December 31, 2015 |
Gross Additions |
Gross Reductions |
Shares September 30, 2016 |
|||||||||||||
|
|
||||||||||||||||
| Oppenheimer Institutional Government Money Market Fund, Cl. E a |
131,359,385 | 126,653,654 | 258,013,039 | — | ||||||||||||
| Income | ||||||||||||||||
|
|
||||||||||||||||
| Oppenheimer Institutional Government Money Market Fund, Cl. E a |
$ | 190,049 | ||||||||||||||
a. Prior to September 28, 2016, this fund was named Oppenheimer Institutional Money Market Fund.
2 OPPENHEIMER GOVERNMENT MONEY FUND/VA
NOTES TO STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1. Organization
Oppenheimer Government Money Fund/VA (the “Fund”), formerly Oppenheimer Money Fund/VA, a separate series of Oppenheimer Variable Account Funds, is a diversified open-end management investment company registered under the Investment Company Act of 1940 (“1940 Act”), as amended. The Fund’s investment objective is to seek income consistent with stability of principal. The Fund’s investment adviser is OFI Global Asset Management, Inc. (“OFI Global” or the “Manager”), a wholly-owned subsidiary of OppenheimerFunds, Inc. (“OFI” or the “Sub-Adviser”). The Manager has entered into a sub-advisory agreement with OFI. Shares of the Fund are sold only to separate accounts of life insurance companies.
2. Securities Valuation
The Fund calculates the net asset value of its shares as of 4:00 P.M. Eastern time, on each day the New York Stock Exchange (the “Exchange”) is open for trading, except in the case of a scheduled early closing of the Exchange, in which case the Fund will calculate net asset value of the shares as of the scheduled early closing time of the Exchange.
The Fund’s Board has adopted procedures for the valuation of the Fund’s securities and has delegated the day-to-day responsibility for valuation determinations under those procedures to the Manager. The Manager has established a Valuation Committee which is responsible for determining a “fair valuation” for any security for which market quotations are not “readily available.” The Valuation Committee’s fair valuation determinations are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined.
Valuation Methods and Inputs
Securities are valued at cost adjusted by the amortization of discount or premium to maturity (amortized cost), which approximates market value. If amortized cost is determined not to approximate market value, the fair value of the portfolio securities will be determined under procedures approved by the Fund’s Board of Trustees.
If a market value or price cannot be determined for a security using the methodologies described above, or if, in the “good faith” opinion of the Manager, the market value or price obtained does not constitute a “readily available market quotation,” or a significant event has occurred that would materially affect the value of the security, the security is fair valued either (i) by a standardized fair valuation methodology applicable to the security type or the significant event as previously approved by the Valuation Committee and the Fund’s Board or (ii) as determined in good faith by the Manager’s Valuation Committee. The Valuation Committee considers all relevant facts that are reasonably available, through either public information or information available to the Manager, when determining the fair value of a security. Fair value determinations by the Manager are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined. Those fair valuation standardized methodologies include, but are not limited to, valuing securities at the last sale price or initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be further adjusted for any discounts related to security-specific resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities nor can it be assured that the Fund can obtain the fair value assigned to a security if it were to sell the security.
To assess the continuing appropriateness of security valuations, the Manager, or its third party service provider who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and sale prices to the current day prices and challenges those prices exceeding certain tolerance levels with the third party pricing service or broker source. For those securities valued by fair valuations, whether through a standardized fair valuation methodology or a fair valuation determination, the Valuation Committee reviews and affirms the reasonableness of the valuations based on such methodologies and fair valuation determinations on a regular basis after considering all relevant information that is reasonably available.
Classifications
Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:
1) Level 1-unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
2) Level 2-inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)
3) Level 3-significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).
The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.
The table below categorizes amounts at period end based on valuation input level:
3 OPPENHEIMER GOVERNMENT MONEY FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
2. Securities Valuation (Continued)
| Level 1— Unadjusted Quoted Prices |
Level 2— Other Significant Observable Inputs |
Level 3— Significant Unobservable Inputs |
Value | |||||||||||||||||||
|
|
||||||||||||||||||||||
| Assets Table |
||||||||||||||||||||||
| Investments, at Value: |
||||||||||||||||||||||
| U.S. Government Agencies |
$ | — | $ | 315,351,774 | $ | — | $ | 315,351,774 | ||||||||||||||
| Repurchase Agreement |
— | 160,000,000 | — | 160,000,000 | ||||||||||||||||||
|
|
||||||||||||||||||||||
| Total Assets |
$ | — | $ | 475,351,774 | $ | — | $ | 475,351,774 | ||||||||||||||
|
|
||||||||||||||||||||||
3. Investments and Risks
Investments in Affiliated Funds. The Fund is permitted to invest in other mutual funds advised by the Manager (“Affiliated Funds”). Affiliated Funds are open-end management investment companies registered under the 1940 Act, as amended. The Manager is the investment adviser of, and the Sub-Adviser provides investment and related advisory services to, the Affiliated Funds. When applicable, the Fund’s investments in Affiliated Funds are included in the Statement of Investments. Shares of Affiliated Funds are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of the Affiliated Funds’ expenses, including their management fee. The Manager will waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Fund’s investment in the Affiliated Funds.
Each of the Affiliated Funds in which the Fund invests has its own investment risks, and those risks can affect the value of the Fund’s investments and therefore the value of the Fund’s shares. To the extent that the Fund invests more of its assets in one Affiliated Fund than in another, the Fund will have greater exposure to the risks of that Affiliated Fund.
Investments in Money Market Instruments. The Fund is permitted to invest its free cash balances in money market instruments to provide liquidity or for defensive purposes. The Fund may invest in money market instruments by investing in Class E shares of Oppenheimer Institutional Government Money Market Fund (“IGMMF”), formerly known as Oppenheimer Institutional Money Market Fund, which is an Affiliated Fund. IGMMF is regulated as a money market fund under the 1940 Act, as amended. The Fund may also invest in money market instruments directly or in other affiliated or unaffiliated money market funds.
4. Market Risk Factors
The Fund’s investments in securities and/or financial derivatives may expose the Fund to various market risk factors:
Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.
Credit Risk. Credit risk relates to the ability of the issuer of debt to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield debt securities are subject to credit risk to a greater extent than lower-yield, higher-quality securities.
Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.
Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.
Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.
Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.
5. Borrowings and Other Financing
Repurchase Agreements. In a repurchase transaction, a Fund buys a security and simultaneously sells it back to an approved institution for delivery on an agreed-upon future date. The resale price exceeds the purchase price by an amount that reflects an agreed-upon interest rate effective for the period during which the repurchase agreement is in effect. Approved institutions include U.S. commercial banks, U.S. branches of foreign banks or broker-dealers that have been designated as primary dealers in government securities. They must meet credit requirements set by the investment adviser from time to time. Repurchase agreements must be fully collateralized. However, if the seller fails to pay the repurchase price on the delivery date, a Fund may incur costs in disposing of the collateral and may experience losses if there is any delay in its ability to do so. If the default on the part of the seller is due to its bankruptcy, a Fund’s ability to liquidate the collateral may be delayed or limited.
The following is a summary by counterparty of the market value of Borrowings and Other Financing Transactions and collateral (received) as of period end:
4 OPPENHEIMER GOVERNMENT MONEY FUND/VA
5. Borrowings and Other Financing (Continued)
| Counterparty | Repurchase Agreement Proceeds to be Received1 |
Collateral (Received) / Pledged | Net Exposure2 | |||||||||
|
|
||||||||||||
| Repurchase Agreement |
||||||||||||
| Royal Bank of Canada |
$ | 15,000,525 | $ | (15,300,536) | $ | (300,011) | ||||||
| South Street Securities LLC |
100,005,833 | (102,005,950) | (2,000,117) | |||||||||
| Toronto Dominion Bank |
35,002,157 | (35,702,200) | (700,043) | |||||||||
| Toronto Dominion Bank |
10,000,493 | (10,200,503) | (200,010) | |||||||||
|
|
|
|||||||||||
| $ | 160,009,008 | |||||||||||
|
|
|
|||||||||||
1. Includes accrued interest.
2. Net exposure represents the net receivable/payable that would be due from the counterparty in the event of default.
5 OPPENHEIMER GOVERNMENT MONEY FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
2 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
3 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
4 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
5 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
6 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
7 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
8 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
9 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
10 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
11 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
12 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
13 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
14 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
15 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
16 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
17 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
18 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| Principal Amount | Value | |||||||
| Electric Utilities (Continued) | ||||||||
| NextEra Energy Capital Holdings, Inc., 1.586% Sr. Unsec. Nts., 6/1/17 | $ | 793,000 | $ | 794,562 | ||||
| PPL Capital Funding, Inc., 3.50% Sr. Unsec. Unsub. Nts., 12/1/22 | 411,000 | 436,791 | ||||||
| PPL WEM Ltd./Western Power Distribution Ltd., 5.375% Sr. Unsec. Unsub. Nts., 5/1/211 | 1,280,000 | 1,427,406 | ||||||
| Public Service Co. of New Mexico, 7.95% Sr. Unsec. Nts., 5/15/18 | 523,000 | 574,577 | ||||||
| Southern Power Co., 1.85% Sr. Unsec. Nts., 12/1/17 | 596,000 | 599,949 | ||||||
| TECO Finance, Inc., 6.572% Sr. Unsec. Nts., 11/1/17 | 650,000 | 685,608 | ||||||
| Trans-Allegheny Interstate Line Co., 3.85% Sr. Unsec. Nts., 6/1/251 | 568,000 | 607,017 | ||||||
| Xcel Energy, Inc., 3.30% Sr. Unsec. Nts., 6/1/25 | 431,000 | 455,766 | ||||||
| 16,265,382 | ||||||||
| Gas Utilities—0.1% | ||||||||
| AmeriGas Partners LP/AmeriGas Finance Corp., 5.625% Sr. Unsec. Nts., 5/20/24 | 995,000 | 1,057,187 | ||||||
| Ferrellgas LP/Ferrellgas Finance Corp., 6.50% Sr. Unsec. Nts., 5/1/21 | 660,000 | 607,200 | ||||||
| 1,664,387 | ||||||||
| Independent Power and Renewable Electricity Producers—0.8% | ||||||||
| AES Andres BV/Dominican Power Partners/Empresa Generadora de Electricidad It, 7.95% Sr. Unsec. Nts., 5/11/261 | 790,000 | 844,312 | ||||||
| AES Corp.: | ||||||||
| 6.00% Sr. Unsec. Nts., 5/15/26 | 225,000 | 237,656 | ||||||
| 7.375% Sr. Unsec. Nts., 7/1/21 | 1,045,000 | 1,201,750 | ||||||
| Calpine Corp.: | ||||||||
| 5.25% Sr. Sec. Nts., 6/1/261 | 740,000 | 751,100 | ||||||
| 5.375% Sr. Unsec. Nts., 1/15/23 | 460,000 | 460,575 | ||||||
| 7.875% Sr. Sec. Nts., 1/15/231 | 638,000 | 674,685 | ||||||
| Dynegy, Inc.: | ||||||||
| 5.875% Sr. Unsec. Nts., 6/1/23 | 420,000 | 383,250 | ||||||
| 7.375% Sr. Unsec. Nts., 11/1/22 | 1,580,000 | 1,568,150 | ||||||
| Energy Future Intermediate Holding Co. LLC/EFIH Finance, Inc., 12.25% Sec. Nts., 3/1/221,9 | 1,487,674 | 1,831,699 | ||||||
| GenOn Energy, Inc., 9.50% Sr. Unsec. Nts., 10/15/18 | 935,000 | 743,325 | ||||||
| Listrindo Capital BV, 4.95% Sr. Unsec. Nts., 9/14/261 | 2,020,000 | 2,029,165 | ||||||
| Miran Mid-Atlantic Trust, 10.06% Sec. Pass-Through Certificates, Series C, 12/30/28 | 662,520 | 507,656 | ||||||
| NRG Energy, Inc.: | ||||||||
| 6.625% Sr. Unsec. Nts., 3/15/23 | 1,455,000 | 1,476,825 | ||||||
| 7.25% Sr. Unsec. Nts., 5/15/261 | 245,000 | 250,513 | ||||||
| 12,960,661 | ||||||||
| Multi-Utilities—0.5% | ||||||||
| CenterPoint Energy, Inc., 6.50% Sr. Unsec. Nts., 5/1/18 | 580,000 | 619,652 | ||||||
| CMS Energy Corp.: | ||||||||
| 3.875% Sr. Unsec. Nts., 3/1/24 | 740,000 | 809,128 | ||||||
| 5.05% Sr. Unsec. Unsub. Nts., 3/15/22 | 83,000 | 94,802 | ||||||
| InterGen NV, 7% Sr. Sec. Nts., 6/30/231 | 1,055,000 | 896,750 | ||||||
| NGG Finance plc, 4.25% Sub. Nts., 6/18/763 | EUR | 4,005,000 | 4,852,995 | |||||
| Principal Amount | Value | |||||||
| Multi-Utilities (Continued) |
|
|||||||
| NiSource Finance Corp.: |
||||||||
| 4.80% Sr. Unsec. Nts., 2/15/44 |
$ | 403,000 | $ | 457,970 | ||||
| 6.80% Sr. Unsec. Nts., 1/15/19 |
843,000 | 939,151 | ||||||
| 8,670,448 | ||||||||
| Total Corporate Bonds and Notes (Cost $792,601,601) |
|
799,364,736 | ||||||
| Shares | ||||||||
| Common Stocks—0.1% | ||||||||
| Arco Capital Corp. Ltd.1,15,16 |
690,638 | — | ||||||
| JP Morgan International, GDR15 | 446,838 | — | ||||||
| Kaiser Aluminum Corp. |
205 | 17,730 | ||||||
| Premier Holdings Ltd.15 |
18,514 | — | ||||||
| Sabine Oil15 |
824 | 39,964 | ||||||
| Valeant Pharmaceuticals International, Inc.15 | 52,243 | 1,282,566 | ||||||
| Wallace Theater Holdings, Inc.1,15 | 1,525 | 15 | ||||||
| Total Common Stocks (Cost $2,434,829) |
|
1,340,275 | ||||||
| Units | ||||||||
| Rights, Warrants and Certificates—0.0% | ||||||||
| MediaNews Group, Inc. Wts., Strike Price $48.72, Exp. 3/19/1715 | 22,685 | — | ||||||
| Sabine Oil Tranche 1 Wts., Strike Price $4.49, Exp. 8/11/2615 | 2,611 | 19,582 | ||||||
| Sabine Oil Tranche 2 Wts., Strike Price $2.72, Exp. 8/11/2615 | 465 | 3,023 | ||||||
| Total Rights, Warrants and Certificates (Cost $6,682,364) |
|
22,605 | ||||||
| Principal Amount | ||||||||
| Structured Securities—0.5% | ||||||||
| Credit Suisse First Boston International, Moitk Total Return Linked Nts., 21%, 3/30/119 | RUB | 53,910,000 | — | |||||
| Credit Suisse First Boston, Inc. (Nassau Branch), Russian Specialized Construction & Installation Administration Total Return Linked Nts., 13%, 5/24/109 | RUB | 97,250,000 | — | |||||
| Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Bonds: | ||||||||
| 3.003%, 4/30/251,17 |
1,220,885 | 694,829 | ||||||
| 3.054%, 4/30/251,17 |
1,555,595 | 885,320 | ||||||
| 3.098%, 4/30/251,17 |
1,343,008 | 764,332 | ||||||
| 3.131%, 4/30/251,17 |
1,200,479 | 683,216 | ||||||
| 3.179%, 4/30/251,17 |
1,494,694 | 850,660 | ||||||
| 3.231%, 4/30/251,17 |
1,705,966 | 970,899 | ||||||
| 3.265%, 4/30/251,17 |
1,362,868 | 775,635 | ||||||
| 3.346%, 4/30/251,17 |
1,281,038 | 729,064 | ||||||
| 71.468%, 12/31/1710,12 |
BRL | 5,140,000 | 2,592,008 | |||||
| LB Peru Trust II Certificates, Series 1998-A, 3.796%, 2/28/169,17 | 2,994 | — | ||||||
| Morgan Stanley, Russian Federation Total Return Linked Bonds, Series 007, Cl. VR, 5%, 8/22/34 | RUB | 33,537,719 | 235,655 | |||||
| Total Structured Securities (Cost $17,505,445) |
9,181,618 | |||||||
| Short-Term Note—5.7% | ||||||||
| United States Treasury Bills, 0.10%, 12/15/1617 (Cost $99,979,167) |
100,000,000 | 99,964,000 | ||||||
| Shares | ||||||||
| Investment Companies—20.7% | ||||||||
| Oppenheimer Institutional Government Money Market Fund, Cl. E, 0.28%18,19 | 81,906,646 | 81,906,646 | ||||||
| Oppenheimer Master Event-Linked Bond Fund, LLC19 | 2,520,983 | 40,164,593 | ||||||
| Oppenheimer Master Loan Fund, LLC19 | 12,870,585 | 200,889,091 | ||||||
| Oppenheimer Ultra-Short Duration Fund, Cl. Y19 | 8,015,258 | 40,156,441 | ||||||
| Total Investment Companies (Cost $361,037,826) | 363,116,771 | |||||||
| Counterparty | Exercise Price | Expiration Date | Contracts | |||||||||||||||||||||||||
| Over-the-Counter Options Purchased—0.1% | ||||||||||||||||||||||||||||
| EUR Currency Call15,20 | CITNA-B | EUR | 1.097 | 12/16/16 | EUR | 2,500,000 | 143,750 | |||||||||||||||||||||
19 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
| Counterparty | Exercise Price | Expiration Date | Contracts | Value | ||||||||||||||||||||||||||||||||||||
| Over-the-Counter Options Purchased (Continued) |
| |||||||||||||||||||||||||||||||||||||||
| EUR Currency Put15 |
DEU | EUR | 1.100 | 11/29/16 | EUR | 16,165,000 | $ | 97,216 | ||||||||||||||||||||||||||||||||
| GBP Currency Call15 |
BNP | GBP | 1.341 | 12/15/16 | GBP | 13,000,000 | 92,885 | |||||||||||||||||||||||||||||||||
| JPY Currency Put15 |
BAC | JPY | 104.000 | 10/28/16 | JPY | 1,870,000,000 | 39,270 | |||||||||||||||||||||||||||||||||
| JPY Currency Call15,21 |
DEU | JPY | 105.000 | 10/11/16 | JPY | 1,540,000 | 30,989 | |||||||||||||||||||||||||||||||||
| KRW Currency Put15 |
HSBC | KRW | 1120.000 | 11/23/16 | KRW | 14,400,000,000 | 158,400 | |||||||||||||||||||||||||||||||||
| MXN Currency Call15 |
GSG | MXN | 19.050 | 11/28/16 | MXN | 490,000,000 | 486,570 | |||||||||||||||||||||||||||||||||
| S&P 500 Index Call15 |
BOA | USD | 2200.000 | 12/16/16 | USD | 203 | 610,281 | |||||||||||||||||||||||||||||||||
| United States Treasury |
||||||||||||||||||||||||||||||||||||||||
| Bonds, 1.50%, 8/26 Put15 |
BOA | USD | 98.184 | 3/23/17 | USD | 10,590,000 | 148,096 | |||||||||||||||||||||||||||||||||
| Total Over-the-Counter Options Purchased (Cost $2,640,206) |
|
1,807,457 | ||||||||||||||||||||||||||||||||||||||
| Buy /Sell | Expiration | |||||||||||||||||||||||||||||||||||||||
| Counterparty | Protection | Reference Asset | Fixed Rate | Date | Notional (000’s) | |||||||||||||||||||||||||||||||||||
| Over-the-Counter Credit Default Swaptions Purchased—0.0% |
| |||||||||||||||||||||||||||||||||||||||
| Credit Default Swap maturing 12/21/16 Call15 | JPM | Buy | CDX.NA.HY.26 | 5.000% | 12/21/16 | USD | 5,344 | 44,010 | ||||||||||||||||||||||||||||||||
| Credit Default Swap maturing 12/21/16 Call15 | JPM | Buy | CDX.NA.HY.26 | 5.000 | 12/21/16 | USD | 6,210 | 51,141 | ||||||||||||||||||||||||||||||||
| Credit Default Swap maturing 12/21/16 Call15 | JPM | Buy | CDX.NA.HY.26 | 5.000 | 12/21/16 | USD | 6,210 | 51,141 | ||||||||||||||||||||||||||||||||
| Total Over-the-Counter Credit Default Swaptions Purchased (Cost $282,982) |
|
146,292 | ||||||||||||||||||||||||||||||||||||||
| Pay / Receive | Expiration | |||||||||||||||||||||||||||||||
| Counterparty | Floating Rate | Floating Rate | Fixed Rate | Date | Notional Amount (000’s) | |||||||||||||||||||||||||||
| Over-the-Counter Interest Rate Swaption Purchased—0.0% | ||||||||||||||||||||||||||||||||
| Interest Rate Swap maturing 5/30/33 Put15 (Cost $115,675)
|
|
BAC
|
|
|
Pay
|
|
|
Six-Month GBP BBA LIBOR
|
|
|
3.990%
|
|
|
5/30/23
|
|
|
GBP
|
|
|
1,235
|
|
|
18,147
|
| ||||||||
| Total Investments, at Value (Cost $1,844,284,128) |
|
104.9 | % | 1,843,749,165 | ||||||||||||||||||||||||||||
| Net Other Assets (Liabilities) |
|
(4.9 | ) | (86,514,048 | ) | |||||||||||||||||||||||||||
| Net Assets
|
|
100.0 | % | $ | 1,757,235,117 | |||||||||||||||||||||||||||
Footnotes to Consolidated Statement of Investments
1. 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 $514,602,918 or 29.28% of the Fund’s net assets at period end.
2. All or a portion of the security position is when-issued or delayed delivery to be delivered and settled after period end. See Note 4 of the accompanying Consolidated Notes.
3. Represents the current interest rate for a variable or increasing rate security.
4. Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of mortgage loans. These securities typically decline in price as interest rates decline. Most other fixed income securities increase in price when interest rates decline. The principal amount of the underlying pool represents the notional amount on which current interest is calculated. The price of these securities is typically more sensitive to changes in prepayment rates than traditional mortgage-backed securities (for example, GNMA pass-throughs). Interest rates disclosed represent current yields based upon the current cost basis and estimated timing and amount of future cash flows. These securities amount to $3,455,478 or 0.20% of the Fund’s net assets at period end.
5. Interest rate is less than 0.0005%.
6. The current amortization rate of the security’s cost basis exceeds the future interest payments currently estimated to be received. Both the amortization rate and interest payments are contingent on future mortgage pre-payment speeds and are therefore subject to change.
7. All or a portion of the security position is held in accounts at a futures clearing merchant and pledged to cover margin requirements on open futures contracts and written options on futures, if applicable. The aggregate market value of such securities is $4,477,037. See Note 6 of the accompanying Consolidated Notes.
8. All or a portion of the security position is held in segregated accounts and pledged to cover margin requirements under certain derivative contracts. The aggregate market value of such securities is $1,608,525. See Note 6 of the accompanying Consolidated Notes.
9. This security is not accruing income because the issuer has missed an interest payment on it and/or is not anticipated to make future interest and or principal payments. The rate shown is the contractual interest rate. See Note 4 of the accompanying Consolidated Notes.
10. Restricted security. The aggregate value of restricted securities at period end was $5,290,716, which represents 0.30% of the Fund’s net assets. See Note 4 of the accompanying Consolidated Notes. Information concerning restricted securities is as follows:
| Unrealized | ||||||||||||||||
| Acquisition | Appreciation/ | |||||||||||||||
| Security | Dates | Cost | Value | (Depreciation) | ||||||||||||
| Aeropuerto Internacional de Tocumen SA, 5.625% Sr. Sec. Nts., 5/18/36 | 5/13/16 – 9/8/16 | $ | 1,091,074 | $ | 1,139,500 | $ | 48,426 | |||||||||
| Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Bonds, 71.468%, 12/31/17 | 9/19/07 | 2,555,769 | 2,592,008 | 36,239 | ||||||||||||
| JPMorgan Hipotecaria su Casita, 6.47% Sec. Nts., 8/26/35 |
3/21/07 | 528,899 | 29,208 | (499,691) | ||||||||||||
| LBC Tank Terminals Holding Netherlands BV, 6.875% Sr. Unsec. Nts., 5/15/23 | 5/8/13 – 4/17/14 | 1,572,417 | 1,530,000 | (42,417) | ||||||||||||
| $ | 5,748,159 | $ | 5,290,716 | $ | (457,443) | |||||||||||
11. This bond has no contractual maturity date, is not redeemable and contractually pays an indefinite stream of interest. Rate reported represents the current interest rate for this variable rate security.
| 12. | Denotes an inflation-indexed security: coupon or principal are indexed to a consumer price index. |
| 13. | Interest or dividend is paid-in-kind, when applicable. |
| 14. | All or a portion of this security is owned by the subsidiary. See Note 2 of the accompanying Consolidated Notes. |
20 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
Footnotes to Consolidated Statement of Investments (Continued)
15. Non-income producing security.
16. Security received as the result of issuer reorganization.
17. Zero coupon bond reflects effective yield on the original acquisition date.
18. Rate shown is the 7-day yield at period end.
19. Is or was an affiliate, as defined in the Investment Company Act of 1940, as amended, at or during the reporting period, by virtue of the Fund owning at least 5% of the voting securities of the issuer or as a result of the Fund and the issuer having the same investment adviser. Transactions during the reporting period in which the issuer was an affiliate are as follows:
| Shares | Gross | Gross | Shares | |||||||||||||
| December 31, 2015 | Additions | Reductions | September 30, 2016 | |||||||||||||
| Oppenheimer Institutional Government Money Market Fund, Cl. Ea | 92,728,261 | 640,810,471 | 651,632,086 | 81,906,646 | ||||||||||||
| Oppenheimer Master Event-Linked Bond Fund, LLC | 3,158,849 | — | 637,866 | 2,520,983 | ||||||||||||
| Oppenheimer Master Loan Fund, LLC |
6,443,877 | 6,426,708 | — | 12,870,585 | ||||||||||||
| Oppenheimer Ultra-Short Duration Fund, Cl. Y |
— | 8,015,258 | — | 8,015,258 | ||||||||||||
| Value | Income | Realized Loss | ||||||||||||||
| Oppenheimer Institutional Government Money Market Fund, Cl. Ea | $ | 81,906,646 | $ | 517,494 | $ | — | ||||||||||
| Oppenheimer Master Event-Linked Bond Fund, LLC | 40,164,593 | 1,959,911b | 605,820b | |||||||||||||
| Oppenheimer Master Loan Fund, LLC |
200,889,091 | 6,609,365c | 3,856,961c | |||||||||||||
| Oppenheimer Ultra-Short Duration Fund, Cl. Y |
40,156,441 | 156,457 | — | |||||||||||||
| Total |
$ | 363,116,771 | $ | 9,243,227 | $ | 4,462,781 | ||||||||||
a. Prior to September 28, 2016, this fund was named Oppenheimer Institutional Money Market Fund.
b. Represents the amount allocated to the Fund from Oppenheimer Master Event-Linked Bond Fund, LLC.
c. Represents the amount allocated to the Fund from Oppenheimer Master Loan Fund, LLC.
20. Dual Digital option is eligible for exercise if the spot exchange rate remains less than 1.0973 USD per 1 EUR and if the spot exchange rate at expiration is equal to or greater than 1.3324 USD per 1 GBP.
21. Dual Digital option is eligible for exercise if the spot exchange rate remains less than 1.3 USD per 1 GBP and if the spot exchange rate at expiration is equal to or greater than 105 JPY per 1 USD.
| Distribution of investments representing geographic holdings, as a percentage of total investments at value, is as follows: | ||||||||
| Geographic Holdings | Value | Percent | ||||||
| United States |
$ | 1,453,200,260 | 78.8% | |||||
| Indonesia |
42,088,774 | 2.3 | ||||||
| Brazil |
23,590,453 | 1.3 | ||||||
| Canada |
22,554,503 | 1.2 | ||||||
| United Kingdom |
22,425,258 | 1.2 | ||||||
| France |
19,420,699 | 1.1 | ||||||
| Netherlands |
19,254,994 | 1.0 | ||||||
| Mexico |
18,221,525 | 1.0 | ||||||
| Supranational |
16,866,656 | 0.9 | ||||||
| Russia |
12,738,198 | 0.7 | ||||||
| Argentina |
12,099,882 | 0.7 | ||||||
| Peru |
12,068,673 | 0.7 | ||||||
| Luxembourg |
10,507,492 | 0.6 | ||||||
| India |
10,025,162 | 0.5 | ||||||
| Colombia |
8,391,953 | 0.5 | ||||||
| Germany |
8,120,236 | 0.4 | ||||||
| Ireland |
7,719,798 | 0.4 | ||||||
| Ukraine |
7,509,453 | 0.4 | ||||||
| South Africa |
7,038,106 | 0.4 | ||||||
| Hungary |
6,991,519 | 0.4 | ||||||
| Kazakhstan |
6,929,291 | 0.4 | ||||||
| Italy |
6,561,225 | 0.4 | ||||||
| Turkey |
6,175,623 | 0.3 | ||||||
| Ivory Coast |
6,024,067 | 0.3 | ||||||
| China |
5,732,115 | 0.3 | ||||||
| Sri Lanka |
5,598,575 | 0.3 | ||||||
| Spain |
4,992,661 | 0.3 | ||||||
| Dominican Republic |
4,115,856 | 0.2 | ||||||
| Belgium |
4,101,121 | 0.2 | ||||||
| Jamaica |
4,007,637 | 0.2 | ||||||
| Australia |
3,583,778 | 0.2 | ||||||
| Israel |
3,502,262 | 0.2 | ||||||
| Serbia |
3,284,507 | 0.2 | ||||||
| Uruguay |
2,922,400 | 0.2 | ||||||
| Romania |
2,883,035 | 0.2 | ||||||
| Switzerland |
2,728,252 | 0.1 | ||||||
| Croatia |
2,487,303 | 0.1 | ||||||
| Vietnam |
2,351,458 | 0.1 | ||||||
| Philippines |
2,278,986 | 0.1 | ||||||
| Jersey, Channel Islands |
2,245,698 | 0.1 | ||||||
21 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
| Geographic Holdings (Continued) | Value | Percent | ||||||
| Greece |
$ | 1,497,925 | 0.1% | |||||
| Honduras |
1,331,138 | 0.1 | ||||||
| Japan |
1,251,585 | 0.1 | ||||||
| Namibia |
1,223,728 | 0.1 | ||||||
| Ghana |
1,197,077 | 0.1 | ||||||
| Panama |
1,139,500 | 0.1 | ||||||
| Sweden |
1,115,705 | 0.1 | ||||||
| New Zealand |
1,038,738 | 0.1 | ||||||
| United Arab Emirates |
969,811 | 0.1 | ||||||
| Morocco |
955,825 | 0.1 | ||||||
| Gabon |
886,841 | 0.1 | ||||||
| Costa Rica |
881,219 | 0.0 | ||||||
| Singapore |
813,142 | 0.0 | ||||||
| South Korea |
791,335 | 0.0 | ||||||
| Thailand |
746,500 | 0.0 | ||||||
| Paraguay |
656,938 | 0.0 | ||||||
| Ecuador |
611,455 | 0.0 | ||||||
| Norway |
605,387 | 0.0 | ||||||
| Senegal |
561,624 | 0.0 | ||||||
| Denmark |
544,134 | 0.0 | ||||||
| Zambia |
492,500 | 0.0 | ||||||
| Iraq |
441,245 | 0.0 | ||||||
| Finland |
361,778 | 0.0 | ||||||
| Cyprus |
197,375 | 0.0 | ||||||
| Eurozone |
97,216 | 0.0 | ||||||
| Total |
$ | 1,843,749,165 | 100.0% | |||||
| Forward Currency Exchange Contracts as of September 30, 2016 | ||||||||||||||||||||||||||
| Unrealized | Unrealized | |||||||||||||||||||||||||
| Counterparty | Settlement Month(s) | Currency Purchased (000’s) | Currency Sold (000’s) | Appreciation | Depreciation | |||||||||||||||||||||
| BAC |
11/2016 | EUR | 855 | USD | 952 | $ | 10,895 | $ | — | |||||||||||||||||
| BAC |
10/2016 | KRW | 9,534,000 | USD | 8,517 | 138,688 | — | |||||||||||||||||||
| BAC |
11/2016 | RUB | 557,700 | USD | 8,641 | 140,817 | — | |||||||||||||||||||
| BAC |
11/2016 | TWD | 90,000 | USD | 2,849 | 36,757 | — | |||||||||||||||||||
| BAC |
11/2016 | USD | 4,686 | COP | 13,909,000 | — | 96,827 | |||||||||||||||||||
| BAC |
10/2016 - 11/2016 | USD | 20,507 | KRW | 22,908,161 | — | 289,194 | |||||||||||||||||||
| BAC |
11/2016 | USD | 9,258 | RUB | 612,300 | — | 405,901 | |||||||||||||||||||
| BNP |
11/2016 | IDR | 34,081,000 | USD | 2,569 | 34,846 | — | |||||||||||||||||||
| BOA |
10/2016 | BRL | 24,870 | USD | 7,595 | 55,984 | 4,171 | |||||||||||||||||||
| BOA |
11/2016 | EUR | 7,555 | USD | 8,452 | 69,470 | 16,922 | |||||||||||||||||||
| BOA |
10/2016 - 11/2016 | KRW | 26,738,500 | USD | 24,316 | 15,299 | 59,526 | |||||||||||||||||||
| BOA |
11/2016 | MXN | 424,500 | USD | 22,625 | — | 847,571 | |||||||||||||||||||
| BOA |
12/2016 | MYR | 21,055 | USD | 5,199 | — | 106,046 | |||||||||||||||||||
| BOA |
11/2016 | RUB | 1,277,300 | USD | 19,201 | 958,073 | — | |||||||||||||||||||
| BOA |
10/2016 | USD | 7,633 | BRL | 24,870 | 9,846 | 23,714 | |||||||||||||||||||
| BOA |
12/2016 | USD | 2,585 | CLP | 1,740,000 | — | 43,153 | |||||||||||||||||||
| BOA |
11/2016 | USD | 7,271 | GBP | 5,025 | 752,606 | — | |||||||||||||||||||
| BOA |
12/2016 | USD | 5,390 | HUF | 1,484,000 | — | 24,251 | |||||||||||||||||||
| BOA |
10/2016 | USD | 7,018 | KRW | 7,705,000 | 22,390 | — | |||||||||||||||||||
| BOA |
11/2016 | USD | 8,770 | MXN | 165,000 | 305,392 | — | |||||||||||||||||||
| BOA |
11/2016 | USD | 9,869 | TWD | 308,000 | — | 4,873 | |||||||||||||||||||
| BOA |
11/2016 | USD | 2,703 | ZAR | 38,820 | — | 100,745 | |||||||||||||||||||
| CITNA-B |
10/2016 - 11/2016 | BRL | 29,147 | USD | 8,942 | — | 48,360 | |||||||||||||||||||
| CITNA-B |
11/2016 | COP | 17,381,000 | USD | 5,877 | 100,299 | — | |||||||||||||||||||
| CITNA-B |
11/2016 | EUR | 9,285 | USD | 10,515 | 3,945 | 66,937 | |||||||||||||||||||
| CITNA-B |
11/2016 | GBP | 7,975 | USD | 10,546 | — | 200,788 | |||||||||||||||||||
| CITNA-B |
11/2016 | MXN | 347,900 | USD | 18,301 | — | 452,860 | |||||||||||||||||||
| CITNA-B |
11/2016 | PLN | 17,010 | USD | 4,392 | 51,923 | — | |||||||||||||||||||
| CITNA-B |
10/2016 - 11/2016 | USD | 4,871 | BRL | 15,844 | 13,538 | — | |||||||||||||||||||
| CITNA-B |
03/2017 | USD | 13,709 | MXN | 268,200 | 136,466 | — | |||||||||||||||||||
| CITNA-B |
11/2016 | USD | 3,074 | ZAR | 41,990 | 40,748 | — | |||||||||||||||||||
| CITNA-B |
11/2016 | ZAR | 35,310 | USD | 2,419 | 131,412 | — | |||||||||||||||||||
| DEU |
11/2016 | EUR | 8,760 | USD | 9,788 | 79,425 | 6,736 | |||||||||||||||||||
| DEU |
11/2016 | NZD | 11,930 | USD | 8,752 | — | 80,851 | |||||||||||||||||||
| DEU |
11/2016 | USD | 476 | EUR | 415 | 8,519 | — | |||||||||||||||||||
| DEU |
11/2016 | USD | 8,613 | MXN | 169,300 | — | 72,488 | |||||||||||||||||||
| GSCO-OT |
11/2016 | COP | 26,477,000 | USD | 8,912 | 193,327 | — | |||||||||||||||||||
| GSCO-OT |
11/2016 | JPY | 548,000 | USD | 5,470 | — | 55,941 | |||||||||||||||||||
| GSCO-OT |
11/2016 | ZAR | 55,530 | USD | 3,857 | 153,894 | — | |||||||||||||||||||
22 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| Forward Currency Exchange Contracts (Continued) | ||||||||||||||||||||||||||
| Unrealized | Unrealized | |||||||||||||||||||||||||
| Counterparty | Settlement Month(s) | Currency Purchased (000’s) | Currency Sold (000’s) | Appreciation | Depreciation | |||||||||||||||||||||
| HSBC |
11/2016 | COP | 132,000 | USD | 45 | $ | 420 | $ | — | |||||||||||||||||
| HSBC |
11/2016 - 03/2017 | EUR | 19,105 | USD | 21,476 | 141,727 | 81,376 | |||||||||||||||||||
| HSBC |
11/2016 | GBP | 9,330 | USD | 13,183 | — | 1,079,059 | |||||||||||||||||||
| HSBC |
11/2016 | USD | 8,912 | EUR | 7,905 | 13,391 | — | |||||||||||||||||||
| HSBC |
11/2016 | USD | 8,855 | NZD | 11,930 | 183,866 | — | |||||||||||||||||||
| JPM |
10/2016 - 11/2016 | BRL | 43,803 | USD | 13,045 | 265,475 | 3,545 | |||||||||||||||||||
| JPM |
12/2016 | CLP | 3,517,000 | USD | 5,149 | 163,498 | — | |||||||||||||||||||
| JPM |
11/2016 | COP | 26,321,000 | USD | 8,771 | 280,752 | — | |||||||||||||||||||
| JPM |
11/2016 | EUR | 7,865 | USD | 8,825 | 41,333 | 13,455 | |||||||||||||||||||
| JPM |
11/2016 | GBP | 1,625 | USD | 2,141 | — | 33,094 | |||||||||||||||||||
| JPM |
11/2016 | INR | 335,000 | USD | 4,979 | 18,941 | — | |||||||||||||||||||
| JPM |
11/2016 | KRW | 6,426,000 | USD | 5,805 | 25,941 | — | |||||||||||||||||||
| JPM |
11/2016 | MXN | 367,000 | USD | 19,657 | — | 829,558 | |||||||||||||||||||
| JPM |
11/2016 | PLN | 17,030 | USD | 4,396 | 53,173 | — | |||||||||||||||||||
| JPM |
11/2016 | RUB | 283,600 | USD | 4,351 | 114,692 | — | |||||||||||||||||||
| JPM |
11/2016 | SGD | 220 | USD | 163 | — | 1,509 | |||||||||||||||||||
| JPM |
11/2016 | TRY | 8,260 | USD | 2,745 | — | 18,258 | |||||||||||||||||||
| JPM |
11/2016 | TWD | 218,000 | USD | 7,005 | — | 16,282 | |||||||||||||||||||
| JPM |
10/2016 - 11/2016 | USD | 4,862 | BRL | 15,866 | 32,422 | — | |||||||||||||||||||
| JPM |
11/2016 | USD | 13,939 | EUR | 12,180 | 230,836 | 68 | |||||||||||||||||||
| JPM |
11/2016 | USD | 40,972 | GBP | 28,125 | 4,485,983 | — | |||||||||||||||||||
| JPM |
11/2016 | USD | 14,854 | IDR | 197,898,000 | — | 267,284 | |||||||||||||||||||
| JPM |
10/2016 - 11/2016 | USD | 11,129 | KRW | 12,432,839 | — | 153,046 | |||||||||||||||||||
| JPM |
10/2016 - 11/2016 | USD | 14,460 | MXN | 273,800 | 437,097 | 36,454 | |||||||||||||||||||
| JPM |
11/2016 - 01/2017 | USD | 9,359 | RUB | 613,000 | — | 303,061 | |||||||||||||||||||
| JPM |
11/2016 | ZAR | 35,370 | USD | 2,572 | — | 17,473 | |||||||||||||||||||
| MSCO |
11/2016 | EUR | 14,125 | USD | 15,878 | 108,527 | 85,630 | |||||||||||||||||||
| MSCO |
11/2016 | GBP | 5,700 | USD | 7,913 | — | 518,697 | |||||||||||||||||||
| MSCO |
11/2016 | USD | 25,150 | EUR | 22,095 | 277,113 | — | |||||||||||||||||||
| MSCO |
11/2016 | USD | 26 | MXN | 500 | 777 | — | |||||||||||||||||||
| NOM |
10/2016 | BRL | 8,410 | USD | 2,570 | 16,316 | — | |||||||||||||||||||
| NOM |
11/2016 | COP | 9,978,000 | USD | 3,380 | 51,240 | — | |||||||||||||||||||
| NOM |
10/2016 | USD | 2,609 | BRL | 8,410 | 22,984 | — | |||||||||||||||||||
| RBS |
11/2016 | USD | 8,960 | MXN | 169,700 | 254,222 | — | |||||||||||||||||||
| TDB |
10/2016 - 11/2016 | BRL | 34,940 | USD | 10,697 | — | 24,121 | |||||||||||||||||||
| TDB |
11/2016 | EUR | 710 | USD | 796 | 3,253 | — | |||||||||||||||||||
| TDB |
11/2016 | GBP | 2,670 | USD | 3,550 | — | 86,241 | |||||||||||||||||||
| TDB |
10/2016 | USD | 5,383 | BRL | 17,470 | 11,007 | — | |||||||||||||||||||
| TDB |
11/2016 | USD | 5,244 | COP | 15,370,000 | — | 42,044 | |||||||||||||||||||
| TDB |
11/2016 | USD | 57,596 | EUR | 50,755 | 460,653 | — | |||||||||||||||||||
| TDB |
12/2016 | USD | 2,368 | PHP | 113,000 | 39,795 | — | |||||||||||||||||||
| TDB |
11/2016 | USD | 160 | SGD | 220 | — | 1,155 | |||||||||||||||||||
| TDB |
10/2016 | USD | 1,224 | TRY | 3,660 | 6,280 | — | |||||||||||||||||||
| TDB |
11/2016 | USD | 6,785 | ZAR | 98,120 | — | 302,004 | |||||||||||||||||||
| TDB |
11/2016 | ZAR | 36,150 | USD | 2,498 | 113,246 | — | |||||||||||||||||||
| Total Unrealized Appreciation and Depreciation |
$ | 11,319,519 | $ | 6,921,269 | ||||||||||||||||||||||
| Futures Contracts as of September 30, 2016 | ||||||||||||||||||||||||
| Unrealized Appreciation | ||||||||||||||||||||||||
| Description | Exchange | Buy/Sell | Expiration Date | Number of Contracts | Value | (Depreciation) | ||||||||||||||||||
| Euro-BUND |
EUX | Sell | 12/08/16 | 111 | $ | 20,661,439 | $ | (302,334 | ) | |||||||||||||||
| United States Treasury Long Bonds | CBT | Sell | 12/20/16 | 10 | 1,681,563 | 1,983 | ||||||||||||||||||
| United States Treasury Long Bonds | CBT | Buy | 12/20/16 | 44 | 7,398,875 | (94,951 | ) | |||||||||||||||||
| United States Treasury Nts., 2 yr. |
CBT | Buy | 12/30/16 | 346 | 75,590,188 | 56,802 | ||||||||||||||||||
| United States Treasury Nts., 5 yr. |
CBT | Buy | 12/30/16 | 468 | 56,869,312 | 153,611 | ||||||||||||||||||
| United States Treasury Nts., 5 yr. |
CBT | Sell | 12/30/16 | 13 | 1,579,703 | 1,175 | ||||||||||||||||||
| United States Treasury Nts., 10 yr. | CBT | Buy | 12/20/16 | 393 | 51,532,125 | (83,621 | ) | |||||||||||||||||
| United States Treasury Nts., 10 yr. | CBT | Sell | 12/20/16 | 81 | 10,621,125 | 4,655 | ||||||||||||||||||
| United States Ultra Bonds |
CBT | Buy | 12/20/16 | 197 | 36,223,375 | (720,817 | ) | |||||||||||||||||
| $ | (983,497 | ) | ||||||||||||||||||||||
| Over-the-Counter Options Written at September 30, 2016 | ||||||||||||||||||||||||||||||||
|
Description |
Counterparty |
Exercise Price |
Expiration Date |
Number of Contracts |
Premiums Received |
Value |
||||||||||||||||||||||||||
| EUR Currency Call | DEU | USD | 1.150 | 11/29/16 | EUR | (16,165,000 | ) | $ | 120,468 | $ | (66,066 | ) | ||||||||||||||||||||
| EUR Currency Put | DEU | USD | 1.050 | 11/29/16 | EUR | (16,165,000 | ) | 44,389 | (6,466 | ) | ||||||||||||||||||||||
| GBP Currency Call1 | BNP | USD | 1.350 | 12/15/16 | GBP | (13,000,000 | ) | 77,740 | (70,239 | ) | ||||||||||||||||||||||
23 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
| Over-the-Counter Options Written (Continued) | ||||||||||||||||||||||||||||||||
|
Description |
Counterparty | Exercise Price | Expiration Date | Number of Contracts | Premiums Received | Value | ||||||||||||||||||||||||||
| IDR Currency Call |
BNP | IDR | 13025.000 | 12/7/16 | IDR | (167,328,079,630 | ) | $ | 133,220 | $ | (167,328 | ) | ||||||||||||||||||||
| JPY Currency Put |
BAC | JPY | 108.000 | 10/28/16 | JPY | (1,940,000,000 | ) | 86,402 | (1,940 | ) | ||||||||||||||||||||||
| KRW Currency Call |
HSBC | KRW | 1070.000 | 11/23/16 | KRW | (13,800,000,000 | ) | 64,744 | (69,000 | ) | ||||||||||||||||||||||
| KRW Currency Put |
HSBC | KRW | 1145.000 | 11/23/16 | KRW | (14,750,000,000 | ) | 95,972 | (88,500 | ) | ||||||||||||||||||||||
| MXN Currency Call |
GSCO-OT | MXN | 18.250 | 11/28/16 | MXN | (940,000,000 | ) | 340,048 | (348,740 | ) | ||||||||||||||||||||||
| MYR Currency Put |
NOM | MYR | 4.160 | 10/28/16 | MYR | (53,000,000 | ) | 75,806 | (95,506 | ) | ||||||||||||||||||||||
| MYR Currency Call |
NOM | MYR | 3.880 | 10/28/16 | MYR | (50,000,000 | ) | 76,675 | (950 | ) | ||||||||||||||||||||||
| United States Treasury Bonds, 1.50%, 8/26 Put |
BOA | USD | 95.734 | 3/23/17 | USD | (10,590,000 | ) | 79,425 | (66,000 | ) | ||||||||||||||||||||||
| Total Over-the-Counter Options Written | $ | 1,194,889 | $ | (980,735 | ) | |||||||||||||||||||||||||||
| 1. Knock-in option becomes eligible for exercise if at any time spot rates are greater than or equal to 1.38 USD per 1 GBP. |
| |||||||||||||||||||||||||||||||
| Centrally Cleared Credit Default Swaps at September 30, 2016 | ||||||||||||||||||||||||||||||||
| Buy/Sell | Notional Amount | |||||||||||||||||||||||||||||||
| Reference Asset | Protection | Fixed Rate | Maturity Date | (000’s) | Premiums Received/(Paid) | Value | ||||||||||||||||||||||||||
| CDX.HY.25 |
Buy | 5.000% | 12/20/20 | USD | 8,663 | $ | 19,443 | $ | (507,400 | ) | ||||||||||||||||||||||
| Over-the-Counter Credit Default Swaps at September 30, 2016 | ||||||||||||||||||||||||||||||||
| Buy/Sell | Notional Amount | |||||||||||||||||||||||||||||||
| Reference Asset | Counterparty | Protection | Fixed Rate | Maturity Date | (000’s) | Premiums Received/(Paid) | Value | |||||||||||||||||||||||||
| Alpha Bank AE |
BAC | Buy | 5.000% | 3/20/17 | EUR | 1,165 | $ | (136,738 | ) | $ | (5,279 | ) | ||||||||||||||||||||
| Banco Bilbao Vizcaya Argentaria Sociedad Anonima | UBS | Sell | 3.000 | 12/20/17 | EUR | 125 | (60 | ) | 4,321 | |||||||||||||||||||||||
| Banco Bilbao Vizcaya Argentaria Sociedad Anonima | UBS | Sell | 3.000 | 12/20/17 | EUR | 125 | (60 | ) | 4,321 | |||||||||||||||||||||||
| Banco Santander SA | UBS | Sell | 3.000 | 9/20/17 | EUR | 250 | (997 | ) | 7,042 | |||||||||||||||||||||||
| Federative Republic of Brazil | BNP | Sell | 1.000 | 12/20/18 | USD | 1,190 | 94,152 | (13,653 | ) | |||||||||||||||||||||||
| Hellenic Republic | BAC | Sell | 1.000 | 3/20/20 | USD | 475 | 180,526 | (117,316 | ) | |||||||||||||||||||||||
| Hellenic Republic | BAC | Sell | 1.000 | 3/20/20 | USD | 475 | 168,651 | (117,316 | ) | |||||||||||||||||||||||
| Malaysia | BOA | Buy | 1.000 | 12/20/20 | USD | 765 | (40,897 | ) | (669 | ) | ||||||||||||||||||||||
| Malaysia | BOA | Buy | 1.000 | 12/20/20 | USD | 385 | (26,693 | ) | (337 | ) | ||||||||||||||||||||||
| Malaysia | BOA | Buy | 1.000 | 12/20/20 | USD | 705 | (36,881 | ) | (617 | ) | ||||||||||||||||||||||
| Malaysia | GOL | Buy | 1.000 | 6/20/21 | USD | 1,785 | (47,059 | ) | 8,863 | |||||||||||||||||||||||
| Malaysia | MOS-A | Buy | 1.000 | 12/20/20 | USD | 765 | (48,374 | ) | (669 | ) | ||||||||||||||||||||||
| Petrobras Global Finance BV | BNP | Sell | 1.000 | 12/20/16 | USD | 1,495 | (381 | ) | (873 | ) | ||||||||||||||||||||||
| Republic of Colombia | BOA | Buy | 1.000 | 6/20/21 | USD | 5,100 | (226,324 | ) | 126,916 | |||||||||||||||||||||||
| Republic of Indonesia | BNP | Buy | 1.000 | 6/20/21 | USD | 5,100 | (203,573 | ) | 90,584 | |||||||||||||||||||||||
| Republic of Peru | BNP | Buy | 1.000 | 12/20/20 | USD | 964 | (27,540 | ) | (6,963 | ) | ||||||||||||||||||||||
| Republic of South Africa | BNP | Buy | 1.000 | 6/20/21 | USD | 2,160 | (153,509 | ) | 130,876 | |||||||||||||||||||||||
| Republic of South Africa | CITNA-B | Buy | 1.000 | 6/20/21 | USD | 2,155 | (152,263 | ) | 130,573 | |||||||||||||||||||||||
| Republic of Turkey | CITNA-B | Buy | 1.000 | 6/20/21 | USD | 1,625 | (107,092 | ) | 100,054 | |||||||||||||||||||||||
| Republic of Turkey | CITNA-B | Buy | 1.000 | 6/20/21 | USD | 2,040 | (130,799 | ) | 125,606 | |||||||||||||||||||||||
| Republic of Turkey | HSBC | Buy | 1.000 | 6/20/21 | USD | 2,020 | (150,370 | ) | 126,750 | |||||||||||||||||||||||
| Republic of Turkey | t-DEU | Buy | 1.000 | 6/20/21 | USD | 2,555 | (169,286 | ) | 160,320 | |||||||||||||||||||||||
| Russian Federation | BNP | Buy | 1.000 | 12/20/20 | USD | 765 | (81,669 | ) | 26,161 | |||||||||||||||||||||||
| State Bank of India | BNP | Sell | 1.000 | 9/20/19 | USD | 1,740 | 71,791 | 5,758 | ||||||||||||||||||||||||
| Total Over-the-Counter Credit Default Swaps | $ | (1,225,445 | ) | $ | 784,453 | |||||||||||||||||||||||||||
| The table that follows shows the undiscounted maximum potential payment by the Fund related to selling credit protection in credit default swaps: | ||||||||||||||||||||
| Type of Reference Asset on which the Fund Sold Protection |
Total Maximum Potential Payments for Selling Credit Protection (Undiscounted) |
Amount Recoverable* | Reference Asset Rating Range** |
|||||||||||||||||
| Investment Grade Single Name Corporate Debt |
$ | 1,740,000 | $ | — | BBB- | |||||||||||||||
| Investment Grade Single Name Corporate Debt |
500,000 | EUR | — | BBB to BBB- | ||||||||||||||||
| Non-Investment Grade Single Name Corporate Debt | $ | 1,495,000 | $ | — | B+ | |||||||||||||||
| Non-Investment Grade Sovereign Debt |
$ | 2,140,000 | $ | — | BB to B- | |||||||||||||||
| Total USD |
$ | 5,375,000 | $ | — | ||||||||||||||||
| Total EUR |
500,000 | EUR | — | EUR | ||||||||||||||||
*The Fund has no amounts recoverable from related purchased protection. In addition, the Fund has no recourse provisions under the credit derivatives and holds no collateral which can offset or reduce potential payments under a triggering event.
**The period end reference asset security ratings, as rated by any rating organization, are included in the equivalent Standard & Poor’s rating category. The reference asset rating represents the likelihood of a potential credit event on the reference asset which would result in a related payment by the Fund.
24 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| Centrally Cleared Interest Rate Swaps at September 30, 2016 | ||||||||||||||||||||||||||||||||||||||||
| Pay/Receive | ||||||||||||||||||||||||||||||||||||||||
| Counterparty | Floating Rate | Floating Rate | Fixed Rate | Maturity Date | Notional Amount (000’s) | Value | ||||||||||||||||||||||||||||||||||
| Six-Month PLN WIBOR | ||||||||||||||||||||||||||||||||||||||||
| BAC |
Pay | WIBO | 1.745% | 9/15/18 | PLN | 25,195 | $ | 5,024 | ||||||||||||||||||||||||||||||||
| Six-Month PLN WIBOR | ||||||||||||||||||||||||||||||||||||||||
| BAC |
Pay | WIBO | 1.745 | 9/12/18 | PLN | 25,200 | (2,180 | ) | ||||||||||||||||||||||||||||||||
| Three-Month ZAR | ||||||||||||||||||||||||||||||||||||||||
| DEU |
Receive | JIBAR SAFEX | 8.310 | 6/29/26 | ZAR | 56,100 | (55,032 | ) | ||||||||||||||||||||||||||||||||
| Total Centrally Cleared Interest Rate Swaps |
|
$ | (52,188 | ) | ||||||||||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Over-the-Counter Interest Rate Swaps at September 30, 2016 | ||||||||||||||||||||||||||||||||||||||||
| PAy/Receive | ||||||||||||||||||||||||||||||||||||||||
| Counterparty | Floating Rate | Floating Rate | Fixed Rate | Maturity Date | Notional Amount (000’s) | Value | ||||||||||||||||||||||||||||||||||
| Three-Month KRW CD | ||||||||||||||||||||||||||||||||||||||||
| DEU |
Pay | KSDA | 1.480% | 4/20/18 | KRW | 102,630,000 | $ | 350,193 | ||||||||||||||||||||||||||||||||
| JPM |
Receive | BZDI | 12.220 | 1/2/19 | BRL | 48,700 | 63,921 | |||||||||||||||||||||||||||||||||
| SAN |
Receive | BZDI | 12.170 | 1/2/19 | BRL | 51,300 | 93,476 | |||||||||||||||||||||||||||||||||
| Three-Month MYR | ||||||||||||||||||||||||||||||||||||||||
| SCB |
Pay | KLIBOR BNM | 3.310 | 8/19/21 | MYR | 45,000 | (74,985 | ) | ||||||||||||||||||||||||||||||||
| SIB |
Receive | BZDI | 12.550 | 1/2/25 | BRL | 21,670 | 138,037 | |||||||||||||||||||||||||||||||||
| Total Over-the-Counter Interest Rate Swaps |
|
$ | 570,642 | |||||||||||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Over-the-Counter Credit Default Swaptions Written at September 30, 2016 | ||||||||||||||||||||||||||||||||||||
| Description | Counterparty | Buy/Sell Protection |
Reference Asset | Fixed Rate | Expiration Date | Notional Amount (000’s) | Premiums Received | Value | ||||||||||||||||||||||||||||
| Credit Default Swap maturing 6/20/21 Call | JPM | Buy | CDX.NA.HY.26 | 5.000% | 12/21/16 | USD | 6,210 | $ | 33,534 | $ | (15,020 | ) | ||||||||||||||||||||||||
| Credit Default Swap maturing 6/20/21 Call | JPM | Buy | CDX.NA.HY.26 | 5.000 | 12/21/16 | USD | 6,210 | 33,534 | (15,020 | ) | ||||||||||||||||||||||||||
| Credit Default Swap maturing 6/20/21 Call | JPM | Buy | CDX.NA.HY.26 | 5.000 | 12/21/16 | USD | 5,344 | 27,789 | (12,926 | ) | ||||||||||||||||||||||||||
| Total of Over-the-Counter Credit Default Swaptions Written | $ | 94,857 | $ | (42,966 | ) | |||||||||||||||||||||||||||||||
| Glossary: |
||
| Counterparty Abbreviations |
||
| BAC |
Barclays Bank plc | |
| BNP |
BNP Paribas | |
| BOA |
Bank of America NA | |
| CITNA-B |
Citibank NA | |
| DEU |
Deutsche Bank AG | |
| GOL |
Goldman Sachs & Co. | |
| GSCO-OT |
Goldman Sachs Bank USA | |
| GSG |
Goldman Sachs Group, Inc. (The) | |
| HSBC |
HSBC Bank USA NA | |
| JPM |
JPMorgan Chase Bank NA | |
| MOS-A |
Morgan Stanley | |
| MSCO |
Morgan Stanley Capital Services, Inc. | |
| NOM |
Nomura Global Financial Products, Inc. | |
| RBS |
Royal Bank of Scotland plc (The) | |
| SAN |
Santander | |
| SCB |
Standard Chartered Bank | |
| SIB |
Banco Santander SA | |
| TDB |
Toronto Dominion Bank | |
| t-DEU |
Deutsche Bank Securities, Inc. | |
| UBS |
UBS AG | |
| Currency abbreviations indicate amounts reporting in currencies | ||
| BRL |
Brazilian Real | |
| CLP |
Chilean Peso | |
| COP |
Colombian Peso | |
| EUR |
Euro | |
| GBP |
British Pound Sterling | |
| HUF |
Hungarian Forint | |
| IDR |
Indonesian Rupiah | |
| INR |
Indian Rupee | |
| JPY |
Japanese Yen | |
| KRW |
South Korean Won | |
| MXN |
Mexican Nuevo Peso | |
| MYR |
Malaysian Ringgit | |
| NZD |
New Zealand Dollar | |
25 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
| Currency abbreviations indicate amounts reporting in currencies (Continued) | ||
| PHP |
Philippine Peso | |
| PLN |
Polish Zloty | |
| RUB |
Russian Ruble | |
| SGD |
Singapore Dollar | |
| TRY |
New Turkish Lira | |
| TWD |
New Taiwan Dollar | |
| ZAR |
South African Rand | |
| Definitions | ||
| BBA LIBOR |
British Bankers’ Association London-Interbank Offered Rate | |
| BNM |
Bank Negra Malaysia | |
| BUND |
German Federal Obligation | |
| BZDI |
Brazil Interbank Deposit Rate | |
| CD |
Certificate of Deposit | |
| CDX.HY.25 |
Markit CDX High Yield Index | |
| CDX.NA.HY.26 |
Markit CDX North American High Yield | |
| JIBAR SAFEX |
South Africa Johannesburg Interbank Agreed Rate/Futures Exchange | |
| KLIBOR |
Kuala Lumpur Interbank Offered Rate | |
| KSDA |
Korean Securities Dealers Assn. | |
| S&P |
Standard & Poor’s | |
| WIBOR WIBO |
Poland Warsaw Interbank Offer Bid Rate | |
| Exchange Abbreviations | ||
| CBT |
Chicago Board of Trade | |
| EUX |
European Stock Exchange | |
26 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
NOTES TO CONSOLIDATED STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1. Organization
Oppenheimer Global Strategic Income Fund/VA (the “Fund”), a separate series of Oppenheimer Variable Account Funds, is a diversified open-end management investment company registered under the Investment Company Act of 1940 (“1940 Act”), as amended. The Fund’s main investment objective is to seek total return. The Fund’s investment adviser is OFI Global Asset Management, Inc. (“OFI Global” or the “Manager”), a wholly-owned subsidiary of OppenheimerFunds, Inc. (“OFI” or the “Sub-Adviser”). The Manager has entered into a sub-advisory agreement with OFI. Shares of the Fund are sold only to separate accounts of life insurance companies.
2. Significant Accounting Policies
Security Valuation. All investments in securities are recorded at their estimated fair value, as described in Note 3.
Basis for Consolidation. The Fund has established a Cayman Islands exempted company, Oppenheimer Global Strategic Income Fund/VA (Cayman) Ltd., which is wholly-owned and controlled by the Fund (the “Subsidiary”). The Fund and Subsidiary are both managed by the Manager. The Fund may invest up to 25% of its total assets in the Subsidiary. The Subsidiary invests primarily in commodity-linked derivatives (including commodity futures, financial futures, options and swap contracts) and exchange traded funds related to gold or other special minerals (“Gold ETFs”). The Subsidiary is subject to the same investment restrictions and guidelines, and follows the same compliance policies and procedures, as the Fund.
At period end, the Fund owned 51,485 shares with net assets of $4,476,018 in the Subsidiary.
Foreign Currency Translation. The Fund’s accounting records are maintained in U.S. dollars. The values of securities denominated in foreign currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading. Foreign exchange rates may be valued primarily using a reliable bank, dealer or service authorized by the Board of Trustees.
3. Securities Valuation
The Fund calculates the net asset value of its shares as of 4:00 P.M. Eastern time, on each day the New York Stock Exchange (the “Exchange”) is open for trading, except in the case of a scheduled early closing of the Exchange, in which case the Fund will calculate net asset value of the shares as of the scheduled early closing time of the Exchange.
The Fund’s Board has adopted procedures for the valuation of the Fund’s securities and has delegated the day-to-day responsibility for valuation determinations under those procedures to the Manager. The Manager has established a Valuation Committee which is responsible for determining a “fair valuation” for any security for which market quotations are not “readily available.” The Valuation Committee’s fair valuation determinations are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined.
Valuation Methods and Inputs
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by third party pricing services or dealers.
The following methodologies are used to determine the market value or the fair value of the types of securities described below:
Securities traded on a registered U.S. securities exchange (including exchange-traded derivatives other than futures and futures options) are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the mean between the bid and asked price on the principal exchange or, if not available from the principal exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the principal exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer. A security of a foreign issuer traded on a foreign exchange, but not listed on a registered U.S. securities exchange, is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the third party pricing service used by the Manager, prior to the time when the Fund’s assets are valued. If the last sale price is unavailable, the security is valued at the most recent official closing price on the principal exchange on which it is traded. If the last sales price or official closing price for a foreign security is not available, the security is valued at the mean between the bid and asked price per the exchange or, if not available from the exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer.
Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.
Corporate and government debt securities (of U.S. or foreign issuers) and municipal debt securities, event-linked bonds, loans, mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers who may use matrix pricing methods to determine the evaluated prices.
Short-term money market type debt securities with a remaining maturity of sixty days or less are valued at cost adjusted by the amortization of discount or premium to maturity (amortized cost), which approximates market value. Short-term debt securities with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers.
Structured securities, swaps, swaptions, and other over-the-counter derivatives are valued utilizing evaluated prices obtained from third party pricing
27 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
NOTES TO CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
3. Securities Valuation (Continued)
services or broker-dealers.
Forward foreign currency exchange contracts are valued utilizing current and forward currency rates obtained from third party pricing services. When the settlement date of a contract is an interim date for which a quotation is not available, interpolated values are derived using the nearest dated forward currency rate.
Futures contracts and futures options traded on a commodities or futures exchange will be valued at the final settlement price or official closing price on the principal exchange as reported by such principal exchange at its trading session ending at, or most recently prior to, the time when the Fund’s assets are valued.
A description of the standard inputs that may generally be considered by the third party pricing vendors in determining their evaluated prices is provided below.
| Security Type | Standard inputs generally considered by third-party pricing vendors | |
| Corporate debt, government debt, municipal, mortgage- backed and asset-backed securities | Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, the credit quality, yield, maturity, and other appropriate factors. | |
| Loans | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. | |
| Event-linked bonds | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. | |
| Structured securities | Relevant market information such as the price of underlying financial instruments, stock market indices, foreign currencies, interest rate spreads, commodities, or the occurrence of other specific events. | |
| Swaps | Relevant market information, including underlying reference assets such as credit spreads, credit event probabilities, index values, individual security values, forward interest rates, variable interest rates, volatility measures, and forward currency rates. |
If a market value or price cannot be determined for a security using the methodologies described above, or if, in the “good faith” opinion of the Manager, the market value or price obtained does not constitute a “readily available market quotation,” or a significant event has occurred that would materially affect the value of the security, the security is fair valued either (i) by a standardized fair valuation methodology applicable to the security type or the significant event as previously approved by the Valuation Committee and the Fund’s Board or (ii) as determined in good faith by the Manager’s Valuation Committee. The Valuation Committee considers all relevant facts that are reasonably available, through either public information or information available to the Manager, when determining the fair value of a security. Fair value determinations by the Manager are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined. Those fair valuation standardized methodologies include, but are not limited to, valuing securities at the last sale price or initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be further adjusted for any discounts related to security-specific resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities nor can it be assured that the Fund can obtain the fair value assigned to a security if it were to sell the security.
To assess the continuing appropriateness of security valuations, the Manager, or its third party service provider who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and sale prices to the current day prices and challenges those prices exceeding certain tolerance levels with the third party pricing service or broker source. For those securities valued by fair valuations, whether through a standardized fair valuation methodology or a fair valuation determination, the Valuation Committee reviews and affirms the reasonableness of the valuations based on such methodologies and fair valuation determinations on a regular basis after considering all relevant information that is reasonably available.
Classifications
Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:
1) Level 1-unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
2) Level 2-inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)
3) Level 3-significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).
The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.
The Fund classifies each of its investments in investment companies which are publicly offered as Level 1. Investment companies that are not publicly offered are measured using net asset value as a practical expedient, and are not classified in the fair value hierarchy.
28 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
3. Securities Valuation (Continued)
The table below categorizes amounts at period end based on valuation input level:
| Level 3— | ||||||||||||||||
| Level 1— | Level 2— | Significant | ||||||||||||||
| Unadjusted | Other Significant | Unobservable | ||||||||||||||
| Quoted Prices | Observable Inputs | Inputs | Value | |||||||||||||
| Assets Table |
||||||||||||||||
| Investments, at Value: |
||||||||||||||||
| Asset-Backed Securities |
$ | — | $ | 62,781,545 | $ | 16,866,656 | $ | 79,648,201 | ||||||||
| Mortgage-Backed Obligations |
— | 314,562,151 | — | 314,562,151 | ||||||||||||
| U.S. Government Obligations |
— | 33,130,331 | — | 33,130,331 | ||||||||||||
| Foreign Government Obligations |
— | 138,156,296 | — | 138,156,296 | ||||||||||||
| Corporate Loans |
— | 3,290,285 | — | 3,290,285 | ||||||||||||
| Corporate Bonds and Notes |
— | 799,335,528 | 29,208 | 799,364,736 | ||||||||||||
| Common Stocks |
1,340,260 | — | 15 | 1,340,275 | ||||||||||||
| Rights, Warrants and Certificates |
22,605 | — | — | 22,605 | ||||||||||||
| Structured Securities |
— | 6,353,955 | 2,827,663 | 9,181,618 | ||||||||||||
| Short-Term Note |
— | 99,964,000 | — | 99,964,000 | ||||||||||||
| Investment Companies |
122,063,087 | — | — | 122,063,087 | ||||||||||||
| Over-the-Counter Options Purchased |
— | 1,807,457 | — | 1,807,457 | ||||||||||||
| Over-the-Counter Credit Default Swaptions Purchased | — | 146,292 | — | 146,292 | ||||||||||||
| Over-the-Counter Interest Rate Swaption Purchased |
— | 18,147 | — | 18,147 | ||||||||||||
|
|
|
| ||||||||||||||
| Total Investments, at Value |
123,425,952 | 1,459,545,987 | 19,723,542 | 1,602,695,481 | ||||||||||||
| Other Financial Instruments: |
||||||||||||||||
| Swaps, at value |
— | 1,693,772 | — | 1,693,772 | ||||||||||||
| Centrally cleared swaps, at value |
— | 5,024 | — | 5,024 | ||||||||||||
| Forward currency exchange contracts |
— | 11,319,519 | — | 11,319,519 | ||||||||||||
| Futures contracts |
218,226 | — | — | 218,226 | ||||||||||||
|
|
|
| ||||||||||||||
| Total Assets excluding investment companies valued using practical expedient | $ | 123,644,178 | $ | 1,472,564,302 | $ | 19,723,542 | 1,615,932,022 | |||||||||
|
|
|
| ||||||||||||||
| Investment companies valued using practical expedient | 241,053,684 | |||||||||||||||
|
|
|
| ||||||||||||||
| Total Assets |
$ | 1,856,985,706 | ||||||||||||||
|
|
|
| ||||||||||||||
| Liabilities Table |
||||||||||||||||
| Other Financial Instruments: |
||||||||||||||||
| Swaps, at value |
$ | — | $ | (338,677 | ) | $ | — | $ | (338,677 | ) | ||||||
| Centrally cleared swaps, at value |
— | (564,612 | ) | — | (564,612 | ) | ||||||||||
| Forward currency exchange contracts |
— | (6,921,269 | ) | — | (6,921,269 | ) | ||||||||||
| Futures contracts |
(1,201,723 | ) | — | — | (1,201,723 | ) | ||||||||||
| Options written, at value |
— | (980,735 | ) | — | (980,735 | ) | ||||||||||
| Swaptions written, at value |
— | (42,966 | ) | — | (42,966 | ) | ||||||||||
|
|
|
| ||||||||||||||
| Total Liabilities |
$ | (1,201,723 | ) | $ | (8,848,259 | ) | $ | — | $ | (10,049,982 | ) | |||||
|
|
|
| ||||||||||||||
Forward currency exchange contracts and futures contracts, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
4. Investments and Risks
Risks of Foreign Investing. The Fund may invest in foreign securities which are subject to special risks. Securities traded in foreign markets may be less liquid and more volatile than those traded in U.S. markets. Foreign issuers are usually not subject to the same accounting and disclosure requirements that U.S. companies are subject to, which may make it difficult for the Fund to evaluate a foreign company’s operations or financial condition. A change in the value of a foreign currency against the U.S. dollar will result in a change in the U.S. dollar value of investments denominated in that foreign currency and in the value of any income or distributions the Fund may receive on those investments. The value of foreign investments may be affected by exchange control regulations, foreign taxes, higher transaction and other costs, delays in the settlement of transactions, changes in economic or monetary policy in the United States or abroad, expropriation or nationalization of a company’s assets, or other political and economic factors. In addition, due to the inter-relationship of global economies and financial markets, changes in political and economic factors in one country or region could adversely affect conditions in another country or region. Investments in foreign securities may also expose the Fund to time-zone arbitrage risk. Foreign securities may trade on weekends or other days when the Fund does not price its shares. At times, the Fund may emphasize investments in a particular country or region and may be subject to greater risks from adverse events that occur in that country or region. Foreign securities and foreign currencies held in foreign banks and securities depositories may be subject to limited or no regulatory oversight.
Investments in Affiliated Funds. The Fund is permitted to invest in other mutual funds advised by the Manager (“Affiliated Funds”). Affiliated Funds are open-end management investment companies registered under the 1940 Act, as amended. The Manager is the investment adviser of, and the Sub-Adviser provides investment and related advisory services to, the Affiliated Funds. When applicable, the Fund’s investments in Affiliated Funds
29 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
NOTES TO CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
4. Investments and Risks (Continued)
are included in the Consolidated Statement of Investments. Shares of Affiliated Funds are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of the Affiliated Funds’ expenses, including their management fee. The Manager will waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Fund’s investment in the Affiliated Funds.
Each of the Affiliated Funds in which the Fund invests has its own investment risks, and those risks can affect the value of the Fund’s investments and therefore the value of the Fund’s shares. To the extent that the Fund invests more of its assets in one Affiliated Fund than in another, the Fund will have greater exposure to the risks of that Affiliated Fund.
Investments in Money Market Instruments. The Fund is permitted to invest its free cash balances in money market instruments to provide liquidity or for defensive purposes. The Fund may invest in money market instruments by investing in Class E shares of Oppenheimer Institutional Government Money Market Fund (“IGMMF”), formerly known as Oppenheimer Institutional Money Market Fund, which is an Affiliated Fund. IGMMF is regulated as a money market fund under the 1940 Act, as amended. The Fund may also invest in money market instruments directly or in other affiliated or unaffiliated money market funds.
Investment in Oppenheimer Master Funds. The Fund is permitted to invest in entities sponsored and/or advised by the Manager or an affiliate. Certain of these entities in which the Fund invests are mutual funds registered under the Investment Company Act of 1940 that expect to be treated as partnerships for tax purposes, specifically Oppenheimer Master Loan Fund, LLC (“Master Loan”) and Oppenheimer Master Event-Linked Bond Fund, LLC (“Master Event-Linked Bond”) (the “Master Funds”). Each Master Fund has its own investment risks, and those risks can affect the value of the Fund’s investments and therefore the value of the Fund’s shares. To the extent that the Fund invests more of its assets in one Master Fund than in another, the Fund will have greater exposure to the risks of that Master Fund.
The investment objective of Master Loan is to seek income. The investment objective of Master Event-Linked Bond is to seek total return. The Fund’s investments in the Master Funds are included in the Consolidated Statement of Investments. The Fund recognizes income and gain/(loss) on its investments in each Master Fund according to its allocated pro-rata share, based on its relative proportion of total outstanding Master Fund shares held, of the total net income earned and the net gain/(loss) realized on investments sold by the Master Funds. As a shareholder, the Fund is subject to its proportional share of the Master Funds’ expenses, including their management fee. The Manager will waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Fund’s investment in the Master Funds. The Fund owns 14.3% of Master Loan and 13.6% of Master Event-Linked Bond at period end.
Structured Securities. The Fund invests in structured securities whose market values, interest rates and/or redemption prices are linked to the performance of underlying foreign currencies, interest rate spreads, stock market indices, prices of individual securities, commodities or other financial instruments or the occurrence of other specific events. The structured securities are often leveraged, increasing the volatility of each note’s market value relative to the change in the underlying linked financial element or event. Fluctuations in value of these securities are recorded as unrealized gains and losses in the accompanying Consolidated Statement of Operations in the annual and semiannual reports. The Fund records a realized gain or loss when a structured security is sold or matures.
Loans. The Fund invests in loans made to U.S. and foreign borrowers that are corporations, partnerships or other business entities. The Fund will do so directly as an original lender or by assignment or indirectly through participation agreements or certain derivative instruments. While many of these loans will be collateralized, the Fund can also invest in uncollateralized loans. Loans are often issued in connection with recapitalizations, acquisitions, leveraged buyouts, and refinancing of borrowers. The loans often pay interest at rates that float above (or are adjusted periodically based on) a benchmark that reflects current interest rates although the Fund can also invest in loans with fixed interest rates.
Securities on a When-Issued or Delayed Delivery Basis. The Fund may purchase securities on a “when-issued” basis, and may purchase or sell securities on a “delayed delivery” basis. “When-issued” or “delayed delivery” refers to securities whose terms and indenture are available and for which a market exists, but which are not available for immediate delivery. Delivery and payment for securities that have been purchased by the Fund on a when-issued basis normally takes place within six months and possibly as long as two years or more after the trade date. During this period, such securities do not earn interest, are subject to market fluctuation and may increase or decrease in value prior to their delivery. The purchase of securities on a when-issued basis may increase the volatility of the Fund’s net asset value to the extent the Fund executes such transactions while remaining substantially fully invested. When the Fund engages in when-issued or delayed delivery transactions, it relies on the buyer or seller, as the case may be, to complete the transaction. Their failure to do so may cause the Fund to lose the opportunity to obtain or dispose of the security at a price and yield it considers advantageous. The Fund may also sell securities that it purchased on a when-issued basis or forward commitment prior to settlement of the original purchase.
At period end, the Fund had purchased securities issued on a when-issued or delayed delivery basis and sold securities issued on a delayed delivery basis as follows:
30 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
4. Investments and Risks (Continued)
| When-Issued or | ||||
| Delayed Delivery | ||||
| Basis Transactions | ||||
|
|
||||
| Purchased securities |
$155,976,177 | |||
| Sold securities |
29,149,617 | |||
The Fund may enter into “forward roll” transactions with respect to mortgage-related securities. In this type of transaction, the Fund sells a mortgage-related security to a buyer and simultaneously agrees to repurchase a similar security (same type, coupon and maturity) at a later date at a set price. During the period between the sale and the repurchase, the Fund will not be entitled to receive interest and principal payments on the securities that have been sold. The Fund records the incremental difference between the forward purchase and sale of each forward roll as realized gain (loss) on investments or as fee income in the case of such transactions that have an associated fee in lieu of a difference in the forward purchase and sale price.
Forward roll transactions may be deemed to entail embedded leverage since the Fund purchases mortgage-related securities with extended settlement dates rather than paying for the securities under a normal settlement cycle. This embedded leverage increases the Fund’s market value of investments relative to its net assets which can incrementally increase the volatility of the Fund’s performance. Forward roll transactions can be replicated over multiple settlement periods.
Risks of entering into forward roll transactions include the potential inability of the counterparty to meet the terms of the agreement; the potential of the Fund to receive inferior securities at redelivery as compared to the securities sold to the counterparty; and counterparty credit risk.
Restricted Securities. At period end, investments in securities included issues that are restricted. A restricted security may have a contractual restriction on its resale and is valued under methods approved by the Board of Trustees as reflecting fair value. Securities that are restricted are marked with an applicable footnote on the Consolidated Statement of Investments. Restricted securities are reported on a schedule following the Consolidated Statement of Investments.
Equity Security Risk. Stocks and other equity securities fluctuate in price. The value of the Fund’s portfolio may be affected by changes in the equity markets generally. Equity markets may experience significant short-term volatility and may fall sharply at times. Different markets may behave differently from each other and U.S. equity markets may move in the opposite direction from one or more foreign stock markets. Adverse events in any part of the equity or fixed-income markets may have unexpected negative effects on other market segments.
The prices of individual equity securities generally do not all move in the same direction at the same time and a variety of factors can affect the price of a particular company’s securities. These factors may include, but are not limited to, poor earnings reports, a loss of customers, litigation against the company, general unfavorable performance of the company’s sector or industry, or changes in government regulations affecting the company or its industry.
Credit Risk. The Fund invests in high-yield, non-investment-grade bonds, which may be subject to a greater degree of credit risk. Credit risk relates to the ability of the issuer to meet interest or principal payments or both as they become due. The Fund may acquire securities that have missed an interest payment, and is not obligated to dispose of securities whose issuers or underlying obligors subsequently miss an interest payment.
Information concerning securities not accruing interest at period end is as follows:
| Cost |
$13,542,321 | |||
| Market Value |
$2,867,172 | |||
| Market Value as % of Net Assets |
0.16% |
Sovereign Debt Risk. The Fund invests in sovereign debt securities, which are subject to certain special risks. These risks include, but are not limited to, the risk that a governmental entity may delay or refuse, or otherwise be unable, to pay interest or repay the principal on its sovereign debt. There may also be no legal process for collecting sovereign debt that a government does not pay or bankruptcy proceedings through which all or part of such sovereign debt may be collected. In addition, a restructuring or default of sovereign debt may also cause additional impacts to the financial markets, such as downgrades to credit ratings, reduced liquidity and increased volatility, among others.
5. Market Risk Factors
The Fund’s investments in securities and/or financial derivatives may expose the Fund to various market risk factors:
Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.
Credit Risk. Credit risk relates to the ability of the issuer of debt to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield debt securities are subject to credit risk to a greater extent than lower-yield, higher-quality securities.
Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.
Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.
Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between
31 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
NOTES TO CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
5. Market Risk Factors (Continued)
price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.
Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.
6. Use of Derivatives
The Fund’s investment objective not only permits the Fund to purchase investment securities, it also allows the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward currency exchange contracts, credit default swaps, interest rate swaps, total return swaps, variance swaps and purchased and written options. In doing so, the Fund will employ strategies in differing combinations to permit it to increase, decrease, or change the level or types of exposure to market risk factors. These instruments may allow the Fund to pursue its objectives more quickly and efficiently than if it were to make direct purchases or sales of securities capable of effecting a similar response to market factors. Such contracts may be entered into through a bilateral over-the-counter (“OTC”) transaction, or through a securities or futures exchange and cleared through a clearinghouse.
Derivatives may have little or no initial cash investment relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost due to unanticipated changes in the market risk factors and the overall market. This use of embedded leverage allows the Fund to increase its market value exposure relative to its net assets and can substantially increase the volatility of the Fund’s performance. In instances where the Fund is using derivatives to decrease, or hedge, exposures to market risk factors for securities held by the Fund, there are also risks that those derivatives may not perform as expected resulting in losses for the combined or hedged positions. Some derivatives have the potential for unlimited loss, regardless of the size of the Fund’s initial investment.
Additional associated risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the derivative and the Fund. Typically, the associated risks are not the risks that the Fund is attempting to increase or decrease exposure to, per its investment objectives, but are the additional risks from investing in derivatives. Examples of these associated risks are liquidity risk, which is the risk that the Fund will not be able to sell the derivative in the open market in a timely manner, and counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund.
The Fund’s actual exposures to these market risk factors and associated risks during the period are discussed in further detail, by derivative type, below.
Forward Currency Exchange Contracts
The Fund may enter into forward currency exchange contracts (“forward contracts”) for the purchase or sale of a foreign currency at a negotiated rate at a future date. Such contracts are traded in the OTC inter-bank currency dealer market.
Forward contracts are reported on a schedule following the Consolidated Statement of Investments. The unrealized appreciation (depreciation) is reported in the Consolidated Statement of Assets and Liabilities in the annual and semiannual reports as a receivable (or payable) and in the Consolidated Statement of Operations in the annual and semiannual reports within the change in unrealized appreciation (depreciation). At contract close, the difference between the original cost of the contract and the value at the close date is recorded as a realized gain (loss) in the Consolidated Statement of Operations in the annual and semiannual reports.
The Fund has entered into forward contracts with the obligation to purchase specified foreign currencies in the future at a currently negotiated forward rate in order to take a positive investment perspective on the related currency. These forward contracts seek to increase exposure to foreign exchange rate risk.
The Fund has entered into forward contracts with the obligation to purchase specified foreign currencies in the future at a currently negotiated forward rate in order to decrease exposure to foreign exchange rate risk associated with foreign currency denominated securities held by the Fund.
The Fund has entered into forward contracts with the obligation to sell specified foreign currencies in the future at a currently negotiated forward rate in order to take a negative investment perspective on the related currency. These forward contracts seek to increase exposure to foreign exchange rate risk.
The Fund has entered into forward contracts with the obligation to sell specified foreign currencies in the future at a currently negotiated forward rate in order to decrease exposure to foreign exchange rate risk associated with foreign currency denominated securities held by the Fund.
During the reporting period, the Fund had daily average contract amounts on forward contracts to buy and sell of $388,222,310 and $519,166,277, respectively.
Additional associated risk to the Fund includes counterparty credit risk. Counterparty credit risk arises from the possibility that the counterparty to a forward contract will default and fail to perform its obligations to the Fund.
Futures Contracts
A futures contract is a commitment to buy or sell a specific amount of a commodity, financial instrument or currency at a negotiated price on a stipulated future date. The Fund may buy and sell futures contracts and may also buy or write put or call options on these futures contracts. Futures contracts and options thereon are generally entered into on a regulated futures exchange and cleared through a clearinghouse associated with the exchange.
32 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
6. Use of Derivatives (Continued)
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 in an account registered in the futures commission merchant’s name. Subsequent payments (variation margin) are paid to or from the futures commission merchant each day equal to the daily changes in the contract value. Such payments are recorded as unrealized gains and losses. Should the Fund fail to make requested variation margin payments, the futures commission merchant can gain access to the initial margin to satisfy the Fund’s payment obligations.
Futures contracts are reported on a schedule following the Consolidated Statement of Investments. Securities held by a futures commission merchant to cover initial margin requirements on open futures contracts are noted in the Consolidated Statement of Investments. Cash held by a futures commission merchant to cover initial margin requirements on open futures contracts and the receivable and/or payable for the daily mark to market for the variation margin are noted in the Consolidated Statement of Assets and Liabilities in the annual and semiannual reports. The net change in unrealized appreciation and depreciation is reported in the Consolidated Statement of Operations in the annual and semiannual reports. Realized gains (losses) are reported in the Consolidated Statement of Operations in the annual and semiannual reports at the closing or expiration of futures contracts.
The Fund has purchased futures contracts on various bonds and notes to increase exposure to interest rate risk.
The Fund has sold futures contracts on various bonds and notes to decrease exposure to interest rate risk.
The Fund has sold futures contracts on various equity indexes to decrease exposure to equity risk.
During the reporting period, the Fund had an ending monthly average market value of $146,578,348 and $70,596,708 on futures contracts purchased and sold, respectively.
Additional associated risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market where the Fund is unable to liquidate the contract or enter into an offsetting position and, if used for hedging purposes, the risk that the price of the contract will correlate imperfectly with the prices of the Fund’s securities.
Option Activity
The Fund may buy and sell put and call options, or write put and call options. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security, currency or other underlying financial instrument at a fixed price, upon exercise of the option.
Options can be traded through an exchange or through a privately negotiated arrangement with a dealer in an OTC transaction. Options traded through an exchange are generally cleared through a clearinghouse (such as The Options Clearing Corporation). The difference between the premium received or paid, and market value of the option, is recorded as unrealized appreciation or depreciation. The net change in unrealized appreciation or depreciation is reported in the Consolidated Statement of Operations in the annual and semiannual reports. When an option is exercised, the cost of the security purchased or the proceeds of the security sale are adjusted by the amount of premium received or paid. Upon the expiration or closing of the option transaction, a gain or loss is reported in the Consolidated Statement of Operations in the annual and semiannual reports.
The Fund has purchased call options on currencies to increase exposure to foreign exchange rate risk. A purchased call option becomes more valuable as the price of the underlying financial instrument appreciates relative to the strike price.
The Fund has purchased put options on currencies to decrease exposure to foreign exchange rate risk. A purchased put option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.
The Fund has purchased call options on treasury and/or euro futures to increase exposure to interest rate risk. A purchased call option becomes more valuable as the price of the underlying financial instrument appreciates relative to the strike price.
The Fund has purchased put options on treasury and/or euro futures to decrease exposure to interest rate risk. A purchased put option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.
The Fund has purchased call options on individual equity securities and/or equity indexes to increase exposure to equity risk. A purchased call option becomes more valuable as the price of the underlying financial instrument appreciates relative to the strike price.
During the reporting period, the Fund had an ending monthly average market value of $664,811 and $737,335 on purchased call options and purchased put options, respectively.
Options written, if any, are reported in a schedule following the Consolidated Statement of Investments and as a liability in the Consolidated Statement of Assets and Liabilities in the annual and semiannual reports. Securities held in collateral accounts to cover potential obligations with respect to outstanding written options are noted in the Consolidated Statement of Investments.
The risk in writing a call option is that the market price of the security increases and if the option is exercised, the Fund must either purchase the security at a higher price for delivery or, if the Fund owns the underlying security, give up the opportunity for profit. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk that there may be an illiquid market where the Fund is unable to close the contract.
The Fund has written put options on currencies to increase exposure to foreign exchange rate risk. A written put option becomes more valuable as the price of the underlying financial instrument appreciates relative to the strike price.
The Fund has written call options on currencies to decrease exposure to foreign exchange rate risk. A written call option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.
The Fund has written put options on treasury and/or euro futures to increase exposure to interest rate risk. A written put option becomes more valuable as the price of the underlying financial instrument appreciates relative to the strike price.
The Fund has written call options on individual equity securities and/or equity indexes to decrease exposure to equity risk. A written call option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.
33 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
NOTES TO CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
6. Use of Derivatives (Continued)
During the reporting period, the Fund had an ending monthly average market value of $581,847 and $413,552 on written call options and written put options, respectively.
Additional associated risks to the Fund include counterparty credit risk and liquidity risk.
Written option activity for the reporting period was as follows:
| Number of | Amount of | |||||||
| Contracts | Premiums | |||||||
|
|
||||||||
| Options outstanding as of |
||||||||
| December 31, 2015 |
64,770,515,000 | $ | 2,061,032 | |||||
| Options written |
391,096,859,195 | 5,355,140 | ||||||
| Options closed or expired |
(62,398,038,642 | ) | (1,099,894 | ) | ||||
| Options exercised |
(194,552,335,923 | ) | (5,121,389 | ) | ||||
|
|
|
| ||||||
| Options outstanding as of |
||||||||
| September 30, 2016 |
198,916,999,630 | $ | 1,194,889 | |||||
|
|
|
| ||||||
Swap Contracts
The Fund may enter into swap contract agreements with a counterparty to exchange a series of cash flows based on either specified reference rates, the price or volatility of asset or non-asset references, or the occurrence of a credit event, over a specified period. Swaps can be executed in a bi-lateral privately negotiated arrangement with a dealer in an OTC transaction (“OTC swaps”) or executed on a regulated market. Certain swaps, regardless of the venue of their execution, are required to be cleared through a clearinghouse (“centrally cleared swaps”). Swap contracts may include interest rate, equity, debt, index, total return, credit default, currency, and volatility swaps.
Swap contracts are reported on a schedule following the Consolidated Statement of Investments. The values of centrally cleared swap and OTC swap contracts are aggregated by positive and negative values and disclosed separately on the Consolidated Statement of Assets and Liabilities in the annual and semiannual reports. The unrealized appreciation (depreciation) related to the change in the valuation of the notional amount of the swap is combined with the accrued interest due to (owed by) the Fund, if any, at termination or settlement. The net change in this amount during the period is included on the Consolidated Statement of Operations in the annual and semiannual reports. The Fund also records any periodic payments received from (paid to) the counterparty, including at termination, under such contracts as realized gain (loss) on the Consolidated Statement of Operations in the annual and semiannual reports.
Swap contract agreements are exposed to the market risk factor of the specific underlying reference rate or asset. Swap contracts are typically more attractively priced compared to similar investments in related cash securities because they isolate the risk to one market risk factor and eliminate the other market risk factors. Investments in cash securities (for instance bonds) have exposure to multiple risk factors (credit and interest rate risk). Because swaps have embedded leverage, they can expose the Fund to substantial risk in the isolated market risk factor.
Credit Default Swap Contracts. A credit default swap is a contract that enables an investor to buy or sell protection against a defined-issuer credit event, such as the issuer’s failure to make timely payments of interest or principal on a debt security, bankruptcy or restructuring. The Fund may enter into credit default swaps either by buying or selling protection on a corporate issuer, sovereign issuer, or a basket or index of issuers (the “reference asset”).
The buyer of protection pays a periodic fee to the seller of protection based on the notional amount of the swap contract. The seller of protection agrees to compensate the buyer of protection for future potential losses as a result of a credit event on the reference asset. The contract effectively transfers the credit event risk of the reference asset from the buyer of protection to the seller of protection.
The ongoing value of the contract will fluctuate throughout the term of the contract based primarily on the credit risk of the reference asset. If the credit quality of the reference asset improves relative to the credit quality at contract initiation, the buyer of protection may have an unrealized loss greater than the anticipated periodic fee owed. This unrealized loss would be the result of current credit protection being cheaper than the cost of credit protection at contract initiation. If the buyer elects to terminate the contract prior to its maturity, and there has been no credit event, this unrealized loss will become realized. If the contract is held to maturity, and there has been no credit event, the realized loss will be equal to the periodic fee paid over the life of the contract.
If there is a credit event, the buyer of protection can exercise its rights under the contract and receive a payment from the seller of protection equal to the notional amount of the swap less the market value of specified debt securities issued by the reference asset. Upon exercise of the contract the difference between such value and the notional amount is recorded as realized gain (loss) and is included on the Consolidated Statement of Operations in the annual and semiannual reports.
The Fund has sold credit protection through credit default swaps to increase exposure to the credit risk of individual issuers and/or indexes of issuers that are either unavailable or considered to be less attractive in the bond market.
The Fund has purchased credit protection through credit default swaps to decrease exposure to the credit risk of individual issuers and/or indexes of issuers.
The Fund has engaged in spread curve trades by simultaneously purchasing and selling protection through credit default swaps referenced to the same reference asset but with different maturities. Spread curve trades attempt to gain exposure to credit risk on a forward basis by realizing gains on the expected differences in spreads.
For the reporting period, the Fund had ending monthly average notional amounts of $25,404,136 and $15,072,971 on credit default swaps to buy protection and credit default swaps to sell protection, respectively.
34 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
6. Use of Derivatives (Continued)
Additional associated risks to the Fund include counterparty credit risk and liquidity risk.
Currency Swap Contracts. A currency swap contract is an agreement between counterparties to exchange different currencies at contract inception that are equivalent to a notional value. The exchange at contract inception is made at the current spot rate. The contract also includes an agreement to reverse the exchange of the same notional values of those currencies at contract termination. The re-exchange at contract termination may take place at the same exchange rate, a specified rate or the then current spot rate. Certain currency swap contracts provide for exchanging the currencies only at contract termination and can provide for only a net payment in the settlement currency, typically USD. A currency swap contract may also include the exchange of periodic payments, between the counterparties, that are based on interest rates available in the respective currencies at contract inception. Other currency swap contracts may not provide for exchanging the different currencies at all, and only for exchanging interest cash flows based on the notional value in the contract.
The Fund has entered into currency swap contracts with the obligation to pay an interest rate on the dollar notional amount and receive an interest rate on the various foreign currency notional amounts. These currency swap contracts increase exposure to, or decrease exposure away from, foreign exchange and interest rate risk.
For the reporting period, the Fund had ending monthly average notional amounts of $2,688,708 on currency swaps which receive a fixed rate.
Additional associated risks to the Fund include counterparty credit risk and liquidity risk.
At period end, the Fund had no such currency swap agreements outstanding.
Interest Rate Swap Contracts. An interest rate swap is an agreement between counterparties to exchange periodic payments based on interest rates. One cash flow stream will typically be a floating rate payment based upon a specified floating interest rate while the other is typically a fixed interest rate.
The Fund has entered into interest rate swaps in which it pays a floating interest rate and receives a fixed interest rate in order to increase exposure to interest rate risk. Typically, if relative interest rates rise, payments made by the Fund under a swap agreement will be greater than the payments received by the Fund.
The Fund has entered into interest rate swaps in which it pays a fixed interest rate and receives a floating interest rate in order to decrease exposure to interest rate risk. Typically, if relative interest rates rise, payments received by the Fund under the swap agreement will be greater than the payments made by the Fund.
For the reporting period, the Fund had ending monthly average notional amounts of $20,196,530 and $97,228,767 on interest rate swaps which pay a fixed rate and interest rate swaps which receive a fixed rate, respectively.
Additional associated risks to the Fund include counterparty credit risk and liquidity risk.
Swaption Transactions
The Fund may enter into a swaption contract which grants the purchaser the right, but not the obligation, to enter into a swap transaction at preset terms detailed in the underlying agreement within a specified period of time. The purchaser pays a premium to the swaption writer who bears the risk of unfavorable changes in the preset terms on the underlying swap.
Purchased swaptions are reported as a component of investments in the Consolidated Statement of Investments and the Consolidated Statement of Assets and Liabilities in the annual and semiannual reports. Written swaptions are reported on a schedule following the Consolidated Statement of Investments and their value is reported as a separate asset or liability line item in the Consolidated Statement of Assets and Liabilities in the annual and semiannual reports. The net change in unrealized appreciation or depreciation on written swaptions is separately reported in the Consolidated Statement of Operations in the annual and semiannual reports. When a swaption is exercised, the cost of the swap is adjusted by the amount of premium paid or received. Upon the expiration or closing of an unexercised swaption contract, a gain or loss is reported in the Consolidated Statement of Operations in the annual and semiannual reports for the amount of the premium paid or received.
The Fund generally will incur a greater risk when it writes a swaption than when it purchases a swaption. When the Fund writes a swaption it will become obligated, upon exercise of the swaption, according to the terms of the underlying agreement. Swaption contracts written by the Fund do not give rise to counterparty credit risk prior to exercise as they obligate the Fund, not its counterparty, to perform. When the Fund purchases a swaption it only risks losing the amount of the premium it paid if the swaption expires unexercised. However, when the Fund exercises a purchased swaption there is a risk that the counterparty will fail to perform or otherwise default on its obligations under the swaption contract.
The Fund has purchased swaptions which gives it the option to enter into an interest rate swap in which it pays a floating interest rate and receives a fixed interest rate in order to increase exposure to interest rate risk. A purchased swaption of this type becomes more valuable as the reference interest rate decreases relative to the preset interest rate.
The Fund has purchased swaptions which gives it the option to enter into an interest rate swap in which it pays a fixed interest rate and receives a floating interest rate in order to decrease exposure to interest rate risk. A purchased swaption of this type becomes more valuable as the reference interest rate increases relative to the preset interest rate.
The Fund has purchased swaptions which gives it the option to sell credit protection through credit default swaps in order to increase exposure to the credit risk of individual issuers and/ or indexes of issuers. A purchased swaption of this type becomes more valuable as the likelihood of a credit event on the reference asset decreases.
The Fund has written swaptions which gives it the obligation, if exercised by the purchaser, to enter into an interest rate swap in which it pays a floating interest rate and receives a fixed interest rate in order to increase exposure to interest rate risk. A written swaption of this type becomes more valuable as the reference interest rate decreases relative to the preset interest rate.
The Fund has written swaptions which gives it the obligation, if exercised by the purchaser, to enter into an interest rate swap in which it pays a
35 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
NOTES TO CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
6. Use of Derivatives (Continued)
fixed interest rate and receives a floating interest rate in order to decrease exposure to interest rate risk. A written swaption of this type becomes more valuable as the reference interest rate increases relative to the preset interest rate.
During the reporting period, the Fund had an ending monthly average market value of $1,881,872 and $1,194,324 on purchased and written swaptions, respectively.
Written swaption activity for the reporting period was as follows:
| Amount of | ||||||||
| Notional Amount | Premiums | |||||||
|
|
||||||||
| Swaptions outstanding as of |
||||||||
| December 31, 2015 |
$ | 362,297,441 | $ | 1,043,474 | ||||
| Swaptions written |
1,428,854,000 | 4,204,145 | ||||||
| Swaptions closed or expired |
(362,297,441 | ) | (1,043,475) | |||||
| Swaptions exercised |
(1,411,090,000 | ) | (4,109,287) | |||||
|
|
|
|||||||
| Swaptions outstanding as of September 30, 2016 | 17,764,000 | $ | 94,857 | |||||
|
|
|
|||||||
Counterparty Credit Risk. Derivative positions are subject to the risk that the counterparty will not fulfill its obligation to the Fund. The Fund intends to enter into derivative transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction.
The Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by the Fund. For OTC options purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the contracts. Options written by the Fund do not typically give rise to counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform.
To reduce counterparty risk with respect to OTC transactions, the Fund has entered into master netting arrangements, established within the Fund’s International Swap and Derivatives Association, Inc. (“ISDA”) master agreements, which allow the Fund to make (or to have an entitlement to receive) a single net payment in the event of default (close-out netting) for outstanding payables and receivables with respect to certain OTC positions in swaps, options, swaptions, and forward currency exchange contracts for each individual counterparty. In addition, the Fund may require that certain counterparties post cash and/or securities in collateral accounts to cover their net payment obligations for those derivative contracts subject to ISDA master agreements. If the counterparty fails to perform under these contracts and agreements, the cash and/or securities will be made available to the Fund.
At period end, the Fund has required certain counterparties to post collateral of $7,910,238.
ISDA master agreements include credit related contingent features which allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event that, for example, the Fund’s net assets decline by a stated percentage or the Fund fails to meet the terms of its ISDA master agreements, which would cause the Fund to accelerate payment of any net liability owed to the counterparty.
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Consolidated Statement of Assets and Liabilities in the annual and semiannual reports. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events.
The Fund’s risk of loss from counterparty credit risk on exchange-traded derivatives cleared through a clearinghouse and for centrally cleared swaps is generally considered lower than as compared to OTC derivatives. However, counterparty credit risk exists with respect to initial and variation margin deposited/paid by the Fund that is held in futures commission merchant, broker and/or clearinghouse accounts for such exchange-traded derivatives and for centrally cleared swaps.
With respect to centrally cleared swaps, such transactions will be submitted for clearing, and if cleared, will be held in accounts at futures commission merchants or brokers that are members of clearinghouses. While brokers, futures commission merchants and clearinghouses are required to segregate customer margin from their own assets, in the event that a broker, futures commission merchant or clearinghouse becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the broker, futures commission merchant or clearinghouse for all its customers, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the broker’s, futures commission merchant’s or clearinghouse’s customers, potentially resulting in losses to the Fund.
There is the risk that a broker, futures commission merchant or clearinghouse will decline to clear a transaction on the Fund’s behalf, and the Fund may be required to pay a termination fee to the executing broker with whom the Fund initially enters into the transaction. Clearinghouses may also be permitted to terminate centrally cleared swaps at any time. The Fund is also subject to the risk that the broker or futures commission merchant will improperly use the Fund’s assets deposited/paid as initial or variation margin to satisfy payment obligations of another customer. In the event of a default by another customer of the broker or futures commission merchant, the Fund might not receive its variation margin payments from the clearinghouse, due to the manner in which variation margin payments are aggregated for all customers of the broker/futures commission merchant.
Collateral and margin requirements differ by type of derivative. Margin requirements are established by the broker, futures commission merchant or clearinghouse for exchange-traded and cleared derivatives, including centrally cleared swaps. Brokers, futures commission merchants and clearinghouses can ask for margin in excess of the regulatory minimum, or increase the margin amount, in certain circumstances.
Collateral terms are contract specific for OTC derivatives. For derivatives traded under an ISDA master agreement, the collateral requirements are typically calculated by netting the mark to market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund or the counterparty.
For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Fund, if any, is reported separately on the
36 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
6. Use of Derivatives (Continued)
Consolidated Statement of Assets and Liabilities in the annual and semiannual reports as cash pledged as collateral. Non-cash collateral pledged by the Fund, if any, is noted in the Consolidated Statement of Investments. Generally, the amount of collateral due from or to a party must exceed a minimum transfer amount threshold (e.g. $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty nonperformance.
7. Federal Taxes
The approximate aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes at period end are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses.
| Federal tax cost of securities |
$ | 1,844,496,573 | ||
| Federal tax cost of other investments |
193,969,195 | |||
|
|
|
| ||
| Total federal tax cost |
$ | 2,038,465,768 | ||
|
|
|
| ||
| Gross unrealized appreciation |
$ | 57,845,736 | ||
| Gross unrealized depreciation |
(55,350,826 | ) | ||
|
|
|
| ||
| Net unrealized appreciation |
$ | 2,494,910 | ||
|
|
|
|
37 OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1 OPPENHEIMER EQUITY INCOME FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
Footnotes to Statement of Investments
1. Non-income producing security.
2. Security is a Master Limited Partnership.
3. All or a portion of the security position is held in segregated accounts and pledged to cover margin requirements with respect to outstanding written options. The aggregate market value of such securities is $385,397. See Note 5 of the accompanying Notes.
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 $39,860 or 0.50% of the Fund’s net assets at period end.
The following issuer is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the reporting period by virtue of the Fund owning at least 5% of the voting securities of the issuer or as a result of the Fund and the issuer having the same investment adviser. There were no affiliate securities held by the Fund at period end. Transactions during the period in which the issuer was an affiliate are as follows:
| Shares December 31, 2015 |
Gross Additions |
Gross Reductions |
Shares September 30, 2016 |
|||||||||||||
|
|
||||||||||||||||
| Oppenheimer Institutional Government Money Market Fund, Cl. Ea |
60,375 | 1,048,997 | 1,109,372 | — | ||||||||||||
| Income | ||||||||||||||||
|
|
||||||||||||||||
| Oppenheimer Institutional Government Money Market Fund, Cl. Ea |
$ | 152 | ||||||||||||||
a. Prior to September 28, 2016, this fund was named Oppenheimer Institutional Money Market Fund.
|
|
||||||||||||||||||||||||||||
| Exchange-Traded Options Written at September 30, 2016 | ||||||||||||||||||||||||||||
| Description | Exercise Price | Expiration Date | Number of Contracts |
Premiums Received | Value | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Bank of America Corp. Call |
USD | 16.000 | 10/21/16 | USD | (5) | $ | 132 | $ | (150) | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Chevron Corp. Call |
USD | 100.000 | 10/21/16 | USD | (5) | 2,030 | (2,040) | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| CSX Corp. Call |
USD | 30.000 | 10/21/16 | USD | (6) | 295 | (612) | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Ford Motor Co. Call |
USD | 13.000 | 10/21/16 | USD | (15) | 247 | (45) | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| General Electric Co. Call |
USD | 32.000 | 10/21/16 | USD | (1) | 27 | (2) | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| General Motors Co. Call |
USD | 32.000 | 10/21/16 | USD | (15) | 1,014 | (855) | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| General Motors Co. Call |
USD | 33.000 | 10/21/16 | USD | (5) | 217 | (85) | |||||||||||||||||||||
2 OPPENHEIMER EQUITY INCOME FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
|
|
||||||||||||||||||||||||||||
| Exchange-Traded Options Written (Continued) | ||||||||||||||||||||||||||||
| Description | Exercise Price | Expiration Date | Number of Contracts |
Premiums Received | Value | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| HP, Inc. Call | USD | 15.500 | 10/21/16 | USD | (1 | ) | $ | 22 | $ | (41) | ||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Kinder Morgan, Inc. Call | USD | 21.000 | 10/21/16 | USD | (1 | ) | 182 | (222) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Kinder Morgan, Inc. Call | USD | 22.000 | 10/21/16 | USD | (26 | ) | 3,769 | (4,004) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Kohl’s Corp. Call | USD | 42.500 | 10/21/16 | USD | (1 | ) | 173 | (195) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Kohl’s Corp. Call | USD | 45.000 | 10/21/16 | USD | (1 | ) | 65 | (65) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Lear Corp. Call | USD | 120.000 | 11/18/16 | USD | (1 | ) | 387 | (525) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Macy’s, Inc. Call | USD | 37.000 | 10/21/16 | USD | (2 | ) | 178 | (220) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Marathon Oil Corp. Call | USD | 16.000 | 10/21/16 | USD | (15 | ) | 689 | (1,020) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| MetLife, Inc. Call | USD | 46.000 | 10/21/16 | USD | (1 | ) | 37 | (35) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Micron Technology, Inc. Call | USD | 15.000 | 10/21/16 | USD | (5 | ) | 1,020 | (1,460) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Microsoft Corp. Call | USD | 60.000 | 10/21/16 | USD | (2 | ) | 96 | (92) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Molson Coors Brewing Co. Call | USD | 110.000 | 10/21/16 | USD | (4 | ) | 829 | (900) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Oracle Corp. Call | USD | 41.000 | 10/21/16 | USD | (1 | ) | 74 | (4) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Philip Morris International, Inc. Call | USD | 105.000 | 10/21/16 | USD | (1 | ) | 49 | (8) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Procter & Gamble Co. (The) Call | USD | 90.000 | 10/21/16 | USD | (2 | ) | 130 | (200) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| QUALCOMM, Inc. Call | USD | 62.500 | 10/21/16 | USD | (5 | ) | 835 | (3,100) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| United Continental Holdings, Inc. Call | USD | 55.000 | 10/21/16 | USD | (1 | ) | 89 | (88) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Williams Cos., Inc. (The) Call | USD | 30.000 | 10/21/16 | USD | (6 | ) | 690 | (930) | ||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Total of Exchange-Traded Options Written | $ | 13,276 | $ | (16,898) | ||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
3 OPPENHEIMER EQUITY INCOME FUND/VA
NOTES TO STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1. Organization
Oppenheimer Equity Income Fund/VA (the “Fund”), is a separate series of Oppenheimer Variable Account Funds, a diversified open-end management investment company registered under the Investment Company Act of 1940 (“1940 Act”), as amended. The Fund’s investment objective is to seek total return. The Fund’s investment adviser is OFI Global Asset Management, Inc. (“OFI Global” or the “Manager”), a wholly-owned subsidiary of OppenheimerFunds, Inc. (“OFI” or the “Sub-Adviser”). The Manager has entered into a sub-advisory agreement with OFI. Shares of the Fund are sold only to separate accounts of life insurance companies.
2. Securities Valuation
The Fund calculates the net asset value of its shares as of 4:00 P.M. Eastern time, on each day the New York Stock Exchange (the “Exchange”) is open for trading, except in the case of a scheduled early closing of the Exchange, in which case the Fund will calculate net asset value of the shares as of the scheduled early closing time of the Exchange.
The Fund’s Board has adopted procedures for the valuation of the Fund’s securities and has delegated the day-to-day responsibility for valuation determinations under those procedures to the Manager. The Manager has established a Valuation Committee which is responsible for determining a “fair valuation” for any security for which market quotations are not “readily available.” The Valuation Committee’s fair valuation determinations are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined.
Valuation Methods and Inputs
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by third party pricing services or dealers.
The following methodologies are used to determine the market value or the fair value of the types of securities described below:
Securities traded on a registered U.S. securities exchange (including exchange-traded derivatives other than futures and futures options) are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the mean between the bid and asked price on the principal exchange or, if not available from the principal exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the principal exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer. A security of a foreign issuer traded on a foreign exchange, but not listed on a registered U.S. securities exchange, is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the third party pricing service used by the Manager, prior to the time when the Fund’s assets are valued. If the last sale price is unavailable, the security is valued at the most recent official closing price on the principal exchange on which it is traded. If the last sales price or official closing price for a foreign security is not available, the security is valued at the mean between the bid and asked price per the exchange or, if not available from the exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer.
Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share. Corporate and government debt securities (of U.S. or foreign issuers) and municipal debt securities, event-linked bonds, loans, mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers who may use matrix pricing methods to determine the evaluated prices. Short-term money market type debt securities with a remaining maturity of sixty days or less are valued at cost adjusted by the amortization of discount or premium to maturity (amortized cost), which approximates market value. Short-term debt securities with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers.
Structured securities, swaps, swaptions, and other over-the-counter derivatives are valued utilizing evaluated prices obtained from third party pricing services or broker-dealers.
A description of the standard inputs that may generally be considered by the third party pricing vendors in determining their evaluated prices is provided below.
4 OPPENHEIMER EQUITY INCOME FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
2. Securities Valuation (Continued)
| Security Type | Standard inputs generally considered by third-party pricing vendors | |
|
| ||
| Corporate debt, government debt, municipal, mortgage- backed and asset-backed securities | Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, the credit quality, yield, maturity, and other appropriate factors. | |
|
| ||
| Loans | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. | |
|
| ||
| Event-linked bonds | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. | |
|
| ||
| Structured securities | Relevant market information such as the price of underlying financial instruments, stock market indices, foreign currencies, interest rate spreads, commodities, or the occurrence of other specific events. | |
|
| ||
| Swaps | Relevant market information, including underlying reference assets such as credit spreads, credit event probabilities, index values, individual security values, forward interest rates, variable interest rates, volatility measures, and forward currency rates. | |
If a market value or price cannot be determined for a security using the methodologies described above, or if, in the “good faith” opinion of the Manager, the market value or price obtained does not constitute a “readily available market quotation,” or a significant event has occurred that would materially affect the value of the security, the security is fair valued either (i) by a standardized fair valuation methodology applicable to the security type or the significant event as previously approved by the Valuation Committee and the Fund’s Board or (ii) as determined in good faith by the Manager’s Valuation Committee. The Valuation Committee considers all relevant facts that are reasonably available, through either public information or information available to the Manager, when determining the fair value of a security. Fair value determinations by the Manager are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined. Those fair valuation standardized methodologies include, but are not limited to, valuing securities at the last sale price or initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be further adjusted for any discounts related to security-specific resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities nor can it be assured that the Fund can obtain the fair value assigned to a security if it were to sell the security.
To assess the continuing appropriateness of security valuations, the Manager, or its third party service provider who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and sale prices to the current day prices and challenges those prices exceeding certain tolerance levels with the third party pricing service or broker source. For those securities valued by fair valuations, whether through a standardized fair valuation methodology or a fair valuation determination, the Valuation Committee reviews and affirms the reasonableness of the valuations based on such methodologies and fair valuation determinations on a regular basis after considering all relevant information that is reasonably available.
Classifications
Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:
1) Level 1-unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
2) Level 2-inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)
3) Level 3-significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).
The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.
The table below categorizes amounts at period end based on valuation input level:
| Level 1— Unadjusted Quoted Prices |
Level 2— Other Significant Observable Inputs |
Level 3— Significant Unobservable Inputs |
Value | |||||||||||||
|
|
||||||||||||||||
| Assets Table |
||||||||||||||||
| Investments, at Value: |
||||||||||||||||
| Common Stocks |
||||||||||||||||
| Consumer Discretionary |
$ | 647,456 | $ | — | $ | — | $ | 647,456 | ||||||||
| Consumer Staples |
534,663 | — | — | 534,663 | ||||||||||||
| Energy |
824,081 | — | — | 824,081 | ||||||||||||
| Financials |
2,487,527 | — | — | 2,487,527 | ||||||||||||
| Health Care |
734,175 | — | — | 734,175 | ||||||||||||
| Industrials |
447,256 | — | — | 447,256 | ||||||||||||
5 OPPENHEIMER EQUITY INCOME FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
2. Securities Valuation (Continued)
| Level 1— Unadjusted Quoted Prices |
Level 2— Other Significant Observable Inputs |
Level 3— Significant Unobservable Inputs |
Value | |||||||||||||
|
|
||||||||||||||||
| Common Stocks (Continued) |
||||||||||||||||
| Information Technology |
$ | 865,549 | $ | — | $ | — | $ | 865,549 | ||||||||
| Materials |
104,782 | — | — | 104,782 | ||||||||||||
| Telecommunication Services |
208,488 | — | — | 208,488 | ||||||||||||
| Utilities |
213,713 | — | — | 213,713 | ||||||||||||
| Preferred Stocks |
625,232 | 115,327 | — | 740,559 | ||||||||||||
| Convertible Corporate Bonds and Notes |
— | 133,672 | — | 133,672 | ||||||||||||
| Structured Security |
— | 15,252 | — | 15,252 | ||||||||||||
|
|
|
|||||||||||||||
| Total Assets |
$ | 7,692,922 | $ | 264,251 | $ | — | $ | 7,957,173 | ||||||||
|
|
|
|||||||||||||||
| Liabilities Table |
||||||||||||||||
| Other Financial Instruments: |
||||||||||||||||
| Options written, at value |
$ | (16,898 | ) | $ | — | $ | — | $ | (16,898 | ) | ||||||
|
|
|
|||||||||||||||
| Total Liabilities |
$ | (16,898 | ) | $ | — | $ | — | $ | (16,898 | ) | ||||||
|
|
|
|||||||||||||||
Forward currency exchange contracts and futures contracts, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
3. Investments and Risks
Investments in Affiliated Funds. The Fund is permitted to invest in other mutual funds advised by the Manager (“Affiliated Funds”). Affiliated Funds are open-end management investment companies registered under the 1940 Act, as amended. The Manager is the investment adviser of, and the Sub-Adviser provides investment and related advisory services to, the Affiliated Funds. When applicable, the Fund’s investments in Affiliated Funds are included in the Statement of Investments. Shares of Affiliated Funds are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of the Affiliated Funds’ expenses, including their management fee. The Manager will waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Fund’s investment in the Affiliated Funds.
Each of the Affiliated Funds in which the Fund invests has its own investment risks, and those risks can affect the value of the Fund’s investments and therefore the value of the Fund’s shares. To the extent that the Fund invests more of its assets in one Affiliated Fund than in another, the Fund will have greater exposure to the risks of that Affiliated Fund.
Investments in Money Market Instruments. The Fund is permitted to invest its free cash balances in money market instruments to provide liquidity or for defensive purposes. The Fund may invest in money market instruments by investing in Class E shares of Oppenheimer Institutional Government Money Market Fund (“IGMMF”), formerly known as Oppenheimer Institutional Money Market Fund, which is an Affiliated Fund. IGMMF is regulated as a money market fund under the 1940 Act, as amended. The Fund may also invest in money market instruments directly or in other affiliated or unaffiliated money market funds.
Master Limited Partnerships (“MLPs”). MLPs issue common units that represent an equity ownership interest in a partnership and provide limited voting rights. MLP common units are registered with the Securities and Exchange Commission (“SEC”), and are freely tradable on securities exchanges such as the NYSE and the NASDAQ Stock Market (“NASDAQ”), or in the over-the-counter (“OTC”) market. An MLP consists of one or more general partners, who conduct the business, and one or more limited partners, who contribute capital. MLP common unit holders have a limited role in the partnership’s operations and management. The Fund, as a limited partner, normally would not be liable for the debts of the MLP beyond the amounts the Fund has contributed, but would not be shielded to the same extent that a shareholder of a corporation would be. In certain circumstances creditors of an MLP would have the right to seek return of capital distributed to a limited partner. This right of an MLP’s creditors would continue after the Fund sold its investment in the MLP.
Structured Securities. The Fund invests in structured securities whose market values, interest rates and/or redemption prices are linked to the performance of underlying foreign currencies, interest rate spreads, stock market indices, prices of individual securities, commodities or other financial instruments or the occurrence of other specific events. The structured securities are often leveraged, increasing the volatility of each note’s market value relative to the change in the underlying linked financial element or event. Fluctuations in value of these securities are recorded as unrealized gains and losses in the accompanying Statement of Operations in the annual and semiannual reports. The Fund records a realized gain or loss when a structured security is sold or matures.
Equity Security Risk. Stocks and other equity securities fluctuate in price. The value of the Fund’s portfolio may be affected by changes in the equity markets generally. Equity markets may experience significant short-term volatility and may fall sharply at times. Different markets may behave differently from each other and U.S. equity markets may move in the opposite direction from one or more foreign stock markets. Adverse events in any part of the equity or fixed-income markets may have unexpected negative effects on other market segments.
The prices of individual equity securities generally do not all move in the same direction at the same time and a variety of factors can affect the price
6 OPPENHEIMER EQUITY INCOME FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
3. Investments and Risks (Continued)
of a particular company’s securities. These factors may include, but are not limited to, poor earnings reports, a loss of customers, litigation against the company, general unfavorable performance of the company’s sector or industry, or changes in government regulations affecting the company or its industry.
4. Market Risk Factors
The Fund’s investments in securities and/or financial derivatives may expose the Fund to various market risk factors:
Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.
Credit Risk. Credit risk relates to the ability of the issuer of debt to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield debt securities are subject to credit risk to a greater extent than lower-yield, higher-quality securities.
Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.
Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.
Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.
Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.
5. Use of Derivatives
The Fund’s investment objective not only permits the Fund to purchase investment securities, it also allows the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward currency exchange contracts, credit default swaps, interest rate swaps, total return swaps, variance swaps and purchased and written options. In doing so, the Fund will employ strategies in differing combinations to permit it to increase, decrease, or change the level or types of exposure to market risk factors. These instruments may allow the Fund to pursue its objectives more quickly and efficiently than if it were to make direct purchases or sales of securities capable of effecting a similar response to market factors. Such contracts may be entered into through a bilateral over-the-counter (“OTC”) transaction, or through a securities or futures exchange and cleared through a clearinghouse.
Derivatives may have little or no initial cash investment relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost due to unanticipated changes in the market risk factors and the overall market. This use of embedded leverage allows the Fund to increase its market value exposure relative to its net assets and can substantially increase the volatility of the Fund’s performance. In instances where the Fund is using derivatives to decrease, or hedge, exposures to market risk factors for securities held by the Fund, there are also risks that those derivatives may not perform as expected resulting in losses for the combined or hedged positions. Some derivatives have the potential for unlimited loss, regardless of the size of the Fund’s initial investment.
Additional associated risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the derivative and the Fund. Typically, the associated risks are not the risks that the Fund is attempting to increase or decrease exposure to, per its investment objectives, but are the additional risks from investing in derivatives. Examples of these associated risks are liquidity risk, which is the risk that the Fund will not be able to sell the derivative in the open market in a timely manner, and counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund.
The Fund’s actual exposures to these market risk factors and associated risks during the period are discussed in further detail, by derivative type, below.
Option Activity
The Fund may buy and sell put and call options, or write put and call options. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security, currency or other underlying financial instrument at a fixed price, upon exercise of the option.
Options can be traded through an exchange or through a privately negotiated arrangement with a dealer in an OTC transaction. Options traded through an exchange are generally cleared through a clearinghouse (such as The Options Clearing Corporation). The difference between the premium received or paid, and market value of the option, is recorded as unrealized appreciation or depreciation. The net change in unrealized appreciation or depreciation is reported in the Statement of Operations in the annual and semiannual reports. When an option is exercised, the cost of the security purchased or the proceeds of the security sale are adjusted by the amount of premium received or paid. Upon the expiration or closing of the option transaction, a gain or loss is reported in the Statement of Operations in the annual and semiannual reports.
The Fund has purchased put options on individual equity securities and/or equity indexes to decrease exposure to equity risk. A purchased put option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.
7 OPPENHEIMER EQUITY INCOME FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
5. Use of Derivatives (Continued)
During the reporting period, the Fund had an ending monthly average market value of $157 on purchased put options.
Options written, if any, are reported in a schedule following the Statement of Investments and as a liability in the Statement of Assets and Liabilities in the annual and semiannual reports. Securities held in collateral accounts to cover potential obligations with respect to outstanding written options are noted in the Statement of Investments.
The risk in writing a call option is that the market price of the security increases and if the option is exercised, the Fund must either purchase the security at a higher price for delivery or, if the Fund owns the underlying security, give up the opportunity for profit. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk that there may be an illiquid market where the Fund is unable to close the contract.
The Fund has written put options on individual equity securities and/or equity indexes to increase exposure to equity risk. A written put option becomes more valuable as the price of the underlying financial instrument appreciates relative to the strike price.
The Fund has written call options on individual equity securities and/or equity indexes to decrease exposure to equity risk. A written call option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.
During the reporting period, the Fund had an ending monthly average market value of $9,685 and $1,210 on written call options and written put options, respectively.
Additional associated risks to the Fund include counterparty credit risk and liquidity risk.
Written option activity for the reporting period was as follows:
| Number of Contracts |
Amount of Premiums |
|||||||
|
|
||||||||
| Options outstanding as of |
||||||||
| December 31, 2015 |
49 | $ | 9,487 | |||||
| Options written |
737 | 69,573 | ||||||
| Options closed or expired |
(338 | ) | (24,785 | ) | ||||
| Options exercised |
(320 | ) | (40,999 | ) | ||||
|
|
|
|||||||
| Options outstanding as of September 30, 2016 |
128 | $ | 13,276 | |||||
|
|
|
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Counterparty Credit Risk. Derivative positions are subject to the risk that the counterparty will not fulfill its obligation to the Fund. The Fund intends to enter into derivative transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction.
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities in the annual and semiannual reports. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events.
The Fund’s risk of loss from counterparty credit risk on exchange-traded derivatives cleared through a clearinghouse and for centrally cleared swaps is generally considered lower than as compared to OTC derivatives. However, counterparty credit risk exists with respect to initial and variation margin deposited/paid by the Fund that is held in futures commission merchant, broker and/or clearinghouse accounts for such exchange-traded derivatives and for centrally cleared swaps.
With respect to centrally cleared swaps, such transactions will be submitted for clearing, and if cleared, will be held in accounts at futures commission merchants or brokers that are members of clearinghouses. While brokers, futures commission merchants and clearinghouses are required to segregate customer margin from their own assets, in the event that a broker, futures commission merchant or clearinghouse becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the broker, futures commission merchant or clearinghouse for all its customers, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the broker’s, futures commission merchant’s or clearinghouse’s customers, potentially resulting in losses to the Fund.
There is the risk that a broker, futures commission merchant or clearinghouse will decline to clear a transaction on the Fund’s behalf, and the Fund may be required to pay a termination fee to the executing broker with whom the Fund initially enters into the transaction. Clearinghouses may also be permitted to terminate centrally cleared swaps at any time. The Fund is also subject to the risk that the broker or futures commission merchant will improperly use the Fund’s assets deposited/paid as initial or variation margin to satisfy payment obligations of another customer. In the event of a default by another customer of the broker or futures commission merchant, the Fund might not receive its variation margin payments from the clearinghouse, due to the manner in which variation margin payments are aggregated for all customers of the broker/futures commission merchant. Collateral and margin requirements differ by type of derivative. Margin requirements are established by the broker, futures commission merchant or clearinghouse for exchange-traded and cleared derivatives, including centrally cleared swaps. Brokers, futures commission merchants and clearinghouses can ask for margin in excess of the regulatory minimum, or increase the margin amount, in certain circumstances.
For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Fund, if any, is reported separately on the Statement of Assets and Liabilities in the annual and semiannual reports as cash pledged as collateral. Non-cash collateral pledged by the Fund, if any, is noted in the Statement of Investments. Generally, the amount of collateral due from or to a party must exceed a minimum transfer amount threshold (e.g. $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty nonperformance.
8 OPPENHEIMER EQUITY INCOME FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
6. Borrowings and Other Financing
Securities Sold Short. The Fund sells securities that it does not own, and it will therefore be obligated to purchase such securities at a future date. Upon entering into a short position, the Fund is required to segregate cash or securities at its custodian which are pledged for the benefit of the lending broker and/or to deposit and pledge cash directly at the lending broker, with a value equal to a certain percentage, exceeding 100%, of the value of the securities that it sold short. Cash that has been segregated and pledged for this purpose will be disclosed on the Statement of Assets and Liabilities in the annual and semiannual reports; securities that have been segregated and pledged for this purpose are disclosed as such in the Statement of Investments. The value of the open short position is recorded as a liability, and the Fund records an unrealized gain or loss to the extent of the difference between the proceeds received and the change in value of the open short position. The Fund records a realized gain or loss when the short position is closed out. By entering into short sales, the Fund bears the market risk of increases in value of the security sold short in excess of the proceeds received. Until the security is replaced, the Fund is required to pay the lender any dividend or interest earned. Dividend expense on short sales is treated as an expense in the Statement of Operations in the annual and semiannual reports.
At period end, the Fund had no outstanding securities sold short.
7. Federal Taxes
The approximate aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes at period end are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses.
| Federal tax cost of securities |
$ | 7,288,191 | ||
|
|
|
|||
| Gross unrealized appreciation |
$ | 1,002,487 | ||
| Gross unrealized depreciation |
(333,505) | |||
|
|
|
|||
| Net unrealized appreciation |
$ | 668,982 | ||
|
|
|
9 OPPENHEIMER EQUITY INCOME FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
2 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
3 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
4 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
5 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
6 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
| Exercise Price | Expiration Date | Contracts | ||||||||||||||||||||||||||
| Exchange-Traded Option Purchased—0.0% | ||||||||||||||||||||||||||||
| S&P 500 Index Put1 (Cost $131,923) | USD 2,110.000 | 11/18/16 | USD | 54 | 126,360 | |||||||||||||||||||||||
7 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
| Counterparty | Exercise Price | Expiration Date | Contracts | Value | ||||||||||||||||||||||||||
| Over-the-Counter Options Purchased—0.4% |
| |||||||||||||||||||||||||||||
| CNH Currency Put1 |
GSG | CNH | 6.800 | 4/5/17 | CNH | 47,600,000 | $ | 96,866 | ||||||||||||||||||||||
| EUR Currency Put1 |
NOM | BRL | 3.930 | 3/16/17 | EUR | 18,500,000 | 1,201,657 | |||||||||||||||||||||||
| MXN Currency Call1,18 |
CITNA-B | MXN | 19.000 | 11/18/16 | MXN | 17,542,700 | 136,851 | |||||||||||||||||||||||
| NZD Currency Put1 |
BOA | CAD | 0.900 | 1/17/17 | NZD | 23,050,000 | 76,050 | |||||||||||||||||||||||
| Total Over-the-Counter Options Purchased (Cost $1,774,022) |
|
1,511,424 | ||||||||||||||||||||||||||||
| Pay / Receive | Expiration | |||||||||||||||||||||||||||||
| Counterparty | Floating Rate | Floating Rate | Fixed Rate | Date | Notional Amount (000’s) | |||||||||||||||||||||||||
| Over-the-Counter Interest Rate Swaptions Purchased—0.1% | ||||||||||||||||||||||||||||||
| Interest Rate Swap maturing 9/6/28 Call1 | GOL | Receive | Three-Month USD BBA LIBOR | 1.610% | 9/4/18 | USD | 5,400 | 216,526 | ||||||||||||||||||||||
| Interest Rate Swap maturing 11/2/27 Call1 | GSG | Pay | Six-Month JPY BBA LIBOR | 1.070 | 11/20/17 | JPY | 560,000 | 26,160 | ||||||||||||||||||||||
| Interest Rate Swap maturing 11/22/27 Call1 | GSG | Pay | Six-Month JPY BBA LIBOR | 1.070 | 11/20/17 | JPY | 424,000 | 19,807 | ||||||||||||||||||||||
| Interest Rate Swap maturing 7/25/28 Call1 | GSG | Pay | Six-Month JPY BBA LIBOR | 1.050 | 7/23/18 | JPY | 630,000 | 54,256 | ||||||||||||||||||||||
| Total Over-the-Counter Interest Rate Swaptions Purchased (Cost $567,006)
|
|
|
316,749
|
| ||||||||||||||||||||||||||
| Total Investments, at Value (Cost $397,608,124) |
|
98.5% | 405,684,477 | |||||||||||||||||||||||||||
| Net Other Assets (Liabilities) |
|
1.5 | 6,157,515 | |||||||||||||||||||||||||||
| Net Assets |
|
100.0% | $ | 411,841,992 | ||||||||||||||||||||||||||
Footnotes to Consolidated Statement of Investments
1. Non-income producing security.
2. All or portion of the security position is held in segregated accounts and pledged to cover margin requirements with respect to securities sold short. The aggregate market value of such securities is $9,331,078. See Note 7 of accompanying Consolidated Notes.
3. Security is a Master Limited Partnership.
4. This security is not accruing income because the issuer has missed an interest payment on it and/or is not anticipated to make future interest and or principal payments. The rate shown is the contractual interest rate. See Note 4 of the accompanying Consolidated Notes.
5. Security received as the result of issuer reorganization.
6. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $82,092,015 or 19.93% of the Fund’s net assets at period end.
7. Represents the current interest rate for a variable or increasing rate security.
8. Restricted security. The aggregate value of restricted securities at period end was $4,072,235, which represents 0.99% of the Fund’s net assets. See Note 4 of the accompanying Consolidated Notes. Information concerning restricted securities is as follows:
| Unrealized | ||||||||||||||||
| Acquisition | Appreciation/ | |||||||||||||||
| Security | Dates | Cost | Value | (Depreciation) | ||||||||||||
| Blade Engine Securitization Ltd., Series 2006-1AW, 0.824%, 9/15/41 |
7/25/14-8/28/14 | $ | 1,533,431 | $ | 1,029,935 | $ | (503,496) | |||||||||
| Bosphorus Ltd. Catastrophe Linked Nts., 4.036%, 8/17/18 |
8/11/15 | 500,000 | 508,375 | 8,375 | ||||||||||||
| Kizuna Re II Ltd. Catastrophe Linked Nts., 2.769%, 4/6/18 |
5/2/14-5/5/15 | 752,325 | 751,762 | (563) | ||||||||||||
| Merna Re Ltd. Catastrophe Linked Nts., 2.264%, 4/9/18 |
3/16/15-6/22/15 | 499,312 | 500,425 | 1,113 | ||||||||||||
| Nakama Re Ltd. Catastrophe Linked Nts., 3.514%, 1/14/21 |
12/14/15 | 250,000 | 257,163 | 7,163 | ||||||||||||
| OAS Financial Ltd., 8% Sr. Unsec. Nts., 7/2/21 |
9/3/14 | 204,171 | 10,000 | (194,171) | ||||||||||||
| Ursa Re Ltd. Catastrophe Linked Nts., 5%, 9/21/18 |
12/16/15-3/29/16 | 500,911 | 507,425 | 6,514 | ||||||||||||
| Vitality Re V Ltd. Catastrophe Linked Nts., 2.769%, 1/7/19 |
4/29/15 | 252,742 | 252,612 | (130) | ||||||||||||
| Vitality Re VII Ltd. Catastrophe Linked Nts., 2.919%, 1/7/20 | 1/22/16 | 250,000 | 254,538 | 4,538 | ||||||||||||
| $ | 4,742,892 | $ | 4,072,235 | $ | (670,657) | |||||||||||
9. This bond has no contractual maturity date, is not redeemable and contractually pays an indefinite stream of interest. Rate reported represents the current interest rate for this variable rate security.
| 10. | Interest or dividend is paid-in-kind, when applicable. |
11. All or a portion of the security position is when-issued or delayed delivery to be delivered and settled after period end. See Note 4 of the accompanying Consolidated Notes.
| 12. | Zero coupon bond reflects effective yield on the original acquisition date. |
13. All or a portion of the security position is held in accounts at a futures clearing merchant and pledged to cover margin requirements on open futures contracts and written options on futures, if applicable. The aggregate market value of such securities is $9,073,440. See Note 6 of the accompanying Consolidated Notes.
14. All or a portion of the security position is held in segregated accounts and pledged to cover margin requirements under certain derivative contracts. The aggregate market value of such securities is $4,317,596. See Note 6 of the accompanying Consolidated Notes.
15. Is or was an affiliate, as defined in the Investment Company Act of 1940, as amended, at or during the reporting period, by virtue of the Fund owning at least 5% of the voting securities of the issuer or as a result of the Fund and the issuer having the same investment adviser. Transactions during the reporting period in which the issuer was an affiliate are as follows:
| Shares | Gross | Gross | Shares | |||||||||||||
| December 31, 2015 | Additions | Reductions | September 30, 2016 | |||||||||||||
| Oppenheimer Institutional Government Money Market Fund, Cl. Ea |
23,203,584 | 238,602,138 | 254,081,179 | 7,724,543 | ||||||||||||
8 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
Footnotes to Consolidated Statement of Investments (Continued)
| Value | Income | |||||||
| Oppenheimer Institutional Government Money Market Fund, Cl. Ea |
$ | 7,724,543 | $ | 97,534 | ||||
a. Prior to September 28, 2016, this fund was named Oppenheimer Institutional Money Market Fund.
| 16. | Rate shown is the 7-day yield at period end. |
| 17. | All or a portion of this security is owned by the subsidiary. See Note 2 of the accompanying Consolidated Notes. |
18. Digital option becomes eligible for exercise if at any time spot rates are less than or equal to 19MXN to 1 USD. Knock-out option becomes ineligible for exercise if at any time spot rates are less than or equal to 18 MXN per 1USD.
| Distribution of investments representing geographic holdings, as a percentage of total investments at value, is as follows: | ||||||||
| Geographic Holdings | Value | Percent | ||||||
| United States |
$ | 280,004,185 | 69.0% | |||||
| Japan |
28,737,955 | 7.1 | ||||||
| Sweden |
14,436,562 | 3.6 | ||||||
| France |
12,992,362 | 3.2 | ||||||
| Italy |
8,486,938 | 2.1 | ||||||
| Supranational |
8,077,650 | 2.0 | ||||||
| Russia |
5,096,479 | 1.3 | ||||||
| Brazil |
4,994,535 | 1.2 | ||||||
| Bermuda |
4,829,501 | 1.2 | ||||||
| Cayman Islands |
4,387,394 | 1.1 | ||||||
| Eurozone |
3,498,885 | 0.9 | ||||||
| Canada |
3,362,075 | 0.8 | ||||||
| Spain |
3,269,156 | 0.8 | ||||||
| Mexico |
2,867,791 | 0.7 | ||||||
| Portugal |
2,522,092 | 0.6 | ||||||
| Switzerland |
2,421,747 | 0.6 | ||||||
| Ireland |
2,077,814 | 0.5 | ||||||
| Colombia |
1,639,896 | 0.4 | ||||||
| Australia |
1,458,487 | 0.4 | ||||||
| Hong Kong |
1,372,921 | 0.3 | ||||||
| Turkey |
1,109,896 | 0.3 | ||||||
| United Kingdom |
995,068 | 0.2 | ||||||
| Germany |
941,594 | 0.2 | ||||||
| China |
938,833 | 0.2 | ||||||
| Singapore |
854,982 | 0.2 | ||||||
| Argentina |
691,331 | 0.2 | ||||||
| Chile |
657,187 | 0.2 | ||||||
| Barbados |
425,900 | 0.1 | ||||||
| Netherlands |
409,497 | 0.1 | ||||||
| Luxembourg |
311,912 | 0.1 | ||||||
| Peru |
260,938 | 0.1 | ||||||
| South Africa |
260,242 | 0.1 | ||||||
| Dominican Republic |
213,750 | 0.1 | ||||||
| India |
204,235 | 0.1 | ||||||
| Macau |
203,000 | 0.0 | ||||||
| Ukraine |
192,500 | 0.0 | ||||||
| Jamaica |
174,750 | 0.0 | ||||||
| Venezuela |
131,520 | 0.0 | ||||||
| China Offshore |
96,866 | 0.0 | ||||||
| New Zealand |
76,051 | 0.0 | ||||||
| Total |
$ | 405,684,477 | 100.0% | |||||
| Shares Sold Short | Value | |||||||
| Securities Sold Short—(11.5)% |
||||||||
| Common Stock Securities Sold Short—(10.2)% |
||||||||
| AGCO Corp. |
(26,510 | ) | $ | (1,307,473 | ) | |||
| Air Lease Corp., Cl. A |
(52,605 | ) | (1,503,451 | ) | ||||
| Aircastle Ltd. |
(24,325 | ) | (483,094 | ) | ||||
| Aker Solutions ASA1 |
(244,171 | ) | (1,145,418 | ) | ||||
| athenahealth, Inc.1 |
(4,430 | ) | (558,712 | ) | ||||
| Boeing Co. (The) |
(13,220 | ) | (1,741,603 | ) | ||||
| Camden Property Trust |
(16,730 | ) | (1,400,970 | ) | ||||
| Caterpillar, Inc. |
(19,350 | ) | (1,717,699 | ) | ||||
| CBL & Associates Properties, Inc. |
(57,290 | ) | (695,501 | ) | ||||
| Charter Communications, Inc., Cl. A1 |
(8,785 | ) | (2,371,686 | ) | ||||
| Cheniere Energy, Inc.1 |
(26,850 | ) | (1,170,660 | ) | ||||
9 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
| Securities Sold Short—(11.5)% (Continued) |
||||||||
| Common Stock Securities Sold Short (Continued) |
||||||||
| Cie Financiere Richemont SA |
(19,443 | ) | $ | (1,183,840 | ) | |||
| CNH Industrial NV |
(144,010 | ) | (1,039,752 | ) | ||||
| Colgate-Palmolive Co. |
(13,820 | ) | (1,024,615 | ) | ||||
| Comcast Corp., Cl. A |
(11,240 | ) | (745,662 | ) | ||||
| Comerica, Inc. |
(10,302 | ) | (487,491 | ) | ||||
| Commerce Bancshares, Inc. |
(20,292 | ) | (999,584 | ) | ||||
| Deere & Co. |
(20,200 | ) | (1,724,070 | ) | ||||
| Fastenal Co. |
(19,380 | ) | (809,696 | ) | ||||
| Franklin Resources, Inc. |
(34,290 | ) | (1,219,695 | ) | ||||
| Intel Corp. |
(19,965 | ) | (753,679 | ) | ||||
| Kennametal, Inc. |
(16,433 | ) | (476,886 | ) | ||||
| Oracle Corp. |
(44,175 | ) | (1,735,194 | ) | ||||
| Pennsylvania Real Estate Investment Trust |
(73,402 | ) | (1,690,448 | ) | ||||
| Procter & Gamble Co. (The) |
(14,535 | ) | (1,304,516 | ) | ||||
| Rio Tinto plc, Sponsored ADR |
(19,000 | ) | (634,600 | ) | ||||
| RLJ Lodging Trust |
(45,190 | ) | (950,346 | ) | ||||
| SAP SE, ADR |
(20,450 | ) | (1,869,334 | ) | ||||
| Southern Copper Corp. |
(52,550 | ) | (1,382,065 | ) | ||||
| Subsea 7 SA1 |
(216,575 | ) | (2,331,516 | ) | ||||
| Tiffany & Co. |
(15,810 | ) | (1,148,280 | ) | ||||
| W.W. Grainger, Inc. |
(3,810 | ) | (856,640 | ) | ||||
| Walt Disney Co. (The) |
(4,460 | ) | (414,156 | ) | ||||
| Weingarten Realty Investors |
(53,763 | ) | (2,095,682 | ) | ||||
| Zions Bancorporation |
(27,990 | ) | (868,250 | ) | ||||
| Common Stock Securities Sold Short (Proceeds $40,433,497)
|
|
(41,842,264
|
)
| |||||
| Investment Company Securities Sold Short—(1.3)% iShares US Preferred Stock Exchange Traded Fund (Proceeds $5,426,875) |
(137,700 | ) | (5,439,150 | ) | ||||
| Total Securities Sold Short (Proceeds $45,860,372) |
$ | (47,281,414 | ) | |||||
1. Non-income producing security.
| Forward Currency Exchange Contracts as of September 30, 2016 | ||||||||||||||||||||||||||||
| Unrealized | Unrealized | |||||||||||||||||||||||||||
| Counterparty | Settlement Month(s) | Currency Purchased (000’s) | Currency Sold (000’s) | Appreciation | Depreciation | |||||||||||||||||||||||
| BAC |
10/2016 | USD | 3,302 | IDR | 44,032,000 | $ | — | $ | 77,231 | |||||||||||||||||||
| BNP |
10/2016 | BRL | 10,400 | USD | 3,204 | — | 5,861 | |||||||||||||||||||||
| BNP |
10/2016 | USD | 3,111 | BRL | 10,400 | — | 86,627 | |||||||||||||||||||||
| BOA |
10/2016 - 01/2017 | BRL | 30,110 | USD | 9,046 | 67,208 | 20,091 | |||||||||||||||||||||
| BOA |
11/2016 | CHF | 3,045 | USD | 3,121 | 23,159 | — | |||||||||||||||||||||
| BOA |
12/2016 | CLP | 3,515,685 | USD | 5,151 | 159,516 | — | |||||||||||||||||||||
| BOA |
12/2016 | TRY | 7,580 | USD | 2,503 | — | 16,578 | |||||||||||||||||||||
| BOA |
10/2016 - 01/2017 | USD | 6,325 | BRL | 20,800 | 17,754 | — | |||||||||||||||||||||
| BOA |
12/2016 | USD | 1,807 | CAD | 2,380 | — | 7,799 | |||||||||||||||||||||
| BOA |
12/2016 | USD | 1,806 | CHF | 1,745 | 889 | — | |||||||||||||||||||||
| BOA |
01/2017 | USD | 2,523 | EUR | 2,245 | — | 11,927 | |||||||||||||||||||||
| BOA |
12/2016 | USD | 2,428 | THB | 85,000 | — | 22,490 | |||||||||||||||||||||
| BOA |
12/2016 | USD | 2,550 | TRY | 7,740 | 11,135 | — | |||||||||||||||||||||
| BOA |
12/2016 | ZAR | 36,640 | USD | 2,635 | — | 6,249 | |||||||||||||||||||||
| CITNA-B |
12/2016 | EUR | 2,785 | USD | 3,141 | — | 391 | |||||||||||||||||||||
| CITNA-B |
12/2016 | HUF | 1,079,000 | USD | 3,949 | 8,245 | 19,892 | |||||||||||||||||||||
| CITNA-B |
12/2016 | JPY | 136,000 | USD | 1,334 | 12,216 | — | |||||||||||||||||||||
| CITNA-B |
12/2016 | NOK | 28,880 | USD | 3,557 | 55,929 | — | |||||||||||||||||||||
| CITNA-B |
12/2016 | TRY | 3,950 | USD | 1,299 | — | 3,887 | |||||||||||||||||||||
| CITNA-B |
12/2016 | USD | 2,656 | CHF | 2,560 | 8,014 | — | |||||||||||||||||||||
| CITNA-B |
11/2016 - 12/2016 | USD | 13,993 | EUR | 12,392 | 34,443 | 2,812 | |||||||||||||||||||||
| CITNA-B |
12/2016 | USD | 1,189 | GBP | 900 | 20,432 | — | |||||||||||||||||||||
| CITNA-B |
12/2016 | USD | 2,614 | KRW | 2,932,000 | — | 45,820 | |||||||||||||||||||||
| CITNA-B |
12/2016 | ZAR | 29,680 | USD | 2,034 | 95,304 | — | |||||||||||||||||||||
| DEU |
12/2016 | CHF | 1,745 | USD | 1,807 | — | 2,120 | |||||||||||||||||||||
| DEU |
12/2016 | NOK | 39,830 | USD | 4,818 | 164,852 | — | |||||||||||||||||||||
| DEU |
12/2016 | USD | 1,801 | CHF | 1,745 | — | 3,931 | |||||||||||||||||||||
| DEU |
12/2016 | USD | 2,103 | EUR | 1,870 | — | 5,749 | |||||||||||||||||||||
| DEU |
12/2016 | USD | 3,553 | NOK | 28,880 | — | 60,182 | |||||||||||||||||||||
| DEU |
10/2016 | USD | 14,439 | SEK | 123,800 | — | 3,256 | |||||||||||||||||||||
| GSCO-OT |
12/2016 | SEK | 11,290 | USD | 1,335 | — | 13,673 | |||||||||||||||||||||
| GSCO-OT |
12/2016 | USD | 1,323 | AUD | 1,775 | — | 33,275 | |||||||||||||||||||||
| GSCO-OT |
04/2017 | USD | 1,505 | CNH | 10,000 | 21,999 | — | |||||||||||||||||||||
| GSCO-OT |
11/2016 | USD | 795 | JPY | 83,000 | — | 25,068 | |||||||||||||||||||||
10 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
| Forward Currency Exchange Contracts (Continued) | ||||||||||||||||||||||||||||
| Unrealized | Unrealized | |||||||||||||||||||||||||||
| Counterparty | Settlement Month(s) | Currency Purchased (000’s) | Currency Sold (000’s) | Appreciation | Depreciation | |||||||||||||||||||||||
| HSBC |
12/2016 | MXN | 61,200 | USD | 3,092 | $ | 36,618 | $ | — | |||||||||||||||||||
| HSBC |
12/2016 | USD | 7,495 | CAD | 9,884 | — | 43,056 | |||||||||||||||||||||
| HSBC |
12/2016 | USD | 2,105 | CHF | 2,045 | — | 9,872 | |||||||||||||||||||||
| HSBC |
12/2016 | USD | 1,881 | EUR | 1,680 | — | 12,292 | |||||||||||||||||||||
| HSBC |
10/2016 | USD | 2,987 | IDR | 39,897,000 | — | 74,727 | |||||||||||||||||||||
| HSBC |
12/2016 | USD | 1,870 | MXN | 37,400 | — | 42,682 | |||||||||||||||||||||
| JPM |
12/2016 | AUD | 3,500 | USD | 2,636 | 37,743 | — | |||||||||||||||||||||
| JPM |
12/2016 | CHF | 1,290 | USD | 1,332 | 2,215 | — | |||||||||||||||||||||
| JPM |
12/2016 | GBP | 1,005 | USD | 1,327 | — | 22,241 | |||||||||||||||||||||
| JPM |
12/2016 | IDR | 40,840,900 | USD | 3,048 | 58,575 | — | |||||||||||||||||||||
| JPM |
11/2016 | JPY | 397,000 | USD | 3,890 | 33,927 | — | |||||||||||||||||||||
| JPM |
12/2016 | KRW | 4,366,000 | USD | 3,922 | 39,450 | — | |||||||||||||||||||||
| JPM |
12/2016 | NZD | 1,825 | USD | 1,324 | 617 | — | |||||||||||||||||||||
| JPM |
12/2016 | USD | 1,830 | AUD | 2,455 | — | 45,878 | |||||||||||||||||||||
| JPM |
01/2017 | USD | 2,587 | BRL | 8,790 | — | 41,617 | |||||||||||||||||||||
| JPM |
11/2016 | USD | 3,957 | CHF | 3,840 | — | 7,434 | |||||||||||||||||||||
| JPM |
10/2016 | USD | 9,186 | EUR | 8,400 | — | 256,064 | |||||||||||||||||||||
| JPM |
12/2016 | USD | 2,623 | GBP | 2,005 | 20,228 | — | |||||||||||||||||||||
| JPM |
12/2016 | USD | 2,627 | HUF | 724,000 | — | 15,442 | |||||||||||||||||||||
| JPM |
11/2016 - 12/2016 | USD | 5,915 | JPY | 604,400 | — | 62,341 | |||||||||||||||||||||
| JPM |
12/2016 | USD | 1,300 | MXN | 25,200 | 11,927 | — | |||||||||||||||||||||
| JPM |
12/2016 | USD | 1,319 | ZAR | 19,100 | — | 51,850 | |||||||||||||||||||||
| MSCO |
10/2016 | USD | 3,227 | EUR | 2,900 | — | 34,785 | |||||||||||||||||||||
| NOM |
10/2016 | IDR | 79,214,000 | USD | 5,997 | 82,817 | — | |||||||||||||||||||||
| RBS |
11/2016 | USD | 18,501 | JPY | 2,000,000 | — | 1,253,080 | |||||||||||||||||||||
| TDB |
11/2016 | CHF | 795 | USD | 812 | 8,647 | — | |||||||||||||||||||||
| Total Unrealized Appreciation and Depreciation |
|
$ | 1,033,859 | $ | 2,448,270 | |||||||||||||||||||||||
| Futures Contracts as of September 30, 2016 | ||||||||||||||||||||||||
| Unrealized Appreciation | ||||||||||||||||||||||||
| Description | Exchange | Buy/Sell | Expiration Date | Number of Contracts | Value | (Depreciation) | ||||||||||||||||||
| Brent Crude Oil* | ICE | Buy | 10/31/16 | 12 | $ | 602,280 | $ | 43,404 | ||||||||||||||||
| CAC 40 10 Index | PAR | Sell | 10/21/16 | 332 | 16,572,131 | (108,544 | ) | |||||||||||||||||
| Copper* | CMX | Buy | 12/28/16 | 13 | 718,412 | (1,627 | ) | |||||||||||||||||
| Corn* | CBT | Sell | 12/14/16 | 42 | 707,175 | (1,583 | ) | |||||||||||||||||
| Cotton No. 2* | NYB | Sell | 12/07/16 | 20 | 680,800 | 50,715 | ||||||||||||||||||
| Euro-BTP | EUX | Sell | 12/08/16 | 9 | 1,446,661 | 10,683 | ||||||||||||||||||
| FTSE 100 Index | ICE | Sell | 12/16/16 | 182 | 16,176,794 | (433,097 | ) | |||||||||||||||||
| Gold (100 oz.)* | CMX | Buy | 12/28/16 | 7 | 921,970 | (4,287 | ) | |||||||||||||||||
| Nickel* | LME | Buy | 11/14/16 | 11 | 696,432 | 47,914 | ||||||||||||||||||
| Natural Gas* | NYM | Sell | 10/27/16 | 22 | 639,320 | 10,204 | ||||||||||||||||||
| Russell 2000 Mini Index | NYF | Sell | 12/16/16 | 245 | 30,583,350 | (398,764 | ) | |||||||||||||||||
| S&P 500 E-Mini Index | CME | Buy | 12/16/16 | 262 | 28,301,240 | 258,431 | ||||||||||||||||||
| S&P/TSX 60 Index | MON | Sell | 12/15/16 | 16 | 2,085,933 | (29,953 | ) | |||||||||||||||||
| Silver* | CMX | Buy | 12/28/16 | 7 | 672,490 | (48,601 | ) | |||||||||||||||||
| SPI 200 Index | SFE | Sell | 12/15/16 | 27 | 2,797,966 | (128,676 | ) | |||||||||||||||||
| STOXX Europe 600 Index | EUX | Sell | 12/16/16 | 879 | 16,875,087 | (178,783 | ) | |||||||||||||||||
| Sugar #11 World* | NYB | Buy | 2/28/17 | 29 | 747,040 | 83,720 | ||||||||||||||||||
| United States Treasury Long Bonds | CBT | Buy | 12/20/16 | 78 | 13,116,187 | (14,783 | ) | |||||||||||||||||
| United States Treasury Nts., 10 yr. |
CBT | Sell | 12/20/16 | 94 | 12,325,750 | 11,594 | ||||||||||||||||||
| Wheat* | CBT | Sell | 12/14/16 | 34 | 683,400 | 53,995 | ||||||||||||||||||
| WTI Crude Oil* |
NYM | Buy | 10/20/16 | 6 | 289,440 | 30,782 | ||||||||||||||||||
| $ | (747,256 | ) | ||||||||||||||||||||||
| * | All or a portion of this security is owned by the subsidiary. See Note 2 of the accompanying Consolidated Notes. |
| Over-the-Counter Options Written at September 30, 2016 | ||||||||||||||||||||||||||||||||
|
Description |
Counterparty |
Exercise Price |
Expiration Date |
Number of Contracts |
Premiums Received |
Value |
||||||||||||||||||||||||||
| CNH Currency Put | GSG | CNH | 7.500 | 4/5/17 | CNH | (52,500,000 | ) | $ | 65,240 | $ | (5,407 | ) | ||||||||||||||||||||
| EUR Currency Put | NOM | BRL | 3.650 | 3/16/17 | EUR | (18,500,000 | ) | 386,535 | (440,251 | ) | ||||||||||||||||||||||
| IDR Currency Put | DEU | IDR | 13100.000 | 12/8/16 | IDR | (242,210,000,000 | ) | 372,744 | (242,210 | ) | ||||||||||||||||||||||
| IDR Currency Call | DEU | IDR | 13100.000 | 12/8/16 | IDR | (242,210,000,000 | ) | 267,910 | (242,210 | ) | ||||||||||||||||||||||
| IDR Currency Call | NOM | IDR | 13300.000 | 10/11/16 | IDR | (306,750,000,000 | ) | 570,256 | (613,500 | ) | ||||||||||||||||||||||
| IDR Currency Put | NOM | IDR | 13300.000 | 10/11/16 | IDR | (306,750,000,000 | ) | 412,844 | — | |||||||||||||||||||||||
| NZD Currency Call | BOA | CAD | 0.960 | 1/17/17 | NZD | (23,050,000 | ) | 198,311 | (255,614 | ) | ||||||||||||||||||||||
| ZAR Currency Call | GSCO-OT | ZAR | 14.350 | 11/28/16 | ZAR | (132,590,000 | ) | 372,823 | (360,778 | ) | ||||||||||||||||||||||
11 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
| Over-the-Counter Options Written (Continued) | ||||||||||||||||||||||||||||||||
|
Description |
Counterparty | Exercise Price | Expiration Date | Number of Contracts | Premiums Received | Value | ||||||||||||||||||||||||||
| ZAR Currency Put |
GSCO-OT | ZAR | 14.350 | 11/28/16 | ZAR | (132,590,000 | ) | $ | 355,729 | $ | (221,425) | |||||||||||||||||||||
| Total of Over-the-Counter Options Written | $ | 3,002,392 | $ | (2,381,395) | ||||||||||||||||||||||||||||
| Centrally Cleared Credit Default Swaps at September 30, 2016 | ||||||||||||||||||||||||||||||
| Buy/Sell | Notional Amount | |||||||||||||||||||||||||||||
| Reference Asset | Protection | Fixed Rate | Maturity Date | (000’s) | Premiums Received/(Paid) | Value | ||||||||||||||||||||||||
| Aetna, Inc. |
Buy | 1.000% | 6/20/21 | USD | 1,580 | $ | 50,302 | $ | (45,446 | ) | ||||||||||||||||||||
| Capital One Bank USA NA |
Buy | 1.000 | 6/20/21 | USD | 1,580 | 43,254 | (38,592 | ) | ||||||||||||||||||||||
| CDX.HY.24 |
Buy | 5.000 | 6/20/20 | USD | 181 | 11,644 | (13,195 | ) | ||||||||||||||||||||||
| CDX.HY.24 |
Buy | 5.000 | 6/20/20 | USD | 887 | 63,389 | (64,548 | ) | ||||||||||||||||||||||
| CDX.HY.24 |
Buy | 5.000 | 6/20/20 | USD | 107 | 5,495 | (7,774 | ) | ||||||||||||||||||||||
| CDX.HY.24 |
Buy | 5.000 | 6/20/20 | USD | 1,862 | 144,017 | (135,516 | ) | ||||||||||||||||||||||
| CDX.HY.24 |
Buy | 5.000 | 6/20/20 | USD | 215 | 13,140 | (15,620 | ) | ||||||||||||||||||||||
| CDX.HY.25 |
Buy | 5.000 | 12/20/20 | USD | 9,531 | 235,859 | (558,256 | ) | ||||||||||||||||||||||
| CDX.HY.25 |
Buy | 5.000 | 12/20/20 | USD | 12,628 | (25,958 | ) | (739,702 | ) | |||||||||||||||||||||
| CDX.IG.25 |
Sell | 1.000 | 12/20/20 | USD | 5,655 | (44,408 | ) | 75,310 | ||||||||||||||||||||||
| Chubb Ina Holdings, Inc. |
Sell | 1.000 | 6/20/21 | USD | 1,580 | (62,932 | ) | 58,924 | ||||||||||||||||||||||
| Domtar Corp. |
Buy | 1.000 | 6/20/21 | USD | 1,580 | (42,891 | ) | 26,829 | ||||||||||||||||||||||
| Firstenergy Corp. |
Buy | 1.000 | 6/20/21 | USD | 1,580 | 4,008 | (3,547 | ) | ||||||||||||||||||||||
| General Motors Co. |
Buy | 5.000 | 6/20/21 | USD | 1,580 | 235,385 | (216,192 | ) | ||||||||||||||||||||||
| Halliburton Co. |
Sell | 1.000 | 6/20/21 | USD | 1,580 | (2,060 | ) | 1,911 | ||||||||||||||||||||||
| iTraxx.Main.24 |
Buy | 1.000 | 12/20/20 | EUR | 5,160 | 69,067 | (87,358 | ) | ||||||||||||||||||||||
| Johnson Controls, Inc. |
Sell | 1.000 | 6/20/21 | USD | 1,580 | (62,950 | ) | 51,470 | ||||||||||||||||||||||
| Marsh & Mclennan Cos., Inc. |
Sell | 1.000 | 6/20/21 | USD | 1,580 | (52,658 | ) | 47,469 | ||||||||||||||||||||||
| Metlife, Inc. |
Buy | 1.000 | 6/20/21 | USD | 1,580 | (25,133 | ) | 14,268 | ||||||||||||||||||||||
| Nabors Industries, Inc. |
Buy | 1.000 | 6/20/21 | USD | 1,580 | (246,041 | ) | 185,970 | ||||||||||||||||||||||
| Neiman Marcus Group LLC (The) |
Buy | 5.000 | 12/20/20 | USD | 715 | 41,431 | (49,714 | ) | ||||||||||||||||||||||
| Northrop Grumman Systems Corp. |
Sell | 1.000 | 6/20/21 | USD | 1,580 | (62,138 | ) | 59,096 | ||||||||||||||||||||||
| Ryder System, Inc. |
Buy | 1.000 | 6/20/21 | USD | 1,580 | 9,849 | (7,692 | ) | ||||||||||||||||||||||
| Sempra Energy |
Sell | 1.000 | 6/20/21 | USD | 1,580 | (46,389 | ) | 41,816 | ||||||||||||||||||||||
| Wal-Mart Stores, Inc. |
Sell | 1.000 | 6/20/21 | USD | 1,580 | (53,446 | ) | 42,786 | ||||||||||||||||||||||
| Total of Cleared Credit Default Swaps |
$ | 199,836 | $ | (1,377,303 | ) | |||||||||||||||||||||||||
| Over-the-Counter Credit Default Swaps at September 30, 2016 | ||||||||||||||||||||||||||||||
| Buy/Sell | Notional Amount | |||||||||||||||||||||||||||||
| Reference Asset | Counterparty | Protection | Fixed Rate | Maturity Date | (000’s) | Premiums Received/(Paid) | Value | |||||||||||||||||||||||
| Altria Group, Inc. | JPM | Sell | 1.000% | 6/20/21 | USD | 1,540 | $ | (55,864 | ) | $ | 49,580 | |||||||||||||||||||
| Bristol-Myers Squibb Co. | JPM | Sell | 1.000 | 6/20/21 | USD | 1,540 | (70,681 | ) | 57,094 | |||||||||||||||||||||
| CDX.NA.HY.21 | CITNA-B | Buy | 5.000 | 12/20/18 | USD | 1,125 | (34,531 | ) | (96,641 | ) | ||||||||||||||||||||
| CDX.NA.HY.21 | CITNA-B | Sell | 5.000 | 12/20/18 | USD | 288 | 160,725 | (70,465 | ) | |||||||||||||||||||||
| CDX.NA.HY.21 | GSG | Sell | 5.000 | 12/20/18 | USD | 84 | 46,161 | (20,670 | ) | |||||||||||||||||||||
| CDX.NA.HY.25 | GSG | Buy | 5.000 | 12/20/20 | USD | 1,125 | (194,688 | ) | 6,719 | |||||||||||||||||||||
| CDX.NA.HY.25 | GSG | Sell | 5.000 | 12/20/20 | USD | 353 | 234,113 | (189,064 | ) | |||||||||||||||||||||
| Ford Motor Co. | BNP | Buy | 5.000 | 6/20/21 | USD | 1,540 | 248,432 | (219,723 | ) | |||||||||||||||||||||
| Kingdom of Spain | BAC | Buy | 1.000 | 6/20/21 | USD | 449 | (1,152 | ) | (4,216 | ) | ||||||||||||||||||||
| Kingdom of Spain | BAC | Buy | 1.000 | 12/20/20 | USD | 4,278 | 30,105 | (46,129 | ) | |||||||||||||||||||||
| Kroger Co. (The) | BNP | Buy | 1.000 | 6/20/21 | USD | 1,540 | 27,516 | (27,867 | ) | |||||||||||||||||||||
| Malaysia | BNP | Buy | 1.000 | 6/20/21 | USD | 775 | (22,856 | ) | 3,848 | |||||||||||||||||||||
| Malaysia | BNP | Buy | 1.000 | 12/20/20 | USD | 1,700 | (110,693 | ) | (1,487 | ) | ||||||||||||||||||||
| Malaysia | MOS-A | Buy | 1.000 | 12/20/20 | USD | 1,700 | (85,394 | ) | (1,487 | ) | ||||||||||||||||||||
| Portuguese Republic | BAC | Buy | 1.000 | 12/20/20 | USD | 2,567 | (96,674 | ) | 181,847 | |||||||||||||||||||||
| Portuguese Republic | GSG | Buy | 1.000 | 6/20/21 | USD | 568 | (46,803 | ) | 47,494 | |||||||||||||||||||||
| Portuguese Republic | GSG | Buy | 1.000 | 6/20/21 | USD | 1,400 | (157,783 | ) | 117,062 | |||||||||||||||||||||
| Republic of Austria | BAC | Buy | 1.000 | 12/20/20 | USD | 1,454 | 55,320 | (47,805 | ) | |||||||||||||||||||||
| Republic of Austria | GSG | Buy | 1.000 | 6/20/21 | USD | 314 | 11,120 | (11,013 | ) | |||||||||||||||||||||
| Republic of Italy | BAC | Buy | 1.000 | 6/20/21 | USD | 532 | (10,856 | ) | 10,723 | |||||||||||||||||||||
| Republic of Italy | BAC | Buy | 1.000 | 12/20/20 | USD | 5,133 | 5,513 | 80,663 | ||||||||||||||||||||||
| Sherwin-Williams Co. (The) | BOA | Sell | 1.000 | 6/20/21 | USD | 1,540 | (36,909 | ) | 14,134 | |||||||||||||||||||||
| Total of Over-the-Counter Credit Default Swaps | $ | (105,879 | ) | $ | (167,403 | ) | ||||||||||||||||||||||||
12 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
The table that follows shows the undiscounted maximum potential payment by the Fund related to selling credit protection in credit default swaps:
| Type of Reference Asset on which the Fund Sold Protection |
Total Maximum Potential Payments for Selling Credit Protection |
Amount Recoverable* | Reference Asset Rating Range** |
|||||||||||||||||||||||||
| Investment Grade Corporate Debt Indexes |
$ | 5,655,000 | $ | — | BBB+ | |||||||||||||||||||||||
| Non-Investment Grade Corporate Debt Indexes |
725,149 | 24,409,170 | BB | |||||||||||||||||||||||||
| Investment Grade Single Name Corporate Debt |
15,680,000 | — | AA to BBB+ | |||||||||||||||||||||||||
| Total |
$ | 22,060,149 | $ | 24,409,170 | ||||||||||||||||||||||||
* Amounts recoverable includes potential payments from related purchased protection for instances where the Fund is the seller of protection. In addition, the Fund has no recourse provisions under the credit derivatives and holds no collateral which can offset or reduce potential payments under a triggering event.
** The period end reference asset security ratings, as rated by any rating organization, are included in the equivalent Standard & Poor’s rating category. The reference asset rating represents the likelihood of a potential credit event on the reference asset which would result in a related payment by the Fund.
| Centrally Cleared Interest Rate Swaps at September 30, 2016 | ||||||||||||||||||||||||||||||||
| Pay/Receive | Premiums | |||||||||||||||||||||||||||||||
| Counterparty | Floating Rate | Floating Rate | Fixed Rate | Maturity Date | Notional Amount (000’s) | Received / (Paid) | Value | |||||||||||||||||||||||||
| Six-Month JPY BBA | ||||||||||||||||||||||||||||||||
| BAC |
Receive | LIBOR | 0.468% | 11/12/25 | JPY | 23,000 | $ | — | $ | (9,748 | ) | |||||||||||||||||||||
| Three-Month SEK | ||||||||||||||||||||||||||||||||
| BAC |
Pay | STIBOR SIDE | 1.418 | 11/12/25 | SEK | 1,840 | — | 20,177 | ||||||||||||||||||||||||
| Three-Month SEK | ||||||||||||||||||||||||||||||||
| BAC |
Pay | STIBOR SIDE | 0.628 | 7/8/26 | SEK | 2,340 | — | 1,311 | ||||||||||||||||||||||||
| Three-Month SEK | ||||||||||||||||||||||||||||||||
| BAC |
Pay | STIBOR SIDE | 1.501 | 12/9/25 | SEK | 5,120 | — | 60,004 | ||||||||||||||||||||||||
| Three-Month SEK | ||||||||||||||||||||||||||||||||
| BAC |
Pay | STIBOR SIDE | 1.365 | 8/10/25 | SEK | 4,580 | — | 42,498 | ||||||||||||||||||||||||
| Three-Month SEK | ||||||||||||||||||||||||||||||||
| BAC |
Pay | STIBOR SIDE | 1.630 | 7/3/25 | SEK | 66,785 | 19,369 | 821,180 | ||||||||||||||||||||||||
| Six-Month DKK | ||||||||||||||||||||||||||||||||
| GOL |
Receive | CIBOR2 DKNA13 | 0.579 | 9/5/26 | DKK | 66,695 | — | 32,235 | ||||||||||||||||||||||||
| Six-Month NOK | ||||||||||||||||||||||||||||||||
| GOL |
Pay | NIBOR NIBR | 1.393 | 9/5/26 | NOK | 83,420 | — | 71,627 | ||||||||||||||||||||||||
| Three-Month SEK | ||||||||||||||||||||||||||||||||
| JPM |
Pay | STIBOR SIDE | 1.070 | 6/7/26 | SEK | 3,550 | — | 20,346 | ||||||||||||||||||||||||
| Six-Month JPY BBA | ||||||||||||||||||||||||||||||||
| JPM |
Receive | LIBOR | 0.595 | 8/11/25 | JPY | 29,000 | — | (15,206 | ) | |||||||||||||||||||||||
| Six-Month JPY BBA | ||||||||||||||||||||||||||||||||
| JPM |
Receive | LIBOR | 0.593 | 7/10/25 | JPY | 895,000 | — | (469,484 | ) | |||||||||||||||||||||||
| Six-Month JPY BBA | ||||||||||||||||||||||||||||||||
| JPM |
Receive | LIBOR | 0.566 | 8/6/25 | JPY | 13,000 | — | (6,472 | ) | |||||||||||||||||||||||
| Six-Month JPY BBA | ||||||||||||||||||||||||||||||||
| JPM |
Receive | LIBOR | 0.100 | 6/6/26 | JPY | 35,000 | — | (2,244 | ) | |||||||||||||||||||||||
| Six-Month JPY BBA | ||||||||||||||||||||||||||||||||
| JPM |
Receive | LIBOR | 0.461 | 12/9/25 | JPY | 28,000 | — | (11,635 | ) | |||||||||||||||||||||||
| Total of Centrally Cleared Interest Rate Swaps |
|
$ | 19,369 | $ | 554,589 | |||||||||||||||||||||||||||
| Over-the-Counter Interest Rate Swaps at September 30, 2016 | ||||||||||||||||||||||||||||||||
| PAy/Receive | Premiums Received / | |||||||||||||||||||||||||||||||
| Counterparty | Floating Rate | Floating Rate | Fixed Rate | Maturity Date | Notional Amount (000’s) | (Paid) | Value | |||||||||||||||||||||||||
| Three-Month CNY | ||||||||||||||||||||||||||||||||
| BOA |
Receive | CNREPOFIX=CFXS | 2.605% | 3/26/21 | CNY | 3,900 | $ | — | $ | (3,674 | ) | |||||||||||||||||||||
| Three-Month CNY | ||||||||||||||||||||||||||||||||
| BOA |
Receive | CNREPOFIX=CFXS | 2.900 | 7/24/20 | CNY | 14,000 | — | 10,017 | ||||||||||||||||||||||||
| Three-Month CNY | ||||||||||||||||||||||||||||||||
| GSG |
Receive | CNREPOFIX=CFXS | 2.830 | 8/14/20 | CNY | 3,250 | — | 1,255 | ||||||||||||||||||||||||
| Total of Over-the-Counter Interest Rate Swaps |
|
$ | — | $ | 7,598 | |||||||||||||||||||||||||||
| Over-the-Counter Total Return Swaps at September 30, 2016 | ||||||||||||||||||||||||||||||
| Reference Asset | Counterparty | Pay/Receive Total Return* |
Floating Rate | Maturity Date | Notional Amount (000’s) |
Value | ||||||||||||||||||||||||
| One-Month AUD BBR BBSW | ||||||||||||||||||||||||||||||
| CGAUOPAU Custom Basket |
CITNA-B | Receive | plus 50 basis points | 3/9/17 | AUD | 8,351 | $ | 19,763 | ||||||||||||||||||||||
| One-Month CAD BA CDOR | ||||||||||||||||||||||||||||||
| CGCNOCAD Custom Basket |
CITNA-B | Receive | plus 80 basis points | 3/7/17 | CAD | 8,598 | (67,593 | ) | ||||||||||||||||||||||
| One-Month HKD HIBOR | ||||||||||||||||||||||||||||||
| GSEHOPCN Custom Basket |
GSG | Pay | HKAB minus 25 basis points | 6/22/17 | HKD | 14,465 | (572,132 | ) | ||||||||||||||||||||||
| One-Month USD BBA LIBOR | ||||||||||||||||||||||||||||||
| GSOPRUSS Custom Basket |
GOL | Receive | plus 35 basis points | 9/8/17 | USD | 30,191 | 282,950 | |||||||||||||||||||||||
| One-Month BBA LIBOR plus | ||||||||||||||||||||||||||||||
| GSOPSPS3 Custom Basket |
GSCOI | Receive | 35 basis points | 7/10/17 | USD | 22,341 | (98,691 | ) | ||||||||||||||||||||||
13 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
CONSOLIDATED STATEMENT OF INVESTMENTS Unaudited / Continued
| Over-the-Counter Total Return Swaps (Continued) | ||||||||||||||||||||||||||||||||
| Reference Asset | Counterparty | Pay/Receive Total Return* |
Floating Rate | Maturity Date | Notional Amount (000’s) |
Value | ||||||||||||||||||||||||||
| One-Month USD BBA LIBOR | ||||||||||||||||||||||||||||||||
| JPCMOLNG Custom Basket |
JPM | Receive | plus 30 basis points | 3/7/17 | USD | 4,763 | $ | (5,913 | ) | |||||||||||||||||||||||
| One-Month USD BBA LIBOR | ||||||||||||||||||||||||||||||||
| JPCMOSHR Custom Basket |
JPM | Pay | minus 85 basis points | 3/7/17 | USD | 4,735 | (41,833 | ) | ||||||||||||||||||||||||
| One-Month EUR EURIBOR | ||||||||||||||||||||||||||||||||
| JPEBCACO Custom Basket |
JPM | Receive | plus 10 basis points | 1/6/17 | EUR | 14,934 | 190,202 | |||||||||||||||||||||||||
| One-Month GBP BBA LIBOR | ||||||||||||||||||||||||||||||||
| JPEBUKXO Custom Basket |
JPM | Receive | plus 20 basis points | 1/6/17 | GBP | 11,956 | 263,497 | |||||||||||||||||||||||||
| One-Month USD BBA LIBOR | ||||||||||||||||||||||||||||||||
| OEX Index |
GSG | Pay | minus 35 basis points | 4/13/17 | USD | 11,617 | 79,731 | |||||||||||||||||||||||||
| One-Month USD BBA LIBOR | ||||||||||||||||||||||||||||||||
| OEX Index |
GSCOI | Pay | minus 35 basis points | 4/7/17 | USD | 11,073 | 6,540 | |||||||||||||||||||||||||
| One-Month USD BBA LIBOR | ||||||||||||||||||||||||||||||||
| OEX Index |
GOL | Pay | minus 35 basis points | 7/10/17 | USD | 305 | 181 | |||||||||||||||||||||||||
| PowerShares Senior Loan |
One-Month USD BBA LIBOR | |||||||||||||||||||||||||||||||
| Exchange Traded Fund |
CITNA-B | Receive | minus 125 basis points | 11/3/16 | USD | 60,455 | 188,007 | |||||||||||||||||||||||||
| PowerShares Senior Loan |
One-Month USD BBA LIBOR | |||||||||||||||||||||||||||||||
| Exchange Traded Fund |
CITNA-B | Receive | minus 190 basis points | 11/3/16 | USD | 13,025 | 40,505 | |||||||||||||||||||||||||
| Total of Over-the-Counter Total Return Swaps |
|
$ | 285,214 | |||||||||||||||||||||||||||||
* Fund will pay or receive the total return of the reference asset depending on whether the return is positive or negative. For contracts where the Fund has elected to receive the total return of the reference asset if positive, it will be responsible for paying the floating rate and the total return of the reference asset if negative. If the Fund has elected to pay the total return of the reference asset if positive, it will receive the floating rate and the total return of the reference asset if negative.
| Over-the-Counter Volatility Swaps at September 30, 2016 | ||||||||||||||||||||||||||||||||
| Reference Asset | Counterparty | Pay/Receive Volatility* | Strike Price | Maturity Date | Notional Amount | Value | ||||||||||||||||||||||||||
| AUD/USD spot exchange rate |
JPM | Pay | $ 9.350 | 11/7/16 | USD | (4,900 | ) | $ | (1,568 | ) | ||||||||||||||||||||||
| CAD/CHF spot exchange rate |
CITNA-B | Pay | 8.600 | 10/31/16 | CAD | (6,500 | ) | (5,153 | ) | |||||||||||||||||||||||
| EUR/AUD spot exchange rate |
DEU | Pay | 8.300 | 10/6/16 | EUR | (4,400 | ) | (2,620 | ) | |||||||||||||||||||||||
| EUR/NOK spot exchange rate |
GOL | Pay | 7.100 | 10/24/16 | EUR | (4,400 | ) | (8,254 | ) | |||||||||||||||||||||||
| EUR/NOK spot exchange rate |
CITNA-B | Pay | 7.400 | 10/24/16 | EUR | (4,400 | ) | (6,129 | ) | |||||||||||||||||||||||
| EUR/NOK spot exchange rate |
BOA | Pay | 7.000 | 10/17/16 | EUR | (4,400 | ) | (5,289 | ) | |||||||||||||||||||||||
| EUR/NOK spot exchange rate |
HSBC | Pay | 7.250 | 10/20/16 | EUR | (4,400 | ) | (5,437 | ) | |||||||||||||||||||||||
| EUR/NOK spot exchange rate |
BOA | Pay | 6.950 | 10/21/16 | EUR | (4,400 | ) | (7,612 | ) | |||||||||||||||||||||||
| EUR/NOK spot exchange rate |
JPM | Pay | 6.800 | 10/19/16 | EUR | (4,400 | ) | (6,969 | ) | |||||||||||||||||||||||
| EUR/SEK spot exchange rate |
DEU | Pay | 4.750 | 10/27/16 | EUR | (4,400 | ) | (3,213 | ) | |||||||||||||||||||||||
| USD/CAD spot exchange rate |
GOL | Receive | 9.150 | 10/31/16 | USD | 4,900 | (1,519 | ) | ||||||||||||||||||||||||
| USD/NOK spot exchange rate |
JPM | Receive | 9.340 | 10/26/16 | USD | 4,900 | (1,225 | ) | ||||||||||||||||||||||||
| Total of Over-the-Counter Volatility Swaps |
$ | (54,988 | ) | |||||||||||||||||||||||||||||
* Fund will pay or receive the volatility of the reference asset depending on whether the realized volatility of the reference asset exceeds or is less than the strike price. For contracts where the Fund has elected to receive the volatility of the reference asset, it will receive a net payment of the difference between the realized volatility and the strike price multiplied by the notional amount if the realized volatility exceeds the strike price; the Fund will make a net payment of the absolute value of the difference of the realized volatility and the strike price multiplied by the notional amount if the realized volatility is less than the strike price. For contracts where the Fund has elected to pay the volatility of the reference asset, it will make a net payment of the difference between the realized volatility and the strike price multiplied by the notional amount if the realized volatility exceeds the strike price; the Fund will receive a net payment of the absolute value of the difference of the realized and the strike price multiplied by the notional amount if the realized volatility is less than the strike price.
| Glossary: |
||
| Counterparty Abbreviations |
||
| BAC |
Barclays Bank plc | |
| BNP |
BNP Paribas | |
| BOA |
Bank of America NA | |
| CITNA-B |
Citibank NA | |
| DEU |
Deutsche Bank AG | |
| GOL |
Goldman Sachs & Co. | |
| GSCOI |
Goldman Sachs International | |
| GSCO-OT |
Goldman Sachs Bank USA | |
| GSG |
Goldman Sachs Group, Inc. (The) | |
| HSBC |
HSBC Bank USA NA | |
| JPM |
JPMorgan Chase Bank NA | |
| MOS-A |
Morgan Stanley | |
| MSCO |
Morgan Stanley Capital Services, Inc. | |
| NOM |
Nomura Global Financial Products, Inc. | |
| RBS |
Royal Bank of Scotland plc (The) | |
| TDB |
Toronto Dominion Bank | |
| Currency abbreviations indicate amounts reporting in currencies | ||
| AUD |
Australian Dollar | |
14 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
| Currency abbreviations indicate amounts reporting in currencies (Continued) | ||
| BRL |
Brazilian Real | |
| CAD |
Canadian Dollar | |
| CHF |
Swiss Franc | |
| CLP |
Chilean Peso | |
| CNH |
Offshore Chinese Renminbi | |
| CNY |
Chinese Renminbi | |
| DKK |
Danish Krone | |
| EUR |
Euro | |
| GBP |
British Pound Sterling | |
| HKD |
Hong Kong Dollar | |
| HUF |
Hungarian Forint | |
| IDR |
Indonesian Rupiah | |
| JPY |
Japanese Yen | |
| KRW |
South Korean Won | |
| MXN |
Mexican Nuevo Peso | |
| NOK |
Norwegian Krone | |
| NZD |
New Zealand Dollar | |
| SEK |
Swedish Krona | |
| SGD |
Singapore Dollar | |
| THB |
Thailand Baht | |
| TRY |
New Turkish Lira | |
| ZAR |
South African Rand | |
| Definitions | ||
| BA CDOR |
Canada Bankers Acceptances Deposit Offering Rate | |
| BBA LIBOR |
British Bankers’ Association London - Interbank Offered Rate | |
| BBR |
Bank Bill Rate | |
| BBSW |
Bank Bill Swap Reference Rate (Australian Financial Market) | |
| BTP |
Italian Treasury Bonds | |
| CDX.HY.24 |
Merkit CDX High Yield Index | |
| CDX.HY.25 |
Markit CDX High Yield Index | |
| CDX.IG.25 |
Markit CDX Investment Grade Index | |
| CDX.NA.HY.21 |
Markit CDX North American High Yield | |
| CDX.NA.HY.25 |
Markit CDX North American High Yield | |
| CGAUOPAU |
Custom Basket of Securities | |
| CGCNOCAD |
Custom Basket of Securities | |
| CIBOR2 |
Two banking days preceding reset date of Copenhagen Interbank | |
| CNREPOFIX=CFXS |
Repurchase Fixing Rates | |
| DKNA13 |
Reuters 12-Month CIBOR Offered Rate | |
| EURIBOR |
Euro Interbank Offered Rate | |
| GSEHOPCN |
Custom Basket of Securities | |
| GSOPRUSS |
Custom Basket of Securities | |
| GSOPSPS3 |
Custom Basket of Securities | |
| HIBOR |
Hong Kong Interbank Offered Rate | |
| HKAB |
Hong Kong Association of Banks | |
| iTraxx.Main.24 |
Credit Default Swap Trading Index for a Specific Basket of Securities | |
| JPCMOLNG |
Custom Basket of Securities | |
| JPCMOSHR |
Custom Basket of Securities | |
| JPEBCACO |
Custom Basket of Securities | |
| JPEBUKXO |
Custom Basket of Securities | |
| NIBOR NIBR |
Norwegian Interbank Offered Rate | |
| OEX |
S&P 100 Index | |
| S&P |
Standard & Poor’s | |
| STIBOR SIDE |
Stockholm Interbank Offered Rate | |
| Exchange Abbreviations | ||
| CBT |
Chicago Board of Trade | |
| CME |
Chicago Mercantile Exchanges | |
| CMX |
Commodity Exchange, Inc. | |
| EUX |
European Stock Exchange | |
| ICE |
Intercontinental Exchange | |
| LME |
London Metal Exchange | |
| MON |
Montreal Exchange | |
| NYB |
New York Board of Trade | |
| NYF |
New York Futures Exchange | |
| NYM |
New York Mercantile Echange | |
| PAR |
Paris Stock Exchange | |
| SFE |
Sydney Futures Exchange | |
15 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
NOTES TO CONSOLIDATED STATEMENTS OF INVESTMENTS September 30, 2016 Unaudited
1. Organization
Oppenheimer Global Multi-Alternatives Fund/VA (the “Fund”) is a separate series of Oppenheimer Variable Account Funds, a diversified open-end management investment company registered under the Investment Company Act of 1940 (“1940 Act”), as amended. The Fund’s investment objective is to seek total return. The Fund’s investment adviser is OFI Global Asset Management, Inc. (“OFI Global” or the “Manager”), a wholly-owned subsidiary of OppenheimerFunds, Inc. (“OFI” or the “Sub-Adviser”). The Manager has entered into a sub-advisory agreement with OFI. The Sub-Adviser has entered into a sub-sub-advisory agreement with Barings Real Estate Advisers LLC formerly Cornerstone Real Estate Advisers LLC and OFI SteelPath, Inc. (collectively, the “Sub-Sub-Advisers”). Shares of the Fund are sold only to separate accounts of life insurance companies.
2. Significant Accounting Policies
Security Valuation. All investments in securities are recorded at their estimated fair value, as described in Note 3.
Basis for Consolidation. The Fund has established a Cayman Islands exempted company, Oppenheimer Global Multi-Alternatives Fund/VA (Cayman) Ltd., which is wholly-owned and controlled by the Fund (the “Subsidiary”). The Fund and Subsidiary are both managed by the Manager. The Fund may invest up to 25% of its total assets in the Subsidiary. The Subsidiary invests primarily in commodity-linked derivatives (including commodity futures, financial futures, options and swap contracts) and certain fixed-income securities and other investments that may serve as margin or collateral for its derivatives positions. Investments in the Subsidiary are expected to provide the Fund with exposure to commodities markets within the limitations of the federal tax requirements that apply to the Fund. The Subsidiary is subject to the same investment restrictions and guidelines, and follows the same compliance policies and procedures, as the Fund.
At period end, the Fund owned 21,023 shares with net assets of $11,979,917 in the Subsidiary.
Foreign Currency Translation. The Fund’s accounting records are maintained in U.S. dollars. The values of securities denominated in foreign currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading. Foreign exchange rates may be valued primarily using a reliable bank, dealer or service authorized by the Board of Trustees.
3. Securities Valuation
The Fund calculates the net asset value of its shares as of 4:00 P.M. Eastern time, on each day the New York Stock Exchange (the “Exchange”) is open for trading, except in the case of a scheduled early closing of the Exchange, in which case the Fund will calculate net asset value of the shares as of the scheduled early closing time of the Exchange.
The Fund’s Board has adopted procedures for the valuation of the Fund’s securities and has delegated the day-to-day responsibility for valuation determinations under those procedures to the Manager. The Manager has established a Valuation Committee which is responsible for determining a “fair valuation” for any security for which market quotations are not “readily available.” The Valuation Committee’s fair valuation determinations are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined.
Valuation Methods and Inputs
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by third party pricing services or dealers.
The following methodologies are used to determine the market value or the fair value of the types of securities described below:
Securities traded on a registered U.S. securities exchange (including exchange-traded derivatives other than futures and futures options) are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the mean between the bid and asked price on the principal exchange or, if not available from the principal exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the principal exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer. A security of a foreign issuer traded on a foreign exchange, but not listed on a registered U.S. securities exchange, is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the third party pricing service used by the Manager, prior to the time when the Fund’s assets are valued. If the last sale price is unavailable, the security is valued at the most recent official closing price on the principal exchange on which it is traded. If the last sales price or official closing price for a foreign security is not available, the security is valued at the mean between the bid and asked price per the exchange or, if not available from the exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer.
Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.
Corporate and government debt securities (of U.S. or foreign issuers) and municipal debt securities, event-linked bonds, loans, mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers who may use matrix pricing methods to determine the evaluated prices.
Short-term money market type debt securities with a remaining maturity of sixty days or less are valued at cost adjusted by the amortization of discount or premium to maturity (amortized cost), which approximates market value. Short-term debt securities with a remaining maturity in excess
16 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
3. Securities Valuation (Continued)
of sixty days are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers.
Structured securities, swaps, swaptions, and other over-the-counter derivatives are valued utilizing evaluated prices obtained from third party pricing services or broker-dealers.
Forward foreign currency exchange contracts are valued utilizing current and forward currency rates obtained from third party pricing services. When the settlement date of a contract is an interim date for which a quotation is not available, interpolated values are derived using the nearest dated forward currency rate.
Futures contracts and futures options traded on a commodities or futures exchange will be valued at the final settlement price or official closing price on the principal exchange as reported by such principal exchange at its trading session ending at, or most recently prior to, the time when the Fund’s assets are valued.
A description of the standard inputs that may generally be considered by the third party pricing vendors in determining their evaluated prices is provided below.
| Security Type | Standard inputs generally considered by third-party pricing vendors | |
| Corporate debt, government debt, municipal, mortgage- backed and asset-backed securities | Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, the credit quality, yield, maturity, and other appropriate factors. | |
| Loans | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. | |
| Event-linked bonds | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. | |
| Structured securities | Relevant market information such as the price of underlying financial instruments, stock market indices, foreign currencies, interest rate spreads, commodities, or the occurrence of other specific events. | |
| Swaps | Relevant market information, including underlying reference assets such as credit spreads, credit event probabilities, index values, individual security values, forward interest rates, variable interest rates, volatility measures, and forward currency rates. |
If a market value or price cannot be determined for a security using the methodologies described above, or if, in the “good faith” opinion of the Manager, the market value or price obtained does not constitute a “readily available market quotation,” or a significant event has occurred that would materially affect the value of the security, the security is fair valued either (i) by a standardized fair valuation methodology applicable to the security type or the significant event as previously approved by the Valuation Committee and the Fund’s Board or (ii) as determined in good faith by the Manager’s Valuation Committee. The Valuation Committee considers all relevant facts that are reasonably available, through either public information or information available to the Manager, when determining the fair value of a security. Fair value determinations by the Manager are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined. Those fair valuation standardized methodologies include, but are not limited to, valuing securities at the last sale price or initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be further adjusted for any discounts related to security-specific resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities nor can it be assured that the Fund can obtain the fair value assigned to a security if it were to sell the security.
To assess the continuing appropriateness of security valuations, the Manager, or its third party service provider who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and sale prices to the current day prices and challenges those prices exceeding certain tolerance levels with the third party pricing service or broker source. For those securities valued by fair valuations, whether through a standardized fair valuation methodology or a fair valuation determination, the Valuation Committee reviews and affirms the reasonableness of the valuations based on such methodologies and fair valuation determinations on a regular basis after considering all relevant information that is reasonably available.
Classifications
Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:
1) Level 1-unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
2) Level 2-inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)
3) Level 3-significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).
The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.
17 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
NOTES TO CONSOLIDATED STATEMENTS OF INVESTMENTS Unaudited / Continued
3. Securities Valuation (Continued)
The Fund classifies each of its investments in investment companies which are publicly offered as Level 1. Investment companies that are not publicly offered are measured using net asset value as a practical expedient, and are not classified in the fair value hierarchy.
The table below categorizes amounts at period end based on valuation input level:
| Level 3— | ||||||||||||||||
| Level 1— | Level 2— | Significant | ||||||||||||||
| Unadjusted | Other Significant | Unobservable | ||||||||||||||
| Quoted Prices | Observable Inputs | Inputs | Value | |||||||||||||
| Assets Table |
||||||||||||||||
| Investments, at Value: |
||||||||||||||||
| Common Stocks |
||||||||||||||||
| Consumer Discretionary |
$ | 4,717,634 | $ | 341,526 | $ | — | $ | 5,059,160 | ||||||||
| Consumer Staples |
5,018,899 | — | — | 5,018,899 | ||||||||||||
| Energy |
28,866,098 | 35,760 | — | 28,901,858 | ||||||||||||
| Financials |
23,546,757 | 8,530,864 | — | 32,077,621 | ||||||||||||
| Health Care |
12,302,747 | 1,213,659 | 6,316 | 13,522,722 | ||||||||||||
| Industrials |
15,372,088 | — | — | 15,372,088 | ||||||||||||
| Information Technology |
16,365,941 | 20,305 | — | 16,386,246 | ||||||||||||
| Materials |
5,599,333 | — | — | 5,599,333 | ||||||||||||
| Telecommunication Services |
3,590,009 | — | — | 3,590,009 | ||||||||||||
| Utilities |
3,460,296 | 240 | — | 3,460,536 | ||||||||||||
| Preferred Stocks |
— | 839,450 | — | 839,450 | ||||||||||||
| Rights, Warrants and Certificates |
4,669 | — | — | 4,669 | ||||||||||||
| Asset-Backed Securities |
— | 15,861,282 | 1,029,935 | 16,891,217 | ||||||||||||
| Mortgage-Backed Obligation |
— | 2,060,731 | — | 2,060,731 | ||||||||||||
| Foreign Government Obligations |
— | 6,366,605 | — | 6,366,605 | ||||||||||||
| Non-Convertible Corporate Bonds and Notes |
— | 43,570,877 | — | 43,570,877 | ||||||||||||
| Convertible Corporate Bond and Note |
— | 1,826,563 | — | 1,826,563 | ||||||||||||
| Corporate Loans |
— | 12,305,480 | — | 12,305,480 | ||||||||||||
| Event-Linked Bonds |
— | 53,857,937 | — | 53,857,937 | ||||||||||||
| Investment Companies |
15,287,325 | — | — | 15,287,325 | ||||||||||||
| Short-Term Notes |
— | 121,730,618 | — | 121,730,618 | ||||||||||||
| Exchange-Traded Option Purchased |
126,360 | — | — | 126,360 | ||||||||||||
| Over-the-Counter Options Purchased |
— | 1,511,424 | — | 1,511,424 | ||||||||||||
| Over-the-Counter Interest Rate Swaptions Purchased |
— | 316,749 | — | 316,749 | ||||||||||||
|
|
|
| ||||||||||||||
| Total Investments, at Value |
134,258,156 | 270,390,070 | 1,036,251 | 405,684,477 | ||||||||||||
| Other Financial Instruments: |
||||||||||||||||
| Swaps, at value |
— | 1,651,812 | — | 1,651,812 | ||||||||||||
| Centrally cleared swaps, at value |
— | 1,675,227 | — | 1,675,227 | ||||||||||||
| Futures contracts |
601,442 | — | — | 601,442 | ||||||||||||
| Forward currency exchange contracts |
— | 1,033,859 | — | 1,033,859 | ||||||||||||
|
|
|
| ||||||||||||||
| Total Assets |
$ | 134,859,598 | $ | 274,750,968 | $ | 1,036,251 | $ | 410,646,817 | ||||||||
|
|
|
| ||||||||||||||
| Liabilities Table |
||||||||||||||||
| Other Financial Instruments: |
||||||||||||||||
| Investment Company Securities Sold Short |
$ | (5,439,150 | ) | $ | — | $ | — | $ | (5,439,150 | ) | ||||||
| Common Stock Securities Sold Short |
(37,181,490 | ) | (4,660,774 | ) | — | (41,842,264 | ) | |||||||||
| Swaps, at value |
— | (1,581,391 | ) | — | (1,581,391 | ) | ||||||||||
| Centrally cleared swaps, at value |
— | (2,497,941 | ) | — | (2,497,941 | ) | ||||||||||
| Options written, at value |
— | (2,381,395 | ) | — | (2,381,395 | ) | ||||||||||
| Futures contracts |
(1,348,698 | ) | — | — | (1,348,698 | ) | ||||||||||
| Forward currency exchange contracts |
— | (2,448,270 | ) | — | (2,448,270 | ) | ||||||||||
|
|
|
| ||||||||||||||
| Total Liabilities |
$ | (43,969,338 | ) | $ | (13,569,771 | ) | $ | — | $ | (57,539,109 | ) | |||||
|
|
|
| ||||||||||||||
Forward currency exchange contracts and futures contracts, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
4. Investments and Risks
Risks of Foreign Investing. The Fund may invest in foreign securities which are subject to special risks. Securities traded in foreign markets may be less liquid and more volatile than those traded in U.S. markets. Foreign issuers are usually not subject to the same accounting and disclosure requirements that U.S. companies are subject to, which may make it difficult for the Fund to evaluate a foreign company’s operations or financial condition. A change in the value of a foreign currency against the U.S. dollar will result in a change in the U.S. dollar value of investments denominated in that foreign currency and in the value of any income or distributions the Fund may receive on those investments. The value of foreign investments may be affected by exchange control regulations, foreign taxes, higher transaction and other costs, delays in the settlement of transactions, changes in economic or monetary policy in the United States or abroad, expropriation or nationalization of a company’s assets, or other political and economic
18 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
4. Investments and Risks (Continued)
factors. In addition, due to the inter-relationship of global economies and financial markets, changes in political and economic factors in one country or region could adversely affect conditions in another country or region. Investments in foreign securities may also expose the Fund to time-zone arbitrage risk. Foreign securities may trade on weekends or other days when the Fund does not price its shares. At times, the Fund may emphasize investments in a particular country or region and may be subject to greater risks from adverse events that occur in that country or region. Foreign securities and foreign currencies held in foreign banks and securities depositories may be subject to limited or no regulatory oversight.
Investments in Affiliated Funds. The Fund is permitted to invest in other mutual funds advised by the Manager (“Affiliated Funds”). Affiliated Funds are open-end management investment companies registered under the 1940 Act, as amended. The Manager is the investment adviser of, and the Sub-Adviser provides investment and related advisory services to, the Affiliated Funds. When applicable, the Fund’s investments in Affiliated Funds are included in the Consolidated Statement of Investments. Shares of Affiliated Funds are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of the Affiliated Funds’ expenses, including their management fee. The Manager will waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Fund’s investment in the Affiliated Funds.
Each of the Affiliated Funds in which the Fund invests has its own investment risks, and those risks can affect the value of the Fund’s investments and therefore the value of the Fund’s shares. To the extent that the Fund invests more of its assets in one Affiliated Fund than in another, the Fund will have greater exposure to the risks of that Affiliated Fund.
Investments in Money Market Instruments. The Fund is permitted to invest its free cash balances in money market instruments to provide liquidity or for defensive purposes. The Fund may invest in money market instruments by investing in Class E shares of Oppenheimer Institutional Government Money Market Fund (“IGMMF”), formerly known as Oppenheimer Institutional Money Market Fund, which is an Affiliated Fund. IGMMF is regulated as a money market fund under the 1940 Act, as amended. The Fund may also invest in money market instruments directly or in other affiliated or unaffiliated money market funds.
Master Limited Partnerships (“MLPs”). MLPs issue common units that represent an equity ownership interest in a partnership and provide limited voting rights. MLP common units are registered with the Securities and Exchange Commission (“SEC”), and are freely tradable on securities exchanges such as the NYSE and the NASDAQ Stock Market (“NASDAQ”), or in the over-the-counter (“OTC”) market. An MLP consists of one or more general partners, who conduct the business, and one or more limited partners, who contribute capital. MLP common unit holders have a limited role in the partnership’s operations and management. The Fund, as a limited partner, normally would not be liable for the debts of the MLP beyond the amounts the Fund has contributed, but would not be shielded to the same extent that a shareholder of a corporation would be. In certain circumstances creditors of an MLP would have the right to seek return of capital distributed to a limited partner. This right of an MLP’s creditors would continue after the Fund sold its investment in the MLP.
Event-Linked Bonds. The Fund may invest in “event-linked” bonds. Event-linked bonds, which are sometimes referred to as “catastrophe” bonds, are fixed income securities for which the return of principal and payment of interest is contingent on the non-occurrence of a specific trigger event, such as a hurricane, earthquake, or other occurrence that leads to physical or economic loss. If the trigger event occurs prior to maturity, the Fund may lose all or a portion of its principal in addition to interest otherwise due from the security. Event-linked bonds may expose the Fund to certain other risks, including issuer default, adverse regulatory or jurisdictional interpretations, liquidity risk and adverse tax consequences. The Fund records the net change in market value of event-linked bonds on the Consolidated Statement of Operations in the annual and semiannual reports as a change in unrealized appreciation or depreciation on investments. The Fund records a realized gain or loss on the Consolidated Statement of Operations in the annual and semiannual reports upon the sale or maturity of such securities.
Loans. The Fund invests in loans made to U.S. and foreign borrowers that are corporations, partnerships or other business entities. The Fund will do so directly as an original lender or by assignment or indirectly through participation agreements or certain derivative instruments. While many of these loans will be collateralized, the Fund can also invest in uncollateralized loans. Loans are often issued in connection with recapitalizations, acquisitions, leveraged buyouts, and refinancing of borrowers. The loans often pay interest at rates that float above (or are adjusted periodically based on) a benchmark that reflects current interest rates although the Fund can also invest in loans with fixed interest rates.
Securities on a When-Issued or Delayed Delivery Basis. The Fund may purchase securities on a “when-issued” basis, and may purchase or sell securities on a “delayed delivery” basis. “When-issued” or “delayed delivery” refers to securities whose terms and indenture are available and for which a market exists, but which are not available for immediate delivery. Delivery and payment for securities that have been purchased by the Fund on a when-issued basis normally takes place within six months and possibly as long as two years or more after the trade date. During this period, such securities do not earn interest, are subject to market fluctuation and may increase or decrease in value prior to their delivery. The purchase of securities on a when-issued basis may increase the volatility of the Fund’s net asset value to the extent the Fund executes such transactions while remaining substantially fully invested. When the Fund engages in when-issued or delayed delivery transactions, it relies on the buyer or seller, as the case may be, to complete the transaction. Their failure to do so may cause the Fund to lose the opportunity to obtain or dispose of the security at a price and yield it considers advantageous. The Fund may also sell securities that it purchased on a when-issued basis or forward commitment prior to settlement of the original purchase.
19 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
NOTES TO CONSOLIDATED STATEMENTS OF INVESTMENTS Unaudited / Continued
4. Investments and Risks (Continued)
At period end, the Fund had purchased securities issued on a when-issued or delayed delivery basis as follows:
| When-Issued or | ||||
| Delayed Delivery | ||||
| Basis Transactions | ||||
| Purchased securities |
$186,850 | |||
Restricted Securities. At period end, investments in securities included issues that are restricted. A restricted security may have a contractual restriction on its resale and is valued under methods approved by the Board of Trustees as reflecting fair value. Securities that are restricted are marked with an applicable footnote on the Consolidated Statement of Investments. Restricted securities are reported on a schedule following the Consolidated Statement of Investments.
Equity Security Risk. Stocks and other equity securities fluctuate in price. The value of the Fund’s portfolio may be affected by changes in the equity markets generally. Equity markets may experience significant short-term volatility and may fall sharply at times. Different markets may behave differently from each other and U.S. equity markets may move in the opposite direction from one or more foreign stock markets. Adverse events in any part of the equity or fixed-income markets may have unexpected negative effects on other market segments.
The prices of individual equity securities generally do not all move in the same direction at the same time and a variety of factors can affect the price of a particular company’s securities. These factors may include, but are not limited to, poor earnings reports, a loss of customers, litigation against the company, general unfavorable performance of the company’s sector or industry, or changes in government regulations affecting the company or its industry.
Credit Risk. The Fund invests in high-yield, non-investment-grade bonds, which may be subject to a greater degree of credit risk. Credit risk relates to the ability of the issuer to meet interest or principal payments or both as they become due. The Fund may acquire securities that have missed an interest payment, and is not obligated to dispose of securities whose issuers or underlying obligors subsequently miss an interest payment. Information concerning securities not accruing interest at period end is as follows:
| Cost |
$2,096,018 | |||
| Market Value |
$1,194,934 | |||
| Market Value as % of Net Assets |
0.29% |
Sovereign Debt Risk. The Fund invests in sovereign debt securities, which are subject to certain special risks. These risks include, but are not limited to, the risk that a governmental entity may delay or refuse, or otherwise be unable, to pay interest or repay the principal on its sovereign debt. There may also be no legal process for collecting sovereign debt that a government does not pay or bankruptcy proceedings through which all or part of such sovereign debt may be collected. In addition, a restructuring or default of sovereign debt may also cause additional impacts to the financial markets, such as downgrades to credit ratings, reduced liquidity and increased volatility, among others.
5. Market Risk Factors
The Fund’s investments in securities and/or financial derivatives may expose the Fund to various market risk factors:
Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.
Credit Risk. Credit risk relates to the ability of the issuer of debt to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield debt securities are subject to credit risk to a greater extent than lower-yield, higher-quality securities.
Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.
Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.
Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.
Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.
6. Use of Derivatives
The Fund’s investment objective not only permits the Fund to purchase investment securities, it also allows the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward currency exchange contracts, credit default swaps, interest rate swaps, total return swaps, variance swaps and purchased and written options. In doing so, the Fund will employ strategies in differing combinations to permit
20 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
6. Use of Derivatives (Continued)
it to increase, decrease, or change the level or types of exposure to market risk factors. These instruments may allow the Fund to pursue its objectives more quickly and efficiently than if it were to make direct purchases or sales of securities capable of effecting a similar response to market factors. Such contracts may be entered into through a bilateral over-the-counter (“OTC”) transaction, or through a securities or futures exchange and cleared through a clearinghouse.
Derivatives may have little or no initial cash investment relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost due to unanticipated changes in the market risk factors and the overall market. This use of embedded leverage allows the Fund to increase its market value exposure relative to its net assets and can substantially increase the volatility of the Fund’s performance. In instances where the Fund is using derivatives to decrease, or hedge, exposures to market risk factors for securities held by the Fund, there are also risks that those derivatives may not perform as expected resulting in losses for the combined or hedged positions. Some derivatives have the potential for unlimited loss, regardless of the size of the Fund’s initial investment.
Additional associated risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the derivative and the Fund. Typically, the associated risks are not the risks that the Fund is attempting to increase or decrease exposure to, per its investment objectives, but are the additional risks from investing in derivatives. Examples of these associated risks are liquidity risk, which is the risk that the Fund will not be able to sell the derivative in the open market in a timely manner, and counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund.
The Fund’s actual exposures to these market risk factors and associated risks during the period are discussed in further detail, by derivative type, below.
Forward Currency Exchange Contracts
The Fund may enter into forward currency exchange contracts (“forward contracts”) for the purchase or sale of a foreign currency at a negotiated rate at a future date. Such contracts are traded in the OTC inter-bank currency dealer market.
Forward contracts are reported on a schedule following the Consolidated Statement of Investments. The unrealized appreciation (depreciation) is reported in the Consolidated Statement of Assets and Liabilities in the annual and semiannual reports as a receivable (or payable) and in the Consolidated Statement of Operations in the annual and semiannual reports within the change in unrealized appreciation (depreciation). At contract close, the difference between the original cost of the contract and the value at the close date is recorded as a realized gain (loss) in the Consolidated Statement of Operations in the annual and semiannual reports.
The Fund has entered into forward contracts with the obligation to purchase specified foreign currencies in the future at a currently negotiated forward rate in order to take a positive investment perspective on the related currency. These forward contracts seek to increase exposure to foreign exchange rate risk.
The Fund has entered into forward contracts with the obligation to purchase specified foreign currencies in the future at a currently negotiated forward rate in order to decrease exposure to foreign exchange rate risk associated with foreign currency denominated securities held by the Fund.
The Fund has entered into forward contracts with the obligation to sell specified foreign currencies in the future at a currently negotiated forward rate in order to take a negative investment perspective on the related currency. These forward contracts seek to increase exposure to foreign exchange rate risk.
The Fund has entered into forward contracts with the obligation to sell specified foreign currencies in the future at a currently negotiated forward rate in order to decrease exposure to foreign exchange rate risk associated with foreign currency denominated securities held by the Fund.
During the
reporting period, the Fund had daily average contract amounts on forward contracts to buy and sell of
$ 114,874,418 and $ 177,329,911, respectively.
Additional associated risk to the Fund includes counterparty credit risk. Counterparty credit risk arises from the possibility that the counterparty to a forward contract will default and fail to perform its obligations to the Fund.
Futures Contracts
A futures contract is a commitment to buy or sell a specific amount of a commodity, financial instrument or currency at a negotiated price on a stipulated future date. The Fund may buy and sell futures contracts and may also buy or write put or call options on these futures contracts. Futures contracts and options thereon are generally entered into on a regulated futures exchange and cleared through a clearinghouse associated with the exchange.
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 in an account registered in the futures commission merchant’s name. Subsequent payments (variation margin) are paid to or from the futures commission merchant each day equal to the daily changes in the contract value. Such payments are recorded as unrealized gains and losses. Should the Fund fail to make requested variation margin payments, the futures commission merchant can gain access to the initial margin to satisfy the Fund’s payment obligations.
Futures contracts are reported on a schedule following the Consolidated Statement of Investments. Securities held by a futures commission merchant to cover initial margin requirements on open futures contracts are noted in the Consolidated Statement of Investments. Cash held by a futures commission merchant to cover initial margin requirements on open futures contracts and the receivable and/or payable for the daily mark to market for the variation margin are noted in the Consolidated Statement of Assets and Liabilities in the annual and semiannual reports. The net change in unrealized appreciation and depreciation is reported in the Consolidated Statement of Operations in the annual and semiannual reports. Realized gains (losses) are reported in the Consolidated Statement of Operations in the annual and semiannual reports at the closing or expiration of futures contracts.
The Fund has purchased futures contracts on various bonds and notes to increase exposure to interest rate risk.
21 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
NOTES TO CONSOLIDATED STATEMENTS OF INVESTMENTS Unaudited / Continued
6. Use of Derivatives (Continued)
The Fund has sold futures contracts on various bonds and notes to decrease exposure to interest rate risk.
The Fund has purchased futures contracts on various equity indexes to increase exposure to equity risk.
The Fund has sold futures contracts on various equity indexes to decrease exposure to equity risk.
The Fund has purchased futures contracts, which have values that are linked to the price movement of the related volatility indexes, in order to increase exposure to volatility risk.
The Fund has sold futures contracts, which have values that are linked to the price movement of the related volatility indexes, in order to decrease exposure to volatility risk.
The Fund has purchased futures contracts, which have values that are linked to the price movement of the related commodities, in order to increase exposure to commodity risk.
The Fund has sold futures contracts, which have values that are linked to the price movement of the related commodities, in order to decrease exposure to commodity risk.
During the reporting period, the Fund had an ending monthly average market value of $42,057,387 and $103,712,039 on futures contracts purchased and sold, respectively.
Additional associated risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market where the Fund is unable to liquidate the contract or enter into an offsetting position and, if used for hedging purposes, the risk that the price of the contract will correlate imperfectly with the prices of the Fund’s securities.
Option Activity
The Fund may buy and sell put and call options, or write put and call options. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security, currency or other underlying financial instrument at a fixed price, upon exercise of the option.
Options can be traded through an exchange or through a privately negotiated arrangement with a dealer in an OTC transaction. Options traded through an exchange are generally cleared through a clearinghouse (such as The Options Clearing Corporation). The difference between the premium received or paid, and market value of the option, is recorded as unrealized appreciation or depreciation. The net change in unrealized appreciation or depreciation is reported in the Consolidated Statement of Operations in the annual and semiannual reports. When an option is exercised, the cost of the security purchased or the proceeds of the security sale are adjusted by the amount of premium received or paid. Upon the expiration or closing of the option transaction, a gain or loss is reported in the Consolidated Statement of Operations in the annual and semiannual reports.
The Fund has purchased call options on currencies to increase exposure to foreign exchange rate risk. A purchased call option becomes more valuable as the price of the underlying financial instrument appreciates relative to the strike price.
The Fund has purchased put options on currencies to decrease exposure to foreign exchange rate risk. A purchased put option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.
The Fund has purchased put options on treasury and/or euro futures to decrease exposure to interest rate risk. A purchased put option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.
The Fund has purchased call options on individual equity securities and/or equity indexes to increase exposure to equity risk. A purchased call option becomes more valuable as the price of the underlying financial instrument appreciates relative to the strike price.
The Fund has purchased put options on individual equity securities and/or equity indexes to decrease exposure to equity risk. A purchased put option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.
During the reporting period, the Fund had an ending monthly average market value of $431,511 and $709,747 on purchased call options and purchased put options, respectively.
Options written, if any, are reported in a schedule following the Consolidated Statement of Investments and as a liability in the Consolidated Statement of Assets and Liabilities in the annual and semiannual reports. Securities held in collateral accounts to cover potential obligations with respect to outstanding written options are noted in the Consolidated Statement of Investments.
The risk in writing a call option is that the market price of the security increases and if the option is exercised, the Fund must either purchase the security at a higher price for delivery or, if the Fund owns the underlying security, give up the opportunity for profit. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk that there may be an illiquid market where the Fund is unable to close the contract.
The Fund has written put options on currencies to increase exposure to foreign exchange rate risk. A written put option becomes more valuable as the price of the underlying financial instrument appreciates relative to the strike price.
The Fund has written call options on currencies to decrease exposure to foreign exchange rate risk. A written call option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.
The Fund has written call options on treasury and/or euro futures to decrease exposure to interest rate risk. A written call option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.
During the reporting period, the Fund had an ending monthly average market value of $872,611 and $610,381 on written call options and written put options, respectively.
Additional associated risks to the Fund include counterparty credit risk and liquidity risk.
Written option activity for the reporting period was as follows:
22 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
6. Use of Derivatives (Continued)
| Number of | Amount of | |||||||
| Contracts | Premiums | |||||||
|
|
||||||||
| Options outstanding as of December 31, 2015 | 5,400,003,810 | $ | 609,380 | |||||
| Options written |
1,246,227,303,630 | 13,266,964 | ||||||
| Options closed or expired |
(28,206,870,000 | ) | (5,085,177 | ) | ||||
| Options exercised |
(125,141,207,440 | ) | (5,788,775 | ) | ||||
|
|
|
| ||||||
| Options outstanding as of |
||||||||
| September 30, 2016 |
1,098,279,230,000 | $ | 3,002,392 | |||||
|
|
|
| ||||||
Swap Contracts
The Fund may enter into swap contract agreements with a counterparty to exchange a series of cash flows based on either specified reference rates, the price or volatility of asset or non-asset references, or the occurrence of a credit event, over a specified period. Swaps can be executed in a bi-lateral privately negotiated arrangement with a dealer in an OTC transaction (“OTC swaps”) or executed on a regulated market. Certain swaps, regardless of the venue of their execution, are required to be cleared through a clearinghouse (“centrally cleared swaps”). Swap contracts may include interest rate, equity, debt, index, total return, credit default, currency, and volatility swaps.
Swap contracts are reported on a schedule following the Consolidated Statement of Investments. The values of centrally cleared swap and OTC swap contracts are aggregated by positive and negative values and disclosed separately on the Consolidated Statement of Assets and Liabilities in the annual and semiannual reports. The unrealized appreciation (depreciation) related to the change in the valuation of the notional amount of the swap is combined with the accrued interest due to (owed by) the Fund, if any, at termination or settlement. The net change in this amount during the period is included on the Consolidated Statement of Operations in the annual and semiannual reports. The Fund also records any periodic payments received from (paid to) the counterparty, including at termination, under such contracts as realized gain (loss) on the Consolidated Statement of Operations in the annual and semiannual reports.
Swap contract agreements are exposed to the market risk factor of the specific underlying reference rate or asset. Swap contracts are typically more attractively priced compared to similar investments in related cash securities because they isolate the risk to one market risk factor and eliminate the other market risk factors. Investments in cash securities (for instance bonds) have exposure to multiple risk factors (credit and interest rate risk). Because swaps have embedded leverage, they can expose the Fund to substantial risk in the isolated market risk factor.
Credit Default Swap Contracts. A credit default swap is a contract that enables an investor to buy or sell protection against a defined-issuer credit event, such as the issuer’s failure to make timely payments of interest or principal on a debt security, bankruptcy or restructuring. The Fund may enter into credit default swaps either by buying or selling protection on a corporate issuer, sovereign issuer, or a basket or index of issuers (the “reference asset”).
The buyer of protection pays a periodic fee to the seller of protection based on the notional amount of the swap contract. The seller of protection agrees to compensate the buyer of protection for future potential losses as a result of a credit event on the reference asset. The contract effectively transfers the credit event risk of the reference asset from the buyer of protection to the seller of protection.
The ongoing value of the contract will fluctuate throughout the term of the contract based primarily on the credit risk of the reference asset. If the credit quality of the reference asset improves relative to the credit quality at contract initiation, the buyer of protection may have an unrealized loss greater than the anticipated periodic fee owed. This unrealized loss would be the result of current credit protection being cheaper than the cost of credit protection at contract initiation. If the buyer elects to terminate the contract prior to its maturity, and there has been no credit event, this unrealized loss will become realized. If the contract is held to maturity, and there has been no credit event, the realized loss will be equal to the periodic fee paid over the life of the contract.
If there is a credit event, the buyer of protection can exercise its rights under the contract and receive a payment from the seller of protection equal to the notional amount of the swap less the market value of specified debt securities issued by the reference asset. Upon exercise of the contract the difference between such value and the notional amount is recorded as realized gain (loss) and is included on the Consolidated Statement of Operations in the annual and semiannual reports.
The Fund has sold credit protection through credit default swaps to increase exposure to the credit risk of individual issuers and/or indexes of issuers that are either unavailable or considered to be less attractive in the bond market.
The Fund has purchased credit protection through credit default swaps to decrease exposure to the credit risk of individual issuers and/or indexes of issuers.
The Fund has engaged in spread curve trades by simultaneously purchasing and selling protection through credit default swaps referenced to the same reference asset but with different maturities. Spread curve trades attempt to gain exposure to credit risk on a forward basis by realizing gains on the expected differences in spreads.
For the reporting period, the Fund had ending monthly average notional amounts of $67,344,194 and $20,213,294 on credit default swaps to buy protection and credit default swaps to sell protection, respectively.
Additional associated risks to the Fund include counterparty credit risk and liquidity risk.
Interest Rate Swap Contracts. An interest rate swap is an agreement between counterparties to exchange periodic payments based on interest rates. One cash flow stream will typically be a floating rate payment based upon a specified floating interest rate while the other is typically a fixed interest rate.
The Fund has entered into interest rate swaps in which it pays a floating interest rate and receives a fixed interest rate in order to increase exposure
23 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
NOTES TO CONSOLIDATED STATEMENTS OF INVESTMENTS Unaudited / Continued
6. Use of Derivatives (Continued)
to interest rate risk. Typically, if relative interest rates rise, payments made by the Fund under a swap agreement will be greater than the payments received by the Fund.
The Fund has entered into interest rate swaps in which it pays a fixed interest rate and receives a floating interest rate in order to decrease exposure to interest rate risk. Typically, if relative interest rates rise, payments received by the Fund under the swap agreement will be greater than the payments made by the Fund.
For the reporting period, the Fund had ending monthly average notional amounts of $18,884,810 and $22,398,157 on interest rate swaps which pay a fixed rate and interest rate swaps which receive a fixed rate, respectively.
Additional associated risks to the Fund include counterparty credit risk and liquidity risk.
Total Return Swap Contracts. A total return swap is an agreement between counterparties to exchange periodic payments based on the value of asset or non-asset references. One cash flow is typically based on a non-asset reference (such as an interest rate) and the other on the total return of a reference asset (such as a security or a basket of securities or securities index). The total return of the reference asset typically includes appreciation or depreciation on the reference asset, plus any interest or dividend payments.
Total return swap contracts are exposed to the market risk factor of the specific underlying financial instrument or index. Total return swaps are less standard in structure than other types of swaps and can isolate and/or include multiple types of market risk factors including equity risk, credit risk, and interest rate risk.
The Fund has entered into total return swaps on various equity securities or indexes to increase exposure to equity risk. These equity risk related total return swaps require the Fund to pay a floating reference interest rate, and an amount equal to the negative price movement of securities or an index (expressed as a percentage) multiplied by the notional amount of the contract. The Fund will receive payments equal to the positive price movement of the same securities or index (expressed as a percentage) multiplied by the notional amount of the contract and, in some cases, dividends paid on the securities.
The Fund has entered into total return swaps on various equity securities or indexes to decrease exposure to equity risk. These equity risk related total return swaps require the Fund to pay an amount equal to the positive price movement of securities or an index (expressed as a percentage) multiplied by the notional amount of the contract and, in some cases, dividends paid on the securities. The Fund will receive payments of a floating reference interest rate and an amount equal to the negative price movement of the same securities or index (expressed as a percentage) multiplied by the notional amount of the contract.
The Fund has entered into total return swaps to increase exposure to the credit risk of various indexes or basket of securities. These credit risk related total return swaps require the Fund to pay to, or receive payments from, the counterparty based on the movement of credit spreads of the related indexes or securities.
The Fund has entered into total return swaps to decrease exposure to the credit risk of various indexes or basket of securities. These credit risk related total return swaps require the fund to pay to, or receive payments from, the counterparty based on the movement of credit spreads of the related indexes or securities.
For the reporting period, the Fund had ending monthly average notional amounts of $175,929,834 and $39,833,199 on total return swaps which are long the reference asset and total return swaps which are short the reference asset, respectively.
Additional associated risks to the Fund include counterparty credit risk and liquidity risk.
Volatility Swap Contracts. A volatility swap is an agreement between counterparties to exchange periodic payments based on the measured volatility of a reference security, index, currency or other reference investment over a specified time frame. One cash flow is typically based on the realized volatility of the reference investment as measured by changes in its price or level over the specified time period while the other cash flow is based on a specified rate representing expected volatility for the reference investment at the time the swap is executed, or the measured volatility of a different reference investment over the specified time period. The appreciation or depreciation on a volatility swap will typically depend on the magnitude of the reference investment’s volatility, or size of the movements in its price, over the specified time period, rather than general directional increases or decreases in its price.
Volatility swaps are less standard in structure than other types of swaps and provide pure, or isolated, exposure to volatility risk of the specific underlying reference investment. Volatility swaps are typically used to speculate on future volatility levels, to trade the spread between realized and expected volatility, or to decrease the volatility exposure of investments held by the Fund.
Variance swaps are a type of volatility swap where counterparties agree to exchange periodic payments based on the measured variance (or the volatility squared) of a reference security, index, or other reference investment over a specified time period. At payment date, a net cash flow will be exchanged based on the difference between the realized variance of the reference investment over the specified time period and the specified rate representing expected variance for the reference investment at the time the swap is executed multiplied by the notional amount of the contract.
The Fund has entered into volatility swaps to increase exposure to the volatility risk of various reference investments. These types of volatility swaps require the Fund to pay the measured volatility and receive a fixed rate payment. If the measured volatility of the related reference investment increases over the period, the swaps will depreciate in value. Conversely, if the measured volatility of the related reference investment decreases over the period, the swaps will appreciate in value.
The Fund has entered into volatility swaps to decrease exposure to the volatility risk of various reference investments. These types of volatility swaps require the Fund to pay a fixed rate payment and receive the measured volatility. If the measured volatility of the related reference investment increases over the period, the swaps will appreciate in value. Conversely, if the measured volatility of the related reference investment decreases over the period, the swaps will depreciate in value.
The Fund has entered into variance swaps to increase exposure to the volatility risk of various reference investments. These types of volatility swaps
24 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
6. Use of Derivatives (Continued)
require the Fund to make a payment if the measured price variance of the reference investment exceeds the specified fixed rate. If the measured variance of the related reference investment increases over the period, the swaps will depreciate in value. Conversely, if the measured variance of the related reference investment decreases over the period, the swaps will appreciate in value.
The Fund has entered into variance swaps to decrease exposure to the volatility risk of various reference investments. These types of volatility swaps require the Fund to make a payment if the measured price variance of the reference asset is less than the specified fixed rate. If the measured variance of the related reference investment increases over the period, the swaps will appreciate in value. Conversely, if the measured variance of the related reference investment decreases over the period, the swaps will depreciate in value.
For the reporting period, the Fund had ending monthly average notional amounts of $41,923 and $26,528 on volatility swaps which pay measured volatility/variance and volatility swaps which receive measured volatility/variance, respectively.
Additional associated risks to the Fund include counterparty credit risk and liquidity risk.
Swaption Transactions
The Fund may enter into a swaption contract which grants the purchaser the right, but not the obligation, to enter into a swap transaction at preset terms detailed in the underlying agreement within a specified period of time. The purchaser pays a premium to the swaption writer who bears the risk of unfavorable changes in the preset terms on the underlying swap.
Purchased swaptions are reported as a component of investments in the Consolidated Statement of Investments and the Consolidated Statement of Assets and Liabilities in the annual and semiannual reports. Written swaptions are reported on a schedule following the Consolidated Statement of Investments and their value is reported as a separate asset or liability line item in the Consolidated Statement of Assets and Liabilities in the annual and semiannual reports. The net change in unrealized appreciation or depreciation on written swaptions is separately reported in the Consolidated Statement of Operations in the annual and semiannual reports. When a swaption is exercised, the cost of the swap is adjusted by the amount of premium paid or received. Upon the expiration or closing of an unexercised swaption contract, a gain or loss is reported in the Consolidated Statement of Operations in the annual and semiannual reports for the amount of the premium paid or received.
The Fund generally will incur a greater risk when it writes a swaption than when it purchases a swaption. When the Fund writes a swaption it will become obligated, upon exercise of the swaption, according to the terms of the underlying agreement. Swaption contracts written by the Fund do not give rise to counterparty credit risk prior to exercise as they obligate the Fund, not its counterparty, to perform. When the Fund purchases a swaption it only risks losing the amount of the premium it paid if the swaption expires unexercised. However, when the Fund exercises a purchased swaption there is a risk that the counterparty will fail to perform or otherwise default on its obligations under the swaption contract.
The Fund has purchased swaptions which gives it the option to enter into an interest rate swap in which it pays a floating interest rate and receives a fixed interest rate in order to increase exposure to interest rate risk. A purchased swaption of this type becomes more valuable as the reference interest rate decreases relative to the preset interest rate.
The Fund has purchased swaptions which gives it the option to enter into an interest rate swap in which it pays a fixed interest rate and receives a floating interest rate in order to decrease exposure to interest rate risk. A purchased swaption of this type becomes more valuable as the reference interest rate increases relative to the preset interest rate.
During the reporting period, the Fund had an ending monthly average market value of $370,546 on purchased swaptions.
At period end, the Fund had no outstanding purchased or written swaption contracts.
Counterparty Credit Risk. Derivative positions are subject to the risk that the counterparty will not fulfill its obligation to the Fund. The Fund intends to enter into derivative transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction.
The Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by the Fund. For OTC options purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the contracts. Options written by the Fund do not typically give rise to counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform.
To reduce counterparty risk with respect to OTC transactions, the Fund has entered into master netting arrangements, established within the Fund’s International Swap and Derivatives Association, Inc. (“ISDA”) master agreements, which allow the Fund to make (or to have an entitlement to receive) a single net payment in the event of default (close-out netting) for outstanding payables and receivables with respect to certain OTC positions in swaps, options, swaptions, and forward currency exchange contracts for each individual counterparty. In addition, the Fund may require that certain counterparties post cash and/or securities in collateral accounts to cover their net payment obligations for those derivative contracts subject to ISDA master agreements. If the counterparty fails to perform under these contracts and agreements, the cash and/or securities will be made available to the Fund.
At period end, the Fund has required certain counterparties to post collateral of $134,667.
ISDA master agreements include credit related contingent features which allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event that, for example, the Fund’s net assets decline by a stated percentage or the Fund fails to meet the terms of its ISDA master agreements, which would cause the Fund to accelerate payment of any net liability owed to the counterparty.
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Consolidated Statement of Assets and Liabilities in the annual and semiannual reports. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events.
The Fund’s risk of loss from counterparty credit risk on exchange-traded derivatives cleared through a clearinghouse and for centrally cleared swaps
25 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
NOTES TO CONSOLIDATED STATEMENTS OF INVESTMENTS Unaudited / Continued
6. Use of Derivatives (Continued)
is generally considered lower than as compared to OTC derivatives. However, counterparty credit risk exists with respect to initial and variation margin deposited/paid by the Fund that is held in futures commission merchant, broker and/or clearinghouse accounts for such exchange-traded derivatives and for centrally cleared swaps.
With respect to centrally cleared swaps, such transactions will be submitted for clearing, and if cleared, will be held in accounts at futures commission merchants or brokers that are members of clearinghouses. While brokers, futures commission merchants and clearinghouses are required to segregate customer margin from their own assets, in the event that a broker, futures commission merchant or clearinghouse becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the broker, futures commission merchant or clearinghouse for all its customers, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the broker’s, futures commission merchant’s or clearinghouse’s customers, potentially resulting in losses to the Fund.
There is the risk that a broker, futures commission merchant or clearinghouse will decline to clear a transaction on the Fund’s behalf, and the Fund may be required to pay a termination fee to the executing broker with whom the Fund initially enters into the transaction. Clearinghouses may also be permitted to terminate centrally cleared swaps at any time. The Fund is also subject to the risk that the broker or futures commission merchant will improperly use the Fund’s assets deposited/paid as initial or variation margin to satisfy payment obligations of another customer. In the event of a default by another customer of the broker or futures commission merchant, the Fund might not receive its variation margin payments from the clearinghouse, due to the manner in which variation margin payments are aggregated for all customers of the broker/futures commission merchant.
Collateral and margin requirements differ by type of derivative. Margin requirements are established by the broker, futures commission merchant or clearinghouse for exchange-traded and cleared derivatives, including centrally cleared swaps. Brokers, futures commission merchants and clearinghouses can ask for margin in excess of the regulatory minimum, or increase the margin amount, in certain circumstances.
Collateral terms are contract specific for OTC derivatives. For derivatives traded under an ISDA master agreement, the collateral requirements are typically calculated by netting the mark to market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund or the counterparty.
For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Fund, if any, is reported separately on the Consolidated Statement of Assets and Liabilities in the annual and semiannual reports as cash pledged as collateral. Non-cash collateral pledged by the Fund, if any, is noted in the Consolidated Statement of Investments. Generally, the amount of collateral due from or to a party must exceed a minimum transfer amount threshold (e.g. $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty nonperformance.
7. Borrowing and Other Financing
Securities Sold Short. The Fund sells securities that it does not own, and it will therefore be obligated to purchase such securities at a future date. Upon entering into a short position, the Fund is required to segregate cash or securities at its custodian which are pledged for the benefit of the lending broker and/or to deposit and pledge cash directly at the lending broker, with a value equal to a certain percentage, exceeding 100%, of the value of the securities that it sold short. Cash that has been segregated and pledged for this purpose will be disclosed on the Consolidated Statement of Assets and Liabilities in the annual and semiannual reports; securities that have been segregated and pledged for this purpose are disclosed as such in the Consolidated Statement of Investments. The aggregate market value of such cash and securities at period end is $56,704,644. The value of the open short position is recorded as a liability, and the Fund records an unrealized gain or loss to the extent of the difference between the proceeds received and the change in value of the open short position. The Fund records a realized gain or loss when the short position is closed out. By entering into short sales, the Fund bears the market risk of increases in value of the security sold short in excess of the proceeds received. Until the security is replaced, the Fund is required to pay the lender any dividend or interest earned. Dividend expense on short sales is treated as an expense in the Consolidated Statement of Operations in the annual and semiannual reports.
8. Federal Taxes
The approximate aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes at period end are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses.
| Federal tax cost of securities |
$ | 398,789,544 | ||
| Federal tax cost of other investments |
(103,737,709) | |||
|
|
|
|||
| Total federal tax cost |
$ | 295,051,835 | ||
|
|
|
|||
| Gross unrealized appreciation |
$ | 22,929,683 | ||
| Gross unrealized depreciation |
(19,714,637) | |||
|
|
|
|||
| Net unrealized appreciation |
$ | 3,215,046 | ||
|
|
|
26 OPPENHEIMER GLOBAL MULTI-ALTERNATIVES FUND/VA
STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA
STATEMENT OF INVESTMENTS Unaudited / Continued
Footnotes to Statement of Investments
1. Non-income producing security.
2. Rate shown is the 7-day yield at period end.
3. Is or was an affiliate, as defined in the Investment Company Act of 1940, as amended, at or during the reporting period, by virtue of the Fund owning at least 5% of the voting securities of the issuer or as a result of the Fund and the issuer having the same investment adviser. Transactions during the reporting period in which the issuer was an affiliate are as follows:
| Shares December 31, 2015 |
Gross Additions |
Gross Reductions |
Shares September 30, 2016 |
|||||||||||||
|
|
||||||||||||||||
| Oppenheimer Institutional Government Money Market Fund, Cl. Ea | 4,009,537 | 55,996,493 | 55,386,205 | 4,619,825 | ||||||||||||
| Value | Income | |||||||||||||||
|
|
||||||||||||||||
| Oppenheimer Institutional Government Money Market Fund, Cl. Ea | $ | 4,619,825 | $ | 22,473 | ||||||||||||
a. Prior to September 28, 2016, this fund was named Oppenheimer Institutional Money Market Fund.
Distribution of investments representing geographic holdings, as a percentage of total investments at value, is as follows:
| Geographic Holdings | Value | Percent | ||||||
|
|
||||||||
| United Kingdom | $ | 106,690,719 | 21.4% | |||||
| France | 78,656,703 | 15.8 | ||||||
| Switzerland | 55,987,012 | 11.3 | ||||||
| Germany | 41,499,072 | 8.3 | ||||||
| Japan | 31,652,218 | 6.4 | ||||||
| Canada | 30,783,105 | 6.2 | ||||||
2 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA
| Geographic Holdings (Continued) | Value | Percent | ||||||
|
|
||||||||
| Netherlands | $ | 30,308,528 | 6.1% | |||||
| Spain | 23,440,334 | 4.7 | ||||||
| Denmark | 19,628,489 | 3.9 | ||||||
| Australia | 16,062,127 | 3.2 | ||||||
| Sweden | 11,476,705 | 2.3 | ||||||
| United States | 11,231,378 | 2.3 | ||||||
| India | 9,206,923 | 1.9 | ||||||
| Thailand | 6,587,883 | 1.3 | ||||||
| Ireland | 6,434,257 | 1.3 | ||||||
| Finland | 5,370,147 | 1.1 | ||||||
| South Africa | 4,338,340 | 0.9 | ||||||
| Belgium | 3,570,647 | 0.7 | ||||||
| Mexico | 3,223,324 | 0.6 | ||||||
| Brazil | 1,367,015 | 0.3 | ||||||
|
|
|
|||||||
| Total | $ | 497,514,926 | 100.0% | |||||
|
|
|
|||||||
3 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA
NOTES TO STATEMENT OF INVESTMENTS September 30, 2016 Unaudited
1. Organization
Oppenheimer International Growth Fund/VA (the “Fund”) is a separate series of Oppenheimer Variable Account Funds, which is registered under the Investment Company Act of 1940 (“1940 Act”), as amended, as a diversified open-end management investment company. The Fund’s investment objective is to seek capital appreciation. The Fund’s investment adviser is OFI Global Asset Management, Inc. (“OFI Global” or the “Manager”), a wholly-owned subsidiary of OppenheimerFunds, Inc. (“OFI” or the “Sub-Adviser”). The Manager has entered into a sub-advisory agreement with OFI. Shares of the Fund are sold only to separate accounts of life insurance companies.
2. Significant Accounting Policies
Security Valuation. All investments in securities are recorded at their estimated fair value, as described in Note 3.
Foreign Currency Translation. The Fund’s accounting records are maintained in U.S. dollars. The values of securities denominated in foreign currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading. Foreign exchange rates may be valued primarily using a reliable bank, dealer or service authorized by the Board of Trustees.
3. Securities Valuation
The Fund calculates the net asset value of its shares as of 4:00 P.M. Eastern time, on each day the New York Stock Exchange (the “Exchange”) is open for trading, except in the case of a scheduled early closing of the Exchange, in which case the Fund will calculate net asset value of the shares as of the scheduled early closing time of the Exchange.
The Fund’s Board has adopted procedures for the valuation of the Fund’s securities and has delegated the day-to-day responsibility for valuation determinations under those procedures to the Manager. The Manager has established a Valuation Committee which is responsible for determining a “fair valuation” for any security for which market quotations are not “readily available.” The Valuation Committee’s fair valuation determinations are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined.
Valuation Methods and Inputs
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by third party pricing services or dealers.
The following methodologies are used to determine the market value or the fair value of the types of securities described below:
Securities traded on a registered U.S. securities exchange (including exchange-traded derivatives other than futures and futures options) are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the mean between the bid and asked price on the principal exchange or, if not available from the principal exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the principal exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer. A security of a foreign issuer traded on a foreign exchange, but not listed on a registered U.S. securities exchange, is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the third party pricing service used by the Manager, prior to the time when the Fund’s assets are valued. If the last sale price is unavailable, the security is valued at the most recent official closing price on the principal exchange on which it is traded. If the last sales price or official closing price for a foreign security is not available, the security is valued at the mean between the bid and asked price per the exchange or, if not available from the exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer.
Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.
Corporate and government debt securities (of U.S. or foreign issuers) and municipal debt securities, event-linked bonds, loans, mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers who may use matrix pricing methods to determine the evaluated prices.
Short-term money market type debt securities with a remaining maturity of sixty days or less are valued at cost adjusted by the amortization of discount or premium to maturity (amortized cost), which approximates market value. Short-term debt securities with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers.
A description of the standard inputs that may generally be considered by the third party pricing vendors in determining their evaluated prices is provided below.
4 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA
3. Securities Valuation (Continued)
| Security Type | Standard inputs generally considered by third-party pricing vendors | |
| Corporate debt, government debt, municipal, mortgage- backed and asset-backed securities | Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, the credit quality, yield, maturity, and other appropriate factors. | |
| Loans | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. | |
| Event-linked bonds | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. |
If a market value or price cannot be determined for a security using the methodologies described above, or if, in the “good faith” opinion of the Manager, the market value or price obtained does not constitute a “readily available market quotation,” or a significant event has occurred that would materially affect the value of the security, the security is fair valued either (i) by a standardized fair valuation methodology applicable to the security type or the significant event as previously approved by the Valuation Committee and the Fund’s Board or (ii) as determined in good faith by the Manager’s Valuation Committee. The Valuation Committee considers all relevant facts that are reasonably available, through either public information or information available to the Manager, when determining the fair value of a security. Fair value determinations by the Manager are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined. Those fair valuation standardized methodologies include, but are not limited to, valuing securities at the last sale price or initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be further adjusted for any discounts related to security-specific resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities nor can it be assured that the Fund can obtain the fair value assigned to a security if it were to sell the security.
To assess the continuing appropriateness of security valuations, the Manager, or its third party service provider who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and sale prices to the current day prices and challenges those prices exceeding certain tolerance levels with the third party pricing service or broker source. For those securities valued by fair valuations, whether through a standardized fair valuation methodology or a fair valuation determination, the Valuation Committee reviews and affirms the reasonableness of the valuations based on such methodologies and fair valuation determinations on a regular basis after considering all relevant information that is reasonably available.
Classifications
Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:
1) Level 1-unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
2) Level 2-inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)
3) Level 3-significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).
The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.
The Fund classifies each of its investments in investment companies which are publicly offered as Level 1. Investment companies that are not publicly offered are measured using net asset value as a practical expedient, and are not classified in the fair value hierarchy.
The table below categorizes amounts at period end based on valuation input level:
| Level 1— Unadjusted Quoted Prices |
Level 2— Other Significant Observable Inputs |
Level 3— Significant Unobservable Inputs |
Value | |||||||||||||
|
|
||||||||||||||||
| Assets Table |
||||||||||||||||
| Investments, at Value: |
||||||||||||||||
| Common Stocks |
||||||||||||||||
| Consumer Discretionary |
$ | 23,859,850 | $ | 90,243,767 | $ | — | $ | 114,103,617 | ||||||||
| Consumer Staples |
11,539,969 | 53,606,356 | — | 65,146,325 | ||||||||||||
| Energy |
— | 8,669,564 | — | 8,669,564 | ||||||||||||
| Financials |
2,508,389 | 13,026,519 | — | 15,534,908 | ||||||||||||
| Health Care |
— | 52,161,057 | — | 52,161,057 | ||||||||||||
| Industrials |
— | 103,981,888 | — | 103,981,888 | ||||||||||||
| Information Technology |
— | 76,719,951 | — | 76,719,951 | ||||||||||||
| Materials |
5,215,863 | 22,620,260 | — | 27,836,123 | ||||||||||||
5 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
3. Securities Valuation (Continued)
| Level 1— Unadjusted Quoted Prices |
Level 2— Other Significant Observable Inputs |
Level 3— Significant Unobservable Inputs |
Value | |||||||||||||
|
|
||||||||||||||||
| Common Stocks (Continued) | ||||||||||||||||
| Telecommunication Services |
$ | — | $ | 28,654,181 | $ | — | $ | 28,654,181 | ||||||||
| Preferred Stock |
85,186 | — | — | 85,186 | ||||||||||||
| Rights, Warrants and Certificates |
— | 2,301 | — | 2,301 | ||||||||||||
| Investment Company |
4,619,825 | — | — | 4,619,825 | ||||||||||||
|
|
|
|||||||||||||||
| Total Assets |
$ | 47,829,082 | $ | 449,685,844 | $ | — | $ | 497,514,926 | ||||||||
|
|
|
|||||||||||||||
Forward currency exchange contracts and futures contracts, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
4. Investments and Risks
Risks of Foreign Investing. The Fund may invest in foreign securities which are subject to special risks. Securities traded in foreign markets may be less liquid and more volatile than those traded in U.S. markets. Foreign issuers are usually not subject to the same accounting and disclosure requirements that U.S. companies are subject to, which may make it difficult for the Fund to evaluate a foreign company’s operations or financial condition. A change in the value of a foreign currency against the U.S. dollar will result in a change in the U.S. dollar value of investments denominated in that foreign currency and in the value of any income or distributions the Fund may receive on those investments. The value of foreign investments may be affected by exchange control regulations, foreign taxes, higher transaction and other costs, delays in the settlement of transactions, changes in economic or monetary policy in the United States or abroad, expropriation or nationalization of a company’s assets, or other political and economic factors. In addition, due to the inter-relationship of global economies and financial markets, changes in political and economic factors in one country or region could adversely affect conditions in another country or region. Investments in foreign securities may also expose the Fund to time-zone arbitrage risk. Foreign securities may trade on weekends or other days when the Fund does not price its shares. At times, the Fund may emphasize investments in a particular country or region and may be subject to greater risks from adverse events that occur in that country or region. Foreign securities and foreign currencies held in foreign banks and securities depositories may be subject to limited or no regulatory oversight.
Investments in Affiliated Funds. The Fund is permitted to invest in other mutual funds advised by the Manager (“Affiliated Funds”). Affiliated Funds are open-end management investment companies registered under the 1940 Act, as amended. The Manager is the investment adviser of, and the Sub-Adviser provides investment and related advisory services to, the Affiliated Funds. When applicable, the Fund’s investments in Affiliated Funds are included in the Statement of Investments. Shares of Affiliated Funds are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of the Affiliated Funds’ expenses, including their management fee. The Manager will waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Fund’s investment in the Affiliated Funds.
Each of the Affiliated Funds in which the Fund invests has its own investment risks, and those risks can affect the value of the Fund’s investments and therefore the value of the Fund’s shares. To the extent that the Fund invests more of its assets in one Affiliated Fund than in another, the Fund will have greater exposure to the risks of that Affiliated Fund.
Investments in Money Market Instruments. The Fund is permitted to invest its free cash balances in money market instruments to provide liquidity or for defensive purposes. The Fund may invest in money market instruments by investing in Class E shares of Oppenheimer Institutional Government Money Market Fund (“IGMMF”), formerly known as Oppenheimer Institutional Money Market Fund, which is an Affiliated Fund. IGMMF is regulated as a money market fund under the 1940 Act, as amended. The Fund may also invest in money market instruments directly or in other affiliated or unaffiliated money market funds.
Equity Security Risk. Stocks and other equity securities fluctuate in price. The value of the Fund’s portfolio may be affected by changes in the equity markets generally. Equity markets may experience significant short-term volatility and may fall sharply at times. Different markets may behave differently from each other and U.S. equity markets may move in the opposite direction from one or more foreign stock markets. Adverse events in any part of the equity or fixed-income markets may have unexpected negative effects on other market segments.
The prices of individual equity securities generally do not all move in the same direction at the same time and a variety of factors can affect the price of a particular company’s securities. These factors may include, but are not limited to, poor earnings reports, a loss of customers, litigation against the company, general unfavorable performance of the company’s sector or industry, or changes in government regulations affecting the company or its industry.
5. Market Risk Factors
The Fund’s investments in securities and/or financial derivatives may expose the Fund to various market risk factors:
Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil,
6 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA
5. Market Risk Factors (Continued)
metals, livestock, and agricultural products.
Credit Risk. Credit risk relates to the ability of the issuer of debt to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield debt securities are subject to credit risk to a greater extent than lower-yield, higher-quality securities.
Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.
Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.
Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.
Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.
6. Federal Taxes
The approximate aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes at period end are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses.
| Federal tax cost of securities |
$ | 355,704,259 | ||
| Federal tax cost of other investments |
243,161 | |||
|
|
|
|||
| Total federal tax cost |
$ | 355,947,420 | ||
|
|
|
|||
| Gross unrealized appreciation |
$ | 182,746,316 | ||
| Gross unrealized depreciation |
(41,372,566) | |||
|
|
|
|||
| Net unrealized appreciation |
$ | 141,373,750 | ||
|
|
|
|||
7 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA
Item 2. Controls and Procedures.
| (a) | Based on their evaluation of the registrant’s disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR 270.30a-3(c)) as of 9/30/2016, the registrant’s principal executive officer and principal financial officer found the registrant’s disclosure controls and procedures to provide reasonable assurances that information required to be disclosed by the registrant in the reports that it files under the Securities Exchange Act of 1934 (a) is accumulated and communicated to the registrant’s management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure, and (b) is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the U.S. Securities and Exchange Commission. |
| (b) | There have been no significant changes in the registrant’s internal controls over financial reporting that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 3. Exhibits.
Exhibits attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Oppenheimer Variable Account Funds
| By: | /s/ Arthur P. Steinmetz | |
|
Arthur P. Steinmetz | ||
|
Principal Executive Officer | ||
|
Date: |
11/21/2016 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ Arthur P. Steinmetz | |
|
Arthur P. Steinmetz | ||
|
Principal Executive Officer | ||
|
Date: |
11/21/2016 |
| By: | /s/ Brian S. Petersen | |
|
Brian S. Petersen | ||
|
Principal Financial Officer | ||
|
Date: |
11/21/2016 |
Exhibit 99.CERT
Section 302 Certifications
CERTIFICATIONS
I, Arthur P. Steinmetz, certify that:
| 1. | I have reviewed this report on Form N-Q of Oppenheimer Variable Account Funds; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of Trustees (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Arthur P. Steinmetz |
| Arthur P. Steinmetz |
| Principal Executive Officer |
| Date: 11/21/2016 |
Exhibit 99.CERT
Section 302 Certifications
CERTIFICATIONS
I, Brian S. Petersen, certify that:
| 1. | I have reviewed this report on Form N-Q of Oppenheimer Variable Account Funds; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of Trustees (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Brian S. Petersen |
| Brian S. Petersen |
| Principal Financial Officer |
| Date: 11/21/2016 |