UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-4108
Oppenheimer Variable Account Funds
(Exact name of registrant as specified in charter)
6803 South Tucson Way, Centennial, Colorado 80112-3924
(Address of principal executive offices) (Zip code)
Arthur S. Gabinet
OppenheimerFunds, Inc.
Two World Financial Center, New York, New York 10281-1008
(Name and address of agent for service)
Registrant’s telephone number, including area code: (303) 768-3200
Date of fiscal year end: December 31
Date of reporting period: 12/30/2011
Item 1. Reports to Stockholders.
OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
Portfolio Manager: Ronald J. Zibelli, Jr., CFA
Average Annual Total Returns
For the Periods Ended 12/30/111
| | | | | | | | | | | | |
| | 1-Year | | | 5-Year | | | 10-Year | |
|
Non-Service Shares | | | 1.09 | % | | | -1.54 | % | | | 1.52 | % |
Service Shares | | | 0.83 | | | | -1.80 | | | | 1.25 | |
Expense Ratios
For the Period Ended 12/30/111
| | | | | | | | |
| | Gross | | | Net | |
| | Expense | | | Expense | |
| | Ratios | | | Ratios | |
|
Non-Service Shares | | | 0.84 | % | | | 0.80 | % |
Service Shares | | | 1.09 | | | | 1.05 | |
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance and expense ratios may be lower or higher than the data quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account. The net expense ratios take into account voluntary fee waivers and/or expense reimbursements, without which performance would have been less. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund’s prospectus.
Sector Allocation
Portfolio holdings and allocations are subject to change. Percentages are as of December 30, 2011, and are based on the total market value of common stocks.
Top Ten Common Stock Holdings
| | | | |
|
Dollar Tree, Inc. | | | 2.6 | % |
Alexion Pharmaceuticals, Inc. | | | 2.5 | |
Hansen Natural Corp. | | | 2.2 | |
Kansas City Southern, Inc. | | | 2.1 | |
Concho Resources, Inc. | | | 2.0 | |
HMS Holdings Corp. | | | 1.9 | |
Tractor Supply Co. | | | 1.8 | |
Estee Lauder Cos., Inc. (The), Cl. A | | | 1.7 | |
Gardner Denver, Inc. | | | 1.7 | |
Chipotle Mexican Grill, Inc., Cl. A | | | 1.7 | |
Portfolio holdings and allocations are subject to change. Percentages are as of December 30, 2011, and are based on net assets.
2 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
FUND PERFORMANCE DISCUSSION
Management’s Discussion of Fund Performance. During the reporting period, the Fund’s Non-Service shares produced a return of 1.09%.1 On a relative basis, the Fund outperformed the Russell 2500 Growth Index (the “Index”), which returned -1.57% over the period. The Fund outperformed the Index primarily in the health care and consumer discretionary sectors, where a number of Fund holdings generated solid returns. The Fund also outperformed in industrials and consumer staples. The Fund underperformed the Index primarily in three sectors: information technology, energy and telecommunication services, where weaker relative stock selection detracted from results. The Fund also outperformed the Russell 2000 Growth Index and the Russell MidCap Growth Index, which returned -2.91% and -1.65%, respectively.
Economic and Market Overview
The reporting period began with a sense of market optimism over improving Gross Domestic Product (“GDP”) growth in Europe and the U.S., and equity markets in those regions generally experienced solid gains through the first four months of 2011. After strong gains in 2010, developing market equities generally started the year off lagging their developed market counterparts due to concerns over slowing growth and rising inflation.
Market volatility across global equity markets grew over the second quarter of 2011 when Greece again teetered on the brink of defaulting on its sovereign debt, rekindling worries that fiscal instability might spread to other parts of Europe. Concerns over the economic problems in other European countries intensified as did a sense of unease over the health of the European banking system. A natural disaster in Japan caused disruptions in supply chains in the information technology sector and the automotive industry. Previously high-flying economies such as Brazil, Australia and India saw their GDP numbers cool off significantly as they struggled to keep their economies from heading into recession. In the U.S., the Fed’s latest round of quantitative easing, labeled “QE2”, officially ended on June 30, adding to questions around what the Fed’s next move might be to help stimulate the U.S. economy. These developments, in addition to persistently high levels of U.S. unemployment and a depressed U.S. housing market, contributed to a weaker-than-expected estimate of U.S. GDP during the second quarter of the year.
Due to the sluggish economy and lowered expectations for future economic growth, global equities began a decline over the summer that intensified as the third quarter progressed. The markets priced in a renewed sense of pessimism that Europe might succumb to a double-dip recession and that the U.S. was headed for a prolonged period of disappointing growth. Uncertainty and market nervousness grew as a deal to raise the U.S. debt ceiling was not reached until shortly before the deadline. As a result of the intense political wrangling, the credit rating agency Standard & Poor’s took the unprecedented and controversial step of downgrading the debt of the U.S., a decision that the two other major U.S. credit rating agencies opted not to follow. These events, coupled with the high likelihood of a Greek default on its debt and worries that Italy might be next, sent stocks sharply lower over the third quarter of 2011.
In the fourth quarter, equity markets finished the period largely on a positive note, rebounding strongly in October in particular, as European leaders sought to undertake measures to address the debt issues in the region and the U.S. economy began to show some signs of life as high unemployment trended downward, the housing market picked up slightly and consumer sentiment improved.
Top Individual Contributors
Health care was a top performing sector for the Fund during the period, led by two holdings in the pharmaceuticals industry: Alexion Pharmaceuticals, Inc. and Valeant Pharmaceuticals. Alexion Pharmaceuticals, a stock that we have owned for more than three years, continued to perform well. The company’s drug Soliris treats patients with rare, life-threatening blood disorders. In addition to growing quickly in its original indication, Soliris was recently approved for patients in a second indication (an additional medical use) and new clinical data shows the drug may work in a series of related conditions. Alexion management raised guidance every quarter last year as operational performance was excellent. Alexion was the second largest holding of the Fund at period end. Valeant Pharmaceuticals owns a broad
1. December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011.
3 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
FUND PERFORMANCE DISCUSSION
portfolio of drugs sold mostly outside of the U.S. The company completed a few significant acquisitions during the year that we believe should allow for steady growth at high margins. The Fund exited its position in Valeant late in the reporting period as the market cap grew above $15 billion.
Consumer discretionary was the second-best performing sector and outperformance came from a number of holdings. Dollar Tree, Inc. is an operator of discount variety stores that performed particularly well over the closing months of the period, as it benefited from consumers seeking sales in a difficult economic environment. It was the Fund’s top holding at period end. Beauty retailer Ulta Salon, Cosmetics & Fragrance, Inc. reported positive earnings results during the period, continuing a streak of quarters in which it reported earnings above analysts’ estimates. Solid same-store sales, as well as revenue from new stores, benefited the company’s stock price. In addition, Ulta’s success can be attributed to market share shifts in the beauty industry away from department stores and toward specialty stores. Chipotle Mexican Grill, Inc., a fast food chain specializing in burritos and tacos, experienced increased traffic in its stores and continued to grow by opening new locations. Higher prices also benefited the company, and helped combat rising food prices.
Consumer staples stock Hansen Natural Corp. also contributed positively to performance this period. Hansen Natural, through its subsidiaries, develops and sells specialty beverages in the U.S. and internationally. High demand for the company’s Monster energy drinks was a primary driver of its success.
Top Individual Detractors
Holdings that detracted from performance this period included health care stock Brookdale Senior Living, Inc., information technology holdings Aruba Networks, Inc. and Acme Packet, Inc., and consumer discretionary stock Green Mountain Coffee, Inc. Green Mountain Coffee was the most significant underperformer this reporting period. The company underperformed because investor sentiment was negatively impacted by disappointing revenues and a bearish presentation made by a high profile hedge fund manager. Aruba Networks and Acme Packet underperformed in a generally weak environment for networking firms. Acme Packet, a networks solutions company that enables the delivery of interactive communications across internet protocol (IP) network borders, was also adversely affected by the timing of orders from large telecommunication services customers. Brookdale Senior Living, Inc., an operator of senior living communities in the U.S., declined over the second half of the period as higher operating expenses weighed on its stock price. We exited our positions in Brookdale Senior Living, Acme Packet and Green Mountain Coffee by period end.
Outlook
The macroeconomic environment is characterized by modest economic expansion, solid but decelerating profit growth and increased merger and acquisition activity. We believe that this is an environment that favors growth companies and are optimistic regarding the Fund’s investment strategy. We use a disciplined investment process designed to help take advantage of inefficiencies inherent in the small- and mid-cap markets. We rely on bottom-up, or company-level, research to help identify dynamic firms whose potential for above-average, sustainable revenue and earnings growth may position them to outperform. We believe our focus on higher quality growth companies has the potential to provide both upside participation and a degree of downside protection over the long term.
Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing.
Total returns include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown.
The Fund’s investment strategy and focus can change over time. The mention of specific fund holdings does not constitute a recommendation by OppenheimerFunds, Inc.
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.
4 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
Comparing the Fund’s Performance to the Market. The graphs that follow show the performance of a hypothetical $10,000 investment in each share class of the Fund held until December 30, 2011. Performance is measured over a ten-fiscal-year period for both Classes. Performance information does not reflect charges that apply to separate accounts investing in the Fund. If these charges were taken into account, performance would be lower. The graphs assume that all dividends and capital gains distributions were reinvested in additional shares. Past performance cannot guarantee future results.
The Fund’s performance is compared to the performance of the Russell 2500® Growth Index, the Russell 2000® Growth Index and the Russell MidCap® Growth Index. The Russell 2500® Growth Index is an unmanaged index of U.S. small-cap and mid-cap growth stocks. The Russell 2000® Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell MidCap® Growth Index is an unmanaged index of medium-capitalization domestic growth stocks. Index performance includes reinvestment of income but does not reflect transaction costs, fees or expenses. The Fund’s performance reflects the effects of the Fund’s business and operating expenses. While index comparisons may be useful to provide a benchmark for the Fund’s performance, it must be noted that the Fund’s investments are not limited to the securities comprising the index.
5 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
FUND PERFORMANCE DISCUSSION
Non-Service Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
6 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
Service Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account.
1. December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011.
7 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
FUND EXPENSES
Fund Expenses. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 30, 2011.
Actual Expenses. The first section of the table provides information about actual account values and actual expenses. You may use the information in this section for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes. The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio for each class of shares, and an assumed rate of return of 5% per year for each class before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the “hypothetical” lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included your costs would have been higher.
| | | | | | | | | | | | |
| | Beginning | | | Ending | | | Expenses | |
| | Account | | | Account | | | Paid During | |
| | Value | | | Value | | | 6 Months Ended | |
| | July 1, 2011 | | | December 30, 2011 | | | December 30, 2011 | |
|
Actual | | | | | | | | | | | | |
Non-Service shares | | $ | 1,000.00 | | | $ | 881.60 | | | $ | 3.78 | |
|
Service shares | | | 1,000.00 | | | | 880.50 | | | | 4.96 | |
| | | | | | | | | | | | |
Hypothetical | | | | | | | | | | | | |
(5% return before expenses) | | | | | | | | | | | | |
|
Non-Service shares | | | 1,000.00 | | | | 1,021.06 | | | | 4.06 | |
|
Service shares | | | 1,000.00 | | | | 1,019.80 | | | | 5.33 | |
Expenses are equal to the Fund’s annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). Those annualized expense ratios, excluding indirect expenses from affiliated fund, based on the 6-month period ended December 30, 2011 are as follows:
| | | | |
Class | | Expense Ratios |
|
Non-Service shares | | | 0.80 | % |
Service shares | | | 1.05 | |
The expense ratios reflect voluntary waivers and/or reimbursements of expenses by the Fund’s Manager. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund’s prospectus. The “Financial Highlights” tables in the Fund’s financial statements, included in this report, also show the gross expense ratios, without such waivers or reimbursements and reduction to custodian expenses, if applicable.
8 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
STATEMENT OF INVESTMENTS December 30, 2011*
| | | | | | | | |
| | Shares | | | Value | |
|
Common Stocks—98.0% | | | | | | | | |
Consumer Discretionary—19.5% | | | | | | | | |
Distributors—0.5% | | | | | | | | |
LKQ Corp.1 | | | 99,510 | | | $ | 2,993,261 | |
Hotels, Restaurants & Leisure—3.6% | | | | | | | | |
Chipotle Mexican Grill, Inc., Cl. A1 | | | 28,631 | | | | 9,669,834 | |
Panera Bread Co., Cl. A1 | | | 59,520 | | | | 8,419,104 | |
Tim Hortons, Inc. | | | 58,380 | | | | 2,826,760 | |
| | | | | | | |
| | | | | | | 20,915,698 | |
| | | | | | | | |
Household Durables—0.9% | | | | | | | | |
Tempur-Pedic International, Inc.1 | | | 96,710 | | | | 5,080,176 | |
Internet & Catalog Retail—0.3% | | | | | | | | |
HomeAway, Inc.1 | | | 79,380 | | | | 1,845,585 | |
Multiline Retail—3.7% | | | | | | | | |
Dollar Tree, Inc.1 | | | 181,315 | | | | 15,069,090 | |
Nordstrom, Inc. | | | 125,220 | | | | 6,224,686 | |
| | | | | | | |
| | | | | | | 21,293,776 | |
| | | | | | | | |
Specialty Retail—6.5% | | | | | | | | |
O’Reilly Automotive, Inc.1 | | | 35,700 | | | | 2,854,215 | |
PetSmart, Inc. | | | 97,900 | | | | 5,021,291 | |
Sally Beauty Holdings, Inc.1 | | | 160,740 | | | | 3,396,436 | |
Tiffany & Co. | | | 99,910 | | | | 6,620,037 | |
Tractor Supply Co. | | | 146,470 | | | | 10,274,863 | |
Ulta Salon, Cosmetics & Fragrance, Inc.1 | | | 148,120 | | | | 9,615,950 | |
| | | | | | | |
| | | | | | | 37,782,792 | |
| | | | | | | | |
Textiles, Apparel & Luxury Goods—4.0% | | | | | | | | |
Deckers Outdoor Corp.1 | | | 82,970 | | | | 6,270,043 | |
Fossil, Inc.1 | | | 57,560 | | | | 4,567,962 | |
lululemon athletica, Inc.1 | | | 103,810 | | | | 4,843,775 | |
Michael Kors Holdings Ltd.1 | | | 127,020 | | | | 3,461,295 | |
Under Armour, Inc., Cl. A1 | | | 54,600 | | | | 3,919,734 | |
| | | | | | | |
| | | | | | | 23,062,809 | |
| | | | | | | | |
Consumer Staples—7.1% | | | | | | | | |
Beverages—2.2% | | | | | | | | |
Hansen Natural Corp.1 | | | 138,920 | | | | 12,800,089 | |
Food & Staples Retailing—2.1% | | | | | | | | |
Fresh Market, Inc. (The)1 | | | 93,470 | | | | 3,729,453 | |
Whole Foods Market, Inc. | | | 123,860 | | | | 8,618,179 | |
| | | | | | | |
| | | | | | | 12,347,632 | |
| | | | | | | | |
Personal Products—2.8% | | | | | | | | |
Estee Lauder Cos., Inc. (The), Cl. A | | | 89,650 | | | | 10,069,488 | |
Herbalife Ltd. | | | 113,510 | | | | 5,865,062 | |
| | | | | | | |
| | | | | | | 15,934,550 | |
| | | | | | | | |
Energy—8.8% | | | | | | | | |
Energy Equipment & Services—6.0% | | | | | | | | |
Atwood Oceanics, Inc.1 | | | 164,200 | | | | 6,533,518 | |
Carbo Ceramics, Inc. | | | 44,690 | | | | 5,511,618 | |
Core Laboratories NV | | | 66,090 | | | | 7,530,956 | |
Oceaneering International, Inc. | | | 63,770 | | | | 2,941,710 | |
Oil States International, Inc.1 | | | 102,650 | | | | 7,839,381 | |
Superior Energy Services, Inc.1 | | | 149,780 | | | | 4,259,743 | |
| | | | | | | |
| | | | | | | 34,616,926 | |
| | | | | | | | |
Oil, Gas & Consumable Fuels—2.8% | | | | | | | | |
Cabot Oil & Gas Corp., Cl. A | | | 63,180 | | | | 4,795,362 | |
Concho Resources, Inc.1 | | | 121,300 | | | | 11,371,875 | |
| | | | | | | |
| | | | | | | 16,167,237 | |
| | | | | | | | |
Financials—5.8% | | | | | | | | |
Capital Markets—1.5% | | | | | | | | |
Affiliated Managers Group, Inc.1 | | | 52,650 | | | | 5,051,768 | |
LPL Investment Holdings, Inc.1 | | | 110,290 | | | | 3,368,257 | |
| | | | | | | |
| | | | | | | 8,420,025 | |
| | | | | | | | |
Commercial Banks—2.2% | | | | | | | | |
First Republic Bank1 | | | 158,250 | | | | 4,844,033 | |
Signature Bank1 | | | 128,940 | | | | 7,735,111 | |
| | | | | | | |
| | | | | | | 12,579,144 | |
| | | | | | | | |
Insurance—2.1% | | | | | | | | |
Arthur J. Gallagher & Co. | | | 160,940 | | | | 5,381,834 | |
ProAssurance Corp. | | | 85,920 | | | | 6,858,134 | |
| | | | | | | |
| | | | | | | 12,239,968 | |
| | | | | | | | |
Health Care—13.5% | | | | | | | | |
Biotechnology—3.1% | | | | | | | | |
Alexion Pharmaceuticals, Inc.1 | | | 202,940 | | | | 14,510,210 | |
BioMarin Pharmaceutical, Inc.1 | | | 92,570 | | | | 3,182,557 | |
| | | | | | | |
| | | | | | | 17,692,767 | |
| | | | | | | | |
Health Care Equipment & Supplies—1.8% | | | | | | | | |
Cooper Cos., Inc. (The) | | | 57,790 | | | | 4,075,351 | |
Edwards Lifesciences Corp.1 | | | 46,160 | | | | 3,263,512 | |
IDEXX Laboratories, Inc.1 | | | 41,660 | | | | 3,206,154 | |
| | | | | | | |
| | | | | | | 10,545,017 | |
9 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Shares | | | Value | |
|
Health Care Providers & Services—4.0% | | | | | | | | |
AmerisourceBergen Corp. | | | 205,340 | | | $ | 7,636,595 | |
Catalyst Health Solutions, Inc.1 | | | 92,800 | | | | 4,825,600 | |
HMS Holdings Corp.1 | | | 338,930 | | | | 10,838,981 | |
| | | | | | | |
| | | | | | | 23,301,176 | |
| | | | | | | | |
Health Care Technology—2.4% | | | | | | | | |
Cerner Corp.1 | | | 127,760 | | | | 7,825,300 | |
SXC Health Solutions Corp.1 | | | 107,270 | | | | 6,058,610 | |
| | | | | | | |
| | | | | | | 13,883,910 | |
| | | | | | | | |
Pharmaceuticals—2.2% | | | | | | | | |
Perrigo Co. | | | 56,770 | | | | 5,523,721 | |
Watson Pharmaceuticals, Inc.1 | | | 118,580 | | | | 7,155,117 | |
| | | | | | | |
| | | | | | | 12,678,838 | |
| | | | | | | | |
Industrials—18.2% | | | | | | | | |
Aerospace & Defense—3.8% | | | | | | | | |
B/E Aerospace, Inc.1 | | | 181,170 | | | | 7,013,091 | |
Hexcel Corp.1 | | | 236,710 | | | | 5,730,749 | |
TransDigm Group, Inc.1 | | | 97,200 | | | | 9,300,096 | |
| | | | | | | |
| | | | | | | 22,043,936 | |
| | | | | | | | |
Commercial Services & Supplies—2.4% | | | | | | | | |
Clean Harbors, Inc.1 | | | 54,310 | | | | 3,461,176 | |
Stericycle, Inc.1 | | | 61,730 | | | | 4,810,002 | |
Waste Connections, Inc. | | | 163,980 | | | | 5,434,297 | |
| | | | | | | |
| | | | | | | 13,705,475 | |
| | | | | | | | |
Electrical Equipment—3.7% | | | | | | | | |
AMETEK, Inc. | | | 185,905 | | | | 7,826,601 | |
Polypore International, Inc.1 | | | 125,110 | | | | 5,503,589 | |
Roper Industries, Inc. | | | 96,860 | | | | 8,414,228 | |
| | | | | | | |
| | | | | | | 21,744,418 | |
| | | | | | | | |
Machinery—5.4% | | | | | | | | |
Gardner Denver, Inc. | | | 130,181 | | | | 10,031,748 | |
Joy Global, Inc. | | | 77,510 | | | | 5,810,925 | |
Pall Corp. | | | 50,530 | | | | 2,887,790 | |
Robbins & Myers, Inc. | | | 107,062 | | | | 5,197,860 | |
Wabtec Corp. | | | 106,080 | | | | 7,420,296 | |
| | | | | | | |
| | | | | | | 31,348,619 | |
| | | | | | | | |
Marine—0.8% | | | | | | | | |
Kirby Corp.1 | | | 66,820 | | | | 4,399,429 | |
Road & Rail—2.1% | | | | | | | | |
Kansas City Southern, Inc.1 | | | 177,770 | | | | 12,090,138 | |
Information Technology—19.0% | | | | | | | | |
Communications Equipment—1.6% | | | | | | | | |
Aruba Networks, Inc.1 | | | 207,400 | | | | 3,841,048 | |
F5 Networks, Inc.1 | | | 27,220 | | | | 2,888,586 | |
Riverbed Technology, Inc.1 | | | 116,600 | | | | 2,740,100 | |
| | | | | | | |
| | | | | | | 9,469,734 | |
| | | | | | | | |
Computers & Peripherals—1.0% | | | | | | | | |
SanDisk Corp.1 | | | 118,800 | | | | 5,846,148 | |
Internet Software & Services—3.7% | | | | | | | | |
Equinix, Inc.1 | | | 57,900 | | | | 5,871,060 | |
IAC/InterActiveCorp | | | 73,750 | | | | 3,141,750 | |
Mercadolibre, Inc. | | | 35,970 | | | | 2,861,054 | |
Rackspace Hosting, Inc.1 | | | 223,380 | | | | 9,607,574 | |
| | | | | | | |
| | | | | | | 21,481,438 | |
| | | | | | | | |
IT Services—1.8% | | | | | | | | |
Alliance Data Systems Corp.1 | | | 33,690 | | | | 3,498,370 | |
Teradata Corp.1 | | | 140,160 | | | | 6,799,162 | |
| | | | | | | |
| | | | | | | 10,297,532 | |
| | | | | | | | |
Semiconductors & Semiconductor Equipment—2.8% | | | | | | | | |
Avago Technologies Ltd. | | | 210,940 | | | | 6,087,728 | |
Cavuim, Inc.1 | | | 195,800 | | | | 5,566,594 | |
Cypress Semiconductor Corp. | | | 249,080 | | | | 4,206,961 | |
| | | | | | | |
| | | | | | | 15,861,283 | |
| | | | | | | | |
Software—8.1% | | | | | | | | |
Ariba, Inc.1 | | | 196,950 | | | | 5,530,356 | |
Check Point Software Technologies Ltd.1 | | | 112,540 | | | | 5,912,852 | |
Citrix Systems, Inc.1 | | | 86,480 | | | | 5,251,066 | |
Fortinet, Inc.1 | | | 298,510 | | | | 6,510,503 | |
MICROS Systems, Inc.1 | | | 74,030 | | | | 3,448,317 | |
Nuance Communications, Inc.1 | | | 243,720 | | | | 6,131,995 | |
Red Hat, Inc.1 | | | 157,870 | | | | 6,518,452 | |
TIBCO Software, Inc.1 | | | 318,930 | | | | 7,625,616 | |
| | | | | | | |
| | | | | | | 46,929,157 | |
| | | | | | | | |
Materials—4.4% | | | | | | | | |
Chemicals—3.0% | | | | | | | | |
Airgas, Inc. | | | 78,650 | | | | 6,140,992 | |
Albemarle Corp. | | | 60,020 | | | | 3,091,630 | |
CF Industries Holdings, Inc. | | | 35,240 | | | | 5,109,095 | |
Sigma-Aldrich Corp. | | | 45,410 | | | | 2,836,309 | |
| | | | | | | |
| | | | | | | 17,178,026 | |
10 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
| | | | | | | | |
| | Shares | | | Value | |
Containers & Packaging—0.5% | | | | | | | | |
Ball Corp. | | | 85,850 | | | $ | 3,065,704 | |
Metals & Mining—0.9% | | | | | | | | |
Allied Nevada Gold Corp.1 | | | 115,380 | | | | 3,493,706 | |
Silver Wheaton Corp. | | | 64,680 | | | | 1,873,133 | |
| | | | | | | |
| | | | | | | 5,366,839 | |
| | | | | | | | |
Telecommunication Services—0.9% | | | | | | | | |
Wireless Telecommunication Services—0.9% | | | | | | | | |
SBA Communications Corp.1 | | | 124,300 | | | | 5,339,928 | |
Utilities—0.8% | | | | | | | | |
Electric Utilities—0.8% | | | | | | | | |
ITC Holdings Corp. | | | 61,890 | | | | 4,696,213 | |
| | | | | | | |
Total Common Stocks (Cost $443,441,234) | | | | | | | 567,045,393 | |
| | | | | | | | |
Investment Company—2.4% | | | | | | | | |
Oppenheimer Institutional | | | | | | | | |
Money Market Fund, | | | | | | | | |
Cl. E, 0.20%2,3 (Cost $14,138,260) | | | 14,138,260 | | | | 14,138,260 | |
Total Investments, at Value (Cost $457,579,494) | | | 100.4 | % | | | 581,183,653 | |
Liabilities in Excess of Other Assets | | | (0.4 | ) | | | (2,391,076 | ) |
| | |
Net Assets | | | 100.0 | % | | $ | 578,792,577 | |
| | |
Footnotes to Statement of Investments
* December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes.
1. Non-income producing security.
2. Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 30, 2011, 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 period in which the issuer was an affiliate are as follows:
| | | | | | | | | | | | | | | | |
| | Shares | | | Gross | | | Gross | | | Shares | |
| | December 31, 2010 | | | Additions | | | Reductions | | | December 30, 2011 | |
|
Oppenheimer Institutional Money Market Fund, Cl. E | | | 2,477,343 | | | | 298,507,957 | | | | 286,847,040 | | | | 14,138,260 | |
| | | | | | | | |
| | Value | | | Income | |
|
Oppenheimer Institutional Money Market Fund, Cl. E | | $ | 14,138,260 | | | $ | 29,298 | |
3. Rate shown is the 7-day yield as of December 30, 2011.
Valuation Inputs
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). |
11 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
STATEMENT OF INVESTMENTS Continued
Footnotes to Statement of Investments Continued
The table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 30, 2011 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 | | $ | 112,974,097 | | | $ | — | | | $ | — | | | $ | 112,974,097 | |
Consumer Staples | | | 41,082,271 | | | | — | | | | — | | | | 41,082,271 | |
Energy | | | 50,784,163 | | | | — | | | | — | | | | 50,784,163 | |
Financials | | | 33,239,137 | | | | — | | | | — | | | | 33,239,137 | |
Health Care | | | 78,101,708 | | | | — | | | | — | | | | 78,101,708 | |
Industrials | | | 105,332,015 | | | | — | | | | — | | | | 105,332,015 | |
Information Technology | | | 109,885,292 | | | | — | | | | — | | | | 109,885,292 | |
Materials | | | 25,610,569 | | | | — | | | | — | | | | 25,610,569 | |
Telecommunication Services | | | 5,339,928 | | | | — | | | | — | | | | 5,339,928 | |
Utilities | | | 4,696,213 | | | | — | | | | — | | | | 4,696,213 | |
Investment Company | | | 14,138,260 | | | | — | | | | — | | | | 14,138,260 | |
| | |
Total Assets | | $ | 581,183,653 | | | $ | — | | | $ | — | | | $ | 581,183,653 | |
| | |
Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.
See accompanying Notes to Financial Statements.
12 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 30, 20111
| | | | |
|
Assets | | | | |
| | | | |
Investments, at value—see accompanying statement of investments: | | | | |
Unaffiliated companies (cost $443,441,234) | | $ | 567,045,393 | |
Affiliated companies (cost $14,138,260) | | | 14,138,260 | |
| | | |
| | | 581,183,653 | |
Cash | | | 10,642 | |
Receivables and other assets: | | | | |
Investments sold | | | 4,950,623 | |
Dividends | | | 146,929 | |
Other | | | 25,495 | |
| | | |
Total assets | | | 586,317,342 | |
| | | | |
Liabilities | | | | |
Payables and other liabilities: | | | | |
Investments purchased | | | 7,107,703 | |
Shares of beneficial interest redeemed | | | 218,488 | |
Shareholder communications | | | 94,613 | |
Transfer and shareholder servicing agent fees | | | 50,230 | |
Trustees’ compensation | | | 23,054 | |
Distribution and service plan fees | | | 7,115 | |
Other | | | 23,562 | |
| | | |
Total liabilities | | | 7,524,765 | |
| | | | |
Net Assets | | $ | 578,792,577 | |
| | | |
| | | | |
Composition of Net Assets | | | | |
Par value of shares of beneficial interest | | $ | 12,320 | |
Additional paid-in capital | | | 680,555,657 | |
Accumulated net investment loss | | | (23,054 | ) |
Accumulated net realized loss on investments | | | (225,356,505 | ) |
Net unrealized appreciation on investments | | | 123,604,159 | |
| | | |
Net Assets | | $ | 578,792,577 | |
| | | |
| | | | |
Net Asset Value Per Share | | | | |
Non-Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $543,019,910 and 11,539,403 shares of beneficial interest outstanding) | | $ | 47.06 | |
Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $35,772,667 and 780,440 shares of beneficial interest outstanding) | | $ | 45.84 | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
13 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 30, 20111
| | | | |
|
Investment Income | | | | |
Dividends: | | | | |
Unaffiliated companies (net of foreign withholding taxes of $12,856) | | $ | 1,694,660 | |
Affiliated companies | | | 29,298 | |
Interest | | | 400 | |
| | | |
Total investment income | | | 1,724,358 | |
| | | | |
Expenses | | | | |
Management fees | | | 4,602,216 | |
Distribution and service plan fees—Service shares | | | 94,416 | |
Transfer and shareholder servicing agent fees: | | | | |
Non-Service shares | | | 605,262 | |
Service shares | | | 37,794 | |
Shareholder communications: | | | | |
Non-Service shares | | | 66,395 | |
Service shares | | | 4,003 | |
Trustees’ compensation | | | 27,965 | |
Custodian fees and expenses | | | 4,518 | |
Administration service fees | | | 1,500 | |
Other | | | 49,607 | |
| | | |
Total expenses | | | 5,493,676 | |
Less waivers and reimbursements of expenses | | | (265,165 | ) |
| | | |
Net expenses | | | 5,228,511 | |
| | | | |
Net Investment Loss | | | (3,504,153 | ) |
| | | | |
Realized and Unrealized Gain (Loss) | | | | |
Net realized gain on investments from unaffiliated companies | | | 77,531,562 | |
Net change in unrealized appreciation/depreciation on investments | | | (62,965,525 | ) |
| | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 11,061,884 | |
| | | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
14 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
| | | | | | | | |
| | Year Ended | | | Year Ended | |
| | December 30, | | | December 31, | |
| | 20111 | | | 2010 | |
Operations | | | | | | | | |
Net investment loss | | $ | (3,504,153 | ) | | $ | (1,731,317 | ) |
Net realized gain | | | 77,531,562 | | | | 74,149,150 | |
Net change in unrealized appreciation/depreciation | | | (62,965,525 | ) | | | 71,236,219 | |
| | |
Net increase in net assets resulting from operations | | | 11,061,884 | | | | 143,654,052 | |
| | | | | | | | |
Beneficial Interest Transactions | | | | | | | | |
Net increase (decrease) in net assets resulting from beneficial interest transactions: | | | | | | | | |
Non-Service shares | | | (80,390,137 | ) | | | (72,544,702 | ) |
Service shares | | | 3,579,422 | | | | (348,697 | ) |
| | |
| | | (76,810,715 | ) | | | (72,893,399 | ) |
| | | | | | | | |
Net Assets | | | | | | | | |
Total increase (decrease) | | | (65,748,831 | ) | | | 70,760,653 | |
Beginning of period | | | 644,541,408 | | | | 573,780,755 | |
| | |
End of period (including accumulated net investment loss of $23,054 and $20,834, respectively) | | $ | 578,792,577 | | | $ | 644,541,408 | |
| | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
15 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Non-Service Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 46.55 | | | $ | 36.52 | | | $ | 27.54 | | | $ | 54.07 | | | $ | 50.85 | |
|
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment loss2 | | | (.26 | ) | | | (.11 | ) | | | (.05 | ) | | | (.13 | ) | | | (.02 | ) |
Net realized and unrealized gain (loss) | | | .77 | | | | 10.14 | | | | 9.03 | | | | (26.40 | ) | | | 3.24 | |
| | |
|
Total from investment operations | | | .51 | | | | 10.03 | | | | 8.98 | | | | (26.53 | ) | | | 3.22 | |
|
Net asset value, end of period | | $ | 47.06 | | | $ | 46.55 | | | $ | 36.52 | | | $ | 27.54 | | | $ | 54.07 | |
| | |
Total Return, at Net Asset Value3 | | | 1.09 | % | | | 27.46 | % | | | 32.61 | % | | | (49.07 | )% | | | 6.33 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 543,020 | | | $ | 611,872 | | | $ | 547,683 | | | $ | 461,684 | | | $ | 1,002,442 | |
|
Average net assets (in thousands) | | $ | 605,083 | | | $ | 548,739 | | | $ | 478,968 | | | $ | 754,170 | | | $ | 1,045,592 | |
|
Ratios to average net assets:4 | | | | | | | | | | | | | | | | | | | | |
Net investment loss | | | (0.53 | )% | | | (0.29 | )% | | | (0.17 | )% | | | (0.30 | )% | | | (0.04 | )% |
Total expenses5 | | | 0.84 | % | | | 0.85 | % | | | 0.86 | % | | | 0.71 | % | | | 0.69 | % |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 0.80 | % | | | 0.76 | % | | | 0.71 | % | | | 0.68 | % | | | 0.69 | % |
|
Portfolio turnover rate | | | 91 | % | | | 95 | % | | | 102 | % | | | 78 | % | | | 112 | % |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
4. | | Annualized for periods less than one full year. |
|
5. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 0.84 | % |
Year Ended December 31, 2010 | | | 0.85 | % |
Year Ended December 31, 2009 | | | 0.86 | % |
Year Ended December 31, 2008 | | | 0.71 | % |
Year Ended December 31, 2007 | | | 0.69 | % |
See accompanying Notes to Financial Statements.
16 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Service Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 45.46 | | | $ | 35.75 | | | $ | 27.03 | | | $ | 53.22 | | | $ | 50.19 | |
|
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment loss2 | | | (.37 | ) | | | (.20 | ) | | | (.13 | ) | | | (.24 | ) | | | (.17 | ) |
Net realized and unrealized gain (loss) | | | .75 | | | | 9.91 | | | | 8.85 | | | | (25.95 | ) | | | 3.20 | |
| | |
Total from investment operations | | | .38 | | | | 9.71 | | | | 8.72 | | | | (26.19 | ) | | | 3.03 | |
|
Net asset value, end of period | | $ | 45.84 | | | $ | 45.46 | | | $ | 35.75 | | | $ | 27.03 | | | $ | 53.22 | |
| | |
| | | | | | | | | | | | | | | | | | | | |
Total Return, at Net Asset Value3 | | | 0.83 | % | | | 27.16 | % | | | 32.26 | % | | | (49.21 | )% | | | 6.04 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 35,773 | | | $ | 32,669 | | | $ | 26,098 | | | $ | 21,952 | | | $ | 47,270 | |
|
Average net assets (in thousands) | | $ | 37,775 | | | $ | 27,552 | | | $ | 22,605 | | | $ | 35,815 | | | $ | 49,421 | |
|
Ratios to average net assets:4 | | | | | | | | | | | | | | | | | | | | |
Net investment loss | | | (0.78 | )% | | | (0.53 | )% | | | (0.44 | )% | | | (0.57 | )% | | | (0.31 | )% |
Total expenses5 | | | 1.09 | % | | | 1.10 | % | | | 1.12 | % | | | 0.98 | % | | | 0.96 | % |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 1.05 | % | | | 1.01 | % | | | 0.97 | % | | | 0.95 | % | | | 0.96 | % |
|
Portfolio turnover rate | | | 91 | % | | | 95 | % | | | 102 | % | | | 78 | % | | | 112 | % |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
4. | | Annualized for periods less than one full year. |
|
5. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 1.09 | % |
Year Ended December 31, 2010 | | | 1.10 | % |
Year Ended December 31, 2009 | | | 1.12 | % |
Year Ended December 31, 2008 | | | 0.98 | % |
Year Ended December 31, 2007 | | | 0.96 | % |
See accompanying Notes to Financial Statements.
17 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Oppenheimer Small- & Mid-Cap Growth Fund/VA (the “Fund”) is a separate series of Oppenheimer Variable Account Funds, an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund’s investment objective is to seek capital appreciation by investing in “growth type” companies. The Fund’s investment adviser is OppenheimerFunds, Inc. (the “Manager”).
The Fund offers two classes of shares. Both classes are sold at their offering price, which is the net asset value per share, to separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. The class of shares designated as Service shares is subject to a distribution and service plan. Both classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class.
The following is a summary of significant accounting policies consistently followed by the Fund.
Fiscal Year End. Since December 30, 2011 represents the last day during the Fund’s 2011 fiscal year on which the New York Stock Exchange was open for trading, the Fund’s financial statements have been presented through that date to maintain consistency with the Fund’s net asset value calculations used for shareholder transactions.
Securities Valuation. The Fund calculates the net asset value of its shares as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading.
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. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” observable market inputs other than unadjusted quoted prices are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.
Securities traded on a registered U.S. securities exchange 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. Securities whose principal exchange is NASDAQ® are valued based on the official closing prices reported by NASDAQ prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.
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.
U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.
18 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
“Money market-type” debt instruments with remaining maturities 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.
In the absence of a current price quotation obtained from an independent pricing service or broker-dealer, including for securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund’s assets are valued but after the close of the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities 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 adjusted for any discounts related to 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.
There have been no significant changes to the fair valuation methodologies of the Fund during the period.
Investment in Oppenheimer Institutional Money Market Fund. The Fund is permitted to invest daily available cash balances in an affiliated money market fund. The Fund may invest the available cash in Class E shares of Oppenheimer Institutional Money Market Fund (“IMMF”) to seek current income while preserving liquidity. IMMF is a registered open-end management investment company, regulated as a money market fund under the Investment Company Act of 1940, as amended. The Manager is also the investment adviser of IMMF. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of IMMF’s Class E expenses, including its 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 IMMF.
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
Federal Taxes. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. Therefore, no federal income or excise tax provision is required. The Fund files income tax returns in U.S. federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remain open for the three preceding fiscal reporting period ends.
The tax components of capital shown in the following table represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes.
| | | | | | | | | | | |
| | | | | | | | | Net Unrealized | |
| | | | | | | | | Appreciation | |
| | | | | | | | | Based on Cost of | |
Undistributed | | Undistributed | | Accumulated | | Securities and Other | |
Net Investment | | Long-Term | | Loss | | Investments for Federal | |
Income | | Gain | | Carryforward1,2,3,4 | | Income Tax Purposes | |
|
$ | — | | $ | — | | $ | 224,611,819 | | $ | 122,859,464 | |
19 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
1. Significant Accounting Policies Continued
1. As of December 30, 2011, the Fund had $217,070,467 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. Details of the capital loss carryforwards are included in the table below. Capital loss carryovers with no expiration, if any, must be utilized prior to those with expiration dates.
| | | | |
Expiring | | | | |
|
2017 | | $ | 217,070,467 | |
2. As of December 30, 2011, the Fund had $7,541,352 of post-October losses available to offset future realized capital gains, if any.
3. During the fiscal year ended December 30, 2011, the Fund utilized $83,964,525 of capital loss carryforward to offset capital gains realized in that fiscal year.
4. During the fiscal year ended December 31, 2010, the Fund utilized $72,390,451 of capital loss carryforward to offset capital gains realized in that fiscal year.
Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund.
Accordingly, the following amounts have been reclassified for December 30, 2011. Net assets of the Fund were unaffected by the reclassifications.
| | | | |
| | Reduction to | |
| | Accumulated | |
Reduction to | | Net Investment | |
Paid-in Capital | | Loss | |
|
$3,501,933 | | $ | 3,501,933 | |
The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 30, 2011 are noted in the following table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.
| | | | |
|
Federal tax cost of securities | | $ | 458,324,189 | |
| | | |
Gross unrealized appreciation | | $ | 135,530,691 | |
Gross unrealized depreciation | | | (12,671,227 | ) |
| | | |
Net unrealized appreciation | | $ | 122,859,464 | |
| | | |
Trustees’ Compensation. The Board of Trustees has adopted a compensation deferral plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of “Other” within the asset section of the Statement of Assets and Liabilities. Deferral of trustees’ fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund’s assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance with the compensation deferral plan.
Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles, are recorded on the ex-dividend date. Income and capital gain distributions, if any, are declared and paid annually or at other times as deemed necessary by the Manager.
20 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
Investment Income. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is recognized on an accrual basis. Discount and premium, which are included in interest income on the Statement of Operations, are amortized or accreted daily.
Custodian Fees. “Custodian fees and expenses” in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by the Fund, at a rate equal to the Federal Funds Rate plus 0.50%. The “Reduction to custodian expenses” line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings.
Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost.
Indemnifications. The Fund’s organizational documents provide current and former trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
| | | | | | | | | | | | | | | | |
| | Year Ended December 30, 2011 | | Year Ended December 31, 2010 |
| | Shares | | | Amount | | | Shares | | | Amount | |
|
Non-Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 665,252 | | | $ | 32,309,437 | | | | 660,517 | | | $ | 26,701,795 | |
Redeemed | | | (2,270,275 | ) | | | (112,699,574 | ) | | | (2,513,826 | ) | | | (99,246,497 | ) |
| | |
Net decrease | | | (1,605,023 | ) | | $ | (80,390,137 | ) | | | (1,853,309 | ) | | $ | (72,544,702 | ) |
| | |
| | | | | | | | | | | | | | | | |
Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 366,560 | | | $ | 18,018,685 | | | | 170,363 | | | $ | 6,822,078 | |
Redeemed | | | (304,822 | ) | | | (14,439,263 | ) | | | (181,692 | ) | | | (7,170,775 | ) |
| | |
Net increase (decrease) | | | 61,738 | | | $ | 3,579,422 | | | | (11,329 | ) | | $ | (348,697 | ) |
| | |
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations and investments in IMMF, for the year ended December 30, 2011, were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
|
Investment securities | | $ | 577,573,605 | | | $ | 673,534,159 | |
21 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
4. Fees and Other Transactions with Affiliates
Management Fees. Under the investment advisory agreement, the Fund pays the Manager a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| | | | |
Fee Schedule | | | | |
|
Up to $200 million | | | 0.75 | % |
Next $200 million | | | 0.72 | |
Next $200 million | | | 0.69 | |
Next $200 million | | | 0.66 | |
Next $700 million | | | 0.60 | |
Over $1.5 billion | | | 0.58 | |
Administration Service Fees. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund’s tax returns.
Transfer Agent Fees. OppenheimerFunds Services (“OFS”), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. For the year ended December 30, 2011, the Fund paid $648,358 to OFS for services to the Fund.
Distribution and Service Plan for Service Shares. The Fund has adopted a Distribution and Service Plan (the “Plan”) in accordance with Rule 12b-1 under the Investment Company Act of 1940 for Service shares to pay OppenheimerFunds Distributor, Inc. (the “Distributor”), for distribution related services, personal service and account maintenance for the Fund’s Service shares. Under the Plan, payments are made periodically at an annual rate of 0.25% of the daily net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors of the insurance product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service shares. These fees are paid out of the Fund’s assets on an on-going basis and increase operating expenses of the Service shares, which results in lower performance compared to the Fund’s shares that are not subject to a service fee. Fees incurred by the Fund under the Plan are detailed in the Statement of Operations.
Waivers and Reimbursements of Expenses. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.80% for Non-Service shares and 1.05% for Service shares. During the year ended December 30, 2011, the Manager waived fees and/or reimbursed the Fund $232,824 and $14,506 for Non-Service and Service shares, respectively.
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 IMMF. During the year ended December 30, 2011, the Manager waived fees and/or reimbursed the Fund $17,835 for IMMF management fees.
Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.
5. Pending Litigation
Since 2009, a number of class action, derivative and individual lawsuits have been pending in federal and state courts against OppenheimerFunds, Inc., the Fund’s investment advisor (the “Manager”), OppenheimerFunds Distributor, Inc., the Fund’s principal underwriter and distributor (the “Distributor”), and certain funds (but not including the Fund) advised by the Manager and distributed by the Distributor (the “Defendant Funds”). Several of these lawsuits also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The lawsuits raise claims under federal securities laws and various states’ securities, consumer protection and common law and allege, among other things, that the disclosure documents of the respective Defendant Funds contained misrepresentations and omissions and that the respective Defendant Funds’ investment policies were not followed. The plaintiffs in these actions seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. On September 30, 2011, the U.S. District Court for the District of Colorado entered orders and final judgments approving
22 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
the settlement of certain putative class actions involving two Defendant Funds, Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund. Those orders are not subject to further appeal. These settlements do not resolve other outstanding lawsuits relating to Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund, nor do the settlements affect certain other putative class action lawsuits pending in federal court against the Manager, the Distributor, and other Defendant Funds and their independent trustees.
In 2009, what are claimed to be derivative lawsuits were filed in New Mexico state court against the Manager and a subsidiary (but not against the Fund) on behalf of the New Mexico Education Plan Trust challenging a settlement reached in 2010 between the Manager, its subsidiary and the Distributor and the board of the New Mexico section 529 college savings plan. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses. On September 9, 2011, the court denied plaintiffs’ request for a hearing to determine the fairness of the settlement, finding that plaintiffs lacked standing to pursue derivative claims on behalf of the Trust. On October 27, 2011, the parties to these actions filed a joint motion to dismiss the lawsuits with prejudice, which the court granted on October 28, 2011.
Other class action and individual lawsuits have been filed since 2008 in various state and federal courts against the Manager and certain of its affiliates by investors seeking to recover investments they allegedly lost as a result of the “Ponzi” scheme run by Bernard L. Madoff and his firm, Bernard L. Madoff Investment Securities, LLC (“BLMIS”). Plaintiffs in these suits allege that they suffered losses as a result of their investments in several funds managed by an affiliate of the Manager and assert a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. Neither the Distributor, nor any of the Oppenheimer mutual funds, their independent trustees or directors are named as defendants in these lawsuits. None of the Oppenheimer mutual funds invested in any funds or accounts managed by Madoff or BLMIS. On February 28, 2011, a stipulation of partial settlement of three groups of consolidated putative class action lawsuits relating to these matters was filed in the U.S. District Court for the Southern District of New York. On August 19, 2011, the court entered an order and final judgment approving the settlement as fair, reasonable and adequate. In September 2011, certain parties filed notices of appeal from the court’s order approving the settlement. On July 29, 2011, a stipulation of settlement between certain affiliates of the Manager and the Trustee appointed under the Securities Investor Protection Act to liquidate BLMIS was filed in the U.S. Bankruptcy Court for the Southern District of New York to resolve purported preference and fraudulent transfer claims by the Trustee. On September 22, 2011, the court entered an order approving the settlement as fair, reasonable and adequate. In October 2011, certain parties filed notices of appeal from the court’s order approving the settlement. The aforementioned settlements do not resolve other outstanding lawsuits against the Manager and its affiliates relating to BLMIS.
On April 16, 2010, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark IV Funding Limited (“AAArdvark IV”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark IV. Plaintiffs allege breach of contract against the defendants and seek compensatory damages, costs and disbursements, including attorney fees. On July 15, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark Funding Limited (“AAArdvark I”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark I. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees. On November 9, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark XS Funding Limited (“AAArdvark XS”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark XS. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees.
23 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
5. Pending Litigation Continued
The Manager believes the lawsuits and appeals described above are without legal merit and, with the exception of actions it has settled, is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to represent the Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer mutual funds.
24 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:
We have audited the accompanying statement of assets and liabilities of Oppenheimer Small- & Mid-Cap Growth Fund/VA (a separate series of Oppenheimer Variable Account Funds), including the statement of investments, as of December 30, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of Oppenheimer Small- & Mid-Cap Growth Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 30, 2011, by correspondence with the custodian, transfer agent and brokers, or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Small- & Mid-Cap Growth Fund/VA as of December 30, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended, in conformity with U.S. generally accepted accounting principles.
KPMG llp
Denver, Colorado
February 16, 2012
25 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
In early 2012, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2011. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service.
The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance.
26 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
BOARD APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT Unaudited
Each year, the Board of Trustees (the “Board”), including a majority of the independent Trustees, is required to determine whether to renew the Fund’s investment advisory agreement (the “Agreement”). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager’s services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager and its affiliates, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. The Board was aware that there are alternatives to retaining the Manager.
Outlined below is a summary of the principal information considered by the Board as well as the Board’s conclusions.
Nature, Quality and Extent of Services. The Board considered information about the nature, quality and extent of the services provided to the Fund and information regarding the Manager’s key personnel who provide such services. The Manager’s duties include providing the Fund with the services of the portfolio manager and the Manager’s investment team, who provide research, analysis and other advisory services in regard to the Fund’s investments; securities trading services; oversight of third-party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund’s investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel who are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund’s operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund’s shares. The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the quality of the Manager’s resources that are available to the Fund. The Board took account of the fact that the Manager has had over fifty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager’s advisory, administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager’s key personnel and the size and functions of its staff. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Ronald Zibelli, Jr., the portfolio manager for the Fund, and the Manager’s investment team and analysts. The Board members also considered the totality of their experiences with the Manager as directors or trustees of the Fund and other funds advised by the Manager. The Board considered information regarding the quality of services provided by affiliates of the Manager, which its members have become knowledgeable about in connection with the renewal of the Fund’s service agreements. The Board concluded, in light of the Manager’s experience, reputation, personnel, operations and resources that the Fund benefits from the services provided under the Agreement.
Investment Performance of the Manager and the Fund. Throughout the year, the Manager provided information on the investment performance of the Fund and the Manager, including comparative performance information. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund’s historical
27 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
BOARD APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT Unaudited / Continued
performance to relevant market indices and to the performance of other mid-cap growth funds underlying variable insurance products. The Board considered that the Fund underperformed its performance universe median during the one-, three-, five-, and ten-year Lipper periods. The Board also considered, however, the Manager’s assertion that the portfolio manager’s high quality emphasis, which generally was out of favor in 2009, accounted for the Fund’s underperformance. The Board considered that the Manager changed the Fund’s name and investment policies on May 1, 2010 to reflect that the Fund could invest in small-cap stocks as well as mid-cap stocks. The Board also considered the Manager’s assertion that, going forward, these changes should improve the Fund’s performance. The Board also considered the Fund’s recent improved performance, ranking in the top quintile of its expense universe for the year to date ended April 30, 2011.
Costs of Services by the Manager. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also considered the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund and other mid-cap growth funds underlying variable insurance products. In reviewing the fees and expenses charged to the VA funds, the Board considered the Manager’s assertion that, because there is much greater disparity in the fees and services that may be provided by a manager to a VA fund as opposed to a retail fund, when comparing the expenses of the various VA funds to those of retail funds, it is most appropriate to focus on total expenses (rather than on the management fees). Accordingly, while the Board reviewed and considered all expenses, it focused on total expenses. The Board considered that the Fund’s actual management fees and total expenses were lower than the expense group median. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.80% for Non-Service Shares and 1.05% for Service Shares. This voluntary expense limitation my not be amended or withdrawn until one year after the date of prospectus.
Economies of Scale and Profits Realized by the Manager. The Board considered information regarding the Manager’s costs in serving as the Fund’s investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager’s profitability from its relationship with the Fund. The Board reviewed whether the Manager may realize economies of scale in managing and supporting the Fund. The Board noted that the Fund currently has management fee breakpoints, which are intended to share with Fund shareholders economies of scale that may exist as the Fund’s assets grow.
Other Benefits to the Manager. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager’s affiliates and research provided to the Manager in connection with permissible brokerage arrangements (soft dollar arrangements). The Board also considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide quality services to the Fund.
Conclusions. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees’ counsel are independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the Agreement through August 31, 2012. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the above information, and considered the terms and conditions of the Agreement, including the management fee, in light of all of the surrounding circumstances.
28 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities (“portfolio proxies”) held by the Fund. A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund’s website at oppenheimerfunds.com, and (iii) on the SEC’s website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund’s voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC’s website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund’s Form N-Q filings are available on the SEC’s website at www.sec.gov. Those forms may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
29 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
TRUSTEES AND OFFICERS Unaudited
| | |
|
Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
| | |
INDEPENDENT TRUSTEES | | The address of each Trustee in the chart below is 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Trustee serves for an indefinite term, or until his or her resignation, retirement, death or removal. |
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William L. Armstrong, Chairman of the Board of Trustees (since 2003), Trustee (since 1999) Age: 74 | | President, Colorado Christian University (since 2006); Chairman, Cherry Creek Mortgage Company (since 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso Mortgage Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman, Broadway Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), former Director of Campus Crusade for Christ (non-profit) (1991-2008); former Director, The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (2002-2006); former Chairman of: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Armstrong has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Edward L. Cameron, Trustee (since 1999) Age: 73 | | Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000 — June 2006); Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (accounting firm) (July 1994-June 1998). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Cameron has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Jon S. Fossel, Trustee (since 1990) Age: 69 | | Chairman of the Board (since 2006) and Director (since June 2002) of UNUMProvident (insurance company); Director of Northwestern Energy Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003 and February 2005-February 2007); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. (“OAC”) (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Fossel has served on the Boards of certain Oppenheimer funds since 1990, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Sam Freedman, Trustee (since 1996) Age: 71 | | Director of Colorado UpLIFT (charitable organization) (since September 1984). Mr. Freedman held several positions with the Manager and with subsidiary or affiliated companies of the Manager (until October 1994). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Freedman has served on the Boards of certain Oppenheimer funds since 1996, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Beverly L. Hamilton, Trustee (since 2002) Age: 65 | | Trustee of Monterey Institute for International Studies (educational organization) (since February 2000); Board Member of Middlebury College (educational organization) (since December 2005); Chairman (since 2010) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); Director of The California Endowment (philanthropic organization) (April 2002-April 2008); Director (February 2002-2005) and Chairman of Trustees (2006-2007) of the Community Hospital of Monterey Peninsula; Director (October 1991-2005); Vice Chairman (2006-2009) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation (2001-2006) and The University of Michigan (since 2000); Advisor at Credit Suisse First Boston’s Sprout |
30 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
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Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
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Beverly L. Hamilton, Continued | | venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April 1989- June 2004); Member of the investment committee of Hartford Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 36 portfolios in the OppenheimerFunds complex. Ms. Hamilton has served on the Boards of certain Oppenheimer funds since 2002, during which time she has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Robert J. Malone, Trustee (since 2002) Age: 67 | | Board of Directors of Opera Colorado Foundation (non-profit organization) (since March 2008); Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director of Steele Street Bank & Trust (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank- Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Malone has served on the Boards of certain Oppenheimer funds since 2002, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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F. William Marshall, Jr., Trustee (since 2001) Age: 69 | | Trustee Emeritus of Worcester Poly tech Institute (WPI) (private university) (since 2009); Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment company) (since 1996) and MML Series Investment Fund (investment company) (since 1996); President and Treasurer of the SIS Funds (private charitable fund) (January 1999 — March 2011); Former Trustee of WPI (1985-2008); Former Chairman of the Board (2004-2006) and Former Chairman of the Investment Committee of WPI (1994-2008); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999); and Former President and Chief Executive Officer of SIS Bancorp. (1993-1999). Oversees 38 portfolios in the OppenheimerFunds complex. Mr. Marshall has served on the Boards of certain Oppenheimer funds since 2000, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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INTERESTED TRUSTEE AND OFFICER | | The address of Mr. Glavin is Two World Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008. Mr. Glavin serves as a Trustee for an indefinite term, or until his resignation, retirement, death or removal and as an Officer for an indefinite term, or until his resignation, retirement, death or removal. Mr. Glavin is an Interested Trustee due to his positions with OppenheimerFunds, Inc. and its affiliates. |
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William F. Glavin, Jr., Trustee, President and Principal Executive Officer (since 2009) Age: 53 | | Chairman of the Manager (since December 2009); Chief Executive Officer and Director of the Manager (since January 2009); President of the Manager (since May 2009); Director of Oppenheimer Acquisition Corp. (“OAC”) (the Manager’s parent holding company) (since June 2009); Executive Vice President (March 2006-February 2009) and Chief Operating Officer (July 2007-February 2009) of Massachusetts Mutual Life Insurance Company (OAC’s parent company); Director (May 2004-March 2006) and Chief Operating Officer and Chief Compliance Officer (May 2004-January 2005), President (January 2005-March 2006) and Chief Executive Officer (June 2005- March 2006) of Babson Capital Management LLC; Director (March 2005-March 2006), President (May 2003- March 2006) and Chief Compliance Officer (July 2005-March 2006) of Babson Capital Securities, Inc. (a broker-dealer); President (May 2003-March 2006) of Babson Investment Company, Inc.; Director (May 2004- August 2006) of Babson Capital Europe Limited; Director (May 2004-October 2006) of Babson Capital Guernsey Limited; Director (May 2004-March 2006) of Babson Capital Management LLC; Non-Executive Director (March 2005-March 2007) of Baring Asset Management Limited; Director (February 2005-June 2006) Baring Pension Trustees Limited; Director and Treasurer (December 2003-November 2006) of Charter Oak Capital Management, Inc.; Director (May 2006-September 2006) of C.M. Benefit Insurance Company; Director (May 2008-June 2009) and Executive Vice President (June 2007-July 2009) of C.M. Life Insurance Company; President (March 2006- May 2007) of MassMutual Assignment Company; Director (January 2005-December 2006), Deputy Chairman (March 2005-December 2006) and President (February 2005-March 2005) of MassMutual Holdings (Bermuda) Limited; Director (May 2008-June 2009) and Executive Vice President (June 2007-July 2009) of MML Bay State Life Insurance Company; Chief Executive Officer and President (April 2007-January 2009) of MML Distributors, LLC; |
31 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
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Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
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William F. Glavin, Jr., Continued | | and Chairman (March 2006-December 2008) and Chief Executive Officer (May 2007-December 2008) of MML Investors Services, Inc. Oversees 63 portfolios as a Trustee/Director and 96 portfolios as an officer in the OppenheimerFunds complex. |
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OTHER OFFICERS OF THE FUND | | The addresses of the Officers in the chart below are as follows: for Messrs. Zibelli, Jr., Gabinet and Ms. Nasta, Two World Financial Center, 225 Liberty Street, New York, New York 10281-1008, for Messrs. Vandehey and Wixted, 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Officer serves for an indefinite term or until his or her resignation, retirement, death or removal. |
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Ronald J. Zibelli, Jr., Vice President (since 2008) Age: 52 | | Vice President of the Manager (since May 2006); a Chartered Financial Analyst. Prior to joining the Manager, Managing Director and Small Cap Growth Team Leader at Merrill Lynch Investment Managers (January 2002- May 2006). A portfolio manager and officer of 3 portfolios in the OppenheimerFunds complex. |
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Arthur S. Gabinet, Secretary (since 2011) Age: 53 | | Executive Vice President (since May 2010) and General Counsel (since January 2011) of the Manager; General Counsel of the Distributor (since January 2011); General Counsel of Centennial Asset Management Corporation (since January 2011); Executive Vice President and General Counsel of HarbourView Asset Management Corporation (since January 2011); Assistant Secretary (since January 2011) and Director (since January 2011) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since January 2011); Director of Oppenheimer Real Asset Management, Inc. (since January 2011); Executive Vice President and General Counsel of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since January 2011); Executive Vice President and General Counsel of OFI Private Investments, Inc. (since January 2011); Vice President of OppenheimerFunds Legacy Program (since January 2011); Executive Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since January 2011); General Counsel, Asset Management of the Manager (May 2010-December 2010); Principal, The Vanguard Group (November 2005- April 2010); District Administrator, U.S. Securities and Exchange Commission (January 2003-October 2005). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Christina M. Nasta, Vice President and Chief Business Officer (since 2011) Age: 38 | | Senior Vice President of the Manager (since July 2010); Vice President of the Manager (since January 2003); Vice President of OppenheimerFunds Distributor, Inc. (since January 2003). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Mark S. Vandehey, Vice President and Chief Compliance Officer (since 2004) Age: 61 | | Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Brian W. Wixted, Treasurer and Principal Financial & Accounting Officer (since 1999) Age: 52 | | Senior Vice President of the Manager (since March 1999); Treasurer of the Manager and the following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership Holdings, Inc. (March 1999-June 2008), OFI Private Investments, Inc. (March 2000-June 2008), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of OAC (March 1999-June 2008). An officer of 96 portfolios in the OppenheimerFunds complex. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and Officers and is available without charge, upon request, by calling 1.800.988.8287.
32 | OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA
A Series of Oppenheimer Variable Account Funds
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Manager | | OppenheimerFunds, Inc. |
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Distributor | | OppenheimerFunds Distributor, Inc. |
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Transfer Agent | | OppenheimerFunds Services |
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Independent Registered Public Accounting Firm | | KPMG llp |
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Counsel | | K&L Gates LLP |
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| | Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing. |
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©2012 OppenheimerFunds, Inc. All rights reserved. | | ![()](https://capedge.com/proxy/N-CSR/0000950123-12-003003/g60124g6012405.gif) |
Oppenheimer Balanced Fund/VA AnnualReport |
A Series of Oppenheimer Variable Account Funds |
Listing of Top Holdings Fund Performance |
Discussion Financial Statements |
OPPENHEIMER BALANCED FUND/VA
Portfolio Managers: Mitch Williams,1 CFA; Krishna Memani and Peter A. Strzalkowski, CFA
Average Annual Total Returns
For the Periods Ended 12/30/112
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| | 1-Year | | | 5-Year | | | 10-Year | |
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Non-Service Shares | | 0.72% | | | -4.05% | | | 1.47% | |
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| | | | | | | | | | Since | |
| | | | | | | | | | Inception | |
| | 1-Year | | | 5-Year | | | (5/1/02) | |
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Service Shares | | 0.38% | | | -4.30% | | | 1.40% | |
Expense Ratios
For the Periods Ended 12/30/112
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| | Gross | | | Net | |
| | Expense | | | Expense | |
| | Ratios3 | | | Ratios3 | |
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Non-Service Shares | | 0.93% | | | 0.69% | |
Service Shares | | 1.18 | | | 0.94 | |
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance and expense ratios may be lower or higher than the data quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account. The net expense ratios take into account voluntary fee waivers and/or expense reimbursements, without which performance would have been less. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund’s prospectus.
Portfolio Allocation
Portfolio holdings and allocations are subject to change. Percentages are as of December 30, 2011, and are based on the total market value of investments.
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Top Ten Common Stock Holdings | | | | |
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Chevron Corp. | | | 3.5 | % |
U.S. Bancorp | | | 2.1 | |
Coca-Cola Co. (The) | | | 2.0 | |
Wells Fargo & Co. | | | 1.9 | |
MetLife, Inc. | | | 1.6 | |
Jupiter Telecommunications Co. Ltd. | | | 1.6 | |
Goldman Sachs Group, Inc. (The) | | | 1.6 | |
Exxon Mobil Corp. | | | 1.5 | |
Pfizer, Inc. | | | 1.5 | |
ACE Ltd. | | | 1.4 | |
Portfolio holdings and allocations are subject to change. Percentages are as of December 30, 2011, and are based on net assets.
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1. | | Effective November 2011. |
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2. | | December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. |
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3. | | These Expense Ratios include the applicable indirect expenses attributable to the Fund’s investments in other investment companies. |
2 | OPPENHEIMER BALANCED FUND/VA
FUND PERFORMANCE DISCUSSION
Management’s Discussion of Fund Performance. The Fund’s Non-Service shares produced a total return of 0.72% for the reporting period ended December 30, 2011.4 In comparison, the S&P 500 Index returned 2.11% and the Barclays Capital U.S. Aggregate Bond Index returned 7.84%. Fixed-income investments generally performed much better relative to equities during this volatile reporting period. As such, the Fund’s equity component experienced declines and the fixed-income component produced positive results, resulting in a muted return for the Fund overall.
Economic and Market Overview
The first half of the reporting period was generally characterized by resilience among investors who looked forward to improved credit conditions in a recovering global economy. Even the wave of political unrest in the Middle East in early 2011, which led to sharply higher energy prices, had only a temporary dampening effect on most financial markets. Likewise, markets recovered relatively quickly after a devastating natural disaster and subsequent nuclear energy crisis hit Japan in March, disrupting global industrial supply chains. During this time, equities and higher-yielding fixed income securities generally performed well.
Investor sentiment began to deteriorate in late April, when U.S. economic data proved disappointing, and a contentious U.S. fiscal policy debate intensified. These concerns reached a tipping point in early August, when the credit rating company Standard & Poor’s downgraded the sovereign debt of the U.S., a decision that the two other major credit rating firms opted not to follow.
Meanwhile, international uncertainty worsened with the high likelihood that Greece was headed for default on its debt and other members of the European Union continued to struggle with heavy debt burdens, leading to worries over the health of the European banking system. Inflationary pressures mounted in China and other emerging markets, where investors grew concerned that remedial measures, including higher local interest rates, might derail these major engines of global growth. Financial markets also grew concerned that new recessions in the developed markets could mean a slowdown in growth in export dependent emerging economies. Some emerging market countries saw their GDP growth stall after a prolonged period of solid increases.
These events triggered a flight to quality that boosted traditional safe havens but hurt areas of the market that historically have been considered riskier. Fixed-income investments in emerging markets generally underperformed their developed markets counterparts as a result of shifting investor sentiment. In the United States, long-term U.S. Treasury securities continued to rally even after the credit-rating downgrade, but high yield corporate bonds gave back earlier gains, despite generally healthy balance sheets and limited needs for near term refinancing. Market turbulence throughout the world was particularly severe over the third quarter of 2011 with most global risk markets experiencing sharp declines.
In the fourth quarter, risk markets finished the period largely on a positive note, rebounding strongly in October in particular, as European leaders sought to undertake measures to address the debt issues in the region and the U.S. economy began to show some signs of life as high unemployment trended downward, the housing market picked up slightly and consumer sentiment improved.
Equity Component
During the period, the Fund’s equity component experienced declines and underperformed the S&P 500 Index. The equity component underperformed primarily due to a steep sell-off in global equity markets over the third quarter of 2011. The Fund’s holdings, particularly in the financials, information technology and industrials sectors, suffered during this time. The equity component received better results from its investments in the energy and consumer staples sectors.
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4. | | December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011. |
3 | OPPENHEIMER BALANCED FUND/VA
FUND PERFORMANCE DISCUSSION
In terms of individual Fund holdings, the most significant detractor from performance this period was video game company THQ, Inc. Shares of THQ declined over the first half of the period after reviews for its Homefront game came in weaker than expected. The company experienced further weakness over the second half of the year during which it lowered its revenue outlook for its fiscal third quarter. We exited our position in the stock by period end. Financial holdings JPMorgan Chase & Co. and MetLife, Inc. also hurt the Fund’s performance this period. Financial stocks generally declined this year as a weak global economy and banks’ exposure to the crisis in the Eurozone worried investors.
The equity component’s strongest contributor to performance was Take-Two Interactive Software, Inc. During the period, Take-Two generally executed its business plan well and continued to develop new intellectual property. It also benefited from Red Dead Redemption, a video game released by Rockstar Studios. We exited our position in Take-Two by period end and locked in our gains. Other holdings that benefited performance this period were energy stock Chevron Corp. and health care holding Humana, Inc. Chevron benefited from the rising price of oil over the first quarter, but its stock price also appreciated as the market rewarded its impressive drilling prowess and the highest resource replacement rate among its peers. Humana is a leading Medicare provider in the U.S. and in 2011 expanded its base of operations as well as Medicare Advantage policyholders through a series of acquisitions, including deals to acquire Antiva Health, MD Care, Arcadian Management Services, SeniorBridge and several urgent medical centers from NextCare, Inc. through its subsidiary Concentra, Inc.
Fixed-Income Component
During the reporting period, the Fund’s fixed-income component performed roughly in line with the Barclays Capital U.S. Aggregate Bond Index. The fixed-income component’s positive absolute performance was driven by its investments in mortgage backed obligations, particularly residential mortgage-backed securities (RMBS). The fixed-income component’s exposure to RMBS included securities guaranteed by government-sponsored enterprises, commonly referred to as agency RMBS, as well as a smaller allocation to RMBS originated by private entities, also known as non-agency RMBS. Commercial mortgage-backed securities (CMBS) and asset backed securities (ABS) also performed well for the fixed-income component. Despite bouts of risk aversion, particularly over the volatile third quarter of 2011, mortgage backed obligations generally produced positive results for the year. The fixed-income component also benefited from an allocation to investment grade and high yield securities for the year.
In terms of detractors from performance, the fixed-income component’s limited exposure to U.S. Treasuries hurt performance. Despite Standard & Poor’s downgrade of U.S. sovereign debt, U.S. Treasuries held up well during the year as many investors remained cautious of risk. Our underweight position in agency debt also detracted from relative performance this period.
Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing.
Total returns include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown.
The Fund’s investment strategy and focus can change over time. The mention of specific fund holdings does not constitute a recommendation by OppenheimerFunds, Inc.
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.
4 | OPPENHEIMER BALANCED FUND/VA
Comparing the Fund’s Performance to the Market. The graphs that follow show the performance of a hypothetical $10,000 investment in each share class of the Fund held until December 30, 2011. In the case of Non-Service shares, performance is measured over a ten-fiscal-year period. In the case of Service shares, performance is measured from inception of the Class on May 1, 2002. Performance information does not reflect charges that apply to separate accounts investing in the Fund. If these charges were taken into account, performance would be lower. The graphs assume that all dividends and capital gains distributions were reinvested in additional shares.
The Fund’s performance is compared to the performance of both the S&P 500 Index, an unmanaged index of large-capitalization equity securities that is a measure of the general domestic stock market, and the Barclays Capital U.S. Aggregate Bond Index, an unmanaged index of U.S. corporate, government and mortgage-backed securities that is a measure of the domestic bond market. Index performance includes reinvestment of income but does not reflect transaction costs, fees or expenses. While index comparisons may be useful to provide a benchmark for the Fund’s performance, it must be noted that the Fund’s investments vary from the securities comprising the indices.
5 | OPPENHEIMER BALANCED FUND/VA
FUND PERFORMANCE DISCUSSION
Non-Service Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Service Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account.
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1. | | December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011. |
6 | OPPENHEIMER BALANCED FUND/VA
FUND EXPENSES
Fund Expenses. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 30, 2011.
Actual Expenses. The first section of the table provides information about actual account values and actual expenses. You may use the information in this section for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes. The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio for each class of shares, and an assumed rate of return of 5% per year for each class before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the “hypothetical” lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included your costs would have been higher.
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| | Beginning | | | Ending | | | Expenses | |
| | Account | | | Account | | | Paid During | |
| | Value | | | Value | | | 6 Months Ended | |
| | July 1, 2011 | | | December 30, 2011 | | | December 30, 2011 | |
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Actual | | | | | | | | | | | | |
Non-Service Shares | | $ | 1,000.00 | | | $ | 965.80 | | | $ | 3.31 | |
Service Shares | | | 1,000.00 | | | | 963.80 | | | | 4.54 | |
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Hypothetical | | | | | | | | | | | | |
(5% return before expenses) | | | | | | | | | | | | |
Non-Service Shares | | | 1,000.00 | | | | 1,021.71 | | | | 3.40 | |
Service Shares | | | 1,000.00 | | | | 1,020.46 | | | | 4.67 | |
Expenses are equal to the Fund’s annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). Those annualized expense ratios, excluding indirect expenses from affiliated fund, based on the 6-month period ended December 30, 2011 are as follows:
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Class | | Expense Ratios | |
|
Non-Service Shares | | | 0.67 | % |
Service Shares | | | 0.92 | |
The expense ratios reflect voluntary waivers and/or reimbursements of expenses by the Fund’s Manager. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund’s prospectus. The “Financial Highlights” tables in the Fund’s financial statements, included in this report, also show the gross expense ratios, without such waivers or reimbursements and reduction to custodian expenses, if applicable.
7 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS December 30, 2011*
| | | | | | | | |
| | Shares | | | Value | |
|
Common Stocks—48.1% | | | | | | | | |
Consumer Discretionary—6.5% | | | | | | | | |
Automobiles—0.9% | | | | | | | | |
Ford Motor Co.1 | | | 175,370 | | | $ | 1,886,981 | |
Household Durables—0.5% | | | | | | | | |
Mohawk Industries, Inc.1 | | | 17,780 | | | | 1,064,133 | |
Media—3.8% | | | | | | | | |
Comcast Corp., Cl. A | | | 118,380 | | | | 2,806,790 | |
Jupiter Telecommunications Co. Ltd. | | | 3,231 | | | | 3,274,237 | |
Viacom, Inc., Cl. B | | | 35,080 | | | | 1,592,983 | |
| | | | | | | |
| | | | | | | 7,674,010 | |
| | | | | | | | |
Multiline Retail—1.3% | | | | | | | | |
Target Corp. | | | 53,080 | | | | 2,718,758 | |
Consumer Staples—4.0% | | | | | | | | |
Beverages—2.0% | | | | | | | | |
Coca-Cola Co. (The) | | | 58,860 | | | | 4,118,434 | |
Food & Staples Retailing—1.3% | | | | | | | | |
Wal-Mart Stores, Inc. | | | 45,590 | | | | 2,724,458 | |
Household Products—0.7% | | | | | | | | |
Church & Dwight Co., Inc. | | | 29,050 | | | | 1,329,328 | |
Energy—7.3% | | | | | | | | |
Energy Equipment & Services—0.4% | | | | | | | | |
Nabors Industries Ltd.1 | | | 51,520 | | | | 893,357 | |
Oil, Gas & Consumable Fuels—6.9% | | | | | | | | |
Apache Corp. | | | 12,290 | | | | 1,113,228 | |
Chevron Corp. | | | 68,690 | | | | 7,308,612 | |
Exxon Mobil Corp. | | | 37,000 | | | | 3,136,120 | |
Penn West Petroleum Ltd. | | | 30,730 | | | | 608,454 | |
Royal Dutch Shell plc, ADR | | | 26,970 | | | | 1,971,237 | |
| | | | | | | |
| | | | | | | 14,137,651 | |
| | | | | | | | |
Financials—11.1% | | | | | | | | |
Capital Markets—1.6% | | | | | | | | |
Goldman Sachs Group, Inc. (The) | | | 35,530 | | | | 3,212,978 | |
Commercial Banks—5.2% | | | | | | | | |
CIT Group, Inc.1 | | | 25,970 | | | | 905,574 | |
M&T Bank Corp. | | | 20,750 | | | | 1,584,055 | |
U.S. Bancorp | | | 158,000 | | | | 4,273,900 | |
Wells Fargo & Co. | | | 143,530 | | | | 3,955,687 | |
| | | | | | | |
| | | | | | | 10,719,216 | |
| | | | | | | | |
Diversified Financial Services—1.3% | | | | | | | | |
JPMorgan Chase & Co. | | | 81,040 | | | | 2,694,580 | |
Insurance—3.0% | | | | | | | | |
ACE Ltd. | | | 40,870 | | | | 2,865,804 | |
MetLife, Inc. | | | 107,300 | | | | 3,345,614 | |
| | | | | | | |
| | | | | | | 6,211,418 | |
| | | | | | | | |
Health Care—5.8% | | | | | | | | |
Biotechnology—1.0% | | | | | | | | |
Gilead Sciences, Inc.1 | | | 49,760 | | | | 2,036,677 | |
Health Care Equipment & Supplies—1.1% | | | | | | | | |
Medtronic, Inc. | | | 57,750 | | | | 2,208,938 | |
Health Care Providers & Services—2.2% | | | | | | | | |
Humana, Inc. | | | 18,400 | | | | 1,612,024 | |
UnitedHealth Group, Inc. | | | 40,010 | | | | 2,027,707 | |
WellPoint, Inc. | | | 13,700 | | | | 907,625 | |
| | | | | | | |
| | | | | | | 4,547,356 | |
| | | | | | | | |
Pharmaceuticals—1.5% | | | | | | | | |
Pfizer, Inc. | | | 143,630 | | | | 3,108,153 | |
Industrials—3.0% | | | | | | | | |
Electrical Equipment—1.3% | | | | | | | | |
Cooper Industries plc | | | 50,210 | | | | 2,718,872 | |
Industrial Conglomerates—1.3% | | | | | | | | |
Tyco International Ltd. | | | 54,600 | | | | 2,550,366 | |
Trading Companies & Distributors—0.4% | | | | | | | | |
AerCap Holdings NV1 | | | 73,620 | | | | 831,170 | |
Information Technology—4.7% | | | | | | | | |
Communications Equipment—1.0% | | | | | | | | |
Juniper Networks, Inc.1 | | | 102,000 | | | | 2,081,820 | |
Orbcomm, Inc.1 | | | 375 | | | | 1,121 | |
| | | | | | | |
| | | | | | | 2,082,941 | |
| | | | | | | | |
Computers & Peripherals—0.3% | | | | | | | | |
Hewlett-Packard Co. | | | 20,090 | | | | 517,518 | |
Internet Software & Services—0.3% | | | | | | | | |
VeriSign, Inc. | | | 17,710 | | | | 632,601 | |
Semiconductors & Semiconductor Equipment—0.7% | | | | | | | | |
Xilinx, Inc. | | | 45,620 | | | | 1,462,577 | |
Software—2.4% | | | | | | | | |
Microsoft Corp. | | | 107,420 | | | | 2,788,623 | |
Oracle Corp. | | | 86,240 | | | | 2,212,056 | |
| | | | | | | |
| | | | | | | 5,000,679 | |
| | | | | | | | |
Materials—1.5% | | | | | | | | |
Chemicals—1.1% | | | | | | | | |
Celanese Corp., Series A | | | 13,790 | | | | 610,483 | |
Mosaic Co. (The) | | | 35,010 | | | | 1,765,554 | |
| | | | | | | |
| | | | | | | 2,376,037 | |
| | | | | | | | |
Containers & Packaging—0.4% | | | | | | | | |
Rock-Tenn Co., Cl. A | | | 14,350 | | | | 827,995 | |
Telecommunication Services—1.7% | | | | | | | | |
Diversified Telecommunication Services—0.7% | | | | | | | | |
AT&T, Inc. | | | 51,330 | | | | 1,552,219 | |
8 | OPPENHEIMER BALANCED FUND/VA
| | | | | | | | |
| | Shares | | | Value | |
|
Wireless Telecommunication Services—1.0% | | | | | | | | |
Vodafone Group plc, Sponsored ADR | | | 72,840 | | | $ | 2,041,705 | |
Utilities—2.5% | | | | | | | | |
Electric Utilities—1.6% | | | | | | | | |
American Electric Power Co., Inc. | | | 16,520 | | | | 682,441 | |
Edison International, Inc. | | | 65,690 | | | | 2,719,566 | |
| | | | | | | |
| | | | | | | 3,402,007 | |
| | | | | | | | |
Energy Traders—0.3% | | | | | | | | |
GenOn Energy, Inc.1 | | | 208,040 | | | | 542,984 | |
Multi-Utilities—0.6% | | | | | | | | |
Public Service Enterprise Group, Inc. | | | 38,850 | | | | 1,282,439 | |
| | | | | | | |
Total Common Stocks (Cost $95,567,248) | | | | | | | 99,108,536 | |
| | | | | | | | |
| | Principal | | | | | |
| | Amount | | | | | |
|
Asset-Backed Securities—4.3% | | | | | | | | |
AESOP Funding II LLC, Automobile Receivables Nts., Series 2011-1A, Cl. A, 1.85%, 11/20/132 | | $ | 125,000 | | | | 124,718 | |
Ally Auto Receivables Trust 2010-4, Automobile Receivables Nts., Series 2010-4, Cl. A3, 0.91%, 11/17/14 | | | 30,000 | | | | 30,036 | |
Ally Master Owner Trust 2010-3, Asset-Backed Certificates, Series 2010-3, Cl. A, 2.88%, 4/15/152 | | | 200,000 | | | | 203,361 | |
Ally Master Owner Trust, Automobile Receivables Nts., Series 2011-4, Cl. A2, 1.54%, 9/15/16 | | | 240,000 | | | | 239,359 | |
AmeriCredit Automobile Receivables Trust 2009-1, Automobile Receivables-Backed Nts., Series 2009-1, Cl. A3, 3.04%, 10/15/13 | | | 63,097 | | | | 63,447 | |
AmeriCredit Automobile Receivables Trust 2011-1, Automobile Receivables-Backed Nts., Series 2011-1, Cl. D, 4.26%, 2/8/17 | | | 60,000 | | | | 60,771 | |
AmeriCredit Automobile Receivables Trust 2011-2, Automobile Receivables-Backed Nts.: | | | | | | | | |
Series 2011-2, Cl. A3, 1.61%, 10/8/15 | | | 70,000 | | | | 70,304 | |
Series 2011-2, Cl. D, 4%, 5/8/17 | | | 120,000 | | | | 119,838 | |
AmeriCredit Automobile Receivables Trust 2011-4, Automobile Receivables-Backed Nts., Series 2011-4, Cl. D, 4.08%, 7/10/17 | | | 335,000 | | | | 334,498 | |
AmeriCredit Automobile Receivables Trust 2011-5, Automobile Receivables Nts., Series 2011-5, Cl. D, 4.72%, 12/8/17 | | | 205,000 | | | | 209,733 | |
AmeriCredit Prime Automobile Receivables Trust 2010-2, Automobile Receivables Nts., Series 2010-2, Cl. A2, 1.22%, 10/8/13 | | | 18,188 | | | | 18,197 | |
CarMax Auto Owner Trust 2010-3, Automobile Asset-Backed Nts., Series 2010-3, Cl. A3, 0.99%, 2/17/15 | | | 65,000 | | | | 65,140 | |
Carrington Mortgage Loan Trust, Asset-Backed Pass-Through Certificates, Series 2006-FRE1, Cl. A2, 0.404%, 7/25/363 | | | 177,363 | | | | 163,486 | |
Centre Point Funding LLC, Asset-Backed Nts., Series 2010-1A, Cl. 1, 5.43%, 7/20/152 | | | 52,768 | | | | 55,340 | |
Citibank Credit Card Issuance Trust, Credit Card Receivable Nts., Series 2003-C4, Cl. C4, 5%, 6/10/15 | | | 180,000 | | | | 187,736 | |
Citibank Omni Master Trust, Credit Card Receivables: | | | | | | | | |
Series 2009-A13, Cl. A13, 5.35%, 8/15/182 | | | 475,000 | | | | 519,207 | |
Series 2009-A17, Cl. A17, 4.90%, 11/15/182 | | | 370,000 | | | | 402,724 | |
Series 2009-A8, Cl. A8, 2.378%, 5/16/162,3 | | | 325,000 | | | | 327,026 | |
CNH Wholesale Master Note Trust 2011-1, Equipment Nts., Series 2011-1, Cl. 1A, 1.078%, 1/20/413 | | | 240,000 | | | | 240,290 | |
Countrywide Home Loans, Asset-Backed Certificates: | | | | | | | | |
Series 2002-4, Cl. A1, 1.034%, 2/25/333 | | | 8,285 | | | | 7,957 | |
Series 2005-16, Cl. 2AF2, 5.377%, 5/1/363 | | | 222,632 | | | | 171,039 | |
CWABS Asset-Backed Certificates Trust 2006-25, Asset-Backed Certificates, Series 2006-25, Cl. 2A2, 0.414%, 6/25/473 | | | 428,317 | | | | 378,736 | |
DSC Floorplan Master Owner Trust, Automobile Receivable Nts., Series 2011-1, Cl. A, 3.91%, 3/15/16 | | | 210,000 | | | | 212,845 | |
DT Auto Owner Trust 2009-1, Automobile Receivable Nts., Series 2009-1, Cl. A1, 2.98%, 10/15/152 | | | 104,466 | | | | 104,976 | |
DT Auto Owner Trust 2011-1A, Automobile Receivable Nts., Series 2011-1A, Cl. C, 3.05%, 8/15/152 | | | 290,000 | | | | 290,555 | |
DT Auto Owner Trust 2011-2A, Automobile Receivable Nts., Series 2011-2A, Cl. C, 3.05%, 7/15/132 | | | 70,000 | | | | 69,769 | |
DT Auto Owner Trust 2011-3A, Automobile Receivable Nts., Series 2011-3A, Cl. C, 4.03%, 12/15/414 | | | 201,000 | | | | 200,600 | |
First Investors Auto Owner Trust 2011-1, Automobile Receivable Nts., Series 2011-1, Cl. A2, 1.47%, 3/16/15 | | | 155,498 | | | | 154,780 | |
Ford Credit Floorplan Master Owner Trust 2009-2, Asset-Backed Nts., Series 2009-2, Cl. A, 1.828%, 9/15/143 | | | 245,000 | | | | 246,891 | |
Ford Credit Floorplan Master Owner Trust 2010-1, Asset-Backed Nts., Series 2010-1, Cl. A, 1.928%, 12/15/142,3 | | | 250,000 | | | | 252,743 | |
9 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Asset-Backed Securities Continued | | | | | | | | |
Ford Credit Floorplan Master Owner Trust 2011-1, Asset-Backed Nts., Series 2011-1, Cl. A1, 2.12%, 2/15/16 | | $ | 255,000 | | | $ | 258,540 | |
GE Dealer Floorplan Master Note Trust, Asset-Backed Securities, Series 2009-2A, Cl. A, 1.828%, 10/20/142,3 | | | 240,000 | | | | 242,118 | |
GMAC Mortgage Servicer Advance Funding Ltd., Asset-Backed Nts., Series 2011-1A, Cl. A, 3.72%, 2/15/232 | | | 230,000 | | | | 229,983 | |
Hertz Vehicle Financing LLC, Automobile Receivable Nts., Series 2010-1A, Cl. A1, 2.60%, 2/25/152 | | | 315,000 | | | | 318,683 | |
MBNA Credit Card Master Note Trust, Credit Card Receivables, Series 2003-C7, Cl. C7, 1.628%, 3/15/163 | | | 255,000 | | | | 255,717 | |
Nissan Auto Lease Trust 2010-B, Automobile Asset-Backed Nts., Series 2010-B, Cl. A3, 1.12%, 12/15/13 | | | 220,000 | | | | 220,565 | |
Nissan Master Owner Trust, Automobile Receivable Nts., Series 2010-AA, Cl. A, 1.428%, 1/15/152,3 | | | 240,000 | | | | 241,833 | |
Rental Car Finance Corp., Automobile Receivable Nts., Series 2011-1A, Cl. A1, 2.51%, 2/25/162 | | | 180,000 | | | | 179,678 | |
Santander Drive Auto Receivables Trust 2010-2, Automobile Receivables Nts., Series 2010-2, Cl. A2, 0.95%, 8/15/13 | | | 84,342 | | | | 84,339 | |
Santander Drive Auto Receivables Trust 2010-3, Automobile Receivables Nts., Series 2010-3, Cl. C, 3.06%, 11/15/17 | | | 235,000 | | | | 235,014 | |
Santander Drive Auto Receivables Trust 2010-A, Automobile Receivables Nts., Series 2010-A, Cl. A2, 1.37%, 8/15/132 | | | 113,838 | | | | 113,937 | |
Santander Drive Auto Receivables Trust 2011-1, Automobile Receivables Nts., Series 2011-1, Cl. D, 4.01%, 2/15/17 | | | 245,000 | | | | 244,501 | |
Santander Drive Auto Receivables Trust 2011-S1A, Automobile Receivables Nts., Series 2011-S1A, Cl. D, 3.10%, 5/15/174 | | | 230,913 | | | | 228,892 | |
Santander Drive Auto Receivables Trust 2011-S2A, Automobile Receivables Nts., Series 2011-S2A, Cl. D, 3.35%, 6/15/172 | | | 177,527 | | | | 174,865 | |
Volkswagen Auto Lease Trust 2010-A, Automobile Receivable Nts., Series 2010-A, Cl. A3, 0.99%, 11/20/13 | | | 215,000 | | | | 215,349 | |
Westlake Automobile Receivables Trust 2011-1, Automobile Receivables Nts., Series 2011-1, Cl. A3, 1.49%, 6/16/142 | | | 105,000 | | | | 104,898 | |
| | | | | | | |
Total Asset-Backed Securities (Cost $8,956,068) | | | | | | | 8,875,014 | |
| | | | | | | | |
Mortgage-Backed Obligations—28.2% | | | | | | | | |
Government Agency—23.0% | | | | | | | | |
FHLMC/FNMA/FHLB/Sponsored—22.6% | | | | | | | | |
Federal Home Loan Mortgage Corp.: | | | | | | | | |
4.50%, 1/1/425 | | | 1,595,000 | | | | 1,690,451 | |
5.50%, 9/1/39 | | | 1,038,003 | | | | 1,128,541 | |
7%, 10/1/37 | | | 756,180 | | | | 862,947 | |
Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates: | | | | | | | | |
Series 2006-11, Cl. PS, 23.49%, 3/25/363 | | | 208,974 | | | | 291,823 | |
Series 2426, Cl. BG, 6%, 3/15/17 | | | 292,502 | | | | 313,107 | |
Series 2427, Cl. ZM, 6.50%, 3/15/32 | | | 355,826 | | | | 409,262 | |
Series 2626, Cl. TB, 5%, 6/1/33 | | | 495,738 | | | | 547,873 | |
Series 2663, Cl. BA, 4%, 8/1/16 | | | 79,583 | | | | 79,761 | |
Series 2686, Cl. CD, 4.50%, 2/1/17 | | | 3,816 | | | | 3,815 | |
Series 3019, Cl. MD, 4.75%, 1/1/31 | | | 88,424 | | | | 88,878 | |
Series 3025, Cl. SJ, 23.73%, 8/15/353 | | | 60,634 | | | | 86,707 | |
Series 3094, Cl. HS, 23.363%, 6/15/343 | | | 120,743 | | | | 163,480 | |
Series 3242, Cl. QA, 5.50%, 3/1/30 | | | 41,838 | | | | 42,019 | |
Series 3822, Cl. JA, 5%, 6/1/40 | | | 398,780 | | | | 431,858 | |
Series 3848, Cl. WL, 4%, 4/1/40 | | | 288,558 | | | | 305,005 | |
Series R001, Cl. AE, 4.375%, 4/1/15 | | | 3,759 | | | | 3,758 | |
Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security: | | | | | | | | |
Series 183, Cl. IO, 15.233%, 4/1/276 | | | 143,551 | | | | 23,425 | |
Series 192, Cl. IO, 13.427%, 2/1/286 | | | 41,272 | | | | 7,891 | |
Series 2130, Cl. SC, 50.18%, 3/15/296 | | | 116,974 | | | | 23,846 | |
Series 243, Cl. 6, 0.377%, 12/15/326 | | | 138,077 | | | | 25,081 | |
Series 2527, Cl. SG, 10.403%, 2/15/326 | | | 12,469 | | | | 133 | |
Series 2531, Cl. ST, 58.412%, 2/15/306 | | | 368,946 | | | | 11,344 | |
Series 2796, Cl. SD, 61.829%, 7/15/266 | | | 169,644 | | | | 33,314 | |
Series 2802, Cl. AS, 60.97%, 4/15/336 | | | 118,293 | | | | 8,478 | |
Series 2920, Cl. S, 63.683%, 1/15/356 | | | 932,789 | | | | 158,091 | |
Series 3110, Cl. SL, 99.999%, 2/15/266 | | | 123,887 | | | | 15,878 | |
Series 3451, Cl. SB, 20.751%, 5/15/386 | | | 725,978 | | | | 86,535 | |
Federal Home Loan Mortgage Corp., Principal-Only Stripped Mtg.-Backed Security, Series 176, Cl. PO, 3.812%, 6/1/267 | | | 41,694 | | | | 38,195 | |
Federal National Mortgage Assn.: | | | | | | | | |
3.50%, 1/1/275 | | | 2,500,000 | | | | 2,614,844 | |
4%, 1/1/425 | | | 4,285,000 | | | | 4,502,598 | |
4.50%, 1/1/27-1/1/425 | | | 7,687,000 | | | | 8,185,248 | |
5%, 1/1/425 | | | 5,657,000 | | | | 6,112,213 | |
5.50%, 9/25/20 | | | 9,370 | | | | 10,265 | |
10 | OPPENHEIMER BALANCED FUND/VA
| | | | | | | | |
| | Principal | | | |
| | Amount | | | Value | |
|
FHLMC/FNMA/FHLB/Sponsored Continued | | | | | | | | |
Federal National Mortgage Assn.: Continued | | | | | | | | |
5.50%, 1/1/27-1/1/425 | | $ | 2,644,000 | | | $ | 2,878,069 | |
6%, 3/1/37 | | | 644,704 | | | | 711,313 | |
6%, 1/1/425 | | | 2,025,000 | | | | 2,230,032 | |
6.50%, 1/1/425 | | | 680,000 | | | | 756,713 | |
7%, 11/1/17 | | | 119,583 | | | | 127,915 | |
7.50%, 1/1/33 | | | 176,098 | | | | 209,822 | |
8.50%, 7/1/32 | | | 5,673 | | | | 6,937 | |
Federal National Mortgage Assn., 15 yr.: | | | | | | | | |
3%, 1/1/275 | | | 4,630,000 | | | | 4,782,645 | |
4%, 1/1/275 | | | 235,000 | | | | 247,888 | |
Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates: | | | | | | | | |
Trust 1998-61, Cl. PL, 6%, 11/25/28 | | | 121,285 | | | | 136,532 | |
Trust 2004-101, Cl. BG, 5%, 1/25/20 | | | 721,364 | | | | 772,696 | |
Trust 2004-9, Cl. AB, 4%, 7/1/17 | | | 87,826 | | | | 88,598 | |
Trust 2005-104, Cl. MC, 5.50%, 12/25/25 | | | 700,000 | | | | 776,851 | |
Trust 2005-12, Cl. JC, 5%, 6/1/28 | | | 61,136 | | | | 61,308 | |
Trust 2005-22, Cl. EC, 5%, 10/1/28 | | | 26,639 | | | | 26,690 | |
Trust 2005-30, Cl. CU, 5%, 4/1/29 | | | 42,270 | | | | 42,506 | |
Trust 2005-69, Cl. LE, 5.50%, 11/1/33 | | | 266,714 | | | | 278,672 | |
Trust 2006-46, Cl. SW, 23.123%, 6/25/363 | | | 151,290 | | | | 211,240 | |
Trust 2007-42, Cl. A, 6%, 2/1/33 | | | 349,324 | | | | 366,115 | |
Trust 2009-36, Cl. FA, 1.234%, 6/25/373 | | | 358,304 | | | | 362,778 | |
Trust 2009-37, Cl. HA, 4%, 4/1/19 | | | 433,702 | | | | 457,191 | |
Trust 2009-70, Cl. PA, 5%, 8/1/35 | | | 530,387 | | | | 545,953 | |
Trust 2011-15, Cl. DA, 4%, 3/1/41 | | | 190,903 | | | | 202,069 | |
Trust 2011-3, Cl. KA, 5%, 4/1/40 | | | 278,638 | | | | 301,981 | |
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: | | | | | | | | |
Trust 2001-65, Cl. S, 36.887%, 11/25/316 | | | 328,819 | | | | 59,590 | |
Trust 2001-81, Cl. S, 31.648%, 1/25/326 | | | 77,633 | | | | 15,352 | |
Trust 2002-47, Cl. NS, 34.45%, 4/25/326 | | | 185,860 | | | | 35,476 | |
Trust 2002-51, Cl. S, 34.703%, 8/25/326 | | | 170,663 | | | | 32,581 | |
Trust 2002-52, Cl. SD, 41.209%, 9/25/326 | | | 214,578 | | | | 42,915 | |
Trust 2002-77, Cl. SH, 41.713%, 12/18/326 | | | 113,096 | | | | 22,106 | |
Trust 2002-84, Cl. SA, 40.239%, 12/25/326 | | | 304,774 | | | | 52,674 | |
Trust 2002-9, Cl. MS, 33.177%, 3/25/326 | | | 121,884 | | | | 23,634 | |
Trust 2003-33, Cl. SP, 40.163%, 5/25/336 | | | 350,732 | | | | 57,225 | |
Trust 2003-4, Cl. S, 36.497%, 2/25/336 | | | 194,987 | | | | 34,270 | |
Trust 2003-46, Cl. IH, 16.403%, 6/1/236 | | | 1,063,523 | | | | 132,960 | |
Trust 2003-89, Cl. XS, 40.943%, 11/25/326 | | | 87,834 | | | | 4,413 | |
Trust 2004-54, Cl. DS, 51.305%, 11/25/306 | | | 182,972 | | | | 34,373 | |
Trust 2005-14, Cl. SE, 41.53%, 3/25/356 | | | 134,956 | | | | 19,579 | |
Trust 2005-40, Cl. SA, 60.391%, 5/25/356 | | | 505,274 | | | | 89,975 | |
Trust 2005-71, Cl. SA, 61.101%, 8/25/256 | | | 515,615 | | | | 72,292 | |
Trust 2005-93, Cl. SI, 18.704%, 10/25/356 | | | 96,809 | | | | 14,289 | |
Trust 2006-129, Cl. SM, 28.813%, 1/25/376 | | | 604,763 | | | | 86,646 | |
Trust 2006-60, Cl. DI, 38.798%, 4/25/356 | | | 81,947 | | | | 11,823 | |
Trust 2007-88, Cl. XI, 35.148%, 6/25/376 | | | 550,091 | | | | 78,478 | |
Trust 2008-55, Cl. SA, 25.574%, 7/25/386 | | | 381,957 | | | | 42,398 | |
Trust 2008-67, Cl. KS, 48.433%, 8/25/346 | | | 199,750 | | | | 14,558 | |
Trust 222, Cl. 2, 24.79%, 6/1/236 | | | 315,791 | | | | 59,435 | |
Trust 233, Cl. 2, 43.257%, 8/1/236 | | | 307,466 | | | | 59,505 | |
Trust 252, Cl. 2, 36.731%, 11/1/236 | | | 263,105 | | | | 48,348 | |
Trust 319, Cl. 2, 6.059%, 2/1/326 | | | 81,417 | | | | 14,738 | |
Trust 331, Cl. 9, 13.163%, 2/1/336 | | | 255,461 | | | | 50,232 | |
Trust 334, Cl. 17, 20.772%, 2/1/336 | | | 148,926 | | | | 32,853 | |
Trust 339, Cl. 12, 2.509%, 7/1/336 | | | 249,514 | | | | 47,615 | |
Trust 339, Cl. 7, 6.752%, 7/1/336 | | | 836,751 | | | | 119,298 | |
Trust 343, Cl. 13, 10.17%, 9/1/336 | | | 239,504 | | | | 44,553 | |
Trust 345, Cl. 9, 0%, 1/1/346,8 | | | 310,390 | | | | 40,167 | |
Trust 351, Cl. 10, 0.79%, 4/1/346 | | | 35,430 | | | | 5,170 | |
Trust 351, Cl. 8, 1.45%, 4/1/346 | | | 111,218 | | | | 16,394 | |
Trust 356, Cl. 10, 1.267%, 6/1/356 | | | 87,783 | | | | 12,792 | |
Trust 356, Cl. 12, 1.968%, 2/1/356 | | | 46,186 | | | | 6,733 | |
Trust 362, Cl. 13, 3.439%, 8/1/356 | | | 337,362 | | | | 54,105 | |
Trust 364, Cl. 16, 0.174%, 9/1/356 | | | 242,082 | | | | 40,407 | |
Federal National Mortgage Assn., Principal-Only Stripped Mtg.-Backed Security, Trust 1993-184, Cl. M, 4.309%, 9/25/237 | | | 117,021 | | | | 105,902 | |
| | | | | | | |
| | | | | | | 46,625,032 | |
| | | | | | | | |
GNMA/Guaranteed—0.2% | | | | | | | | |
Government National Mortgage Assn., 8%, 4/15/23 | | | 50,341 | | | | 59,309 | |
Government National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: | | | | | | | | |
Series 2001-21, Cl. SB, 91.36%, 1/16/276 | | | 211,360 | | | | 41,625 | |
Series 2002-15, Cl. SM, 82.507%, 2/16/326 | | | 246,720 | | | | 45,794 | |
Series 2002-76, Cl. SY, 83.178%, 12/16/266 | | | 540,644 | | | | 109,381 | |
Series 2004-11, Cl. SM, 80.843%, 1/17/306 | | | 197,888 | | | | 45,101 | |
Series 2007-17, Cl. AI, 21.004%, 4/16/376 | | | 475,917 | | | | 89,263 | |
| | | | | | | |
| | | | | | | 390,473 | |
| | | | | | | | |
Other Agency—0.2% | | | | | | | | |
NCUA Guaranteed Notes Trust 2010-R3, Gtd. Nts., Series 2010-R3, Cl. 2A, 0.834%, 12/8/203 | | | 347,813 | | | | 349,225 | |
| | | | | | | | |
Non-Agency—5.2% | | | | | | | | |
Commercial—3.7% | | | | | | | | |
Banc of America Commercial Mortgage Trust 2007-1, Commercial Mtg. Pass-Through Certificates, Series 2007-1, Cl. A4, 5.451%, 1/1/49 | | | 355,000 | | | | 387,161 | |
Banc of America Commercial Mortgage, Inc., Commercial Mtg. Pass-Through Certificates, Series 2007-3, Cl. A4, 5.622%, 6/1/493 | | | 180,000 | | | | 193,776 | |
11 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | |
| | Amount | | | Value | |
|
Commercial Continued | | | | | | | | |
Bear Stearns ARM Trust 2007-4, Mtg. Pass-Through Certificates, Series 2007-4, Cl. 22A1, 5.669%, 6/1/473 | | $ | 244,346 | | | $ | 170,875 | |
CFCRE Commercial Mortgage Trust, Commercial Mtg. Pass-Through Certificates, Series 2011-C1, Cl. A1, 1.871%, 4/1/442 | | | 67,207 | | | | 67,053 | |
CHL Mortgage Pass-Through Trust 2007-J3, Mtg. Pass-Through Certificates, Series 2007-J3, Cl. A9, 6%, 7/1/37 | | | 51,542 | | | | 40,788 | |
Citigroup Commercial Mortgage Trust 2008-C7, Commercial Mtg. Pass-Through Certificates, Series 2008-C7, Cl. A4, 6.072%, 12/1/493 | | | 300,000 | | | | 334,582 | |
Citigroup, Inc./Deutsche Bank 2007-CD4 Commercial Mortgage Trust, Commercial Mtg. Pass-Through Certificates, Series 2007-CD4, Cl. A4, 5.322%, 12/1/49 | | | 290,000 | | | | 308,768 | |
Deutsche Alt-B Securities, Inc., Mtg. Pass-Through Certificates, Series 2006-AB4, Cl. A1A, 6.005%, 10/25/36 | | | 238,868 | | | | 130,853 | |
Deutsche Mortgage & Asset Receiving, Commercial Mtg. Pass-Through Certificates, Series 2010-C1, Cl. A1, 3.156%, 7/1/462 | | | 278,414 | | | | 286,650 | |
Deutsche Mortgage & Asset Receiving, Commercial Mtg. Pass-Through Certificates, Interest-Only Stripped Mtg.-Backed Security, Series 2010-C1, Cl. XPA, 4.859%, 9/1/202,6 | | | 2,197,256 | | | | 165,137 | |
First Horizon Alternative Mortgage Securities Trust 2004-FA2, Mtg. Pass-Through Certificates, Series 2004-FA2, Cl. 3A1, 6%, 1/25/35 | | | 249,510 | | | | 243,426 | |
First Horizon Alternative Mortgage Securities Trust 2007-FA2, Mtg. Pass-Through Certificates, Series 2007-FA2, Cl. 1A1, 5.50%, 4/25/37 | | | 449,147 | | | | 294,661 | |
Greenwich Capital Commercial Funding Corp./Commercial Mortgage Trust 2007-GG11, Commercial Mtg. Pass-Through Certificates, Series 2007-GG11, Cl. A4, 5.736%, 12/1/49 | | | 70,000 | | | | 75,829 | |
Greenwich Capital Commercial Funding Corp./Commercial Mortgage Trust 2007-GG9, Commercial Mtg. Pass-Through Certificates, Series 2007-GG9, Cl. AM, 5.475%, 3/1/39 | | | 235,000 | | | | 221,593 | |
GS Mortgage Securities Corp. II, Commercial Mtg. Obligations, Series 2011-GC3, Cl. A1, 2.331%, 3/1/44 | | | 182,343 | | | | 186,451 | |
Impac CMB Trust Series 2005-4, Collateralized Asset-Backed Bonds, Series 2005-4, Cl. 1A1A, 0.834%, 5/25/353 | | | 148,829 | | | | 101,340 | |
IndyMac Index Mortgage Loan Trust 2005-AR23, Mtg. Pass-Through Certificates, Series 2005-AR23, Cl. 6A1, 5.11%, 11/1/353 | | | 315,769 | | | | 215,229 | |
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial Mtg. Pass-Through Certificates: | | | | | | | | |
Series 2011-C3, Cl. A1, 1.875%, 2/1/462 | | | 209,174 | | | | 210,091 | |
Series 2010-C2, Cl. A2, 3.616%, 11/1/432 | | | 340,000 | | | | 353,925 | |
Series 2007-LDPX, Cl. A2S2, 5.187%, 1/1/494 | | | 127,552 | | | | 128,776 | |
Series 2007-LDP10, Cl. A3S, 5.317%, 1/1/49 | | | 355,000 | | | | 366,823 | |
Series 2007-LDPX, Cl. A3, 5.42%, 1/15/49 | | | 40,000 | | | | 43,409 | |
Series 2007-LD11, Cl. A2, 5.802%, 6/15/493 | | | 268,798 | | | | 271,887 | |
JPMorgan Mortgage Trust 2007-S3, Mtg. Pass-Through Certificates, Series 2007-S3, Cl. 1A90, 7%, 8/1/37 | | | 332,593 | | | | 279,692 | |
LB-UBS Commercial Mortgage Trust 2007-C1, Commercial Mtg. Pass-Through Certificates, Series 2007-C1, Cl. A2, 5.318%, 2/11/40 | | | 107,611 | | | | 107,690 | |
LB-UBS Commercial Mortgage Trust 2007-C6, Commercial Mtg. Pass-Through Certificates, Series 2007-C6, Cl. A4, 5.858%, 7/11/40 | | | 415,000 | | | | 456,450 | |
Mastr Adjustable Rate Mortgages Trust 2004-13, Mtg. Pass-Through Certificates, Series 2004-13, Cl. 2A2, 2.664%, 4/1/343 | | | 198,378 | | | | 191,352 | |
Mastr Alternative Loan Trust 2004-6, Mtg. Pass-Through Certificates, Series 2004-6, Cl. 10A1, 6%, 7/25/34 | | | 470,261 | | | | 482,720 | |
Morgan Stanley Capital I Trust 2007-IQ15, Commercial Mtg. Pass-Through Certificates, Series 2007-IQ15, Cl. AM, 5.879%, 6/1/493 | | | 230,000 | | | | 217,466 | |
Structured Adjustable Rate Mortgage Loan Trust, Mtg. Pass-Through Certificates, Series 2007-6, Cl. 3A1, 5.118%, 7/1/373 | | | 304,680 | | | | 183,410 | |
Wachovia Bank Commercial Mortgage Trust 2007-C34, Commercial Mtg. Pass-Through Certificates, Series 2007-C34, Cl. A3, 5.678%, 5/1/46 | | | 260,000 | | | | 286,373 | |
12 | OPPENHEIMER BALANCED FUND/VA
| | | | | | | | |
| | Principal | | | |
| | Amount | | | Value | |
|
Commercial Continued | | | | | | | | |
WaMu Mortgage Pass-Through Certificates 2005-AR14 Trust, Mtg. Pass-Through Certificates, Series 2005-AR14, Cl. 1A4, 2.474%, 12/1/353 | | $ | 153,943 | | | $ | 119,433 | |
Wells Fargo Commercial Mortgage Trust 2010-C1, Commercial Mtg. Pass-Through Certificates, Series 2010-C1, Cl. A1, 3.349%, 11/1/432 | | | 176,891 | | | | 183,613 | |
Wells Fargo Mortgage-Backed Securities 2007-AR8 Trust, Mtg. Pass-Through Certificates, Series 2007-AR8, Cl. A1, 6.042%, 11/1/373 | | | 213,735 | | | | 155,757 | |
WFRBS Commercial Mortgage Trust 2011-C3, Interest-Only Commercial Mtg. Pass-Through Certificates, Series 2011-C3, Cl. XA, 7.82%, 3/1/446 | | | 2,833,135 | | | | 251,663 | |
| | | | | | | |
| | | | | | | 7,714,702 | |
| | | | | | | | |
Multifamily—0.3% | | | | | | | | |
Citigroup Mortgage Loan Trust, Inc. 2006-AR3, Mtg. Pass-Through Certificates, Series 2006-AR3, Cl. 1A2A, 5.672%, 6/1/363 | | | 203,226 | | | | 165,839 | |
JPMorgan Mortgage Trust 2007-A3, Mtg. Pass-Through Certificates, Series 2007-A3, Cl. 3A2M, 5.259%, 5/1/373 | | | 42,477 | | | | 34,372 | |
Wells Fargo Mortgage-Backed Securities 2006-AR6 Trust, Mtg. Pass-Through Certificates, Series 2006-AR6, Cl. 3A1, 2.689%, 3/25/363 | | | 521,619 | | | | 417,110 | |
| | | | | | | |
| | | | | | | 617,321 | |
| | | | | | | | |
Other—0.2% | | | | | | | | |
Greenwich Capital Commercial Funding Corp./Commercial Mortgage Trust 2007-GG9, Commercial Mtg. Pass-Through Certificates, Series 2007-GG9, Cl. A4, 5.444%, 3/1/39 | | | 320,000 | | | | 347,679 | |
Residential—1.0% | | | | | | | | |
Banc of America Funding 2007-C Trust, Mtg. Pass-Through Certificates, Series 2007-C, Cl. 1A4, 5.544%, 5/1/363 | | | 80,000 | | | | 70,893 | |
Banc of America Mortgage Securities, Inc., Mtg. Pass-Through Certificates, Series 2004-E, Cl. 2A6, 2.866%, 6/1/343 | | | 128,623 | | | | 113,717 | |
CHL Mortgage Pass-Through Trust 2005-29, Mtg. Pass-Through Certificates, Series 2005-29, Cl. A1, 5.75%, 12/1/35 | | | 62,243 | | | | 52,213 | |
CHL Mortgage Pass-Through Trust 2006-6, Mtg. Pass-Through Certificates, Series 2006-6, Cl. A3, 6%, 4/1/36 | | | 169,268 | | | | 161,050 | |
Countrywide Alternative Loan Trust 2005-29CB, Mtg. Pass-Through Certificates, Series 2005-29CB, Cl. A4, 5%, 7/1/35 | | | 688,524 | | | | 540,622 | |
Countrywide Alternative Loan Trust 2007-19, Mtg. Pass-Through Certificates, Series 2007-19, Cl. 1A34, 6%, 8/1/37 | | | 195,456 | | | | 136,115 | |
GSR Mortgage Loan Trust 2006-5F, Mtg. Pass-Through Certificates, Series 2006-5F, Cl. 2A1, 6%, 6/1/36 | | | 169,436 | | | | 164,920 | |
JPMorgan Alternative Loan Trust 2006-S4, Mtg. Pass-Through Certificates, Series 2006-S4, Cl. A6, 5.71%, 12/1/36 | | | 119,999 | | | | 103,140 | |
RALI Series 2003-QS1 Trust, Mtg. Asset-Backed Pass-Through Certificates, Series 2003-QS1, Cl. A2, 5.75%, 1/25/33 | | | 116,801 | | | | 121,208 | |
RALI Series 2006-QS13 Trust, Mtg. Asset-Backed Pass-Through Certificates, Series 2006-QS13, Cl. 1A8, 6%, 9/25/36 | | | 24,192 | | | | 13,734 | |
Residential Asset Securitization Trust 2005-A15, Mtg. Pass-Through Certificates, Series 2005-A15, Cl. 1A4, 5.75%, 2/1/36 | | | 39,406 | | | | 30,547 | |
WaMu Mortgage Pass-Through Certificates 2007-HY5 Trust, Mtg. Pass-Through Certificates, Series 2007-HY5, Cl. 3A1, 5.467%, 5/1/373 | | | 204,503 | | | | 170,770 | |
Wells Fargo Alternative Loan 2007-PA5 Trust, Mtg. Asset-Backed Pass-Through Certificates, Series 2007-PA5, Cl. 1A1, 6.25%, 11/1/37 | | | 174,937 | | | | 136,051 | |
Wells Fargo Mortgage-Backed Securities 2004-R Trust, Mtg. Pass-Through Certificates, Series 2004-R, Cl. 2A1, 2.625%, 9/1/343 | | | 85,387 | | | | 81,395 | |
Wells Fargo Mortgage-Backed Securities 2006-AR14 Trust, Mtg. Pass-Through Certificates, Series 2006-AR14, Cl. 1A2, 5.667%, 10/1/363 | | | 198,909 | | | | 167,167 | |
| | | | | | | |
| | | | | | | 2,063,542 | |
| | | | | | | |
Total Mortgage-Backed Obligations (Cost $56,907,510) | | | | | | | 58,107,974 | |
13 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | |
| | Amount | | | Value | |
|
U.S. Government Obligations—0.6% | | | | | | | | |
Federal Home Loan Mortgage Corp. Nts.: | | | | | | | | |
2%, 8/25/16 | | $ | 65,000 | | | $ | 67,696 | |
2.50%, 5/27/16 | | | 100,000 | | | | 106,063 | |
5%, 2/16/17 | | | 115,000 | | | | 135,958 | |
5.25%, 4/18/16 | | | 195,000 | | | | 230,030 | |
5.50%, 7/18/16 | | | 110,000 | | | | 131,364 | |
Federal National Mortgage Assn. Nts.: | | | | | | | | |
2.375%, 4/11/169 | | | 190,000 | | | | 201,032 | |
4.875%, 12/15/16 | | | 160,000 | | | | 188,755 | |
5%, 3/15/169 | | | 120,000 | | | | 140,028 | |
| | | | | | | |
Total U.S. Government Obligations (Cost $1,127,545) | | | | | | | 1,200,926 | |
| | | | | | | | |
Non-Convertible Corporate Bonds and Notes—18.3% | | | | | | | | |
Consumer Discretionary—3.0% | | | | | | | | |
Automobiles—0.3% | | | | | | | | |
Daimler Finance North America LLC, 1.875% Sr. Unsec. Nts., 9/15/142 | | | 153,000 | | | | 152,291 | |
DaimlerChrysler NA Holdings Corp., 8.50% Nts., 1/18/31 | | | 88,000 | | | | 123,203 | |
Ford Motor Credit Co. LLC, 5.875% Sr. Unsec. Nts., 8/2/21 | | | 236,000 | | | | 246,321 | |
| | | | | | | |
| | | | | | | 521,815 | |
| | | | | | | | |
Diversified Consumer Services—0.1% | | | | | | | | |
Service Corp. International, 6.75% Sr. Unsec. Nts., 4/1/15 | | | 230,000 | | | | 248,400 | |
Hotels, Restaurants & Leisure—0.3% | | | | | | | | |
Hyatt Hotels Corp., 5.75% Sr. Unsec. Unsub. Nts., 8/15/152 | | | 349,000 | | | | 374,101 | |
Marriott International, Inc., 6.20% Sr. Unsec. Unsub. Nts., 6/15/16 | | | 255,000 | | | | 286,944 | |
| | | | | | | |
| | | | | | | 661,045 | |
| | | | | | | | |
Household Durables—0.3% | | | | | | | | |
Jarden Corp., 6.125% Sr. Unsec. Nts., 11/15/22 | | | 201,000 | | | | 206,528 | |
Newell Rubbermaid, Inc., 5.50% Sr. Unsec. Nts., 4/15/13 | | | 223,000 | | | | 233,922 | |
Whirlpool Corp.: | | | | | | | | |
5.50% Sr. Unsec. Unsub. Nts., 3/1/13 | | | 90,000 | | | | 93,567 | |
8% Sr. Unsec. Nts., 5/1/12 | | | 180,000 | | | | 184,037 | |
| | | | | | | |
| | | | | | | 718,054 | |
| | | | | | | | |
Leisure Equipment & Products—0.1% | | | | | | | | |
Mattel, Inc., 5.625% Sr. Unsec. Nts., 3/15/13 | | | 215,000 | | | | 225,985 | |
| | | | | | | | |
Media—1.3% | | | | | | | | |
Comcast Cable Communications Holdings, Inc., 9.455% Sr. Unsec. Nts., 11/15/22 | | | 138,000 | | | | 196,932 | |
Comcast Corp., 6.40% Sr. Unsec. Nts., 3/1/40 | | | 52,000 | | | | 64,752 | |
CSC Holdings, Inc., 7.625% Sr. Unsec. Debs., 7/15/18 | | | 188,000 | | | | 207,740 | |
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc., 6.375% Sr. Unsec. Nts., 3/1/41 | | | 182,000 | | | | 210,208 | |
Dish DBS Corp., 6.75% Sr. Unsec. Nts., 6/1/21 | | | 201,000 | | | | 217,583 | |
Historic TW, Inc., 9.125% Debs., 1/15/13 | | | 78,000 | | | | 84,128 | |
Interpublic Group of Cos., Inc. (The): | | | | | | | | |
6.25% Sr. Unsec. Nts., 11/15/14 | | | 80,000 | | | | 85,400 | |
10% Sr. Unsec. Nts., 7/15/17 | | | 264,000 | | | | 302,940 | |
Lamar Media Corp., 9.75% Sr. Unsec. Nts., 4/1/14 | | | 218,000 | | | | 245,250 | |
News America, Inc., 6.15% Sr. Unsec. Nts., 2/15/41 | | | 130,000 | | | | 150,098 | |
Time Warner Entertainment Co. LP, 8.375% Sr. Nts., 7/15/33 | | | 122,000 | | | | 160,126 | |
Time Warner, Inc., 4% Sr. Unsec. Unsub. Nts., 1/15/22 | | | 203,000 | | | | 209,734 | |
Virgin Media Secured Finance plc: | | | | | | | | |
5.25% Sr. Sec. Nts., 1/15/21 | | | 132,000 | | | | 140,053 | |
6.50% Sr. Sec. Nts., 1/15/18 | | | 282,000 | | | | 301,035 | |
| | | | | | | |
| | | | | | | 2,575,979 | |
| | | | | | | | |
Multiline Retail—0.3% | | | | | | | | |
Family Dollar Stores, Inc., 5% Sr. Unsec. Nts., 2/1/21 | | | 127,000 | | | | 130,891 | |
Macy’s Retail Holdings, Inc., 5.75% Sr. Unsec. Nts., 7/15/14 | | | 336,000 | | | | 357,659 | |
Target Corp., 7% Bonds, 1/15/38 | | | 46,000 | | | | 64,408 | |
| | | | | | | |
| | | | | | | 552,958 | |
| | | | | | | | |
Specialty Retail—0.3% | | | | | | | | |
Limited Brands, Inc., 6.625% Sr. Nts., 4/1/21 | | | 198,000 | | | | 210,870 | |
Rent-A-Center, Inc., 6.625% Sr. Unsec. Nts., 11/15/20 | | | 240,000 | | | | 243,000 | |
Sally Holdings LLC/Sally Capital, Inc., 6.875% Sr. Unsec. Nts., 11/15/192 | | | 214,000 | | | | 224,700 | |
| | | | | | | |
| | | | | | | 678,570 | |
14 | OPPENHEIMER BALANCED FUND/VA
| | | | | | | | |
| | Principal | | | |
| | Amount | | | Value | |
|
Consumer Staples—1.2% | | | | | | | | |
Beverages—0.2% | | | | | | | | |
Anheuser-Busch Inbev Worldwide, Inc., 7.75% Sr. Unsec. Unsub. Nts., 1/15/19 | | $ | 111,000 | | | $ | 143,926 | |
Fortune Brands, Inc., 6.375% Sr. Unsec. Unsub. Nts., 6/15/14 | | | 55,000 | | | | 60,185 | |
Pernod-Ricard SA, 4.45% Sr. Unsec. Nts., 1/15/222 | | | 211,000 | | | | 221,399 | |
| | | | | | | |
| | | | | | | 425,510 | |
| | | | | | | | |
Food & Staples Retailing—0.2% | | | | | | | | |
CVS Caremark Corp., 6.125% Sr. Unsec. Unsub. Nts., 9/15/39 | | | 80,000 | | | | 97,521 | |
Delhaize Group, 5.70% Sr. Unsec. Nts., 10/1/40 | | | 63,000 | | | | 64,785 | |
Kroger Co. (The), 5% Sr. Nts., 4/15/13 | | | 199,000 | | | | 208,270 | |
| | | | | | | |
| | | | | | | 370,576 | |
| | | | | | | | |
Food Products—0.4% | | | | | | | | |
Bunge Ltd. Finance Corp.: | | | | | | | | |
5.35% Sr. Unsec. Unsub. Nts., 4/15/14 | | | 29,000 | | | | 30,436 | |
8.50% Sr. Unsec. Nts., 6/15/19 | | | 155,000 | | | | 188,888 | |
Kraft Foods, Inc.: | | | | | | | | |
6% Sr. Unsec. Nts., 2/11/13 | | | 207,000 | | | | 218,160 | |
6.50% Sr. Unsec. Unsub. Nts., 2/9/40 | | | 120,000 | | | | 156,388 | |
TreeHouse Foods, Inc., 7.75% Sr. Unsec. Nts., 3/1/18 | | | 240,000 | | | | 260,400 | |
| | | | | | | |
| | | | | | | 854,272 | |
| | | | | | | | |
Household Products—0.1% | | | | | | | | |
Energizer Holdings, Inc., 4.70% Sr. Nts., 5/19/212 | | | 233,000 | | | | 245,581 | |
Tobacco—0.3% | | | | | | | | |
Altria Group, Inc., 10.20% Sr. Unsec. Nts., 2/6/39 | | | 177,000 | | | | 275,834 | |
Lorillard Tobacco Co., 7% Sr. Unsec. Nts., 8/4/41 | | | 149,000 | | | | 156,856 | |
Reynolds American, Inc., 7.25% Sr. Sec. Nts., 6/1/13 | | | 214,000 | | | | 229,619 | |
| | | | | | | |
| | | | | | | 662,309 | |
| | | | | | | | |
Energy—2.5% | | | | | | | | |
Energy Equipment & Services—0.6% | | | | | | | | |
Ensco plc, 4.70% Sr. Unsec. Nts., 3/15/21 | | | 235,000 | | | | 245,096 | |
Nabors Industries, Inc., 6.15% Sr. Unsec. Unsub. Nts., 2/15/18 | | | 286,000 | | | | 319,817 | |
Precision Drilling Corp.: | | | | | | | | |
6.50% Sr. Unsec. Nts., 12/15/212 | | | 102,000 | | | | 104,550 | |
6.625% Sr. Unsec. Nts., 11/15/20 | | | 97,000 | | | | 99,668 | |
Rowan Cos., Inc., 5% Sr. Unsec. Nts., 9/1/17 | | | 244,000 | | | | 256,764 | |
Weatherford International Ltd. Bermuda, 5.125% Sr. Unsec. Unsub. Nts., 9/15/20 | | | 242,000 | | | | 251,833 | |
| | | | | | | |
| | | | | | | 1,277,728 | |
| | | | | | | | |
Oil, Gas & Consumable Fuels—1.9% | | | | | | | | |
Anadarko Petroleum Corp., 6.20% Sr. Unsec. Nts., 3/15/40 | | | 145,000 | | | | 161,640 | |
BG Energy Capital plc, 4% Sr. Unsec. Nts., 10/15/212 | | | 152,000 | | | | 156,930 | |
Bill Barrett Corp., 7.625% Sr. Unsec. Unsub. Nts., 10/1/19 | | | 199,000 | | | | 208,950 | |
Canadian Oil Sands Ltd., 5.80% Sr. Unsec. Nts., 8/15/132 | | | 213,000 | | | | 226,074 | |
Cloud Peak Energy Resources LLC, 8.25% Sr. Unsec. Unsub. Nts., 12/15/17 | | | 215,000 | | | | 230,050 | |
El Paso Pipeline Partners LP, 6.50% Sr. Unsec. Nts., 4/1/20 | | | 330,000 | | | | 365,234 | |
Encana Corp., 3.90% Sr. Unsec. Unsub. Nts., 11/15/21 | | | 79,000 | | | | 79,493 | |
Energy Transfer Partners LP, 4.65% Sr. Unsec. Unsub. Nts., 6/1/21 | | | 172,000 | | | | 168,744 | |
EQT Corp., 4.875% Sr. Unsec. Unsub. Nts., 11/15/21 | | | 130,000 | | | | 131,432 | |
Kaneb Pipe Line Operating Partnership LP, 5.875% Sr. Unsec. Nts., 6/1/13 | | | 383,000 | | | | 403,854 | |
Marathon Petroleum Corp., 5.125% Sr. Unsec. Unsub. Nts., 3/1/21 | | | 110,000 | | | | 115,082 | |
Newfield Exploration Co., 6.875% Sr. Unsec. Sub. Nts., 2/1/20 | | | 195,000 | | | | 209,625 | |
Nexen, Inc., 6.40% Sr. Unsec. Unsub. Bonds, 5/15/37 | | | 245,000 | | | | 259,918 | |
Range Resources Corp., 8% Sr. Unsec. Sub. Nts., 5/15/19 | | | 212,000 | | | | 237,440 | |
Ras Laffan Liquefied Natural Gas Co. Ltd. III, 5.50% Sr. Sec. Nts., 9/30/142 | | | 140,000 | | | | 150,500 | |
Rockies Express Pipeline LLC, 3.90% Sr. Unsec. Unsub. Nts., 4/15/152 | | | 393,000 | | | | 388,715 | |
Sunoco Logistics Partners Operations LP, 7.25% Sr. Unsec. Nts., 2/15/12 | | | 214,000 | | | | 215,395 | |
Woodside Finance Ltd., 4.60% Sr. Unsec. Nts., 5/10/212 | | | 165,000 | | | | 168,731 | |
| | | | | | | |
| | | | | | | 3,877,807 | |
15 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | |
| | Amount | | | Value | |
|
Financials—5.6% | | | | | | | | |
Capital Markets—1.3% | | | | | | | | |
Blackstone Holdings Finance Co. LLC, 6.625% Sr. Unsec. Nts., 8/15/192 | | $ | 405,000 | | | $ | 429,052 | |
Goldman Sachs Capital, Inc. (The), 6.345% Sub. Bonds, 2/15/34 | | | 232,000 | | | | 196,624 | |
Goldman Sachs Group, Inc. (The): | | | | | | | | |
5.25% Sr. Unsec. Nts., 7/27/21 | | | 326,000 | | | | 318,497 | |
6.25% Sr. Nts., 2/1/41 | | | 206,000 | | | | 202,412 | |
Macquarie Bank Ltd., 6.625% Unsec. Sub. Nts., 4/7/212 | | | 314,000 | | | | 289,883 | |
Morgan Stanley: | | | | | | | | |
5.50% Sr. Unsec. Unsub. Nts., 7/24/202 | | | 114,000 | | | | 103,789 | |
5.55% Sr. Unsec. Unsub. Nts., Series F, 4/27/17 | | | 595,000 | | | | 574,843 | |
Nomura Holdings, Inc., 4.125% Sr. Unsec. Unsub. Nts., 1/19/16 | | | 223,000 | | | | 217,861 | |
TD Ameritrade Holding Corp., 2.95% Sr. Unsec. Unsub. Nts., 12/1/12 | | | 237,000 | | | | 240,025 | |
UBS AG Stamford CT, 2.25% Sr. Unsec. Nts., 8/12/13 | | | 94,000 | | | | 93,210 | |
| | | | | | | |
| | | | | | | 2,666,196 | |
| | | | | | | | |
Commercial Banks—1.0% | | | | | | | | |
ANZ National International Ltd., 2.375% Sr. Unsec. Nts., 12/21/122 | | | 258,000 | | | | 262,526 | |
Fifth Third Cap Trust IV, 6.50% Jr. Unsec. Sub. Nts., 4/15/37 | | | 433,000 | | | | 426,505 | |
HSBC Finance Capital Trust IX, 5.911% Nts., 11/30/353 | | | 510,000 | | | | 425,850 | |
Lloyds TSB Bank plc, 6.50% Unsec. Sub. Nts., 9/14/202 | | | 174,000 | | | | 145,779 | |
Mercantile Bankshares Corp., 4.625% Unsec. Sub. Nts., Series B, 4/15/13 | | | 147,000 | | | | 153,246 | |
Sumitomo Mitsui Banking Corp., 8% Unsec. Sub. Nts., 6/15/12 | | | 227,000 | | | | 232,579 | |
Wells Fargo & Co., 7.98% Jr. Sub. Perpetual Bonds, Series K10 | | | 162,000 | | | | 174,353 | |
Zions Bancorp., 7.75% Sr. Unsec. Nts., 9/23/14 | | | 306,000 | | | | 324,687 | |
| | | | | | | |
| | | | | | | 2,145,525 | |
| | | | | | | | |
Consumer Finance—0.5% | | | | | | | | |
American Express Bank FSB, 5.50% Sr. Unsec. Nts., 4/16/13 | | | 223,000 | | | | 233,187 | |
American Express Credit Corp., 2.80% Sr. Unsec. Unsub. Nts., 9/19/16 | | | 209,000 | | | | 210,301 | |
Capital One Financial Corp., 4.75% Sr. Nts., 7/15/21 | | | 205,000 | | | | 211,291 | |
SLM Corp., 6.25% Sr. Nts., 1/25/16 | | | 312,000 | | | | 303,734 | |
| | | | | | | |
| | | | | | | 958,513 | |
| | | | | | | | |
Diversified Financial Services—0.9% | | | | | | | | |
Bank of America Corp., 3.75% Sr. Unsec. Unsub. Nts., 7/12/16 | | | 230,000 | | | | 213,222 | |
Citigroup, Inc., 6.125% Sr. Unsec. Unsub. Nts., 11/21/17 | | | 669,000 | | | | 715,037 | |
Glen Meadow Pass-Through Trust, 6.505% Bonds, 2/12/673,4 | | | 300,000 | | | | 213,750 | |
Irish Life & Permanent Group Holdings plc, 3.60% Sr. Unsec. Unsub. Nts., 1/14/132 | | | 120,000 | | | | 106,153 | |
JPMorgan Chase & Co.: | | | | | | | | |
5.40% Sr. Unsec. Nts., 1/6/42 | | | 60,000 | | | | 62,729 | |
7.90% Perpetual Bonds, Series 110 | | | 379,000 | | | | 404,879 | |
Merrill Lynch & Co., Inc., 7.75% Jr. Sub. Bonds, 5/14/38 | | | 193,000 | | | | 183,612 | |
| | | | | | | |
| | | | | | | 1,899,382 | |
| | | | | | | | |
Insurance—1.5% | | | | | | | | |
Burlington Northern Santa Fe LLC, 5.75% Sr. Unsec. Bonds, 5/1/40 | | | 60,000 | | | | 71,915 | |
CNA Financial Corp.: | | | | | | | | |
5.75% Sr. Unsec. Unsub. Nts., 8/15/21 | | | 197,000 | | | | 201,319 | |
5.875% Sr. Unsec. Unsub. Bonds, 8/15/20 | | | 114,000 | | | | 117,264 | |
Gulf South Pipeline Co. LP, 5.75% Sr. Unsec. Nts., 8/15/122 | | | 212,000 | | | | 216,706 | |
Hartford Financial Services Group, Inc. (The), 6.625% Sr. Unsec. Unsub. Nts., 3/30/40 | | | 139,000 | | | | 138,155 | |
International Lease Finance Corp., 5.75% Sr. Unsec. Unsub. Nts., 5/15/16 | | | 228,000 | | | | 211,718 | |
Liberty Mutual Group, Inc., 5% Sr. Nts., 6/1/212 | | | 342,000 | | | | 335,624 | |
Lincoln National Corp., 6.05% Jr. Unsec. Sub. Bonds, 4/20/67 | | | 466,000 | | | | 391,440 | |
Prudential Financial, Inc., 5.375% Sr. Unsec. Unsub. Nts., 6/21/20 | | | 386,000 | | | | 413,674 | |
Swiss Re Capital I LP, 6.854% Perpetual Bonds2,10 | | | 455,000 | | | | 389,030 | |
Unum Group, 5.625% Sr. Unsec. Unsub. Nts., 9/15/20 | | | 146,000 | | | | 150,538 | |
Willis Group Holdings plc, 4.125% Sr. Unsec. Unsub. Nts., 3/15/16 | | | 241,000 | | | | 245,050 | |
ZFS Finance USA Trust V, 6.50% Jr. Sub. Bonds, 5/9/373,4 | | | 252,000 | | | | 228,060 | |
| | | | | | | |
| | | | | | | 3,110,493 | |
| | | | | | | | |
Real Estate Investment Trusts—0.4% | | | | | | | | |
Brandywine Operating Partnership LP, 5.75% Sr. Unsec. Unsub. Nts., 4/1/12 | | | 123,000 | | | | 123,794 | |
CommonWealth REIT, 6.95% Sr. Unsec. Nts., 4/1/12 | | | 54,000 | | | | 54,000 | |
16 | OPPENHEIMER BALANCED FUND/VA
| | | | | | | | |
| | Principal | | | |
| | Amount | | | Value | |
|
Real Estate Investment Trusts Continued | | | | | | | | |
Duke Realty LP, 6.25% Sr. Unsec. Unsub. Nts., 5/15/13 | | $ | 216,000 | | | $ | 225,990 | |
Mack-Cali Realty LP, 5.25% Sr. Unsec. Unsub. Nts., 1/15/12 | | | 93,000 | | | | 93,070 | |
WCI Finance LLC/WEA Finance LLC, 5.40% Sr. Unsec. Unsub. Nts., 10/1/122 | | | 226,000 | | | | 231,603 | |
| | | | | | | |
| | | | | | | 728,457 | |
| | | | | | | | |
Health Care—0.4% | | | | | | | | |
Biotechnology—0.1% | | | | | | | | |
Celgene Corp., 5.70% Sr. Unsec. Nts., 10/15/40 | | | 145,000 | | | | 159,867 | |
Health Care Providers & Services—0.2% | | | | | | | | |
McKesson Corp., 6% Sr. Unsec. Unsub. Nts., 3/1/41 | | | 124,000 | | | | 158,786 | |
Quest Diagnostics, Inc., 5.75% Sr. Unsec. Nts., 1/30/40 | | | 145,000 | | | | 156,655 | |
| | | | | | | |
| | | | | | | 315,441 | |
| | | | | | | | |
Pharmaceuticals—0.1% | | | | | | | | |
Mylan, Inc., 6% Sr. Nts., 11/15/182 | | | 245,000 | | | | 253,269 | |
Industrials—1.3% | | | | | | | | |
Aerospace & Defense—0.2% | | | | | | | | |
Alliant Techsystems, Inc., 6.75% Sr. Sub. Nts., 4/1/16 | | | 230,000 | | | | 236,900 | |
BE Aerospace, Inc., 8.50% Sr. Unsec. Nts., 7/1/18 | | | 205,000 | | | | 225,500 | |
| | | | | | | |
| | | | | | | 462,400 | |
| | | | | | | | |
Commercial Services & Supplies—0.2% | | | | | | | | |
Corrections Corp. of America, 7.75% Sr. Nts., 6/1/17 | | | 235,000 | | | | 256,150 | |
R.R. Donnelley & Sons Co., 8.60% Sr. Unsec. Unsub. Nts., 8/15/16 | | | 203,000 | | | | 204,269 | |
| | | | | | | |
| | | | | | | 460,419 | |
| | | | | | | | |
Industrial Conglomerates—0.4% | | | | | | | | |
General Electric Capital Corp.: | | | | | | | | |
4.25% Sr. Unsec. Nts., Series A, 6/15/12 | | | 215,000 | | | | 217,632 | |
4.65% Sr. Unsec. Nts., 10/17/21 | | | 203,000 | | | | 212,198 | |
5.25% Sr. Unsec. Nts., 10/19/12 | | | 34,000 | | | | 35,197 | |
6.375% Unsec. Sub. Bonds, 11/15/67 | | | 428,000 | | | | 422,650 | |
| | | | | | | |
| | | | | | | 887,677 | |
| | | | | | | | |
Machinery—0.3% | | | | | | | | |
CNH Capital LLC, 6.25% Sr. Unsec. Nts., 11/1/162 | | | 214,000 | | | | 221,490 | |
Joy Global, Inc., 5.125% Sr. Unsec. Unsub. Nts., 10/15/21 | | | 97,000 | | | | 103,704 | |
SPX Corp., 6.875% Sr. Unsec. Nts., 9/1/172 | | | 192,000 | | | | 208,320 | |
| | | | | | | |
| | | | | | | 533,514 | |
| | | | | | | | |
Professional Services—0.0% | | | | | | | | |
FTI Consulting, Inc., 6.75% Sr. Unsec. Nts., 10/1/20 | | | 35,000 | | | | 36,313 | |
Road & Rail—0.2% | | | | | | | | |
CSX Corp., 5.50% Sr. Unsec. Nts., 4/15/41 | | | 62,000 | | | | 70,357 | |
Kansas City Southern de Mexico, 8% Sr. Unsec. Unsub. Nts., 2/1/18 | | | 185,000 | | | | 204,425 | |
| | | | | | | |
| | | | | | | 274,782 | |
| | | | | | | | |
Information Technology—0.8% | | | | | | | | |
Communications Equipment—0.1% | | | | | | | | |
Harris Corp., 6.15% Sr. Unsec. Nts., 12/15/40 | | | 71,000 | | | | 80,430 | |
Juniper Networks, Inc., 5.95% Sr. Unsec. Unsub. Nts., 3/15/41 | | | 93,000 | | | | 101,891 | |
| | | | | | | |
| | | | | | | 182,321 | |
| | | | | | | | |
Computers & Peripherals—0.2% | | | | | | | | |
Hewlett-Packard Co.: | | | | | | | | |
2.35% Sr. Unsec. Unsub. Nts., 3/15/15 | | | 216,000 | | | | 215,152 | |
4.65% Sr. Unsec. Nts., 12/9/21 | | | 167,000 | | | | 176,479 | |
| | | | | | | |
| | | | | | | 391,631 | |
| | | | | | | | |
Electronic Equipment & Instruments—0.2% | | | | | | | | |
Arrow Electronics, Inc., 3.375% Sr. Unsec. Unsub. Nts., 11/1/15 | | | 430,000 | | | | 431,014 | |
Office Electronics—0.1% | | | | | | | | |
Xerox Corp., 5.65% Sr. Unsec. Nts., 5/15/13 | | | 223,000 | | | | 234,207 | |
Semiconductors & Semiconductor Equipment—0.1% | | | | | | | | |
KLA-Tencor Corp., 6.90% Sr. Unsec. Nts., 5/1/18 | | | 157,000 | | | | 181,234 | |
Software—0.1% | | | | | | | | |
Symantec Corp., 4.20% Sr. Unsec. Unsub. Nts., 9/15/20 | | | 264,000 | | | | 265,844 | |
Materials—1.3% | | | | | | | | |
Chemicals—0.4% | | | | | | | | |
Agrium, Inc., 6.125% Sr. Unsec. Nts., 1/15/41 | | | 101,000 | | | | 125,502 | |
Airgas, Inc., 3.25% Sr. Nts., 10/1/15 | | | 374,000 | | | | 385,194 | |
Ashland, Inc., 9.125% Sr. Unsec. Nts., 6/1/17 | | | 210,000 | | | | 235,200 | |
Potash Corp. of Saskatchewan, Inc., 5.625% Sr. Unsec. Unsub. Nts., 12/1/40 | | | 140,000 | | | | 171,269 | |
| | | | | | | |
| | | | | | | 917,165 | |
| | | | | | | | |
Containers & Packaging—0.1% | | | | | | | | |
Sealed Air Corp., 7.875% Sr. Nts., 6/15/17 | | | 180,000 | | | | 190,029 | |
17 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | |
| | Amount | | | Value | |
|
Metals & Mining—0.7% | | | | | | | | |
Freeport-McMoRan Copper & Gold, Inc., 8.375% Sr. Nts., 4/1/17 | | $ | 330,000 | | | $ | 350,997 | |
Petrohawk Energy Corp., 6.25% Sr. Unsec. Nts., 6/1/19 | | | 307,000 | | | | 339,235 | |
Teck Resources Ltd., 7% Sr. Unsec. Unsub. Nts., 9/15/12 | | | 216,000 | | | | 224,263 | |
Vale Inco Ltd., 5.70% Sr. Unsec. Unsub. Nts., 10/15/15 | | | 14,000 | | | | 15,258 | |
Xstrata Canada Corp.: | | | | | | | | |
5.375% Sr. Unsec. Unsub. Nts., 6/1/15 | | | 75,000 | | | | 81,520 | |
6% Sr. Unsec. Unsub. Nts., 10/15/15 | | | 177,000 | | | | 190,853 | |
7.25% Sr. Unsec. Unsub. Nts., 7/15/12 | | | 94,000 | | | | 96,846 | |
Xstrata Finance Canada Ltd., 5.80% Sr. Unsec. Unsub. Bonds, 11/15/162 | | | 35,000 | | | | 38,230 | |
| | | | | | | |
| | | | | | | 1,337,202 | |
| | | | | | | | |
Paper & Forest Products—0.1% | | | | | | | | |
International Paper Co., 4.75% Sr. Unsec. Unsub. Nts., 2/15/22 | | | 172,000 | | | | 183,117 | |
Telecommunication Services—1.0% | | | | | | | | |
Diversified Telecommunication Services—0.7% | | | | | | | | |
AT&T, Inc., 6.30% Sr. Unsec. Bonds, 1/15/38 | | | 236,000 | | | | 290,234 | |
British Telecommunications plc, 9.875% Bonds, 12/15/30 | | | 142,000 | | | | 200,367 | |
CenturyLink, Inc., 7.60% Sr. Unsec. Unsub. Nts., Series P, 9/15/39 | | | 82,000 | | | | 80,574 | |
Frontier Communications Corp., 8.25% Sr. Unsec. Nts., 4/15/17 | | | 230,000 | | | | 236,325 | |
Qwest Corp., 7.625% Sr. Unsec. Unsub. Nts., 6/15/15 | | | 225,000 | | | | 250,511 | |
Verizon Communications, Inc., 6.40% Sr. Unsec. Nts., 2/15/38 | | | 134,000 | | | | 170,389 | |
Windstream Corp., 7.875% Sr. Unsec. Unsub. Nts., 11/1/17 | | | 192,000 | | | | 208,800 | |
| | | | | | | |
| | | | | | | 1,437,200 | |
| | | | | | | | |
Wireless Telecommunication Services—0.3% | | | | | | | | |
America Movil SAB de CV, 2.375% Unsec. Unsub. Nts., 9/8/16 | | | 349,000 | | | | 349,849 | |
American Tower Corp.: | | | | | | | | |
5.05% Sr. Unsec. Unsub. Nts., 9/1/20 | | | 50,000 | | | | 50,160 | |
7% Sr. Unsec. Nts., 10/15/17 | | | 162,000 | | | | 183,207 | |
| | | | | | | |
| | | | | | | 583,216 | |
|
Utilities—1.2% | | | | | | | | |
Electric Utilities—1.0% | | | | | | | | |
Allegheny Energy Supply Co. LLC, 8.25% Bonds, 4/15/122 | | | 205,000 | | | | 208,721 | |
Edison International, 3.75% Sr. Unsec. Unsub. Nts., 9/15/17 | | | 154,000 | | | | 158,714 | |
FirstEnergy Solutions Corp., 6.80% Sr. Unsec. Nts., 8/15/39 | | | 138,000 | | | | 154,772 | |
Great Plains Energy, Inc., 2.75% Sr. Unsec. Unsub. Nts., 8/15/13 | | | 239,000 | | | | 242,524 | |
Kansas City Power & Light Co., 5.30% Sr. Unsec. Nts., 10/1/41 | | | 120,000 | | | | 129,399 | |
Northeast Utilities Co., 7.25% Sr. Unsec. Nts., 4/1/12 | | | 230,000 | | | | 233,273 | |
Oncor Electric Delivery Co., 7% Debs., 9/1/22 | | | 198,000 | | | | 254,036 | |
PPL WEM Holdings plc, 5.375% Sr. Unsec. Nts., 5/1/212 | | | 322,000 | | | | 338,161 | |
Texas-New Mexico Power Co., 9.50% Sec. Nts., 4/1/192 | | | 235,000 | | | | 308,556 | |
| | | | | | | |
| | | | | | | 2,028,156 | |
| | | | | | | | |
Energy Traders—0.1% | | | | | | | | |
TransAlta Corp., 5.75% Sr. Unsec. Nts., 12/15/13 | | | 212,000 | | | | 227,064 | |
Multi-Utilities—0.1% | | | | | | | | |
CMS Energy Corp., 6.25% Sr. Unsec. Nts., 2/1/20 | | | 194,000 | | | | 204,628 | |
Pacific Gas & Electric Co., 4.50% Sr. Unsec. Nts., 12/15/41 | | | 53,000 | | | | 54,303 | |
| | | | | | | |
| | | | | | | 258,931 | |
| | | | | | | |
| | | | | | | | |
Total Non-Convertible Corporate Bonds and Notes (Cost $36,798,681) | | | | | | | 37,637,168 | |
|
| | | Shares | | | | | |
|
Investment Companies—15.9% | | | | | | | | |
Oppenheimer Institutional Money Market Fund, Cl. E, 0.20%11,12 (Cost $32,784,414) | | | 32,784,414 | | | | 32,784,414 | |
| | | | | | | | |
Total Investments, at Value (Cost $232,141,466) | | | 115.4 | % | | | 237,714,032 | |
Liabilities in Excess of Other Assets | | | (15.4 | ) | | | (31,779,971 | ) |
| | | | |
Net Assets | | | 100.0 | % | | $ | 205,934,061 | |
| | | | |
18 OPPENHEIMER BALANCED FUND/VA
Footnotes to Statement of Investments
| | |
* | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
1. | | Non-income producing security. |
|
2. | | Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $11,723,347 or 5.69% of the Fund’s net assets as of December 30, 2011. |
|
3. | | Represents the current interest rate for a variable or increasing rate security. |
|
4. | | Restricted security. The aggregate value of restricted securities as of December 30, 2011 was $1,000,078, which represents 0.49% of the Fund’s net assets. See Note 6 of the accompanying Notes. Information concerning restricted securities is as follows: |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Unrealized | |
| | Acquisition | | | | | | | | | | | Appreciation | |
Security | | Dates | | | Cost | | | Value | | | (Depreciation) | |
|
DT Auto Owner Trust 2011-3A, Automobile Receivable Nts., Series 2011-3A, Cl. C, 4.03%, 12/15/41 | | | 11/2/11 | | | $ | 200,984 | | | $ | 200,600 | | | $ | (384 | ) |
Glen Meadow Pass-Through Trust, 6.505% Bonds, 2/12/67 | | | 1/5/11-10/11/11 | | | | 251,672 | | | | 213,750 | | | | (37,922 | ) |
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial Mtg. Pass-Through Certificates, Series 2007-LDPX, Cl. A2S2, 5.187%, 1/1/49 | | | 7/14/10 | | | | 125,957 | | | | 128,776 | | | | 2,819 | |
Santander Drive Auto Receivables Trust 2011-S1A, Automobile Receivables Nts., Series 2011-S1A, Cl. D, 3.10%, 5/15/17 | | | 2/4/11-4/14/11 | | | | 231,246 | | | | 228,892 | | | | (2,354 | ) |
ZFS Finance USA Trust V, 6.50% Jr. Sub. Bonds, 5/9/37 | | | 2/24/11-7/26/11 | | | | 254,109 | | | | 228,060 | | | | (26,049 | ) |
| | | | | | | | |
| | | | | | $ | 1,063,968 | | | $ | 1,000,078 | | | $ | (63,890 | ) |
| | | | | | | | |
| | |
5. | | When-issued security or delayed delivery to be delivered and settled after December 30, 2011. See Note 1 of the accompanying Notes. |
|
6. | | Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of mortgage loans or other receivables. 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 or asset-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 $2,771,932 or 1.35% of the Fund’s net assets as of December 30, 2011. |
|
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 $144,097 or 0.07% of the Fund’s net assets as of December 30, 2011. |
|
8. | | 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. |
|
9. | | All or a portion of the security position is held in collateralized accounts to cover initial margin requirements on open futures contracts and written options on futures, if applicable. The aggregate market value of such securities is $212,701. See Note 5 of the accompanying Notes. |
|
10. | | 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. |
|
11. | | Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 30, 2011, 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 period in which the issuer was an affiliate are as follows: |
| | | | | | | | | | | | | | | | |
| | Shares | | | Gross | | | Gross | | | Shares | |
| | December 31, 2010 | | | Additions | | | Reductions | | | December 30, 2011 | |
|
Oppenheimer Institutional Money Market Fund, Cl. E | | | 45,755,638 | | | | 100,641,276 | | | | 113,612,500 | | | | 32,784,414 | |
|
| | | | | | | | | | Value | | | Income | |
|
Oppenheimer Institutional Money Market Fund, Cl. E | | | | | | | | | | $ | 32,784,414 | | | $ | 80,528 | |
| | |
12. | | Rate shown is the 7-day yield as of December 30, 2011. |
19 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
Footnotes to Statement of Investments Continued
Valuation Inputs
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 table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 30, 2011 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 | | $ | 13,343,882 | | | $ | — | | | $ | — | | | $ | 13,343,882 | |
Consumer Staples | | | 8,172,220 | | | | — | | | | — | | | | 8,172,220 | |
Energy | | | 15,031,008 | �� | | | — | | | | — | | | | 15,031,008 | |
Financials | | | 22,838,192 | | | | — | | | | — | | | | 22,838,192 | |
Health Care | | | 11,901,124 | | | | — | | | | — | | | | 11,901,124 | |
Industrials | | | 6,100,408 | | | | — | | | | — | | | | 6,100,408 | |
Information Technology | | | 9,696,316 | | | | — | | | | — | | | | 9,696,316 | |
Materials | | | 3,204,032 | | | | — | | | | — | | | | 3,204,032 | |
Telecommunication Services | | | 3,593,924 | | | | — | | | | — | | | | 3,593,924 | |
Utilities | | | 5,227,430 | | | | — | | | | — | | | | 5,227,430 | |
Asset-Backed Securities | | | — | | | | 8,875,014 | | | | — | | | | 8,875,014 | |
Mortgage-Backed Obligations | | | — | | | | 58,107,974 | | | | — | | | | 58,107,974 | |
U.S. Government Obligations | | | — | | | | 1,200,926 | | | | — | | | | 1,200,926 | |
Non-Convertible Corporate Bonds and Notes | | | — | | | | 37,637,168 | | | | — | | | | 37,637,168 | |
Investment Company | | | 32,784,414 | | | | — | | | | — | | | | 32,784,414 | |
| | |
Total Investments, at Value | | | 131,892,950 | | | | 105,821,082 | | | | — | | | | 237,714,032 | |
Other Financial Instruments: | | | | | | | | | | | | | | | | |
Futures margins | | | 18,316 | | | | — | | | | — | | | | 18,316 | |
Foreign currency exchange contracts | | | — | | | | 28,920 | | | | — | | | | 28,920 | |
| | |
Total Assets | | $ | 131,911,266 | | | $ | 105,850,002 | | | $ | — | | | $ | 237,761,268 | |
| | |
| | | | | | | | | | | | | | | | |
Liabilities Table | | | | | | | | | | | | | | | | |
Other Financial Instruments: | | | | | | | | | | | | | | | | |
Futures margins | | $ | (11,188 | ) | | $ | — | | | $ | — | | | $ | (11,188 | ) |
Foreign currency exchange contracts | | | — | | | | (8,731 | ) | | | — | | | | (8,731 | ) |
| | |
Total Liabilities | | $ | (11,188 | ) | | $ | (8,731 | ) | | $ | — | | | $ | (19,919 | ) |
| | |
Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.
20 | OPPENHEIMER BALANCED FUND/VA
Foreign Currency Exchange Contracts as of December 30, 2011 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
Counterparty/ | | | | | | Contract | | | Expiration | | | | | | | Unrealized | | | Unrealized | |
Contract Description | | Buy/Sell | | | Amount (000’s) | | | Dates | | | Value | | | Appreciation | | | Depreciation | |
|
Brown Brothers Harriman | | | | | | | | | | | | | | | | | | | | | | | | |
Japanese Yen (JPY) | | Sell | | | 36,617 JPY | | | | 1/6/12 | | | $ | 475,728 | | | $ | 208 | | | $ | — | |
Bank of America | | | | | | | | | | | | | | | | | | | | | | | | |
Japanese Yen (JPY) | | Sell | | | 61,566 JPY | | | | 1/4/12-1/5/12 | | | | 799,924 | | | | — | | | | 8,731 | |
Chase Manhattan Bank | | | | | | | | | | | | | | | | | | | | | | | | |
Swiss Franc (CHF) | | Sell | | | 4,647 CHF | | | | 1/3/12 | | | | 4,947,229 | | | | 28,712 | | | | — | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | 28,920 | | | $ | 8,731 | |
| | | | | | | | | | | | | | | | | | |
Futures Contracts as of December 30, 2011 are as follows:
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | Unrealized | |
| | | | | | Number of | | | Expiration | | | | | | | Appreciation | |
Contract Description | | Buy/Sell | | | Contracts | | | Date | | | Value | | | (Depreciation) | |
|
U.S. Long Bonds | | Buy | | | | 24 | | | | 3/21/12 | | | $ | 3,475,500 | | | $ | 42,776 | |
U.S. Treasury Nts., 10 yr. | | Buy | | | | 1 | | | | 3/21/12 | | | | 131,125 | | | | 6 | |
U.S. Treasury Nts., 2 yr. | | Sell | | | | 54 | | | | 3/30/12 | | | | 11,909,531 | | | | (3,064 | ) |
U.S. Treasury Nts., 5 yr. | | Sell | | | | 37 | | | | 3/30/12 | | | | 4,560,539 | | | | (17,547 | ) |
U.S. Treasury Ultra Bonds | | Buy | | | | 21 | | | | 3/21/12 | | | | 3,363,938 | | | | 20,631 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | 42,802 | |
| | | | | | | | | | | | | | | | | | | |
See accompanying Notes to Financial Statements.
21 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 30, 20111
| | | | |
|
Assets | | | | |
Investments, at value—see accompanying statement of investments: | | | | |
Unaffiliated companies (cost $199,357,052) | | $ | 204,929,618 | |
Affiliated companies (cost $32,784,414) | | | 32,784,414 | |
| | | |
| | | 237,714,032 | |
Cash | | | 55,568 | |
Unrealized appreciation on foreign currency exchange contracts | | | 28,920 | |
Receivables and other assets: | | | | |
Investments sold (including $834,575 sold on a when-issued or delayed delivery basis) | | | 2,110,172 | |
Interest, dividends and principal paydowns | | | 934,679 | |
Futures margins | | | 18,316 | |
Other | | | 15,397 | |
| | | |
Total assets | | | 240,877,084 | |
| | | | |
Liabilities | | | | |
Unrealized depreciation on foreign currency exchange contracts | | | 8,731 | |
Payables and other liabilities: | | | | |
Investments purchased on a when-issued or delayed delivery basis | | | 34,608,626 | |
Shares of beneficial interest redeemed | | | 134,661 | |
Shareholder communications | | | 45,714 | |
Transfer and shareholder servicing agent fees | | | 17,606 | |
Distribution and service plan fees | | | 15,095 | |
Trustees’ compensation | | | 13,626 | |
Futures margins | | | 11,188 | |
Other | | | 87,776 | |
| | | |
Total liabilities | | | 34,943,023 | |
Net Assets | | $ | 205,934,061 | |
| | | |
| | | | |
Composition of Net Assets | | | | |
Par value of shares of beneficial interest | | $ | 18,310 | |
Additional paid-in capital | | | 261,404,840 | |
Accumulated net investment income | | | 3,885,373 | |
Accumulated net realized loss on investments and foreign currency transactions | | | (64,994,840 | ) |
Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies | | | 5,620,378 | |
| | | |
Net Assets | | $ | 205,934,061 | |
| | | |
|
Net Asset Value Per Share | | | | |
Non-Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $128,383,141 and 11,366,261 shares of beneficial interest outstanding) | | $ | 11.30 | |
Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $77,550,920 and 6,943,916 shares of beneficial interest outstanding) | | $ | 11.17 | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
22 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 30, 20111
| | | | |
|
Investment Income | | | | |
Interest | | $ | 3,740,550 | |
Dividends: | | | | |
Unaffiliated companies (net of foreign withholding taxes of $41,729) | | | 1,555,903 | |
Affiliated companies | | | 80,528 | |
| | | |
Total investment income | | | 5,376,981 | |
| | | | |
Expenses | | | | |
Management fees | | | 1,695,109 | |
Distribution and service plan fees—Service shares | | | 212,975 | |
Transfer and shareholder servicing agent fees: | | | | |
Non-Service shares | | | 141,905 | |
Service shares | | | 85,192 | |
Shareholder communications: | | | | |
Non-Service shares | | | 34,918 | |
Service shares | | | 20,972 | |
Custodian fees and expenses | | | 23,781 | |
Trustees’ compensation | | | 11,530 | |
Administration service fees | | | 1,500 | |
Other | | | 51,445 | |
| | | |
Total expenses | | | 2,279,327 | |
Less waivers and reimbursements of expenses | | | (545,502 | ) |
| | | |
Net expenses | | | 1,733,825 | |
Net Investment Income | | | 3,643,156 | |
| | | | |
Realized and Unrealized Gain (Loss) | | | | |
Net realized gain on: | | | | |
Investments from unaffiliated companies | | | 7,451,196 | |
Closing and expiration of futures contracts | | | 1,402,952 | |
Foreign currency transactions | | | 721,809 | |
| | | |
Net realized gain | | | 9,575,957 | |
Net change in unrealized appreciation/depreciation on: | | | | |
Investments | | | (10,948,759 | ) |
Translation of assets and liabilities denominated in foreign currencies | | | (559,038 | ) |
Futures contracts | | | 50,474 | |
| | | |
Net change in unrealized appreciation/depreciation | | | (11,457,323 | ) |
| | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 1,761,790 | |
| | | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
23 | OPPENHEIMER BALANCED FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
| | | | | | | | |
| | Year Ended | | | Year Ended | |
| | December 30, | | | December 31, | |
| | 20111 | | | 2010 | |
|
Operations | | | | | | | | |
Net investment income | | $ | 3,643,156 | | | $ | 4,859,704 | |
Net realized gain | | | 9,575,957 | | | | 16,046,665 | |
Net change in unrealized appreciation/depreciation | | | (11,457,323 | ) | | | 7,623,134 | |
| | |
Net increase in net assets resulting from operations | | | 1,761,790 | | | | 28,529,503 | |
| | | | | | | | |
Dividends and/or Distributions to Shareholders | | | | | | | | |
Dividends from net investment income: | | | | | | | | |
Non-Service shares | | | (3,355,682 | ) | | | (2,184,050 | ) |
Service shares | | | (1,802,307 | ) | | | (1,027,757 | ) |
| | |
| | | (5,157,989 | ) | | | (3,211,807 | ) |
| | | | | | | | |
Beneficial Interest Transactions | | | | | | | | |
Net decrease in net assets resulting from beneficial interest transactions: | | | | | | | | |
Non-Service shares | | | (20,174,392 | ) | | | (25,243,141 | ) |
Service shares | | | (10,697,145 | ) | | | (8,416,068 | ) |
| | |
| | | (30,871,537 | ) | | | (33,659,209 | ) |
| | | | | | | | |
Net Assets | | | | | | | | |
Total decrease | | | (34,267,736 | ) | | | (8,341,513 | ) |
Beginning of period | | | 240,201,797 | | | | 248,543,310 | |
| | |
End of period (including accumulated net investment income of $3,885,373 and $5,128,069, respectively) | | $ | 205,934,061 | | | $ | 240,201,797 | |
| | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
24 | OPPENHEIMER BALANCED FUND/VA
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Non-Service Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 11.47 | | | $ | 10.30 | | | $ | 8.45 | | | $ | 16.41 | | | $ | 17.69 | |
|
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income2 | | | .20 | | | | .23 | | | | .25 | | | | .41 | | | | .43 | |
Net realized and unrealized gain (loss) | | | (.11 | ) | | | 1.09 | | | | 1.60 | | | | (7.03 | ) | | | .19 | |
| | |
Total from investment operations | | | .09 | | | | 1.32 | | | | 1.85 | | | | (6.62 | ) | | | .62 | |
|
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.26 | ) | | | (.15 | ) | | | — | | | | (.39 | ) | | | (.46 | ) |
| | |
Distributions from net realized gain | | | — | | | | — | | | | — | | | | (.95 | ) | | | (1.44 | ) |
| | |
Total dividends and/or distributions to shareholders | | | (.26 | ) | | | (.15 | ) | | | — | | | | (1.34 | ) | | | (1.90 | ) |
|
Net asset value, end of period | | $ | 11.30 | | | $ | 11.47 | | | $ | 10.30 | | | $ | 8.45 | | | $ | 16.41 | |
| | |
|
Total Return, at Net Asset Value3 | | | 0.72 | % | | | 12.91 | % | | | 21.89 | % | | | (43.47 | )% | | | 3.79 | % |
|
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 128,383 | | | $ | 150,622 | | | $ | 159,797 | | | $ | 169,621 | | | $ | 385,948 | |
|
Average net assets (in thousands) | | $ | 141,848 | | | $ | 151,620 | | | $ | 159,013 | | | $ | 295,669 | | | $ | 418,103 | |
|
Ratios to average net assets:4 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.70 | % | | | 2.13 | % | | | 2.71 | % | | | 3.14 | % | | | 2.55 | % |
Total expenses5 | | | 0.91 | % | | | 0.91 | % | | | 0.89 | % | | | 0.76 | % | | | 0.75 | % |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 0.67 | % | | | 0.65 | % | | | 0.60 | % | | | 0.67 | % | | | 0.73 | % |
|
Portfolio turnover rate6 | | | 102 | % | | | 54 | % | | | 87 | % | | | 67 | % | | | 68 | % |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
4. | | Annualized for periods less than one full year. |
|
5. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 0.93 | % |
Year Ended December 31, 2010 | | | 0.92 | % |
Year Ended December 31, 2009 | | | 0.91 | % |
Year Ended December 31, 2008 | | | 0.76 | % |
Year Ended December 31, 2007 | | | 0.75 | % |
| | |
6. | | The portfolio turnover rate excludes purchase and sale transactions of To Be Announced (TBA) mortgage-related securities as follows: |
| | | | | | | | |
| | Purchase Transactions | | | Sale Transactions | |
|
Year Ended December 30, 2011 | | $ | 450,804,195 | | | $ | 453,759,282 | |
Year Ended December 31, 2010 | | $ | 412,930,431 | | | $ | 414,511,903 | |
Year Ended December 31, 2009 | | $ | 504,698,365 | | | $ | 520,212,670 | |
Year Ended December 31, 2008 | | $ | 474,582,075 | | | $ | 434,587,487 | |
Year Ended December 31, 2007 | | $ | 296,201,319 | | | $ | 315,527,720 | |
See accompanying Notes to Financial Statements.
25 | OPPENHEIMER BALANCED FUND/VA
FINANCIAL HIGHLIGHTS Continued
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Service Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 11.35 | | | $ | 10.19 | | | $ | 8.38 | | | $ | 16.28 | | | $ | 17.57 | |
|
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income2 | | | .16 | | | | .20 | | | | .22 | | | | .37 | | | | .38 | |
Net realized and unrealized gain (loss) | | | (.11 | ) | | | 1.08 | | | | 1.59 | | | | (6.97 | ) | | | .19 | |
| | |
Total from investment operations | | | .05 | | | | 1.28 | | | | 1.81 | | | | (6.60 | ) | | | .57 | |
|
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.23 | ) | | | (.12 | ) | | | — | | | | (.35 | ) | | | (.42 | ) |
Distributions from net realized gain | | | — | | | | — | | | | — | | | | (.95 | ) | | | (1.44 | ) |
| | |
Total dividends and/or distributions to shareholders | | | (.23 | ) | | | (.12 | ) | | | — | | | | (1.30 | ) | | | (1.86 | ) |
|
Net asset value, end of period | | $ | 11.17 | | | $ | 11.35 | | | $ | 10.19 | | | $ | 8.38 | | | $ | 16.28 | |
| | |
|
Total Return, at Net Asset Value3 | | | 0.38 | % | | | 12.68 | % | | | 21.60 | % | | | (43.62 | )% | | | 3.49 | % |
|
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 77,551 | | | $ | 89,580 | | | $ | 88,746 | | | $ | 68,798 | | | $ | 121,399 | |
|
Average net assets (in thousands) | | $ | 85,157 | | | $ | 87,280 | | | $ | 77,101 | | | $ | 100,164 | | | $ | 117,012 | |
|
Ratios to average net assets:4 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.45 | % | | | 1.87 | % | | | 2.42 | % | | | 2.90 | % | | | 2.30 | % |
Total expenses5 | | | 1.16 | % | | | 1.16 | % | | | 1.15 | % | | | 1.01 | % | | | 1.00 | % |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 0.92 | % | | | 0.90 | % | | | 0.85 | % | | | 0.92 | % | | | 0.98 | % |
|
Portfolio turnover rate6 | | | 102 | % | | | 54 | % | | | 87 | % | | | 67 | % | | | 68 | % |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
4. | | Annualized for periods less than one full year. |
|
5. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 1.18 | % |
Year Ended December 31, 2010 | | | 1.17 | % |
Year Ended December 31, 2009 | | | 1.17 | % |
Year Ended December 31, 2008 | | | 1.01 | % |
Year Ended December 31, 2007 | | | 1.00 | % |
| | |
6. | | The portfolio turnover rate excludes purchase and sale transactions of To Be Announced (TBA) mortgage-related securities as follows: |
| | | | | | | | |
| | Purchase Transactions | | | Sale Transactions | |
|
Year Ended December 30, 2011 | | $ | 450,804,195 | | | $ | 453,759,282 | |
Year Ended December 31, 2010 | | $ | 412,930,431 | | | $ | 414,511,903 | |
Year Ended December 31, 2009 | | $ | 504,698,365 | | | $ | 520,212,670 | |
Year Ended December 31, 2008 | | $ | 474,582,075 | | | $ | 434,587,487 | |
Year Ended December 31, 2007 | | $ | 296,201,319 | | | $ | 315,527,720 | |
See accompanying Notes to Financial Statements.
26 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Oppenheimer Balanced Fund/VA (the “Fund”), is a separate series of Oppenheimer Variable Account Funds, an open end management investment company registered under the Investment Company Act of 1940, as amended. The Fund’s investment objective is to seek high total investment return, which includes current income and capital appreciation. The Fund’s investment adviser is OppenheimerFunds, Inc. (the “Manager”).
The Fund offers two classes of shares. Both classes are sold at their offering price, which is the net asset value per share, to separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. The class of shares designated as Service shares is subject to a distribution and service plan. Both classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class.
The following is a summary of significant accounting policies consistently followed by the Fund.
Fiscal Year End. Since December 30, 2011 represents the last day during the Fund’s 2011 fiscal year on which the New York Stock Exchange was open for trading, the Fund’s financial statements have been presented through that date to maintain consistency with the Fund’s net asset value calculations used for shareholder transactions.
Securities Valuation. The Fund calculates the net asset value of its shares as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading.
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. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” observable market inputs other than unadjusted quoted prices are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.
Securities traded on a registered U.S. securities exchange 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. Securities whose principal exchange is NASDAQ® are valued based on the official closing prices reported by NASDAQ prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.
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.
U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.
27 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
1. Significant Accounting Policies Continued
Forward foreign currency exchange contracts are valued utilizing current and forward currency rates obtained from independent pricing services.
“Money market-type” debt instruments with remaining maturities 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.
In the absence of a current price quotation obtained from an independent pricing service or broker-dealer, including for securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund’s assets are valued but after the close of the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities 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 adjusted for any discounts related to 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.
There have been no significant changes to the fair valuation methodologies of the Fund during the period.
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.
As of December 30, 2011, 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 | | | $34,608,626 | |
Sold securities | | | 834,575 | |
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.
28 | OPPENHEIMER BALANCED FUND/VA
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.
Investment in Oppenheimer Institutional Money Market Fund. The Fund is permitted to invest daily available cash balances in an affiliated money market fund. The Fund may invest the available cash in Class E shares of Oppenheimer Institutional Money Market Fund (“IMMF”) to seek current income while preserving liquidity. IMMF is a registered open-end management investment company, regulated as a money market fund under the Investment Company Act of 1940, as amended. The Manager is also the investment adviser of IMMF. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of IMMF’s Class E expenses, including its 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 IMMF.
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 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.
Reported net realized gains and losses from foreign currency transactions arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, exchange rate fluctuations between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized appreciation and depreciation on the translation of assets and liabilities denominated in foreign currencies arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund’s Statement of Operations.
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
Federal Taxes. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. Therefore, no federal income or excise tax provision is required. The Fund files income tax returns in U.S. federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remain open for the three preceding fiscal reporting period ends.
29 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
1. Significant Accounting Policies Continued
The tax components of capital shown in the following table represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes.
| | | | | | | | | | | | |
| | | | | | | | | | Net Unrealized | |
| | | | | | | | | | Appreciation | |
| | | | | | | | | | Based on Cost of | |
| | | | | | | | | | Securities and | |
Undistributed | | Undistributed | | | Accumulated | | | Other Investments | |
Net Investment | | Long-Term | | | Loss | | | for Federal Income | |
Income | | Gain | | | Carryforward1,2,3,4 | | | Tax Purposes | |
|
$3,890,265 | | | $— | | | | $64,721,622 | | | | $5,355,887 | |
| | |
1. | | As of December 30, 2011, the Fund had $58,137,466 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. Details of the capital loss carryforwards are included in the table below. Capital loss carryovers with no expiration, if any, must be utilized prior to those with expiration dates. |
| | | | |
Expiring | | | | |
|
2016 | | $ | 13,408,759 | |
2017 | | | 44,728,707 | |
| | | |
Total | | $ | 58,137,466 | |
| | | |
| | |
2. | | As of December 30, 2011, the Fund had $6,584,156 of post-October losses available to offset future realized capital gains, if any. |
|
3. | | During the fiscal year ended December 30, 2011, the Fund utilized $15,143,099 of capital loss carryforward to offset capital gains realized in that fiscal year. |
|
4. | | During the fiscal year ended December 31, 2010, the Fund utilized $15,850,248 of capital loss carryforward to offset capital gains realized in that fiscal year. |
Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund.
Accordingly, the following amounts have been reclassified for December 30, 2011. Net assets of the Fund were unaffected by the reclassifications.
| | | | |
Increase to | | Increase to | |
Accumulated | | Accumulated | |
Net Investment | | Net Realized Loss | |
Income | | on Investments | |
|
$272,137 | | | $272,137 | |
The tax character of distributions paid during the years ended December 30, 2011 and December 31, 2010 was as follows:
| | | | | | | | |
| | Year Ended | | | Year Ended | |
| | December 30, 2011 | | | December 31, 2010 | |
|
Distributions paid from: | | | | | | | | |
Ordinary income | | | $5,157,989 | | | | $3,211,807 | |
The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 30, 2011 are noted in the following table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.
| | | | |
|
Federal tax cost of securities | | $ | 232,371,885 | |
Federal tax cost of other investments | | | (5,355,361 | ) |
| | | |
Total federal tax cost | | $ | 227,016,524 | |
| | | |
| | | | |
Gross unrealized appreciation | | $ | 8,427,376 | |
Gross unrealized depreciation | | | (3,071,489 | ) |
| | | |
Net unrealized appreciation | | $ | 5,355,887 | |
| | | |
30 | OPPENHEIMER BALANCED FUND/VA
Trustees’ Compensation. The Board of Trustees has adopted a compensation deferral plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of “Other” within the asset section of the Statement of Assets and Liabilities. Deferral of trustees’ fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund’s assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance with the compensation deferral plan.
Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles, are recorded on the ex-dividend date. Income and capital gain distributions, if any, are declared and paid annually or at other times as deemed necessary by the Manager.
Investment Income. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is recognized on an accrual basis. Discount and premium, which are included in interest income on the Statement of Operations, are amortized or accreted daily.
Custodian Fees. “Custodian fees and expenses” in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by the Fund, at a rate equal to the Federal Funds Rate plus 0.50%. The “Reduction to custodian expenses” line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings.
Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost.
Indemnifications. The Fund’s organizational documents provide current and former trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
31 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
2. Shares of Beneficial Interest Continued
| | | | | | | | | | | | | | | | |
| | Year Ended December 30, 2011 | | | Year Ended December 31, 2010 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
|
Non-Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 252,001 | | | $ | 2,909,335 | | | | 272,126 | | | $ | 2,909,287 | |
Dividends and/or distributions reinvested | | | 287,056 | | | | 3,355,682 | | | | 209,000 | | | | 2,184,050 | |
Redeemed | | | (2,302,830 | ) | | | (26,439,409 | ) | | | (2,866,355 | ) | | | (30,336,478 | ) |
| | |
Net decrease | | | (1,763,773 | ) | | $ | (20,174,392 | ) | | | (2,385,229 | ) | | $ | (25,243,141 | ) |
| | |
| | | | | | | | | | | | | | | | |
Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 423,625 | | | $ | 4,837,026 | | | | 627,983 | | | $ | 6,716,376 | |
Dividends and/or distributions reinvested | | | 155,505 | | | | 1,802,307 | | | | 99,204 | | | | 1,027,757 | |
Redeemed | | | (1,531,184 | ) | | | (17,336,478 | ) | | | (1,542,514 | ) | | | (16,160,201 | ) |
| | |
Net decrease | | | (952,054 | ) | | $ | (10,697,145 | ) | | | (815,327 | ) | | $ | (8,416,068 | ) |
| | |
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations and investments in IMMF, for the year ended December 30, 2011, were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
|
Investment securities | | $ | 175,187,163 | | | $ | 188,834,785 | |
U.S. government and government agency obligations | | | 737,646 | | | | 771,994 | |
To Be Announced (TBA) mortgage-related securities | | | 450,804,195 | | | | 453,759,282 | |
4. Fees and Other Transactions with Affiliates
Management Fees. Under the investment advisory agreement, the Fund pays the Manager a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| | | | |
Fee Schedule | | | | |
|
Up to $200 million | | | 0.75 | % |
Next $200 million | | | 0.72 | |
Next $200 million | | | 0.69 | |
Next $200 million | | | 0.66 | |
Over $800 million | | | 0.60 | |
Administration Service Fees. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund’s tax returns.
Transfer Agent Fees. OppenheimerFunds Services (“OFS”), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. For the year ended December 30, 2011, the Fund paid $229,756 to OFS for services to the Fund.
Distribution and Service Plan for Service Shares. The Fund has adopted a Distribution and Service Plan (the “Plan”) in accordance with Rule 12b-1 under the Investment Company Act of 1940 for Service shares to pay OppenheimerFunds Distributor, Inc. (the “Distributor”), for distribution related services, personal service and account maintenance for the Fund’s Service shares. Under the Plan, payments are made periodically at an annual rate of 0.25% of the daily net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors of the insurance product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service shares. These fees are paid out of the Fund’s assets on an on-going basis and increase operating expenses of the Service shares, which results in lower performance compared to the Fund’s shares that are not subject to a service fee. Fees incurred by the Fund under the Plan are detailed in the Statement of Operations.
32 | OPPENHEIMER BALANCED FUND/VA
Waivers and Reimbursements of Expenses. The Manager has voluntarily agreed to waive a portion of the advisory fee and/or reimburse certain expenses so that the “Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses” will not exceed 0.67% of average annual net assets for Non-Service shares and 0.92% of average annual net assets for Service shares. During the year ended December 30, 2011, the Manager waived fees and/or reimbursed the Fund $312,513 and $187,740 for Non-Service and Service shares, respectively.
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 IMMF. During the year ended December 30, 2011, the Manager waived fees and/or reimbursed the Fund $45,249 for IMMF management fees.
Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.
5. Risk Exposures and the Use of Derivative Instruments
The Fund’s investment objectives not only permit the Fund to purchase investment securities, they also allow the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward foreign currency exchange contracts, credit default swaps, interest rate swaps, total return 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. Central to those strategies are features inherent to derivatives that make them more attractive for this purpose than equity and debt securities: they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This 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.
Market Risk Factors. In accordance with its investment objectives, the Fund may use derivatives to increase or decrease its exposure to one or more of the following 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 to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds.
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.
33 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
5. Risk Exposures and the Use of Derivative Instruments Continued
The Fund’s actual exposures to these market risk factors during the period are discussed in further detail, by derivative type, below.
Risks of Investing in Derivatives. The Fund’s use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. 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.
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. 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.
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. Associated risks can be different for each type of derivative and are discussed by each derivative type in the notes that follow.
Counterparty Credit Risk. Certain derivative positions are subject to counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. The Fund’s derivative counterparties are financial institutions who are subject to market conditions that may weaken their financial position. The Fund intends to enter into financial transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction.
Credit Related Contingent Features. The Fund’s agreements with derivative counterparties have several credit related contingent features that if triggered would allow its derivatives counterparties to close out and demand payment or additional collateral to cover their exposure from the Fund. Credit related contingent features are established between the Fund and its derivatives counterparties to reduce the risk that the Fund will not fulfill its payment obligations to its counterparties. These triggering features include, but are not limited to, a percentage decrease in the Fund’s net assets and or a percentage decrease in the Fund’s Net Asset Value or NAV. The contingent features are established within the Fund’s International Swap and Derivatives Association, Inc. master agreements which govern certain positions in swaps, over-the-counter options and swaptions, and forward currency exchange contracts for each individual counterparty.
Valuations of derivative instruments as of December 30, 2011 are as follows:
| | | | | | | | | | | | | | | | |
| | Asset Derivatives | | | Liability Derivatives | |
Derivatives Not Accounted for | | Statement of Assets and | | | | | | | Statement of Assets and | | | | |
as Hedging Instruments | | Liabilities Location | | | Value | | | Liabilities Location | | | Value | |
|
Interest rate contracts | | Futures margins | | $ | 18,316 | * | | Futures margins | | $ | 11,188 | * |
Foreign exchange contracts | | Unrealized depreciation on foreign currency exchange contracts | | | 28,920 | | | Unrealized appreciation on foreign currency exchange contracts | | | 8,731 | |
| | | | | | | | | | | | | | |
Total | | | | | | $ | 47,236 | | | | | | | $ | 19,919 | |
| | | | | | | | | | | | | | |
| | |
* | | Includes only the current day’s variation margin. Prior variation margin movements have been reflected in cash on the Statement of Assets and Liabilities upon receipt or payment. |
34 | OPPENHEIMER BALANCED FUND/VA
The effect of derivative instruments on the Statement of Operations is as follows:
| | | | | | | | | | | | |
Amount of Realized Gain or (Loss) Recognized on Derivatives |
|
Derivatives Not | | Closing and | | | | | | | |
Accounted for as | | expiration of futures | | | Foreign currency | | | | |
Hedging Instruments | | contracts | | | transactions | | | Total | |
|
Foreign exchange contracts | | $ | — | | | $ | (4,185 | ) | | $ | (4,185 | ) |
Interest rate contracts | | | 1,402,952 | | | | — | | | | 1,402,952 | |
| | |
Total | | $ | 1,402,952 | | | $ | (4,185 | ) | | $ | 1,398,767 | |
| | |
| | | | | | | | | | | | |
Amount of Change in Unrealized Gain or (Loss) Recognized on Derivatives |
|
Derivatives Not | | | | | | Translation of assets and | | | | |
Accounted for as | | | | | | liabilities denominated in | | | | |
Hedging Instruments | | Futures contracts | | | foreign currencies | | | Total | |
|
Foreign exchange contracts | | $ | — | | | $ | 20,189 | | | $ | 20,189 | |
Interest rate contracts | | | 50,474 | | | | — | | | | 50,474 | |
| | |
Total | | $ | 50,474 | | | $ | 20,189 | | | $ | 70,663 | |
| | |
Foreign Currency Exchange Contracts
The Fund may enter into foreign currency exchange contracts (“forward contracts”) for the purchase or sale of a foreign currency at a negotiated rate at a future date.
Forward contracts are reported on a schedule following the Statement of Investments. Forward contracts will be valued daily based upon the closing prices of the forward currency rates determined at the close of the Exchange as provided by a bank, dealer or pricing service. The resulting unrealized appreciation (depreciation) is reported in the Statement of Assets and Liabilities as a receivable or payable and in the Statement of Operations 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 Statement of Operations.
The Fund has purchased and sold certain forward foreign currency exchange contracts of different currencies in order to acquire currencies to pay for or sell currencies to acquire related foreign securities purchase and sale transactions, respectively, or to convert foreign currencies to U.S. dollars from related foreign securities transactions. These foreign currency exchange contracts are negotiated at the current spot exchange rate with settlement typically within two business days thereafter.
During the year ended December 30, 2011, the Fund had daily average contract amounts on forward foreign currency contracts to buy and sell of $13,905 and $21,677, respectively.
Additional associated risk to the Fund includes counterparty credit risk. Counterparty credit risk arises from the possibility that the counterparty will default.
Futures Contracts
A futures contract is a commitment to buy or sell a specific amount of a 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 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.
Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses.
35 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
5. Risk Exposures and the Use of Derivative Instruments Continued
Futures contracts are reported on a schedule following the Statement of Investments. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. Cash held by the broker 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. The net change in unrealized appreciation and depreciation is reported in the Statement of Operations. Realized gains (losses) are reported in the Statement of Operations 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 year ended December 30, 2011, the Fund had an ending monthly average market value of $8,387,118 and $14,904,462 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.
6. Restricted Securities
As of December 30, 2011, 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 Statement of Investments. Restricted securities are reported on a schedule following the Statement of Investments.
7. Pending Litigation
Since 2009, a number of class action, derivative and individual lawsuits have been pending in federal and state courts against OppenheimerFunds, Inc., the Fund’s investment advisor (the “Manager”), OppenheimerFunds Distributor, Inc., the Fund’s principal underwriter and distributor (the “Distributor”), and certain funds (but not including the Fund) advised by the Manager and distributed by the Distributor (the “Defendant Funds”). Several of these lawsuits also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The lawsuits raise claims under federal securities laws and various states’ securities, consumer protection and common law and allege, among other things, that the disclosure documents of the respective Defendant Funds contained misrepresentations and omissions and that the respective Defendant Funds’ investment policies were not followed. The plaintiffs in these actions seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. On September 30, 2011, the U.S. District Court for the District of Colorado entered orders and final judgments approving the settlement of certain putative class actions involving two Defendant Funds, Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund. Those orders are not subject to further appeal. These settlements do not resolve other outstanding lawsuits relating to Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund, nor do the settlements affect certain other putative class action lawsuits pending in federal court against the Manager, the Distributor, and other Defendant Funds and their independent trustees.
In 2009, what are claimed to be derivative lawsuits were filed in New Mexico state court against the Manager and a subsidiary (but not against the Fund) on behalf of the New Mexico Education Plan Trust challenging a settlement reached in 2010 between the Manager, its subsidiary and the Distributor and the board of the New Mexico section 529 college savings plan. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses. On September 9, 2011, the court denied plaintiffs’ request for a hearing to determine the fairness of the settlement, finding that plaintiffs lacked standing to pursue derivative claims on behalf of the Trust. On October 27, 2011, the parties to these actions filed a joint motion to dismiss the lawsuits with prejudice, which the court granted on October 28, 2011.
36 | OPPENHEIMER BALANCED FUND/VA
Other class action and individual lawsuits have been filed since 2008 in various state and federal courts against the Manager and certain of its affiliates by investors seeking to recover investments they allegedly lost as a result of the “Ponzi” scheme run by Bernard L. Madoff and his firm, Bernard L. Madoff Investment Securities, LLC (“BLMIS”). Plaintiffs in these suits allege that they suffered losses as a result of their investments in several funds managed by an affiliate of the Manager and assert a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. Neither the Distributor, nor any of the Oppenheimer mutual funds, their independent trustees or directors are named as defendants in these lawsuits. None of the Oppenheimer mutual funds invested in any funds or accounts managed by Madoff or BLMIS. On February 28, 2011, a stipulation of partial settlement of three groups of consolidated putative class action lawsuits relating to these matters was filed in the U.S. District Court for the Southern District of New York. On August 19, 2011, the court entered an order and final judgment approving the settlement as fair, reasonable and adequate. In September 2011, certain parties filed notices of appeal from the court’s order approving the settlement. On July 29, 2011, a stipulation of settlement between certain affiliates of the Manager and the Trustee appointed under the Securities Investor Protection Act to liquidate BLMIS was filed in the U.S. Bankruptcy Court for the Southern District of New York to resolve purported preference and fraudulent transfer claims by the Trustee. On September 22, 2011, the court entered an order approving the settlement as fair, reasonable and adequate. In October 2011, certain parties filed notices of appeal from the court’s order approving the settlement. The aforementioned settlements do not resolve other outstanding lawsuits against the Manager and its affiliates relating to BLMIS.
On April 16, 2010, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark IV Funding Limited (“AAArdvark IV”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark IV. Plaintiffs allege breach of contract against the defendants and seek compensatory damages, costs and disbursements, including attorney fees. On July 15, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark Funding Limited (“AAArdvark I”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark I. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees. On November 9, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark XS Funding Limited (“AAArdvark XS”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark XS. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees.
The Manager believes the lawsuits and appeals described above are without legal merit and, with the exception of actions it has settled, is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to represent the Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer mutual funds.
37 | OPPENHEIMER BALANCED FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:
We have audited the accompanying statement of assets and liabilities of Oppenheimer Balanced Fund/VA (a separate series of Oppenheimer Variable Account Funds), including the statement of investments, as of December 30, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of Oppenheimer Balanced Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 30, 2011, by correspondence with the custodian, transfer agent and brokers, or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Balanced Fund/VA as of December 30, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended, in conformity with U.S. generally accepted accounting principles.
KPMG llp
Denver,Colorado
February 16, 2012
38 | OPPENHEIMER BALANCED FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
In early 2012, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2011. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service.
Dividends, if any, paid by the Fund during the fiscal year ended December 30, 2011 which are not designated as capital gain distributions should be multiplied by the maximum amount allowable but not less than 26.69% to arrive at the amount eligible for the corporate dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance.
39 | OPPENHEIMER BALANCED FUND/VA
BOARD APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT Unaudited
Each year, the Board of Trustees (the “Board”), including a majority of the independent Trustees, is required to determine whether to renew the Fund’s investment advisory agreement (the “Agreement”). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager’s services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager and its affiliates, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. The Board was aware that there are alternatives to retaining the Manager.
Outlined below is a summary of the principal information considered by the Board as well as the Board’s conclusions.
Nature, Quality and Extent of Services. The Board considered information about the nature, quality and extent of the services provided to the Fund and information regarding the Manager’s key personnel who provide such services. The Manager’s duties include providing the Fund with the services of the portfolio managers and the Manager’s investment team, who provide research, analysis and other advisory services in regard to the Fund’s investments; securities trading services; oversight of third-party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund’s investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel who are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund’s operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund’s shares. The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the quality of the Manager’s resources that are available to the Fund. The Board took account of the fact that the Manager has had over fifty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager’s advisory, administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager’s key personnel and the size and functions of its staff. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Mitch Williams, Krishna Memani, and Peter Strzalkowski, the portfolio managers for the Fund, and the Manager’s investment team and analysts. The Board members also considered the totality of their experiences with the Manager as directors or trustees of the Fund and other funds advised by the Manager. The Board considered information regarding the quality of services provided by affiliates of the Manager, which its members have become knowledgeable about in connection with the renewal of the Fund’s service agreements. The Board concluded, in light of the Manager’s experience, reputation, personnel, operations and resources that the Fund benefits from the services provided under the Agreement.
Investment Performance of the Manager and the Fund. Throughout the year, the Manager provided information on the investment performance of the Fund and the Manager, including comparative performance information. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund’s historical performance to relevant market indices and to the performance of other mixed-asset target allocation moderate
40 | OPPENHEIMER BALANCED FUND/VA
funds underlying variable insurance products. The Board considered that the Fund outperformed its performance universe median during the one-year Lipper period, although it underperformed its performance universe median during the three-, five-, and ten-year periods. The Board noted the appointment on April 1, 2009 of a new portfolio manager for the Fund and of the head of the Investment Grade Fixed Income Team to oversee the Fund’s investments. The Board also noted that the Fund performed in the second quintile of its performance universe for the year to date ended April 30, 2011.
Costs of Services by the Manager. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also considered the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund and other mixed-asset target allocation moderate funds underlying variable insurance products. In reviewing the fees and expenses charged to the VA funds, the Board considered the Manager’s assertion that, because there is much greater disparity in the fees and services that may be provided by a manager to a VA fund as opposed to a retail fund, when comparing the expenses of the various VA funds to those of retail funds, it is most appropriate to focus on total expenses (rather than on the management fees). Accordingly, while the Board reviewed and considered all expenses, it focused on total expenses. The Board considered that the Fund’s actual management fees and total expenses were lower than its expense group median. The Board also considered that the Manager has voluntarily agreed to waive a portion of the management fee so that total annual fund operating expenses will not exceed 0.67% of average annual net assets for Non-Service shares and 0.92% of average annual net assets for Service shares. This voluntary expense limitation may not be amended or withdrawn until one year after the date of the prospectus.
Economies of Scale and Profits Realized by the Manager. The Board considered information regarding the Manager’s costs in serving as the Fund’s investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager’s profitability from its relationship with the Fund. The Board reviewed whether the Manager may realize economies of scale in managing and supporting the Fund. The Board noted that the Fund currently has management fee breakpoints, which are intended to share with Fund shareholders economies of scale that may exist as the Fund’s assets grow.
Other Benefits to the Manager. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager’s affiliates and research provided to the Manager in connection with permissible brokerage arrangements (soft dollar arrangements). The Board also considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide quality services to the Fund.
Conclusions. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees’ counsel are independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the Agreement through August 31, 2012. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the above information, and considered the terms and conditions of the Agreement, including the management fee, in light of all of the surrounding circumstances.
41 | OPPENHEIMER BALANCED FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities (“portfolio proxies”) held by the Fund. A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund’s website at oppenheimerfunds.com, and (iii) on the SEC’s website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund’s voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC’s website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund’s Form N-Q filings are available on the SEC’s website at www.sec.gov. Those forms may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
42 | OPPENHEIMER BALANCED FUND/VA
TRUSTEES AND OFFICERS Unaudited
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Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
| | |
INDEPENDENT TRUSTEES | | The address of each Trustee in the chart below is 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Trustee serves for an indefinite term, or until his or her resignation, retirement, death or removal. |
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William L. Armstrong, Chairman of the Board of Trustees (since 2003), Trustee (since 1999) Age: 74 | | President, Colorado Christian University (since 2006); Chairman, Cherry Creek Mortgage Company (since 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso Mortgage Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman, Broadway Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), former Director of Campus Crusade for Christ (non-profit) (1991-2008); former Director, The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (2002-2006); former Chairman of: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Armstrong has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Edward L. Cameron, Trustee (since 1999) Age: 73 | | Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000 — June 2006); Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (accounting firm) (July 1994-June 1998). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Cameron has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Jon S. Fossel, Trustee (since 1990) Age: 69 | | Chairman of the Board (since 2006) and Director (since June 2002) of UNUMProvident (insurance company); Director of Northwestern Energy Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003 and February 2005-February 2007); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. (“OAC”) (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Fossel has served on the Boards of certain Oppenheimer funds since 1990, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Sam Freedman, Trustee (since 1996) Age: 71 | | Director of Colorado UpLIFT (charitable organization) (since September 1984). Mr. Freedman held several positions with the Manager and with subsidiary or affiliated companies of the Manager (until October 1994). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Freedman has served on the Boards of certain Oppenheimer funds since 1996, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Beverly L. Hamilton, Trustee (since 2002) Age: 65 | | Trustee of Monterey Institute for International Studies (educational organization) (since February 2000); Board Member of Middlebury College (educational organization) (since December 2005); Chairman (since 2010) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); Director of The California Endowment (philanthropic organization) (April 2002-April 2008); Director (February 2002-2005) and Chairman of Trustees (2006-2007) of the Community Hospital of Monterey Peninsula; Director (October 1991-2005); Vice Chairman (2006-2009) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation (2001-2006) and The University of Michigan (since 2000); Advisor at Credit Suisse First |
43 | OPPENHEIMER BALANCED FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
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|
Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
|
Beverly L. Hamilton, Continued | | Boston’s Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member of the investment committee of Hartford Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 36 portfolios in the OppenheimerFunds complex. Ms. Hamilton has served on the Boards of certain Oppenheimer funds since 2002, during which time she has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Robert J. Malone, Trustee (since 2002) Age: 67 | | Board of Directors of Opera Colorado Foundation (non-profit organization) (since March 2008); Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University (educational organization)(since August 2005); Chairman, Chief Executive Officer and Director of Steele Street Bank & Trust (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Malone has served on the Boards of certain Oppenheimer funds since 2002, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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F. William Marshall, Jr., Trustee (since 2000) Age: 69 | | Trustee Emeritus of Worcester Polytech Institute (WPI) (private university) (since 2009); Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment company) (since 1996) and MML Series Investment Fund (investment company) (since 1996); President and Treasurer of the SIS Funds (private charitable fund) (January 1999 — March 2011); Former Trustee of WPI (1985-2008); Former Chairman of the Board (2004-2006) and Former Chairman of the Investment Committee of WPI (1994-2008); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999); and Former President and Chief Executive Officer of SIS Bancorp. (1993-1999). Oversees 38 portfolios in the OppenheimerFunds complex. Mr. Marshall has served on the Boards of certain Oppenheimer funds since 2000, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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INTERESTED TRUSTEE AND OFFICER | | The address of Mr. Glavin is Two World Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008. Mr. Glavin serves as a Trustee for an indefinite term, or until his resignation, retirement, death or removal and as an Officer for an indefinite term, or until his resignation, retirement, death or removal. Mr. Glavin is an Interested Trustee due to his positions with OppenheimerFunds, Inc. and its affiliates. |
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William F. Glavin, Jr., Trustee, President and Principal Executive Officer (since 2009) Age: 53 | | Chairman of the Manager (since December 2009); Chief Executive Officer and Director of the Manager (since January 2009); President of the Manager (since May 2009); Director of Oppenheimer Acquisition Corp. (“OAC”) (the Manager’s parent holding company) (since June 2009); Executive Vice President (March 2006-February 2009) and Chief Operating Officer (July 2007-February 2009) of Massachusetts Mutual Life Insurance Company (OAC’s parent company); Director (May 2004-March 2006) and Chief Operating Officer and Chief Compliance Officer (May 2004-January 2005), President (January 2005-March 2006) and Chief Executive Officer (June 2005- March 2006) of Babson Capital Management LLC; Director (March 2005-March 2006), President (May 2003-March 2006) and Chief Compliance Officer (July 2005-March 2006) of Babson Capital Securities, Inc. (a broker-dealer); President (May 2003-March 2006) of Babson Investment Company, Inc.; Director (May 2004- August 2006) of Babson Capital Europe Limited; Director (May 2004-October 2006) of Babson Capital Guernsey Limited; Director (May 2004-March 2006) of Babson Capital Management LLC; Non-Executive Director (March 2005-March 2007) of Baring Asset Management Limited; Director (February 2005-June 2006) Baring Pension Trustees Limited; Director and Treasurer (December 2003-November 2006) of Charter Oak Capital Management, Inc.; Director (May 2006-September 2006) of C.M. Benefit Insurance Company; Director (May 2008-June 2009) and Executive Vice President (June 2007-July 2009) of C.M. Life Insurance Company; President (March 2006-May 2007) of MassMutual Assignment Company; Director (January 2005-December 2006), Deputy Chairman (March 2005-December 2006) and President (February 2005-March 2005) of MassMutual Holdings (Bermuda) Limited; Director (May 2008-June 2009) and Executive Vice President |
44 | OPPENHEIMER BALANCED FUND/VA
| | |
|
Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
| | |
William F. Glavin, Jr., Continued | | (June 2007-July 2009) of MML Bay State Life Insurance Company; Chief Executive Officer and President (April 2007-January 2009) of MML Distributors, LLC; and Chairman (March 2006-December 2008) and Chief Executive Officer (May 2007-December 2008) of MML Investors Services, Inc. Oversees 63 portfolios as a Trustee/Director and 96 portfolios as an officer in the OppenheimerFunds complex. |
| | |
OTHER OFFICERS OF THE FUND | | The addresses of the Officers in the chart below are as follows: for Messrs. Memani, Strzalkowski, Williams, Gabinet and Ms. Nasta, Two World Financial Center, 225 Liberty Street, New York, New York 10281-1008, for Messrs. Vandehey and Wixted. Each Officer serves for an indefinite term or until his or her resignation, retirement, death or removal. |
| | |
Krishna Memani, Vice President (since 2009) Age: 51 | | Director of Fixed Income (since October 2010), Senior Vice President and Head of the Investment Grade Fixed Income Team of the Manager (since March 2009). Prior to joining the Manager, Managing Director and Head of the U.S. and European Credit Analyst Team at Deutsche Bank Securities (June 2006-January 2009); Chief Credit Strategist at Credit Suisse Securities (August 2002-March 2006); a Managing Director and Senior Portfolio Manager at Putnam Investments (September 1998-June 2002). A portfolio manager and an officer of 22 portfolios in the OppenheimerFunds complex. |
| | |
Peter A. Strzalkowski, Vice President (since 2009) Age: 46 | | Vice President of the Manager (since August 2007), a Chartered Financial Analyst and a member of the Manager’s Investment Grade Fixed Income Team (since April 2009). Prior to joining the Manager, Managing Partner and Chief Investment Officer of Vector Capital Management, LLC, a structured products money management firm he founded, (July 2006-August 2007); a Senior Portfolio Manager at Highland Capital Management, L.P. (June 2005-July 2006) and a Senior Fixed Income Portfolio Manager at Microsoft Corp. (June 2003-June 2005); a Vice President and Senior Fixed Income Portfolio Manager at First Citizens Bank Trust, Capital Management Group (April 2000-June 2003); a Vice President and Fixed Income Portfolio Manager at Centura Banks (November 1998-April 2000). A portfolio manager and officer of 7 portfolios in the OppenheimerFunds complex. |
| | |
Mitch Williams, Vice President (since 2011) Age: 43 | | Vice President of the Manager (since July 2006); a Chartered Financial Analyst and a Senior Research Analyst of the Manager (since April 2002). Prior to joining the manager, Vice President and Research Analyst for Evergreen Funds (October 2000-January 2002). A portfolio manager and officer of 6 portfolios in the OppenheimerFunds complex. |
| | |
Arthur S. Gabinet, Secretary (since 2011) Age: 53 | | Executive Vice President (since May 2010) and General Counsel (since January 2011) of the Manager; General Counsel of the Distributor (since January 2011); General Counsel of Centennial Asset Management Corporation (since January 2011); Executive Vice President and General Counsel of HarbourView Asset Management Corporation (since January 2011); Assistant Secretary (since January 2011) and Director (since January 2011) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since January 2011); Director of Oppenheimer Real Asset Management, Inc. (since January 2011); Executive Vice President and General Counsel of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since January 2011); Executive Vice President and General Counsel of OFI Private Investments, Inc. (since January 2011); Vice President of OppenheimerFunds Legacy Program (since January 2011); Executive Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since January 2011); General Counsel, Asset Management of the Manager (May 2010-December 2010); Principal, The Vanguard Group (November 2005-April 2010); District Administrator, U.S. Securities and Exchange Commission (January 2003-October 2005). An officer of 96 portfolios in the OppenheimerFunds complex. |
| | |
Christina M. Nasta, Vice President and Chief Business Officer (since 2011) Age: 38 | | Senior Vice President of the Manager (since July 2010); Vice President of the Manager (since January 2003); Vice President of OppenheimerFunds Distributor, Inc. (since January 2003). An officer of 96 portfolios in the OppenheimerFunds complex. |
| | |
Mark S. Vandehey, Vice President and Chief Compliance Officer (since 2004) Age: 61 | | Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983). An officer of 96 portfolios in the OppenheimerFunds complex. |
45 | OPPENHEIMER BALANCED FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
| | |
|
Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
| | |
Brian W. Wixted, Treasurer and Principal Financial & Accounting Officer (since 1999) Age: 52 | | Senior Vice President of the Manager (since March 1999); Treasurer of the Manager and the following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership Holdings, Inc. (March 1999-June 2008), OFI Private Investments, Inc. (March 2000-June 2008), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of OAC (March 1999-June 2008). An officer of 96 portfolios in the OppenheimerFunds complex. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and Officers and is available without charge, upon request, by calling 1.800.988.8287.
46 | OPPENHEIMER BALANCED FUND/VA
OPPENHEIMER BALANCED FUND/VA
A Series of Oppenheimer Variable Account Funds
| | |
|
Manager | | OppenheimerFunds, Inc. |
| | |
Distributor | | OppenheimerFunds Distributor, Inc. |
| | |
Transfer Agent | | OppenheimerFunds Services |
| | |
Independent Registered | | KPMG LLP |
Public Accounting Firm | | |
| | |
Counsel | | K&L Gates LLP |
| | |
| | Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing. |
©2012 OppenheimerFunds, Inc. All rights reserved.
A Series of Oppenheimer Variable Account Funds |
Listing of Top Holdings Fund Performance Discussion Financial Statements |
OPPENHEIMER CAPITAL APPRECIATION FUND/VA
Portfolio Manager: Julie Van Cleave, CFA
Average Annual Total Returns
For the Periods Ended 12/30/111
| | | | | | | | | | | | |
| | 1-Year | | 5-Year | | 10-Year |
|
Non-Service Shares | | | –1.15 | % | | | –0.56 | % | | | 1.23 | % |
Service Shares | | | –1.37 | % | | | –0.81 | % | | | 0.97 | % |
Expense Ratios
For the Fiscal Year Ended 12/30/111
| | | | |
|
Non-Service Shares | | | 0.80 | % |
Service Shares | | | 1.05 | |
The performance data quoted represents past performance, which does not guarantee future results.
The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance and expense ratios may be lower or higher than the data quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account.
Sector Allocation
Portfolio holdings and allocations are subject to change. Percentages are as of December 30, 2011, and are based on the total market value of common stocks.
| | | | |
|
Top Ten Common Stock Holdings | | | | |
Apple, Inc. | | | 6.5 | % |
QUALCOMM, Inc. | | | 4.6 | |
Google, Inc., Cl. A | | | 3.4 | |
McDonald’s Corp. | | | 2.4 | |
Oracle Corp. | | | 2.1 | |
Allergan, Inc. | | | 2.1 | |
Union Pacific Corp. | | | 2.1 | |
Costco Wholesale Corp. | | | 2.0 | |
Occidental Petroleum Corp. | | | 1.9 | |
Coca-Cola Co. (The) | | | 1.9 | |
Portfolio holdings and allocations are subject to change. Percentages are as of December 30, 2011, and are based on net assets.
2 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FUND PERFORMANCE DISCUSSION
Management’s Discussion of Fund Performance. The Fund’s Non-Service shares produced a total return of -1.15% for the reporting period ended December 30, 2011.1 On a relative basis, the Fund underperformed the Russell 1000 Growth Index (the “Index”), which returned 2.64% and the S&P 500 Index, which returned 2.11%. The bulk of the Fund’s declines occurred over the third quarter of 2011, when the U.S. equity market experienced significant volatility. The Fund underperformed the Index primarily in the energy sector due to stock selection. The Fund outperformed versus the Index primarily in consumer discretionary.
Economic and Market Overview
The reporting period began with a sense of market optimism over improving Gross Domestic Product (“GDP”) growth in Europe and the U.S., and equity markets in those regions overall experienced solid gains through the first four months of 2011. After strong gains in 2010, most developing market equities started the year off lagging their developed market counterparts due to concerns over slowing growth and rising inflation.
Market volatility across global equity markets grew over the second quarter of 2011 when Greece again teetered on the brink of defaulting on its sovereign debt, rekindling worries that fiscal instability might spread to other parts of Europe. Concerns over the economic problems in other European countries intensified as did a sense of unease over the health of the European banking system. A natural disaster in Japan caused disruptions in supply chains in the information technology sector and the automotive industry. Previously high-flying economies such as Brazil, Australia and India saw their GDP numbers cool off significantly as they struggled to keep their economies from heading into recession. In the U.S., the Fed’s latest round of quantitative easing, labeled “QE2”, officially ended on June 30, adding to questions around what the Fed’s next move might be to help stimulate the U.S. economy. These developments, in addition to persistently high levels of U.S. unemployment and a depressed U.S. housing market, contributed to a weaker-than-expected estimate of U.S. GDP during the second quarter of the year.
Due to the sluggish economy and lowered expectations for future economic growth, global equities began a decline over the summer that intensified as the third quarter progressed. The markets priced in a renewed sense of pessimism that Europe might succumb to a double-dip recession and that the U.S. was headed for a prolonged period of disappointing growth. Uncertainty and market nervousness grew as a deal to raise the U.S. debt ceiling was not reached until shortly before the deadline. As a result of the intense political wrangling, the credit rating agency Standard & Poor’s took the unprecedented and controversial step of downgrading the debt of the U.S., a decision that the two other major U.S. credit rating agencies opted not to follow. These events, coupled with the high likelihood of a Greek default on its debt and worries that Italy might be next, sent stocks sharply lower over the third quarter of 2011.
In the fourth quarter, equity markets finished the period largely on a positive note, rebounding strongly in October in particular, as European leaders sought to undertake measures to address the debt issues in the region and the U.S. economy began to show some signs of life as high unemployment trended downward, the housing market picked up slightly and consumer sentiment improved.
Top Individual Contributors
The top contributor to overall performance was information technology holding Apple, Inc., which was also the top holding of the Fund at period end. Apple continued to out-execute its peers. The company’s continued success at innovation and highly recognizable brand led to global growth and share gains across its top revenue producing products—iPhones, iPads and Mac PCs. QUALCOMM, Inc., the Fund’s second largest holding at period end, was another information technology stock that contributed positively to Fund performance. During the period, QUALCOMM experienced strong sales and completed its acquisition of Atheros Communications, Inc., which is a developer of wireless connectivity chips such as WiFi. QUALCOMM also began to benefit from share gains in smartphones, by becoming a leading supplier to market leader Apple, Inc.
1. December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011.
3 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FUND PERFORMANCE DISCUSSION
Outside of the information technology sector, aerospace and defense company Goodrich Corp. produced positive results for the Fund. During the period, United Technologies Corp. announced that it planned to purchase Goodrich for $127.50 per share. The market reacted positively to this news, sending Goodrich’s stock price higher. Within the consumer discretionary sector, fast food chain McDonald’s Corp. posted solid results, as it benefited from the popularity of its McCafe beverage line-up, breakfasts and its premium chicken sandwiches.
The Fund also received positive results from pharmaceutical holdings Bristol-Myers Squibb Co. and Allergan, Inc. Bristol-Myers Squibb, which produces such drugs as Plavix and Abilify, benefited from recent trial results for Eliquis, an anticoagulant that showed “best in class” data for both stroke and major bleeding against the existing drug Warfarin, while also showing a statistically significant reduction in mortality. Additionally, a competing drug from Johnson & Johnson/Bayer, which is currently in trials, experienced a setback from the Food and Drug Administration (FDA). Multi-specialty health care company Allergan continued to benefit from sales of Botox.
Top Individual Detractors
During the reporting period, information technology stocks Juniper Networks, Inc. and Broadcom Corp. detracted from Fund performance. During the period, Juniper Networks was impacted by slowing capital expenditure trends at telecommunications services companies who were paralyzed by the weakening global economy and European uncertainty. Semiconductor firm Broadcom had a difficult reporting period, as the semiconductor industry generally did not fare well given the difficult economic environment and lack of new investment. In telecommunication services, NII Holdings, Inc. detracted from performance. NII Holdings’ stock declined over the last quarter of 2011 after reporting a third-quarter loss and a lowered revenue outlook for 2011. We exited our position by period end.
Energy holding Baker Hughes, Inc. and health care stock Illumina, Inc. detracted from Fund results given the significant market volatility over the second half of 2011. Baker Hughes is the world’s third largest oilfield services company delivering focused efforts on shale gas and other oilfield services. The Fund’s investment in Baker Hughes was negatively impacted by a sell-off in energy stocks in the third quarter of 2011 as crude oil prices declined amid concerns that an economic slowdown could dampen demand. Biotech firm Illumina fell sharply after it warned it would miss third quarter revenue forecasts and withdraw its full-year estimate. While biotech stocks overall performed poorly for the period, Illumina’s stock fell further than most after it expressed a negative outlook for research funding in the U.S. and Europe and a drop in demand for the company’s Genome Analyzer equipment. We exited our position by period end.
Outlook
Weak GDP numbers in multiple regions of the globe have raised questions around whether the fragile global economic recovery has reversed course and begun a slide back into recession. Concerns exist that slow or negative growth will negatively impact consumer sentiment and spending habits, leading to further weakness in the global economy and the markets. The markets are pricing in a great deal of uncertainty, whether that uncertainty lies with the outcomes of the debates in the U.S. Congress over debt reduction or the political upheavals across much of Europe. Improving unemployment figures in the U.S. offer some degree of optimism for the U.S economy. Measures being undertaken in Europe to shore up the euro and the Eurozone may help to stem in 2012 some of the significant market volatility we saw in 2011.
Despite the market volatility we have witnessed of late, we remain confident in our investment approach. We will continue to search for companies that, in our view, offer strong earnings prospects and are trading at attractive valuations. We believe that moments like these can lead to significant investment opportunities where solid companies are undervalued and which we can purchase at an attractive price. While current global political and economic conditions are causing significant market fluctuations, we have not changed our long-term approach to investing and believe that reacting strongly to short-term market gyrations is rarely warranted or a prudent investment strategy.
4 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing.
Total returns include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown.
The Fund’s investment strategy and focus can change over time. The mention of specific fund holdings does not constitute a recommendation by OppenheimerFunds, Inc.
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.
Comparing the Fund’s Performance to the Market. The graphs that follow show the performance of a hypothetical $10,000 investment in each share class of the Fund held until December 30, 2011. Performance is measured over a ten-fiscal-year period for both Classes. Performance information does not reflect charges that apply to separate accounts investing in the Fund. If these charges were taken into account, performance would be lower. The graphs assume that all dividends and capital gains distributions were reinvested in additional shares.
The Fund’s performance is compared to the performance of the S&P 500 Index, an unmanaged index of large-capitalization equity securities that is a measure of the general domestic stock market, and the Russell 1000 Growth Index, an unmanaged index of 1,000 U.S. large cap growth stocks. Index performance includes reinvestment of income but does not reflect transaction costs, fees or expenses. The Fund’s performance reflects the effects of the Fund’s business and operating expenses. While index comparisons may be useful to provide a benchmark for the Fund’s performance, it must be noted that the Fund’s investments are not limited to the securities comprising the indices.
5 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FUND PERFORMANCE DISCUSSION
Non-Service Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Capital Appreciation Fund/VA (Non-Service) S&P 500 Index Russell 1000 Growth Index |
Service Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Capital Appreciation Fund/VA (Service) S&P 500 Index Russell 1000 Growth Index |
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account.
1. December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011.
6 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FUND EXPENSES
Fund Expenses. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 30, 2011.
Actual Expenses. The first section of the table provides information about actual account values and actual expenses. You may use the information in this section for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes. The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio for each class of shares, and an assumed rate of return of 5% per year for each class before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the “hypothetical” lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included your costs would have been higher.
| | | | | | | | | | | | |
| | Beginning | | | Ending | | | Expenses | |
| | Account | | | Account | | | Paid During | |
| | Value | | | Value | | | 6 Months Ended | |
| | July 1, 2011 | | | December 30, 2011 | | | December 30, 2011 | |
|
Actual | | | | | | | | | | | | |
Non-Service shares | | $ | 1,000.00 | | | $ | 937.30 | | | $ | 3.84 | |
Service shares | | | 1,000.00 | | | | 936.30 | | | | 5.06 | |
| | | | | | | | | | | | |
Hypothetical (5% return before expenses) | | | | | | | | | | | | |
Non-Service shares | | | 1,000.00 | | | | 1,021.11 | | | | 4.01 | |
Service shares | | | 1,000.00 | | | | 1,019.85 | | | | 5.28 | |
Expenses are equal to the Fund’s annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). Those annualized expense ratios, excluding indirect expenses from affiliated fund, based on the 6-month period ended December 30, 2011 are as follows:
| | | | |
Class | | Expense Ratios |
|
Non-Service shares | | | 0.79 | % |
Service shares | | | 1.04 | |
The expense ratios reflect voluntary waivers and/or reimbursements of expenses by the Fund’s Manager. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund’s prospectus. The “Financial Highlights” tables in the Fund’s financial statements, included in this report, also show the gross expense ratios, without such waivers or reimbursements and reduction to custodian expenses, if applicable.
7 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENT OF INVESTMENTS December 30, 2011*
| | | | | | | | |
| | Shares | | | Value | |
|
Common Stocks—99.0% | | | | | | | | |
Consumer Discretionary—15.4% | | | | | | | | |
Auto Components—1.1% | | | | | | | | |
Johnson Controls, Inc. | | | 345,170 | | | $ | 10,790,014 | |
Hotels, Restaurants & Leisure—3.3% | | | | | | | | |
McDonald’s Corp. | | | 240,060 | | | | 24,085,220 | |
Yum! Brands, Inc. | | | 161,580 | | | | 9,534,836 | |
| | | | | | | |
| | | | | | | 33,620,056 | |
| | | | | | | | |
Internet & Catalog Retail—1.4% | | | | | | | | |
Amazon.com, Inc.1 | | | 80,064 | | | | 13,859,078 | |
Media—1.6% | | | | | | | | |
Walt Disney Co. (The) | | | 420,360 | | | | 15,763,500 | |
Specialty Retail—4.2% | | | | | | | | |
Bed Bath & Beyond, Inc.1 | | | 77,280 | | | | 4,479,922 | |
O’Reilly Automotive, Inc.1 | | | 198,330 | | | | 15,856,484 | |
Tiffany & Co. | | | 153,330 | | | | 10,159,646 | |
TJX Cos., Inc. (The) | | | 194,880 | | | | 12,579,504 | |
| | | | | | | |
| | | | | | | 43,075,556 | |
| | | | | | | | |
Textiles, Apparel & Luxury Goods—3.8% | | | | | | | | |
Coach, Inc. | | | 214,130 | | | | 13,070,495 | |
Nike, Inc., Cl. B | | | 159,740 | | | | 15,394,144 | |
Ralph Lauren Corp. | | | 73,590 | | | | 10,161,307 | |
| | | | | | | |
| | | | | | | 38,625,946 | |
| | | | | | | | |
Consumer Staples—11.7% | | | | | | | | |
Beverages—4.0% | | | | | | | | |
Brown-Forman Corp., Cl. B | | | 104,700 | | | | 8,429,397 | |
Coca-Cola Co. (The) | | | 270,190 | | | | 18,905,194 | |
SABMiller plc | | | 377,520 | | | | 13,234,908 | |
| | | | | | | |
| | | | | | | 40,569,499 | |
| | | | | | | | |
Food & Staples Retailing—2.0% | | | | | | | | |
Costco Wholesale Corp. | | | 239,690 | | | | 19,970,971 | |
Food Products—3.1% | | | | | | | | |
Mead Johnson Nutrition Co., Cl. A | | | 57,800 | | | | 3,972,594 | |
Nestle SA | | | 271,734 | | | | 15,621,884 | |
Unilever NV CVA | | | 338,928 | | | | 11,655,105 | |
| | | | | | | |
| | | | | | | 31,249,583 | |
| | | | | | | | |
Household Products—1.5% | | | | | | | | |
Colgate-Palmolive Co. | | | 169,090 | | | | 15,622,225 | |
Personal Products—0.6% | | | | | | | | |
Estee Lauder Cos., Inc. (The), Cl. A | | | 54,320 | | | | 6,101,222 | |
Tobacco—0.5% | | | | | | | | |
Philip Morris International, Inc. | | | 64,880 | | | | 5,091,782 | |
Energy—11.3% | | | | | | | | |
Energy Equipment & Services—5.3% | | | | | | | | |
Baker Hughes, Inc. | | | 193,570 | | | | 9,415,245 | |
Cameron International Corp.1 | | | 208,180 | | | | 10,240,374 | |
Ensco plc, Sponsored ADR | | | 148,610 | | | | 6,972,781 | |
National Oilwell Varco, Inc. | | | 168,250 | | | | 11,439,318 | |
Schlumberger Ltd. | | | 236,260 | | | | 16,138,921 | |
| | | | | | | |
| | | | | | | 54,206,639 | |
| | | | | | | | |
Oil, Gas & Consumable Fuels—6.0% | | | | | | | | |
Apache Corp. | | | 100,230 | | | | 9,078,833 | |
Chevron Corp. | | | 171,580 | | | | 18,256,112 | |
ConocoPhillips | | | 187,230 | | | | 13,643,450 | |
Occidental Petroleum Corp. | | | 206,680 | | | | 19,365,916 | |
| | | | | | | |
| | | | | | | 60,344,311 | |
| | | | | | | | |
Financials—1.8% | | | | | | | | |
Capital Markets—0.2% | | | | | | | | |
Charles Schwab Corp. (The) | | | 181,470 | | | | 2,043,352 | |
Commercial Banks—0.6% | | | | | | | | |
Standard Chartered plc | | | 264,590 | | | | 5,760,745 | |
Consumer Finance—1.0% | | | | | | | | |
American Express Co. | | | 219,650 | | | | 10,360,891 | |
Health Care—12.1% | | | | | | | | |
Biotechnology—2.1% | | | | | | | | |
Alexion Pharmaceuticals, Inc.1 | | | 67,730 | | | | 4,842,695 | |
Celgene Corp.1 | | | 130,230 | | | | 8,803,548 | |
Vertex Pharmaceuticals, Inc.1 | | | 229,680 | | | | 7,627,673 | |
| | | | | | | |
| | | | | | | 21,273,916 | |
| | | | | | | | |
Health Care Equipment & Supplies—1.3% | | | | | | | | |
Baxter International, Inc. | | | 266,400 | | | | 13,181,472 | |
Life Sciences Tools & Services—1.7% | | | | | | | | |
Mettler-Toledo International, Inc.1 | | | 49,000 | | | | 7,237,790 | |
Thermo Fisher Scientific, Inc.1 | | | 224,650 | | | | 10,102,511 | |
| | | | | | | |
| | | | | | | 17,340,301 | |
| | | | | | | | |
Pharmaceuticals—7.0% | | | | | | | | |
Allergan, Inc. | | | 245,170 | | | | 21,511,216 | |
Bristol-Myers Squibb Co. | | | 499,230 | | | | 17,592,865 | |
Novo Nordisk AS, Cl. B | | | 152,384 | | | | 17,511,438 | |
Roche Holding AG | | | 83,549 | | | | 14,160,546 | |
| | | | | | | |
| | | | | | | 70,776,065 | |
| | | | | | | | |
Industrials—15.0% | | | | | | | | |
Aerospace & Defense—3.4% | | | | | | | | |
Goodrich Corp. | | | 78,122 | | | | 9,663,691 | |
Precision Castparts Corp. | | | 71,670 | | | | 11,810,499 | |
United Technologies Corp. | | | 174,990 | | | | 12,790,019 | |
| | | | | | | |
| | | | | | | 34,264,209 | |
8 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
| | | | | | | | |
| | Shares | | | Value | |
|
Air Freight & Logistics—1.4% | | | | | | | | |
United Parcel Service, Inc., Cl. B | | | 192,050 | | | $ | 14,056,140 | |
Electrical Equipment—1.3% | | | | | | | | |
Emerson Electric Co. | | | 278,810 | | | | 12,989,758 | |
Industrial Conglomerates—1.5% | | | | | | | | |
Danaher Corp. | | | 332,420 | | | | 15,637,037 | |
Machinery—5.3% | | | | | | | | |
Caterpillar, Inc. | | | 151,360 | | | | 13,713,216 | |
Cummins, Inc. | | | 43,420 | | | | 3,821,828 | |
Deere & Co. | | | 93,600 | | | | 7,239,960 | |
Joy Global, Inc. | | | 181,857 | | | | 13,633,819 | |
Parker-Hannifin Corp. | | | 202,230 | | | | 15,420,038 | |
| | | | | | | |
| | | | | | | 53,828,861 | |
| | | | | | | | |
Road & Rail—2.1% | | | | | | | | |
Union Pacific Corp. | | | 196,220 | | | | 20,787,547 | |
Information Technology—26.4% | | | | | | | | |
Communications Equipment—5.2% | | | | | | | | |
Juniper Networks, Inc.1 | | | 305,190 | | | | 6,228,928 | |
QUALCOMM, Inc. | | | 843,470 | | | | 46,137,809 | |
| | | | | | | |
| | | | | | | 52,366,737 | |
| | | | | | | | |
Computers & Peripherals—6.5% | | | | | | | | |
Apple, Inc.1 | | | 162,590 | | | | 65,848,950 | |
Electronic Equipment & Instruments—1.0% | | | | | | | | |
Corning, Inc. | | | 828,440 | | | | 10,753,151 | |
Internet Software & Services—4.8% | | | | | | | | |
eBay, Inc.1 | | | 473,620 | | | | 14,364,895 | |
Google, Inc., Cl. A1 | | | 52,670 | | | | 34,019,553 | |
| | | | | | | |
| | | | | | | 48,384,448 | |
| | | | | | | | |
IT Services—2.7% | | | | | | | | |
International Business Machines Corp. | | | 86,300 | | | | 15,868,844 | |
Visa, Inc., Cl. A | | | 113,257 | | | | 11,498,983 | |
| | | | | | | |
| | | | | | | 27,367,827 | |
Semiconductors & Semiconductor | | | | | | | | |
Equipment—1.1% | | | | | | | | |
Broadcom Corp., Cl. A | | | 395,580 | | | | 11,614,229 | |
Software—5.1% | | | | | | | | |
Intuit, Inc. | | | 300,400 | | | | 15,798,036 | |
Oracle Corp. | | | 845,390 | | | | 21,684,254 | |
Vmware, Inc., Cl. A1 | | | 167,190 | | | | 13,908,536 | |
| | | | | | | |
| | | | | | | 51,390,826 | |
| | | | | | | | |
Materials—5.3% | | | | | | | | |
Chemicals—3.7% | | | | | | | | |
Albemarle Corp. | | | 82,010 | | | | 4,224,335 | |
Ecolab, Inc. | | | 197,680 | | | | 11,427,881 | |
Mosaic Co. (The) | | | 77,660 | | | | 3,916,394 | |
Praxair, Inc. | | | 173,052 | | | | 18,499,259 | |
| | | | | | | |
| | | | | | | 38,067,869 | |
| | | | | | | | |
Metals & Mining—1.6% | | | | | | | | |
Freeport-McMoRan Copper & Gold, Inc., Cl. B | | | 281,190 | | | | 10,344,980 | |
Rio Tinto plc | | | 113,948 | | | | 5,529,995 | |
| | | | | | | |
| | | | | | | 15,874,975 | |
| | | | | | | |
| | | | | | | | |
Total Common Stocks (Cost $735,719,310) | | | | | | | 1,002,859,688 | |
| | | | | | | | |
Investment Company—0.8% | | | | | | | | |
Oppenheimer Institutional Money Market Fund, Cl. E, 0.20%2,3 (Cost $8,136,365) | | | 8,136,365 | | | | 8,136,365 | |
| | | | | | | | |
Total Investments, at Value (Cost $743,855,675) | | | 99.8 | % | | | 1,010,996,053 | |
Other Assets Net of Liabilities | | | 0.2 | | | | 2,202,155 | |
| | |
Net Assets | | | 100.0 | % | | $ | 1,013,198,208 | |
| | |
9 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENT OF INVESTMENTS Continued
Footnotes to Statement of Investments
| | |
* | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Nore 1 of the accompanying Note. |
|
1. | | Non-income producing security. |
|
2. | | Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 30, 2011, 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 period in which the issuer was an affiliate are as follows: |
| | | | | | | | | | | | | | | | |
| | Shares | | | Gross | | | Gross | | | Shares | |
| | December 31, 2010 | | | Additions | | | Reductions | | | December 30, 2011 | |
|
Oppenheimer Institutional Money Market Fund, Cl. E | | | 72,534 | | | | 147,246,660 | | | | 139,182,829 | | | | 8,136,365 | |
| | | | | | | | |
| | Value | | | Income | |
|
Oppenheimer Institutional Money Market Fund, Cl. E | | $ | 8,136,365 | | | $ | 7,315 | |
| | |
3. | | Rate shown is the 7-day yield as of December 30, 2011. |
Valuation Inputs
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 table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 30, 2011 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 | | $ | 155,734,150 | | | $ | — | | | $ | — | | | $ | 155,734,150 | |
Consumer Staples | | | 105,370,374 | | | | 13,234,908 | | | | — | | | | 118,605,282 | |
Energy | | | 114,550,950 | | | | — | | | | — | | | | 114,550,950 | |
Financials | | | 12,404,243 | | | | 5,760,745 | | | | — | | | | 18,164,988 | |
Health Care | | | 122,571,754 | | | | — | | | | — | | | | 122,571,754 | |
Industrials | | | 151,563,552 | | | | — | | | | — | | | | 151,563,552 | |
Information Technology | | | 267,726,168 | | | | — | | | | — | | | | 267,726,168 | |
Materials | | | 53,942,844 | | | | — | | | | — | | | | 53,942,844 | |
Investment Company | | | 8,136,365 | | | | — | | | | — | | | | 8,136,365 | |
| | |
Total Assets | | $ | 992,000,400 | | | $ | 18,995,653 | | | $ | — | | | $ | 1,010,996,053 | |
| | |
Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.
See accompanying Notes to Financial Statements.
10 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 30, 20111
| | | | |
|
Assets | | | | |
Investments, at value—see accompanying statement of investments: | | | | |
Unaffiliated companies (cost $735,719,310) | | $ | 1,002,859,688 | |
Affiliated companies (cost $8,136,365) | | | 8,136,365 | |
| | | |
| | | 1,010,996,053 | |
Cash | | | 2,683 | |
Receivables and other assets: | | | | |
Dividends | | | 2,875,070 | |
Shares of beneficial interest sold | | | 276,097 | |
Other | | | 101,548 | |
| | | |
Total assets | | | 1,014,251,451 | |
Liabilities | | | | |
Payables and other liabilities: | | | | |
Shares of beneficial interest redeemed | | | 607,498 | |
Shareholder communications | | | 213,049 | |
Transfer and shareholder servicing agent fees | | | 86,922 | |
Distribution and service plan fees | | | 71,553 | |
Trustees’ compensation | | | 39,042 | |
Legal, auditing and other professional fees | | | 26,000 | |
Other | | | 9,179 | |
| | | |
Total liabilities | | | 1,053,243 | |
Net Assets | | $ | 1,013,198,208 | |
| | | |
Composition of Net Assets | | | | |
Par value of shares of beneficial interest | | $ | 25,573 | |
Additional paid-in capital | | | 1,040,394,286 | |
Accumulated net investment income | | | 3,993,822 | |
Accumulated net realized loss on investments and foreign currency transactions | | | (298,600,481 | ) |
Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies | | | 267,385,008 | |
| | | |
Net Assets | | $ | 1,013,198,208 | |
| | | |
Net Asset Value Per Share | | | | |
Non-Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $637,868,461 and 16,045,913 shares of beneficial interest outstanding) | | $ | 39.75 | |
Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $375,329,747 and 9,526,732 shares of beneficial interest outstanding) | | $ | 39.40 | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
11 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 30, 20111
| | | | |
|
Investment Income | | | | |
Dividends: | | | | |
Unaffiliated companies (net of foreign withholding taxes of $298,519) | | $ | 15,258,739 | |
Affiliated companies | | | 7,315 | |
Interest | | | 716 | |
| | | |
Total investment income | | | 15,266,770 | |
Expenses | | | | |
Management fees | | | 7,570,152 | |
Distribution and service plan fees—Service shares | | | 1,018,862 | |
Transfer and shareholder servicing agent fees: | | | | |
Non-Service shares | | | 714,086 | |
Service shares | | | 407,595 | |
Shareholder communications: | | | | |
Non-Service shares | | | 104,964 | |
Service shares | | | 59,333 | |
Trustees’ compensation | | | 52,240 | |
Custodian fees and expenses | | | 33,816 | |
Administration service fees | | | 1,500 | |
Other | | | 73,144 | |
| | | |
Total expenses | | | 10,035,692 | |
Less waivers and reimbursements of expenses | | | (91,612 | ) |
| | | |
Net expenses | | | 9,944,080 | |
Net Investment Income | | | 5,322,690 | |
Realized and Unrealized Gain (Loss) | | | | |
Net realized gain on: | | | | |
Investments from unaffiliated companies | | | 51,490,189 | |
Foreign currency transactions | | | 7,557,246 | |
| | | |
Net realized gain | | | 59,047,435 | |
Net change in unrealized appreciation/depreciation on: | | | | |
Investments | | | (66,910,317 | ) |
Translation of assets and liabilities denominated in foreign currencies | | | (7,021,334 | ) |
| | | |
Net change in unrealized appreciation/depreciation | | | (73,931,651 | ) |
Net Decrease in Net Assets Resulting from Operations | | $ | (9,561,526 | ) |
| | | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
12 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
| | | | | | | | |
| | Year Ended | | Year Ended |
| | December 30, | | December 31, |
| | 20111 | | 2010 |
|
Operations | | | | | | | | |
Net investment income | | $ | 5,322,690 | | | $ | 3,239,641 | |
Net realized gain | | | 59,047,435 | | | | 159,280,200 | |
Net change in unrealized appreciation/depreciation | | | (73,931,651 | ) | | | (38,941,658 | ) |
| | |
Net increase (decrease) in net assets resulting from operations | | | (9,561,526 | ) | | | 123,578,183 | |
Dividends and/or Distributions to Shareholders | | | | | | | | |
Dividends from net investment income: | | | | | | | | |
Non-Service shares | | | (2,685,368 | ) | | | (1,796,034 | ) |
Service shares | | | (448,818 | ) | | | — | |
| | |
| | | (3,134,186 | ) | | | (1,796,034 | ) |
Beneficial Interest Transactions | | | | | | | | |
Net decrease in net assets resulting from beneficial interest transactions: | | | | | | | | |
Non-Service shares | | | (125,913,455 | ) | | | (385,079,054 | ) |
Service shares | | | (43,268,026 | ) | | | (59,987,624 | ) |
| | |
| | | (169,181,481 | ) | | | (445,066,678 | ) |
Net Assets | | | | | | | | |
Total decrease | | | (181,877,193 | ) | | | (323,284,529 | ) |
Beginning of period | | | 1,195,075,401 | | | | 1,518,359,930 | |
| | |
End of period (including accumulated net investment income of $3,993,822 and $1,761,658, respectively) | | $ | 1,013,198,208 | | | $ | 1,195,075,401 | |
| | |
| | |
1 | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
13 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | | | | | |
Non-Service Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | | | | | |
| | | | | |
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 40.35 | | | $ | 36.94 | | | $ | 25.67 | | | $ | 47.18 | | | $ | 41.43 | | | | | |
|
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income2 | | | .23 | | | | .11 | | | | .09 | | | | .10 | | | | .07 | | | | | |
Net realized and unrealized gain (loss) | | | (.69 | ) | | | 3.36 | | | | 11.27 | | | | (21.55 | ) | | | 5.78 | | | | | |
| | |
Total from investment operations | | | (.46 | ) | | | 3.47 | | | | 11.36 | | | | (21.45 | ) | | | 5.85 | | | | | |
|
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.14 | ) | | | (.06 | ) | | | (.09 | ) | | | (.06 | ) | | | (.10 | ) | | | | |
|
Net asset value, end of period | | $ | 39.75 | | | $ | 40.35 | | | $ | 36.94 | | | $ | 25.67 | | | $ | 47.18 | | | | | |
| | |
Total Return, at Net Asset Value3 | | | (1.15 | )% | | | 9.42 | % | | | 44.52 | % | | | (45.52 | )% | | | 14.15 | % | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 637,868 | | | $ | 771,086 | | | $ | 1,074,190 | | | $ | 829,931 | | | $ | 1,631,791 | | | | | |
|
Average net assets (in thousands) | | $ | 713,770 | | | $ | 976,242 | | | $ | 927,670 | | | $ | 1,256,525 | | | $ | 1,631,686 | | | | | |
|
Ratios to average net assets:4 | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.57 | % | | | 0.31 | % | | | 0.29 | % | | | 0.25 | % | | | 0.15 | % | | | | |
Total expenses5 | | | 0.80 | % | | | 0.79 | % | | | 0.78 | % | | | 0.66 | % | | | 0.65 | % | | | | |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 0.80 | % | | | 0.79 | % | | | 0.78 | % | | | 0.66 | % | | | 0.65 | % | | | | |
|
Portfolio turnover rate | | | 27 | % | | | 58 | % | | | 46 | % | | | 67 | % | | | 59 | % | | | | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
4. | | Annualized for periods less than one full year. |
|
5. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 0.80 | % |
Year Ended December 31, 2010 | | | 0.79 | % |
Year Ended December 31, 2009 | | | 0.78 | % |
Year Ended December 31, 2008 | | | 0.66 | % |
Year Ended December 31, 2007 | | | 0.65 | % |
See accompanying Notes to Financial Statements.
14 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | | | | | |
Service Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | | | | | |
| | | | |
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 39.99 | | | $ | 36.64 | | | $ | 25.42 | | | $ | 46.78 | | | $ | 41.09 | | | | | |
|
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss)2 | | | .13 | | | | .02 | | | | .01 | | | | — | 3 | | | (.05 | ) | | | | |
Net realized and unrealized gain (loss) | | | (.68 | ) | | | 3.33 | | | | 11.21 | | | | (21.36 | ) | | | 5.74 | | | | | |
| | | | | | |
Total from investment operations | | | (.55 | ) | | | 3.35 | | | | 11.22 | | | | (21.36 | ) | | | 5.69 | | | | | |
|
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.04 | ) | | | — | | | | — | 3 | | | — | | | | — | 3 | | | | |
|
Net asset value, end of period | | $ | 39.40 | | | $ | 39.99 | | | $ | 36.64 | | | $ | 25.42 | | | $ | 46.78 | | | | | |
| | | | | | |
Total Return, at Net Asset Value4 | | | (1.37 | )% | | | 9.15 | % | | | 44.15 | % | | | (45.66 | )% | | | 13.86 | % | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 375,330 | | | $ | 423,989 | | | $ | 444,170 | | | $ | 313,931 | | | $ | 546,887 | | | | | |
|
Average net assets (in thousands) | | $ | 407,413 | | | $ | 427,640 | | | $ | 368,634 | | | $ | 454,558 | | | $ | 510,874 | | | | | |
|
Ratios to average net assets:5 | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | | 0.32 | % | | | 0.06 | % | | | 0.03 | % | | | 0.00 | %6 | | | (0.10 | )% | | | | |
Total expenses7 | | | 1.05 | % | | | 1.04 | % | | | 1.04 | % | | | 0.91 | % | | | 0.91 | % | | | | |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 1.05 | % | | | 1.04 | % | | | 1.03 | % | | | 0.91 | % | | | 0.91 | % | | | | |
|
Portfolio turnover rate | | | 27 | % | | | 58 | % | | | 46 | % | | | 67 | % | | | 59 | % | | | | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Less than $0.005 per share. |
|
4. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
5. | | Annualized for periods less than one full year. |
|
6. | | Less than 0.005%. |
|
7. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 1.05 | % |
Year Ended December 31, 2010 | | | 1.04 | % |
Year Ended December 31, 2009 | | | 1.04 | % |
Year Ended December 31, 2008 | | | 0.91 | % |
Year Ended December 31, 2007 | | | 0.91 | % |
See accompanying Notes to Financial Statements.
15 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Oppenheimer Capital Appreciation Fund/VA (the “Fund”) is a separate series of Oppenheimer Variable Account Funds, an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund’s investment objective is to seek capital appreciation by investing in securities of well-known, established companies. The Fund’s investment adviser is OppenheimerFunds, Inc. (the “Manager”).
The Fund offers two classes of shares. Both classes are sold at their offering price, which is the net asset value per share, to separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. The class of shares designated as Service shares is subject to a distribution and service plan. Both classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class.
The following is a summary of significant accounting policies consistently followed by the Fund.
Fiscal Year End. Since December 30, 2011 represents the last day during the Fund’s 2011 fiscal year on which the New York Stock Exchange was open for trading, the Fund’s financial statements have been presented through that date to maintain consistency with the Fund’s net asset value calculations used for shareholder transactions.
Securities Valuation. The Fund calculates the net asset value of its shares as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading.
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. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” observable market inputs other than unadjusted quoted prices are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.
Securities traded on a registered U.S. securities exchange 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. Securities whose principal exchange is NASDAQ® are valued based on the official closing prices reported by NASDAQ prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.
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.
U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.
16 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
“Money market-type” debt instruments with remaining maturities 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.
In the absence of a current price quotation obtained from an independent pricing service or broker-dealer, including for securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund’s assets are valued but after the close of the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities 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 adjusted for any discounts related to 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.
There have been no significant changes to the fair valuation methodologies of the Fund during the period.
Investment in Oppenheimer Institutional Money Market Fund. The Fund is permitted to invest daily available cash balances in an affiliated money market fund. The Fund may invest the available cash in Class E shares of Oppenheimer Institutional Money Market Fund (“IMMF”) to seek current income while preserving liquidity. IMMF is a registered open-end management investment company, regulated as a money market fund under the Investment Company Act of 1940, as amended. The Manager is also the investment adviser of IMMF. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of IMMF’s Class E expenses, including its 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 IMMF.
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 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.
Reported net realized gains and losses from foreign currency transactions arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, exchange rate fluctuations between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized appreciation and depreciation on the translation of assets and liabilities denominated in foreign currencies arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund’s Statement of Operations.
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
17 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
1. Significant Accounting Policies Continued
Federal Taxes. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. Therefore, no federal income or excise tax provision is required. The Fund files income tax returns in U.S. federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remain open for the three preceding fiscal reporting period ends.
The tax components of capital shown in the following table represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes.
| | | | | | | | | | | | |
| | | | | | | | | | Net Unrealized |
| | | | | | | | | | Appreciation |
| | | | | | | | | | Based on Cost |
| | | | | | | | | | of Securities and |
Undistributed | | Undistributed | | Accumulated | | Other Investments |
Net Investment | | Long-Term | | Loss | | for Federal Income |
Income | | Gain | | Carryforward1,2,3,4 | | Tax Purposes |
|
$5,355,106 | | | $ | — | | | $ | 296,790,277 | | | $ | 265,435,167 | |
| | |
1. | | As of December 30, 2011, the Fund had $289,995,783 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. Details of the capital loss carryforwards are included in the table below. Capital loss carryovers with no expiration, if any, must be utilized prior to those with expiration dates. |
| | | | |
Expiring | | | | |
|
2016 | | $ | 109,362,611 | |
2017 | | | 180,633,172 | |
| | | |
Total | | $ | 289,995,783 | |
| | | |
| | |
2. | | As of December 30, 2011, the Fund had $6,794,494 of post-October losses available to offset future realized capital gains, if any. |
|
3. | | During the fiscal year ended December 30, 2011, the Fund utilized $62,322,990 of capital loss carryforward to offset capital gains realized in that fiscal year. |
|
4. | | During the fiscal year ended December 31, 2010, the Fund utilized $72,900,879 of capital loss carryforward to offset capital gains realized in that fiscal year. |
Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund.
Accordingly, the following amounts have been reclassified for December 30, 2011. Net assets of the Fund were unaffected by the reclassifications.
| | | | |
Increase | | Increase to |
to Accumulated | | Accumulated Net |
Net Investment | | Realized Loss |
Income | | on Investments |
|
$43,660 | | | $ | 43,660 |
The tax character of distributions paid during the years ended December 30, 2011 and December 31, 2010 was as follows:
| | | | | | | | |
| | Year Ended | | Year Ended |
| | December 30, 2011 | | December 31, 2010 |
|
Distributions paid from: | | | | | | | | |
Ordinary income | | | $ | 3,134,186 | | | $ | 1,796,034 |
The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 30, 2011 are noted in the following table.
18 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.
| | | | |
|
Federal tax cost of securities | | $ | 745,805,516 | |
| | | |
Gross unrealized appreciation | | $ | 298,208,830 | |
Gross unrealized depreciation | | | (32,773,663 | ) |
| | | |
Net unrealized appreciation | | $ | 265,435,167 | |
| | | |
Trustees’ Compensation. The Board of Trustees has adopted a compensation deferral plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of “Other” within the asset section of the Statement of Assets and Liabilities. Deferral of trustees’ fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund’s assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance with the compensation deferral plan.
Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles, are recorded on the ex-dividend date. Income and capital gain distributions, if any, are declared and paid annually or at other times as deemed necessary by the Manager.
Investment Income. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is recognized on an accrual basis. Discount and premium, which are included in interest income on the Statement of Operations, are amortized or accreted daily.
Custodian Fees. “Custodian fees and expenses” in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by the Fund, at a rate equal to the Federal Funds Rate plus 0.50%. The “Reduction to custodian expenses” line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings.
Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost.
Indemnifications. The Fund’s organizational documents provide current and former trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
19 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
1. Significant Accounting Policies Continued
reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of
each class. Transactions in shares of beneficial interest were as follows:
| | | | | | | | | | | | | | | | |
| | Year Ended December 30, 2011 | | | Year Ended December 31, 2010 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
|
Non-Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 1,249,985 | | | $ | 50,511,923 | | | | 2,554,247 | | | $ | 93,160,063 | |
Dividends and/or distributions reinvested | | | 63,634 | | | | 2,685,368 | | | | 48,307 | | | | 1,796,034 | |
Redeemed | | | (4,379,711 | ) | | | (179,110,746 | ) | | | (12,572,941 | ) | | | (480,035,151 | ) |
| | |
Net decrease | | | (3,066,092 | ) | | $ | (125,913,455 | ) | | | (9,970,387 | ) | | $ | (385,079,054 | ) |
| | |
| | | | | | | | | | | | | | | | |
Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 696,209 | | | $ | 28,336,802 | | | | 1,613,467 | | | $ | 57,695,403 | |
Dividends and/or distributions reinvested | | | 10,709 | | | | 448,818 | | | | — | | | | — | |
Redeemed | | | (1,782,789 | ) | | | (72,053,646 | ) | | | (3,133,549 | ) | | | (117,683,027 | ) |
| | |
Net decrease | | | (1,075,871 | ) | | $ | (43,268,026 | ) | | | (1,520,082 | ) | | $ | (59,987,624 | ) |
| | |
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations and investments in IMMF, for the year ended December 30, 2011, were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
|
Investment securities | | $ | 299,307,755 | | | $ | 476,954,733 | |
4. Fees and Other Transactions with Affiliates
Management Fees. Under the investment advisory agreement, the Fund pays the Manager a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| | | | |
Fee Schedule | | | | |
|
Up to $200 million | | | 0.75 | % |
Next $200 million | | | 0.72 | |
Next $200 million | | | 0.69 | |
Next $200 million | | | 0.66 | |
Over $800 million | | | 0.60 | |
Administration Service Fees. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund’s tax returns.
Transfer Agent Fees. OppenheimerFunds Services (“OFS”), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. For the year ended December 30, 2011, the Fund paid $1,145,815 to OFS for services to the Fund.
Distribution and Service Plan for Service Shares. The Fund has adopted a Distribution and Service Plan (the “Plan”) in accordance with Rule 12b-1 under the Investment Company Act of 1940 for Service shares to pay OppenheimerFunds Distributor, Inc. (the “Distributor”), for distribution related services, personal service and account maintenance for the Fund’s Service shares. Under the Plan, payments are made periodically at an annual rate of 0.25% of the daily net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors of the insurance
20 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service shares. These fees are paid out of the Fund’s assets on an on-going basis and increase operating expenses of the Service shares, which results in lower performance compared to the Fund’s shares that are not subject to a service fee. Fees incurred by the Fund under the Plan are detailed in the Statement of Operations.
Waivers and Reimbursements of Expenses. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.80% for Non-Service shares and 1.05% for Service shares. During the year ended December 30, 2011, the Manager waived fees and/or reimbursed the Fund $28,772 and $17,036 for Non-Service and Service shares, respectively.
Effective September 1, 2011, the Manager had voluntarily agreed to reduce its management fee by 0.05% of the Fund’s average daily net assets until the Fund’s trailing one-year total return performance was in the third quintile of the Fund’s Lipper peer group as measured at each calendar quarter end. The management fee reduction would be terminated effective as of the first business day following the achievement of this goal and therefore terminated effective October 1, 2011. During the year ended December 30, 2011, the Manager reimbursed the Fund $41,699.
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 IMMF. During the year ended December 30, 2011, the Manager waived fees and/or reimbursed the Fund $4,105 for IMMF management fees.
Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.
5. Risk Exposures and the Use of Derivative Instruments
The Fund’s investment objectives not only permit the Fund to purchase investment securities, they also allow the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward foreign currency exchange contracts, credit default swaps, interest rate swaps, total return 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. Central to those strategies are features inherent to derivatives that make them more attractive for this purpose than equity and debt securities: they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This 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.
Market Risk Factors. In accordance with its investment objectives, the Fund may use derivatives to increase or decrease its exposure to one or more of the following 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 to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds.
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.
21 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
5. Risk Exposures and the Use of Derivative Instruments 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.
The Fund’s actual exposures to these market risk factors during the period are discussed in further detail, by derivative type, below.
Risks of Investing in Derivatives. The Fund’s use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. 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.
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. 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.
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. Associated risks can be different for each type of derivative and are discussed by each derivative type in the notes that follow.
Counterparty Credit Risk. Certain derivative positions are subject to counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. The Fund’s derivative counterparties are financial institutions who are subject to market conditions that may weaken their financial position. The Fund intends to enter into financial transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction.
Credit Related Contingent Features. The Fund’s agreements with derivative counterparties have several credit related contingent features that if triggered would allow its derivatives counterparties to close out and demand payment or additional collateral to cover their exposure from the Fund. Credit related contingent features are established between the Fund and its derivatives counterparties to reduce the risk that the Fund will not fulfill its payment obligations to its counterparties. These triggering features include, but are not limited to, a percentage decrease in the Fund’s net assets and or a percentage decrease in the Fund’s Net Asset Value or NAV. The contingent features are established within the Fund’s International Swap and Derivatives Association, Inc. master agreements which govern certain positions in swaps, over-the-counter options and swaptions, and forward currency exchange contracts for each individual counterparty.
22 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
The effect of derivative instruments on the Statement of Operations is as follows:
| | | | |
Amount of Realized Gain or (Loss) Recognized on Derivatives |
Derivatives Not Accounted for | | |
as Hedging Instruments | | Foreign currency transactions |
|
Foreign exchange contracts | | | $ | 65,057 |
| | | | |
Amount of Change in Unrealized Gain or (Loss) Recognized on Derivatives | |
Derivatives Not Accounted for | | Translation of assets and liabilities | |
as Hedging Instruments | | denominated in foreign currencies | |
|
Foreign exchange contracts | | $ | 1,356 | |
Foreign Currency Exchange Contracts
The Fund may enter into foreign currency exchange contracts (“forward contracts”) for the purchase or sale of a foreign currency at a negotiated rate at a future date.
Forward contracts are reported on a schedule following the Statement of Investments. Forward contracts will be valued daily based upon the closing prices of the forward currency rates determined at the close of the Exchange as provided by a bank, dealer or pricing service. The resulting unrealized appreciation (depreciation) is reported in the Statement of Assets and Liabilities as a receivable or payable and in the Statement of Operations 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 Statement of Operations.
The Fund has purchased and sold certain forward foreign currency exchange contracts of different currencies in order to acquire currencies to pay for or sell currencies to acquire related foreign securities purchase and sale transactions, respectively, or to convert foreign currencies to U.S. dollars from related foreign securities transactions. These foreign currency exchange contracts are negotiated at the current spot exchange rate with settlement typically within two business days thereafter.
During the year ended December 30, 2011, the Fund had daily average contract amounts on forward foreign currency contracts to buy and sell of $318,483 and $449,775, respectively.
Additional associated risk to the Fund includes counterparty credit risk. Counterparty credit risk arises from the possibility that the counterparty will default.
As of December 30, 2011, the Fund had no outstanding forward contracts.
6. Pending Litigation
Since 2009, a number of class action, derivative and individual lawsuits have been pending in federal and state courts against OppenheimerFunds, Inc., the Fund’s investment advisor (the “Manager”), OppenheimerFunds Distributor, Inc., the Fund’s principal underwriter and distributor (the “Distributor”), and certain funds (but not including the Fund) advised by the Manager and distributed by the Distributor (the “Defendant Funds”). Several of these lawsuits also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The lawsuits raise claims under federal securities laws and various states’ securities, consumer protection and common law and allege, among other things, that the disclosure documents of the respective Defendant Funds contained misrepresentations and omissions and that the respective Defendant Funds’ investment policies were not followed. The plaintiffs in these actions seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. On September 30, 2011, the U.S. District Court for the District of Colorado entered orders and final judgments approving the settlement of certain putative class actions involving two Defendant Funds, Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund. Those orders are not subject to further appeal. These settlements do not resolve other outstanding lawsuits relating to Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund, nor do the settlements affect certain other putative class action lawsuits pending in federal court against the Manager, the Distributor, and other Defendant Funds and their independent trustees.
23 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
5. Pending Litigation Continued
In 2009, what are claimed to be derivative lawsuits were filed in New Mexico state court against the Manager and a subsidiary (but not against the Fund) on behalf of the New Mexico Education Plan Trust challenging a settlement reached in 2010 between the Manager, its subsidiary and the Distributor and the board of the New Mexico section 529 college savings plan. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses. On September 9, 2011, the court denied plaintiffs’ request for a hearing to determine the fairness of the settlement, finding that plaintiffs lacked standing to pursue derivative claims on behalf of the Trust. On October 27, 2011, the parties to these actions filed a joint motion to dismiss the lawsuits with prejudice, which the court granted on October 28, 2011.
Other class action and individual lawsuits have been filed since 2008 in various state and federal courts against the Manager and certain of its affiliates by investors seeking to recover investments they allegedly lost as a result of the “Ponzi” scheme run by Bernard L. Madoff and his firm, Bernard L. Madoff Investment Securities, LLC (“BLMIS”). Plaintiffs in these suits allege that they suffered losses as a result of their investments in several funds managed by an affiliate of the Manager and assert a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. Neither the Distributor, nor any of the Oppenheimer mutual funds, their independent trustees or directors are named as defendants in these lawsuits. None of the Oppenheimer mutual funds invested in any funds or accounts managed by Madoff or BLMIS. On February 28, 2011, a stipulation of partial settlement of three groups of consolidated putative class action lawsuits relating to these matters was filed in the U.S. District Court for the Southern District of New York. On August 19, 2011, the court entered an order and final judgment approving the settlement as fair, reasonable and adequate. In September 2011, certain parties filed notices of appeal from the court’s order approving the settlement. On July 29, 2011, a stipulation of settlement between certain affiliates of the Manager and the Trustee appointed under the Securities Investor Protection Act to liquidate BLMIS was filed in the U.S. Bankruptcy Court for the Southern District of New York to resolve purported preference and fraudulent transfer claims by the Trustee. On September 22, 2011, the court entered an order approving the settlement as fair, reasonable and adequate. In October 2011, certain parties filed notices of appeal from the court’s order approving the settlement. The aforementioned settlements do not resolve other outstanding lawsuits against the Manager and its affiliates relating to BLMIS.
On April 16, 2010, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark IV Funding Limited (“AAArdvark IV”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark IV. Plaintiffs allege breach of contract against the defendants and seek compensatory damages, costs and disbursements, including attorney fees. On July 15, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark Funding Limited (“AAArdvark I”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark I. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees. On November 9, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark XS Funding Limited (“AAArdvark XS”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark XS. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees.
The Manager believes the lawsuits and appeals described above are without legal merit and, with the exception of actions it has settled, is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to represent the Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer mutual funds.
24 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:
We have audited the accompanying statement of assets and liabilities of Oppenheimer Capital Appreciation Fund/VA (a separate series of Oppenheimer Variable Account Funds), including the statement of investments, as of December 30, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of Oppenheimer Capital Appreciation Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 30, 2011, by correspondence with the custodian and transfer agent. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Capital Appreciation Fund/VA as of December 30, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended, in conformity with U.S. generally accepted accounting principles.
KPMG llp
Denver, Colorado
February 16, 2012
25 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
In early 2012, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2011. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service.
Dividends, if any, paid by the Fund during the fiscal year ended December 30, 2011 which are not designated as capital gain distributions should be multiplied by the maximum amount allowable but not less than 100% to arrive at the amount eligible for the corporate dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance.
26 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
BOARD APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT Unaudited
Each year, the Board of Trustees (the “Board”), including a majority of the independent Trustees, is required to determine whether to renew the Fund’s investment advisory agreement (the “Agreement”). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager’s services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager and its affiliates, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. The Board was aware that there are alternatives to retaining the Manager.
Outlined below is a summary of the principal information considered by the Board as well as the Board’s conclusions.
Nature, Quality and Extent of Services. The Board considered information about the nature, quality and extent of the services provided to the Fund and information regarding the Manager’s key personnel who provide such services. The Manager’s duties include providing the Fund with the services of the portfolio manager and the Manager’s investment team, who provide research, analysis and other advisory services in regard to the Fund’s investments; securities trading services; oversight of third-party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund’s investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel who are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund’s operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund’s shares. The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the quality of the Manager’s resources that are available to the Fund. The Board took account of the fact that the Manager has had over fifty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager’s advisory, administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager’s key personnel and the size and functions of its staff. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Julie Van Cleave, the portfolio manager for the Fund, and the Manager’s investment team and analysts. The Board members also considered the totality of their experiences with the Manager as directors or trustees of the Fund and other funds advised by the Manager. The Board considered information regarding the quality of services provided by affiliates of the Manager, which its members have become knowledgeable about in connection with the renewal of the Fund’s service agreements. The Board concluded, in light of the Manager’s experience, reputation, personnel, operations and resources that the Fund benefits from the services provided under the Agreement.
Investment Performance of the Manager and the Fund. Throughout the year, the Manager provided information on the investment performance of the Fund and the Manager, including comparative performance information. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund’s historical performance to relevant market indices and to the performance of other large-cap growth funds underlying variable
27 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
BOARD APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT Unaudited / Continued
insurance products. The Board considered that the Fund outperformed its performance universe median during the ten-year Lipper period, although it underperformed its performance universe median during the one-, three-, and five-year periods. The Board considered the Fund’s recent improved performance, ranking in the third quintile for the year to date ended April 30, 2011. The Board noted the recent change in portfolio management to the Fund, effective April 26, 2010.
Costs of Services by the Manager. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also considered the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund and other large-cap growth funds underlying variable insurance products. Effective September 1, 2011, the Manager has voluntarily agreed to reduce its management fee by 0.05% of the Fund’s average daily net assets until the Fund’s trailing one-year total return performance is in the third quintile of the Fund’s Lipper peer group as measured at each calendar quarter end. The management fee reduction will be terminated effective as of the first business day following the achievement of this goal. The management fee reduction is a voluntary undertaking by the Manager, and the Manager may terminate it at any time. In reviewing the fees and expenses charged to the VA funds, the Board considered the Manager’s assertion that, because there is much greater disparity in the fees and services that may be provided by a manager to a VA fund as opposed to a retail fund, when comparing the expenses of the various VA funds to those of retail funds, it is most appropriate to focus on total expenses (rather than on the management fees). Accordingly, while the Board reviewed and considered all expenses, it focused on total expenses. The Board considered that the Fund’s actual management fees and total expenses were higher than its expense group median. The Board also considered that the actual management fees were only two basis points higher than the median. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.80% for Non-Service shares and 1.05% for Service shares.
Economies of Scale and Profits Realized by the Manager. The Board considered information regarding the Manager’s costs in serving as the Fund’s investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager’s profitability from its relationship with the Fund. The Board reviewed whether the Manager may realize economies of scale in managing and supporting the Fund. The Board noted that the Fund currently has management fee breakpoints, which are intended to share with Fund shareholders economies of scale that may exist as the Fund’s assets grow.
Other Benefits to the Manager. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager’s affiliates and research provided to the Manager in connection with permissible brokerage arrangements (soft dollar arrangements). The Board also considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide quality services to the Fund.
Conclusions. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees’ counsel are independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the Agreement through August 31, 2012. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the above information, and considered the terms and conditions of the Agreement, including the management fee, in light of all of the surrounding circumstances.
28 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities (“portfolio proxies”) held by the Fund. A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund’s website at oppenheimerfunds.com, and (iii) on the SEC’s website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund’s voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC’s website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund’s Form N-Q filings are available on the SEC’s website at www.sec.gov. Those forms may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
29 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
TRUSTEES AND OFFICERS Unaudited
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Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
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INDEPENDENT TRUSTEES | | The address of each Trustee in the chart below is 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Trustee serves for an indefinite term, or until his or her resignation, retirement, death or removal |
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William L. Armstrong, Chairman of the Board of Trustees (since 2003), Trustee (since 1999) Age: 74 | | President, Colorado Christian University (since 2006); Chairman, Cherry Creek Mortgage Company (since 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso Mortgage Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman, Broadway Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), former Director of Campus Crusade for Christ (non-profit) (1991-2008); former Director, The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (2002-2006); former Chairman of: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Armstrong has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Edward L. Cameron, Trustee (since 1999) Age: 73 | | Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000-June 2006); Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (accounting firm) (July 1994-June 1998). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Cameron has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Jon S. Fossel, Trustee (since 1990) Age: 69 | | Chairman of the Board (since 2006) and Director (since June 2002) of UNUMProvident (insurance company); Director of Northwestern Energy Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003 and February 2005-February 2007); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. (“OAC”) (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Fossel has served on the Boards of certain Oppenheimer funds since 1990, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Sam Freedman, Trustee (since 1996) Age: 71 | | Director of Colorado UpLIFT (charitable organization) (since September 1984). Mr. Freedman held several positions with the Manager and with subsidiary or affiliated companies of the Manager (until October 1994). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Freedman has served on the Boards of certain Oppenheimer funds since 1996, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Beverly L. Hamilton, Trustee (since 2002) Age: 65 | | Trustee of Monterey Institute for International Studies (educational organization) (since February 2000); Board Member of Middlebury College (educational organization) (since December 2005); Chairman (since 2010) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); Director of The California Endowment (philanthropic organization) (April 2002-April 2008); Director (February 2002-2005) and Chairman of Trustees (2006-2007) of the Community Hospital of Monterey Peninsula; Director (October 1991-2005); Vice Chairman (2006-2009) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation (2001-2006) and The University of Michigan (since 2000); Advisor at Credit Suisse First Boston’s Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member of the investment committee of Hartford Hospital (2000-2003); and |
30 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
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Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
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Beverly L. Hamilton, Continued
| | Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 36 portfolios in the OppenheimerFunds complex. Ms. Hamilton has served on the Boards of certain Oppenheimer funds since 2002, during which time she has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Robert J. Malone, Trustee (since 2002) Age: 67 | | Board of Directors of Opera Colorado Foundation (non-profit organization) (since March 2008); Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director of Steele Street Bank & Trust (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Malone has served on the Boards of certain Oppenheimer funds since 2002, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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F. William Marshall, Jr., Trustee (since 2000) Age: 69 | | Trustee Emeritus of Worcester Polytech Institute (WPI) (private university) (since 2009); Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment company) (since 1996) and MML Series Investment Fund (investment company) (since 1996); President and Treasurer of the SIS Funds (private charitable fund) (January 1999—March 2011); Former Trustee of WPI (1985-2008); Former Chairman of the Board (2004-2006) and Former Chairman of the Investment Committee of WPI (1994-2008); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999); and Former President and Chief Executive Officer of SIS Bancorp. (1993-1999). Oversees 38 portfolios in the OppenheimerFunds complex. Mr. Marshall has served on the Boards of certain Oppenheimer funds since 2000, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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INTERESTED TRUSTEE AND OFFICER | | The address of Mr. Glavin is Two World Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008. Mr. Glavin serves as a Trustee for an indefinite term, or until his resignation, retirement, death or removal and as an Officer for an indefinite term, or until his resignation, retirement, death or removal. Mr. Glavin is an Interested Trustee due to his positions with OppenheimerFunds, Inc. and its affiliates. |
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William F. Glavin, Jr., Trustee, President and Principal Executive Officer (since 2009) Age: 53 | | Chairman of the Manager (since December 2009); Chief Executive Officer and Director of the Manager (since January 2009); President of the Manager (since May 2009); Director of Oppenheimer Acquisition Corp. (“OAC”) (the Manager’s parent holding company) (since June 2009); Executive Vice President (March 2006-February 2009) and Chief Operating Officer (July 2007-February 2009) of Massachusetts Mutual Life Insurance Company (OAC’s parent company); Director (May 2004-March 2006) and Chief Operating Officer and Chief Compliance Officer (May 2004-January 2005), President (January 2005-March 2006) and Chief Executive Officer (June 2005-March 2006) of Babson Capital Management LLC; Director (March 2005-March 2006), President (May 2003-March 2006) and Chief Compliance Officer (July 2005-March 2006) of Babson Capital Securities, Inc. (a broker-dealer); President (May 2003-March 2006) of Babson Investment Company, Inc.; Director (May 2004- August 2006) of Babson Capital Europe Limited; Director (May 2004-October 2006) of Babson Capital Guernsey Limited; Director (May 2004-March 2006) of Babson Capital Management LLC; Non-Executive Director (March 2005-March 2007) of Baring Asset Management Limited; Director (February 2005-June 2006) Baring Pension Trustees Limited; Director and Treasurer (December 2003-November 2006) of Charter Oak Capital Management, Inc.; Director (May 2006-September 2006) of C.M. Benefit Insurance Company; Director (May 2008-June 2009) and Executive Vice President (June 2007-July 2009) of C.M. Life Insurance Company; President (March 2006-May 2007) of MassMutual Assignment Company; Director (January 2005-December 2006), Deputy Chairman (March 2005-December 2006) and President (February 2005-March 2005) of MassMutual Holdings (Bermuda) Limited; Director (May 2008-June 2009) and Executive Vice President (June 2007-July 2009) of MML Bay State Life Insurance Company; Chief Executive Officer and President (April 2007-January 2009) of MML Distributors, LLC; and Chairman (March 2006-December 2008) and Chief Executive Officer (May 2007-December 2008) of MML Investors Services, Inc. Oversees 63 portfolios as a Trustee/Director and 96 portfolios as an officer in the OppenheimerFunds complex. |
31 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
TRUSTEES AND OFFICERS Unaudited/Continued
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Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
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OTHER OFFICERS OF THE FUND | | The addresses of the Officers in the chart below are as follows: for Mr. Gabinet, Mss. Van Cleave and Nasta, Two World Financial Center, 225 Liberty Street, New York, New York 10281-1008, for Messrs. Vandehey and Wixted, 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Officer serves for an indefinite term or until his or her resignation, retirement, death or removal. |
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Julie Van Cleave, Vice President (since 2010) Age: 52 | | Vice President of the Manager (since April 2010); a Chartered Financial Analyst. Prior to joining the Manager, a Managing Director, U.S. Large-Cap Growth Equity, and lead portfolio manager at Deutsche Asset Management (December 2002-February 2009). Prior to 2002, a Managing Director, a portfolio manager and a team leader with Mason Street Advisors, a wholly owned subsidiary of Northwestern Mutual Life. A portfolio manager and officer of 3 portfolios in the OppenheimerFunds complex. |
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Arthur S. Gabinet, Secretary (since 2011) Age: 53 | | Executive Vice President (since May 2010) and General Counsel (since January 2011) of the Manager; General Counsel of the Distributor (since January 2011); General Counsel of Centennial Asset Management Corporation (since January 2011); Executive Vice President and General Counsel of HarbourView Asset Management Corporation (since January 2011); Assistant Secretary (since January 2011) and Director (since January 2011) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since January 2011); Director of Oppenheimer Real Asset Management, Inc. (since January 2011); Executive Vice President and General Counsel of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since January 2011); Executive Vice President and General Counsel of OFI Private Investments, Inc. (since January 2011); Vice President of OppenheimerFunds Legacy Program (since January 2011); Executive Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since January 2011); General Counsel, Asset Management of the Manager (May 2010-December 2010); Principal, The Vanguard Group (November 2005- April 2010); District Administrator, U.S. Securities and Exchange Commission (January 2003-October 2005). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Christina M. Nasta, Vice President and Chief Business Officer (since 2011) Age: 38 | | Senior Vice President of the Manager (since July 2010); Vice President of the Manager (since January 2003); Vice President of OppenheimerFunds Distributor, Inc. (since January 2003). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Mark S. Vandehey, Vice President and Chief Compliance Officer (since 2004) Age: 61 | | Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Brian W. Wixted, Treasurer and Principal Financial & Accounting Officer (since 1999) Age: 52 | | Senior Vice President of the Manager (since March 1999); Treasurer of the Manager and the following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership Holdings, Inc. (March 1999-June 2008), OFI Private Investments, Inc. (March 2000-June 2008), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of OAC (March 1999-June 2008). An officer of 96 portfolios in the OppenheimerFunds complex. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and Officers and is available without charge, upon request, by calling 1.800.988.8287.
32 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
OPPENHEIMER CAPITAL APPRECIATION FUND/VA
A Series of Oppenheimer Variable Account Funds
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Manager | | OppenheimerFunds, Inc. |
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Distributor | | OppenheimerFunds Distributor, Inc. |
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Transfer Agent | | OppenheimerFunds Services |
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Independent Registered Public Accounting Firm | | KPMG llp |
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Counsel | | K&L Gates LLP |
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| | Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing. |
©2012 OppenheimerFunds, Inc. All rights reserved.
December 31, 2011 Oppenheimer Core Bond Fund/VAAnnual Report A Series of Oppenheimer Variable Account Funds A N N UA L R E P O RT Fund Allocations Fund Performance Discussion Financial Statements |
OPPENHEIMER CORE BOND FUND/VA
Portfolio Managers: Krishna Memani and
Peter A. Strzalkowski, CFA
Average Annual Total Returns
For the Periods Ended 12/30/111
| | | | | | |
| | 1-Year | | 5-Year | | 10-Year |
|
Non-Service Shares | | 8.27% | | -3.40% | | 1.11% |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | 1-Year | | 5-Year | | Since Inception (5/1/02) |
|
Service Shares | | 7.93% | | -3.64% | | 0.80% |
Expense Ratios
For the Period Ended 12/30/111
| | | | | | | | | | | | |
| | Gross | | Net | | | | |
| | Expense | | Expense | | | | |
| | Ratios2 | | Ratios2 | | | | |
|
Non-Service Shares | | | 0.79 | % | | | 0.77 | % | | | | |
Service Shares | | | 1.04 | | | | 1.02 | | | | | |
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance and expense ratios may be lower or higher than the data quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account. The net expense ratios take into account voluntary fee waivers and/or expense reimbursements, without which performance would have been less. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund’s prospectus.
| | |
1. | | December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. |
|
2. | | These Expense Ratios include the applicable indirect expenses attributable to the Fund’s investments in other investment companies. |
| | | | |
Corporate Bonds & Notes — Top Ten Industries | | | | |
|
Oil, Gas & Consumable Fuels | | | 4.3 | % |
Insurance | | | 3.4 | |
Capital Markets | | | 3.0 | |
Media | | | 2.9 | |
Commercial Banks | | | 2.4 | |
Electric Utilities | | | 2.3 | |
Diversified Financial Services | | | 2.3 | |
Diversified Telecommunication Services | | | 1.6 | |
Metals & Mining | | | 1.5 | |
Energy Equipment & Services | | | 1.5 | |
Portfolio holdings and allocations are subject to change. Percentages are as of December 30, 2011, and are based on net assets.
| | | | |
Credit Rating Breakdown | | NRSRO Only Total |
|
AAA | | | 63.1 | % |
AA | | | 1.5 | |
A | | | 9.8 | |
BBB | | | 17.0 | |
BB | | | 5.5 | |
B | | | 0.6 | |
CCC | | | 2.3 | |
CC | | | 0.0 | * |
D | | | 0.2 | |
| | | |
Total | | | 100.0 | % |
| | | |
| | |
* | | Represents a value of less than 0.05%. |
The percentages above are based on the market value of the Fund’s securities as of December 30, 2011, and are subject to change. Except for certain securities issued or guaranteed by a sovereign or supranational entity, all securities have been rated by at least one Nationally Recognized Statistical Rating Organization (“NRSRO”), such as Standard & Poor’s (“S&P”). For securities rated only by an NRSRO other than S&P, OppenheimerFunds, Inc. converts that rating to the equivalent S&P rating. If two or more NRSROs have assigned a rating to a security, the highest S&P equivalent rating is used. Unrated securities issued or guaranteed by a sovereign entity are assigned a credit rating equal to the highest NRSRO rating assigned to that sovereign entity. U.S. Government “Treasury” and “Agency” securities are included in the AAA category. Fund assets invested in Oppenheimer Institutional Money Market Fund are assigned that fund’s S&P rating, which is currently AAA. For the purposes of this Credit Allocation table, “investment-grade” securities are securities rated within the NRSROs’ four highest rating categories, which include AAA, AA, A and BBB. Unrated securities do not necessarily indicate low credit quality, and may or may not be the equivalent of investment-grade. Please consult the Fund’s prospectus for further information. Additional information can be found in the Fund’s Statement of Additional Information.
2 | OPPENHEIMER CORE BOND FUND/VA
FUND PERFORMANCE DISCUSSION
Management’s Discussion of Fund Performance. The Fund’s Non-Service shares produced a total return of 8.27% for the reporting period ended December 30, 2011.3 On a relative basis, the Fund outperformed the Barclays Capital U.S. Aggregate Bond Index (the “Index”), which generated a total return of 7.84%. In comparison, the Barclays Capital Credit Index and the Citigroup Broad Investment Grade Bond Index produced total returns of 8.35% and 7.85%, respectively. The Fund’s positive performance occurred in an environment where fixed-income investments, particularly those domiciled in the U.S., generally performed much better relative to global equities.
Economic and Market Overview
The first half of the reporting period was generally characterized by resilience among investors who looked forward to improved credit conditions in a recovering global economy. Even the wave of political unrest in the Middle East in early 2011, which led to sharply higher energy prices, had only a temporary dampening effect on most financial markets. Likewise, markets recovered relatively quickly after a devastating natural disaster and subsequent nuclear energy crisis hit Japan in March, disrupting global industrial supply chains. During this time, equities and higher-yielding fixed income securities generally performed well.
Investor sentiment began to deteriorate in late April, when U.S. economic data proved disappointing, and a contentious U.S. fiscal policy debate intensified. These concerns reached a tipping point in early August, when the credit rating company Standard & Poor’s downgraded the sovereign debt of the U.S., a decision that the two other major credit rating firms opted not to follow.
Meanwhile, international uncertainty worsened with the high likelihood that Greece was headed for default on its debt and other members of the European Union continued to struggle with heavy debt burdens, leading to worries over the health of the European banking system. Inflationary pressures mounted in China and other emerging markets, where investors grew concerned that remedial measures, including higher local interest rates, might derail these major engines of global growth. Financial markets also grew concerned that new recessions in the developed markets could mean a slowdown in growth in export dependent emerging economies. Some emerging market countries saw their GDP growth stall after a prolonged period of solid increases.
These events triggered a flight to quality that boosted traditional safe havens but hurt areas of the market that historically have been considered riskier. Fixed-income investments in emerging markets generally underperformed their developed markets counterparts as a result of shifting investor sentiment. In the United States, long-term U.S. Treasury securities continued to rally even after the credit-rating downgrade, but high yield corporate bonds gave back earlier gains, despite generally healthy balance sheets and limited needs for near term refinancing. Market turbulence throughout the world was particularly severe over the third quarter of 2011 with most global risk markets experiencing sharp declines.
In the fourth quarter, risk markets finished the period largely on a positive note, rebounding strongly in October in particular, as European leaders sought to undertake measures to address the debt issues in the region and the U.S. economy began to show some signs of life as high unemployment trended downward, the housing market picked up slightly and consumer sentiment improved.
Fund Review
During the reporting period, the Fund’s positive performance was driven by its investments in mortgage backed obligations, primarily residential mortgage-backed securities (RMBS). The Fund’s exposure to RMBS included securities guaranteed by government-sponsored enterprises, commonly referred to as agency RMBS, as well as a smaller allocation to RMBS originated by private entities, also known as non-agency RMBS. Commercial mortgage-backed securities (CMBS) and asset backed securities (ABS) also performed well for the Fund. Despite bouts of risk aversion, particularly over the volatile third quarter of 2011, mortgage backed obligations generally produced positive results for the year. The Fund also benefited from an allocation to investment grade and high yield securities for the year.
| | |
3. | | December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011. |
3 | OPPENHEIMER CORE BOND FUND/VA
FUND PERFORMANCE DISCUSSION
In terms of detractors from performance, the Fund’s limited exposure to U.S. Treasuries hurt relative performance versus the Index. Despite Standard & Poor’s downgrade of U.S. sovereign debt, U.S. Treasuries held up well during the year as many investors remained cautious of risk. Our underweight position in agency debt also detracted from relative performance this period.
Outlook
We remain cautiously optimistic at period end. We expect uncertainty in the Eurozone to keep consumer, business and investor anxiety elevated. Yet, we see recent steps taken by Eurozone policymakers to address the crisis as positive; albeit slow and incomplete. In the U.S., concerns remain over slow growth and the ability of elected officials to address the key issues relating to deficits, entitlements and taxation. However, a domestic recession seems unlikely given recent upside surprises and the possibility of QE3 as 2012 progresses.
Despite these ongoing concerns, we believe the continued high level of risk aversion could mean bond markets have priced in most negative outcomes. This could be beneficial to riskier asset classes in the face of positive, or less negative, headlines. As such, we expect to maintain allocations to domestic credit, ABS, RMBS and CMBS. Corporate profitability continues to advance while defaults for non-investment-grade issuers remain low. We view the wide spreads on credit as an opportunity; yet, this tilt results in underweights to U.S. Treasuries, which may benefit if events trigger a flight to quality in the market. Given the potential risk emanating from Europe, we have a more defensive posture than usual. Overall, the Fund is focused on carry, or additional yield, by seeking to maintain positions that boost income above that of the benchmark. We believe our careful and tactical security selection process can uncover opportunities in 2012.
Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing.
Total returns include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown.
The Fund’s investment strategy and focus can change over time. The mention of specific fund holdings does not constitute a recommendation by OppenheimerFunds, Inc.
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.
Comparing the Fund’s Performance to the Market. The graphs that follow show the performance of a hypothetical $10,000 investment in each share class of the Fund held until December 30, 2011. In the case of Non-Service shares, performance is measured over a ten-fiscal-year period. In the case of Service shares, performance is measured from inception of the Class on May 1, 2002. Performance information does not reflect charges that apply to separate accounts investing in the Fund. If these charges were taken into account, performance would be lower. The graphs assume that all dividends and capital gains distributions were reinvested in additional shares.
The Fund’s performance is compared to the performance of the Citigroup Broad Investment Grade Bond Index, an index of institutionally traded U.S. Treasury Bonds, government-sponsored bonds, mortgage-backed securities and corporate securities; the Barclays Capital U.S. Aggregate Bond Index, an index of U.S. corporate and government bonds, and the Barclays Capital Credit Index, an index of non-convertible U.S. investment grade corporate bonds. Index performance includes reinvestment of income but does not reflect transaction costs, fees or expenses. Indices are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of the Fund. The Fund’s performance reflects the effects of the Fund’s business and operating expenses. While index comparisons may be useful to provide a benchmark for the Fund’s performance, it must be noted that the Fund’s investments are not limited to the securities comprising the indices.
4 | OPPENHEIMER CORE BOND FUND/VA
Non-Service Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Core Bond Fund/VA(NonService) Citigroup Broad Investment Grade Bond Index Barclays Capital U.S. Aggregate Bond Index Barclays Capital Credit Index |
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account.
| | |
1. | | December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011. |
5 | OPPENHEIMER CORE BOND FUND/VA
FUND PERFORMANCE DISCUSSION
Service Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Core Bond Fund/VA (Service) Citigroup Broad Investment Grade Bond Index Barclays Capital U.S. Aggregate Bond Index Barclays Capital Credit Index |
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account.
| | |
1. | | December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011. |
6 | OPPENHEIMER CORE BOND FUND/VA
FUND EXPENSES
Fund Expenses. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 30, 2011.
Actual Expenses. The first section of the table provides information about actual account values and actual expenses. You may use the information in this section for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes. The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio for each class of shares, and an assumed rate of return of 5% per year for each class before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the “hypothetical” lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included your costs would have been higher.
| | | | | | | | | | | | |
| | Beginning | | | Ending | | | Expenses | |
| | Account | | | Account | | | Paid During | |
| | Value | | | Value | | | 6 Months Ended | |
| | July 1, 2011 | | | December 30, 2011 | | | December 30, 2011 | |
|
Actual | | | | | | | | | | | | |
Non-Service shares | | $ | 1,000.00 | | | $ | 1,042.30 | | | $ | 3.85 | |
Service shares | | | 1,000.00 | | | | 1,040.10 | | | | 5.13 | |
| | | | | | | | | | | | |
Hypothetical (5% return before expenses) | | | | | | | | | | | | |
Non-Service shares | | | 1,000.00 | | | | 1,021.31 | | | | 3.81 | |
Service shares | | | 1,000.00 | | | | 1,020.05 | | | | 5.08 | |
Expenses are equal to the Fund’s annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). Those annualized expense ratios, excluding indirect expenses from affiliated fund, based on the 6-month period ended December 30, 2011 are as follows:
| | | | |
Class | | Expense Ratios | |
|
Non-Service shares | | | 0.75 | % |
Service shares | | | 1.00 | |
The expense ratios reflect voluntary waivers and/or reimbursements of expenses by the Fund’s Manager. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund’s prospectus. The “Financial Highlights” tables in the Fund’s financial statements, included in this report, also show the gross expense ratios, without such waivers or reimbursements and reduction to custodian expenses, if applicable.
7 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS December 30, 2011*
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Asset-Backed Securities—10.3% | | | | | | | | |
AESOP Funding II LLC, Automobile Receivables Nts., Series 2011-1A, Cl. A, 1.85%, 11/20/131 | | $ | 235,000 | | | $ | 234,471 | |
Ally Auto Receivables Trust 2010-4, Automobile Receivables Nts., Series 2010-4, Cl. A3, 0.91%, 11/17/14 | | | 280,000 | | | | 280,317 | |
Ally Master Owner Trust 2010-3, Asset-Backed Certificates, Series 2010-3, Cl. A, 2.88%, 4/15/151 | | | 660,000 | | | | 671,093 | |
Ally Master Owner Trust, Asset-Backed Nts., Series 2011-1, Cl. A2, 2.15%, 1/15/16 | | | 230,000 | | | | 232,599 | |
Ally Master Owner Trust, Automobile Receivables Nts., Series 2011-4, Cl. A2, 1.54%, 9/15/16 | | | 545,000 | | | | 543,545 | |
AmeriCredit Automobile Receivables Trust 2009-1, Automobile Receivables-Backed Nts., Series 2009-1, Cl. A3, 3.04%, 10/15/13 | | | 13,802 | | | | 13,879 | |
AmeriCredit Automobile Receivables Trust 2010-3, Automobile Receivables-Backed Nts., Series 2010-3, Cl. A2, 0.77%, 12/9/13 | | | 195,640 | | | | 195,618 | |
AmeriCredit Automobile Receivables Trust 2011-1, Automobile Receivables-Backed Nts., Series 2011-1, Cl. D, 4.26%, 2/8/17 | | | 120,000 | | | | 121,541 | |
AmeriCredit Automobile Receivables Trust 2011-2, Automobile Receivables-Backed Nts.: | | | | | | | | |
Series 2011-2, Cl. A3, 1.61%, 10/8/15 | | | 140,000 | | | | 140,607 | |
Series 2011-2, Cl. D, 4%, 5/8/17 | | | 235,000 | | | | 234,683 | |
AmeriCredit Automobile Receivables Trust 2011-4, Automobile Receivables-Backed Nts., Series 2011-4, Cl. D, 4.08%, 7/10/17 | | | 650,000 | | | | 649,027 | |
AmeriCredit Automobile Receivables Trust 2011-5, Automobile Receivables Nts.: | | | | | | | | |
Series 2011-5, Cl. D, 4.72%, 12/8/17 | | | 435,000 | | | | 445,042 | |
Series 2011-5, Cl. D., 1.55%, 7/8/16 | | | 360,000 | | | | 359,921 | |
AmeriCredit Prime Automobile Receivables Trust 2010-2, Automobile Receivables Nts., Series 2010-2, Cl. A2, 1.22%, 10/8/13 | | | 35,467 | | | | 35,483 | |
Argent Securities Trust 2006-M3, Asset-Backed Pass-Through Certificates, Series 2006-M3, Cl. A2B, 0.394%, 9/25/362 | | | 19,776 | | | | 5,814 | |
Carrington Mortgage Loan Trust, Asset-Backed Pass-Through Certificates, Series 2006-FRE1, Cl. A2, 0.404%, 7/25/362 | | | 343,755 | | | | 316,859 | |
Centre Point Funding LLC, Asset-Backed Nts., Series 2010-1A, Cl. 1, 5.43%, 7/20/151 | | | 102,238 | | | | 107,220 | |
Citibank Credit Card Issuance Trust, Credit Card Receivable Nts., Series 2003-C4, Cl. C4, 5%, 6/10/15 | | | 310,000 | | | | 323,323 | |
Citibank Omni Master Trust, Credit Card Receivables: | | | | | | | | |
Series 2009-A13, Cl. A13, 5.35%, 8/15/181 | | | 915,000 | | | | 1,000,157 | |
Series 2009-A17, Cl. A17, 4.90%, 11/15/181 | | | 725,000 | | | | 789,121 | |
Series 2009-A8, Cl. A8, 2.378%, 5/16/161,2 | | | 620,000 | | | | 623,866 | |
CNH Wholesale Master Note Trust 2011-1, Equipment Nts., Series 2011-1, Cl. 1A, 1.078%, 1/20/412 | | | 465,000 | | | | 465,563 | |
Countrywide Home Loans, Asset-Backed Certificates: | | | | | | | | |
Series 2002-4, Cl. A1, 1.034%, 2/25/332 | | | 15,723 | | | | 15,101 | |
Series 2005-16, Cl. 2AF2, 5.377%, 5/1/362 | | | 432,896 | | | | 332,575 | |
CWABS Asset-Backed Certificates Trust 2006-25, Asset-Backed Certificates, Series 2006-25, Cl. 2A2, 0.414%, 6/25/472 | | | 35,693 | | | | 31,561 | |
DSC Floorplan Master Owner Trust, Automobile Receivable Nts., Series 2011-1, Cl. A, 3.91%, 3/15/16 | | | 400,000 | | | | 405,419 | |
DT Auto Owner Trust 2009-1, Automobile Receivable Nts., Series 2009-1, Cl. A1, 2.98%, 10/15/151 | | | 206,383 | | | | 207,391 | |
DT Auto Owner Trust 2011-1A, Automobile Receivable Nts., Series 2011-1A, Cl. C, 3.05%, 8/15/151 | | | 570,000 | | | | 571,091 | |
DT Auto Owner Trust 2011-2A, Automobile Receivable Nts., Series 2011-2A, Cl. C, 3.05%, 7/15/131 | | | 134,000 | | | | 133,557 | |
DT Auto Owner Trust 2011-3A, Automobile Receivable Nts., Series 2011-3A, Cl. C, 4.03%, 12/15/413 | | | 435,000 | | | | 434,133 | |
First Investors Auto Owner Trust 2011-1, Automobile Receivable Nts., Series 2011-1, Cl. A2, 1.47%, 3/16/15 | | | 304,650 | | | | 303,242 | |
Ford Credit Auto Lease Trust, Automobile Receivable Nts., Series 2010-B, Cl. A2, 0.75%, 10/15/121 | | | 163,213 | | | | 163,194 | |
Ford Credit Auto Owner Trust, Automobile Receivable Nts., Series 2010-A, Cl. A4, 2.15%, 6/15/15 | | | 670,000 | | | | 683,012 | |
8 | OPPENHEIMER CORE BOND FUND/VA
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Asset-Backed Securities Continued | | | | | | | | |
Ford Credit Floorplan Master Owner Trust 2009-2, Asset-Backed Nts., Series 2009-2, Cl. A, 1.828%, 9/15/142 | | $ | 470,000 | | | $ | 473,627 | |
Ford Credit Floorplan Master Owner Trust 2010-1, Asset-Backed Nts., Series 2010-1, Cl. A, 1.928%, 12/15/141,2 | | | 490,000 | | | | 495,377 | |
Ford Credit Floorplan Master Owner Trust 2011-1, Asset-Backed Nts., Series 2011-1, Cl. A1, 2.12%, 2/15/16 | | | 490,000 | | | | 496,803 | |
GE Dealer Floorplan Master Note Trust, Asset-Backed Securities, Series 2009-2A, Cl. A, 1.828%, 10/20/141,2 | | | 460,000 | | | | 464,060 | |
GMAC Mortgage Servicer Advance Funding Ltd., Asset-Backed Nts., Series 2011-1A, Cl. A, 3.72%, 2/15/231 | | | 445,000 | | | | 444,967 | |
Hertz Vehicle Financing LLC, Automobile Receivable Nts., Series 2010-1A, Cl. A1, 2.60%, 2/25/151 | | | 1,015,000 | | | | 1,026,867 | |
Mastr Asset-Backed Securities Trust 2006-WMC3, Mtg. Pass-Through Certificates, Series 2006-WMC3, Cl. A3, 0.394%, 8/25/362 | | | 63,521 | | | | 19,359 | |
NC Finance Trust, Collateralized Mtg. Obligation Pass-Through Certificates, Series 1999-I, Cl. ECFD, 3.405%, 1/25/293,4 | | | 3,370,016 | | | | 303,301 | |
Nissan Auto Lease Trust 2010-B, Automobile Asset-Backed Nts., Series 2010-B, Cl. A3, 1.12%, 12/15/13 | | | 440,000 | | | | 441,130 | |
Nissan Master Owner Trust, Automobile Receivable Nts., Series 2010-AA, Cl. A, 1.428%, 1/15/151,2 | | | 485,000 | | | | 488,705 | |
Rental Car Finance Corp., Automobile Receivable Nts., Series 2011-1A, Cl. A1, 2.51%, 2/25/161 | | | 365,000 | | | | 364,348 | |
Santander Drive Auto Receivables Trust 2010-2, Automobile Receivables Nts., Series 2010-2, Cl. A2, 0.95%, 8/15/13 | | | 181,803 | | | | 181,798 | |
Santander Drive Auto Receivables Trust 2010-3, Automobile Receivables Nts., Series 2010-3, Cl. C, 3.06%, 11/15/17 | | | 485,000 | | | | 485,029 | |
Santander Drive Auto Receivables Trust 2010-A, Automobile Receivables Nts., Series 2010-A, Cl. A2, 1.37%, 8/15/131 | | | 219,052 | | | | 219,242 | |
Santander Drive Auto Receivables Trust 2011-1, Automobile Receivables Nts., Series 2011-1, Cl. D, 4.01%, 2/15/17 | | | 465,000 | | | | 464,053 | |
Santander Drive Auto Receivables Trust 2011-4, Automobile Receivables Nts., Series 2011-4, Cl. A3, 1.64%, 9/15/15 | | | 40,000 | | | | 40,010 | |
Santander Drive Auto Receivables Trust 2011-S1A, Automobile Receivables Nts., Series 2011-S1A, Cl. D, 3.10%, 5/15/173 | | | 437,701 | | | | 433,871 | |
Santander Drive Auto Receivables Trust 2011-S2A, Automobile Receivables Nts., Series 2011-S2A, Cl. D, 3.35%, 6/15/171 | | | 369,547 | | | | 364,004 | |
Volkswagen Auto Lease Trust 2010-A, Automobile Receivable Nts., Series 2010-A, Cl. A3, 0.99%, 11/20/13 | | | 440,000 | | | | 440,715 | |
Westlake Automobile Receivables Trust 2011-1, Automobile Receivables Nts., Series 2011-1, Cl. A3, 1.49%, 6/16/141 | | | 205,000 | | | | 204,801 | |
Total Asset-Backed Securities (Cost $21,965,197) | | | | | | | 18,922,092 | |
| | | | | | | | |
Mortgage-Backed Obligations—68.7% | | | | | | | | |
Government Agency—56.9% | | | | | | | | |
FHLMC/FNMA/FHLB/Sponsored—56.5% | | | | | | | | |
Federal Home Loan Mortgage Corp.: | | | | | | | | |
4.50%, 1/1/425 | | | 3,455,000 | | | | 3,661,760 | |
5%, 12/15/34 | | | 19,762 | | | | 21,279 | |
5.50%, 9/1/39 | | | 1,311,162 | | | | 1,425,525 | |
6%, 5/15/18-10/15/29 | | | 2,556,913 | | | | 2,819,008 | |
6.50%, 4/15/18-4/1/34 | | | 575,095 | | | | 647,369 | |
7%, 8/15/16-10/1/37 | | | 704,099 | | | | 808,842 | |
8%, 4/1/16 | | | 164,882 | | | | 178,703 | |
9%, 8/1/22-5/1/25 | | | 62,719 | | | | 72,329 | |
10.50%, 11/14/20 | | | 2,662 | | | | 3,227 | |
Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates: | | | | | | | | |
Series 151, Cl. F, 9%, 5/15/21 | | | 15,444 | | | | 17,675 | |
Series 1674, Cl. Z, 6.75%, 2/15/24 | | | 47,509 | | | | 53,813 | |
Series 2006-11, Cl. PS, 23.49%, 3/25/362 | | | 401,801 | | | | 561,097 | |
Series 2034, Cl. Z, 6.50%, 2/15/28 | | | 5,663 | | | | 6,334 | |
Series 2042, Cl. N, 6.50%, 3/15/28 | | | 17,019 | | | | 19,724 | |
Series 2043, Cl. ZP, 6.50%, 4/15/28 | | | 663,971 | | | | 761,453 | |
Series 2046, Cl. G, 6.50%, 4/15/28 | | | 45,826 | | | | 52,599 | |
Series 2053, Cl. Z, 6.50%, 4/15/28 | | | 6,825 | | | | 7,633 | |
Series 2066, Cl. Z, 6.50%, 6/15/28 | | | 740,183 | | | | 849,508 | |
Series 2195, Cl. LH, 6.50%, 10/15/29 | | | 562,840 | | | | 658,104 | |
Series 2220, Cl. PD, 8%, 3/15/30 | | | 2,717 | | | | 3,244 | |
Series 2326, Cl. ZP, 6.50%, 6/15/31 | | | 159,913 | | | | 185,282 | |
9 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | |
| | Amount | | Value |
|
FHLMC/FNMA/FHLB/Sponsored Continued | | | | | | | | |
Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates: Continued | | | | | | | | |
Series 2461, Cl. PZ, 6.50%, 6/15/32 | | $ | 774,966 | | | $ | 879,599 | |
Series 2470, Cl. LF, 1.278%, 2/15/322 | | | 6,794 | | | | 6,919 | |
Series 2500, Cl. FD, 0.778%, 3/15/322 | | | 151,899 | | | | 152,645 | |
Series 2526, Cl. FE, 0.678%, 6/15/292 | | | 216,768 | | | | 217,531 | |
Series 2538, Cl. F, 0.878%, 12/15/322 | | | 856,802 | | | | 862,726 | |
Series 2551, Cl. FD, 0.678%, 1/15/332 | | | 142,836 | | | | 143,267 | |
Series 2663, Cl. BA, 4%, 8/1/16 | | | 74,057 | | | | 74,222 | |
Series 2686, Cl. CD, 4.50%, 2/1/17 | | | 5,687 | | | | 5,685 | |
Series 2936, Cl. PE, 5%, 2/1/35 | | | 69,000 | | | | 77,333 | |
Series 3019, Cl. MD, 4.75%, 1/1/31 | | | 134,215 | | | | 134,904 | |
Series 3025, Cl. SJ, 23.73%, 8/15/352 | | | 76,803 | | | | 109,830 | |
Series 3094, Cl. HS, 23.363%, 6/15/342 | | | 222,910 | | | | 301,810 | |
Series 3242, Cl. QA, 5.50%, 3/1/30 | | | 86,664 | | | | 87,040 | |
Series 3822, Cl. JA, 5%, 6/1/40 | | | 58,249 | | | | 63,080 | |
Series 3848, Cl. WL, 4%, 4/1/40 | | | 65,158 | | | | 68,872 | |
Series R001, Cl. AE, 4.375%, 4/1/15 | | | 11,643 | | | | 11,640 | |
Federal Home Loan Mortgage Corp., | | | | | | | | |
Interest-Only Stripped | | | | | | | | |
Mtg.-Backed Security: | | | | | | | | |
Series 205, Cl. IO, 13.265%, 9/1/296 | | | 19,360 | | | | 3,354 | |
Series 206, Cl. IO, 10.491%, 12/1/296 | | | 238,719 | | | | 43,411 | |
Series 2074, Cl. S, 63.15%, 7/17/286 | | | 4,152 | | | | 889 | |
Series 2079, Cl. S, 73.948%, 7/17/286 | | | 7,129 | | | | 1,537 | |
Series 2130, Cl. SC, 50.33%, 3/15/296 | | | 274,054 | | | | 55,868 | |
Series 243, Cl. 6, 0.377%, 12/15/326 | | | 269,732 | | | | 48,995 | |
Series 2526, Cl. SE, 40.405%, 6/15/296 | | | 9,790 | | | | 1,976 | |
Series 2527, Cl. SG, 10.406%, 2/15/326 | | | 145,042 | | | | 1,546 | |
Series 2531, Cl. ST, 56.547%, 2/15/306 | | | 111,449 | | | | 3,427 | |
Series 2796, Cl. SD, 61.789%, 7/15/266 | | | 441,997 | | | | 86,799 | |
Series 2802, Cl. AS, 62.443%, 4/15/336 | | | 232,163 | | | | 16,640 | |
Series 2819, Cl. S, 53.364%, 6/15/346 | | | 91,180 | | | | 18,501 | |
Series 2920, Cl. S, 63.715%, 1/15/356 | | | 1,665,099 | | | | 282,204 | |
Series 3004, Cl. SB, 99.999%, 7/15/356 | | | 95,608 | | | | 14,714 | |
Series 3110, Cl. SL, 99.999%, 2/15/266 | | | 247,773 | | | | 31,756 | |
Series 3451, Cl. SB, 20.75%, 5/15/386 | | | 274,136 | | | | 32,676 | |
Federal Home Loan Mortgage Corp., Principal-Only Stripped Mtg.-Backed Security, Series 176, Cl. PO, 3.804%, 6/1/267 | | | 104,236 | | | | 95,487 | |
Federal National Mortgage Assn.: | | | | | | | | |
2.579%, 10/1/362 | | | 185,087 | | | | 195,812 | |
3.50%, 1/1/275 | | | 5,535,000 | | | | 5,789,264 | |
4%, 1/1/425 | | | 9,480,000 | | | | 9,961,407 | |
4.50%, 1/1/27-1/1/425 | | | 16,305,000 | | | | 17,361,225 | |
5%, 2/25/22-7/25/22 | | | 16,175 | | | | 17,433 | |
5%, 1/1/425 | | | 12,283,000 | | | | 13,271,401 | |
5.50%, 1/1/27-1/1/425 | | | 6,616,000 | | | | 7,203,121 | |
6%, 1/1/425 | | | 3,815,000 | | | | 4,201,270 | |
6.50%, 5/25/17-1/1/34 | | | 1,043,267 | | | | 1,142,030 | |
6.50%, 1/1/425 | | | 1,611,000 | | | | 1,792,741 | |
7%, 11/1/17-7/25/35 | | | 493,426 | | | | 545,939 | |
7.50%, 1/1/33 | | | 11,253 | | | | 13,408 | |
8.50%, 7/1/32 | | | 20,802 | | | | 25,436 | |
Federal National Mortgage Assn., 15 yr.: | | | | | | | | |
3%, 1/1/275 | | | 10,010,000 | | | | 10,340,017 | |
4%, 1/1/275 | | | 490,000 | | | | 516,873 | |
Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates: | | | | | | | | |
Trust 1989-17, Cl. E, 10.40%, 4/25/19 | | | 11,430 | | | | 12,731 | |
Trust 1993-87, Cl. Z, 6.50%, 6/25/23 | | | 557,768 | | | | 630,536 | |
Trust 1998-58, Cl. PC, 6.50%, 10/25/28 | | | 446,810 | | | | 497,067 | |
Trust 1998-61, Cl. PL, 6%, 11/25/28 | | | 228,301 | | | | 257,001 | |
Trust 1999-54, Cl. LH, 6.50%, 11/25/29 | | | 367,654 | | | | 421,439 | |
Trust 2001-44, Cl. QC, 6%, 9/25/16 | | | 20,234 | | | | 21,597 | |
Trust 2001-51, Cl. OD, 6.50%, 10/25/31 | | | 28,123 | | | | 32,659 | |
Trust 2001-74, Cl. QE, 6%, 12/25/31 | | | 647,052 | | | | 729,510 | |
Trust 2002-12, Cl. PG, 6%, 3/25/17 | | | 10,455 | | | | 11,308 | |
Trust 2003-28, Cl. KG, 5.50%, 4/25/23 | | | 3,964,000 | | | | 4,413,662 | |
Trust 2004-101, Cl. BG, 5%, 1/25/20 | | | 1,424,695 | | | | 1,526,075 | |
Trust 2004-9, Cl. AB, 4%, 7/1/17 | | | 234,006 | | | | 236,062 | |
Trust 2005-12, Cl. JC, 5%, 6/1/28 | | | 120,341 | | | | 120,681 | |
Trust 2005-22, Cl. EC, 5%, 10/1/28 | | | 54,062 | | | | 54,165 | |
Trust 2005-30, Cl. CU, 5%, 4/1/29 | | | 74,529 | | | | 74,946 | |
Trust 2006-46, Cl. SW, 23.123%, 6/25/362 | | | 294,847 | | | | 411,682 | |
Trust 2006-50, Cl. KS, 23.124%, 6/25/362 | | | 431,309 | | | | 601,834 | |
Trust 2007-42, Cl. A, 6%, 2/1/33 | | | 715,327 | | | | 749,709 | |
Trust 2009-36, Cl. FA, 1.234%, 6/25/372 | | | 563,821 | | | | 570,861 | |
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: | | | | | | | | |
Trust 2001-61, Cl. SH, 38.447%, 11/18/316 | | | 25,535 | | | | 4,596 | |
Trust 2001-63, Cl. SD, 35.722%, 12/18/316 | | | 8,219 | | | | 1,464 | |
Trust 2001-65, Cl. S, 36.948%, 11/25/316 | | | 640,666 | | | | 116,105 | |
Trust 2001-68, Cl. SC, 26.238%, 11/25/316 | | | 5,426 | | | | 983 | |
Trust 2001-81, Cl. S, 31.868%, 1/25/326 | | | 175,653 | | | | 34,736 | |
Trust 2002-28, Cl. SA, 38.371%, 4/25/326 | | | 4,862 | | | | 901 | |
Trust 2002-38, Cl. SO, 53.992%, 4/25/326 | | | 12,050 | | | | 2,197 | |
Trust 2002-39, Cl. SD, 43.567%, 3/18/326 | | | 7,968 | | | | 1,596 | |
Trust 2002-47, Cl. NS, 34.496%, 4/25/326 | | | 483,784 | | | | 92,342 | |
Trust 2002-48, Cl. S, 34.501%, 7/25/326 | | | 7,945 | | | | 1,500 | |
Trust 2002-51, Cl. S, 34.75%, 8/25/326 | | | 444,115 | | | | 84,784 | |
Trust 2002-52, Cl. SD, 40.908%, 9/25/326 | | | 560,808 | | | | 112,159 | |
Trust 2002-52, Cl. SL, 36.61%, 9/25/326 | | | 5,025 | | | | 959 | |
Trust 2002-53, Cl. SK, 41.633%, 4/25/326 | | | 27,763 | | | | 5,723 | |
Trust 2002-56, Cl. SN, 36.625%, 7/25/326 | | | 10,833 | | | | 2,047 | |
Trust 2002-60, Cl. SM, 37.002%, 8/25/326 | | | 86,925 | | | | 13,456 | |
10 | OPPENHEIMER CORE BOND FUND/VA
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
FHLMC/FNMA/FHLB/Sponsored Continued | | | | | | | | |
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: Continued | | | | | | | | |
Trust 2002-7, Cl. SK, 36.625%, 1/25/326 | | $ | 40,260 | | | $ | 6,447 | |
Trust 2002-77, Cl. BS, 31.49%, 12/18/326 | | | 52,703 | | | | 8,904 | |
Trust 2002-77, Cl. IS, 49.219%, 12/18/326 | | | 20,530 | | | | 4,195 | |
Trust 2002-77, Cl. JS, 29.15%, 12/18/326 | | | 86,882 | | | | 13,978 | |
Trust 2002-77, Cl. SA, 30.879%, 12/18/326 | | | 83,124 | | | | 13,979 | |
Trust 2002-77, Cl. SH, 41.744%, 12/18/326 | | | 236,071 | | | | 46,144 | |
Trust 2002-84, Cl. SA, 40.331%, 12/25/326 | | | 595,074 | | | | 102,847 | |
Trust 2002-9, Cl. MS, 33.469%, 3/25/326 | | | 9,056 | | | | 1,756 | |
Trust 2002-90, Cl. SN, 38.32%, 8/25/326 | | | 44,719 | | | | 6,922 | |
Trust 2002-90, Cl. SY, 42.875%, 9/25/326 | | | 29,782 | | | | 4,743 | |
Trust 2003-26, Cl. DI, 11.339%, 4/25/336 | | | 19,479 | | | | 3,223 | |
Trust 2003-33, Cl. SP, 40.253%, 5/25/336 | | | 644,497 | | | | 105,155 | |
Trust 2003-4, Cl. S, 36.576%, 2/25/336 | | | 410,619 | | | | 72,169 | |
Trust 2003-89, Cl. XS, 40.742%, 11/25/326 | | | 257,718 | | | | 12,950 | |
Trust 2004-54, Cl. DS, 51.344%, 11/25/306 | | | 406,838 | | | | 76,427 | |
Trust 2005-14, Cl. SE, 41.553%, 3/25/356 | | | 321,895 | | | | 46,700 | |
Trust 2005-40, Cl. SA, 60.463%, 5/25/356 | | | 910,791 | | | | 162,186 | |
Trust 2005-40, Cl. SB, 70.886%, 5/25/356 | | | 43,208 | | | | 7,327 | |
Trust 2005-71, Cl. SA, 61.213%, 8/25/256 | | | 1,064,192 | | | | 149,205 | |
Trust 2005-93, Cl. SI, 18.704%, 10/25/356 | | | 858,372 | | | | 126,692 | |
Trust 2006-129, Cl. SM, 28.813%, 1/25/376 | | | 359,365 | | | | 51,487 | |
Trust 2006-60, Cl. DI, 38.843%, 4/25/356 | | | 219,501 | | | | 31,667 | |
Trust 2008-55, Cl. SA, 20.914%, 7/25/386 | | | 174,277 | | | | 19,345 | |
Trust 2008-67, Cl. KS, 48.436%, 8/25/346 | | | 1,862,074 | | | | 135,713 | |
Trust 221, Cl. 2, 38.599%, 5/1/236 | | | 7,095 | | | | 1,299 | |
Trust 222, Cl. 2, 25.595%, 6/1/236 | | | 797,465 | | | | 150,091 | |
Trust 252, Cl. 2, 36.807%, 11/1/236 | | | 688,313 | | | | 126,484 | |
Trust 294, Cl. 2, 15.406%, 2/1/286 | | | 77,542 | | | | 12,792 | |
Trust 301, Cl. 2, 2.112%, 4/1/296 | | | 8,385 | | | | 1,516 | |
Trust 303, Cl. IO, 7.301%, 11/1/296 | | | 121,718 | | | | 21,862 | |
Trust 320, Cl. 2, 11.724%, 4/1/326 | | | 542,817 | | | | 94,745 | |
Trust 321, Cl. 2, 1.699%, 4/1/326 | | | 1,669,799 | | | | 301,875 | |
Trust 324, Cl. 2, 0.501%, 7/1/326 | | | 17,319 | | | | 3,083 | |
Trust 331, Cl. 5, 0%, 2/1/336,8 | | | 23,882 | | | | 4,034 | |
Trust 331, Cl. 9, 13.237%, 2/1/336 | | | 450,538 | | | | 88,590 | |
Trust 334, Cl. 12, 0.423%, 2/1/336 | | | 42,634 | | | | 7,058 | |
Trust 334, Cl. 17, 20.883%, 2/1/336 | | | 314,392 | | | | 69,355 | |
Trust 339, Cl. 12, 2.511%, 7/1/336 | | | 598,401 | | | | 114,193 | |
Trust 339, Cl. 7, 4.65%, 7/1/336 | | | 1,407,874 | | | | 200,725 | |
Trust 343, Cl. 13, 10.169%, 9/1/336 | | | 571,447 | | | | 106,302 | |
Trust 343, Cl. 18, 1.089%, 5/1/346 | | | 156,841 | | | | 26,048 | |
Trust 345, Cl. 9, 0%, 1/1/346,8 | | | 590,152 | | | | 76,371 | |
Trust 351, Cl. 10, 0.79%, 4/1/346 | | | 214,546 | | | | 31,305 | |
Trust 351, Cl. 8, 1.45%, 4/1/346 | | | 338,575 | | | | 49,908 | |
Trust 356, Cl. 10, 1.266%, 6/1/356 | | | 277,143 | | | | 40,385 | |
Trust 356, Cl. 12, 1.97%, 2/1/356 | | | 138,557 | | | | 20,198 | |
Trust 362, Cl. 13, 3.439%, 8/1/356 | | | 498,643 | | | | 79,971 | |
Trust 364, Cl. 15, 4.816%, 9/1/356 | | | 30,226 | | | | 4,711 | |
Trust 364, Cl. 16, 0.173%, 9/1/356 | | | 581,279 | | | | 97,023 | |
Trust 365, Cl. 16, 2.414%, 3/1/366 | | | 901,114 | | | | 146,806 | |
Federal National Mortgage Assn., Principal-Only Stripped Mtg.-Backed Security, Trust 1993-184, Cl. M, 4.278%, 9/25/237 | | | 247,603 | | | | 224,077 | |
| | | | | | | |
| | | | | | | 104,288,809 | |
| | | | | | | | |
GNMA/Guaranteed—0.4% | | | | | | | | |
Government National Mortgage Assn.: | | | | | | | | |
7%, 12/29/23-3/15/26 | | | 24,890 | | | | 28,843 | |
8.50%, 8/1/17-12/15/17 | | | 89,649 | | | | 101,221 | |
Government National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates: | | | | | | | | |
Series 1999-32, Cl. ZB, 8%, 9/16/29 | | | 74,144 | | | | 88,350 | |
Series 2000-7, Cl. Z, 8%, 1/16/30 | | | 31,700 | | | | 38,060 | |
Government National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: | | | | | | | | |
Series 1998-19, Cl. SB, 71.063%, 7/16/286 | | | 15,299 | | | | 3,310 | |
Series 2001-21, Cl. SB, 91.534%, 1/16/276 | | | 545,428 | | | | 107,416 | |
Series 2002-15, Cl. SM, 82.478%, 2/16/326 | | | 571,974 | | | | 106,165 | |
Series 2004-11, Cl. SM, 73.936%, 1/17/306 | | | 451,877 | | | | 102,989 | |
Series 2007-17, Cl. AI, 21.009%, 4/16/376 | | | 170,572 | | | | 31,993 | |
| | | | | | | |
| | | | | | | 608,347 | |
| | | | | | | | |
Non-Agency—11.8% | | | | | | | | |
Commercial—8.7% | | | | | | | | |
Asset Securitization Corp., Commercial Interest-Only Stripped Mtg.-Backed Security, Series 1997-D4, Cl. PS1, 0.304%, 4/14/296 | | | 5,269,927 | | | | 145,432 | |
Banc of America Commercial Mortgage Trust 2007-1, Commercial Mtg. Pass-Through Certificates, Series 2007-1, Cl. A4, 5.451%, 1/1/49 | | | 710,000 | | | | 774,322 | |
Banc of America Commercial Mortgage, Inc., Commercial Mtg. Pass-Through Certificates, Series 2007-3, Cl. A4, 5.622%, 6/1/492 | | | 385,000 | | | | 414,465 | |
Capital Lease Funding Securitization LP, Interest-Only Corporate-Backed Pass-Through Certificates, Series 1997-CTL1, 3.287%, 6/22/241,6 | | | 2,702,173 | | | | 131,511 | |
CFCRE Commercial Mortgage Trust, Commercial Mtg. Pass-Through Certificates, Series 2011-C1, Cl. A1, 1.871%, 4/1/441 | | | 134,414 | | | | 134,106 | |
11 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Commercial Continued | | | | | | | | |
CHL Mortgage Pass-Through Trust 2005-17, Mtg. Pass-Through Certificates, Series 2005-17, Cl. 1A8, 5.50%, 9/1/35 | | $ | 67,367 | | | $ | 64,310 | |
CHL Mortgage Pass-Through Trust 2007-J3, Mtg. Pass-Through Certificates, Series 2007-J3, Cl. A9, 6%, 7/1/37 | | | 321,377 | | | | 254,324 | |
Citigroup, Inc./Deutsche Bank 2007-CD4 Commercial Mortgage Trust, Commercial Mtg. Pass-Through Certificates: | | | | | | | | |
Series 2007-CD4, Cl. A2B, 5.205%, 12/11/49 | | | 376,206 | | | | 381,230 | |
Series 2007-CD4, Cl. A4, 5.322%, 12/1/49 | | | 875,000 | | | | 931,627 | |
Deutsche Mortgage & Asset Receiving, Commercial Mtg. Pass-Through Certificates, Series 2010-C1, Cl. A1, 3.156%, 7/1/461 | | | 581,251 | | | | 598,446 | |
Deutsche Mortgage & Asset Receiving, Commercial Mtg. Pass-Through Certificates, Interest-Only Stripped Mtg.-Backed Security, Series 2010-C1, Cl. XPA, 4.857%, 9/1/201,6 | | | 4,602,164 | | | | 345,880 | |
First Horizon Alternative Mortgage Securities Trust 2004-FA2, Mtg. Pass-Through Certificates, Series 2004-FA2, Cl. 3A1, 6%, 1/25/35 | | | 515,654 | | | | 503,080 | |
First Horizon Alternative Mortgage Securities Trust 2007-FA2, Mtg. Pass-Through Certificates, Series 2007-FA2, Cl. 1A1, 5.50%, 4/25/37 | | | 199,832 | | | | 131,099 | |
First Horizon Mortgage Pass-Through Trust 2007-AR3, Mtg. Pass-Through Certificates, Series 2007-AR3, Cl. 1A1, 5.857%, 11/1/372 | | | 383,103 | | | | 233,851 | |
Greenwich Capital Commercial Funding Corp./Commercial Mortgage Trust 2007-GG11, Commercial Mtg. Pass-Through Certificates, Series 2007-GG11, Cl. A4, 5.736%, 12/1/49 | | | 1,280,000 | | | | 1,386,588 | |
Greenwich Capital Commercial Funding Corp./Commercial Mortgage Trust 2007-GG9, Commercial Mtg. Pass-Through Certificates, Series 2007-GG9, Cl. AM, 5.475%, 3/1/39 | | | 495,000 | | | | 466,759 | |
GS Mortgage Securities Corp. II, Commercial Mtg. Obligations, Series 2011-GC3, Cl. A1, 2.331%, 3/1/44 | | | 351,661 | | | | 359,584 | |
GSR Mortgage Loan Trust 2005-AR4, Mtg. Pass-Through Certificates, Series 2005-AR4, Cl. 6A1, 5.25%, 7/1/35 | | | 380,206 | | | | 350,790 | |
Impac CMB Trust Series 2005-4, Collateralized Asset-Backed Bonds, Series 2005-4, Cl. 1A1A, 0.834%, 5/25/352 | | | 566,538 | | | | 385,765 | |
IndyMac Index Mortgage Loan Trust 2005-AR23, Mtg. Pass-Through Certificates, Series 2005-AR23, Cl. 6A1, 5.11%, 11/1/352 | | | 656,173 | | | | 447,249 | |
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial Mtg. Pass-Through Certificates: | | | | | | | | |
Series 2011-C3, Cl. A1, 1.875%, 2/1/461 | | | 396,095 | | | | 397,831 | |
Series 2010-C2, Cl. A2, 3.616%, 11/1/431 | | | 710,000 | | | | 739,079 | |
Series 2007-LDPX, Cl. A2S2, 5.187%, 1/1/493 | | | 1,270,963 | | | | 1,283,164 | |
JPMorgan Mortgage Trust 2007-S3, Mtg. Pass-Through Certificates, Series 2007-S3, Cl. 1A90, 7%, 8/1/37 | | | 646,709 | | | | 543,845 | |
LB-UBS Commercial Mortgage Trust 2007-C6, Commercial Mtg. Pass-Through Certificates, Series 2007-C6, Cl. A4, 5.858%, 7/11/40 | | | 880,000 | | | | 967,894 | |
Lehman Brothers Commercial Conduit Mortgage Trust, Interest- Only Stripped Mtg.-Backed Security, Series 1998-C1, Cl. IO, 57.776%, 2/18/306 | | | 3,192,227 | | | | 51,436 | |
Lehman Structured Securities Corp., Commercial Mtg. Pass-Through Certificates, Series 2002-GE1, Cl. A, 2.514%, 7/1/241 | | | 132,743 | | | | 108,327 | |
Mastr Alternative Loan Trust 2004-6, Mtg. Pass-Through Certificates, Series 2004-6, Cl. 10A1, 6%, 7/25/34 | | | 904,998 | | | | 928,973 | |
Morgan Stanley Capital I Trust 2007-IQ15, Commercial Mtg. Pass-Through Certificates, Series 2007-IQ15, Cl. AM, 5.879%, 6/1/492 | | | 490,000 | | | | 463,298 | |
Salomon Brothers Mortgage Securities VII, Inc., Interest-Only Commercial Mtg. Pass-Through Certificates, Series 1999-C1, Cl. X, 31.725%, 5/18/326 | | | 41,277,456 | | | | 96,548 | |
12 | OPPENHEIMER CORE BOND FUND/VA
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Commercial Continued | | | | | | | | |
Structured Adjustable Rate Mortgage Loan Trust, Mtg. Pass-Through Certificates, Series 2007-6, Cl. 3A1, 5.118%, 7/1/372 | | $ | 591,438 | | | $ | 356,032 | |
Wachovia Bank Commercial Mortgage Trust 2007-C34, Commercial Mtg. Pass-Through Certificates, Series 2007-C34, Cl. A3, 5.678%, 5/1/46 | | | 520,000 | | | | 572,745 | |
WaMu Mortgage Pass-Through Certificates 2005-AR14 Trust, Mtg. Pass-Through Certificates, Series 2005-AR14, Cl. 1A4, 2.474%, 12/1/352 | | | 360,667 | | | | 279,814 | |
Wells Fargo Commercial Mortgage Trust 2010-C1, Commercial Mtg. Pass-Through Certificates, Series 2010-C1, Cl. A1, 3.349%, 11/1/431 | | | 358,437 | | | | 372,057 | |
Wells Fargo Mortgage-Backed Securities 2007-AR3 Trust, Mtg. Pass-Through Certificates, Series 2007-AR3, Cl. A4, 5.777%, 4/1/372 | | | 182,781 | | | | 147,685 | |
Wells Fargo Mortgage-Backed Securities 2007-AR8 Trust, Mtg. Pass-Through Certificates, Series 2007-AR8, Cl. A1, 6.042%, 11/1/372 | | | 455,796 | | | | 332,157 | |
| | | | | | | |
| | | | | | | 16,081,303 | |
| | | | | | | | |
Multifamily—0.5% | | | | | | | | |
Citigroup Mortgage Loan Trust, Inc. 2006-AR3, Mtg. Pass-Through Certificates, Series 2006-AR3, Cl. 1A2A, 5.672%, 6/1/362 | | | 415,587 | | | | 339,132 | |
JPMorgan Mortgage Trust 2007-A3, Mtg. Pass-Through Certificates, Series 2007-A3, Cl. 3A2M, 5.259%, 5/1/372 | | | 155,749 | | | | 126,031 | |
Wells Fargo Mortgage-Backed Securities 2006-AR6 Trust, Mtg. Pass-Through Certificates, Series 2006-AR6, Cl. 3A1, 2.689%, 3/25/362 | | | 508,897 | | | | 406,937 | |
| | | | | | | |
| | | | | | | 872,100 | |
| | | | | | | | |
Other—0.2% | | | | | | | | |
Greenwich Capital Commercial Funding Corp./Commercial Mortgage Trust 2007-GG9, Commercial Mtg. Pass-Through Certificates, Series 2007-GG9, Cl. A4, 5.444%, 3/1/39 | | | 350,000 | | | | 380,274 | |
Salomon Brothers Mortgage Securities VI, Inc., Interest-Only Stripped Mtg.-Backed Security, Series 1987-3, Cl. B, 77.143%, 10/23/176 | | | 562 | | | | 55 | |
Salomon Brothers Mortgage Securities VI, Inc., Principal-Only Stripped Mtg.-Backed Security, Series 1987-3, Cl. A, 3.603%, 10/23/177 | | | 832 | | | | 816 | |
| | | | | | | |
| | | | | | | 381,145 | |
| | | | | | | | |
Residential—2.4% | | | | | | | | |
Banc of America Funding 2007-C Trust, Mtg. Pass-Through Certificates, Series 2007-C, Cl. 1A4, 5.544%, 5/1/362 | | | 155,000 | | | | 137,355 | |
CHL Mortgage Pass-Through Trust 2005-29, Mtg. Pass-Through Certificates, Series 2005-29, Cl. A1, 5.75%, 12/1/35 | | | 231,189 | | | | 193,936 | |
CHL Mortgage Pass-Through Trust 2005-30, Mtg. Pass-Through Certificates, Series 2005-30, Cl. A5, 5.50%, 1/1/36 | | | 339,202 | | | | 326,136 | |
CHL Mortgage Pass-Through Trust 2005-J4, Mtg. Pass-Through Certificates, Series 2005-J4, Cl. A7, 5.50%, 11/1/35 | | | 36,141 | | | | 34,989 | |
Countrywide Alternative Loan Trust 2007-19, Mtg. Pass-Through Certificates, Series 2007-19, Cl. 1A34, 6%, 8/1/37 | | | 373,766 | | | | 260,289 | |
GSR Mortgage Loan Trust 2006-5F, Mtg. Pass-Through Certificates, Series 2006-5F, Cl. 2A1, 6%, 6/1/36 | | | 380,681 | | | | 370,535 | |
JPMorgan Alternative Loan Trust 2006-S4, Mtg. Pass-Through Certificates, Series 2006-S4, Cl. A6, 5.71%, 12/1/36 | | | 524,442 | | | | 450,761 | |
Merrill Lynch Mortgage Investors Trust 2006-3, Mtg. Pass-Through Certificates, Series MLCC 2006-3, Cl. 2A1, 2.375%, 10/25/362 | | | 44,682 | | | | 40,319 | |
RALI Series 2003-QS1 Trust, Mtg. Asset-Backed Pass-Through Certificates, Series 2003-QS1, Cl. A2, 5.75%, 1/25/33 | | | 232,844 | | | | 241,629 | |
RALI Series 2006-QS13 Trust, Mtg. Asset-Backed Pass-Through Certificates: | | | | | | | | |
Series 2006-QS13, Cl. 1A5, 6%, 9/25/36 | | | 54,626 | | | | 31,012 | |
Series 2006-QS13, Cl. 1A8, 6%, 9/25/36 | | | 1,914 | | | | 1,087 | |
RALI Series 2007-QS6 Trust, Mtg. Asset-Backed Pass-Through Certificates, Series 2007-QS6, Cl. A28, 5.75%, 4/25/37 | | | 23,792 | | | | 13,952 | |
13 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Residential Continued | | | | | | | | |
Residential Asset Securitization Trust 2005-A15, Mtg. Pass-Through Certificates, Series 2005-A15, Cl. 1A4, 5.75%, 2/1/36 | | $ | 153,247 | | | $ | 118,795 | |
Structured Adjustable Rate Mortgage Loan Trust, Mtg. Pass-Through Certificates, Series 2004-5, Cl. 3A1, 2.505%, 5/1/342 | | | 238,564 | | | | 219,579 | |
WaMu Mortgage Pass-Through Certificates 2007-HY1 Trust, Mtg. Pass-Through Certificates, Series 2007-HY1, Cl. 4A1, 2.61%, 2/1/372 | | | 59,121 | | | | 39,307 | |
WaMu Mortgage Pass-Through Certificates 2007-HY5 Trust, Mtg. Pass-Through Certificates, Series 2007-HY5, Cl. 3A1, 5.467%, 5/1/372 | | | 849,883 | | | | 709,694 | |
Wells Fargo Alternative Loan 2007-PA5 Trust, Mtg. Asset-Backed Pass-Through Certificates, Series 2007-PA5, Cl. 1A1, 6.25%, 11/1/37 | | | 356,352 | | | | 277,141 | |
Wells Fargo Mortgage-Backed Securities 2004-R Trust, Mtg. Pass-Through Certificates, Series 2004-R, Cl. 2A1, 2.625%, 9/1/342 | | | 230,777 | | | | 219,987 | |
Wells Fargo Mortgage-Backed Securities 2005-9 Trust, Mtg. Pass-Through Certificates, Series 2005-9, Cl. 2A6, 5.25%, 10/25/35 | | | 469,449 | | | | 451,553 | |
Wells Fargo Mortgage-Backed Securities 2006-AR14 Trust, Mtg. Pass-Through Certificates, Series 2006-AR14, Cl. 1A2, 5.667%, 10/1/362 | | | 389,016 | | | | 326,937 | |
| | | | | | | |
| | | | | | | 4,464,993 | |
| | | | | | | |
| | | | | | | | |
Total Mortgage-Backed Obligations (Cost $124,323,010) | | | | | | | 126,696,697 | |
| | | | | | | | |
U.S. Government Obligations—1.7% | | | | | | | | |
Federal Home Loan Mortgage Corp. Nts.: | | | | | | | | |
2%, 8/25/16 | | | 180,000 | | | | 187,467 | |
2.50%, 5/27/16 | | | 255,000 | | | | 270,459 | |
5%, 2/16/17 | | | 295,000 | | | | 348,763 | |
5.25%, 4/18/16 | | | 515,000 | | | | 607,516 | |
5.50%, 7/18/16 | | | 295,000 | | | | 352,295 | |
Federal National Mortgage Assn. Nts.: | | | | | | | | |
2.375%, 4/11/169 | | | 485,000 | | | | 513,160 | |
4.875%, 12/15/16 | | | 415,000 | | | | 489,583 | |
5%, 3/15/16 | | | 320,000 | | | | 373,407 | |
| | | | | | | |
|
Total U.S. Government Obligations (Cost $2,949,907) | | | | | | | 3,142,650 | |
|
Corporate Bonds and Notes—42.4% | | | | | | | | |
Consumer Discretionary—7.0% | | | | | | | | |
Automobiles—0.6% | | | | | | | | |
Daimler Finance North America LLC, 1.875% Sr. Unsec. Nts., 9/15/141 | | | 348,000 | | | | 346,388 | |
DaimlerChrysler NA Holdings Corp., 8.50% Nts., 1/18/31 | | | 192,000 | | | | 268,806 | |
Ford Motor Credit Co. LLC, 5.875% Sr. Unsec. Nts., 8/2/21 | | | 513,000 | | | | 535,436 | |
| | | | | | | |
| | | | | | | 1,150,630 | |
Diversified Consumer Services—0.3% | | | | | | | | |
Service Corp. International, 6.75% Sr. Unsec. Nts., 4/1/15 | | | 475,000 | | | | 513,000 | |
Hotels, Restaurants & Leisure—0.7% | | | | | | | | |
Hyatt Hotels Corp., 5.75% Sr. Unsec. Unsub. Nts., 8/15/151 | | | 753,000 | | | | 807,159 | |
Marriott International, Inc., 6.20% Sr. Unsec. Unsub. Nts., 6/15/16 | | | 526,000 | | | | 591,893 | |
| | | | | | | |
| | | | | | | 1,399,052 | |
| | | | | | | | |
Household Durables—0.8% | | | | | | | | |
Jarden Corp., 6.125% Sr. Unsec. Nts., 11/15/22 | | | 435,000 | | | | 446,963 | |
Newell Rubbermaid, Inc., 5.50% Sr. Unsec. Nts., 4/15/13 | | | 429,000 | | | | 450,011 | |
Whirlpool Corp.: | | | | | | | | |
5.50% Sr. Unsec. Unsub. Nts., 3/1/13 | | | 152,000 | | | | 158,025 | |
8% Sr. Unsec. Nts., 5/1/12 | | | 380,000 | | | | 388,522 | |
| | | | | | | |
| | | | | | | 1,443,521 | |
| | | | | | | | |
Leisure Equipment & Products—0.2% | | | | | | | | |
Mattel, Inc., 5.625% Sr. Unsec. Nts., 3/15/13 | | | 395,000 | | | | 415,182 | |
Media—2.9% | | | | | | | | |
Comcast Cable Communications Holdings, Inc., 9.455% Sr. Unsec. Nts., 11/15/22 | | | 292,000 | | | | 416,697 | |
Comcast Corp., 6.40% Sr. Unsec. Nts., 3/1/40 | | | 112,000 | | | | 139,465 | |
CSC Holdings, Inc., 7.625% Sr. Unsec. Debs., 7/15/18 | | | 404,000 | | | | 446,420 | |
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc., 6.375% Sr. Unsec. Nts., 3/1/41 | | | 359,000 | | | | 414,641 | |
Dish DBS Corp., 6.75% Sr. Unsec. Nts., 6/1/21 | | | 431,000 | | | | 466,558 | |
Historic TW, Inc., 9.125% Debs., 1/15/13 | | | 149,000 | | | | 160,706 | |
Interpublic Group of Cos., Inc. (The): | | | | | | | | |
6.25% Sr. Unsec. Nts., 11/15/14 | | | 190,000 | | | | 202,825 | |
10% Sr. Unsec. Nts., 7/15/17 | | | 528,000 | | | | 605,880 | |
Lamar Media Corp., 9.75% Sr. Unsec. Nts., 4/1/14 | | | 438,000 | | | | 492,750 | |
14 | OPPENHEIMER CORE BOND FUND/VA
| | | | | | | | |
| | Principal | | | |
| | Amount | | | Value | |
|
Media Continued | | | | | | | | |
News America, Inc., 6.15% Sr. Unsec. Nts., 2/15/41 | | $ | 281,000 | | | $ | 324,443 | |
Time Warner Entertainment Co. LP, 8.375% Sr. Nts., 7/15/33 | | | 257,000 | | | | 337,314 | |
Time Warner, Inc., 4% Sr. Unsec. Unsub. Nts., 1/15/22 | | | 439,000 | | | | 453,563 | |
Virgin Media Secured Finance plc: | | | | | | | | |
5.25% Sr. Sec. Nts., 1/15/21 | | | 230,000 | | | | 244,032 | |
6.50% Sr. Sec. Nts., 1/15/18 | | | 555,000 | | | | 592,463 | |
| | | | | | | | |
| | | | | | | 5,297,757 | |
| | | | | | | | |
Multiline Retail—0.7% | | | | | | | | |
Family Dollar Stores, Inc., 5% Sr. Unsec. Nts., 2/1/21 | | | 261,000 | | | | 268,997 | |
Macy’s Retail Holdings, Inc., 5.75% Sr. Unsec. Nts., 7/15/14 | | | 765,000 | | | | 814,312 | |
Target Corp., 7% Bonds, 1/15/38 | | | 103,000 | | | | 144,217 | |
| | | | | | | | |
| | | | | | | 1,227,526 | |
| | | | | | | | |
Specialty Retail—0.8% | | | | | | | | |
Limited Brands, Inc., 6.625% Sr. Nts., 4/1/21 | | | 426,000 | | | | 453,690 | |
Rent-A-Center, Inc., 6.625% Sr. Unsec. Nts., 11/15/20 | | | 477,000 | | | | 482,963 | |
Sally Holdings LLC/Sally Capital, Inc., 6.875% Sr. Unsec. Nts., 11/15/191 | | | 460,000 | | | | 483,000 | |
| | | | | | | | |
| | | | | | | 1,419,653 | |
| | | | | | | | |
Consumer Staples—2.9% | | | | | | | | |
Beverages—0.5% | | | | | | | | |
Anheuser-Busch Inbev Worldwide, Inc., 7.75% Sr. Unsec. Unsub. Nts., 1/15/19 | | | 246,000 | | | | 318,970 | |
Fortune Brands, Inc., 6.375% Sr. Unsec. Unsub. Nts., 6/15/14 | | | 119,000 | | | | 130,217 | |
Pernod-Ricard SA, 4.45% Sr. Unsec. Nts., 1/15/221 | | | 459,000 | | | | 481,620 | |
| | | | | | | | |
| | | | | | | 930,807 | |
| | | | | | | | |
Food & Staples Retailing—0.4% | | | | | | | | |
CVS Caremark Corp., 6.125% Sr. Unsec. Unsub. Nts., 9/15/39 | | | 174,000 | | | | 212,109 | |
Delhaize Group, 5.70% Sr. Unsec. Nts., 10/1/40 | | | 133,000 | | | | 136,768 | |
Kroger Co. (The), 5% Sr. Nts., 4/15/13 | | | 443,000 | | | | 463,636 | |
| | | | | | | | |
| | | | | | | 812,513 | |
Food Products—0.9% | | | | | | | | |
Bunge Ltd. Finance Corp.: | | | | | | | | |
5.35% Sr. Unsec. Unsub. Nts., 4/15/14 | | | 210,000 | | | | 220,401 | |
8.50% Sr. Unsec. Nts., 6/15/19 | | | 200,000 | | | | 243,726 | |
Kraft Foods, Inc.: | | | | | | | | |
6% Sr. Unsec. Nts., 2/11/13 | | | 410,000 | | | | 432,105 | |
6.50% Sr. Unsec. Unsub. Nts., 2/9/40 | | | 262,000 | | | | 341,447 | |
TreeHouse Foods, Inc., 7.75% Sr. Unsec. Nts., 3/1/18 | | | 470,000 | | | | 509,950 | |
| | | | | | | | |
| | | | | | | 1,747,629 | |
| | | | | | | | |
Household Products—0.3% | | | | | | | | |
Energizer Holdings, Inc., 4.70% Sr. Nts., 5/19/211 | | | 463,000 | | | | 488,000 | |
Tobacco—0.8% | | | | | | | | |
Altria Group, Inc., 10.20% Sr. Unsec. Nts., 2/6/39 | | | 358,000 | | | | 557,902 | |
Lorillard Tobacco Co., 7% Sr. Unsec. Nts., 8/4/41 | | | 311,000 | | | | 327,398 | |
Reynolds American, Inc., 7.25% Sr. Sec. Nts., 6/1/13 | | | 460,000 | | | | 493,574 | |
| | | | | | | | |
| | | | | | | 1,378,874 | |
| | | | | | | | |
Energy—5.8% | | | | | | | | |
Energy Equipment & Services—1.5% | | | | | | | | |
Ensco plc, 4.70% Sr. Unsec. Nts., 3/15/21 | | | 524,000 | | | | 546,511 | |
Nabors Industries, Inc., 6.15% Sr. Unsec. Unsub. Nts., 2/15/18 | | | 593,000 | | | | 663,116 | |
Precision Drilling Corp.: | | | | | | | | |
6.50% Sr. Unsec. Nts., 12/15/211 | | | 217,000 | | | | 222,425 | |
6.625% Sr. Unsec. Nts., 11/15/20 | | | 208,000 | | | | 213,720 | |
Rowan Cos., Inc., 5% Sr. Unsec. Nts., 9/1/17 | | | 499,000 | | | | 525,103 | |
Weatherford International Ltd. Bermuda, 5.125% Sr. Unsec. Unsub. Nts., 9/15/20 | | | 496,000 | | | | 516,154 | |
| | | | | | | | |
| | | | | | | 2,687,029 | |
| | | | | | | | |
Oil, Gas & Consumable Fuels—4.3% | | | | | | | | |
Anadarko Petroleum Corp., 6.20% Sr. Unsec. Nts., 3/15/40 | | | 316,000 | | | | 352,265 | |
BG Energy Capital plc, 4% Sr. Unsec. Nts., 10/15/211 | | | 329,000 | | | | 339,671 | |
Bill Barrett Corp., 7.625% Sr. Unsec. Unsub. Nts., 10/1/19 | | | 427,000 | | | | 448,350 | |
Canadian Oil Sands Ltd., 5.80% Sr. Unsec. Nts., 8/15/131 | | | 457,000 | | | | 485,050 | |
Cloud Peak Energy Resources LLC, 8.25% Sr. Unsec. Unsub. Nts., 12/15/17 | | | 445,000 | | | | 476,150 | |
El Paso Pipeline Partners LP, 6.50% Sr. Unsec. Nts., 4/1/20 | | | 665,000 | | | | 736,003 | |
Encana Corp., 3.90% Sr. Unsec. Unsub. Nts., 11/15/21 | | | 169,000 | | | | 170,055 | |
Energy Transfer Partners LP, 4.65% Sr. Unsec. Unsub. Nts., 6/1/21 | | | 374,000 | | | | 366,921 | |
15 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Oil, Gas & Consumable Fuels Continued | | | | | | | | |
EQT Corp., 4.875% Sr. Unsec. Unsub. Nts., 11/15/21 | | $ | 281,000 | | | $ | 284,095 | |
Kaneb Pipe Line Operating Partnership LP, 5.875% Sr. Unsec. Nts., 6/1/13 | | | 757,000 | | | | 798,217 | |
Marathon Petroleum Corp., 5.125% Sr. Unsec. Unsub. Nts., 3/1/21 | | | 240,000 | | | | 251,088 | |
Newfield Exploration Co., 6.875% Sr. Unsec. Sub. Nts., 2/1/20 | | | 419,000 | | | | 450,425 | |
Nexen, Inc., 6.40% Sr. Unsec. Unsub. Bonds, 5/15/37 | | | 466,000 | | | | 494,375 | |
Range Resources Corp., 8% Sr. Unsec. Sub. Nts., 5/15/19 | | | 427,000 | | | | 478,240 | |
Ras Laffan Liquefied Natural Gas Co. Ltd. III, 5.50% Sr. Sec. Nts., 9/30/141 | | | 270,000 | | | | 290,250 | |
Rockies Express Pipeline LLC, 3.90% Sr. Unsec. Unsub. Nts., 4/15/151 | | | 764,000 | | | | 755,669 | |
Sunoco Logistics Partners Operations LP, 7.25% Sr. Unsec. Nts., 2/15/12 | | | 441,000 | | | | 443,875 | |
Woodside Finance Ltd., 4.60% Sr. Unsec. Nts., 5/10/211 | | | 339,000 | | | | 346,666 | |
| | | | | | | |
| | | | | | | 7,967,365 | |
| | | | | | | | |
Financials—12.9% | | | | | | | | |
Capital Markets—3.0% | | | | | | | | |
Blackstone Holdings Finance Co. LLC, 6.625% Sr. Unsec. Nts., 8/15/191 | | | 800,000 | | | | 847,510 | |
Goldman Sachs Capital, Inc. (The), 6.345% Sub. Bonds, 2/15/34 | | | 477,000 | | | | 404,266 | |
Goldman Sachs Group, Inc. (The): | | | | | | | | |
5.25% Sr. Unsec. Nts., 7/27/21 | | | 703,000 | | | | 686,821 | |
6.25% Sr. Nts., 2/1/41 | | | 443,000 | | | | 435,284 | |
Macquarie Bank Ltd., 6.625% Unsec. Sub. Nts., 4/7/211 | | | 598,000 | | | | 552,070 | |
Morgan Stanley: | | | | | | | | |
5.50% Sr. Unsec. Unsub. Nts., 7/24/201 | | | 262,000 | | | | 238,534 | |
5.55% Sr. Unsec. Unsub. Nts., Series F, 4/27/17 | | | 1,285,000 | | | | 1,241,467 | |
Nomura Holdings, Inc., 4.125% Sr. Unsec. Unsub. Nts., 1/19/16 | | | 433,000 | | | | 423,022 | |
TD Ameritrade Holding Corp., 2.95% Sr. Unsec. Unsub. Nts., 12/1/12 | | | 509,000 | | | | 515,496 | |
UBS AG Stamford CT, 2.25% Sr. Unsec. Nts., 8/12/13 | | | 181,000 | | | | 179,479 | |
| | | | | | | |
| | | | | | | 5,523,949 | |
| | | | | | | | |
Commercial Banks—2.4% | | | | | | | | |
ANZ National International Ltd., 2.375% Sr. Unsec. Nts., 12/21/121 | | | 507,000 | | | | 515,895 | |
Fifth Third Cap Trust IV, 6.50% Jr. Unsec. Sub. Nts., 4/15/37 | | | 845,000 | | | | 832,325 | |
HSBC Finance Capital Trust IX, 5.911% Nts., 11/30/352 | | | 1,090,000 | | | | 910,150 | |
Lloyds TSB Bank plc, 6.50% Unsec. Sub. Nts., 9/14/201 | | | 356,000 | | | | 298,261 | |
Mercantile Bankshares Corp., 4.625% Unsec. Sub. Nts., Series B, 4/15/13 | | | 308,000 | | | | 321,087 | |
Sumitomo Mitsui Banking Corp., 8% Unsec. Sub. Nts., 6/15/12 | | | 466,000 | | | | 477,454 | |
Wells Fargo & Co., 7.98% Jr. Sub. Perpetual Bonds, Series K10 | | | 367,000 | | | | 394,984 | |
Zions Bancorp., 7.75% Sr. Unsec. Nts., 9/23/14 | | | 581,000 | | | | 616,481 | |
| | | | | | | |
| | | | | | | 4,366,637 | |
| | | | | | | | |
Consumer Finance—1.0% | | | | | | | | |
American Express Bank FSB, 5.50% Sr. Unsec. Nts., 4/16/13 | | | 441,000 | | | | 461,146 | |
American Express Credit Corp., 2.80% Sr. Unsec. Unsub. Nts., 9/19/16 | | | 450,000 | | | | 452,800 | |
Capital One Financial Corp., 4.75% Sr. Nts., 7/15/21 | | | 439,000 | | | | 452,472 | |
SLM Corp., 6.25% Sr. Nts., 1/25/16 | | | 602,000 | | | | 586,051 | |
| | | | | | | |
| | | | | | | 1,952,469 | |
| | | | | | | | |
Diversified Financial Services—2.3% | | | | | | | | |
Bank of America Corp., 3.75% Sr. Unsec. Unsub. Nts., 7/12/16 | | | 495,000 | | | | 458,890 | |
Citigroup, Inc., 6.125% Sr. Unsec. Unsub. Nts., 11/21/17 | | | 1,462,000 | | | | 1,562,606 | |
Glen Meadow Pass-Through Trust, 6.505% Bonds, 2/12/672,3 | | | 666,000 | | | | 474,525 | |
Irish Life & Permanent Group Holdings plc, 3.60% Sr. Unsec. Unsub. Nts., 1/14/131 | | | 320,000 | | | | 283,075 | |
JPMorgan Chase & Co.: | | | | | | | | |
5.40% Sr. Unsec. Nts., 1/6/42 | | | 135,000 | | | | 141,140 | |
7.90% Perpetual Bonds, Series 110 | | | 869,000 | | | | 928,337 | |
Merrill Lynch & Co., Inc., 7.75% Jr. Sub. Bonds, 5/14/38 | | | 416,000 | | | | 395,765 | |
| | | | | | | |
| | | | | | | 4,244,338 | |
| | | | | | | | |
Insurance—3.4% | | | | | | | | |
Burlington Northern Santa Fe LLC, 5.75% Sr. Unsec. Bonds, 5/1/40 | | | 125,000 | | | | 149,824 | |
CNA Financial Corp.: | | | | | | | | |
5.75% Sr. Unsec. Unsub. Nts., 8/15/21 | | | 368,000 | | | | 376,069 | |
5.875% Sr. Unsec. Unsub. Bonds, 8/15/20 | | | 260,000 | | | | 267,444 | |
Gulf South Pipeline Co. LP, 5.75% Sr. Unsec. Nts., 8/15/121 | | | 455,000 | | �� | | 465,101 | |
Hartford Financial Services Group, Inc. (The), 6.625% Sr. Unsec. Unsub. Nts., 3/30/40 | | | 306,000 | | | | 304,141 | |
16 | OPPENHEIMER CORE BOND FUND/VA
| | | | | | | | |
| | Principal | | | |
| | Amount | | | Value | |
|
Insurance Continued | | | | | | | | |
International Lease Finance Corp., 5.75% Sr. Unsec. Unsub. Nts., 5/15/16 | | $ | 441,000 | | | $ | 409,507 | |
Liberty Mutual Group, Inc., 5% Sr. Nts., 6/1/211 | | | 685,000 | | | | 672,230 | |
Lincoln National Corp., 6.05% Jr. Unsec. Sub. Bonds, 4/20/67 | | | 945,000 | | | | 793,800 | |
Prudential Financial, Inc., 5.375% Sr. Unsec. Unsub. Nts., 6/21/20 | | | 833,000 | | | | 892,720 | |
Swiss Re Capital I LP, 6.854% Perpetual Bonds1,10 | | | 875,000 | | | | 748,136 | |
Unum Group, 5.625% Sr. Unsec. Unsub. Nts., 9/15/20 | | | 320,000 | | | | 329,947 | |
Willis Group Holdings plc, 4.125% Sr. Unsec. Unsub. Nts., 3/15/16 | | | 463,000 | | | | 470,781 | |
ZFS Finance USA Trust V, 6.50% Jr. Sub. Bonds, 5/9/372,3 | | | 513,000 | | | | 464,265 | |
| | | | | | | | |
| | | | | | | 6,343,965 | |
| | | | | | | | |
Real Estate Investment Trusts—0.8% | | | | | | | | |
Brandywine Operating Partnership LP, 5.75% Sr. Unsec. Unsub. Nts., 4/1/12 | | | 237,000 | | | | 238,529 | |
CommonWealth REIT, 6.95% Sr. Unsec. Nts., 4/1/12 | | | 103,000 | | | | 103,000 | |
Duke Realty LP, 6.25% Sr. Unsec. Unsub. Nts., 5/15/13 | | | 464,000 | | | | 485,460 | |
Mack-Cali Realty LP, 5.25% Sr. Unsec. Unsub. Nts., 1/15/12 | | | 180,000 | | | | 180,135 | |
WCI Finance LLC/WEA Finance LLC, 5.40% Sr. Unsec. Unsub. Nts., 10/1/121 | | | 439,000 | | | | 449,883 | |
| | | | | | | | |
| | | | | | | 1,457,007 | |
| | | | | | | | |
Health Care—0.8% | | | | | | | | |
Biotechnology—0.2% | | | | | | | | |
Celgene Corp., 5.70% Sr. Unsec. Nts., 10/15/40 | | | 291,000 | | | | 320,836 | |
Health Care Providers & Services—0.3% | | | | | | | | |
McKesson Corp., 6% Sr. Unsec. Unsub. Nts., 3/1/41 | | | 237,000 | | | | 303,487 | |
Quest Diagnostics, Inc., 5.75% Sr. Unsec. Nts., 1/30/40 | | | 300,000 | | | | 324,114 | |
| | | | | | | | |
| | | | | | | 627,601 | |
| | | | | | | | |
Pharmaceuticals—0.3% | | | | | | | | |
Mylan, Inc., 6% Sr. Nts., 11/15/181 | | | 495,000 | | | | 511,706 | |
Industrials—3.0% | | | | | | | | |
Aerospace & Defense—0.5% | | | | | | | | |
Alliant Techsystems, Inc., 6.75% Sr. Sub. Nts., 4/1/16 | | | 477,000 | | | | 491,310 | |
BE Aerospace, Inc., 8.50% Sr. Unsec. Nts., 7/1/18 | | | 420,000 | | | | 462,000 | |
| | | | | | | | |
| | | | | | | 953,310 | |
Commercial Services & Supplies—0.5% | | | | | | | | |
Corrections Corp. of America, 7.75% Sr. Nts., 6/1/17 | | | 473,000 | | | | 515,570 | |
R.R. Donnelley & Sons Co., 8.60% Sr. Unsec. Unsub. Nts., 8/15/16 | | | 434,000 | | | | 436,713 | |
| | | | | | | | |
| | | | | | | 952,283 | |
| | | | | | | | |
Industrial Conglomerates—1.0% | | | | | | | | |
General Electric Capital Corp.: | | | | | | | | |
4.25% Sr. Unsec. Nts., Series A, 6/15/12 | | | 460,000 | | | | 465,631 | |
4.65% Sr. Unsec. Nts., 10/17/21 | | | 446,000 | | | | 466,208 | |
5.25% Sr. Unsec. Nts., 10/19/12 | | | 28,000 | | | | 28,986 | |
6.375% Unsec. Sub. Bonds, 11/15/67 | | | 852,000 | | | | 841,350 | |
| | | | | | | | |
| | | | | | | 1,802,175 | |
| | | | | | | | |
Machinery—0.6% | | | | | | | | |
CNH Capital LLC, 6.25% Sr. Unsec. Nts., 11/1/161 | | | 457,000 | | | | 472,995 | |
Joy Global, Inc., 5.125% Sr. Unsec. Unsub. Nts., 10/15/21 | | | 216,000 | | | | 230,928 | |
SPX Corp., 6.875% Sr. Unsec. Nts., 9/1/171 | | | 412,000 | | | | 447,020 | |
| | | | | | | | |
| | | | | | | 1,150,943 | |
| | | | | | | | |
Professional Services—0.1% | | | | | | | | |
FTI Consulting, Inc., 6.75% Sr. Unsec. Nts., 10/1/20 | | | 76,000 | | | | 78,850 | |
Road & Rail—0.3% | | | | | | | | |
CSX Corp., 5.50% Sr. Unsec. Nts., 4/15/41 | | | 130,000 | | | | 147,523 | |
Kansas City Southern de Mexico, 8% Sr. Unsec. Unsub. Nts., 2/1/18 | | | 400,000 | | | | 442,000 | |
| | | | | | | | |
| | | | | | | 589,523 | |
| | | | | | | | |
Information Technology—1.8% | | | | | | | | |
Communications Equipment—0.2% | | | | | | | | |
Harris Corp., 6.15% Sr. Unsec. Nts., 12/15/40 | | | 144,000 | | | | 163,126 | |
Juniper Networks, Inc., 5.95% Sr. Unsec. Unsub. Nts., 3/15/41 | | | 179,000 | | | | 196,113 | |
| | | | | | | | |
| | | | | | | 359,239 | |
| | | | | | | | |
Computers & Peripherals—0.4% | | | | | | | | |
Hewlett-Packard Co.: | | | | | | | | |
2.35% Sr. Unsec. Unsub. Nts., 3/15/15 | | | 490,000 | | | | 488,076 | |
4.65% Sr. Unsec. Nts., 12/9/21 | | | 363,000 | | | | 383,605 | |
| | | | | | | | |
| | | | | | | 871,681 | |
| | | | | | | | |
Electronic Equipment & Instruments—0.5% | | | | | | | | |
Arrow Electronics, Inc., 3.375% Sr. Unsec. Unsub. Nts., 11/1/15 | | | 875,000 | | | | 877,062 | |
Office Electronics—0.2% Xerox Corp., 5.65% Sr. Unsec. Nts., 5/15/13 | | | 435,000 | | | | 456,861 | |
17 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Semiconductors & Semiconductor Equipment—0.2% | | | | | | | | |
KLA-Tencor Corp., 6.90% Sr. Unsec. Nts., 5/1/18 | | $ | 306,000 | | | $ | 353,233 | |
Software—0.3% | | | | | | | | |
Symantec Corp., 4.20% Sr. Unsec. Unsub. Nts., 9/15/20 | | | 517,000 | | | | 520,611 | |
Materials—3.0% | | | | | | | | |
Chemicals—1.1% | | | | | | | | |
Agrium, Inc., 6.125% Sr. Unsec. Nts., 1/15/41 | | | 200,000 | | | | 248,518 | |
Airgas, Inc., 3.25% Sr. Nts., 10/1/15 | | | 842,000 | | | | 867,202 | |
Ashland, Inc., 9.125% Sr. Unsec. Nts., 6/1/17 | | | 440,000 | | | | 492,800 | |
Potash Corp. of Saskatchewan, Inc., 5.625% Sr. Unsec. Unsub. Nts., 12/1/40 | | | 285,000 | | | | 348,654 | |
| | | | | | | |
| | | | | | | 1,957,174 | |
| | | | | | | | |
Containers & Packaging—0.2% | | | | | | | | |
Sealed Air Corp., 7.875% Sr. Nts., 6/15/17 | | | 370,000 | | | | 390,615 | |
Metals & Mining—1.5% | | | | | | | | |
Freeport-McMoRan Copper & Gold, Inc., 8.375% Sr. Nts., 4/1/17 | | | 698,000 | | | | 742,411 | |
Petrohawk Energy Corp., 6.25% Sr. Unsec. Nts., 6/1/19 | | | 669,000 | | | | 739,245 | |
Teck Resources Ltd., 7% Sr. Unsec. Unsub. Nts., 9/15/12 | | | 465,000 | | | | 482,788 | |
Vale Inco Ltd., 5.70% Sr. Unsec. Unsub. Nts., 10/15/15 | | | 28,000 | | | | 30,516 | |
Xstrata Canada Corp.: | | | | | | | | |
5.375% Sr. Unsec. Unsub. Nts., 6/1/15 | | | 245,000 | | | | 266,297 | |
6% Sr. Unsec. Unsub. Nts., 10/15/15 | | | 432,000 | | | | 465,810 | |
7.25% Sr. Unsec. Unsub. Nts., 7/15/12 | | | 80,000 | | | | 82,422 | |
| | | | | | | |
| | | | | | | 2,809,489 | |
| | | | | | | | |
Paper & Forest Products—0.2% | | | | | | | | |
International Paper Co., 4.75% Sr. Unsec. Unsub. Nts., 2/15/22 | | | 365,000 | | | | 388,591 | |
Telecommunication Services—2.3% | | | | | | | | |
Diversified Telecommunication Services—1.6% | | | | | | | | |
AT&T, Inc., 6.30% Sr. Unsec. Bonds, 1/15/38 | | | 518,000 | | | | 637,038 | |
British Telecommunications plc, 9.875% Bonds, 12/15/30 | | | 298,000 | | | | 420,488 | |
CenturyLink, Inc., 7.60% Sr. Unsec. Unsub. Nts., Series P, 9/15/39 | | | 158,000 | | | | 155,252 | |
Frontier Communications Corp., 8.25% Sr. Unsec. Nts., 4/15/17 | | | 477,000 | | | | 490,118 | |
Qwest Corp., 7.625% Sr. Unsec. Unsub. Nts., 6/15/15 | | | 447,000 | | | | 497,682 | |
Verizon Communications, Inc., 6.40% Sr. Unsec. Nts., 2/15/38 | | | 286,000 | | | | 363,665 | |
Windstream Corp., 7.875% Sr. Unsec. Unsub. Nts., 11/1/17 | | | 412,000 | | | | 448,050 | |
| | | | | | | |
| | | | | | | 3,012,293 | |
| | | | | | | | |
Wireless Telecommunication Services—0.7% | | | | | | | | |
America Movil SAB de CV, 2.375% Unsec. Unsub. Nts., 9/8/16 | | | 774,000 | | | | 775,884 | |
American Tower Corp.: | | | | | | | | |
5.05% Sr. Unsec. Unsub. Nts., 9/1/20 | | | 130,000 | | | | 130,416 | |
7% Sr. Unsec. Nts., 10/15/17 | | | 337,000 | | | | 381,116 | |
| | | | | | | |
| | | | | | | 1,287,416 | |
| | | | | | | | |
Utilities—2.9% | | | | | | | | |
Electric Utilities—2.3% | | | | | | | | |
Allegheny Energy Supply Co. LLC, 8.25% Bonds, 4/15/121 | | | 447,000 | | | | 455,114 | |
Edison International, 3.75% Sr. Unsec. Unsub. Nts., 9/15/17 | | | 342,000 | | | | 352,469 | |
FirstEnergy Solutions Corp., 6.80% Sr. Unsec. Nts., 8/15/39 | | | 292,000 | | | | 327,488 | |
Great Plains Energy, Inc., 2.75% Sr. Unsec. Unsub. Nts., 8/15/13 | | | 464,000 | | | | 470,842 | |
Kansas City Power & Light Co., 5.30% Sr. Unsec. Nts., 10/1/41 | | | 261,000 | | | | 281,443 | |
Northeast Utilities Co., 7.25% Sr. Unsec. Nts., 4/1/12 | | | 470,000 | | | | 476,689 | |
Oncor Electric Delivery Co., 7% Debs., 9/1/22 | | | 409,000 | | | | 524,752 | |
PPL WEM Holdings plc, 5.375% Sr. Unsec. Nts., 5/1/211 | | | 655,000 | | | | 687,874 | |
Texas-New Mexico Power Co., 9.50% Sec. Nts., 4/1/191 | | | 510,000 | | | | 669,632 | |
| | | | | | | |
| | | | | | | 4,246,303 | |
| | | | | | | | |
Energy Traders—0.3% | | | | | | | | |
TransAlta Corp., 5.75% Sr. Unsec. Nts., 12/15/13 | | | 455,000 | | | | 487,330 | |
Multi-Utilities—0.3% | | | | | | | | |
CMS Energy Corp., 6.25% Sr. Unsec. Nts., 2/1/20 | | | 424,000 | | | | 447,228 | |
Pacific Gas & Electric Co., 4.50% Sr. Unsec. Nts., 12/15/41 | | | 116,000 | | | | 118,852 | |
| | | | | | | |
| | | | | | | 566,080 | |
| | | | | | | |
| | | | | | | | |
Total Corporate Bonds and Notes (Cost $76,704,877) | | | | | | | 78,338,108 | |
|
| | Shares | | | | | |
|
Investment Company—15.3% | | | | | | | | |
Oppenheimer Institutional Money Market Fund, Cl. E, 0.20%11,12 (Cost $28,319,973) | | | 28,319,973 | | | | 28,319,973 | |
| | | | | | | | |
Total Investments, at Value (Cost $254,262,964) | | | 138.4 | % | | | 255,419,520 | |
Liabilities in Excess of Other Assets | | | (38.4 | ) | | | (70,854,222 | ) |
| | | | | | |
Net Assets | | | 100.0 | % | | $ | 184,565,298 | |
| | | | | | |
18 | OPPENHEIMER CORE BOND FUND/VA
Footnotes to Statement of Investments
| | |
* | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
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 $24,761,703 or 13.42% of the Fund’s net assets as of December 30, 2011. |
|
2. | | Represents the current interest rate for a variable or increasing rate security. |
|
3. | | Restricted security. The aggregate value of restricted securities as of December 30, 2011 was $3,393,259, which represents 1.84% of the Fund’s net assets. See Note 6 of the accompanying Notes. Information concerning restricted securities is as follows: |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Unrealized | |
| | Acquisition | | | | | | | | | | | Appreciation | |
Security | | Dates | | | Cost | | | Value | | | (Depreciation) | |
|
DT Auto Owner Trust 2011-3A, Automobile Receivable Nts., Series 2011-3A, Cl. C, 4.03%, 12/15/41 | | | 11/2/11 | | | $ | 434,965 | | | $ | 434,133 | | | $ | (832 | ) |
Glen Meadow Pass-Through Trust, 6.505% Bonds, 2/12/67 | | | 1/5/11-10/11/11 | | | | 543,979 | | | | 474,525 | | | | (69,454 | ) |
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial | | | | | | | | | | | | | | | | |
Mtg. Pass-Through Certificates, Series 2007-LDPX, Cl. A2S2, 5.187%, 1/1/49 | | | 7/14/10 | | | | 1,255,075 | | | | 1,283,164 | | | | 28,089 | |
NC Finance Trust, Collateralized Mtg. Obligation Pass-Through Certificates, Series 1999-I, Cl. ECFD, 3.405%, 1/25/29 | | | 8/10/10 | | | | 3,281,116 | | | | 303,301 | | | | (2,977,815 | ) |
Santander Drive Auto Receivables Trust 2011-S1A, Automobile Receivables Nts., Series 2011-S1A, Cl. D, 3.10%, 5/15/17 | | | 2/4/11-4/14/11 | | | | 438,271 | | | | 433,871 | | | | (4,400 | ) |
ZFS Finance USA Trust V, 6.50% Jr. Sub. Bonds, 5/9/37 | | | 2/24/11-7/26/11 | | | | 517,024 | | | | 464,265 | | | | (52,759 | ) |
| | | | | | | | | | | | | |
| | | | | | $ | 6,470,430 | | | $ | 3,393,259 | | | $ | (3,077,171 | ) |
| | | | | | | | | | | | | |
| | |
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 original contractual interest rate. See Note 1 of the accompanying Notes. |
|
5. | | When-issued security or delayed delivery to be delivered and settled after December 30, 2011. See Note 1 of the accompanying Notes. |
|
6. | | Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of mortgage loans or other receivables. 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 or asset-backed securities (for example, GNMA pass-throughs). Interest rates disclosed represent current yields based upon the current cost basis and estimated timing and amount of future cash flows. These securities amount to $5,329,467 or 2.89% of the Fund’s net assets as of December 30, 2011. |
|
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 $320,380 or 0.17% of the Fund’s net assets as of December 30, 2011. |
|
8. | | 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. |
|
9. | | All or a portion of the security position is held in collateralized accounts to cover initial margin requirements on open futures contracts and written options on futures, if applicable. The aggregate market value of such securities is $513,160. See Note 5 of the accompanying Notes. |
|
10. | | 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. |
|
11. | | Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 30, 2011, 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 period in which the issuer was an affiliate are as follows: |
| | | | | | | | | | | | | | | | |
| | Shares | | | Gross | | | Gross | | | Shares | |
| | December 31,2010 | | | Additions | | | Reductions | | | December 30,2011 | |
|
Oppenheimer Institutional Money Market Fund, Cl. E | | | 25,899,825 | | | | 93,303,874 | | | | 90,883,726 | | | | 28,319,973 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | Value | | | Income | |
|
Oppenheimer Institutional Money Market Fund, Cl. E | | | | | | | | | | $ | 28,319,973 | | | $ | 57,584 | |
| | |
12. | | Rate shown is the 7-day yield as of December 30, 2011. |
Valuation Inputs
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). |
19 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
Footnotes to Statement of Investments Continued
The table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 30, 2011 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 | | $ | — | | | $ | 18,922,092 | | | $ | — | | | $ | 18,922,092 | |
Mortgage-Backed Obligations | | | — | | | | 126,696,697 | | | | — | | | | 126,696,697 | |
U.S. Government Obligations | | | — | | | | 3,142,650 | | | | — | | | | 3,142,650 | |
Corporate Bonds and Notes | | | — | | | | 78,338,108 | | | | — | | | | 78,338,108 | |
Investment Company | | | 28,319,973 | | | | — | | | | — | | | | 28,319,973 | |
| | | | | | | | | | | | |
Total Investments, at Value | | | 28,319,973 | | | | 227,099,547 | | | | — | | | | 255,419,520 | |
|
Other Financial Instruments: | | | | | | | | | | | | | | | | |
Futures margins | | | 50,877 | | | | — | | | | — | | | | 50,877 | |
| | | | | | | | | | | | |
Total Assets | | $ | 28,370,850 | | | $ | 227,099,547 | | | $ | — | | | $ | 255,470,397 | |
| | | | | | | | | | | | |
|
Liabilities Table | | | | | | | | | | | | | | | | |
Other Financial Instruments: | | | | | | | | | | | | | | | | |
Futures margins | | $ | (25,518 | ) | | $ | — | | | $ | — | | | $ | (25,518 | ) |
| | | | | | | | | | | | |
Total Liabilities | | $ | (25,518 | ) | | $ | — | | | $ | — | | | $ | (25,518 | ) |
| | | | | | | | | | | | |
Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.
Futures Contracts as of December 30, 2011 are as follows:
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | Unrealized | |
| | | | | | Number of | | | Expiration | | | | | | | Appreciation | |
Contract Description | | Buy/Sell | | | Contracts | | | Date | | | Value | | | (Depreciation) | |
|
U.S. Long Bonds | | Buy | | | 45 | | | | 3/21/12 | | | $ | 6,516,563 | | | $ | 70,811 | |
U.S. Treasury Nts., 2 yr. | | Sell | | | 110 | | | | 3/30/12 | | | | 24,260,156 | | | | (5,569 | ) |
U.S. Treasury Nts., 5 yr. | | Sell | | | 79 | | | | 3/30/12 | | | | 9,737,367 | | | | (37,808 | ) |
U.S. Treasury Nts., 10 yr. | | Buy | | | 11 | | | | 3/21/12 | | | | 1,442,375 | | | | 6,347 | |
U.S. Treasury Ultra Bonds | | Buy | | | 54 | | | | 3/21/12 | | | | 8,650,125 | | | | 52,435 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | 86,216 | |
| | | | | | | | | | | | | | | | | | | |
See accompanying Notes to Financial Statements.
20 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 30, 20111
| | | | |
|
|
Assets | | | | |
Investments, at value—see accompanying statement of investments: | | | | |
Unaffiliated companies (cost $225,942,991) | | $ | 227,099,547 | |
Affiliated companies (cost $28,319,973) | | | 28,319,973 | |
| | | |
| | | 255,419,520 | |
Cash | | | 78,759 | |
Receivables and other assets: | | | | |
Investments sold on a when-issued or delayed delivery basis | | | 1,815,274 | |
Interest, dividends and principal paydowns | | | 1,479,073 | |
Shares of beneficial interest sold | | | 1,270,462 | |
Futures margins | | | 50,877 | |
Other | | | 46,178 | |
| | | |
Total assets | | | 260,160,143 | |
| | | | |
Liabilities | | | | |
Payables and other liabilities: | | | | |
Investments purchased on a when-issued or delayed delivery basis | | | 75,414,943 | |
Shareholder communications | | | 52,011 | |
Futures margins | | | 25,518 | |
Shares of beneficial interest redeemed | | | 18,977 | |
Trustees’ compensation | | | 16,770 | |
Transfer and shareholder servicing agent fees | | | 15,453 | |
Distribution and service plan fees | | | 12,568 | |
Other | | | 38,605 | |
| | | |
Total liabilities | | | 75,594,845 | |
|
Net Assets | | $ | 184,565,298 | |
| | | |
| | | | |
Composition of Net Assets | | | | |
Par value of shares of beneficial interest | | $ | 23,514 | |
Additional paid-in capital | | | 264,231,050 | |
Accumulated net investment income | | | 8,902,644 | |
Accumulated net realized loss on investments | | | (89,834,682 | ) |
Net unrealized appreciation on investments | | | 1,242,772 | |
| | | |
Net Assets | | $ | 184,565,298 | |
| | | |
| | | | |
Net Asset Value Per Share | | | | |
Non-Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $122,271,102 and 15,520,149 shares of beneficial interest outstanding) | | $ | 7.88 | |
Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $62,294,196 and 7,993,566 shares of beneficial interest outstanding) | | $ | 7.79 | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
21 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 30, 20111
| | | | |
|
Investment Income | | | | |
Interest | | $ | 8,013,498 | |
Dividends from affiliated companies | | | 57,584 | |
Fee income on when-issued securities | | | 2,053,668 | |
| | | |
Total investment income | | | 10,124,750 | |
|
Expenses | | | | |
Management fees | | | 1,115,919 | |
Distribution and service plan fees—Service shares | | | 146,541 | |
Transfer and shareholder servicing agent fees: | | | | |
Non-Service shares | | | 127,352 | |
Service shares | | | 58,632 | |
Shareholder communications: | | | | |
Non-Service shares | | | 34,078 | |
Service shares | | | 15,296 | |
Custodian fees and expenses | | | 20,464 | |
Trustees’ compensation | | | 14,794 | |
Administration service fees | | | 1,500 | |
Other | | | 50,062 | |
| | | |
Total expenses | | | 1,584,638 | |
Less waivers and reimbursements of expenses | | | (43,913 | ) |
| | | |
Net expenses | | | 1,540,725 | |
|
Net Investment Income | | | 8,584,025 | |
|
Realized and Unrealized Gain (Loss) | | | | |
Net realized gain on: | | | | |
Investments from unaffiliated companies | | | 4,215,975 | |
Closing and expiration of futures contracts | | | 2,940,895 | |
| | | |
Net realized gain | | | 7,156,870 | |
Net change in unrealized appreciation/depreciation on: | | | | |
Investments | | | (1,183,198 | ) |
Futures contracts | | | 71,994 | |
| | | |
Net change in unrealized appreciation/depreciation | | | (1,111,204 | ) |
|
Net Increase in Net Assets Resulting from Operations | | $ | 14,629,691 | |
| | | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
22 | OPPENHEIMER CORE BOND FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
| | | | | | | | |
| | Year Ended | | | Year Ended | |
| | December 30, | | | December 31, | |
| | 20111 | | | 2010 | |
|
Operations | | | | | | | | |
Net investment income | | $ | 8,584,025 | | | $ | 10,146,680 | |
Net realized gain | | | 7,156,870 | | | | 8,147,844 | |
Net change in unrealized appreciation/depreciation | | | (1,111,204 | ) | | | 2,718,458 | |
| | | | | | |
Net increase in net assets resulting from operations | | | 14,629,691 | | | | 21,012,982 | |
| | | | | | | | |
Dividends and/or Distributions to Shareholders | | | | | | | | |
Dividends from net investment income: | | | | | | | | |
Non-Service shares | | | (7,632,636 | ) | | | (2,543,053 | ) |
Service shares | | | (3,102,242 | ) | | | (932,463 | ) |
| | | | | | |
| | | (10,734,878 | ) | | | (3,475,516 | ) |
| | | | | | | | |
Beneficial Interest Transactions | | | | | | | | |
Net increase (decrease) in net assets resulting from beneficial interest transactions: | | | | | | | | |
Non-Service shares | | | (12,784,495 | ) | | | (17,432,675 | ) |
Service shares | | | 4,335,577 | | | | (5,299,305 | ) |
| | | | | | |
| | | (8,448,918 | ) | | | (22,731,980 | ) |
| | | | | | | | |
Net Assets | | | | | | | | |
Total decrease | | | (4,554,105 | ) | | | (5,194,514 | ) |
Beginning of period | | | 189,119,403 | | | | 194,313,917 | |
| | | | | | |
End of period (including accumulated net investment income of $8,902,644 and $10,595,621, respectively) | | $ | 184,565,298 | | | $ | 189,119,403 | |
| | | | | | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
23 | OPPENHEIMER CORE BOND FUND/VA
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Non-Service Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 7.73 | | | $ | 7.07 | | | $ | 6.45 | | | $ | 11.06 | | | $ | 11.16 | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income2 | | | .36 | | | | .40 | | | | .48 | | | | .66 | | | | .55 | |
Net realized and unrealized gain (loss) | | | .25 | | | | .40 | | | | .14 | | | | (4.82 | ) | | | (.08 | ) |
| | | | | | | | | | | | | | | |
Total from investment operations | | | .61 | | | | .80 | | | | .62 | | | | (4.16 | ) | | | .47 | |
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.46 | ) | | | (.14 | ) | | | — | | | | (.45 | ) | | | (.57 | ) |
Net asset value, end of period | | $ | 7.88 | | | $ | 7.73 | | | $ | 7.07 | | | $ | 6.45 | | | $ | 11.06 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return, at Net Asset Value3 | | | 8.27 | % | | | 11.42 | % | | | 9.61 | % | | | (39.05 | )% | | | 4.39 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 122,271 | | | $ | 132,557 | | | $ | 137,597 | | | $ | 156,339 | | | $ | 325,661 | |
Average net assets (in thousands) | | $ | 127,341 | | | $ | 136,333 | | | $ | 137,631 | | | $ | 271,355 | | | $ | 345,723 | |
Ratios to average net assets:4 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 4.71 | % | | | 5.32 | % | | | 7.40 | % | | | 6.76 | % | | | 5.07 | % |
Total expenses5 | | | 0.77 | % | | | 0.79 | % | | | 0.75 | % | | | 0.63 | % | | | 0.68 | % |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 0.75 | % | | | 0.70 | % | | | 0.61 | % | | | 0.62 | % | | | 0.68 | % |
Portfolio turnover rate6 | | | 99 | % | | | 98 | % | | | 143 | % | | | 51 | % | | | 89 | % |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
4. | | Annualized for periods less than one full year. |
|
5. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 0.79 | % |
Year Ended December 31, 2010 | | | 0.80 | % |
Year Ended December 31, 2009 | | | 0.76 | % |
Year Ended December 31, 2008 | | | 0.63 | % |
Year Ended December 31, 2007 | | | 0.68 | % |
| | |
6. | | The portfolio turnover rate excludes purchase and sale transactions of To Be Announced (TBA) mortgage-related securities as follows: |
| | | | | | | | |
| | Purchase Transactions | | | Sale Transactions | |
|
Year Ended December 30, 2011 | | $ | 911,850,847 | | | $ | 909,531,196 | |
Year Ended December 31, 2010 | | $ | 775,240,942 | | | $ | 766,486,357 | |
Year Ended December 31, 2009 | | $ | 977,840,247 | | | $ | 1,009,549,121 | |
Year Ended December 31, 2008 | | $ | 1,019,711,829 | | | $ | 963,377,934 | |
Year Ended December 31, 2007 | | $ | 662,784,931 | | | $ | 678,316,693 | |
See accompanying Notes to Financial Statements.
24 | OPPENHEIMER CORE BOND FUND/VA
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Service Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 7.65 | | | $ | 6.99 | | | $ | 6.41 | | | $ | 10.98 | | | $ | 11.10 | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income2 | | | .34 | | | | .37 | | | | .46 | | | | .63 | | | | .52 | |
Net realized and unrealized gain (loss) | | | .24 | | | | .41 | | | | .12 | | | | (4.77 | ) | | | (.08 | ) |
| | | | | | | | | | | | | | | |
Total from investment operations | | | .58 | | | | .78 | | | | .58 | | | | (4.14 | ) | | | .44 | |
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.44 | ) | | | (.12 | ) | | | — | | | | (.43 | ) | | | (.56 | ) |
Net asset value, end of period | | $ | 7.79 | | | $ | 7.65 | | | $ | 6.99 | | | $ | 6.41 | | | $ | 10.98 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return, at Net Asset Value3 | | | 7.93 | % | | | 11.28 | % | | | 9.05 | % | | | (39.07 | )% | | | 4.09 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 62,294 | | | $ | 56,562 | | | $ | 56,717 | | | $ | 63,093 | | | $ | 103,542 | |
Average net assets (in thousands) | | $ | 58,629 | | | $ | 57,313 | | | $ | 52,648 | | | $ | 101,597 | | | $ | 70,116 | |
Ratios to average net assets:4 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 4.42 | % | | | 5.06 | % | | | 7.16 | % | | | 6.55 | % | | | 4.85 | % |
Total expenses5 | | | 1.02 | % | | | 1.04 | % | | | 1.01 | % | | | 0.88 | % | | | 0.92 | % |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 1.00 | % | | | 0.95 | % | | | 0.86 | % | | | 0.87 | % | | | 0.92 | % |
Portfolio turnover rate6 | | | 99 | % | | | 98 | % | | | 143 | % | | | 51 | % | | | 89 | % |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
4. | | Annualized for periods less than one full year. |
|
5. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
Year Ended December 30, 2011 | | | 1.04 | % |
Year Ended December 31, 2010 | | | 1.05 | % |
Year Ended December 31, 2009 | | | 1.02 | % |
Year Ended December 31, 2008 | | | 0.88 | % |
Year Ended December 31, 2007 | | | 0.92 | % |
| | |
6. | | The portfolio turnover rate excludes purchase and sale transactions of To Be Announced (TBA) mortgage-related securities as follows: |
| | | | | | | | |
| | Purchase Transactions | | | Sale Transactions | |
|
Year Ended December 30, 2011 | | $ | 911,850,847 | | | $ | 909,531,196 | |
Year Ended December 31, 2010 | | $ | 775,240,942 | | | $ | 766,486,357 | |
Year Ended December 31, 2009 | | $ | 977,840,247 | | | $ | 1,009,549,121 | |
Year Ended December 31, 2008 | | $ | 1,019,711,829 | | | $ | 963,377,934 | |
Year Ended December 31, 2007 | | $ | 662,784,931 | | | $ | 678,316,693 | |
See accompanying Notes to Financial Statements.
25 | OPPENHEIMER CORE BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Oppenheimer Core Bond Fund/VA (the “Fund”) is a separate series of Oppenheimer Variable Account Funds, an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund’s main investment objective is to seek a high level of current income. As a secondary objective, the Fund seeks capital appreciation when consistent with its primary objective. The Fund’s investment adviser is OppenheimerFunds, Inc. (the “Manager”).
The Fund offers two classes of shares. Both classes are sold at their offering price, which is the net asset value per share, to separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. The class of shares designated as Service shares is subject to a distribution and service plan. Both classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class.
The following is a summary of significant accounting policies consistently followed by the Fund.
Fiscal Year End. Since December 30, 2011 represents the last day during the Fund’s 2011 fiscal year on which the New York Stock Exchange was open for trading, the Fund’s financial statements have been presented through that date to maintain consistency with the Fund’s net asset value calculations used for shareholder transactions.
Securities Valuation. The Fund calculates the net asset value of its shares as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading.
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. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” observable market inputs other than unadjusted quoted prices are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.
Securities traded on a registered U.S. securities exchange 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. Securities whose principal exchange is NASDAQ® are valued based on the official closing prices reported by NASDAQ prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.
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.
U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.
“Money market-type” debt instruments with remaining maturities 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.
26 | OPPENHEIMER CORE BOND FUND/VA
In the absence of a current price quotation obtained from an independent pricing service or broker-dealer, including for securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund’s assets are valued but after the close of the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities 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 adjusted for any discounts related to 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.
There have been no significant changes to the fair valuation methodologies of the Fund during the period.
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.
As of December 30, 2011, 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 | | $ | 75,414,943 | |
Sold securities | | | 1,815,274 | |
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.
27 | OPPENHEIMER CORE BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
1. | | Significant Accounting Policies Continued |
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 as of December 30, 2011 is as follows: |
| | | | |
|
Cost | | $ | 3,281,116 | |
Market Value | | $ | 303,301 | |
Market Value as a % of Net Assets | | | 0.16 | % |
Investment in Oppenheimer Institutional Money Market Fund. The Fund is permitted to invest daily available cash balances in an affiliated money market fund. The Fund may invest the available cash in Class E shares of Oppenheimer Institutional Money Market Fund (“IMMF”) to seek current income while preserving liquidity. IMMF is a registered open-end management investment company, regulated as a money market fund under the Investment Company Act of 1940, as amended. The Manager is also the investment adviser of IMMF. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of IMMF’s Class E expenses, including its 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 IMMF.
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
Federal Taxes. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. Therefore, no federal income or excise tax provision is required. The Fund files income tax returns in U.S. federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remain open for the three preceding fiscal reporting period ends.
The tax components of capital shown in the following table represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes.
| | | | | | | | | | | | |
| | | | | | | | | | Net Unrealized | |
| | | | | | | | | | Appreciation Based on | |
Undistributed | | | | | | | | | | Cost of Securities and | |
Net Investment | | Undistributed | | | Accumulated Loss | | | Other Investments for | |
Income | | Long-Term Gain | | | Carryforward1,2,3 | | | Federal Income Tax Purposes | |
|
$9,181,275 | | $ | — | | | $ | 89,702,948 | | | $ | 1,097,897 | |
| | |
1. | | As of December 30, 2011, the Fund had $89,702,948 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. Details of the capital loss carryforwards are included in the table below. Capital loss carryovers with no expiration, if any, must be utilized prior to those with expiration dates. |
| | | | |
Expiring | | | | |
|
2014 | | $ | 609,788 | |
2015 | | | 1,245,459 | |
2016 | | | 12,777,851 | |
2017 | | | 75,069,850 | |
| | | |
Total | | $ | 89,702,948 | |
| | | |
| | |
2. | | During the fiscal year ended December 30, 2011, the Fund utilized $5,723,749 of capital loss carryforward to offset capital gains realized in that fiscal year. |
|
3. | | During the fiscal year ended December 31, 2010, the Fund utilized $8,990,701 of capital loss carryforward to offset capital gains realized in that fiscal year. |
28 | OPPENHEIMER CORE BOND FUND/VA
Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund.
Accordingly, the following amounts have been reclassified for December 30, 2011. Net assets of the Fund were unaffected by the reclassifications.
| | | | |
| | Increase to | |
Increase to | | Accumulated Net | |
Accumulated Net | | Realized Loss | |
Investment Income | | on Investments | |
|
$457,876 | | $ | 457,876 | |
The tax character of distributions paid during the years ended December 30, 2011 and December 31, 2010 was as follows:
| | | | | | | | |
| | Year Ended | | | Year Ended | |
| | December 30, 2011 | | | December 31, 2010 | |
|
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 10,734,878 | | | $ | 3,475,516 | |
The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 30, 2011 are noted in the following table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.
| | | | |
|
Federal tax cost of securities | | $ | 254,321,623 | |
Federal tax cost of other investments | | | (17,388,462 | ) |
| | | |
Total federal tax cost | | $ | 236,933,161 | |
| | | |
|
Gross unrealized appreciation | | $ | 7,268,695 | |
Gross unrealized depreciation | | | (6,170,798 | ) |
| | | |
Net unrealized appreciation | | $ | 1,097,897 | |
| | | |
Trustees’ Compensation. The Board of Trustees has adopted a compensation deferral plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of “Other” within the asset section of the Statement of Assets and Liabilities. Deferral of trustees’ fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund’s assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance with the compensation deferral plan.
Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles, are recorded on the ex-dividend date. Income and capital gain distributions, if any, are declared and paid annually or at other times as deemed necessary by the Manager.
29 | OPPENHEIMER CORE BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
1. Significant Accounting Policies Continued
Investment Income. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is recognized on an accrual basis. Discount and premium, which are included in interest income on the Statement of Operations, are amortized or accreted daily.
Custodian Fees. “Custodian fees and expenses” in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by the Fund, at a rate equal to the Federal Funds Rate plus 0.50%. The “Reduction to custodian expenses” line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings.
Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost.
Indemnifications. The Fund’s organizational documents provide current and former trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
| | | | | | | | | | | | | | | | |
| | Year Ended December 30, 2011 | | | Year Ended December 31, 2010 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
|
Non-Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 1,525,561 | | | $ | 11,724,677 | | | | 1,228,005 | | | $ | 9,215,341 | |
Dividends and/or distributions reinvested | | | 1,028,657 | | | | 7,632,636 | | | | 357,672 | | | | 2,543,053 | |
Redeemed | | | (4,179,877 | ) | | | (32,141,808 | ) | | | (3,913,294 | ) | | | (29,191,069 | ) |
| | | | | | | | | | | | |
Net decrease | | | (1,625,659 | ) | | $ | (12,784,495 | ) | | | (2,327,617 | ) | | $ | (17,432,675 | ) |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 2,658,754 | | | $ | 20,149,296 | | | | 1,784,838 | | | $ | 13,294,523 | |
Dividends and/or distributions reinvested | | | 422,074 | | | | 3,102,242 | | | | 132,264 | | | | 932,463 | |
Redeemed | | | (2,480,364 | ) | | | (18,915,961 | ) | | | (2,632,411 | ) | | | (19,526,291 | ) |
| | | | | | | | | | | | |
Net increase (decrease) | | | 600,464 | | | $ | 4,335,577 | | | | (715,309 | ) | | $ | (5,299,305 | ) |
| | | | | | | | | | | | |
30 | OPPENHEIMER CORE BOND FUND/VA
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations and investments in IMMF, for the year ended December 30, 2011, were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
|
Investment securities | | $ | 130,891,879 | | | $ | 132,306,983 | |
U.S. government and government agency obligations | | | 1,812,430 | | | | 1,894,880 | |
To Be Announced (TBA) mortgage-related securities | | | 911,850,847 | | | | 909,531,196 | |
4. Fees and Other Transactions with Affiliates
Management Fees. Under the investment advisory agreement, the Fund pays the Manager a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| | | | |
Fee Schedule | | | | |
|
Up to $1 billion | | | 0.60 | % |
Over $1 billion | | | 0.50 | |
Administration Service Fees. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund’s tax returns.
Transfer Agent Fees. OppenheimerFunds Services (“OFS”), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. For the year ended December 30, 2011, the Fund paid $186,542 to OFS for services to the Fund.
Distribution and Service Plan for Service Shares. The Fund has adopted a Distribution and Service Plan (the “Plan”) in accordance with Rule 12b-1 under the Investment Company Act of 1940 for Service shares to pay OppenheimerFunds Distributor, Inc. (the “Distributor”), for distribution related services, personal service and account maintenance for the Fund’s Service shares. Under the Plan, payments are made periodically at an annual rate of 0.25% of the daily net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors of the insurance product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service shares. These fees are paid out of the Fund’s assets on an on-going basis and increase operating expenses of the Service shares, which results in lower performance compared to the Fund’s shares that are not subject to a service fee. Fees incurred by the Fund under the Plan are detailed in the Statement of Operations.
Waivers and Reimbursements of Expenses. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.75% for Non-Service shares and 1.00% for Service shares. During the year ended December 30, 2011, the Manager waived fees and/or reimbursed the Fund $7,170 and $3,043 for Non-Service and Service shares, respectively.
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 IMMF. During the year ended December 30, 2011, the Manager waived fees and/or reimbursed the Fund $33,700 for IMMF management fees.
Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.
5. Risk Exposures and the Use of Derivative Instruments
The Fund’s investment objectives not only permit the Fund to purchase investment securities, they also allow the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward foreign currency exchange contracts, credit default swaps, interest rate swaps, total return 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. Central to those strategies are features inherent to
31 | OPPENHEIMER CORE BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
5. Risk Exposures and the Use of Derivative Instruments Continued
derivatives that make them more attractive for this purpose than equity and debt securities: they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This 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.
Market Risk Factors. In accordance with its investment objectives, the Fund may use derivatives to increase or decrease its exposure to one or more of the following 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 to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds.
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.
The Fund’s actual exposures to these market risk factors during the period are discussed in further detail, by derivative type, below.
Risks of Investing in Derivatives. The Fund’s use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. 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.
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. 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.
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. Associated risks can be different for each type of derivative and are discussed by each derivative type in the notes that follow.
32 | OPPENHEIMER CORE BOND FUND/VA
Valuations of derivative instruments as of December 30, 2011 are as follows:
| | | | | | | | |
| | Asset Derivatives | | Liability Derivatives |
| | Statement | | | | Statement | | |
Derivatives Not | | of Assets | | | | of Assets | | |
Accounted for as | | and Liabilities | | | | and Liabilities | | |
Hedging Instruments | | Location | | Value | | Location | | Value |
|
Interest rate contracts | | Futures margins | | $50,877* | | Futures margins | | $25,518* |
| | |
* | | Includes only the current day’s variation margin. Prior variation margin movements have been reflected in cash on the Statement of Assets and Liabilities upon receipt or payment. |
The effect of derivative instruments on the Statement of Operations is as follows:
| | | | |
Amount of Realized Gain or (Loss) Recognized on Derivatives | |
Derivatives Not | | Closing and | |
Accounted for as | | expiration of | |
Hedging Instruments | | futures contracts | |
|
Interest rate contracts | | $ | 2,940,895 | |
| | | | |
Amount of Change in Unrealized Gain or (Loss) Recognized on Derivatives | |
Derivatives Not | | | |
Accounted for as | | | |
Hedging Instruments | | Futures contracts | |
|
Interest rate contracts | | $ | 71,994 | |
Futures Contracts
A futures contract is a commitment to buy or sell a specific amount of a 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 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.
Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses.
Futures contracts are reported on a schedule following the Statement of Investments. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. Cash held by the broker 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. The net change in unrealized appreciation and depreciation is reported in the Statement of Operations. Realized gains (losses) are reported in the Statement of Operations 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 year ended December 30, 2011, the Fund had an ending monthly average market value of $17,763,413 and $34,052,790 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.
33 | OPPENHEIMER CORE BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
6. Restricted Securities
As of December 30, 2011, 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 Statement of Investments. Restricted securities are reported on a schedule following the Statement of Investments.
7. Pending Litigation
Since 2009, a number of class action, derivative and individual lawsuits have been pending in federal and state courts against OppenheimerFunds, Inc., the Fund’s investment advisor (the “Manager”), OppenheimerFunds Distributor, Inc., the Fund’s principal underwriter and distributor (the “Distributor”), and certain funds (but not including the Fund) advised by the Manager and distributed by the Distributor (the “Defendant Funds”). Several of these lawsuits also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The lawsuits raise claims under federal securities laws and various states’ securities, consumer protection and common law and allege, among other things, that the disclosure documents of the respective Defendant Funds contained misrepresentations and omissions and that the respective Defendant Funds’ investment policies were not followed. The plaintiffs in these actions seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. On September 30, 2011, the U.S. District Court for the District of Colorado entered orders and final judgments approving the settlement of certain putative class actions involving two Defendant Funds, Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund. Those orders are not subject to further appeal. These settlements do not resolve other outstanding lawsuits relating to Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund, nor do the settlements affect certain other putative class action lawsuits pending in federal court against the Manager, the Distributor, and other Defendant Funds and their independent trustees.
In 2009, what are claimed to be derivative lawsuits were filed in New Mexico state court against the Manager and a subsidiary (but not against the Fund) on behalf of the New Mexico Education Plan Trust challenging a settlement reached in 2010 between the Manager, its subsidiary and the Distributor and the board of the New Mexico section 529 college savings plan. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses. On September 9, 2011, the court denied plaintiffs’ request for a hearing to determine the fairness of the settlement, finding that plaintiffs lacked standing to pursue derivative claims on behalf of the Trust. On October 27, 2011, the parties to these actions filed a joint motion to dismiss the lawsuits with prejudice, which the court granted on October 28, 2011.
Other class action and individual lawsuits have been filed since 2008 in various state and federal courts against the Manager and certain of its affiliates by investors seeking to recover investments they allegedly lost as a result of the “Ponzi” scheme run by Bernard L. Madoff and his firm, Bernard L. Madoff Investment Securities, LLC (“BLMIS”). Plaintiffs in these suits allege that they suffered losses as a result of their investments in several funds managed by an affiliate of the Manager and assert a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. Neither the Distributor, nor any of the Oppenheimer mutual funds, their independent trustees or directors are named as defendants in these lawsuits. None of the Oppenheimer mutual funds invested in any funds or accounts managed by Madoff or BLMIS. On February 28, 2011, a stipulation of partial settlement of three groups of consolidated putative class action lawsuits relating to these matters was filed in the U.S. District Court for the Southern District of New York. On August 19, 2011, the court entered an order and final judgment approving the settlement as fair, reasonable and adequate. In September 2011, certain parties filed notices of appeal from the court’s order approving the settlement. On July 29, 2011, a stipulation of settlement between certain affiliates of the Manager and the Trustee appointed under the Securities Investor Protection Act to liquidate BLMIS was filed in the U.S. Bankruptcy Court for the Southern District of New York to resolve purported preference and fraudulent transfer claims by the Trustee. On September 22, 2011, the court entered an order approving the settlement as fair, reasonable and adequate. In October 2011, certain parties filed notices of appeal from the court’s order approving the settlement. The aforementioned settlements do not resolve other outstanding lawsuits against the Manager and its affiliates relating to BLMIS.
34 | OPPENHEIMER CORE BOND FUND/VA
On April 16, 2010, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark IV Funding Limited (“AAArdvark IV”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark IV. Plaintiffs allege breach of contract against the defendants and seek compensatory damages, costs and disbursements, including attorney fees. On July 15, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark Funding Limited (“AAArdvark I”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark I. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees. On November 9, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark XS Funding Limited (“AAArdvark XS”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark XS. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees.
The Manager believes the lawsuits and appeals described above are without legal merit and, with the exception of actions it has settled, is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to represent the Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer mutual funds.
35 | OPPENHEIMER CORE BOND FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds: |
We have audited the accompanying statement of assets and liabilities of Oppenheimer Core Bond Fund/VA (a separate series of Oppenheimer Variable Account Funds), including the statement of investments, as of December 30, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of Oppenheimer Core Bond Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 30, 2011, by correspondence with the custodian, transfer agent and brokers, or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Core Bond Fund/VA as of December 30, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended, in conformity with U.S. generally accepted accounting principles.
KPMG llp
Denver, Colorado
February 16, 2012
36 | OPPENHEIMER CORE BOND FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
In early 2012, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2011. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service.
The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance.
37 | OPPENHEIMER CORE BOND FUND/VA
BOARD APPROVAL OF THE FUND’S INVESTMENT
ADVISORY AGREEMENT Unaudited
Each year, the Board of Trustees (the “Board”), including a majority of the independent Trustees, is required to determine whether to renew the Fund’s investment advisory agreement (the “Agreement”). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager’s services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager and its affiliates, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. The Board was aware that there are alternatives to retaining the Manager.
Outlined below is a summary of the principal information considered by the Board as well as the Board’s conclusions.
Nature, Quality and Extent of Services. The Board considered information about the nature, quality and extent of the services provided to the Fund and information regarding the Manager’s key personnel who provide such services. The Manager’s duties include providing the Fund with the services of the portfolio managers and the Manager’s investment team, who provide research, analysis and other advisory services in regard to the Fund’s investments; securities trading services; oversight of third-party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund’s investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel who are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund’s operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund’s shares. The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the quality of the Manager’s resources that are available to the Fund. The Board took account of the fact that the Manager has had over fifty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager’s advisory, administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager’s key personnel and the size and functions of its staff. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Krishna Memani and Peter Strzalkowski, the portfolio managers for the Fund, and the Manager’s investment team and analysts. The Board members also considered the totality of their experiences with the Manager as directors or trustees of the Fund and other funds advised by the Manager. The Board considered information regarding the quality of services provided by affiliates of the Manager, which its members have become knowledgeable about in connection with the renewal of the Fund’s service agreements. The Board concluded, in light of the Manager’s experience, reputation, personnel, operations and resources that the Fund benefits from the services provided under the Agreement.
Investment Performance of the Manager and the Fund. Throughout the year, the Manager provided information on the investment performance of the Fund and the Manager, including comparative performance information. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund’s historical performance to relevant market indices and to the performance of other A-rated corporate debt funds underlying variable insurance products. The Board considered that the Fund outperformed its performance universe median during the one-year Lipper period, although it underperformed its performance universe median during the three-, five-, and ten-year Lipper periods. The Board also considered the appointment of a new portfolio manager on
38 | OPPENHEIMER CORE BOND FUND/VA
April 1, 2009, and it considered the Manager’s assertion that the Investment Grade Fixed Income Team has been repositioning the portfolio gradually to better take advantage of changing market conditions. The Board considered the Fund’s recent improved performance in light of those changes, ranking in the first quintile for the year to date ended April 30, 2011.
Costs of Services by the Manager. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also considered the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund and other A-rated corporate debt funds underlying variable insurance products. In reviewing the fees and expenses charged to the VA funds, the Board considered the Manager’s assertion that, because there is much greater disparity in the fees and services that may be provided by a manager to a VA fund as opposed to a retail fund, when comparing the expenses of the various VA funds to those of retail funds, it is most appropriate to focus on total expenses (rather than on the management fees). Accordingly, while the Board reviewed and considered all expenses, it focused on total expenses. The Board considered that the Fund’s total expenses and actual management fees were higher than its expense group median. The Board considered that the Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed that annual rate of 0.75% for Non-Service shares and 1.00% for Service shares. This voluntary expense limitation may not be amended or withdrawn until one year after the date of the prospectus.
Economies of Scale and Profits Realized by the Manager. The Board considered information regarding the Manager’s costs in serving as the Fund’s investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager’s profitability from its relationship with the Fund. The Board reviewed whether the Manager may realize economies of scale in managing and supporting the Fund. The Board noted that the Fund currently has management fee breakpoints, which are intended to share with Fund shareholders economies of scale that may exist as the Fund’s assets grow.
Other Benefits to the Manager. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager’s affiliates. The Board also considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide quality services to the Fund.
Conclusions. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees’ counsel are independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the Agreement through August 31, 2012. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the above information, and considered the terms and conditions of the Agreement, including the management fee, in light of all of the surrounding circumstances.
39 | OPPENHEIMER CORE BOND FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies (“portfolio proxies”) relating to securities held by the Fund. A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund’s website at oppenheimerfunds.com, and (iii) on the SEC’s website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund’s voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Fund’s Form N-PX filing on the SEC’s website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund’s Form N-Q filings are available on the SEC’s website at www.sec.gov. Those forms may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
40 | OPPENHEIMER CORE BOND FUND/VA
TRUSTEES AND OFFICERS Unaudited
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Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
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INDEPENDENT TRUSTEES | | The address of each Trustee in the chart below is 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Trustee serves for an indefinite term, or until his or her resignation, retirement, death or removal. |
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William L. Armstrong, Chairman of the Board of Trustees (since 2003), Trustee (since 1999) Age: 74 | | President, Colorado Christian University (since 2006); Chairman, Cherry Creek Mortgage Company (since 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso Mortgage Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman, Broadway Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), former Director of Campus Crusade for Christ (non-profit) (1991-2008); former Director, The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (2002-2006); former Chairman of: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: |
| | UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Armstrong has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Edward L. Cameron, Trustee (since 1999) Age: 73 | | Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000 — June 2006); Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (accounting firm) (July 1994-June 1998). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Cameron has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Jon S. Fossel, Trustee (since 1990) Age: 69 | | Chairman of the Board (since 2006) and Director (since June 2002) of UNUMProvident (insurance company); Director of Northwestern Energy Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003 and February 2005-February 2007); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. (“OAC”) (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Fossel has served on the Boards of certain Oppenheimer funds since 1990, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Sam Freedman, Trustee (since 1996) Age: 71 | | Director of Colorado UpLIFT (charitable organization) (since September 1984). Mr. Freedman held several positions with the Manager and with subsidiary or affiliated companies of the Manager (until October 1994). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Freedman has served on the Boards of certain Oppenheimer funds since 1996, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Beverly L. Hamilton, Trustee (since 2002) Age: 65 | | Trustee of Monterey Institute for International Studies (educational organization) (since February 2000); Board Member of Middlebury College (educational organization) (since December 2005); Chairman (since 2010) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); Director of The California Endowment (philanthropic organization) (April 2002-April 2008); Director (February 2002-2005) and Chairman of Trustees (2006-2007) of the Community Hospital of Monterey Peninsula; Director (October 1991-2005); Vice Chairman (2006-2009) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation (2001-2006) and The University of Michigan (since 2000); Advisor at Credit Suisse First Boston’s Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member of the investment committee of Hartford Hospital (2000-2003); and |
41 | OPPENHEIMER CORE BOND FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
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Beverly L. Hamilton, Continued | | Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 36 portfolios in the OppenheimerFunds complex. Ms. Hamilton has served on the Boards of certain Oppenheimer funds since 2002, during which time she has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Robert J. Malone, Trustee (since 2002) Age: 67 | | Board of Directors of Opera Colorado Foundation (non-profit organization) (since March 2008); Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director of Steele Street Bank & Trust (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Malone has served on the Boards of certain Oppenheimer funds since 2002, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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F. William Marshall, Jr., Trustee (since 2000) Age: 69 | | Trustee Emeritus of Worcester Polytech Institute (WPI) (private university) (since 2009); Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment company) (since 1996) and MML Series Investment Fund (investment company) (since 1996); President and Treasurer of the SIS Funds (private charitable fund) (January 1999 — March 2011); Former Trustee of WPI (1985-2008); Former Chairman of the Board (2004-2006) and Former Chairman of the Investment Committee of WPI (1994-2008); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999); and Former President and Chief Executive Officer of SIS Bancorp. (1993-1999). Oversees 38 portfolios in the OppenheimerFunds complex. Mr. Marshall has served on the Boards of certain Oppenheimer funds since 2000, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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INTERESTED TRUSTEE AND OFFICER | | The address of Mr. Glavin is Two World Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10281- 1008. Mr. Glavin serves as a Trustee for an indefinite term, or until his resignation, retirement, death or removal and as an Officer for an indefinite term, or until his resignation, retirement, death or removal. Mr. Glavin is an Interested Trustee due to his positions with OppenheimerFunds, Inc. and its affiliates. |
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William F. Glavin, Jr., Trustee, President and Principal Executive Officer (since 2009) Age: 53 | | Chairman of the Manager (since December 2009); Chief Executive Officer and Director of the Manager (since January 2009); President of the Manager (since May 2009); Director of Oppenheimer Acquisition Corp. (“OAC”) (the Manager’s parent holding company) (since June 2009); Executive Vice President (March 2006-February 2009) and Chief Operating Officer (July 2007-February 2009) of Massachusetts Mutual Life Insurance Company (OAC’s parent company); Director (May 2004-March 2006) and Chief Operating Officer and Chief Compliance Officer (May 2004-January 2005), President (January 2005-March 2006) and Chief Executive Officer (June 2005-March 2006) of Babson Capital Management LLC; Director (March 2005-March 2006), President (May 2003-March 2006) and Chief Compliance Officer (July 2005-March 2006) of Babson Capital Securities, Inc. (a broker-dealer); President (May 2003-March 2006) of Babson Investment Company, Inc.; Director (May 2004-August 2006) of Babson Capital Europe Limited; Director (May 2004-October 2006) of Babson Capital Guernsey Limited; Director (May 2004-March 2006) of Babson Capital Management LLC; Non-Executive Director (March 2005-March 2007) of Baring Asset Management Limited; Director (February 2005-June 2006) Baring Pension Trustees Limited; Director and Treasurer (December 2003-November 2006) of Charter Oak Capital Management, Inc.; Director (May 2006-September 2006) of C.M. Benefit Insurance Company; Director (May 2008-June 2009) and Executive Vice President (June 2007-July 2009) of C.M. Life Insurance Company; President (March 2006-May 2007) of MassMutual Assignment Company; Director (January 2005-December 2006), Deputy Chairman (March 2005- December 2006) and President (February 2005-March 2005) of MassMutual Holdings (Bermuda) Limited; Director (May 2008-June 2009) and Executive Vice President (June 2007-July 2009) of MML Bay State Life Insurance Company; Chief Executive Officer and President (April 2007-January 2009) of MML Distributors, LLC; and Chairman (March 2006-December 2008) and Chief Executive Officer (May 2007-December 2008) of MML Investors Services, Inc. Oversees 63 portfolios as a Trustee/Director and 96 portfolios as an officer in the OppenheimerFunds complex. |
42 | OPPENHEIMER CORE BOND FUND/VA
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OTHER OFFICERS OF THE FUND | | The addresses of the Officers in the chart below are as follows: for Messrs. Memani, Strzalkowski, Gabinet and Ms. Nasta, Two World Financial Center, 225 Liberty Street, New York, New York 10281-1008, for Messrs. Vandehey and Wixted. Each Officer serves for an indefinite term or until his or her resignation, retirement, death or removal. |
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Krishna Memani, Vice President (since 2009) Age: 51 | | Director of Fixed Income (since October 2010), Senior Vice President and Head of the Investment Grade Fixed Income Team of the Manager (since March 2009). Prior to joining the Manager, Managing Director and Head of the U.S. and European Credit Analyst Team at Deutsche Bank Securities (June 2006-January 2009); Chief Credit Strategist at Credit Suisse Securities (August 2002-March 2006); a Managing Director and Senior Portfolio Manager at Putnam Investments (September 1998-June 2002). A portfolio manager and an officer of 22 portfolios in the OppenheimerFunds complex. |
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Peter A. Strzalkowski, Vice President (since 2009) Age: 46 | | Vice President of the Manager (since August 2007), a Chartered Financial Analyst and a member of the Manager’s Investment Grade Fixed Income Team (since April 2009). Prior to joining the Manager, Managing Partner and Chief Investment Officer of Vector Capital Management, LLC, a structured products money management firm he founded, (July 2006-August 2007); a Senior Portfolio Manager at Highland Capital Management, L.P. (June 2005-July 2006) and a Senior Fixed Income Portfolio Manager at Microsoft Corp. (June 2003-June 2005); a Vice President and Senior Fixed Income Portfolio Manager at First Citizens Bank Trust, Capital Management Group (April 2000-June 2003); a Vice President and Fixed Income Portfolio Manager at Centura Banks (November 1998-April 2000). A portfolio manager and officer of 7 portfolios in the OppenheimerFunds complex. |
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Arthur S. Gabinet, Secretary (since 2011) Age: 53 | | Executive Vice President (since May 2010) and General Counsel (since January 2011) of the Manager; General Counsel of the Distributor (since January 2011); General Counsel of Centennial Asset Management Corporation (since January 2011); Executive Vice President and General Counsel of HarbourView Asset Management Corporation (since January 2011); Assistant Secretary (since January 2011) and Director (since January 2011) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since January 2011); Director of Oppenheimer Real Asset Management, Inc. (since January 2011); Executive Vice President and General Counsel of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since January 2011); Executive Vice President and General Counsel of OFI Private Investments, Inc. (since January 2011); Vice President of OppenheimerFunds Legacy Program (since January 2011); Executive Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since January 2011); General Counsel, Asset Management of the Manager (May 2010-December 2010); Principal, The Vanguard Group (November 2005-April 2010); District Administrator, U.S. Securities and Exchange Commission (January 2003- October 2005). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Christina M. Nasta, Vice President and Chief Business Officer (since 2011) Age: 38 | | Senior Vice President of the Manager (since July 2010); Vice President of the Manager (since January 2003); Vice President of OppenheimerFunds Distributor, Inc. (since January 2003). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Mark S. Vandehey, Vice President and Chief Compliance Officer (since 2004) Age: 61 | | Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Brian W. Wixted, Treasurer and Principal Financial & Accounting Officer (since 1999) Age: 52 | | Senior Vice President of the Manager (since March 1999); Treasurer of the Manager and the following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership Holdings, Inc. (March 1999-June 2008), OFI Private Investments, Inc. (March 2000-June 2008), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of OAC (March 1999-June 2008). An officer of 96 portfolios in the OppenheimerFunds complex. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and Officers and is available without charge, upon request, by calling 1.800.988.8287.
43 | OPPENHEIMER CORE BOND FUND/VA
OPPENHEIMER CORE BOND FUND/VA
A Series of Oppenheimer Variable Account Funds
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Manager | | OppenheimerFunds, Inc. |
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Distributor | | OppenheimerFunds Distributor, Inc. |
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Transfer Agent | | OppenheimerFunds Services |
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Independent Registered Public Accounting Firm | | KPMG llp |
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Counsel | | K&L Gates LLP |
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| | Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing. |
©2012 OppenheimerFunds, Inc. All rights reserved.
December 31, 2011 Annual Report ANNUAL REPORT Listing of Top Holdings Fund Performance Discussion Financial Statements |
OPPENHEIMER GLOBAL SECURITIES FUND/VA
Portfolio Manager: Rajeev Bhaman, CFA
Average Annual Total Returns
For the Periods Ended 12/30/111
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| | 1-Year | | | 5-Year | | | 10-Year | |
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Non-Service Share | | | -8.29 | % | | | -1.12 | % | | | 5.37 | % |
Service Shares | | | -8.53 | % | | | -1.36 | % | | | 5.12 | % |
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| | | | | | | | | | | Since | |
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| | 1-Year | | | 5-Year | | | | (5/1/03) | |
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Class 3 | | | -8.27 | % | | | -1.12 | % | | | 9.39 | % |
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| | | | | | | | | | | Since | |
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| | 1-Year | | | 5-Year | | | | (5/3/04) | |
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Class 4 | | | -8.49 | % | | | -1.37 | % | | | 5.02 | % |
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Expense Ratios | | | | |
For the Period Ended 12/30/111 | | | | |
Non-Service Shares | | | 0.76 | % |
Service Shares | | | 1.01 | |
Class 3 | | | 0.76 | |
Class 4 | | | 1.01 | |
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance and expense ratios may be lower or higher than the data quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account.
Regional Allocation
Portfolio holdings and allocations are subject to change.
Percentages are as of December 30, 2011, and are based on the total market value of investments.
Top Ten Common Stock Holdings
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Telefonaktiebolaget LM Ericsson, B Shares | | | 3.9 | % |
eBay, Inc. | | | 3.1 | |
Siemens AG | | | 2.6 | |
McDonald’s Corp. | | | 2.2 | |
Altera Corp. | | | 2.2 | |
Intuit, Inc. | | | 2.1 | |
SAP AG | | | 2.0 | |
European Aeronautic Defense & Space Co. | | | 1.9 | |
Aetna, Inc. | | | 1.9 | |
Colgate-Palmolive Co. | | | 1.8 | |
Portfolio holdings and allocations are subject to change.
Percentages are as of December 30, 2011, and are based on net assets.
2 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FUND PERFORMANCE DISCUSSION
Management’s Discussion of Fund Performance. The Fund’s Non-Service shares declined by 8.29% for the one-year reporting period ended December 30, 2011.1 On a relative basis, the Fund underperformed the MSCI World Index (the “Index”), which declined by 5.54%. The Fund’s losses occurred over the third quarter of 2011. The global decline in financial markets over the third quarter was triggered by default expectations in Greece spreading to Portugal, Ireland, Spain and even Italy as European policy makers squabbled over who would bear the costs of deteriorating asset quality on bank balance sheets. During this time, the markets moved from favoring riskier asset classes to historically defensive securities. The Fund is invested primarily in stocks with growth characteristics, which tend not to perform well in this type of environment. Furthermore, the Fund had more investments in European and emerging market-based companies than the Index, which led to the underperformance due to worries about the euro and emerging market growth.
Global Market and Economic Environment
The past year has been a tale of many markets. Political unrest in the Middle East with the advent of the “Arab Spring” saw dictators and their governments in North Africa fall. A giant earthquake in Japan and the resulting tsunami caused devastation and a nuclear crisis in the Tohoku region. Ratings agency Standard & Poor’s downgraded the U.S. below AAA. Inflation in China and India reached levels that were deemed too high for central banks there and they tightened monetary policy. Europe and the euro looked wobbly with an untenable situation in Greece and increasing worries over the abilities of Portugal, Ireland, Spain and Italy to pay their debts.
These events led to significant disruptions to global supply chains and concerns over the supply and availability of oil. Oil prices rose unrelentingly through April. The perceived unwillingness of the broader European Community to come together to resolve the European debt crisis created undesirable risk for investors. Economies such as Germany appeared willing to employ a stratagem of brinksmanship to attempt to push debt-laden European countries to make hard political decisions. With hopes that emerging markets would lead the world through a difficult patch, concerns about global growth arose when major emerging markets tightened monetary policy. Unemployment rates have remained stubbornly high as companies make do with fewer workers.
It seemed all of these concerns reached a crescendo over the summer, leading to a major reversal in the uptrend of the markets we had seen until then. Worries about a global recession dominated the markets and a flight to safety ensued. Despite all this, many companies reported robust financial results that beat expectations. Company balance sheets outside of the financials sector generally remained strong and borrowing costs remained low.
Equity markets finished the period largely on a positive note, rebounding strongly in October in particular, as European leaders sought to undertake measures to address the debt issues in the region and the U.S. economy began to show some signs of life, as high unemployment trended downward, the housing market picked up slightly and consumer sentiment improved. Developing markets generally saw equity gains in the fourth quarter, but their performance continued to lag behind that of the developed markets. A decisive shift toward easier monetary policy in China and an interest rate cut by Brazil in late November for the third time since August stimulated large gains in euro zone bond markets, as yields fell in almost every country in the Eurozone and also sparked a rally in the global equity markets.
Top Individual Contributors
During the reporting period, top contributors to Fund performance included global fast-food retailer McDonald’s Corp., health care provider Aetna, Inc., European Aeronautic Defence & Space Co. (EADS), parent of Airbus, and the jeweler, Bulgari SpA. McDonald’s, the iconic American quick service restaurant, continued to grow globally and increase market share. The company also continued to benefit from the popularity of its McCafe beverage line-up, its breakfast offerings and its premium chicken sandwiches. Aetna, a leading managed health care firm based in the U.S., performed well as earnings grew faster than market expectations. EADS, the maker of Airbus airplanes and the
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1. | | December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011. |
3 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FUND PERFORMANCE DISCUSSION
Eurocopter among other defense related products, grew its order book at a record pace and showed rapidly improving profit margins.
Bulgari SpA is an Italian jeweler and one of our luxury goods holdings that was taken over by LVMH, the owner of Luis Vuitton, another one of our holdings, at a substantial premium. Over the year, we also initiated major investments in Google, Inc. and McGraw Hill-Cos., two superb franchise businesses that we believed to be undervalued. Both of these holdings performed positively for the Fund while held.
Top Individual Detractors
Individual securities that were significant detractors included the Swiss bank Credit Suisse Group AG, a leading franchise in private banking worldwide with a very healthy balance sheet, in our opinion. The ultra-strength of the Swiss franc combined with significant risk aversion in the marketplace resulted in an increase in the firm’s costs combined with a decrease in customer revenues, which led to significant profit declines. Financial services giant Goldman Sachs Group, Inc. also detracted from performance. Goldman’s stock price declined primarily due to increased regulation in the financial industry and uncertainty over its eventual implementation, which reduced the outlook for profit growth for many financial firms, particularly in the investment banking sector. A weak global economy and investment banks’ exposure to the Eurozone also gave investors pause. Sony Corp., a legendary consumer electronics franchise, was battered by the global consumers’ unwillingness to buy televisions or other appliances. We continued to hold these companies in our portfolio, notwithstanding these short-term setbacks.
Outlook
We remain confident that our method of investment, which focuses on companies of high quality positioned to capitalize on growth trends and purchased at prices that offer the opportunity to substantially appreciate over a five year investment horizon, will serve us well in the periods to come. Our positioning in the Fund is similar to what it was a year ago. The world’s current concerns are real but the overwhelming focus on these concerns, and an ignoring of the potential in the markets, provides us great opportunities. In a world where the leading companies can have dividend yields higher than their own bond yields and cash flow yields double that, investing in stocks may provide uncommon opportunities.
Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing.
Total returns include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown.
The Fund’s investment strategy and focus can change over time. The mention of specific fund holdings does not constitute a recommendation by OppenheimerFunds, Inc.
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.
Comparing the Fund’s Performance to the Market. The graphs that follow show the performance of a hypothetical $10,000 investment in each share class of the Fund held until December 30, 2011. In the case of Non-Service shares and Service shares, performance is measured over a ten-fiscal-year period. In the case of Class 3 shares, performance is measured from inception of the class on May 1, 2003. In the case of Class 4 shares, performance is measured from inception of the class on May 3, 2004. Performance information does not reflect charges that apply to separate accounts investing in the Fund. If these charges were taken into account, performance would be lower. The graphs assume that all dividends and capital gains distributions were reinvested in additional shares.
4 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
The Fund’s performance is compared to the performance of the Morgan Stanley Capital International (MSCI) World Index, an unmanaged index of equity securities listed on stock exchanges of a select number of foreign countries and the U.S. Index performance includes reinvestment of income but does not reflect transaction costs, fees or expenses. The Fund’s performance reflects the effects of the Fund’s business and operating expenses. While index comparisons may be useful to provide a benchmark for the Fund’s performance, it must be noted that the Fund’s investments are not limited to the securities comprising the index.
5 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FUND PERFORMANCE DISCUSSION
Non-Service Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Service Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
6 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
Class 3 Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Class 4 Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account.
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1. | | December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011. |
7 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FUND EXPENSES
Fund Expenses. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 30, 2011.
Actual Expenses. The first section of the table provides information about actual account values and actual expenses. You may use the information in this section for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes. The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio for each class of shares, and an assumed rate of return of 5% per year for each class before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the “hypothetical” lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included your costs would have been higher.
8 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
| | | | | | | | | | | | |
| | Beginning | | | Ending | | | Expenses | |
| | Account | | | Account | | | Paid During | |
| | Value | | | Value | | | 6 Months Ended | |
Actual | | July 1, 2011 | | | December 30, 2011 | | | December 30, 2011 | |
|
Non-Service shares | | $ | 1,000.00 | | | $ | 852.80 | | | $ | 3.54 | |
Service shares | | | 1,000.00 | | | | 851.60 | | | | 4.70 | |
Class 3 | | | 1,000.00 | | | | 852.90 | | | | 3.54 | |
Class 4 | | | 1,000.00 | | | | 851.60 | | | | 4.70 | |
| | | | | | | | | | | | |
Hypothetical | | | | | | | | | | | | |
(5% return before expenses) | | | | | | | | | | | | |
|
Non-Service shares | | | 1,000.00 | | | | 1,021.26 | | | | 3.86 | |
Service shares | | | 1,000.00 | | | | 1,020.00 | | | | 5.13 | |
Class 3 | | | 1,000.00 | | | | 1,021.26 | | | | 3.86 | |
Class 4 | | | 1,000.00 | | | | 1,020.00 | | | | 5.13 | |
Expenses are equal to the Fund’s annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). Those annualized expense ratios, excluding indirect expenses from affiliated fund, based on the 6-month period ended December 30, 2011 are as follows:
| | | | |
Class | | Expense Ratios | |
Non-Service shares | | | 0.76 | % |
Service shares | | | 1.01 | |
Class 3 | | | 0.76 | |
Class 4 | | | 1.01 | |
The expense ratios reflect voluntary waivers and/or reimbursements of expenses by the Fund’s Manager. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund’s prospectus. The “Financial Highlights” tables in the Fund’s financial statements, included in this report, also show the gross expense ratios, without such waivers or reimbursements and reduction to custodian expenses, if applicable.
9 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF INVESTMENTS December 30, 2011*
| | | | | | | | |
| | Shares | | | Value | |
|
Common Stocks—98.3% | | | | | | | | |
Consumer Discretionary—18.1% | | | | | | | | |
Automobiles—1.5% | | | | | | | | |
Bayerische Motoren Werke (BMW) AG, Preference | | | 771,969 | | | $ | 36,517,785 | |
Diversified Consumer Services—0.0% | | | | | | | | |
Zee Learn Ltd.1 | | | 492,103 | | | | 110,273 | |
Hotels, Restaurants & Leisure—4.1% | | | | | | | | |
Carnival Corp. | | | 1,124,146 | | | | 36,692,125 | |
Lottomatica SpA1 | | | 552,870 | | | | 8,273,787 | |
McDonald’s Corp. | | | 529,050 | | | | 53,079,587 | |
| | | | | | | |
| | | | | | | 98,045,499 | |
| | | | | | | | |
Household Durables—0.6% | | | | | | | | |
Sony Corp. | | | 759,800 | | | | 13,693,158 | |
Leisure Equipment & Products—0.3% | | | | | | | | |
Nintendo Co. Ltd. | | | 61,000 | | | | 8,400,676 | |
Media—4.5% | | | | | | | | |
Grupo Televisa SA, Sponsored GDR | | | 1,333,226 | | | | 28,077,740 | |
McGraw-Hill Cos., Inc. (The) | | | 634,460 | | | | 28,531,666 | |
Walt Disney Co. (The) | | | 1,102,240 | | | | 41,334,000 | |
Wire & Wireless India Ltd.1 | | | 2,281,600 | | | | 255,635 | |
Zee Entertainment Enterprises Ltd. | | | 4,094,715 | | | | 9,086,944 | |
| | | | | | | |
| | | | | | | 107,285,985 | |
| | | | | | | | |
Multiline Retail—0.9% | | | | | | | | |
Pinault-Printemps-Redoute SA | | | 146,730 | | | | 21,012,974 | |
Specialty Retail—3.8% | | | | | | | | |
Abercrombie & Fitch Co., Cl. A | | | 87,250 | | | | 4,261,290 | |
Industria de Diseno Textil SA | | | 439,965 | | | | 36,033,114 | |
Kingfisher plc | | | 1,924,960 | | | | 7,494,525 | |
Tiffany & Co. | | | 650,960 | | | | 43,132,610 | |
| | | | | | | |
| | | | | | | 90,921,539 | |
| | | | | | | | |
Textiles, Apparel & Luxury Goods—2.4% | | | | | | | | |
LVMH Moet Hennessy Louis Vuitton SA | | | 281,770 | | | | 39,698,068 | |
Tod’s SpA | | | 227,470 | | | | 18,497,140 | |
| | | | | | | |
| | | | | | | 58,195,208 | |
| | | | | | | | |
Consumer Staples—9.5% | | | | | | | | |
Beverages—4.2% | | | | | | | | |
Carlsberg AS, Cl. B | | | 199,346 | | | | 14,057,272 | |
Companhia de Bebidas das Americas, Sponsored ADR, Preference | | | 865,575 | | | | 31,238,602 | |
Fomento Economico Mexicano SA de CV, UBD | | | 5,543,613 | | | | 38,744,550 | |
Grupo Modelo SA de CV, Series C | | | 2,376,754 | | | | 14,988,094 | |
| | | | | | | |
| | | | | | | 99,028,518 | |
| | | | | | | | |
Food & Staples Retailing—0.6% | | | | | | | | |
E-Mart Co. Ltd.1 | | | 61,139 | | | | 14,807,102 | |
Food Products—2.9% | | | | | | | | |
Nestle SA | | | 522,946 | | | | 30,063,967 | |
Unilever plc | | | 1,159,843 | | | | 38,960,436 | |
| | | | | | | |
| | | | | | | 69,024,403 | |
| | | | | | | | |
Household Products—1.8% | | | | | | | | |
Colgate-Palmolive Co. | | | 475,810 | | | | 43,960,086 | |
Energy—3.9% | | | | | | | | |
Energy Equipment & Services—2.5% | | | | | | | | |
Technip SA | | | 419,990 | | | | 39,253,414 | |
Transocean Ltd. | | | 505,762 | | | | 19,416,203 | |
| | | | | | | |
| | | | | | | 58,669,617 | |
| | | | | | | | |
Oil, Gas & Consumable Fuels—1.4% | | | | | | | | |
Total SA | | | 548,830 | | | | 28,057,704 | |
YPF Sociedad Anonima SA, Sponsored ADR | | | 166,670 | | | | 5,780,116 | |
| | | | | | | |
| | | | | | | 33,837,820 | |
| | | | | | | | |
Financials—13.8% | | | | | | | | |
Capital Markets—3.6% | | | | | | | | |
Credit Suisse Group AG | | | 1,254,268 | | | | 29,470,558 | |
Goldman Sachs Group, Inc. (The) | | | 259,310 | | | | 23,449,403 | |
UBS AG1 | | | 2,716,046 | | | | 32,327,685 | |
| | | | | | | |
| | | | | | | 85,247,646 | |
| | | | | | | | |
Commercial Banks—2.7% | | | | | | | | |
Banco Bilbao Vizcaya Argentaria SA | | | 3,367,795 | | | | 28,945,218 | |
Itau Unibanco Holding SA, ADR, | | | | | | | | |
Preference | | | 578,240 | | | | 10,732,134 | |
Societe Generale SA, Cl. A | | | 290,239 | | | | 6,441,556 | |
Sumitomo Mitsui Financial | | | | | | | | |
Group, Inc. | | | 655,000 | | | | 18,245,031 | |
| | | | | | | |
| | | | | | | 64,363,939 | |
| | | | | | | | |
Diversified Financial Services—1.9% | | | | | | | | |
BM&F BOVESPA SA | | | 4,348,400 | | | | 22,846,439 | |
Investor AB, B Shares | | | 1,276,082 | | | | 23,712,306 | |
| | | | | | | |
| | | | | | | 46,558,745 | |
| | | | | | | | |
Insurance—5.3% | | | | | | | | |
Aflac, Inc. | | | 482,310 | | | | 20,864,731 | |
Allianz SE | | | 324,402 | | | | 31,031,582 | |
Dai-ichi Life Insurance Co. | | | 21,622 | | | | 21,265,238 | |
Fidelity National Financial, Inc., Cl. A | | | 821,110 | | | | 13,080,282 | |
Prudential plc | | | 2,651,717 | | | | 26,128,476 | |
XL Group plc | | | 709,690 | | | | 14,030,571 | |
| | | | | | | |
| | | | | | | 126,400,880 | |
10 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
| | | | | | | | |
| | Shares | | | Value | |
|
Real Estate Management & Development—0.3% | | | | | | | | |
DLF Ltd. | | | 2,418,376 | | | $ | 8,312,929 | |
Health Care—10.3% | | | | | | | | |
Biotechnology—2.5% | | | | | | | | |
Amgen, Inc. | | | 353,590 | | | | 22,704,014 | |
Amylin Pharmaceuticals, Inc.1 | | | 1,101,708 | | | | 12,537,437 | |
Gilead Sciences, Inc.1 | | | 299,030 | | | | 12,239,298 | |
Theravance, Inc.1 | | | 598,130 | | | | 13,218,673 | |
| | | | | | | |
| | | | | | | 60,699,422 | |
| | | | | | | | |
Health Care Equipment & Supplies—1.2% | | | | | | | | |
Zimmer Holdings, Inc.1 | | | 552,170 | | | | 29,496,921 | |
Health Care Providers & Services—3.7% | | | | | | | | |
Aetna, Inc. | | | 1,057,270 | | | | 44,606,221 | |
WellPoint, Inc. | | | 657,315 | | | | 43,547,119 | |
| | | | | | | |
| | | | | | | 88,153,340 | |
| | | | | | | | |
Pharmaceuticals—2.9% | | | | | | | | |
Allergan, Inc. | | | 104,180 | | | | 9,140,753 | |
Bayer AG | | | 444,545 | | | | 28,422,343 | |
Mitsubishi Tanabe Pharma Corp. | | | 826,300 | | | | 13,075,658 | |
Roche Holding AG | | | 104,226 | | | | 17,665,048 | |
| | | | | | | |
| | | | | | | 68,303,802 | |
| | | | | | | | |
Industrials—12.2% | | | | | | | | |
Aerospace & Defense—2.8% | | | | | | | | |
Embraer SA, ADR | | | 903,943 | | | | 22,797,442 | |
European Aeronautic Defense & Space Co. | | | 1,452,460 | | | | 45,187,675 | |
| | | | | | | |
| | | | | | | 67,985,117 | |
| �� | | | | | | | |
Building Products—1.6% | | | | | | | | |
Assa Abloy AB, Cl. B | | | 1,514,863 | | | | 37,992,365 | |
Commercial Services & Supplies—0.2% | | | | | | | | |
Mulitplus SA | | | 253,800 | | | | 4,388,179 | |
Electrical Equipment—2.0% | | | | | | | | |
Emerson Electric Co. | | | 461,440 | | | | 21,498,490 | |
Nidec Corp. | | | 208,300 | | | | 18,104,807 | |
Prysmian SpA | | | 683,137 | | | | 8,442,341 | |
| | | | | | | |
| | | | | | | 48,045,638 | |
| | | | | | | | |
Industrial Conglomerates—4.7% | | | | | | | | |
3M Co. | | | 397,600 | | | | 32,495,848 | |
Koninklijke Philips Electronics NV | | | 850,531 | | | | 17,823,292 | |
Siemens AG | | | 653,062 | | | | 62,495,832 | |
| | | | | | | |
| | | | | | | 112,814,972 | |
| | | | | | | | |
Machinery—0.7% | | | | | | | | |
Fanuc Ltd. | | | 115,300 | | | | 17,646,278 | |
Road & Rail—0.2% | | | | | | | | |
All America Latina Logistica | | | 732,200 | | | | 3,650,696 | |
Information Technology—27.7% | | | | | | | | |
Communications Equipment—5.0% | | | | | | | | |
Juniper Networks, Inc.1 | | | 1,264,000 | | | | 25,798,240 | |
Telefonaktiebolaget LM Ericsson, B Shares | | | 9,267,681 | | | | 94,139,824 | |
| | | | | | | |
| | | | | | | 119,938,064 | |
| | | | | | | | |
Electronic Equipment & Instruments—4.1% | | | | | | | | |
Corning, Inc. | | | 1,391,750 | | | | 18,064,915 | |
Hoya Corp. | | | 686,800 | | | | 14,794,263 | |
Keyence Corp. | | | 99,374 | | | | 23,962,342 | |
Kyocera Corp. | | | 172,300 | | | | 13,856,529 | |
Murata Manufacturing Co. Ltd. | | | 553,500 | | | | 28,440,854 | |
| | | | | | | |
| | | | | | | 99,118,903 | |
| | | | | | | | |
Internet Software & Services—4.5% | | | | | | | | |
eBay, Inc.1 | | | 2,487,240 | | | | 75,437,989 | |
Google, Inc., Cl. A1 | | | 50,320 | | | | 32,501,688 | |
| | | | | | | |
| | | | | | | 107,939,677 | |
| | | | | | | | |
IT Services—2.2% | | | | | | | | |
Automatic Data Processing, Inc. | | | 430,640 | | | | 23,258,866 | |
Infosys Ltd. | | | 557,544 | | | | 29,057,276 | |
| | | | | | | |
| | | | | | | 52,316,142 | |
| | | | | | | | |
Semiconductors & Semiconductor Equipment—5.0% | | | | | | | | |
Altera Corp. | | | 1,430,470 | | | | 53,070,437 | |
Maxim Integrated Products, Inc. | | | 1,475,275 | | | | 38,416,161 | |
Taiwan Semiconductor Manufacturing Co. Ltd. | | | 11,696,184 | | | | 29,280,054 | |
| | | | | | | |
| | | | | | | 120,766,652 | |
| | | | | | | | |
Software—6.9% | | | | | | | | |
Adobe Systems, Inc.1 | | | 1,012,583 | | | | 28,625,721 | |
Intuit, Inc. | | | 960,780 | | | | 50,527,420 | |
Microsoft Corp. | | | 1,430,270 | | | | 37,129,809 | |
SAP AG | | | 918,335 | | | | 48,552,365 | |
| | | | | | | |
| | | | | | | 164,835,315 | |
| | | | | | | | |
Materials—0.8% | | | | | | | | |
Chemicals—0.8% | | | | | | | | |
Linde AG | | | 125,495 | | | | 18,670,356 | |
11 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Shares | | | Value | |
|
Telecommunication Services—1.3% | | | | | | | | |
Wireless Telecommunication Services—1.3% | | | | | | | | |
KDDI Corp. | | | 4,861 | | | $ | 31,261,466 | |
Utilities—0.7% | | | | | | | | |
Electric Utilities—0.7% | | | | | | | | |
Fortum OYJ | | | 809,831 | | | | 17,229,805 | |
| | | | | | | |
Total Common Stocks (Cost $1,934,470,323) | | | | | | | 2,355,647,892 | |
Investment Company—1.5% | | | | | | | | |
Oppenheimer Institutional Money Market Fund, Cl. E, 0.20%2,3 (Cost $36,459,796) | | | 36,459,796 | | | | 36,459,796 | |
Total Investments, at Value (Cost $1,970,930,119) | | | 99.8 | % | | | 2,392,107,688 | |
Other Assets | | | | | | | | |
Net of Liabilities | | | 0.2 | | | | 3,684,164 | |
| | |
Net Assets | | | 100.0 | % | | $ | 2,395,791,852 | |
| | |
Footnotes to Statement of Investments
* | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
1. | | Non-income producing security. |
|
2. | | Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 30, 2011, 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 period in which the issuer was an affiliate are as follows: |
| | | | | | | | | | | | | | | | |
| | Shares | | | Gross | | | Gross | | | Shares | |
| | December 31, 2010 | | | Additions | | | Reductions | | | December 30, 2011 | |
|
Oppenheimer Institutional Money Market Fund, Cl. E | | | 32,313,050 | | | | 286,291,896 | | | | 282,145,150 | | | | 36,459,796 | |
| | | | | | | | |
| | Value | | | Income | |
|
Oppenheimer Institutional Money Market Fund, Cl. E | | $ | 36,459,796 | | | $ | 47,412 | |
3. | | Rate shown is the 7-day yield as of December 30, 2011. |
Valuation Inputs
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 table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 30, 2011 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 | | $ | 354,020,944 | | | $ | 80,162,153 | | | $ | — | | | $ | 434,183,097 | |
Consumer Staples | | | 226,820,109 | | | | — | | | | — | | | | 226,820,109 | |
Energy | | | 53,254,023 | | | | 39,253,414 | | | | — | | | | 92,507,437 | |
Financials | | | 237,343,654 | | | | 93,540,485 | | | | — | | | | 330,884,139 | |
Health Care | | | 246,653,485 | | | | — | | | | — | | | | 246,653,485 | |
Industrials | | | 221,069,937 | | | | 71,453,308 | | | | — | | | | 292,523,245 | |
Information Technology | | | 570,774,929 | | | | 94,139,824 | | | | — | | | | 664,914,753 | |
Materials | | | 18,670,356 | | | | — | | | | — | | | | 18,670,356 | |
Telecommunication Services | | | 31,261,466 | | | | — | | | | — | | | | 31,261,466 | |
Utilities | | | — | | | | 17,229,805 | | | | — | | | | 17,229,805 | |
Investment Company | | | 36,459,796 | | | | — | | | | — | | | | 36,459,796 | |
| | |
Total Assets | | $ | 1,996,328,699 | | | $ | 395,778,989 | | | $ | — | | | $ | 2,392,107,688 | |
| | |
12 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
The table below shows the significant transfers between Level 1 and Level 2. The Fund’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
| | | | | | | | |
| | Transfers out | | | Transfers into | |
| | of Level 1* | | | Level 2* | |
|
Assets Table | | | | | | | | |
Investments, at Value: | | | | | | | | |
Common Stocks | | | | | | | | |
Consumer Discretionary | | $ | (130,855,018 | ) | | $ | 130,855,018 | |
Energy | | | (38,067,652 | ) | | | 38,067,652 | |
Financials | | | (104,693,932 | ) | | | 104,693,932 | |
Industrials | | | (79,427,212 | ) | | | 79,427,212 | |
| | |
Total Assets | | $ | (353,043,814 | ) | | $ | 353,043,814 | |
| | |
* | | Transferred from Level 1 to Level 2 because of the absence of a readily available unadjusted quoted market price due to a significant event occurring before the Fund’s assets were valued but after the close of the securities’ respective exchanges. |
See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.
Distribution of investments representing geographic holdings, as a percentage of total investments at value, is as follows:
| | | | | | | | |
Geographic Holdings | | Value | | | Percent | |
|
United States | | $ | 988,577,799 | | | | 41.3 | % |
Germany | | | 225,690,263 | | | | 9.4 | |
Japan | | | 222,746,300 | | | | 9.3 | |
France | | | 179,651,391 | | | | 7.5 | |
Sweden | | | 155,844,495 | | | | 6.5 | |
Switzerland | | | 109,527,258 | | | | 4.6 | |
Brazil | | | 95,653,492 | | | | 4.0 | |
Mexico | | | 81,810,384 | | | | 3.4 | |
United Kingdom | | | 72,583,437 | | | | 3.0 | |
Spain | | | 64,978,332 | | | | 2.7 | |
India | | | 46,823,057 | | | | 2.0 | |
Italy | | | 35,213,268 | | | | 1.5 | |
Taiwan | | | 29,280,054 | | | | 1.2 | |
The Netherlands | | | 17,823,292 | | | | 0.8 | |
Finland | | | 17,229,805 | | | | 0.7 | |
Korea, Republic of South | | | 14,807,102 | | | | 0.6 | |
Denmark | | | 14,057,272 | | | | 0.6 | |
Ireland | | | 14,030,571 | | | | 0.6 | |
Argentina | | | 5,780,116 | | | | 0.3 | |
| | | |
Total | | $ | 2,392,107,688 | | | | 100.0 | % |
| | | |
See accompanying Notes to Financial Statements.
13 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 30, 20111
| | | | |
|
Assets | | | | |
Investments, at value—see accompanying statement of investments: | | | | |
Unaffiliated companies (cost $1,934,470,323) | | $ | 2,355,647,892 | |
Affiliated companies (cost $36,459,796) | | | 36,459,796 | |
| | | |
| | | 2,392,107,688 | |
Cash | | | 1,183 | |
| | | |
Receivables and other assets: | | | | |
Interest and dividends | | | 3,826,892 | |
Investments sold | | | 1,130,602 | |
Shares of beneficial interest sold | | | 875,239 | |
Other | | | 206,193 | |
| | | |
Total assets | | | 2,398,147,797 | |
| | | | |
Liabilities | | | | |
Payables and other liabilities: | | | | |
Shares of beneficial interest redeemed | | | 1,482,555 | |
Shareholder communications | | | 284,355 | |
Distribution and service plan fees | | | 216,755 | |
Transfer and shareholder servicing agent fees | | | 204,876 | |
Trustees’ compensation | | | 54,687 | |
Other | | | 112,717 | |
| | | |
Total liabilities | | | 2,355,945 | |
| | | |
Net Assets | | $ | 2,395,791,852 | |
| | | |
Composition of Net Assets | | | | |
Par value of shares of beneficial interest | | $ | 87,548 | |
Additional paid-in capital | | | 1,980,631,676 | |
Accumulated net investment income | | | 46,346,747 | |
Accumulated net realized loss on investments and foreign currency transactions | | | (52,649,142 | ) |
Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies | | | 421,375,023 | |
| | | |
Net Assets | | $ | 2,395,791,852 | |
| | | |
Net Asset Value Per Share | | | | |
Non-Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $1,165,140,987 and 42,424,056 shares of beneficial interest outstanding) | | $ | 27.46 | |
Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $1,003,838,754 and 36,885,726 shares of beneficial interest outstanding) | | $ | 27.21 | |
Class 3 Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $158,342,670 and 5,726,574 shares of beneficial interest outstanding) | | $ | 27.65 | |
Class 4 Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $68,469,441 and 2,511,586 shares of beneficial interest outstanding) | | $ | 27.26 | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
14 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 30, 20111
| | | | |
|
Investment Income | | | | |
Dividends: | | | | |
Unaffiliated companies (net of foreign withholding taxes of $5,118,609) | | $ | 78,653,007 | |
Affiliated companies | | | 47,412 | |
Interest | | | 1,697 | |
| | | |
Total investment income | | | 78,702,116 | |
| | | | |
Expenses | | | | |
Management fees | | | 17,004,569 | |
Distribution and service plan fees: | | | | |
Service shares | | | 2,728,483 | |
Class 4 shares | | | 196,728 | |
Transfer and shareholder servicing agent fees: | | | | |
Non-Service shares | | | 1,335,935 | |
Service shares | | | 1,091,567 | |
Class 3 shares | | | 187,877 | |
Class 4 shares | | | 78,686 | |
Shareholder communications: | | | | |
Non-Service shares | | | 134,206 | |
Service shares | | | 109,469 | |
Class 3 shares | | | 18,868 | |
Class 4 shares | | | 7,880 | |
Custodian fees and expenses | | | 302,416 | |
Trustees’ compensation | | | 54,922 | |
Administration service fees | | | 1,500 | |
Other | | | 100,255 | |
| | | |
Total expenses | | | 23,353,361 | |
Less waivers and reimbursements of expenses | | | (27,171 | ) |
| | | |
Net expenses | | | 23,326,190 | |
| | | | |
Net Investment Income | | | 55,375,926 | |
Realized and Unrealized Gain (Loss) | | | | |
Net realized gain (loss) on: | | | | |
Investments from unaffiliated companies (net of foreign capital gains tax of $58,482) | | | (43,828,208 | ) |
Foreign currency transactions | | | 38,895,302 | |
| | | |
Net realized loss | | | (4,932,906 | ) |
Net change in unrealized appreciation/depreciation on: | | | | |
Investments (net of foreign capital gains tax of $26,446) | | | (221,671,448 | ) |
Translation of assets and liabilities denominated in foreign currencies | | | (44,974,031 | ) |
| | | |
Net change in unrealized appreciation/depreciation | | | (266,645,479 | ) |
Net Decrease in Net Assets Resulting from Operations | | $ | (216,202,459 | ) |
| | | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
15 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
| | | | | | | | | |
| | Year Ended | | | Year Ended | |
| | December 30, | | | December 31, | |
| | 20111 | | | 2010 | |
Operations | | | |
Operations | | | | | | | | | |
Net investment income | | $ | 55,375,926 | | | $ | 28,998,191 | | |
Net realized gain (loss) | | | (4,932,906 | ) | | | 61,465,998 | | |
Net change in unrealized appreciation/depreciation | | | (266,645,479 | ) | | | 297,995,320 | | |
| | | |
Net increase (decrease) in net assets resulting from operations | | | (216,202,459 | ) | | | 388,459,509 | | |
| | | | | | | | | |
Dividends and/or Distributions to Shareholders | | | | | | | | | |
Dividends from net investment income: | | | | | | | | | |
Non-Service shares | | | (17,234,287 | ) | | | (19,240,136 | ) | |
Service shares | | | (11,357,368 | ) | | | (12,039,643 | ) | |
Class 3 shares | | | (2,447,497 | ) | | | (2,863,873 | ) | |
Class 4 shares | | | (819,361 | ) | | | (934,492 | ) | |
| | | |
| | | (31,858,513 | ) | | | (35,078,144 | ) | |
| | | | | | | | | |
Beneficial Interest Transactions | | | | | | | | | |
Net increase (decrease) in net assets resulting from beneficial interest transactions: | | | | | | | | | |
Non-Service shares | | | (124,782,917 | ) | | | (133,425,702 | ) | |
Service shares | | | 5,153,335 | | | | (16,572,723 | ) | |
Class 3 shares | | | (27,368,355 | ) | | | (29,607,611 | ) | |
Class 4 shares | | | (5,984,377 | ) | | | (6,420,742 | ) | |
| | | |
| | | (152,982,314 | ) | | | (186,026,778 | ) | |
| | | | | | | | | |
Net Assets | | | | | | | | | |
Total increase (decrease) | | | (401,043,286 | ) | | | 167,354,587 | | |
Beginning of period | | | 2,796,835,138 | | | | 2,629,480,551 | | |
| | | |
End of period (including accumulated net investment income of $46,346,747 and $23,680,132, respectively) | | $ | 2,395,791,852 | | | $ | 2,796,835,138 | | |
| | | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
16 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Non-Service Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 30.30 | | | $ | 26.50 | | | $ | 20.21 | | | $ | 36.60 | | | $ | 36.79 | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income2 | | | .65 | | | | .33 | | | | .33 | | | | .55 | | | | .45 | |
Net realized and unrealized gain (loss) | | | (3.11 | ) | | | 3.85 | | | | 6.94 | | | | (14.46 | ) | | | 1.69 | |
| | |
Total from investment operations | | | (2.46 | ) | | | 4.18 | | | | 7.27 | | | | (13.91 | ) | | | 2.14 | |
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.38 | ) | | | (.38 | ) | | | (.50 | ) | | | (.46 | ) | | | (.50 | ) |
Distributions from net realized gain | | | — | | | | — | | | | (.48 | ) | | | (2.02 | ) | | | (1.83 | ) |
| | |
Total dividends and/or distributions to shareholders | | | (.38 | ) | | | (.38 | ) | | | (.98 | ) | | | (2.48 | ) | | | (2.33 | ) |
|
Net asset value, end of period | | $ | 27.46 | | | $ | 30.30 | | | $ | 26.50 | | | $ | 20.21 | | | $ | 36.60 | |
| | |
| | | | | | | | | | | | | | | | | | | | |
Total Return, at Net Asset Value3 | | | (8.29 | )% | | | 15.96 | % | | | 39.77 | % | | | (40.19 | )% | | | 6.32 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 1,165,141 | | | $ | 1,410,764 | | | $ | 1,364,597 | | | $ | 1,150,113 | | | $ | 2,193,638 | |
|
Average net assets (in thousands) | | $ | 1,335,403 | | | $ | 1,336,110 | | | $ | 1,206,240 | | | $ | 1,679,720 | | | $ | 2,302,726 | |
|
Ratios to average net assets:4 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 2.17 | % | | | 1.22 | % | | | 1.51 | % | | | 1.95 | % | | | 1.21 | % |
Total expenses5 | | | 0.76 | % | | | 0.76 | % | | | 0.75 | % | | | 0.65 | % | | | 0.65 | % |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 0.76 | % | | | 0.76 | % | | | 0.75 | % | | | 0.65 | % | | | 0.65 | % |
|
Portfolio turnover rate | | | 13 | % | | | 15 | % | | | 11 | % | | | 19 | % | | | 18 | % |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
4. | | Annualized for periods less than one full year. |
|
5. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 0.76 | % |
Year Ended December 31, 2010 | | | 0.76 | % |
Year Ended December 31, 2009 | | | 0.75 | % |
Year Ended December 31, 2008 | | | 0.65 | % |
Year Ended December 31, 2007 | | | 0.65 | % |
See accompanying Notes to Financial Statements.
17 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FINANCIAL HIGHLIGHTS Continued
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Service Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 30.04 | | | $ | 26.28 | | | $ | 20.02 | | | $ | 36.27 | | | $ | 36.49 | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income2 | | | .56 | | | | .26 | | | | .27 | | | | .47 | | | | .33 | |
Net realized and unrealized gain (loss) | | | (3.08 | ) | | | 3.82 | | | | 6.90 | | | | (14.32 | ) | | | 1.72 | |
| | |
Total from investment operations | | | (2.52 | ) | | | 4.08 | | | | 7.17 | | | | (13.85 | ) | | | 2.05 | |
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.31 | ) | | | (.32 | ) | | | (.43 | ) | | | (.38 | ) | | | (.44 | ) |
Distributions from net realized gain | | | — | | | | — | | | | (.48 | ) | | | (2.02 | ) | | | (1.83 | ) |
| | |
Total dividends and/or distributions to shareholders | | | (.31 | ) | | | (.32 | ) | | | (.91 | ) | | | (2.40 | ) | | | (2.27 | ) |
|
Net asset value, end of period | | $ | 27.21 | | | $ | 30.04 | | | $ | 26.28 | | | $ | 20.02 | | | $ | 36.27 | |
| | |
| | | | | | | | | | | | | | | | | | | | |
Total Return, at Net Asset Value3 | | | (8.53 | )% | | | 15.70 | % | | | 39.36 | % | | | (40.33 | )% | | | 6.08 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 1,003,839 | | | $ | 1,101,584 | | | $ | 980,485 | | | $ | 772,107 | | | $ | 1,300,989 | |
|
Average net assets (in thousands) | | $ | 1,091,128 | | | $ | 997,627 | | | $ | 830,887 | | | $ | 1,051,239 | | | $ | 1,180,656 | |
|
Ratios to average net assets:4 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.90 | % | | | 0.96 | % | | | 1.23 | % | | | 1.70 | % | | | 0.91 | % |
Total expenses5 | | | 1.01 | % | | | 1.01 | % | | | 1.00 | % | | | 0.90 | % | | | 0.89 | % |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 1.01 | % | | | 1.01 | % | | | 1.00 | % | | | 0.90 | % | | | 0.89 | % |
|
Portfolio turnover rate | | | 13 | % | | | 15 | % | | | 11 | % | | | 19 | % | | | 18 | % |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
4. | | Annualized for periods less than one full year. |
|
5. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 1.01 | % |
Year Ended December 31, 2010 | | | 1.01 | % |
Year Ended December 31, 2009 | | | 1.00 | % |
Year Ended December 31, 2008 | | | 0.90 | % |
Year Ended December 31, 2007 | | | 0.89 | % |
See accompanying Notes to Financial Statements.
18 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Class 3 Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 30.50 | | | $ | 26.67 | | | $ | 20.34 | | | $ | 36.82 | | | $ | 36.99 | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income2 | | | .66 | | | | .33 | | | | .33 | | | | .56 | | | | .45 | |
Net realized and unrealized gain (loss) | | | (3.13 | ) | | | 3.88 | | | | 6.98 | | | | (14.56 | ) | | | 1.71 | |
| | |
Total from investment operations | | | (2.47 | ) | | | 4.21 | | | | 7.31 | | | | (14.00 | ) | | | 2.16 | |
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.38 | ) | | | (.38 | ) | | | (.50 | ) | | | (.46 | ) | | | (.50 | ) |
Distributions from net realized gain | | | — | | | | — | | | | (.48 | ) | | | (2.02 | ) | | | (1.83 | ) |
| | |
Total dividends and/or distributions to shareholders | | | (.38 | ) | | | (.38 | ) | | | (.98 | ) | | | (2.48 | ) | | | (2.33 | ) |
|
Net asset value, end of period | | $ | 27.65 | | | $ | 30.50 | | | $ | 26.67 | | | $ | 20.34 | | | $ | 36.82 | |
| | |
| | | | | | | | | | | | | | | | | | | | |
Total Return, at Net Asset Value3 | | | (8.27 | )% | | | 15.97 | % | | | 39.70 | % | | | (40.19 | )% | | | 6.34 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 158,343 | | | $ | 202,621 | | | $ | 206,356 | | | $ | 175,971 | | | $ | 361,621 | |
|
Average net assets (in thousands) | | $ | 187,804 | | | $ | 196,495 | | | $ | 182,553 | | | $ | 269,650 | | | $ | 391,270 | |
|
Ratios to average net assets:4 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 2.17 | % | | | 1.22 | % | | | 1.49 | % | | | 1.95 | % | | | 1.22 | % |
Total expenses5 | | | 0.76 | % | | | 0.76 | % | | | 0.75 | % | | | 0.65 | % | | | 0.65 | % |
Expenses after payments, waivers and/or | | | | | | | | | | | | | | | | | | | | |
reimbursements and reduction | | | | | | | | | | | | | | | | | | | | |
to custodian expenses | | | 0.76 | % | | | 0.76 | % | | | 0.75 | % | | | 0.65 | % | | | 0.65 | % |
|
Portfolio turnover rate | | | 13 | % | | | 15 | % | | | 11 | % | | | 19 | % | | | 18 | % |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
4. | | Annualized for periods less than one full year. |
|
5. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 0.76 | % |
Year Ended December 31, 2010 | | | 0.76 | % |
Year Ended December 31, 2009 | | | 0.75 | % |
Year Ended December 31, 2008 | | | 0.65 | % |
Year Ended December 31, 2007 | | | 0.65 | % |
See accompanying Notes to Financial Statements.
19 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FINANCIAL HIGHLIGHTS Continued
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Class 4 Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 30.08 | | | $ | 26.32 | | | $ | 20.03 | | | $ | 36.28 | | | $ | 36.49 | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income2 | | | .57 | | | | .26 | | | | .27 | | | | .47 | | | | .34 | |
Net realized and unrealized gain (loss) | | | (3.08 | ) | | | 3.82 | | | | 6.92 | | | | (14.34 | ) | | | 1.70 | |
| | |
Total from investment operations | | | (2.51 | ) | | | 4.08 | | | | 7.19 | | | | (13.87 | ) | | | 2.04 | |
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.31 | ) | | | (.32 | ) | | | (.42 | ) | | | (.36 | ) | | | (.42 | ) |
Distributions from net realized gain | | | — | | | | — | | | | (.48 | ) | | | (2.02 | ) | | | (1.83 | ) |
| | |
Total dividends and/or distributions to shareholders | | | (.31 | ) | | | (.32 | ) | | | (.90 | ) | | | (2.38 | ) | | | (2.25 | ) |
|
Net asset value, end of period | | $ | 27.26 | | | $ | 30.08 | | | $ | 26.32 | | | $ | 20.03 | | | $ | 36.28 | |
| | |
| | | | | | | | | | | | | | | | | | | | |
Total Return, at Net Asset Value3 | | | (8.49 | )% | | | 15.67 | % | | | 39.38 | % | | | (40.35 | )% | | | 6.06 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 68,469 | | | $ | 81,866 | | | $ | 78,043 | | | $ | 63,099 | | | $ | 123,542 | |
|
Average net assets (in thousands) | | $ | 78,655 | | | $ | 76,519 | | | $ | 66,965 | | | $ | 93,909 | | | $ | 122,385 | |
|
Ratios to average net assets:4 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.93 | % | | | 0.97 | % | | | 1.22 | % | | | 1.69 | % | | | 0.93 | % |
Total expenses5 | | | 1.01 | % | | | 1.01 | % | | | 1.00 | % | | | 0.91 | % | | | 0.90 | % |
Expenses after payments, waivers and/or | | | | | | | | | | | | | | | | | | | | |
reimbursements and reduction | | | | | | | | | | | | | | | | | | | | |
to custodian expenses | | | 1.01 | % | | | 1.01 | % | | | 1.00 | % | | | 0.91 | % | | | 0.90 | % |
|
Portfolio turnover rate | | | 13 | % | | | 15 | % | | | 11 | % | | | 19 | % | | | 18 | % |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
4. | | Annualized for periods less than one full year. |
|
5. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 1.01 | % |
Year Ended December 31, 2010 | | | 1.01 | % |
Year Ended December 31, 2009 | | | 1.00 | % |
Year Ended December 31, 2008 | | | 0.91 | % |
Year Ended December 31, 2007 | | | 0.90 | % |
See accompanying Notes to Financial Statements.
20 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Oppenheimer Global Securities Fund/VA (the “Fund”) is a separate series of Oppenheimer Variable Account Funds, an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund’s investment objective is to seek long-term capital appreciation by investing a substantial portion of its assets in securities of foreign issuers, “growth-type” companies, cyclical industries and special situations that are considered to have appreciation possibilities. The Fund’s investment adviser is OppenheimerFunds, Inc. (the “Manager”).
The Fund offers Non-Service, Service, Class 3 and Class 4 shares. All classes are sold at their offering price, which is the net asset value per share, to separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. The classes of shares being designated as Service shares and Class 4 shares are subject to a distribution and service plan. All classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. The Fund assesses a 1% fee on the proceeds of Class 3 and Class 4 shares that are redeemed (either by selling or exchanging to another Oppenheimer fund or other investment option offered through your variable life insurance or variable annuity contract) within 60 days of their purchase. The fee, which is retained by the Fund, is accounted for as an addition to paid-in capital.
The following is a summary of significant accounting policies consistently followed by the Fund.
Fiscal Year End. Since December 30, 2011 represents the last day during the Fund’s 2011 fiscal year on which the New York Stock Exchange was open for trading, the Fund’s financial statements have been presented through that date to maintain consistency with the Fund’s net asset value calculations used for shareholder transactions.
Securities Valuation. The Fund calculates the net asset value of its shares as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading.
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. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” observable market inputs other than unadjusted quoted prices are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.
Securities traded on a registered U.S. securities exchange 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. Securities whose principal exchange is NASDAQ® are valued based on the official closing prices reported by NASDAQ prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.
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.
U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a
21 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
1. Significant Accounting Policies Continued
remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.
“Money market-type” debt instruments with remaining maturities 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.
In the absence of a current price quotation obtained from an independent pricing service or broker-dealer, including for securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund’s assets are valued but after the close of the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities 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 adjusted for any discounts related to 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.
There have been no significant changes to the fair valuation methodologies of the Fund during the period.
Investment in Oppenheimer Institutional Money Market Fund. The Fund is permitted to invest daily available cash balances in an affiliated money market fund. The Fund may invest the available cash in Class E shares of Oppenheimer Institutional Money Market Fund (“IMMF”) to seek current income while preserving liquidity. IMMF is a registered open-end management investment company, regulated as a money market fund under the Investment Company Act of 1940, as amended. The Manager is also the investment adviser of IMMF. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of IMMF’s Class E expenses, including its 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 IMMF.
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 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.
Reported net realized gains and losses from foreign currency transactions arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, exchange rate fluctuations between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized appreciation and depreciation on the translation of assets and liabilities denominated in foreign currencies arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund’s Statement of Operations.
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets
22 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
Federal Taxes. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. Therefore, no federal income or excise tax provision is required. The Fund files income tax returns in U.S. federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remain open for the three preceding fiscal reporting period ends.
The tax components of capital shown in the following table represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes.
| | | | | | | | | | | | |
| | | | | | | | | | Net Unrealized | |
| | | | | | | | | | Appreciation | |
| | | | | | | | | | Based on Cost of | |
Undistributed | | Undistributed | | | Accumulated | | | Securities and Other | |
Net Investment | | Long-Term | | | Loss | | | Investments for Federal | |
Income | | Gain | | | Carryforward1,2,3,4 | | | Income Tax Purposes | |
|
$51,001,105 | | $ | — | | | $ | 23,697,429 | | | $ | 387,823,483 | |
| | |
1. | | As of December 30, 2011, the Fund had $19,156,083 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. Details of the capital loss carryforwards are included in the table below. Capital loss carryovers with no expiration, if any, must be utilized prior to those with expiration dates. |
| | | | |
Expiring | | | | |
|
2017 | | $ | 17,214,823 | |
No expiration | | | 1,941,260 | |
| | | |
Total | | $ | 19,156,083 | |
| | | |
| | |
2. | | As of December 30, 2011, the Fund had $4,541,346 of post-October losses available to offset future realized capital gains, if any. |
|
3. | | During the fiscal year ended December 30, 2011, the Fund did not utilize any capital loss carryforward. |
|
4. | | During the fiscal year ended December 31, 2010, the Fund utilized $61,984,330 of capital loss carryforward to offset capital gains realized in that fiscal year. |
Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund.
Accordingly, the following amounts have been reclassified for December 30, 2011. Net assets of the Fund were unaffected by the reclassifications.
| | | | |
| | Reduction to | |
Reduction to | | Accumulated | |
Accumulated | | Net Realized Loss | |
Net Investment Income | | on Investments | |
|
$850,798 | | $ | 850,798 | |
The tax character of distributions paid during the years ended December 30, 2011 and December 31, 2010 was as follows:
| | | | | | | | |
| | Year Ended | | | Year Ended | |
| | December 30, 2011 | | | December 31, 2010 | |
|
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 31,858,513 | | | $ | 35,078,144 | |
The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 30, 2011 are noted in the
23 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
1. Significant Accounting Policies Continued
following table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.
| | | | |
|
Federal tax cost of securities | | $ | 2,004,481,659 | |
| | | |
Gross unrealized appreciation | | $ | 523,872,404 | |
Gross unrealized depreciation | | | (136,048,921 | ) |
| | | |
Net unrealized appreciation | | $ | 387,823,483 | |
| | | |
Certain foreign countries impose a tax on capital gains which is accrued by the Fund based on unrealized appreciation, if any, on affected securities. The tax is paid when the gain is realized.
Trustees’ Compensation. The Board of Trustees has adopted a compensation deferral plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of “Other” within the asset section of the Statement of Assets and Liabilities. Deferral of trustees’ fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund’s assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance with the compensation deferral plan.
Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles, are recorded on the ex-dividend date. Income and capital gain distributions, if any, are declared and paid annually or at other times as deemed necessary by the Manager.
Investment Income. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is recognized on an accrual basis. Discount and premium, which are included in interest income on the Statement of Operations, are amortized or accreted daily.
Custodian Fees. “Custodian fees and expenses” in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by the Fund, at a rate equal to the Federal Funds Rate plus 0.50%. The “Reduction to custodian expenses” line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings.
Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost.
Indemnifications. The Fund’s organizational documents provide current and former trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum
24 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
| | | | | | | | | | | | | | | | |
| | Year Ended December 30, 2011 | | | Year Ended December 31, 2010 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
|
Non-Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 2,898,558 | | | $ | 85,697,523 | | | | 3,002,141 | | | $ | 81,399,571 | |
Dividends and/or distributions reinvested | | | 544,183 | | | | 17,234,287 | | | | 719,257 | | | | 19,240,136 | |
Redeemed | | | (7,582,244 | ) | | | (227,714,727 | ) | | | (8,659,048 | ) | | | (234,065,409 | ) |
| | | | | | | | | | | | |
Net decrease | | | (4,139,503 | ) | | $ | (124,782,917 | ) | | | (4,937,650 | ) | | $ | (133,425,702 | ) |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 5,113,489 | | | $ | 150,060,254 | | | | 4,081,506 | | | $ | 109,511,274 | |
Dividends and/or distributions reinvested | | | 361,125 | | | | 11,357,368 | | | | 453,129 | | | | 12,039,643 | |
Redeemed | | | (5,264,551 | ) | | | (156,264,287 | ) | | | (5,166,594 | ) | | | (138,123,640 | ) |
| | | | | | | | | | | | |
Net increase (decrease) | | | 210,063 | | | $ | 5,153,335 | | | | (631,959 | ) | | $ | (16,572,723 | ) |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Class 3 Shares | | | | | | | | | | | | | | | | |
Sold | | | 210,150 | | | $ | 6,434,653 | | | | 201,269 | | | $ | 5,485,318 | |
Dividends and/or distributions reinvested | | | 76,748 | | | | 2,447,497 | | | | 106,384 | | | | 2,863,873 | |
Redeemed | | | (1,203,693 | ) | | | (36,250,505 | )1 | | | (1,401,659 | ) | | | (37,956,802 | )2 |
| | | | | | | | | | | | |
Net decrease | | | (916,795 | ) | | $ | (27,368,355 | ) | | | (1,094,006 | ) | | $ | (29,607,611 | ) |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Class 4 Shares | | | | | | | | | | | | | | | | |
Sold | | | 153,872 | | | $ | 4,648,188 | | | | 83,546 | | | $ | 2,267,578 | |
Dividends and/or distributions reinvested | | | 26,011 | | | | 819,361 | | | | 35,118 | | | | 934,492 | |
Redeemed | | | (389,690 | ) | | | (11,451,926 | )1 | | | (362,658 | ) | | | (9,622,812 | )2 |
| | | | | | | | | | | | |
Net decrease | | | (209,807 | ) | | $ | (5,984,377 | ) | | | (243,994 | ) | | $ | (6,420,742 | ) |
| | | | | | | | | | | | |
| | |
1. | | Net of redemption fees of $1,073 and $1,794 for Class 3 and Class 4, respectively. |
|
2. | | Net of redemption fees of $3,781 and $2,816 for Class 3 and Class 4, respectively. |
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations and investments in IMMF, for the year ended December 30, 2011, were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
|
Investment securities | | $ | 356,222,355 | | | $ | 489,405,781 | |
25 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
4. Fees and Other Transactions with Affiliates
Management Fees. Under the investment advisory agreement, the Fund pays the Manager a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| | | | |
Fee Schedule | | | | |
|
Up to $200 million | | | 0.75 | % |
Next $200 million | | | 0.72 | |
Next $200 million | | | 0.69 | |
Next $200 million | | | 0.66 | |
Over $800 million | | | 0.60 | |
Administration Service Fees. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund’s tax returns.
Transfer Agent Fees. OppenheimerFunds Services (“OFS”), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. For the year ended December 30, 2011, the Fund paid $2,725,086 to OFS for services to the Fund.
Distribution and Service Plan for Service Shares and Class 4 Shares. The Fund has adopted a Distribution and Service Plan (the “Plan”) in accordance with Rule 12b-1 under the Investment Company Act of 1940 for Service shares and Class 4 shares to pay OppenheimerFunds Distributor, Inc. (the “Distributor”), for distribution related services, personal service and account maintenance for the Fund’s Service shares and Class 4 shares. Under the Plan, payments are made periodically at an annual rate of 0.25% of the daily net assets of Service shares and Class 4 shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors of the insurance product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service shares and Class 4 shares. These fees are paid out of the Fund’s assets on an on-going basis and increase operating expenses of the Service shares and Class 4 shares, which results in lower performance compared to the Fund’s shares that are not subject to a service fee. Fees incurred by the Fund under the Plan are detailed in the Statement of Operations.
Waivers and Reimbursements of Expenses. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 1.00% for Non-Service and Class 3 shares and 1.25% for Service and Class 4 shares.
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 IMMF. During the year ended December 30, 2011, the Manager waived fees and/or reimbursed the Fund $27,171 for IMMF management fees.
Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.
5. Risk Exposures and the Use of Derivative Instruments
The Fund’s investment objectives not only permit the Fund to purchase investment securities, they also allow the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward foreign currency exchange contracts, credit default swaps, interest rate swaps, total return 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. Central to those strategies are features inherent to derivatives that make them more attractive for this purpose than equity and debt securities: they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This 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.
26 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
Market Risk Factors. In accordance with its investment objectives, the Fund may use derivatives to increase or decrease its exposure to one or more of the following 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 to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds.
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.
The Fund’s actual exposures to these market risk factors during the period are discussed in further detail, by derivative type, below.
Risks of Investing in Derivatives. The Fund’s use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. 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.
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. 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.
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. Associated risks can be different for each type of derivative and are discussed by each derivative type in the notes that follow.
Counterparty Credit Risk. Certain derivative positions are subject to counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. The Fund’s derivative counterparties are financial institutions who are subject to market conditions that may weaken their financial position. The Fund intends to enter into financial transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction.
27 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
5. Risk Exposures and the Use of Derivative Instruments Continued
Credit Related Contingent Features. The Fund’s agreements with derivative counterparties have several credit related contingent features that if triggered would allow its derivatives counterparties to close out and demand payment or additional collateral to cover their exposure from the Fund. Credit related contingent features are established between the Fund and its derivatives counterparties to reduce the risk that the Fund will not fulfill its payment obligations to its counterparties. These triggering features include, but are not limited to, a percentage decrease in the Fund’s net assets and or a percentage decrease in the Fund’s Net Asset Value or NAV. The contingent features are established within the Fund’s International Swap and Derivatives Association, Inc. master agreements which govern certain positions in swaps, over-the-counter options and swaptions, and forward currency exchange contracts for each individual counterparty.
The effect of derivative instruments on the Statement of Operations is as follows:
| | | | |
Amount of Realized Gain or (Loss) Recognized on Derivatives | |
Derivatives Not Accounted for | | | |
as Hedging Instruments | | Foreign currency transactions | |
|
Foreign exchange contracts | | $ | 203,036 | |
| | | | |
Amount of Change in Unrealized Gain or (Loss) Recognized on Derivatives | |
Derivatives Not Accounted for | | Translation of assets and liabilities | |
as Hedging Instruments | | denominated in foreign currencies | |
|
Foreign exchange contracts | | $ | 2,260 | |
Foreign Currency Exchange Contracts
The Fund may enter into foreign currency exchange contracts (“forward contracts”) for the purchase or sale of a foreign currency at a negotiated rate at a future date.
Forward contracts are reported on a schedule following the Statement of Investments. Forward contracts will be valued daily based upon the closing prices of the forward currency rates determined at the close of the Exchange as provided by a bank, dealer or pricing service. The resulting unrealized appreciation (depreciation) is reported in the Statement of Assets and Liabilities as a receivable or payable and in the Statement of Operations 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 Statement of Operations.
The Fund has purchased and sold certain forward foreign currency exchange contracts of different currencies in order to acquire currencies to pay for or sell currencies to acquire related foreign securities purchase and sale transactions, respectively, or to convert foreign currencies to U.S. dollars from related foreign securities transactions. These foreign currency exchange contracts are negotiated at the current spot exchange rate with settlement typically within two business days thereafter.
During the year ended December 30, 2011, the Fund had daily average contract amounts on forward foreign currency contracts to buy and sell of $1,750,114 and $2,981,138, respectively.
Additional associated risk to the Fund includes counterparty credit risk. Counterparty credit risk arises from the possibility that the counterparty will default.
As of December 30, 2011, the Fund had no outstanding forward contracts.
6. Pending Litigation
Since 2009, a number of class action, derivative and individual lawsuits have been pending in federal and state courts against OppenheimerFunds, Inc., the Fund’s investment advisor (the “Manager”), OppenheimerFunds Distributor, Inc., the Fund’s principal underwriter and distributor (the “Distributor”), and certain funds (but not including the Fund) advised by the Manager and distributed by the Distributor (the “Defendant Funds”). Several of these lawsuits also name
28 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
as defendants certain officers and current and former trustees of the respective Defendant Funds. The lawsuits raise claims under federal securities laws and various states’ securities, consumer protection and common law and allege, among other things, that the disclosure documents of the respective Defendant Funds contained misrepresentations and omissions and that the respective Defendant Funds’ investment policies were not followed. The plaintiffs in these actions seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. On September 30, 2011, the U.S. District Court for the District of Colorado entered orders and final judgments approving the settlement of certain putative class actions involving two Defendant Funds, Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund. Those orders are not subject to further appeal. These settlements do not resolve other outstanding lawsuits relating to Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund, nor do the settlements affect certain other putative class action lawsuits pending in federal court against the Manager, the Distributor, and other Defendant Funds and their independent trustees.
In 2009, what are claimed to be derivative lawsuits were filed in New Mexico state court against the Manager and a subsidiary (but not against the Fund) on behalf of the New Mexico Education Plan Trust challenging a settlement reached in 2010 between the Manager, its subsidiary and the Distributor and the board of the New Mexico section 529 college savings plan. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses. On September 9, 2011, the court denied plaintiffs’ request for a hearing to determine the fairness of the settlement, finding that plaintiffs lacked standing to pursue derivative claims on behalf of the Trust. On October 27, 2011, the parties to these actions filed a joint motion to dismiss the lawsuits with prejudice, which the court granted on October 28, 2011.
Other class action and individual lawsuits have been filed since 2008 in various state and federal courts against the Manager and certain of its affiliates by investors seeking to recover investments they allegedly lost as a result of the “Ponzi” scheme run by Bernard L. Madoff and his firm, Bernard L. Madoff Investment Securities, LLC (“BLMIS”). Plaintiffs in these suits allege that they suffered losses as a result of their investments in several funds managed by an affiliate of the Manager and assert a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. Neither the Distributor, nor any of the Oppenheimer mutual funds, their independent trustees or directors are named as defendants in these lawsuits. None of the Oppenheimer mutual funds invested in any funds or accounts managed by Madoff or BLMIS. On February 28, 2011, a stipulation of partial settlement of three groups of consolidated putative class action lawsuits relating to these matters was filed in the U.S. District Court for the Southern District of New York. On August 19, 2011, the court entered an order and final judgment approving the settlement as fair, reasonable and adequate. In September 2011, certain parties filed notices of appeal from the court’s order approving the settlement. On July 29, 2011, a stipulation of settlement between certain affiliates of the Manager and the Trustee appointed under the Securities Investor Protection Act to liquidate BLMIS was filed in the U.S. Bankruptcy Court for the Southern District of New York to resolve purported preference and fraudulent transfer claims by the Trustee. On September 22, 2011, the court entered an order approving the settlement as fair, reasonable and adequate. In October 2011, certain parties filed notices of appeal from the court’s order approving the settlement. The aforementioned settlements do not resolve other outstanding lawsuits against the Manager and its affiliates relating to BLMIS.
On April 16, 2010, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark IV Funding Limited (“AAArdvark IV”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark IV. Plaintiffs allege breach of contract against the defendants and seek compensatory damages, costs and disbursements, including attorney fees. On July 15, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark Funding Limited (“AAArdvark I”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark I. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees. On November 9, 2011, a lawsuit was filed in New York state court
29 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
NOTE S TO FINANCIAL STATEMENTS Continued
6. Pending Litigation Continued
against the Manager, an affiliate of the Manager and AAArdvark XS Funding Limited (“AAArdvark XS”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark XS. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees.
The Manager believes the lawsuits and appeals described above are without legal merit and, with the exception of actions it has settled, is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to represent the Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer mutual funds.
30 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:
We have audited the accompanying statement of assets and liabilities of Oppenheimer Global Securities Fund/VA (a separate series of Oppenheimer Variable Account Funds), including the statement of investments, as of December 30, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of Oppenheimer Global Securities Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 30, 2011, by correspondence with the custodian and transfer agent. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Global Securities Fund/VA as of December 30, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended, in conformity with U.S. generally accepted accounting principles.
KPMG llp
Denver, Colorado
February 16, 2012
31 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
In early 2012, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2011. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service.
Dividends, if any, paid by the Fund during the fiscal year ended December 30, 2011 which are not designated as capital gain distributions should be multiplied by the maximum amount allowable but not less than 23.65% to arrive at the amount eligible for the corporate dividend-received deduction.
The Fund has elected the application of Section 853 of the Internal Revenue Code to permit shareholders to take a federal income tax credit or deduction, at their option, on a per share basis. The maximum amount allowable but not less than $5,148,157 of foreign income taxes were paid by the Fund during the fiscal year ended December 30, 2011. A separate notice will be mailed to each shareholder, which will reflect the proportionate share of such foreign taxes which must be treated by shareholders as gross income for federal income tax purposes.
Gross income of the maximum amount allowable but not less than $54,961,717 was derived from sources within foreign countries or possessions of the United States.
The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance.
32 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
BOARD APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT Unaudited
Each year, the Board of Trustees (the “Board”), including a majority of the independent Trustees, is required to determine whether to renew the Fund’s investment advisory agreement (the “Agreement”). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager’s services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager and its affiliates, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. The Board was aware that there are alternatives to retaining the Manager.
Outlined below is a summary of the principal information considered by the Board as well as the Board’s conclusions.
Nature, Quality and Extent of Services. The Board considered information about the nature, quality and extent of the services provided to the Fund and information regarding the Manager’s key personnel who provide such services. The Manager’s duties include providing the Fund with the services of the portfolio manager and the Manager’s investment team, who provide research, analysis and other advisory services in regard to the Fund’s investments; securities trading services; oversight of third-party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund’s investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel who are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund’s operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund’s shares. The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the quality of the Manager’s resources that are available to the Fund. The Board took account of the fact that the Manager has had over fifty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager’s advisory, administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager’s key personnel and the size and functions of its staff. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Rajeev Bhaman, the portfolio manager for the Fund, and the Manager’s investment team and analysts. The Board members also considered the totality of their experiences with the Manager as directors or trustees of the Fund and other funds advised by the Manager. The Board considered information regarding the quality of services provided by affiliates of the Manager, which its members have become knowledgeable about in connection with the renewal of the Fund’s service agreements. The Board concluded, in light of the Manager’s experience, reputation, personnel, operations and resources that the Fund benefits from the services provided under the Agreement.
Investment Performance of the Manager and the Fund. Throughout the year, the Manager provided information on the investment performance of the Fund and the Manager, including comparative performance information. The
33 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
BOARD APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT Unaudited / Continued
Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund’s historical performance to relevant market indices and to the performance of other global core funds underlying variable insurance products. The Board considered that the Fund outperformed its performance universe median during the one-, three-, five-, and ten-year Lipper periods.
Costs of Services by the Manager. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also considered the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund and other global core funds underlying variable insurance products. In reviewing the fees and expenses charged to the VA funds, the Board considered the Manager’s assertion that, because there is much greater disparity in the fees and services that may be provided by a manager to a VA fund as opposed to a retail fund, when comparing the expenses of the various VA funds to those of retail funds, it is most appropriate to focus on total expenses (rather than on the management fees). Accordingly, while the Board reviewed and considered all expenses, it focused on total expenses. The Board considered that the Fund’s actual management fees and total expenses were lower than its expense group median. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 1.00% for Non-Service and Class 3 shares and 1.25% for Service and Class 4 shares. This voluntary expense limitation may be amended or withdrawn at any time.
Economies of Scale and Profits Realized by the Manager. The Board considered information regarding the Manager’s costs in serving as the Fund’s investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager’s profitability from its relationship with the Fund. The Board reviewed whether the Manager may realize economies of scale in managing and supporting the Fund. The Board noted that the Fund currently has management fee breakpoints, which are intended to share with Fund shareholders economies of scale that may exist as the Fund’s assets grow.
Other Benefits to the Manager. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager’s affiliates and research provided to the Manager in connection with permissible brokerage arrangements (soft dollar arrangements). The Board also considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide quality services to the Fund.
Conclusions. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees’ counsel are independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the Agreement through August 31, 2012. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the above information, and considered the terms and conditions of the Agreement, including the management fee, in light of all of the surrounding circumstances.
34 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities (“portfolio proxies”) held by the Fund. A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund’s website at oppenheimerfunds.com, and (iii) on the SEC’s website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund’s voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC’s website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund’s Form N-Q filings are available on the SEC’s website at www.sec.gov. Those forms may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
35 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
TRUSTEES AND OFFICERS Unaudited
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Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
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INDEPENDENT TRUSTEES | | The address of each Trustee in the chart below is 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Trustee serves for an indefinite term, or until his or her resignation, retirement, death or removal. |
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William L. Armstrong, Chairman of the Board of Trustees (since 2003), Trustee (since 1999) Age: 74 | | President, Colorado Christian University (since 2006); Chairman, Cherry Creek Mortgage Company (since 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso Mortgage Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman, Broadway Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), former Director of Campus Crusade for Christ (non-profit) (1991-2008); former Director, The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (2002-2006); former Chairman of: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: |
| | UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Armstrong has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Edward L. Cameron, Trustee (since 1999) Age: 73 | | Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000—June 2006); Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (accounting firm) (July 1994-June 1998). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Cameron has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Jon S. Fossel, Trustee (since 1990) Age: 69 | | Chairman of the Board (since 2006) and Director (since June 2002) of UNUMProvident (insurance company); Director of Northwestern Energy Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003 and February 2005-February 2007); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. (“OAC”) (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Fossel has served on the Boards of certain Oppenheimer funds since 1990, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Sam Freedman, Trustee (since 1996) Age: 71 | | Director of Colorado UpLIFT (charitable organization) (since September 1984). Mr. Freedman held several positions with the Manager and with subsidiary or affiliated companies of the Manager (until October 1994). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Freedman has served on the Boards of certain Oppenheimer funds since 1996, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Beverly L. Hamilton, Trustee (since 2002) Age: 65 | | Trustee of Monterey Institute for International Studies (educational organization) (since February 2000); Board Member of Middlebury College (educational organization) (since December 2005); Chairman (since 2010) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); Director of The California Endowment (philanthropic organization) (April 2002-April 2008); Director (February 2002-2005) and Chairman of Trustees (2006-2007) of the Community Hospital of Monterey Peninsula; Director (October 1991-2005); Vice Chairman (2006-2009) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation (2001-2006) and The University of Michigan (since 2000); Advisor at Credit Suisse First Boston’s Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member of the investment committee of Hartford Hospital (2000-2003); and |
36 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
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Beverly L. Hamilton, Continued | | Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 36 portfolios in the OppenheimerFunds complex. Ms. Hamilton has served on the Boards of certain Oppenheimer funds since 2002, during which time she has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Robert J. Malone, Trustee (since 2002) Age: 67 | | Board of Directors of Opera Colorado Foundation (non-profit organization) (since March 2008); Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director of Steele Street Bank & Trust (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Malone has served on the Boards of certain Oppenheimer funds since 2002, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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F. William Marshall, Jr., Trustee (since 2000) Age: 69 | | Trustee Emeritus of Worcester Polytech Institute (WPI) (private university) (since 2009); Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment company) (since 1996) and MML Series Investment Fund (investment company) (since 1996); President and Treasurer of the SIS Funds (private charitable fund) (January 1999-March 2011); Former Trustee of WPI (1985-2008); Former Chairman of the Board (2004-2006) and Former Chairman of the Investment Committee of WPI (1994-2008); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999); and Former President and Chief Executive Officer of SIS Bancorp. (1993-1999). Oversees 38 portfolios in the OppenheimerFunds complex. Mr. Marshall has served on the Boards of certain Oppenheimer funds since 2000, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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INTERESTED TRUSTEE AND OFFICER | | The address of Mr. Glavin is Two World Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008. Mr. Glavin serves as a Trustee for an indefinite term, or until his resignation, retirement, death or removal and as an Officer for an indefinite term, or until his resignation, retirement, death or removal. Mr. Glavin is an Interested Trustee due to his positions with OppenheimerFunds, Inc. and its affiliates. |
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William F. Glavin, Jr., Trustee, President and Principal Executive Officer (since 2009) Age: 53 | | Chairman of the Manager (since December 2009); Chief Executive Officer and Director of the Manager (since January 2009); President of the Manager (since May 2009); Director of Oppenheimer Acquisition Corp. (“OAC”) (the Manager’s parent holding company) (since June 2009); Executive Vice President (March 2006-February 2009) and Chief Operating Officer (July 2007-February 2009) of Massachusetts Mutual Life Insurance Company (OAC’s parent company); Director (May 2004-March 2006) and Chief Operating Officer and Chief Compliance Officer (May 2004-January 2005), President (January 2005-March 2006) and Chief Executive Officer (June 2005-March 2006) of Babson Capital Management LLC; Director (March 2005-March 2006), President (May 2003-March 2006) and Chief Compliance Officer (July 2005-March 2006) of Babson Capital Securities, Inc. (a broker-dealer); President (May 2003-March 2006) of Babson Investment Company, Inc.; Director (May 2004-August 2006) of Babson Capital Europe Limited; Director (May 2004-October 2006) of Babson Capital Guernsey Limited; Director (May 2004-March 2006) of Babson Capital Management LLC; Non-Executive Director (March 2005-March 2007) of Baring Asset Management Limited; Director (February 2005- June 2006) Baring Pension Trustees Limited; Director and Treasurer (December 2003-November 2006) of Charter Oak Capital Management, Inc.; Director (May 2006-September 2006) of C.M. Benefit Insurance Company; Director (May 2008-June 2009) and Executive Vice President (June 2007-July 2009) of C.M. Life Insurance Company; President (March 2006-May 2007) of MassMutual Assignment Company; Director (January 2005-December 2006), Deputy Chairman (March 2005- December 2006) and President (February 2005- March 2005) of MassMutual Holdings (Bermuda) Limited; Director (May 2008-June 2009) and Executive Vice President (June 2007-July 2009) of MML Bay State Life Insurance Company; Chief Executive Officer and President (April 2007-January 2009) of MML Distributors, LLC; and Chairman (March 2006-December 2008) and Chief Executive Officer (May 2007-December 2008) of MML Investors Services, Inc. Oversees 63 portfolios as a Trustee/Director and 96 portfolios as an officer in the OppenheimerFunds complex. |
37 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
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OTHER OFFICERS OF THE FUND | | The addresses of the Officers in the chart below are as follows: for Messrs. Bhaman, Gabinet and Ms. Nasta, Two World Financial Center, 225 Liberty Street, New York, New York 10281-1008, for Messrs. Vandehey and Wixted, 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Officer serves for an indefinite term or until his or her resignation, retirement, death or removal. |
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Rajeev Bhaman, Vice President (since 2004) Age: 48 | | Senior Vice President of the Manager (since May 2006); Vice President of the Manager (January 1997-May 2006); a Chartered Financial Analyst. An officer of 3 portfolios in the OppenheimerFunds complex. |
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Arthur S. Gabinet, Secretary (since 2011) Age: 53 | | Executive Vice President (since May 2010) and General Counsel (since January 2011) of the Manager; General Counsel of the Distributor (since January 2011); General Counsel of Centennial Asset Management Corporation (since January 2011); Executive Vice President and General Counsel of HarbourView Asset Management Corporation (since January 2011); Assistant Secretary (since January 2011) and Director (since January 2011) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since January 2011); Director of Oppenheimer Real Asset Management, Inc. (since January 2011); Executive Vice President and General Counsel of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since January 2011); Executive Vice President and General Counsel of OFI Private Investments, Inc. (since January 2011); Vice President of OppenheimerFunds Legacy Program (since January 2011); Executive Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since January 2011); General Counsel, Asset Management of the Manager (May 2010-December 2010); Principal, The Vanguard Group (November 2005-April 2010); District Administrator, U.S. Securities and Exchange Commission (January 2003- October 2005). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Christina M. Nasta, Vice President and Chief Business Officer (since 2011) Age: 38 | | Senior Vice President of the Manager (since July 2010); Vice President of the Manager (since January 2003); Vice President of OppenheimerFunds Distributor, Inc. (since January 2003). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Mark S. Vandehey, Vice President and Chief Compliance Officer (since 2004) Age: 61 | | Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Brian W. Wixted, Treasurer and Principal Financial & Accounting Officer (since 1999) Age: 52 | | Senior Vice President of the Manager (since March 1999); Treasurer of the Manager and the following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership Holdings, Inc. (March 1999-June 2008), OFI Private Investments, Inc. (March 2000-June 2008), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of OAC (March 1999-June 2008). An officer of 96 portfolios in the OppenheimerFunds complex. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and Officers and is available without charge, upon request, by calling 1.800.988.8287.
38 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
OPPENHEIMER GLOBAL SECURITIES FUND/VA
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A Series of Oppenheimer Variable Account Funds |
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Manager | | OppenheimerFunds, Inc. | | |
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Distributor | | OppenheimerFunds Distributor, Inc. | | |
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Transfer Agent | | OppenheimerFunds Services | | |
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Independent Registered Public Accounting Firm | | KPMG llp | | |
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Counsel | | K&L Gates LLP | | |
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| | Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing. | | |
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December 31, 2011 Oppenheimer High Income Fund/VA Annual Report A Series of Oppenheimer Variable Account Funds A N N UA L R E P O RT Fund Allocations Fund Performance Discussion Financial Statements 1234
OPPENHEIMER HIGH INCOME FUND/VA
Portfolio Manager: Joseph Welsh
Average Annual Total Returns
For the Periods Ended 12/30/111
| | | | | | | | | | | | |
| | 1-Year | | | 5-Year | | | 10-Year | |
|
Non-Service Shares | | | –2.34 | % | | | –21.43 | % | | | –7.84 | % |
Service Shares | | | –2.56 | % | | | –21.42 | % | | | –7.94 | % |
| | | | | | | | | | | | |
| | | | | | | | | | Since | |
| | | | | | | | | | Inception | |
| | 1-Year | | | 5-Year | | | (5/1/07) | |
|
Class 3 | | | –1.88 | % | | | N/A | | | | –23.25 | % |
Class 4 | | | –2.06 | % | | | N/A | | | | –23.20 | % |
Expense Ratios
For the Period Ended 12/30/111
| | | | | | | | |
| | Gross | | | Net | |
| | Expense | | | Expense | |
| | Ratios | | | Ratios | |
|
Non-Service Shares | | | 0.98 | % | | | 0.75 | % |
Service Shares | | | 1.23 | | | | 1.00 | |
Class 3 Shares | | | 0.98 | | | | 0.75 | |
Class 4 Shares | | | 1.23 | | | | 1.00 | |
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance and expense ratios may be lower or higher than the data quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account. The net expense ratios take into account voluntary fee waivers and/or expense reimbursements, without which performance would have been less. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund’s prospectus.
Credit Rating Breakdown
| | | | |
| | NRSRO Only Total | |
|
AAA | | | 10.5 | % |
BBB | | | 2.1 | |
BB | | | 15.7 | |
B | | | 49.6 | |
CCC | | | 17.0 | |
CC | | | 0.8 | |
Unrated | | | 4.3 | |
| | | |
Total | | | 100.0 | % |
| | | |
The percentages above are based on the market value of the Fund’s securities as of December 30, 2011, and are subject to change. Except for securities labeled “Unrated” and except for certain securities issued or guaranteed by a sovereign or supranational entity, all securities have been rated by at least one Nationally Recognized Statistical Rating Organization (“NRSRO”), such as Standard & Poor’s (“S&P”). For securities rated only by an NRSRO other than S&P, OppenheimerFunds, Inc. converts that rating to the equivalent S&P rating. If two or more NRSROs have assigned a rating to a security, the highest S&P equivalent rating is used. Unrated securities issued or guaranteed by a sovereign entity are assigned a credit rating equal to the highest NRSRO rating assigned to that sovereign entity. U.S. Government “Treasury” and “Agency” securities are included in the AAA category. Fund assets invested in Oppenheimer Institutional Money Market Fund are assigned that fund’s S&P rating, which is currently AAA. For the purposes of this Credit Allocation table, “investment-grade” securities are securities rated within the NRSROs’ four highest rating categories, which include AAA, AA, A and BBB. Unrated securities do not necessarily indicate low credit quality, and may or may not be the equivalent of investment-grade. Please consult the Fund’s prospectus for further information. Additional information can be found in the Fund’s Statement of Additional Information.
Corporate Bonds & Notes—Top Ten Industries
| | | | |
|
Media | | | 9.1 | % |
Oil, Gas & Consumable Fuels | | | 6.7 | |
Hotels, Restaurants & Leisure | | | 5.7 | |
Capital Markets | | | 5.6 | |
Aerospace & Defense | | | 3.8 | |
Paper & Forest Products | | | 3.1 | |
Health Care Providers & Services | | | 3.0 | |
Energy Equipment & Services | | | 2.9 | |
Machinery | | | 2.6 | |
Auto Components | | | 2.4 | |
Portfolio holdings and allocations are subject to change. Percentages are as of December 30, 2011, and are based on net assets.
2 | OPPENHEIMER HIGH INCOME FUND/VA
FUND PERFORMANCE DISCUSSION
Management’s Discussion of Fund Performance. The Fund’s Non-Service shares returned –2.34% during the reporting period ended December 30, 2011.1 On a relative basis, the Fund underperformed the JPMorgan Domestic High Yield Index (the “Index”), which returned 6.96%2 The Fund also underperformed the BofA Merrill Lynch High Yield Master Index, which returned 4.50%. The Fund’s negative performance occurred over the volatile third quarter of 2011 when a number of dramatic global events resulted in increased risk aversion in the markets, as higher-yielding securities sold off and investors flocked to traditionally defensive securities, such as U.S. Treasuries.
Economic and Market Overview
The first half of the reporting period was generally characterized by resilience among investors who looked forward to improved credit conditions in a recovering global economy. Even the wave of political unrest in the Middle East in early 2011, which led to sharply higher energy prices, had only a temporary dampening effect on most financial markets. Likewise, markets recovered relatively quickly after a devastating natural disaster and subsequent nuclear energy crisis hit Japan in March, disrupting global industrial supply chains. During this time, equities and higher-yielding fixed income securities generally performed well.
Investor sentiment began to deteriorate in late April, when U.S. economic data proved disappointing, and a contentious U.S. fiscal policy debate intensified. These concerns reached a tipping point in early August, when the credit rating company Standard & Poor’s downgraded the sovereign debt of the U.S., a decision that the two other major credit rating firms opted not to follow.
Meanwhile, international uncertainty worsened with the high likelihood that Greece was headed for default on its debt and other members of the European Union continued to struggle with heavy debt burdens, leading to worries over the health of the European banking system. Inflationary pressures mounted in China and other emerging markets, where investors grew concerned that remedial measures, including higher local interest rates, might derail these major engines of global growth. Financial markets also grew concerned that new recessions in the developed markets could mean a slowdown in growth in export dependent emerging economies. Some emerging market countries saw their GDP growth stall after a prolonged period of solid increases.
These events triggered a flight to quality that boosted traditional safe havens but hurt areas of the market that historically have been considered riskier. In the United States, long-term U.S. Treasury securities continued to rally even after the credit-rating downgrade, but high yield corporate bonds gave back earlier gains, despite generally healthy balance sheets and limited needs for near term refinancing. Market turbulence throughout the world was particularly severe over the third quarter of 2011 with most global risk markets experiencing sharp declines.
In the fourth quarter, risk markets finished the period largely on a positive note, rebounding strongly in October in particular, as European leaders sought to undertake measures to address the debt issues in the region and the U.S. economy began to show some signs of life as high unemployment trended downward, the housing market picked up slightly and consumer sentiment improved.
Fund Review
During the reporting period, the primary reason for the Fund’s underperformance versus the Index was its heavier exposure to high yield bonds with lower credit quality. This positioning impacted performance particularly in the third quarter of 2011 amid heightened risk aversion. The most significant underperforming areas for the Fund this period were paper and packaging and gaming, lodging and leisure. The Fund had overweight positions in these sectors, which were hit hard in the third quarter of 2011. Energy and health care also were underperformers for the Fund.
| | |
1. | | December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011. |
|
2. | | The JPMorgan Domestic High Yield Index is an index of high yield fixed income securities issued by developed countries. The index is unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of the Fund. |
3 | OPPENHEIMER HIGH INCOME FUND/VA
FUND PERFORMANCE DISCUSSION
Positive performing areas for the Fund included retail, technology and cable and satellite. While the Fund had a very small allocation to retail during the period, its investments in the sector performed well. The Fund had larger allocations to technology and cable and satellite-related investments at period end. Stronger relative security selection drove the Fund’s positive performance in these areas.
Outlook
We remain cautiously optimistic at period end. We expect uncertainty in the Eurozone to keep consumer, business and investor anxiety elevated. Yet, we see recent steps taken by Eurozone policymakers to address the crisis as positive; albeit slow and incomplete. In the U.S., concerns remain over slow growth and the ability of elected officials to address the key issues relating to deficits, entitlements and taxation. However, a domestic recession seems unlikely given recent upside surprises and the possibility of QE3 as 2012 progresses.
Despite these ongoing concerns, we believe the continued high level of risk aversion could mean bond markets have priced in most negative outcomes. This could be beneficial to higher-yielding asset classes in the face of positive, or less negative headlines. Defaults in non-investment grade markets remain very low and are a function of stable revenue and profitability in our view. We believe that even in a recession, defaults are not likely to reach an elevated level due to the improved balance sheets of high yield borrowers, limited need for refinancing, and the weeding out of weaker credits in 2008. Finally, we believe that careful security selection may benefit investors as risk aversion abates.
Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing.
Total returns include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown.
The Fund’s investment strategy and focus can change over time. The mention of specific fund holdings does not constitute a recommendation by OppenheimerFunds, Inc.
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.
Comparing the Fund’s Performance to the Market. The graphs that follow show the performance of a hypothetical $10,000 investment in each share class of the Fund held until December 30, 2011. In the case of Non-Service shares and Service shares, performance is measured over a ten-fiscal-year period. In the case of Class 3 and Class 4 shares, performance is measured from inception of the Classes on May 1, 2007. Performance information does not reflect charges that apply to separate accounts investing in the Fund. If these charges were taken into account, performance would be lower. The graphs assume that all dividends and capital gains distributions were reinvested in additional shares.
The Fund’s performance is compared to the performance of the BofA Merrill Lynch High Yield Master Index, an unmanaged index of U.S. corporate and government bonds that is a measure of the performance of the high-yield corporate bond market. Index performance includes reinvestment of income but does not reflect transaction fees or expenses. The Fund’s performance reflects the effects of the Fund’s business and operating expenses. While index comparisons may be useful to provide a benchmark for the Fund’s performance, it must be noted that the Fund’s investments are not limited to the securities comprising the index.
4 | OPPENHEIMER HIGH INCOME FUND/VA
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account.
| | |
1. | | December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011. |
5 | OPPENHEIMER HIGH INCOME FUND/VA
FUND PERFORMANCE DISCUSSION
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account.
| | |
1. | | December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011. |
6 | OPPENHEIMER HIGH INCOME FUND/VA
FUND EXPENSES
Fund Expenses. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 30, 2011.
Actual Expenses. The first section of the table provides information about actual account values and actual expenses. You may use the information in this section for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes. The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio for each class of shares, and an assumed rate of return of 5% per year for each class before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the “hypothetical” lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included your costs would have been higher.
7 | OPPENHEIMER HIGH INCOME FUND/VA
FUND EXPENSES Continued
| | | | | | | | | | | | |
| | Beginning | | | Ending | | | Expenses | |
| | Account | | | Account | | | Paid During | |
| | Value | | | Value | | | 6 Months Ended | |
Actual | | July 1, 2011 | | | December 30, 2011 | | | December 30, 2011 | |
|
Non-Service Shares | | $ | 1,000.00 | | | $ | 931.40 | | | $ | 3.64 | |
Service shares | | | 1,000.00 | | | | 927.20 | | | | 4.84 | |
Class 3 | | | 1,000.00 | | | | 932.00 | | | | 3.64 | |
Class 4 | | | 1,000.00 | | | | 932.70 | | | | 4.86 | |
| | | | | | | | | | | | |
Hypothetical | | | | | | | | | | | | |
(5% return before expenses) | | | | | | | | | | | | |
|
Non-Service Shares | | $ | 1,000.00 | | | $ | 1,021.31 | | | | 3.81 | |
Service shares | | | 1,000.00 | | | | 1,020.05 | | | | 5.08 | |
Class 3 | | | 1,000.00 | | | | 1,021.31 | | | | 3.81 | |
Class 4 | | | 1,000.00 | | | | 1,020.05 | | | | 5.08 | |
Expenses are equal to the Fund’s annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). Those annualized expense ratios, excluding indirect expenses from affiliated fund, based on the 6-month period ended December 30, 2011 are as follows:
| | | | |
Class | | Expense Ratios | |
|
Non-Service shares | | | 0.75 | % |
Service shares | | | 1.00 | |
Class 3 | | | 0.75 | |
Class 4 | | | 1.00 | |
The expense ratios reflect voluntary waivers and/or reimbursements of expenses by the Fund’s Manager. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund’s prospectus. The “Financial Highlights” tables in the Fund’s financial statements, included in this report, also show the gross expense ratios, without such waivers or reimbursements and reduction to custodian expenses, if applicable.
8 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS December 30, 2011*
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Loan Participations—5.2% | | | | | | | | |
Brock Holdings III, Inc., Sr. Sec. Credit Facilities 2nd Lien Term Loan, 10%, 2/15/181 | | $ | 155,000 | | | $ | 142,794 | |
Clear Channel Communications, Inc., Sr. Sec. Credit Facilities 1st Lien Term Loan: | | | | | | | | |
Tranche B, 3.91%, 1/29/161 | | | 430,000 | | | | 319,036 | |
Tranche B, 3.91%, 1/29/161,2 | | | 30,000 | | | | 22,258 | |
Entegra Holdings LLC, Sr. Sec. Credit Facilities 3rd Lien Term Loan, Tranche B, 3.855%, 10/19/151,3 | | | 1,480,568 | | | | 882,171 | |
Nuveen Investments, Inc., Sr. Sec. Credit Facilities 2nd Lien Term Loan, 12.50%, 7/31/15 | | | 696,875 | | | | 723,298 | |
OneLink Communications/San Juan Cable LLC, Sr. Sec. Credit Facilities 2nd Lien Term Loan, Tranche B, 10%, 10/31/131 | | | 420,000 | | | | 409,500 | |
PQ Corp., Sr. Sec. Credit Facilities 2nd Lien Term Loan, 6.50%, 7/30/151,2 | | | 625,000 | | | | 556,446 | |
Realogy Corp., Extended Sr. Sec. Credit Facilities 1st Lien Term Loan: | | | | | | | | |
Tranche B, 4%, 10/10/161,2 | | | 62,376 | | | | 55,971 | |
Tranche B, 4.522%, 10/10/161,2 | | | 791,174 | | | | 709,937 | |
Revel Entertainment LLC, Sr. Sec. Credit Facilities 1st Lien Term Loan, 7.50%, 2/17/171,2 | | | 300,000 | | | | 275,250 | |
Samson Investment Co., Sr. Sec. Credit Facilities Bridge Loan, 6.50%, 12/20/121,2 | | | 1,120,000 | | | | 1,120,000 | |
Walter Investment Management Corp., Sr. Sec. Credit Facilities 2nd Lien Term Loan, 11%, 9/28/161,2 | | | 325,000 | | | | 328,859 | |
Walter Investment Management Corp., Sr. Sec. Credit Facilities 2nd Lien Term Loan, 12.50%, 9/28/161 | | | 330,000 | | | | 333,919 | |
| | | | | | | |
Total Loan Participations (Cost $5,890,695) | | | | | | | 5,879,439 | |
Corporate Bonds and Notes—80.7% | | | | | | | | |
Consumer Discretionary—18.8% | | | | | | | | |
Auto Components—2.4% | | | | | | | | |
Goodyear Tire & Rubber Co. (The), 8.25% Sr. Unsec. Unsub. Nts., 8/15/20 | | | 610,000 | | | | 667,950 | |
Tower Automotive Holdings USA LLC/TA Holdings Finance, Inc., 10.625% Sr. Sec. Nts., 9/1/174 | | | 1,365,000 | | | | 1,378,650 | |
Visteon Corp., 6.75% Sr. Nts., 4/15/194 | | | 690,000 | | | | 691,725 | |
| | | | | | | |
| | | | | | | 2,738,325 | |
Automobiles—0.1% | | | | | | | | |
Jaguar Land Rover plc, 7.75% Sr. Unsec. Bonds, 5/15/184 | | | 110,000 | | | | 105,325 | |
Hotels, Restaurants & Leisure—5.7% | | | | | | | | |
Equinox Holdings, Inc., 9.50% Sr. Sec. Nts., 2/1/164 | | | 510,000 | | | | 526,575 | |
Harrah’s Operating Co., Inc., 10% Sr. Sec. Nts., 12/15/18 | | | 2,608,000 | | | | 1,799,520 | |
HOA Restaurants Group LLC/HOA Finance Corp., 11.25% Sr. Sec. Nts., 4/1/174 | | | 660,000 | | | | 618,750 | |
Isle of Capri Casinos, Inc.: | | | | | | | | |
7% Sr. Unsec. Sub. Nts., 3/1/14 | | | 405,000 | | | | 380,700 | |
7.75% Sr. Unsec. Unsub. Nts., 3/15/19 | | | 585,000 | | | | 538,200 | |
Landry’s Restaurants, Inc., 11.625% Sr. Sec. Nts., 12/1/15 | | | 455,000 | | | | 481,163 | |
MGM Mirage, Inc., 6.625% Sr. Unsec. Nts., 7/15/15 | | | 955,000 | | | | 912,025 | |
Mohegan Tribal Gaming Authority, 8% Sr. Sub. Nts., 4/1/12 | | | 840,000 | | | | 567,000 | |
Penn National Gaming, Inc., 8.75% Sr. Unsec. Sub. Nts., 8/15/19 | | | 435,000 | | | | 475,238 | |
Travelport LLC, 11.875% Sr. Unsec. Sub. Nts., 9/1/16 | | | 560,000 | | | | 165,200 | |
| | | | | | | |
| | | | | | | 6,464,371 | |
Household Durables—0.7% | | | | | | | | |
Beazer Homes USA, Inc.: | | | | | | | | |
6.875% Sr. Unsec. Nts., 7/15/15 | | | 280,000 | | | | 210,700 | |
9.125% Sr. Unsec. Nts., 5/15/19 | | | 790,000 | | | | 543,125 | |
| | | | | | | |
| | | | | | | 753,825 | |
Media—9.1% | | | | | | | | |
Affinion Group Holdings, Inc., 11.625% Sr. Unsec. Nts., 11/15/15 | | | 325,000 | | | | 271,375 | |
Affinion Group, Inc., 7.875% Sr. Unsec. Nts., 12/15/18 | | | 760,000 | | | | 646,000 | |
Belo (A.H.) Corp., 7.75% Sr. Unsec. Unsub. Debs., 6/1/27 | | | 719,000 | | | | 627,328 | |
Cengage Learning Acquisitions, Inc., 10.50% Sr. Nts., 1/15/154 | | | 740,000 | | | | 534,650 | |
Cequel Communications Holdings I LLC, 8.625% Sr. Unsec. Nts., 11/15/174 | | | 620,000 | | | | 660,300 | |
Clear Channel Communications, Inc., 5.75% Sr. Unsec. Unsub. Nts., 1/15/13 | | | 860,000 | | | | 821,300 | |
CSC Holdings LLC, 6.75% Sr. Unsec. Nts., 11/15/214 | | | 1,895,000 | | | | 2,003,963 | |
Cumulus Media, Inc., 7.75% Sr. Nts., 5/1/194 | | | 350,000 | | | | 312,375 | |
Entravision Communications Corp., 8.75% Sr. Sec. Nts., 8/1/17 | | | 535,000 | | | | 526,975 | |
9 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Media Continued | | | | | | | | |
Gray Television, Inc., 10.50% Sr. Sec. Nts., 6/29/15 | | $ | 1,010,000 | | | $ | 959,500 | |
Kabel BW Erste Beteiligungs GmbH/Kabel Baden-Wurttemberg GmbH & Co. KG, 7.50% Sr. Sec. Nts., 3/15/194 | | | 395,000 | | | | 416,725 | |
Newport Television LLC/NTV Finance Corp., 12.719% Sr. Nts., 3/15/173,4 | | | 607,469 | | | | 545,203 | |
Nexstar Broadcasting, Inc./Mission Broadcasting, Inc., 8.875% Sec. Nts., 4/15/17 | | | 535,000 | | | | 551,050 | |
Sinclair Television Group, Inc., 8.375% Sr. Unsec. Nts., 10/15/18 | | | 705,000 | | | | 731,438 | |
UPCB Finance V Ltd., 7.25% Sr. Sec. Nts., 11/15/214 | | | 350,000 | | | | 356,125 | |
Visant Corp., 10% Sr. Unsec. Nts., 10/1/17 | | | 320,000 | | | | 294,400 | |
| | | | | | | |
| | | | | | | 10,258,707 | |
Specialty Retail—0.5% | | | | | | | | |
Burlington Coat Factory Warehouse Corp., 10% Sr. Unsec. Nts., 2/15/19 | | | 545,000 | | | | 535,463 | |
Michaels Stores, Inc., 7.75% Sr. Unsec. Nts., 11/1/18 | | | 45,000 | | | | 45,675 | |
| | | | | | | |
| | | | | | | 581,138 | |
Textiles, Apparel & Luxury Goods—0.3% | | | | | | | | |
Jones Group, Inc. (The) /Jones Apparel Group Holdings, Inc./Jones Apparel Group USA, Inc./JAG Footwear, Accessories & Retail Corp., 6.875% Sr. Unsec. Unsub. Nts., 3/15/19 | | | 400,000 | | | | 362,000 | |
Consumer Staples—2.5% | | | | | | | | |
Food Products—2.2% | | | | | | | | |
American Seafoods Group LLC, 10.75% Sr. Sub. Nts., 5/15/164 | | | 620,000 | | | | 554,900 | |
ASG Consolidated LLC, 15% Sr. Nts., 5/15/173,4 | | | 1,202,532 | | | | 931,962 | |
Bumble Bee Acquisition Corp., 9% Sr. Sec. Nts., 12/15/174 | | | 266,000 | | | | 271,320 | |
Southern States Cooperative, Inc., 11.25% Sr. Nts., 5/15/155 | | | 690,000 | | | | 727,950 | |
| | | | | | | |
| | | | | | | 2,486,132 | |
Household Products—0.3% | | | | | | | | |
Spectrum Brands Holdings, Inc., 9.50% Sr. Sec. Nts., 6/15/18 | | | 250,000 | | | | 274,688 | |
Energy—9.6% | | | | | | | | |
Energy Equipment & Services—2.9% | | | | | | | | |
Forbes Energy Services Ltd., 9% Sr. Unsec. Nts., 6/15/19 | | | 475,000 | | | | 446,500 | |
Global Geophysical Services, Inc., 10.50% Sr. Unsec. Nts., 5/1/17 | | | 615,000 | | | | 581,175 | |
Offshore Group Investments Ltd., 11.50% Sr. Sec. Nts., 8/1/15 | | | 765,000 | | | | 830,981 | |
Precision Drilling Corp., 6.625% Sr. Unsec. Nts., 11/15/20 | | | 575,000 | | | | 590,813 | |
SESI LLC, 6.375% Sr. Unsec. Nts., 5/1/19 | | | 795,000 | | | | 812,888 | |
| | | | | | | |
| | | | | | | 3,262,357 | |
Oil, Gas & Consumable Fuels—6.7% | | | | | | | | |
Arch Coal, Inc., 7% Sr. Unsec. Nts., 6/15/194 | | | 110,000 | | | | 112,750 | |
Atlas Pipeline Partners LP/Atlas Pipeline Finance Corp., 8.75% Sr. Unsec. Nts., 6/15/184 | | | 440,000 | | | | 462,000 | |
ATP Oil & Gas Corp., 11.875% Sr. Sec. Nts., 5/1/15 | | | 760,000 | | | | 503,500 | |
Bill Barrett Corp., 7.625% Sr. Unsec. Unsub. Nts., 10/1/19 | | | 225,000 | | | | 236,250 | |
Breitburn Energy Partners LP/Breitburn Finance Corp., 8.625% Sr. Unsec. Nts., 10/15/20 | | | 665,000 | | | | 699,081 | |
Chaparral Energy, Inc., 9.875% Sr. Unsec. Nts., 10/1/20 | | | 510,000 | | | | 553,350 | |
Cloud Peak Energy Resources LLC/Cloud Peak Energy Finance Corp., 8.50% Sr. Unsec. Unsub. Nts., 12/15/19 | | | 110,000 | | | | 119,350 | |
James River Coal Co., 7.875% Sr. Unsec. Unsub. Nts., 4/1/19 | | | 160,000 | | | | 121,600 | |
Linn Energy LLC/Linn Energy Finance Corp., 8.625% Sr. Unsec. Nts., 4/15/20 | | | 1,035,000 | | | | 1,128,150 | |
MEG Energy Corp., 6.50% Sr. Unsec. Nts., 3/15/214 | | | 795,000 | | | | 816,863 | |
Murray Energy Corp., 10.25% Sr. Sec. Nts., 10/15/154 | | | 895,000 | | | | 892,763 | |
Navios Maritime Acquisition Corp., 8.625% Sr. Sec. Nts., 11/1/17 | | | 195,000 | | | | 142,350 | |
Quicksilver Resources, Inc.: | | | | | | | | |
8.25% Sr. Unsec. Nts., 8/1/15 | | | 50,000 | | | | 52,000 | |
11.75% Sr. Nts., 1/1/16 | | | 500,000 | | | | 570,000 | |
SandRidge Energy, Inc.: | | | | | | | | |
8.75% Sr. Unsec. Nts., 1/15/20 | | | 560,000 | | | | 581,000 | �� |
9.875% Sr. Unsec. Nts., 5/15/164 | | | 305,000 | | | | 327,875 | |
Venoco, Inc., 8.875% Sr. Unsec. Nts., 2/15/19 | | | 345,000 | | | | 312,225 | |
| | | | | | | |
| | | | | | | 7,631,107 | |
Financials—10.9% | | | | | | | | |
Capital Markets—5.6% | | | | | | | | |
Berry Plastics Holding Corp., 10.25% Sr. Unsec. Sub. Nts., 3/1/16 | | | 300,000 | | | | 291,000 | |
10 | OPPENHEIMER HIGH INCOME FUND/VA
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Capital Markets Continued | | | | | | | | |
Edgen Murray Corp., 12.25% Sr. Sec. Nts., 1/15/15 | | $ | 360,000 | | | $ | 325,800 | |
Nationstar Mortgage/Nationstar Capital Corp., 10.875% Sr. Unsec. Nts., 4/1/15 | | | 1,955,000 | | | | 1,945,212 | |
Nuveen Investments, Inc.: | | | | | | | | |
5.50% Sr. Unsec. Nts., 9/15/15 | | | 535,000 | | | | 452,075 | |
10.50% Sr. Unsec. Unsub. Nts., 11/15/15 | | | 565,000 | | | | 563,588 | |
Pinafore LLC/Pinafore, Inc., 9% Sec. Nts., 10/1/18 | | | 1,125,000 | | | | 1,252,969 | |
Springleaf Finance Corp., 6.90% Nts., Series J, 12/15/17 | | | 630,000 | | | | 456,750 | |
Verso Paper Holdings LLC, 11.375% Sr. Unsec. Sub. Nts., Series B, 8/1/16 | | | 1,500,000 | | | | 622,500 | |
Verso Paper Holdings LLC/Verso Paper, Inc., 8.75% Sr. Sec. Nts., 2/1/19 | | | 625,000 | | | | 384,375 | |
| | | | | | | |
| | | | | | | 6,294,269 | |
Commercial Banks—0.5% | | | | | | | | |
CIT Group, Inc., 7% Sec. Bonds, 5/2/174 | | | 560,000 | | | | 560,000 | |
Consumer Finance—0.8% | | | | | | | | |
Speedy Cash, Inc., 10.75% Sr. Sec. Nts., 10/15/184 | | | 430,000 | | | | 434,300 | |
TMX Finance LLC/TitleMax Finance Corp., 13.25% Sr. Sec. Nts., 7/15/15 | | | 455,000 | | | | 502,775 | |
| | | | | | | |
| | | | | | | 937,075 | |
Insurance—0.9% | | | | | | | | |
International Lease Finance Corp.: | | | | | | | | |
8.625% Sr. Unsec. Unsub. Nts., 9/15/15 | | | 410,000 | | | | 421,788 | |
8.75% Sr. Unsec. Unsub. Nts., 3/15/17 | | | 622,000 | | | | 642,215 | |
| | | | | | | |
| | | | | | | 1,064,003 | |
Real Estate Investment Trusts—1.9% | | | | | | | | |
DuPont Fabros Technology LP, 8.50% Sr. Unsec. Nts., 12/15/17 | | | 255,000 | | | | 274,125 | |
FelCor Escrow Holdings LLC, 6.75% Sr. Sec. Nts., 6/1/19 | | | 1,155,000 | | | | 1,114,575 | |
OMEGA Healthcare Investors, Inc., 6.75% Sr. Unsec. Nts., 10/15/22 | | | 695,000 | | | | 701,950 | |
| | | | | | | |
| | | | | | | 2,090,650 | |
Real Estate Management & Development—1.2% | | | | | | | | |
Ainsworth Lumber Co. Ltd., 11% Sr. Unsec. Unsub. Nts., 7/29/153,4 | | | 883,277 | | | | 570,102 | |
Realogy Corp., 11.50% Sr. Unsec. Unsub. Nts., 4/15/17 | | | 365,000 | | | | 286,525 | |
Wallace Theater Holdings, Inc., 12.50% Sr. Sec. Nts., 6/15/131,4 | | | 530,000 | | | | 516,750 | |
| | | | | | | |
| | | | | | | 1,373,377 | |
Health Care—5.6% | | | | | | | | |
Biotechnology—0.2% | | | | | | | | |
Grifols, Inc., 8.25% Sr. Sec. Nts., 2/1/18 | | | 195,000 | | | | 205,725 | |
Health Care Equipment & Supplies—1.7% | | | | | | | | |
Accellent, Inc., 10% Sr. Unsec. Sub. Nts., 11/1/17 | | | 570,000 | | | | 464,550 | |
Alere, Inc., 8.625% Sr. Unsec. Sub. Nts., 10/1/18 | | | 290,000 | | | | 287,100 | |
Biomet, Inc.: | | | | | | | | |
10.375% Sr. Unsec. Nts., 10/15/173 | | | 305,000 | | | | 331,688 | |
11.625% Sr. Unsec. Sub. Nts., 10/15/17 | | | 275,000 | | | | 299,750 | |
Chiron Merger Sub, Inc., 10.50% Sec. Nts., 11/1/184 | | | 290,000 | | | | 284,925 | |
Inverness Medical Innovations, Inc., 7.875% Sr. Unsec. Unsub. Nts., 2/1/16 | | | 290,000 | | | | 292,175 | |
| | | | | | | |
| | | | | | | 1,960,188 | |
Health Care Providers & Services—3.0% | | | | | | | | |
Catalent Pharma Solutions, Inc., 9.50% Sr. Unsec. Nts., 4/15/153 | | | 445,151 | | | | 459,618 | |
Gentiva Health Services, Inc., 11.50% Sr. Unsec. Unsub. Nts., 9/1/18 | | | 340,000 | | | | 280,925 | |
HealthSouth Corp., 8.125% Sr. Unsec. Unsub. Nts., 2/15/20 | | | 514,000 | | | | 520,425 | |
inVentiv Health, Inc., 10% Sr. Unsec. Nts., 8/15/184 | | | 310,000 | | | | 285,200 | |
Kindred Healthcare, Inc., 8.25% Sr. Unsec. Nts., 6/1/19 | | | 620,000 | | | | 523,900 | |
Multiplan, Inc., 9.875% Sr. Nts., 9/1/184 | | | 240,000 | | | | 250,800 | |
Oncure Holdings, Inc., 11.75% Sr. Sec. Nts., 5/15/17 | | | 315,000 | | | | 250,425 | |
Radiation Therapy Services, Inc., 9.875% Sr. Unsec. Sub. Nts., 4/15/17 | | | 335,000 | | | | 252,088 | |
STHI Holding Corp., 8% Sec. Nts., 3/15/184 | | | 200,000 | | | | 206,500 | |
US Oncology, Inc., Escrow Shares (related to 9.125% Sr. Sec. Nts., 8/15/17)6 | | | 435,000 | | | | 7,613 | |
Vanguard Health Holding Co. II LLC/Vanguard Holding Co. II, Inc., 8% Sr. Nts., 2/1/18 | | | 375,000 | | | | 374,063 | |
| | | | | | | |
| | | | | | | 3,411,557 | |
Health Care Technology—0.1% | | | | | | | | |
MedAssets, Inc., 8% Sr. Unsec. Nts., 11/15/18 | | | 75,000 | | | | 73,875 | |
Life Sciences Tools & Services—0.2% | | | | | | | | |
Jaguar Holding Co./Jaguar Merger Sub, Inc., 9.50% Sr. Unsec. Nts., 12/1/194 | | | 220,000 | | | | 232,100 | |
Pharmaceuticals—0.4% | | | | | | | | |
DJO Finance LLC/DJO Finance Corp., 10.875% Sr. Unsec. Nts., 11/15/14 | | | 150,000 | | | | 140,625 | |
11 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Pharmaceuticals Continued | | | | | | | | |
Valeant Pharmaceuticals International, Inc., 6.875% Sr. Unsec. Nts., 12/1/184 | | $ | 190,000 | | | $ | 190,475 | |
Warner Chilcott Co. LLC/Warner Chilcott Finance LLC, 7.75% Sr. Unsec. Nts., 9/15/18 | | | 145,000 | | | | 148,806 | |
| | | | | | | |
| | | | | | | 479,906 | |
Industrials—12.3% | | | | | | | | |
Aerospace & Defense—3.8% | | | | | | | | |
BE Aerospace, Inc., 6.875% Sr. Nts., 10/1/20 | | | 240,000 | | | | 262,800 | |
DynCorp International, Inc., 10.375% Sr. Unsec. Nts., 7/1/17 | | | 1,085,000 | | | | 949,375 | |
Hawker Beechcraft Acquisition Co. LLC: | | | | | | | | |
8.50% Sr. Unsec. Nts., 4/1/15 | | | 1,405,000 | | | | 266,950 | |
9.75% Sr. Unsec. Sub. Nts., 4/1/17 | | | 240,000 | | | | 24,000 | |
Huntington Ingalls Industries, Inc., 7.125% Sr. Unsec. Nts., 3/15/214 | | | 805,000 | | | | 792,925 | |
Kratos Defense & Security Solutions, Inc., 10% Sr. Sec. Nts., 6/1/17 | | | 267,000 | | | | 275,010 | |
TransDigm, Inc., 7.75% Sr. Unsec. Sub. Nts., 12/15/18 | | | 920,000 | | | | 993,600 | |
Triumph Group, Inc., 8.625% Sr. Unsec. Nts., 7/15/18 | | | 650,000 | | | | 715,000 | |
| | | | | | | |
| | | | | | | 4,279,660 | |
Air Freight & Logistics—0.5% | | | | | | | | |
AMGH Merger Sub, Inc., 9.25% Sr. Sec. Nts., 11/1/184 | | | 510,000 | | | | 527,850 | |
Airlines—0.5% | | | | | | | | |
American Airlines 2011-2 Class A Pass Through Trust, 8.625% Sec. Certificates, 4/15/23 | | | 560,000 | | | | 571,200 | |
Building Products—0.9% | | | | | | | | |
Associated Materials LLC, 9.125% Sr. Sec. Nts., 11/1/174 | | | 265,000 | | | | 232,538 | |
Ply Gem Industries, Inc., 13.125% Sr. Unsec. Sub. Nts., 7/15/14 | | | 860,000 | | | | 765,400 | |
Roofing Supply Group LLC/Roofing Supply Finance, Inc., 8.625% Sr. Sec. Nts., 12/1/174 | | | 67,000 | | | | 68,875 | |
| | | | | | | |
| | | | | | | 1,066,813 | |
Commercial Services & Supplies—1.8% | | | | | | | | |
R.R. Donnelley & Sons Co., 7.25% Sr. Nts., 5/15/18 | | | 1,130,000 | | | | 1,101,750 | |
West Corp.: | | | | | | | | |
7.875% Sr. Unsec. Nts., 1/15/19 | | | 305,000 | | | | 304,238 | |
8.625% Sr. Unsec. Nts., 10/1/18 | | | 635,000 | | | | 644,525 | |
| | | | | | | |
| | | | | | | 2,050,513 | |
Machinery—2.6% | | | | | | | | |
Cleaver-Brooks, Inc., 12.25% Sr. Sec. Nts., 5/1/165 | | | 680,000 | | | | 675,716 | |
CNH Capital LLC, 6.25% Sr. Unsec. Nts., 11/1/164 | | | 150,000 | | | | 155,250 | |
Manitowoc Co., Inc. (The), 8.50% Sr. Unsec. Nts., 11/1/20 | | | 685,000 | | | | 725,244 | |
Terex Corp., 8% Sr. Unsec. Sub. Nts., 11/15/17 | | | 1,005,000 | | | | 989,925 | |
Thermadyne Holdings Corp., 9% Sr. Sec. Nts., 12/15/17 | | | 335,000 | | | | 348,400 | |
| | | | | | | |
| | | | | | | 2,894,535 | |
Marine—0.8% | | | | | | | | |
Marquette Transportation Co./ Marquette Transportation Finance Corp., 10.875% Sec. Nts., 1/15/17 | | | 780,000 | | | | 789,750 | |
Navios Maritime Holdings, Inc./ Navios Maritime Finance U.S., Inc., 8.875% Sr. Sec. Nts., 11/1/17 | | | 160,000 | | | | 153,200 | |
| | | | | | | |
| | | | | | | 942,950 | |
Professional Services—0.4% | | | | | | | | |
Altegrity, Inc., 10.50% Sr. Unsec. Sub. Nts., 11/1/154 | | | 280,000 | | | | 253,400 | |
TransUnion LLC/TransUnion Financing Corp., 11.375% Sr. Unsec. Nts., 6/15/18 | | | 150,000 | | | | 172,125 | |
| | | | | | | 425,525 | |
Road & Rail—1.0% | | | | | | | | |
Hertz Corp., 7.50% Sr. Unsec. Nts., 10/15/18 | | | 670,000 | | | | 703,500 | |
Western Express, Inc., 12.50% Sr. Sec. Nts., 4/15/154 | | | 1,045,000 | | | | 449,350 | |
| | | | | | | |
| | | | | | | 1,152,850 | |
Information Technology—5.9% | | | | | | | | |
Communications Equipment—0.3% | | | | | | | | |
Avaya, Inc., 7% Sr. Sec. Nts., 4/1/194 | | | 290,000 | | | | 282,750 | |
Computers & Peripherals—0.9% | | | | | | | | |
Seagate HDD Cayman: | | | | | | | | |
6.875% Sr. Unsec. Nts., 5/1/20 | | | 535,000 | | | | 552,388 | |
7% Sr. Unsec. Nts., 11/1/214 | | | 475,000 | | | | 489,250 | |
| | | | | | | |
| | | | | | | 1,041,638 | |
Electronic Equipment & Instruments—0.5% | | | | | | | | |
CDW LLC/CDW Finance Corp., 12.535% Sr. Unsec. Sub. Nts., 10/12/17 | | | 550,000 | | | | 555,500 | |
Internet Software & Services—1.1% | | | | | | | | |
ITC DeltaCom, Inc., 10.50% Sr. Sec. Nts., 4/1/16 | | | 1,245,000 | | | | 1,279,238 | |
12 | OPPENHEIMER HIGH INCOME FUND/VA
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
IT Services—1.2% | | | | | | | | |
Ceridian Corp., 11.25% Sr. Unsec. Nts., 11/15/15 | | $ | 535,000 | | | $ | 419,975 | |
First Data Corp.: | | | | | | | | |
8.875% Sr. Sec. Nts., 8/15/204 | | | 395,000 | | | | 396,975 | |
9.875% Sr. Unsec. Nts., 9/24/15 | | | 595,000 | | | | 562,275 | |
| | | | | | | |
| | | | | | | 1,379,225 | |
Semiconductors & Semiconductor Equipment—1.8% | | | | | | | | |
Advanced Micro Devices, Inc., 7.75% Sr. Unsec. Nts., 8/1/20 | | | 600,000 | | | | 619,500 | |
Freescale Semiconductor, Inc.: | | | | | | | | |
9.25% Sr. Sec. Nts., 4/15/184 | | | 525,000 | | | | 563,719 | |
10.75% Sr. Unsec. Nts., 8/1/20 | | | 503,000 | | | | 526,893 | |
NXP BV/NXP Funding LLC, 9.75% Sr. Sec. Nts., 8/1/184 | | | 245,000 | | | | 268,275 | |
| | | | | | | |
| | | | | | | 1,978,387 | |
Software—0.1% | | | | | | | | |
SunGard Data Systems, Inc., 7.375% Sr. Unsec. Nts., 11/15/18 | | | 160,000 | | | | 164,600 | |
Materials—7.4% | | | | | | | | |
Chemicals—1.8% | | | | | | | | |
Ferro Corp., 7.875% Sr. Unsec. Nts., 8/15/18 | | | 260,000 | | | | 262,600 | |
Hexion U.S. Finance Corp./Hexion Nova Scotia Finance ULC: | | | | | | | | |
8.875% Sr. Sec. Nts., 2/1/18 | | | 345,000 | | | | 325,163 | |
9% Sec. Nts., 11/15/20 | | | 380,000 | | | | 315,400 | |
Lyondell Chemical Co., 8% Sr. Sec. Nts., 11/1/17 | | | 241,000 | | | | 264,498 | |
LyondellBasell Industries NV, 6% Sr. Nts., 11/15/214 | | | 440,000 | | | | 458,700 | |
Momentive Performance Materials, Inc., 9% Sec. Nts., 1/15/21 | | | 615,000 | | | | 470,475 | |
| | | | | | | |
| | | | | | | 2,096,836 | |
Construction Materials—0.7% | | | | | | | | |
Building Materials Corp. of America, 6.75% Sr. Nts., 5/1/214 | | | 435,000 | | | | 457,838 | |
Ply Gem Industries, Inc., 8.25% Sr. Sec. Nts., 2/15/18 | | | 325,000 | | | | 284,781 | |
| | | | | | | |
| | | | | | | 742,619 | |
Containers & Packaging—0.8% | | | | | | | | |
Polymer Group, Inc., 7.75% Sr. Sec. | | | | | | | | |
Nts., 2/1/194 | | | 650,000 | | | | 676,000 | |
Solo Cup Co., 8.50% Sr. Sub. | | | | | | | | |
Nts., 2/15/14 | | | 245,000 | | | | 226,625 | |
| | | | | | | |
| | | | | | | 902,625 | |
Metals & Mining—1.0% | | | | | | | | |
Aleris International, Inc., 7.625% Sr. Unsec. Nts., 2/15/18 | | | 1,050,000 | | | | 1,029,000 | |
Novelis, Inc., 8.75% Sr. Unsec. Nts., 12/15/20 | | | 135,000 | | | | 145,463 | |
| | | | | | | |
| | | | | | | 1,174,463 | |
Paper & Forest Products—3.1% | | | | | | | | |
ABI Escrow Corp., 10.25% Sr. Sec. Nts., 10/15/184 | | | 369,000 | | | | 408,668 | |
Appleton Papers, Inc., 10.50% Sr. Sec. Nts., 6/15/154 | | | 985,000 | | | | 976,381 | |
Catalyst Paper Corp., 11% Sr. Sec. Nts., 12/15/164 | | | 1,117,000 | | | | 597,595 | |
Mercer International, Inc., 9.50% Sr. Unsec. Nts., 12/1/17 | | | 475,000 | | | | 488,063 | |
NewPage Corp., 11.375% Sr. Sec. Nts., 12/31/146 | | | 1,025,000 | | | | 763,625 | |
Norske Skogindustrier ASA, 6.125% Unsec. Bonds, 10/15/155 | | | 375,000 | | | | 226,875 | |
| | | | | | | |
| | | | | | | 3,461,207 | |
Telecommunication Services—4.0% | | | | | | | | |
Diversified Telecommunication Services—2.3% | | | | | | | | |
Cincinnati Bell, Inc.: | | | | | | | | |
8.25% Sr. Nts., 10/15/17 | | | 335,000 | | | | 338,350 | |
8.75% Sr. Unsec. Sub. Nts., 3/15/18 | | | 480,000 | | | | 448,200 | |
Intelsat Bermuda Ltd.: | | | | | | | | |
11.25% Sr. Unsec. Nts., 2/4/17 | | | 585,000 | | | | 567,450 | |
11.50% Sr. Unsec. Nts., 2/4/173 | | | 710 | | | | 687 | |
Level 3 Financing, Inc.: | | | | | | | | |
9.25% Sr. Unsec. Unsub. Nts., 11/1/14 | | | 80,000 | | | | 82,200 | |
9.375% Sr. Unsec. Unsub. Nts., 4/1/19 | | | 540,000 | | | | 566,325 | |
Windstream Corp., 7.50% Sr. Unsec. Nts., 6/1/224 | | | 570,000 | | | | 570,000 | |
| | | | | | | |
| | | | | | | 2,573,212 | |
Wireless Telecommunication Services—1.7% | | | | | | | | |
Cricket Communications, Inc., 7.75% Sr. Unsec. Nts., 10/15/20 | | | 700,000 | | | | 614,250 | |
MetroPCS Wireless, Inc., 6.625% Sr. Unsec. Nts., 11/15/20 | | | 510,000 | | | | 476,850 | |
Nextel Communications, Inc., 7.375% Sr. Nts., Series D, 8/1/15 | | | 590,000 | | | | 542,800 | |
Sprint Capital Corp., 8.75% Nts., 3/15/32 | | | 135,000 | | | | 109,856 | |
Sprint Nextel Corp., 9% Sr. Unsec. Nts., 11/15/184 | | | 220,000 | | | | 231,550 | |
| | | | | | | |
| | | | | | | 1,975,306 | |
Utilities—3.7% | | | | | | | | |
Electric Utilities—1.9% | | | | | | | | |
Edison Mission Energy, 7% Sr. Unsec. Nts., 5/15/17 | | | 835,000 | | | | 546,925 | |
13 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Electric Utilities Continued | | | | | | | | |
Energy Future Intermediate Holding Co. LLC, 10% Sr. Sec. Nts., 12/1/20 | | $ | 527,000 | | | $ | 558,620 | |
Texas Competitive Electric Holdings Co. LLC: | | | | | | | | |
10.25% Sr. Unsec. Nts., Series A, 11/1/15 | | | 2,325,000 | | | | 837,000 | |
10.25% Sr. Unsec. Nts., Series B, 11/1/15 | | | 410,000 | | | | 143,500 | |
| | | | | | | |
| | | | | | | 2,086,045 | |
Energy Traders—1.7% | | | | | | | | |
AES Corp. (The), 8% Sr. Unsec. Unsub. Nts., 10/15/17 | | | 245,000 | | | | 270,725 | |
Calpine Corp., 7.50% Sr. Sec. Nts., 2/15/214 | | | 255,000 | | | | 274,125 | |
Energy Future Holdings Corp., 10% Sr. Sec. Nts., 1/15/20 | | | 530,000 | | | | 559,150 | |
First Wind Capital LLC, 10.25% Sr. Sec. Nts., 6/1/184 | | | 75,000 | | | | 74,063 | |
Foresight Energy LLC, 9.625% Sr. Unsec. Nts., 8/15/174 | | | 540,000 | | | | 556,200 | |
NRG Energy, Inc., 7.625% Sr. Unsec. Nts., 1/15/18 | | | 160,000 | | | | 160,800 | |
United Maritime Group LLC, 11.75% Sr. Sec. Nts., 6/15/15 | | | 15,000 | | | | 15,338 | |
| | | | | | | |
| | | | | | | 1,910,401 | |
Gas Utilities—0.1% | | | | | | | | |
Ferrellgas LP/Ferrellgas Finance Corp., 6.50% Sr. Unsec. Nts., 5/1/21 | | | 170,000 | | | | 150,450 | |
| | | | | | | |
Total Corporate Bonds and Notes (Cost $98,243,294) | | | | | | | 91,267,098 | |
| |
| | Shares | | | | | |
|
Preferred Stocks—1.4% | | | | | | | | |
Ally Financial, Inc., 7%, Non-Vtg.4 | | | 894 | | | | 640,914 | |
GMAC Capital Trust I, 8.125% Cum. | | | 10,000 | | | | 193,400 | |
Greektown Superholdings, Inc., Series A-17 | | | 11,550 | | | | 751,905 | |
| | | | | | | |
Total Preferred Stocks (Cost $2,195,603) | | | | | | | 1,586,219 | |
Common Stocks—3.0% | | | | | | | | |
AbitibiBowater, Inc.7 | | | 27,638 | | | | 402,133 | |
American Media Operations, Inc.7 | | | 58,065 | | | | 929,040 | |
Dana Holding Corp.7 | | | 19,738 | | | | 239,817 | |
Gaylord Entertainment Co., Cl. A7 | | | 12,561 | | | | 303,223 | |
Global Aviation Holdings, Inc.7 | | | 300 | | | | 3,000 | |
Greektown Superholdings, Inc.7 | | | 874 | | | | 52,929 | |
Huntsman Corp. | | | 6,611 | | | | 66,110 | |
Kaiser Aluminum Corp. | | | 458 | | | | 21,013 | |
LyondellBasell Industries NV, Cl. A | | | 12,828 | | | | 416,782 | |
Orbcomm, Inc.7 | | | 1,127 | | | | 3,370 | |
Range Resources Corp. | | | 1,965 | | | | 121,712 | |
Solutia, Inc.7 | | | 5,507 | | | | 95,161 | |
Visteon Corp.7 | | | 10,807 | | | | 539,702 | |
Walter Industries, Inc. | | | 1,011 | | | | 61,226 | |
Whiting Petroleum Corp.7 | | | 2,034 | | | | 94,967 | |
| | | | | | | |
Total Common Stocks (Cost $5,763,505) | | | | | | | 3,350,185 | |
| |
| | Units | | | | | |
|
Rights, Warrants and Certificates—0.0% | | | | | | | | |
MediaNews Group, Inc. Wts., Strike Price $0.001, Exp. 3/19/177 (Cost $3,168,495) | | | 11,017 | | | | 396 | |
| |
| | Shares | | | | | |
|
Investment Company—10.6% | | | | | | | | |
Oppenheimer Institutional | | | | | | | | |
Money Market Fund, | | | | | | | | |
Cl. E, 0.20%8,9 (Cost $11,964,562) | | | 11,964,562 | | | | 11,964,562 | |
Total Investments, at Value (Cost $127,226,154) | | | 100.9 | % | | | 114,047,899 | |
Liabilities in Excess of Other Assets | | | (0.9 | ) | | | (971,484 | ) |
| | |
Net Assets | | | 100.0 | % | | $ | 113,076,415 | |
| | |
Footnotes to Statement of Investments
* | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
1. | | Represents the current interest rate for a variable or increasing rate security. |
|
2. | | When-issued security or delayed delivery to be delivered and settled after December 30, 2011. See Note 1 of the accompanying Notes. |
|
3. | | Interest or dividend is paid-in-kind, when applicable. |
|
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 $26,455,142 or 23.40% of the Fund’s net assets as of December 30, 2011. |
14 | OPPENHEIMER HIGH INCOME FUND/VA
| | |
5. | | Restricted security. The aggregate value of restricted securities as of December 30, 2011 was $1,630,541, which represents 1.44% of the Fund’s net assets. See Note 6 of the accompanying Notes. Information concerning restricted securities is as follows: |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Unrealized | |
| | Acquisition | | | | | | | | | | | Appreciation | |
Security | | Dates | | | Cost | | | Value | | | (Depreciation) | |
|
Cleaver-Brooks, Inc., 12.25% Sr. Sec. Nts., 5/1/16 | | | 4/21/10-5/3/11 | | | $ | 688,172 | | | $ | 675,716 | | | $ | (12,456 | ) |
Norske Skogindustrier ASA, 6.125% Unsec. Bonds, 10/15/15 | | | 3/7/11-4/6/11 | | | | 341,158 | | | | 226,875 | | | | (114,283 | ) |
Southern States Cooperative, Inc., 11.25% Sr. Nts., 5/15/15 | | | 4/28/10-5/4/11 | | | | 703,283 | | | | 727,950 | | | | 24,667 | |
| | | | | | |
| | | | | | $ | 1,732,613 | | | $ | 1,630,541 | | | $ | (102,072 | ) |
| | | | | | |
| | |
6. | | 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 original contractual interest rate. See Note 1 of the accompanying Notes. |
|
7. | | Non-income producing security. |
|
8. | | Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 30, 2011, 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 period in which the issuer was an affiliate are as follows: |
| | | | | | | | | | | | | | | | |
| | Shares | | | Gross | | | Gross | | | Shares | |
| | December 31, 2010 | | | Additions | | | Reductions | | | December 30, 2011 | |
|
Oppenheimer Institutional Money Market Fund, Cl. E | | | 4,033,152 | | | | 64,468,224 | | | | 56,536,814 | | | | 11,964,562 | |
| | | | | | | | |
| | Value | | | Income | |
|
Oppenheimer Institutional Money Market Fund, Cl. E | | $ | 11,964,562 | | | $ | 9,835 | |
| | |
9. | | Rate shown is the 7-day yield as of December 30, 2011. |
Valuation Inputs
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 table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 30, 2011 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: | | | | | | | | | | | | | | | | |
Loan Participations | | $ | — | | | $ | 5,879,439 | | | $ | — | | | $ | 5,879,439 | |
Corporate Bonds and Notes | | | — | | | | 91,267,098 | | | | — | | | | 91,267,098 | |
Preferred Stocks | | | — | | | | 834,314 | | | | 751,905 | | | | 1,586,219 | |
Common Stocks | | | 1,825,514 | | | | 1,468,742 | | | | 55,929 | | | | 3,350,185 | |
Rights, Warrants and Certificates | | | — | | | | — | | | | 396 | | | | 396 | |
Investment Company | | | 11,964,562 | | | | — | | | | — | | | | 11,964,562 | |
| | |
Total Assets | | $ | 13,790,076 | | | $ | 99,449,593 | | | $ | 808,230 | | | $ | 114,047,899 | |
| | |
Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
15 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
Footnotes to Statement of Investments Continued
The following is a reconciliation of assets in which significant unobservable inputs (level 3) were used in determining fair value:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Change in | | | | | | | | | | | |
| | | | | | | | | | unrealized | | | | | | | Transfers | | | | |
| | Value as of | | | Realized | | | appreciation/ | | | | | | | out of | | | Value as of | |
| | December 31, 2010 | | | gain (loss) | | | depreciation | | | Sales | | | Level 3 | | | December 30, 2011 | |
|
Assets Table | | | | | | | | | | | | | | | | | | | | | | | | |
Investments, at Value: | | | | | | | | | | | | | | | | | | | | | | | | |
Common Stocks | | $ | 1,036,161 | | | $ | (208,776 | ) | | $ | 959,338 | | | $ | — | | | $ | (1,730,794 | )a | | $ | 55,929 | |
Corporate Bonds and Notes | | | 87,082 | | | | (1,591,368 | ) | | | 1,612,742 | | | | (108,456 | ) | | | — | | | | — | |
Preferred Stocks | | | 1,226,957 | | | | (1,097,476 | ) | | | 622,424 | | | | — | | | | — | | | | 751,905 | |
Rights, Warrants and Certificates | | | 403 | | | | (4,340 | ) | | | 4,333 | | | | — | | | | — | | | | 396 | |
| | |
Total Assets | | $ | 2,350,603 | | | $ | (2,901,960 | ) | | $ | 3,198,837 | | | $ | (108,456 | ) | | $ | (1,730,794 | ) | | $ | 808,230 | |
| | |
| | |
a. | | Transferred from Level 3 because of the presence of a readily available unadjusted quoted market price for these securities. |
The total change in unrealized appreciation/depreciation included in the Statement of Operations attributable to Level 3 investments still held at December 30, 2011 includes:
| | | | |
| | Change in unrealized | |
| | appreciation/depreciation | |
|
Common Stocks | | $ | (33,440 | ) |
Preferred Stocks | | | (403,095 | ) |
Rights, Warrants and Certificates | | | (3,168,099 | ) |
| | | |
Total | | $ | (3,604,634 | ) |
| | | |
See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.
See accompanying Notes to Financial Statements.
16 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 30, 20111
| | | | |
|
Assets | | | | |
Investments, at value—see accompanying statement of investments: | | | | |
Unaffiliated companies (cost $115,261,592) | | $ | 102,083,337 | |
Affiliated companies (cost $11,964,562) | | | 11,964,562 | |
| | | |
| | | 114,047,899 | |
Cash | | | 68,417 | |
Receivables and other assets: | | | | |
Interest, dividends and principal paydowns | | | 2,238,917 | |
Shares of beneficial interest sold | | | 154,689 | |
Investments sold | | | 34,212 | |
Other | | | 14,135 | |
| | | |
Total assets | | | 116,558,269 | |
| | | | |
Liabilities | | | | |
Payables and other liabilities: | | | | |
Investments purchased (including $3,051,790 purchased on a when-issued or delayed delivery basis) | | | 3,308,552 | |
Shareholder communications | | | 56,741 | |
Shares of beneficial interest redeemed | | | 31,872 | |
Distribution and service plan fees | | | 12,875 | |
Trustees’ compensation | | | 12,415 | |
Transfer and shareholder servicing agent fees | | | 9,619 | |
Other | | | 49,780 | |
| | | |
Total liabilities | | | 3,481,854 | |
| | | | |
Net Assets | | $ | 113,076,415 | |
| | | |
| | | | |
Composition of Net Assets | | | | |
Par value of shares of beneficial interest | | $ | 59,230 | |
Additional paid-in capital | | | 337,809,203 | |
Accumulated net investment income | | | 10,456,939 | |
Accumulated net realized loss on investments | | | (222,070,702 | ) |
Net unrealized depreciation on investments | | | (13,178,255 | ) |
| | | |
Net Assets | | $ | 113,076,415 | |
| | | |
| | | | |
Net Asset Value Per Share | | | | |
Non-Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $47,499,698 and 24,979,229 shares of beneficial interest outstanding) | | $ | 1.90 | |
Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $54,393,841 and 28,460,077 shares of beneficial interest outstanding) | | $ | 1.91 | |
Class 3 Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $4,034,676 and 2,101,852 shares of beneficial interest outstanding) | | $ | 1.92 | |
Class 4 Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $7,148,200 and 3,689,262 shares of beneficial interest outstanding) | | $ | 1.94 | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
17 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 30, 20111
| | | | |
|
Investment Income | | | | |
Interest | | $ | 11,742,695 | |
Dividends: | | | | |
Unaffiliated companies (net of foreign withholding taxes of $14,196) | | | 212,439 | |
Affiliated companies | | | 9,835 | |
| | | |
Total investment income | | | 11,964,969 | |
Expenses | | | | |
Management fees | | | 965,572 | |
Distribution and service plan fees: | | | | |
Service shares | | | 151,041 | |
Class 4 shares | | | 19,634 | |
Transfer and shareholder servicing agent fees: | | | | |
Non-Service shares | | | 55,024 | |
Service shares | | | 60,423 | |
Class 3 shares | | | 5,436 | |
Class 4 shares | | | 7,859 | |
Shareholder communications: | | | | |
Non-Service shares | | | 24,900 | |
Service shares | | | 27,028 | |
Class 3 shares | | | 2,462 | |
Class 4 shares | | | 3,470 | |
Custodian fees and expenses | | | 31,643 | |
Trustees’ compensation | | | 9,745 | |
Administration service fees | | | 1,500 | |
Other | | | 68,359 | |
| | | |
Total expenses | | | 1,434,096 | |
Less waivers and reimbursements of expenses | | | (298,448 | ) |
| | | |
Net expenses | | | 1,135,648 | |
| | | | |
Net Investment Income | | | 10,829,321 | |
| | | | |
Realized and Unrealized Gain (Loss) | | | | |
Net realized gain (loss) on: | | | | |
Investments from unaffiliated companies | | | 736,886 | |
Swap contracts | | | (48,715 | ) |
| | | |
Net realized gain | | | 688,171 | |
Net change in unrealized appreciation/depreciation on investments | | | (13,278,671 | ) |
| | | |
Net Decrease in Net Assets Resulting from Operations | | $ | (1,761,179 | ) |
| | | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
18 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
| | | | | | | | |
| | Year Ended | | | Year Ended | |
| | December 30, | | | December 31, | |
| | 20111 | | | 2010 | |
|
Operations | | | | | | | | |
Net investment income | | $ | 10,829,321 | | | $ | 12,056,923 | |
Net realized gain | | | 688,171 | | | | 6,278,337 | |
Net change in unrealized appreciation/depreciation | | | (13,278,671 | ) | | | (249,331 | ) |
| | |
Net increase (decrease) in net assets resulting from operations | | | (1,761,179 | ) | | | 18,085,929 | |
Dividends and/or Distributions to Shareholders | | | | | | | | |
Dividends from net investment income: | | | | | | | | |
Non-Service shares | | | (5,402,411 | ) | | | (3,674,586 | ) |
Service shares | | | (5,518,442 | ) | | | (3,877,767 | ) |
Class 3 shares | | | (555,527 | ) | | | (304,126 | ) |
Class 4 shares | | | (704,748 | ) | | | (385,856 | ) |
| | |
| | | (12,181,128 | ) | | | (8,242,335 | ) |
| | | | | | | | |
Beneficial Interest Transactions | | | | | | | | |
Net increase (decrease) in net assets resulting from beneficial interest transactions: | | | | | | | | |
Non-Service shares | | | (8,185,815 | ) | | | (10,126,348 | ) |
Service shares | | | (2,768,423 | ) | | | (5,260,981 | ) |
Class 3 shares | | | (1,395,931 | ) | | | 929,124 | |
Class 4 shares | | | 485,879 | | | | (118,291 | ) |
| | |
| | | (11,864,290 | ) | | | (14,576,496 | ) |
| | | | | | | | |
Net Assets | | | | | | | | |
Total decrease | | | (25,806,597 | ) | | | (4,732,902 | ) |
Beginning of period | | | 138,883,012 | | | | 143,615,914 | |
| | |
End of period (including accumulated net investment income of $10,456,939 and $11,799,334, respectively) | | $ | 113,076,415 | | | $ | 138,883,012 | |
| | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
19 | OPPENHEIMER HIGH INCOME FUND / VA
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Non-Service Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 2.13 | | | $ | 1.98 | | | $ | 1.58 | | | $ | 7.95 | | | $ | 8.55 | |
|
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income2 | | | .17 | | | | .18 | | | | .17 | | | | .54 | | | | .57 | |
Net realized and unrealized gain (loss) | | | (.21 | ) | | | .10 | | | | .23 | | | | (6.44 | ) | | | (.56 | ) |
| | |
Total from investment operations | | | (.04 | ) | | | .28 | | | | .40 | | | | (5.90 | ) | | | .01 | |
|
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.19 | ) | | | (.13 | ) | | | — | | | | (.47 | ) | | | (.61 | ) |
|
Net asset value, end of period | | $ | 1.90 | | | $ | 2.13 | | | $ | 1.98 | | | $ | 1.58 | | | $ | 7.95 | |
| | |
| | | | | | | | | | | | | | | | | | | | |
|
Total Return, at Net Asset Value3 | | | (2.34 | )% | | | 14.81 | % | | | 25.32 | % | | | (78.67 | )% | | | (0.10 | )% |
|
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 47,500 | | | $ | 61,563 | | | $ | 67,385 | | | $ | 111,040 | | | $ | 294,819 | |
|
Average net assets (in thousands) | | $ | 54,997 | | | $ | 59,598 | | | $ | 71,782 | | | $ | 211,186 | | | $ | 335,702 | |
|
Ratios to average net assets:4 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 8.55 | % | | | 9.01 | % | | | 9.78 | % | | | 9.30 | % | | | 6.96 | % |
Total expenses5 | | | 0.98 | % | | | 0.98 | % | | | 0.94 | % | | | 0.80 | % | | | 0.75 | % |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 0.75 | % | | | 0.69 | % | | | 0.57 | % | | | 0.78 | % | | | 0.74 | % |
|
Portfolio turnover rate | | | 54 | % | | | 132 | % | | | 128 | % | | | 53 | %6 | | | 67 | %6 |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
4. | | Annualized for periods less than one full year. |
|
5. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 0.98 | % |
Year Ended December 31, 2010 | | | 0.98 | % |
Year Ended December 31, 2009 | | | 0.96 | % |
Year Ended December 31, 2008 | | | 0.80 | % |
Year Ended December 31, 2007 | | | 0.76 | % |
| | |
6. | | The portfolio turnover rate excludes purchase and sale transactions of To Be Announced (TBA) mortgage-related securities as follows: |
| | | | | | | | |
| | Purchase Transactions | | | Sale Transactions | |
Year Ended December 31, 2008 | | $ | 40,240,084 | | | $ | 41,196,921 | |
Year Ended December 31, 2007 | | $ | 30,798,147 | | | $ | 24,096,458 | |
See accompanying Notes to Financial Statements.
20 | OPPENHEIMER HIGH INCOME FUND/VA
FINANCIAL HIGHLIGHTS Continued
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Service Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 2.14 | | | $ | 1.99 | | | $ | 1.58 | | | $ | 7.89 | | | $ | 8.50 | |
|
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income2 | | | .17 | | | | .17 | | | | .16 | | | | .54 | | | | .55 | |
Net realized and unrealized gain (loss) | | | (.21 | ) | | | .10 | | | | .25 | | | | (6.40 | ) | | | (.57 | ) |
| | |
Total from investment operations | | | (.04 | ) | | | .27 | | | | .41 | | | | (5.86 | ) | | | (.02 | ) |
|
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.19 | ) | | | (.12 | ) | | | — | | | | (.45 | ) | | | (.59 | ) |
|
Net asset value, end of period | | $ | 1.91 | | | $ | 2.14 | | | $ | 1.99 | | | $ | 1.58 | | | $ | 7.89 | |
| | |
| | | | | | | | | | | | | | | | | | | | |
|
Total Return, at Net Asset Value3 | | | (2.56 | )% | | | 14.44 | % | | | 25.95 | % | | | (78.57 | )% | | | (0.47 | )% |
| | | | | | | | | | | | | | | | | | | | |
|
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 54,394 | | | $ | 63,713 | | | $ | 64,440 | | | $ | 43,375 | | | $ | 157,333 | |
|
Average net assets (in thousands) | | $ | 60,391 | | | $ | 63,661 | | | $ | 54,202 | | | $ | 116,236 | | | $ | 169,569 | |
|
Ratios to average net assets:4 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 8.31 | % | | | 8.76 | % | | | 9.60 | % | | | 9.13 | % | | | 6.71 | % |
Total expenses5 | | | 1.23 | % | | | 1.23 | % | | | 1.21 | % | | | 1.05 | % | | | 1.01 | % |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 1.00 | % | | | 0.94 | % | | | 0.80 | % | | | 1.03 | % | | | 1.00 | % |
|
Portfolio turnover rate | | | 54 | % | | | 132 | % | | | 128 | % | | | 53 | %6 | | | 67 | %6 |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
4. | | Annualized for periods less than one full year. |
|
5. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 1.23 | % |
Year Ended December 31, 2010 | | | 1.23 | % |
Year Ended December 31, 2009 | | | 1.23 | % |
Year Ended December 31, 2008 | | | 1.05 | % |
Year Ended December 31, 2007 | | | 1.02 | % |
| | |
6. | | The portfolio turnover rate excludes purchase and sale transactions of To Be Announced (TBA) mortgage-related securities as follows: |
| | | | | | | | |
| | Purchase Transactions | | | Sale Transactions | |
| | | | |
Year Ended December 31, 2008 | | $ | 40,240,084 | | | $ | 41,196,921 | |
Year Ended December 31, 2007 | | $ | 30,798,147 | | | $ | 24,096,458 | |
See accompanying Notes to Financial Statements.
21 | OPPENHEIMER HIGH INCOME FUND/VA
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Class 3 Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 20072 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 2.14 | | | $ | 1.99 | | | $ | 1.57 | | | $ | 7.98 | | | $ | 8.26 | |
|
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income3 | | | .17 | | | | .18 | | | | .17 | | | | .56 | | | | .37 | |
Net realized and unrealized gain (loss) | | | (.20 | ) | | | .10 | | | | .25 | | | | (6.50 | ) | | | (.65 | ) |
| | |
Total from investment operations | | | (.03 | ) | | | .28 | | | | .42 | | | | (5.94 | ) | | | (.28 | ) |
|
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.19 | ) | | | (.13 | ) | | | — | | | | (.47 | ) | | | — | |
|
Net asset value, end of period | | $ | 1.92 | | | $ | 2.14 | | | $ | 1.99 | | | $ | 1.57 | | | $ | 7.98 | |
| | |
| | | | | | | | | | | | | | | | | | | | |
|
Total Return, at Net Asset Value4 | | | (1.88 | )% | | | 14.69 | % | | | 26.75 | % | | | (78.89 | )% | | | (3.39 | )% |
| | | | | | | | | | | | | | | | | | | | |
|
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 4,034 | | | $ | 6,034 | | | $ | 4,684 | | | $ | 1,582 | | | $ | 4,921 | |
|
Average net assets (in thousands) | | $ | 5,432 | | | $ | 5,279 | | | $ | 3,568 | | | $ | 5,292 | | | $ | 3,750 | |
|
Ratios to average net assets:5 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 8.52 | % | | | 8.97 | % | | | 9.86 | % | | | 9.29 | % | | | 6.90 | % |
Total expenses6 | | | 0.98 | % | | | 0.99 | % | | | 0.97 | % | | | 0.80 | % | | | 0.76 | % |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 0.75 | % | | | 0.69 | % | | | 0.53 | % | | | 0.78 | % | | | 0.75 | % |
|
Portfolio turnover rate | | | 54 | % | | | 132 | % | | | 128 | % | | | 53 | %7 | | | 67 | %7 |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | For the period from May 1, 2007 (inception of offering) to December 31, 2007. |
|
3. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
4. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
5. | | Annualized for periods less than one full year. |
|
6. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 0.98 | % |
Year Ended December 31, 2010 | | | 0.99 | % |
Year Ended December 31, 2009 | | | 0.99 | % |
Year Ended December 31, 2008 | | | 0.80 | % |
Period Ended December 31, 2007 | | | 0.77 | % |
| | |
|
7. | | The portfolio turnover rate excludes purchase and sale transactions of To Be Announced (TBA) mortgage-related securities as follows: |
| | | | | | | | |
| | Purchase Transactions | | | Sale Transactions | |
|
Year Ended December 31, 2008 | | $ | 40,240,084 | | | $ | 41,196,921 | |
Period Ended December 31, 2007 | | $ | 30,798,147 | | | $ | 24,096,458 | |
See accompanying Notes to Financial Statements.
22 | OPPENHEIMER HIGH INCOME FUND/VA
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Class 4 Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 20072 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 2.16 | | | $ | 2.01 | | | $ | 1.59 | | | $ | 7.97 | | | $ | 8.26 | |
|
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income3 | | | .17 | | | | .18 | | | | .16 | | | | .54 | | | | .36 | |
Net realized and unrealized gain (loss) | | | (.20 | ) | | | .09 | | | | .26 | | | | (6.46 | ) | | | (.65 | ) |
| | |
Total from investment operations | | | (.03 | ) | | | .27 | | | | .42 | | | | (5.92 | ) | | | (.29 | ) |
|
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.19 | ) | | | (.12 | ) | | | — | | | | (.46 | ) | | | — | |
|
Net asset value, end of period | | $ | 1.94 | | | $ | 2.16 | | | $ | 2.01 | | | $ | 1.59 | | | $ | 7.97 | |
| | |
| | | | | | | | | | | | | | | | | | | | |
|
Total Return, at Net Asset Value4 | | | (2.06 | )% | | | 14.27 | % | | | 26.42 | % | | | (78.63 | )% | | | (3.51 | )% |
| | | | | | | | | | | | | | | | | | | | |
|
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 7,148 | | | $ | 7,573 | | | $ | 7,107 | | | $ | 4,167 | | | $ | 9,476 | |
|
Average net assets (in thousands) | | $ | 7,852 | | | $ | 7,278 | | | $ | 6,285 | | | $ | 10,658 | | | $ | 7,201 | |
|
Ratios to average net assets:5 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 8.29 | % | | | 8.74 | % | | | 9.62 | % | | | 9.00 | % | | | 6.61 | % |
Total expenses6 | | | 1.23 | % | | | 1.23 | % | | | 1.19 | % | | | 1.07 | % | | | 1.05 | % |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 1.00 | % | | | 0.94 | % | | | 0.80 | % | | | 1.05 | % | | | 1.04 | % |
|
Portfolio turnover rate | | | 54 | % | | | 132 | % | | | 128 | % | | | 53 | %7 | | | 67 | %7 |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | For the period from May 1, 2007 (inception of offering) to December 31, 2007. |
|
3. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
4. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
5. | | Annualized for periods less than one full year. |
|
6. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 1.23 | % |
Year Ended December 31, 2010 | | | 1.23 | % |
Year Ended December 31, 2009 | | | 1.21 | % |
Year Ended December 31, 2008 | | | 1.07 | % |
Period Ended December 31, 2007 | | | 1.06 | % |
| | |
7. | | The portfolio turnover rate excludes purchase and sale transactions of To Be Announced (TBA) mortgage-related securities as follows: |
| | | | | | | | |
| | Purchase Transactions | | | Sale Transactions | |
|
Year Ended December 31, 2008 | | $ | 40,240,084 | | | $ | 41,196,921 | |
Period Ended December 31, 2007 | | $ | 30,798,147 | | | $ | 24,096,458 | |
See accompanying Notes to Financial Statements.
23 | OPPENHEIMER HIGH INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Oppenheimer High Income Fund/VA (the “Fund”) is a separate series of Oppenheimer Variable Account Funds, an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund’s investment objective is to seek a high level of current income from investment in high-yield, fixed-income securities. The Fund’s investment adviser is OppenheimerFunds, Inc. (the “Manager”).
The Fund offers Non-Service, Service, Class 3 and Class 4 shares. All classes are sold at their offering price, which is the net asset value per share, to separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. The classes of shares being designated as Service shares and Class 4 shares are subject to a distribution and service plan. All classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. The Fund assesses a 1% fee on the proceeds of Class 3 and Class 4 shares that are redeemed (either by selling or exchanging to another Oppenheimer fund or other investment option offered through your variable life insurance or variable annuity contract) within 60 days of their purchase. The fee, which is retained by the Fund, is accounted for as an addition to paid-in capital.
The following is a summary of significant accounting policies consistently followed by the Fund.
Fiscal Year End. Since December 30, 2011 represents the last day during the Fund’s 2011 fiscal year on which the New York Stock Exchange was open for trading, the Fund’s financial statements have been presented through that date to maintain consistency with the Fund’s net asset value calculations used for shareholder transactions.
Securities Valuation. The Fund calculates the net asset value of its shares as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading.
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. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” observable market inputs other than unadjusted quoted prices are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.
Securities traded on a registered U.S. securities exchange 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. Securities whose principal exchange is NASDAQ® are valued based on the official closing prices reported by NASDAQ prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.
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.
U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based
24 | OPPENHEIMER HIGH INCOME FUND/VA
upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.
“Money market-type” debt instruments with remaining maturities 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.
In the absence of a current price quotation obtained from an independent pricing service or broker-dealer, including for securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund’s assets are valued but after the close of the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities 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 adjusted for any discounts related to 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. As of December 30, 2011, the Manager determined the fair value of certain common stock at the last traded price. For certain common stock and related preferred stock, both of which do not trade, the Manager has determined the fair value of these securities using internal models that utilize quarterly financial statements and manager assumptions using comparable security inputs. For certain warrants received in a bankruptcy reorganization that do not trade, the Manager has determined the fair value of these securities based on the residual value of the original bonds. Such investments have been classified as Level 3 instruments.
There have been no significant changes to the fair valuation methodologies of the Fund during the period.
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.
As of December 30, 2011, 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 | | $ | 3,051,790 | |
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 as of December 30, 2011 is as follows:
| | | | |
|
Cost | | $ | 975,916 | |
Market Value | | $ | 771,238 | |
Market Value as a % of Net Assets | | | 0.68 | % |
25 | OPPENHEIMER HIGH INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
1. Significant Accounting Policies Continued
Investment in Oppenheimer Institutional Money Market Fund. The Fund is permitted to invest daily available cash balances in an affiliated money market fund. The Fund may invest the available cash in Class E shares of Oppenheimer Institutional Money Market Fund (“IMMF”) to seek current income while preserving liquidity. IMMF is a registered open-end management investment company, regulated as a money market fund under the Investment Company Act of 1940, as amended. The Manager is also the investment adviser of IMMF. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of IMMF’s Class E expenses, including its 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 IMMF.
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
Federal Taxes. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. Therefore, no federal income or excise tax provision is required. The Fund files income tax returns in U.S. federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remain open for the three preceding fiscal reporting period ends.
The tax components of capital shown in the following table represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes.
| | | | | | | | | | | | |
| | | | | | | | | | Net Unrealized | |
| | | | | | | | | | Depreciation | |
| | | | | | | | | | Based on Cost | |
Undistributed | | Undistributed | | | Accumulated | | | of Securities and Other | |
Net Investment | | Long-Term | | | Loss | | | Investments for Federal | |
Income | | Gain | | | Carryforward1,2,3,4,5 | | | Income Tax Purposes | |
|
$10,661,122 | | $ | — | | | $ | 222,009,823 | | | $ | 13,406,221 | |
| | |
1. | | As of December 30, 2011, the Fund had $220,562,166 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. Details of the capital loss carryforwards are included in the table below. Capital loss carryovers with no expiration, if any, must be utilized prior to those with expiration dates. |
| | | | |
Expiring | | | | |
|
2012 | | $ | 128,504 | |
2016 | | | 48,495,519 | |
2017 | | | 171,938,143 | |
| | | |
Total | | $ | 220,562,166 | |
| | | |
| | |
2. | | As of December 30, 2011, the Fund had $1,447,657 of post-October losses available to offset future realized capital gains, if any. |
|
3. | | During the fiscal year ended December 30, 2011, the Fund utilized $1,949,628 of capital loss carryforward to offset capital gains realized in that fiscal year. |
|
4. | | During the fiscal year ended December 31, 2010, the Fund utilized $4,432,223 of capital loss carryforward to offset capital gains realized in that fiscal year. |
|
5. | | During the fiscal year ended December 30, 2011, $6,579,675 of unused capital loss carryforward expired. |
26 | OPPENHEIMER HIGH INCOME FUND/VA
Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund.
Accordingly, the following amounts have been reclassified for December 30, 2011. Net assets of the Fund were unaffected by the reclassifications.
| | | | | | | | |
| | | | | Reduction | |
| | Increase | | | to Accumulated | |
Reduction | | to Accumulated Net | | | Net Realized Loss | |
to Paid-in Capital | | Investment Income | | | on Investments | |
|
$6,579,675 | | $ | 9,412 | | | $ | 6,570,263 | |
The tax character of distributions paid during the years ended December 30, 2011 and December 31, 2010 was as follows:
| | | | | | | | |
| | Year Ended | | | Year Ended | |
| | December 30, 2011 | | | December 31, 2010 | |
|
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 12,181,128 | | | $ | 8,242,335 | |
The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 30, 2011 are noted in the following table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.
| | | | |
|
Federal tax cost of securities | | $ | 127,393,293 | |
Federal tax cost of other investments | | | 60,827 | |
| | | |
Total federal tax cost | | $ | 127,454,120 | |
| | | |
Gross unrealized appreciation | | $ | 2,140,166 | |
Gross unrealized depreciation | | | (15,546,387 | ) |
| | | |
Net unrealized depreciation | | $ | (13,406,221 | ) |
| | | |
Trustees’ Compensation. The Board of Trustees has adopted a compensation deferral plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of “Other” within the asset section of the Statement of Assets and Liabilities. Deferral of trustees’ fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund’s assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance with the compensation deferral plan.
Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles, are recorded on the ex-dividend date. Income and capital gain distributions, if any, are declared and paid annually or at other times as deemed necessary by the Manager.
27 | OPPENHEIMER HIGH INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
1. Significant Accounting Policies Continued
Investment Income. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is recognized on an accrual basis. Discount and premium, which are included in interest income on the Statement of Operations, are amortized or accreted daily.
Custodian Fees. “Custodian fees and expenses” in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by the Fund, at a rate equal to the Federal Funds Rate plus 0.50%. The “Reduction to custodian expenses” line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings.
Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost.
Indemnifications. The Fund’s organizational documents provide current and former trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
| | | | | | | | | | | | | | | | |
| | Year Ended December 30, 2011 | | | Year Ended December 31, 2010 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
|
Non-Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 4,435,498 | | | $ | 8,942,368 | | | | 11,152,476 | | | $ | 21,983,381 | |
Dividends and/or distributions reinvested | | | 2,648,241 | | | | 5,402,411 | | | | 1,954,567 | | | | 3,674,586 | |
Redeemed | | | (11,071,648 | ) | | | (22,530,594 | ) | | | (18,147,101 | ) | | | (35,784,315 | ) |
| | |
Net decrease | | | (3,987,909 | ) | | $ | (8,185,815 | ) | | | (5,040,058 | ) | | $ | (10,126,348 | ) |
| | |
| | | | | | | | | | | | | | | | |
Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 3,015,631 | | | $ | 6,027,667 | | | | 2,939,505 | | | $ | 5,849,488 | |
Dividends and/or distributions reinvested | | | 2,691,923 | | | | 5,518,442 | | | | 2,040,930 | | | | 3,877,767 | |
Redeemed | | | (7,087,393 | ) | | | (14,314,532 | ) | | | (7,528,455 | ) | | | (14,988,236 | ) |
| | |
Net decrease | | | (1,379,839 | ) | | $ | (2,768,423 | ) | | | (2,548,020 | ) | | $ | (5,260,981 | ) |
| | |
28 | OPPENHEIMER HIGH INCOME FUND/VA
| | | | | | | | | | | | | | | | |
| | Year Ended December 30, 2011 | | | Year Ended December 31, 2010 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
|
Class 3 Shares | | | | | | | | | | | | | | | | |
Sold | | | 805,055 | | | $ | 1,675,197 | | | | 2,054,702 | | | $ | 4,093,320 | |
Dividends and/or distributions reinvested | | | 269,673 | | | | 555,527 | | | | 160,066 | | | | 304,126 | |
Redeemed | | | (1,789,726 | ) | | | (3,626,655 | )1 | | | (1,747,107 | ) | | | (3,468,322 | )2 |
| | |
Net increase (decrease) | | | (714,998 | ) | | $ | (1,395,931 | ) | | | 467,661 | | | $ | 929,124 | |
| | |
| | | | | | | | | | | | | | | | |
Class 4 Shares | | | | | | | | | | | | | | | | |
Sold | | | 1,952,890 | | | $ | 4,030,364 | | | | 1,725,510 | | | $ | 3,440,558 | |
Dividends and/or distributions reinvested | | | 338,821 | | | | 704,748 | | | | 200,967 | | | | 385,856 | |
Redeemed | | | (2,103,972 | ) | | | (4,249,233 | )1 | | | (1,958,189 | ) | | | (3,944,705 | )2 |
| | |
Net increase (decrease) | | | 187,739 | | | $ | 485,879 | | | | (31,712 | ) | | $ | (118,291 | ) |
| | |
| | |
1. | | Net of redemption fees of $621 and $235 for Class 3 and Class 4 shares, respectively. |
|
2. | | Net of redemption fees of $3,684 and $7,734 for Class 3 and Class 4 shares, respectively. |
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations and investments in IMMF, for the year ended December 30, 2011, were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
|
Investment securities | | $ | 61,907,194 | | | $ | 77,618,929 | |
4. Fees and Other Transactions with Affiliates
Management Fees. Under the investment advisory agreement, the Fund pays the Manager a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| | | | |
Fee Schedule | | | | |
|
Up to $200 million | | | 0.75 | % |
Next $200 million | | | 0.72 | |
Next $200 million | | | 0.69 | |
Next $200 million | | | 0.66 | |
Next $200 million | | | 0.60 | |
Over $1 billion | | | 0.50 | |
Administration Service Fees. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund’s tax returns.
Transfer Agent Fees. OppenheimerFunds Services (“OFS”), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. For the year ended December 30, 2011, the Fund paid $130,775 to OFS for services to the Fund.
Distribution and Service Plan for Service Shares and Class 4 Shares. The Fund has adopted a Distribution and Service Plan (the “Plan”) in accordance with Rule 12b-1 under the Investment Company Act of 1940 for Service shares and Class 4 shares to pay OppenheimerFunds Distributor, Inc. (the “Distributor”), for distribution related services, personal service and account maintenance for the Fund’s Service shares and Class 4 shares. Under the Plan, payments are made periodically at an annual rate of 0.25% of the daily net assets of Service shares and Class 4 shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors of the insurance product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service shares and Class 4 shares. These fees are paid out of the Fund’s assets on an on-going basis and increase operating expenses of the Service shares and Class 4 shares, which results in lower performance compared to the Fund’s shares that are not subject to a service fee. Fees incurred by the Fund under the Plan are detailed in the Statement of Operations.
29 | OPPENHEIMER HIGH INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
4. Fees and Other Transactions with Affiliates Continued
Waivers and Reimbursements of Expenses. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.75% for Non-Service and Class 3 shares and 1.00% for Service and Class 4 shares. During the year ended December 30, 2011, the Manager waived fees and/or reimbursed the Fund $124,994, $137,948, $12,207 and $17,865 for Non-Service, Service, Class 3 and Class 4 shares, respectively.
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 IMMF. During the year ended December 30, 2011, the Manager waived fees and/or reimbursed the Fund $5,434 for IMMF management fees.
Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.
5. Risk Exposures and the Use of Derivative Instruments
The Fund’s investment objectives not only permit the Fund to purchase investment securities, they also allow the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward foreign currency exchange contracts, credit default swaps, interest rate swaps, total return 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. Central to those strategies are features inherent to derivatives that make them more attractive for this purpose than equity and debt securities: they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This 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.
Market Risk Factors. In accordance with its investment objectives, the Fund may use derivatives to increase or decrease its exposure to one or more of the following 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 to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds.
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.
30 | OPPENHEIMER HIGH INCOME FUND/VA
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.
The Fund’s actual exposures to these market risk factors during the period are discussed in further detail, by derivative type, below.
Risks of Investing in Derivatives. The Fund’s use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. 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.
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. 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.
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. Associated risks can be different for each type of derivative and are discussed by each derivative type in the notes that follow.
| | Counterparty Credit Risk. Certain derivative positions are subject to counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. The Fund’s derivative counterparties are financial institutions who are subject to market conditions that may weaken their financial position. The Fund intends to enter into financial transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction. |
Credit Related Contingent Features. The Fund’s agreements with derivative counterparties have several credit related contingent features that if triggered would allow its derivatives counterparties to close out and demand payment or additional collateral to cover their exposure from the Fund. Credit related contingent features are established between the Fund and its derivatives counterparties to reduce the risk that the Fund will not fulfill its payment obligations to its counterparties. These triggering features include, but are not limited to, a percentage decrease in the Fund’s net assets and or a percentage decrease in the Fund’s Net Asset Value or NAV.
The contingent features are established within the Fund’s International Swap and Derivatives Association, Inc. master agreements which govern certain positions in swaps, over-the-counter options and swaptions, and forward currency exchange contracts for each individual counterparty.
The effect of derivative instruments on the Statement of Operations is as follows:
| | | | | | | | | | | | |
Amount of Realized Gain or (Loss) Recognized on Derivatives | |
Derivatives Not Accounted for as Hedging Instruments | | Investments from unaffiliated companies* | | | Swap contracts | | | Total | |
|
Credit contracts | | $ | — | | | $ | (48,715 | ) | | $ | (48,715 | ) |
Interest rate contracts | | | 1,901 | | | | — | | | | 1,901 | |
| | |
Total | | $ | 1,901 | | | $ | (48,715 | ) | | $ | (46,814 | ) |
| | |
| | |
* | | Includes purchased option contracts, purchased swaption contracts and written option contracts exercised, if any. |
31 | OPPENHEIMER HIGH INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
5. Risk Exposures and the Use of Derivative Instruments Continued
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 at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the principal exchange on which the option is traded. 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. 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.
The Fund has purchased put options on treasury 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 year ended December 30, 2011, the Fund had an ending monthly average market value of $144 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. Securities held in collateralized 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 Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk that there may be an illiquid market where the Fund is unable to close the contract.
Additional associated risks to the Fund include counterparty credit risk for over-the-counter options and liquidity risk. As of December 30, 2011, the Fund did not have any outstanding options.
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, or the occurrence of a credit event, over a specified period. Such contracts may include interest rate, equity, debt, index, total return, credit and currency swaps.
Swaps are marked to market daily using primarily quotations from pricing services, counterparties and brokers. Swap contracts are reported on a schedule following the Statement of Investments. The values of swap contracts are aggregated by positive and negative values and disclosed separately on the Statement of Assets and Liabilities by contracts in unrealized appreciation and depreciation positions. Upfront payments paid or received, if any, affect the value of the respective swap. Therefore, to determine the unrealized appreciation (depreciation) on swaps, upfront payments paid should be subtracted from, while upfront payments received should be added to, the value of contracts reported as an asset on the Statement of Assets and Liabilities. Conversely, upfront payments paid should be added to, while upfront payments received should be subtracted from the value of contracts reported as a liability. 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 at termination or settlement. The net change in this amount during the period is included on the Statement of Operations. 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 Statement of Operations.
Swap contract agreements are exposed to the market risk factor of the specific underlying reference 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
32 | OPPENHEIMER HIGH INCOME FUND/VA
(for instance bonds) have exposure to multiple risk factors (credit and interest rate risk). Because swaps require little or no initial cash investment, they can expose the Fund to substantial risk in the isolated market risk factor.
Credit Default Swap Contracts. A credit default swap is a bilateral contract that enables an investor to buy or sell protection on a debt security against a defined-issuer credit event, such as the issuer’s failure to make timely payments of interest or principal on the debt security, bankruptcy or restructuring. The Fund may enter into credit default swaps either by buying or selling protection on a single security or a basket of securities (the “reference asset”).
The buyer of protection pays a periodic fee to the seller of protection based on the notional amount of debt securities underlying 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 reference asset less the market value of the reference asset. Upon exercise of the contract the difference between the value of the underlying reference asset and the notional amount is recorded as realized gain (loss) and is included on the Statement of Operations.
The Fund has sold credit protection through credit default swaps to increase exposure to the credit risk of individual securities and/or, indexes 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 securities and/or, indexes.
For the year ended December 30, 2011, the Fund had ending monthly average notional amounts of $31,538 and $88,462 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.
As of December 30, 2011, the Fund had no such credit default swaps outstanding.
6. Restricted Securities
As of December 30, 2011, 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 Statement of Investments. Restricted securities are reported on a schedule following the Statement of Investments.
7. Pending Litigation
Since 2009, a number of class action, derivative and individual lawsuits have been pending in federal and state courts against OppenheimerFunds, Inc., the Fund’s investment advisor (the “Manager”), OppenheimerFunds Distributor, Inc., the Fund’s principal underwriter and distributor (the “Distributor”), and certain funds (but not including the Fund) advised by the Manager and distributed by the Distributor (the “Defendant Funds”). Several of these lawsuits also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The lawsuits raise claims under federal securities laws and various states’ securities, consumer protection and common law and allege, among other things, that the disclosure documents of the respective Defendant Funds contained misrepresentations
33 | OPPENHEIMER HIGH INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
7. Pending Litigation Continued and omissions and that the respective Defendant Funds’ investment policies were not followed. The plaintiffs in these actions seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. On September 30, 2011, the U.S. District Court for the District of Colorado entered orders and final judgments approving the settlement of certain putative class actions involving two Defendant Funds, Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund. Those orders are not subject to further appeal. These settlements do not resolve other outstanding lawsuits relating to Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund, nor do the settlements affect certain other putative class action lawsuits pending in federal court against the Manager, the Distributor, and other Defendant Funds and their independent trustees.
In 2009, what are claimed to be derivative lawsuits were filed in New Mexico state court against the Manager and a subsidiary (but not against the Fund) on behalf of the New Mexico Education Plan Trust challenging a settlement reached in 2010 between the Manager, its subsidiary and the Distributor and the board of the New Mexico section 529 college savings plan. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses. On September 9, 2011, the court denied plaintiffs’ request for a hearing to determine the fairness of the settlement, finding that plaintiffs lacked standing to pursue derivative claims on behalf of the Trust. On October 27, 2011, the parties to these actions filed a joint motion to dismiss the lawsuits with prejudice, which the court granted on October 28, 2011.
Other class action and individual lawsuits have been filed since 2008 in various state and federal courts against the Manager and certain of its affiliates by investors seeking to recover investments they allegedly lost as a result of the “Ponzi” scheme run by Bernard L. Madoff and his firm, Bernard L. Madoff Investment Securities, LLC (“BLMIS”). Plaintiffs in these suits allege that they suffered losses as a result of their investments in several funds managed by an affiliate of the Manager and assert a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. Neither the Distributor, nor any of the Oppenheimer mutual funds, their independent trustees or directors are named as defendants in these lawsuits. None of the Oppenheimer mutual funds invested in any funds or accounts managed by Madoff or BLMIS. On February 28, 2011, a stipulation of partial settlement of three groups of consolidated putative class action lawsuits relating to these matters was filed in the U.S. District Court for the Southern District of New York. On August 19, 2011, the court entered an order and final judgment approving the settlement as fair, reasonable and adequate. In September 2011, certain parties filed notices of appeal from the court’s order approving the settlement. On July 29, 2011, a stipulation of settlement between certain affiliates of the Manager and the Trustee appointed under the Securities Investor Protection Act to liquidate BLMIS was filed in the U.S. Bankruptcy Court for the Southern District of New York to resolve purported preference and fraudulent transfer claims by the Trustee. On September 22, 2011, the court entered an order approving the settlement as fair, reasonable and adequate. In October 2011, certain parties filed notices of appeal from the court’s order approving the settlement. The aforementioned settlements do not resolve other outstanding lawsuits against the Manager and its affiliates relating to BLMIS.
On April 16, 2010, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark IV Funding Limited (“AAArdvark IV”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark IV. Plaintiffs allege breach of contract against the defendants and seek compensatory damages, costs and disbursements, including attorney fees. On July 15, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark Funding Limited (“AAArdvark I”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark I. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including
34 | OPPENHEIMER HIGH INCOME FUND/VA
attorney fees. On November 9, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark XS Funding Limited (“AAArdvark XS”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark XS. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees.
The Manager believes the lawsuits and appeals described above are without legal merit and, with the exception of actions it has settled, is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to represent the Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer mutual funds.
35 | OPPENHEIMER HIGH INCOME FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:
We have audited the accompanying statement of assets and liabilities of Oppenheimer High Income Fund/VA (a separate series of Oppenheimer Variable Account Funds), including the statement of investments, as of December 30, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of Oppenheimer High Income Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 30, 2011, by correspondence with the custodian, transfer agent and brokers, or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer High Income Fund/VA as of December 30, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended, in conformity with U.S. generally accepted accounting principles.
KPMG llp
Denver, Colorado
February 16, 2012
36 | OPPENHEIMER HIGH INCOME FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
In early 2012, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2011. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service.
Dividends, if any, paid by the Fund during the fiscal year ended December 30, 2011 which are not designated as capital gain distributions should be multiplied by the maximum amount allowable but not less than 1.23% to arrive at the amount eligible for the corporate dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance.
37 | OPPENHEIMER HIGH INCOME FUND/VA
BOARD APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT Unaudited
Each year, the Board of Trustees (the “Board”), including a majority of the independent Trustees, is required to determine whether to renew the Fund’s investment advisory agreement (the “Agreement”). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager’s services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager and its affiliates, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. The Board was aware that there are alternatives to retaining the Manager.
Outlined below is a summary of the principal information considered by the Board as well as the Board’s conclusions.
Nature, Quality and Extent of Services. The Board considered information about the nature, quality and extent of the services provided to the Fund and information regarding the Manager’s key personnel who provide such services. The Manager’s duties include providing the Fund with the services of the portfolio manager and the Manager’s investment team, who provide research, analysis and other advisory services in regard to the Fund’s investments; securities trading services; oversight of third-party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund’s investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel who are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund’s operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund’s shares. The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the quality of the Manager’s resources that are available to the Fund. The Board took account of the fact that the Manager has had over fifty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager’s advisory, administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager’s key personnel and the size and functions of its staff. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Joseph Welsh, the portfolio manager for the Fund, and the Manager’s investment team and analysts. The Board members also considered the totality of their experiences with the Manager as directors or trustees of the Fund and other funds advised by the Manager. The Board considered information regarding the quality of services provided by affiliates of the Manager, which its members have become knowledgeable about in connection with the renewal of the Fund’s service agreements. The Board concluded, in light of the Manager’s experience, reputation, personnel, operations and resources that the Fund benefits from the services provided under the Agreement.
38 | OPPENHEIMER HIGH INCOME FUND/VA
Investment Performance of the Manager and the Fund. Throughout the year, the Manager provided information on the investment performance of the Fund and the Manager, including comparative performance information. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund’s historical performance to relevant market indices and to the performance of other high current yield funds underlying variable insurance products. The Board considered that the Fund outperformed its performance universe median during the one-year Lipper period, although the Fund underperformed its performance universe median during the three-, five-, and ten-year Lipper periods. The Board also considered the appointment of a new portfolio manager and the High Yield Corporate Debt Team in April 2009 to oversee the Fund’s investments. The Board considered the Manager’s assertion that the portfolio manager gradually has re-positioned the Fund to better take advantage of market conditions. The Board considered the Fund’s recent improved performance, noting it had ranked in the first quintile for the year to date ended April 30, 2011.
Costs of Services by the Manager. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also considered the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund and other high current yield funds underlying variable insurance products. In reviewing the fees and expenses charged to the VA funds, the Board considered the Manager’s assertion that, because there is much greater disparity in the fees and services that may be provided by a manager to a VA fund as opposed to a retail fund, when comparing the expenses of the various VA funds to those of retail funds, it is most appropriate to focus on total expenses (rather than on the management fees). Accordingly, while the Board reviewed and considered all expenses, it focused on total expenses. The Board considered that the Fund’s actual management fees and its total expenses were lower than its expense group median. The Board also considered that the Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.75% for Non-Service and Class 3 shares and 1.00% for Service and Class 4 shares. This voluntary expense limitation may not be amended or withdrawn until one year after the date of prospectus.
Economies of Scale and Profits Realized by the Manager. The Board considered information regarding the Manager’s costs in serving as the Fund’s investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager’s profitability from its relationship with the Fund. The Board reviewed whether the Manager may realize economies of scale in managing and supporting the Fund. The Board noted that the Fund currently has management fee breakpoints, which are intended to share with Fund shareholders economies of scale that may exist as the Fund’s assets grow.
Other Benefits to the Manager. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager’s affiliates. The Board also considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide quality services to the Fund.
Conclusions. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees’ counsel are independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the Agreement through August 31, 2012. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the above information, and considered the terms and conditions of the Agreement, including the management fee, in light of all of the surrounding circumstances.
39 | OPPENHEIMER HIGH INCOME FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities (“portfolio proxies”) held by the Fund. A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund’s website at oppenheimerfunds.com, and (iii) on the SEC’s website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund’s voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC’s website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund’s Form N-Q filings are available on the SEC’s website at www.sec.gov. Those forms may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
40 | OPPENHEIMER HIGH INCOME FUND/VA
TRUSTEES AND OFFICERS Unaudited
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Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
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INDEPENDENT TRUSTEES | | The address of each Trustee in the chart below is 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Trustee serves for an indefinite term, or until his or her resignation, retirement, death or removal. |
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William L. Armstrong, Chairman of the Board of Trustees (since 2003), Trustee (since 1999) Age: 74 | | President, Colorado Christian University (since 2006); Chairman, Cherry Creek Mortgage Company (since 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso Mortgage Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman, Broadway Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), former Director of Campus Crusade for Christ (non-profit) (1991-2008); former Director, The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (2002-2006); former Chairman of: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Armstrong has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Edward L. Cameron, Trustee (since 1999) Age: 73 | | Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000 — June 2006); Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (accounting firm) (July 1994-June 1998). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Cameron has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Jon S. Fossel, Trustee (since 1990) Age: 69 | | Chairman of the Board (since 2006) and Director (since June 2002) of UNUMProvident (insurance company); Director of Northwestern Energy Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003 and February 2005-February 2007); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. (“OAC”) (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Fossel has served on the Boards of certain Oppenheimer funds since 1990, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Sam Freedman, Trustee (since 1996) Age: 71 | | Director of Colorado UpLIFT (charitable organization) (since September 1984). Mr. Freedman held several positions with the Manager and with subsidiary or affiliated companies of the Manager (until October 1994). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Freedman has served on the Boards of certain Oppenheimer funds since 1996, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Beverly L. Hamilton, Trustee (since 2002) Age: 65 | | Trustee of Monterey Institute for International Studies (educational organization) (since February 2000); Board Member of Middlebury College (educational organization) (since December 2005); Chairman (since 2010) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); Director of The California Endowment (philanthropic organization) (April 2002-April 2008); Director (February 2002-2005) and Chairman of Trustees (2006-2007) of the Community Hospital of Monterey Peninsula; Director (October 1991-2005); Vice Chairman (2006-2009) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation (2001-2006) and The University of Michigan (since 2000); Advisor at Credit Suisse First Boston’s Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member of the investment committee of Hartford Hospital |
41 | OPPENHEIMER HIGH INCOME FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
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Beverly L. Hamilton, Continued | | (2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 36 portfolios in the OppenheimerFunds complex. Ms. Hamilton has served on the Boards of certain Oppenheimer funds since 2002, during which time she has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Robert J. Malone, Trustee (since 2002) Age: 67 | | Board of Directors of Opera Colorado Foundation (non-profit organization) (since March 2008); Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director of Steele Street Bank & Trust (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Malone has served on the Boards of certain Oppenheimer funds since 2002, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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F. William Marshall, Jr., Trustee (since 2000) Age: 69 | | Trustee Emeritus of Worcester Polytech Institute (WPI) (private university) (since 2009); Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment company) (since 1996) and MML Series Investment Fund (investment company) (since 1996); President and Treasurer of the SIS Funds (private charitable fund) (January 1999 — March 2011); Former Trustee of WPI (1985-2008); Former Chairman of the Board (2004- 2006) and Former Chairman of the Investment Committee of WPI (1994-2008); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999); and Former President and Chief Executive Officer of SIS Bancorp. (1993-1999). Oversees 38 portfolios in the OppenheimerFunds complex. Mr. Marshall has served on the Boards of certain Oppenheimer funds since 2000, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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INTERESTED TRUSTEE AND OFFICER | | The address of Mr. Glavin is Two World Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008. Mr. Glavin serves as a Trustee for an indefinite term, or until his resignation, retirement, death or removal and as an Officer for an indefinite term, or until his resignation, retirement, death or removal. Mr. Glavin is an Interested Trustee due to his positions with OppenheimerFunds, Inc. and its affiliates. |
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William F. Glavin, Jr., Trustee, President and Principal Executive Officer (since 2009) Age: 53 | | Chairman of the Manager (since December 2009); Chief Executive Officer and Director of the Manager (since January 2009); President of the Manager (since May 2009); Director of Oppenheimer Acquisition Corp. (“OAC”) (the Manager’s parent holding company) (since June 2009); Executive Vice President (March 2006-February 2009) and Chief Operating Officer (July 2007-February 2009) of Massachusetts Mutual Life Insurance Company (OAC’s parent company); Director (May 2004-March 2006) and Chief Operating Officer and Chief Compliance Officer (May 2004-January 2005), President (January 2005-March 2006) and Chief Executive Officer (June 2005-March 2006) of Babson Capital Management LLC; Director (March 2005-March 2006), President (May 2003-March 2006) and Chief Compliance Officer (July 2005-March 2006) of Babson Capital Securities, Inc. (a broker-dealer); President (May 2003-March 2006) of Babson Investment Company, Inc.; Director (May 2004-August 2006) of Babson Capital Europe Limited; Director (May 2004-October 2006) of Babson Capital Guernsey Limited; Director (May 2004- March 2006) of Babson Capital Management LLC; Non-Executive Director (March 2005-March 2007) of Baring Asset Management Limited; Director (February 2005-June 2006) Baring Pension Trustees Limited; Director and Treasurer (December 2003-November 2006) of Charter Oak Capital Management, Inc.; Director (May 2006- September 2006) of C.M. Benefit Insurance Company; Director (May 2008-June 2009) and Executive Vice President (June 2007-July 2009) of C.M. Life Insurance Company; President (March 2006-May 2007) of MassMutual Assignment Company; Director (January 2005-December 2006), Deputy Chairman (March 2005-December 2006) and President (February 2005-March 2005) of MassMutual Holdings (Bermuda) Limited; Director (May 2008- June 2009) and Executive Vice President (June 2007-July 2009) of MML Bay State Life Insurance Company; Chief Executive Officer and President (April 2007-January 2009) of MML Distributors, LLC; and Chairman (March 2006- December 2008) and Chief Executive Officer (May 2007-December 2008) of MML Investors Services, Inc. Oversees 63 portfolios as a Trustee/Director and 96 portfolios as an officer in the OppenheimerFunds complex. |
42 | OPPENHEIMER HIGH INCOME FUND/VA
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OTHER OFFICERS OF THE FUND | | The addresses of the Officers in the chart below are as follows: for Mr. Gabinet and Ms. Nasta, Two World Financial Center, 225 Liberty Street, New York, New York 10281-1008, for Messrs. Welsh, Vandehey and Wixted, 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Officer serves for an indefinite term or until his or her resignation, retirement, death or removal. |
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Joseph Welsh, Vice President (since 2009) Age: 47 | | Head of the Manager’s High Yield Corporate Debt Team (since April 2009); Senior Vice President of the Manager (since May 2009); Vice President of the Manager (December 2000-April 2009); Assistant Vice President of the Manager (December 1996-November 2000); a high yield bond analyst of the Manager (January 1995- December 1996); a CFA. A portfolio manager and officer of 6 portfolios in the OppenheimerFunds complex. |
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Arthur S. Gabinet, Secretary (since 2011) Age: 53 | | Executive Vice President (since May 2010) and General Counsel (since January 2011) of the Manager; General Counsel of the Distributor (since January 2011); General Counsel of Centennial Asset Management Corporation (since January 2011); Executive Vice President and General Counsel of HarbourView Asset Management Corporation (since January 2011); Assistant Secretary (since January 2011) and Director (since January 2011) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since January 2011); Director of Oppenheimer Real Asset Management, Inc. (since January 2011); Executive Vice President and General Counsel of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since January 2011); Executive Vice President and General Counsel of OFI Private Investments, Inc. (since January 2011); Vice President of OppenheimerFunds Legacy Program (since January 2011); Executive Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since January 2011); General Counsel, Asset Management of the Manager (May 2010-December 2010); Principal, The Vanguard Group (November 2005- April 2010); District Administrator, U.S. Securities and Exchange Commission (January 2003-October 2005). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Christina M. Nasta, Vice President and Chief Business Officer (since 2011) Age: 38 | | Senior Vice President of the Manager (since July 2010); Vice President of the Manager (since January 2003); Vice President of OppenheimerFunds Distributor, Inc. (since January 2003). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Mark S. Vandehey, Vice President and Chief Compliance Officer (since 2004) Age: 61 | | Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Brian W. Wixted, Treasurer and Principal Financial & Accounting Officer (since 1999) Age: 52 | | Senior Vice President of the Manager (since March 1999); Treasurer of the Manager and the following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership Holdings, Inc. (March 1999-June 2008), OFI Private Investments, Inc. (March 2000-June 2008), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of OAC (March 1999-June 2008). An officer of 96 portfolios in the OppenheimerFunds complex. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and Officers and is available without charge, upon request, by calling 1.800.988.8287.
43 | OPPENHEIMER HIGH INCOME FUND/VA
OPPENHEIMER HIGH INCOME FUND/VA
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A Series of Oppenheimer Variable Account Funds |
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Manager | | OppenheimerFunds, Inc. |
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Distributor | | OppenheimerFunds Distributor, Inc. |
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Transfer Agent | | OppenheimerFunds Services |
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Independent Registered Public Accounting Firm | | KPMG LLP |
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Counsel | | K&L Gates LLP |
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| | Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing. |
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©2012 OppenheimerFunds, Inc. All rights reserved. | | ![(OPPENHEIMERFUNDS LOGO)](https://capedge.com/proxy/N-CSR/0000950123-12-003003/g60124g6012906.gif) |
December 31, 2011 Oppenheimer Main Street Fund®/VA Annual Report A Series of Oppenheimer Variable Account Funds |
ANNUAL REPORT Listing of Top Holdings Fund Performance Discussion Financial Statements |
OPPENHEIMER MAIN STREET FUND ®/ VA
Portfolio Managers: Manind (“Mani”) Govil, CFA and Benjamin Ram
Average Annual Total Returns
For the Periods Ended 12/30/111
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| | 1-Year | | | 5-Year | | | 10-Year | |
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Non-Service Shares | | | –0.01 | % | | | –0.88 | % | | | 2.77 | % |
Service Shares | | | –0.32 | % | | | –1.13 | % | | | 2.51 | % |
Expense Ratios
For the Period Ended 12/30/111
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Non-Service Shares | | | 0.78 | % |
Service Shares | | | 1.03 | |
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance and expense ratios may be lower or higher than the data quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account.
Sector Allocation
Portfolio holdings and allocations are subject to change. Percentages are as of December 30, 2011, and are based on the total market value of common stocks.
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Top Ten Common Stock Holdings | | | | |
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Apple, Inc. | | | 6.6 | % |
Chevron Corp. | | | 5.0 | |
Philip Morris International, Inc. | | | 4.2 | |
Abbott Laboratories | | | 3.6 | |
eBay, Inc. | | | 3.5 | |
McGraw-Hill Cos., Inc. (The) | | | 3.3 | |
CIT Group, Inc. | | | 3.3 | |
Google, Inc., Cl. A | | | 3.2 | |
Ford Motor Co. | | | 2.8 | |
Tyco International Ltd. | | | 2.7 | |
Portfolio holdings and allocations are subject to change. Percentages are as of December 30, 2011, and are based on net assets.
2 | OPPENHEIMER MAIN STREET FUND/VA
FUND PERFORMANCE DISCUSSION
Management’s Discussion of Fund Performance. The Fund’s Non-Service shares produced a total return of —0.01% for the reporting period ended December 30, 2011.1 On a relative basis, the Fund underperformed the S&P 500 Index (the “Index”), which returned 2.11%. Virtually all of the Fund’s relative underperformance occurred during the first quarter of 2011 when the market was driven upward by strong momentum, somewhat irrespective, in our opinion, of underlying fundamentals or valuation. During the reporting period, underperformance relative to the Index was primarily due to unfavorable stock selections within the financials sector. Favorable stock selections within the information technology, energy and consumer staples sectors contributed positively to relative performance.
Economic and Market Overview
Last calendar year proved to be challenging. The environment was characterized by geopolitical uncertainties, fits and starts in economic news (both domestically and internationally), climatic catastrophes, and emotions which waivered erratically between strong optimism about an economic recovery and fears about a global recession. At the end of the day, U.S. equities finished little changed from twelve months prior, but the ride between points was a roller coaster.
We entered 2011 with a note of optimism. Indeed, the first quarter was very momentum driven as investors drove stocks higher, somewhat irrespective of underlying fundamentals or valuation. However, come the reporting of first quarter earnings, concerns over the world’s outlook began to rise. We witnessed the “Arab Spring”; a tragedy in Japan—one that was not only tragic for many but also highly disruptive to manufacturing globally; and a burgeoning European financial crisis that threatened to reach well beyond the borders of the Eurozone.
News from our own shores, too, was uneven. Though employment growth remained stubbornly below levels normally experienced in past recoveries and weakness in the housing market persisted, reported earnings by companies across sectors generally were topping expectations. Additionally, companies were hoarding cash, building considerable financial strength to fund continued growth. But with the specter of contagion from Europe and uncertainty about the growth trajectory of emerging markets, investors fled equities—especially those of lower quality or with high economic sensitivities. The political impasse in Washington during the summer over whether to raise the debt ceiling resulted in an unprecedented downgrade of the U.S. Government’s debt rating and exacerbated market anxiety.
The fourth quarter was quite the reversal from the third quarter’s market trends. Sectors which had been hit hard, particularly economically sensitive sectors, were among the better performing ones. Though Europe made little headway in resolving its deep-seated structural and financial problems, investors seemed calmer about an eventual settlement. And, almost lost among all the noise from overseas were periodic reports of modest domestic improvements in employment, consumer sentiment and in other areas. Throughout much of 2011 two trends remained fairly consistent. One, financial stocks suffered. Despite generally rising earnings and vastly improved balance sheets, the market voiced its concerns about the increasing possibility of another 2008-style financial crisis. Virtually all segments of the sector sold down dramatically, with collapsing valuations which, in some instances, fell below book value.
The second trend was that stocks of well-managed companies with solid business models generally outperformed as the year progressed. Especially during times of macroeconomic uncertainty, investors generally value companies that deliver consistent results. Last year was a market often characterized by a “flight to quality” as investors sought shelter in stocks that had a low likelihood of surprising negatively. We believe a market that pays close attention to the underlying fundamentals of higher quality stocks is favorable for the investment style of the Main Street Team.
Top Individual Contributors
Apple, Inc., Chevron Corp. and Phillip Morris International, Inc., the top three holdings of the Fund at period end, were also among the strongest performers this reporting period. Apple continued to out-execute its peers. The company’s continued success at innovation and its highly recognizable brand led to global growth and share gains across its top revenue producing products—iPhones, iPads and Mac PCs. Phillip Morris International, Inc. continued to generate substantial
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1. | | December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011. |
3 | OPPENHEIMER MAIN STREET FUND/VA
FUND PERFORMANCE DISCUSSION
free cash flow stemming from ongoing market share gains and its considerable ability to raise prices. Chevron announced a new natural discovery by its Australian unit and outlined plans for 2012 to be a year of major investment for the company in large natural gas-related exploration and production projects. The company also benefited from rising oil and gas prices.
Other top performing holdings during the reporting period included pharmaceuticals firm Bristol-Myers Squibb Co. and publishing firm McGraw-Hill Cos., Inc. Bristol-Myers Squibb, which produces such drugs as Plavix and Abilify, benefited from recent trial results for Eliquis, an anticoagulant that showed “best in class” data for both stroke and major bleeding against the existing drug Warfarin. If approved by the FDA, Eliquis can be an important contributor to future revenue and profit growth at Bristol Myers Squibb. McGraw-Hill saw solid performance resulting from strong pricing power and growth in market share across its financial services division which includes Capital IQ and the S&P Indices. The company’s management has undertaken a business restructuring which has included the sale of media properties and the announced spin-off of the Education division. These actions, together with aggressive share repurchase and dividend increases, have also driven the stock price higher.
Top Individual Detractors
The top detractors from Fund performance were mostly in the financials sector. Investors became increasingly bearish towards financials as fears heightened due to a weakening global economy and an uncertain regulatory environment. A lack of transparency regarding the extent of exposure to both European bank and sovereign debt weighed heavily on stocks such as Citigroup, Inc. and JPMorgan Chase & Co. These holdings, together with Wells Fargo & Co., a stock we no longer own, were also negatively impacted by the ongoing high degree of home foreclosures and the razor thin net interest margins that have resulted from the persistence of historically low interest rates. CIT Group, Inc., too, hurt relative performance last year. Expectations that the domestic economy may fall back into a recession raised investor concerns over the timing and magnitude of CIT’s restructuring aimed at improving both its balance sheet strength and profitability.
Beyond financials, Ford Motor Co. detracted from performance results. The auto industry suffered several set-backs during the year. Production costs were negatively impacted from soaring commodity prices and delivery disruptions from Japanese auto parts suppliers. Uncertainty about the health of the economy also tempered expectations for strong auto sales. Despite these hurdles, Ford successfully negotiated a new long-term union contract, which locks-in favorable labor costs, and re-initiated its dividend.
Outlook
At period end, we believe the U.S. economy will continue to improve at a gradual and perhaps uneven fashion. The slow-growth environment could create a bifurcated stock market in which well-run companies with solid business models outperform. We also believe that while cyclical stocks and companies with cyclical earnings have generally performed well as of late, this trend will eventually shift to the benefit of consistent, longer-term performers. If our expectations are correct, the current market environment could potentially favor our investment style and process, which focuses on companies with sustainable competitive advantages. We view such firms as well-positioned to generate stronger profit margins and take market share from weaker players. We seek to buy such companies when their valuations are attractive, and believe that this disciplined investment process is the key to generating solid long-term performance.
Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing.
Total returns include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown.
4 | OPPENHEIMER MAIN STREET FUND/VA
The Fund’s investment strategy and focus can change over time. The mention of specific fund holdings does not constitute a recommendation by OppenheimerFunds, Inc.
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.
Comparing the Fund’s Performance to the Market. The graphs that follow show the performance of a hypothetical $10,000 investment in each share class of the Fund held until December 30, 2011. Performance is measured over a ten-fiscal-year period for both Classes. Performance information does not reflect charges that apply to separate accounts investing in the Fund. If these charges were taken into account, performance would be lower. The graphs assume that all dividends and capital gains distributions were reinvested in additional shares.
The Fund’s performance is compared to the performance of the S&P 500 Index, an unmanaged index of U.S. equity securities. Index performance includes reinvestment of income but does not reflect transaction costs, fees or expenses. The Fund’s performance reflects the effects of the Fund’s business and operating expenses. While index comparisons may be useful to provide a benchmark for the Fund’s performance, it must be noted that the Fund’s investments are not limited to the securities comprising the index.
5 | OPPENHEIMER MAIN STREET FUND/VA
FUND PERFORMANCE DISCUSSION
Non-Service Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Service Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account.
| | |
1. | | December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011. |
6 | OPPENHEIMER MAIN STREET FUND/VA
FUND EXPENSES
Fund Expenses. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 30, 2011.
Actual Expenses. The first section of the table provides information about actual account values and actual expenses. You may use the information in this section for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes. The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio for each class of shares, and an assumed rate of return of 5% per year for each class before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the “hypothetical” lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included your costs would have been higher.
| | | | | | | | | | | | |
| | Beginning | | | Ending | | | Expenses | |
| | Account | | | Account | | | Paid During | |
| | Value | | | Value | | | 6 Months Ended | |
| | July 1, 2011 | | | December 30, 2011 | | | December 30, 2011 | |
|
Actual | | | | | | | | | | | | |
Non-Service Shares | | $ | 1,000.00 | | | $ | 972.70 | | | $ | 3.82 | |
Service Shares | | | 1,000.00 | | | | 971.60 | | | | 5.05 | |
Hypothetical | | | | | | | | | | | | |
(5% return before expenses) | | | | | | | | | | | | |
Non-Service Shares | | | 1,000.00 | | | | 1,021.21 | | | | 3.91 | |
Service Shares | | | 1,000.00 | | | | 1,019.95 | | | | 5.18 | |
Expenses are equal to the Fund’s annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). Those annualized expense ratios, excluding indirect expenses from affiliated fund, based on the 6-month period ended December 30, 2011 are as follows:
| | | | |
Class | | Expense Ratios |
| |
Non-Service Shares | | | 0.77 | % |
Service Shares | | | 1.02 | |
The expense ratios reflect voluntary waivers and/or reimbursements of expenses by the Fund’s Manager. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund’s prospectus. The “Financial Highlights” tables in the Fund’s financial statements, included in this report, also show the gross expense ratios, without such waivers or reimbursements and reduction to custodian expenses, if applicable.
7 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF INVESTMENTS December 30, 2011*
| | | | | | | | |
| | Shares | | | Value | |
Common Stocks—100.1% | | | | | | | | |
Consumer Discretionary—11.3% | | | | | | | | |
Automobiles—2.8% | | | | | | | | |
Ford Motor Co.1 | | | 3,597,200 | | | $ | 38,705,872 | |
Hotels, Restaurants & Leisure—2.1% | | | | | | | | |
Hyatt Hotels Corp., Cl. A1 | | | 512,288 | | | | 19,282,520 | |
McDonald’s Corp. | | | 93,336 | | | | 9,364,401 | |
| | | | | | | |
| | | | | | | 28,646,921 | |
Media—3.3% | | | | | | | | |
McGraw-Hill Cos., Inc. (The) | | | 1,038,811 | | | | 46,715,331 | |
Specialty Retail—3.1% | | | | | | | | |
AutoZone, Inc.1 | | | 42,550 | | | | 13,827,474 | |
CarMax, Inc.1 | | | 249,930 | | | | 7,617,866 | |
TJX Cos., Inc. (The) | | | 344,260 | | | | 22,221,983 | |
| | | | | | | |
| | | | | | | 43,667,323 | |
Consumer Staples—11.1% | | | | | | | | |
Beverages—2.4% | | | | | | | | |
Dr. Pepper Snapple Group, Inc. | | | 862,620 | | | | 34,056,238 | |
Food Products—4.5% | | | | | | | | |
General Mills, Inc. | | | 384,400 | | | | 15,533,604 | |
J.M. Smucker Co. (The) | | | 339,750 | | | | 26,558,258 | |
Mead Johnson Nutrition Co., Cl. A | | | 242,472 | | | | 16,665,101 | |
Sara Lee Corp. | | | 214,480 | | | | 4,057,962 | |
| | | | | | | |
| | | | | | | 62,814,925 | |
Tobacco—4.2% | | | | | | | | |
Philip Morris International, Inc. | | | 740,059 | | | | 58,079,830 | |
Energy—12.3% | | | | | | | | |
Energy Equipment & Services—1.3% | | | | | | | | |
National Oilwell Varco, Inc. | | | 277,840 | | | | 18,890,342 | |
Oil, Gas & Consumable Fuels—11.0% | | | | | | | | |
Chevron Corp. | | | 662,489 | | | | 70,488,830 | |
Kinder Morgan, Inc. | | | 576,310 | | | | 18,539,893 | |
Noble Energy, Inc. | | | 321,000 | | | | 30,299,190 | |
Occidental Petroleum Corp. | | | 360,130 | | | | 33,744,181 | |
| | | | | | | |
| | | | | | | 153,072,094 | |
Financials—16.6% | | | | | | | | |
Capital Markets—1.1% | | | | | | | | |
Blackstone Group LP (The) | | | 1,123,300 | | | | 15,737,433 | |
Commercial Banks—3.7% | | | | | | | | |
CIT Group, Inc.1 | | | 1,304,640 | | | | 45,492,797 | |
M&T Bank Corp. | | | 88,580 | | | | 6,762,197 | |
| | | | | | | |
| | | | | | | 52,254,994 | |
Consumer Finance—1.4% | | | | | | | | |
Discover Financial Services | | | 794,510 | | | | 19,068,240 | |
Diversified Financial Services—6.8% | | | | | | | | |
Citigroup, Inc. | | | 1,103,709 | | | | 29,038,584 | |
CME Group, Inc. | | | 85,050 | | | | 20,724,134 | |
JPMorgan Chase & Co. | | | 1,111,860 | | | | 36,969,345 | |
MSCI, Inc., Cl. A1 | | | 225,280 | | | | 7,418,470 | |
| | | | | | | |
| | | | | | | 94,150,533 | |
Insurance—3.6% | | | | | | | | |
Berkshire Hathaway, Inc., Cl. B1 | | | 96,510 | | | | 7,363,713 | |
Marsh & McLennan Cos., Inc. | | | 768,000 | | | | 24,284,160 | |
Progressive Corp. | | | 976,210 | | | | 19,045,857 | |
| | | | | | | |
| | | | | | | 50,693,730 | |
Health Care—13.5% | | | | | | | | |
Biotechnology—2.5% | | | | | | | | |
Celgene Corp.1 | | | 499,432 | | | | 33,761,603 | |
Health Care Providers & | | | | | | | | |
Services—2.9% | | | | | | | | |
DaVita, Inc.1 | | | 99,970 | | | | 7,578,726 | |
WellPoint, Inc. | | | 497,580 | | | | 32,964,675 | |
| | | | | | | |
| | | | | | | 40,543,401 | |
Life Sciences Tools & Services—1.2% | | | | | | | | |
Waters Corp.1 | | | 228,410 | | | | 16,913,761 | |
Pharmaceuticals—6.9% | | | | | | | | |
Abbott Laboratories | | | 883,770 | | | | 49,694,387 | |
Allergan, Inc. | | | 147,020 | | | | 12,899,535 | |
Bristol-Myers Squibb Co. | | | 964,310 | | | | 33,982,284 | |
| | | | | | | |
| | | | | | | 96,576,206 | |
Industrials—9.8% | | | | | | | | |
Aerospace & Defense—2.2% | | | | | | | | |
Boeing Co. (The) | | | 407,210 | | | | 29,868,854 | |
Air Freight & Logistics—2.4% | | | | | | | | |
United Parcel Service, Inc., Cl. B | | | 458,000 | | | | 33,521,020 | |
Industrial Conglomerates—2.7% | | | | | | | | |
Tyco International Ltd. | | | 814,210 | | | | 38,031,749 | |
Machinery—0.5% | | | | | | | | |
Xylem, Inc. | | | 290,260 | | | | 7,456,779 | |
Road & Rail—2.0% | | | | | | | | |
CSX Corp. | | | 1,275,610 | | | | 26,864,347 | |
QR National Ltd. | | | 439,800 | | | | 1,538,407 | |
| | | | | | | |
| | | | | | | 28,402,754 | |
8 | OPPENHEIMER MAIN STREET FUND/VA
| | | | | | | | |
| | Shares | | | Value | |
Information Technology—19.9% | | | | | | | | |
Communications Equipment—2.5% | | | | | | | | |
QUALCOMM, Inc. | | | 641,851 | | | $ | 35,109,250 | |
Computers & Peripherals—6.6% | | | | | | | | |
Apple, Inc.1 | | | 226,922 | | | | 91,903,410 | |
Internet Software & Services—6.7% | | | | | | | | |
eBay, Inc.1 | | | 1,614,455 | | | | 48,966,420 | |
Google, Inc., Cl. A1 | | | 69,250 | | | | 44,728,575 | |
| | | | | | | |
| | | | | | | 93,694,995 | |
Software—4.1% | | | | | | | | |
Check Point Software Technologies Ltd.1 | | | 247,890 | | | | 13,024,141 | |
Microsoft Corp. | | | 1,215,657 | | | | 31,558,456 | |
Oracle Corp. | | | 478,290 | | | | 12,268,139 | |
| | | | | | | |
| | | | | | | 56,850,736 | |
Materials—2.0% | | | | | | | | |
Chemicals—1.7% | | | | | | | | |
Praxair, Inc. | | | 225,230 | | | | 24,077,082 | |
Construction Materials—0.3% | | | | | | | | |
Vulcan Materials Co. | | | 89,990 | | | | 3,541,107 | |
Telecommunication Services—2.1% | | | | | | | | |
Wireless Telecommunication Services—2.1% | | | | | | | | |
America Movil SAB de CV, ADR, Series L | | | 1,302,422 | | | | 29,434,737 | |
Utilities—1.5% | | | | | | | | |
Energy Traders—1.5% | | | | | | | | |
AES Corp. (The)1 | | | 1,769,160 | | | | 20,946,854 | |
Total Investments, at Value (Cost $1,097,413,107) | | | 100.1 | % | | | 1,397,188,104 | |
Liabilities in Excess of Other Assets | | | (0.1 | ) | | | (1,142,965 | ) |
| | |
Net Assets | | | 100.0 | % | | $ | 1,396,045,139 | |
| | |
Footnotes to Statement of Investments
| | |
* | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
1. | | Non-income producing security. |
The following issuer is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 30, 2011 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 as of December 30, 2011. Transactions during the period in which the issuer was an affiliate are as follows:
| | | | | | | | | | | | | | | | |
| | Shares | | | Gross | | | Gross | | | Shares | |
| | December 31, 2010 | | | Additions | | | Reductions | | | December 30, 2011 | |
|
Oppenheimer Institutional Money Market Fund, Cl. E | | | 21,709,488 | | | | 346,291,600 | | | | 368,001,088 | | | | — | |
| | | | |
| | Income | |
|
Oppenheimer Institutional Money Market Fund, Cl. E | | $ | 40,596 | |
Valuation Inputs
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). |
9 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF INVESTMENTS Continued
Footnotes to Statement of Investments Continued
The table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 30, 2011 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 | | $ | 157,735,447 | | | $ | — | | | $ | — | | | $ | 157,735,447 | |
Consumer Staples | | | 154,950,993 | | | | — | | | | — | | | | 154,950,993 | |
Energy | | | 171,962,436 | | | | — | | | | — | | | | 171,962,436 | |
Financials | | | 231,904,930 | | | | — | | | | — | | | | 231,904,930 | |
Health Care | | | 187,794,971 | | | | — | | | | — | | | | 187,794,971 | |
Industrials | | | 137,281,156 | | | | — | | | | — | | | | 137,281,156 | |
Information Technology | | | 277,558,391 | | | | — | | | | — | | | | 277,558,391 | |
Materials | | | 27,618,189 | | | | — | | | | — | | | | 27,618,189 | |
Telecommunication Services | | | 29,434,737 | | | | — | | | | — | | | | 29,434,737 | |
Utilities | | | 20,946,854 | | | | — | | | | — | | | | 20,946,854 | |
| | |
Total Assets | | $ | 1,397,188,104 | | | $ | — | | | $ | — | | | $ | 1,397,188,104 | |
| | |
Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.
See accompanying Notes to Financial Statements.
10 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 30, 20111
| | | | |
|
Assets | | | | |
Investments, at value (cost $1,097,413,107)—see accompanying statement of investments | | $ | 1,397,188,104 | |
Receivables and other assets: | | | | |
Investments sold | | | 5,146,954 | |
Dividends | | | 1,240,087 | |
Other | | | 66,345 | |
| | | |
Total assets | | | 1,403,641,490 | |
Liabilities | | | | |
Bank overdraft | | | 191,177 | |
Payables and other liabilities: | | | | |
Investments purchased | | | 3,496,879 | |
Shares of beneficial interest redeemed | | | 3,289,111 | |
Shareholder communications | | | 235,774 | |
Distribution and service plan fees | | | 189,380 | |
Transfer and shareholder servicing agent fees | | | 119,165 | |
Trustees’ compensation | | | 38,860 | |
Other | | | 36,005 | |
| | | |
Total liabilities | | | 7,596,351 | |
Net Assets | | $ | 1,396,045,139 | |
| | | |
Composition of Net Assets | | | | |
Par value of shares of beneficial interest | | $ | 67,825 | |
Additional paid-in capital | | | 1,460,842,471 | |
Accumulated net investment income | | | 4,690,401 | |
Accumulated net realized loss on investments and foreign currency transactions | | | (369,330,555 | ) |
Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies | | | 299,774,997 | |
| | | |
Net Assets | | $ | 1,396,045,139 | |
| | | |
Net Asset Value Per Share | | | | |
Non-Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $392,860,646 and 18,970,441 shares of beneficial interest outstanding) | | $ | 20.71 | |
Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $1,003,184,493 and 48,854,175 shares of beneficial interest outstanding) | | $ | 20.53 | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
11 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 30, 20111
| | | | |
|
Investment Income | | | | |
Dividends: | | | | |
Unaffiliated companies (net of foreign withholding taxes of $25,083) | | $ | 23,791,054 | |
Affiliated companies | | | 40,596 | |
Interest | | | 966 | |
| | | |
Total investment income | | | 23,832,616 | |
Expenses | | | | |
Management fees | | | 9,967,881 | |
Distribution and service plan fees—Service shares | | | 2,736,862 | |
Transfer and shareholder servicing agent fees: | | | | |
Non-Service shares | | | 426,553 | |
Service shares | | | 1,094,745 | |
Shareholder communications: | | | | |
Non-Service shares | | | 46,649 | |
Service shares | | | 119,403 | |
Trustees’ compensation | | | 62,646 | |
Custodian fees and expenses | | | 8,713 | |
Administration service fees | | | 1,500 | |
Other | | | 87,403 | |
| | | |
Total expenses | | | 14,552,355 | |
Less waivers and reimbursements of expenses | | | (22,856 | ) |
| | | |
Net expenses | | | 14,529,499 | |
Net Investment Income | | | 9,303,117 | |
Realized and Unrealized Gain (Loss) | | | | |
Net realized gain (loss) on: | | | | |
Investments from unaffiliated companies | | | 60,130,397 | |
Foreign currency transactions | | | (118,065 | ) |
| | | |
Net realized gain | | | 60,012,332 | |
Net change in unrealized appreciation/depreciation on: | | | | |
Investments | | | (72,248,813 | ) |
Translation of assets and liabilities denominated in foreign currencies | | | 68,522 | |
| | | |
Net change in unrealized appreciation/depreciation | | | (72,180,291 | ) |
Net Decrease in Net Assets Resulting from Operations | | $ | (2,864,842 | ) |
| | | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
12 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
| | | | | | | | |
| | Year Ended | | | Year Ended | |
| | December 30, | | | December 31, | |
| | 20111 | | | 2010 | |
Operations | | | | | | | | |
Net investment income | | $ | 9,303,117 | | | $ | 12,343,744 | |
Net realized gain | | | 60,012,332 | | | | 122,769,693 | |
Net change in unrealized appreciation/depreciation | | | (72,180,291 | ) | | | 110,123,026 | |
| | |
Net increase (decrease) in net assets resulting from operations | | | (2,864,842 | ) | | | 245,236,463 | |
Dividends and/or Distributions to Shareholders | | | | | | | | |
Dividends from net investment income: | | | | | | | | |
Non-Service shares | | | (3,755,987 | ) | | | (5,119,114 | ) |
Service shares | | | (6,566,777 | ) | | | (11,011,249 | ) |
| | |
| | | (10,322,764 | ) | | | (16,130,363 | ) |
Beneficial Interest Transactions | | | | | | | | |
Net decrease in net assets resulting from beneficial interest transactions: | | | | | | | | |
Non-Service shares | | | (73,098,026 | ) | | | (66,941,748 | ) |
Service shares | | | (172,844,897 | ) | | | (135,835,930 | ) |
| | |
| | | (245,942,923 | ) | | | (202,777,678 | ) |
Net Assets | | | | | | | | |
Total increase (decrease) | | | (259,130,529 | ) | | | 26,328,422 | |
Beginning of period | | | 1,655,175,668 | | | | 1,628,847,246 | |
| | |
End of period (including accumulated net investment income of $4,690,401 and $13,277,741, respectively) | | $ | 1,396,045,139 | | | $ | 1,655,175,668 | |
| | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
13 | OPPENHEIMER MAIN STREET FUND/VA
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Non-Service Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 20.88 | | | $ | 18.18 | | | $ | 14.56 | | | $ | 25.61 | | | $ | 24.78 | |
|
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income2 | | | .16 | | | | .17 | | | | .21 | | | | .29 | | | | .33 | |
Net realized and unrealized gain (loss) | | | (.16 | ) | | | 2.73 | | | | 3.71 | | | | (9.64 | ) | | | .75 | |
| | |
Total from investment operations | | | — | | | | 2.90 | | | | 3.92 | | | | (9.35 | ) | | | 1.08 | |
|
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.17 | ) | | | (.20 | ) | | | (.30 | ) | | | (.32 | ) | | | (.25 | ) |
Distributions from net realized gain | | | — | | | | — | | | | — | | | | (1.38 | ) | | | — | |
| | |
Total dividends and/or distributions to shareholders | | | (.17 | ) | | | (.20 | ) | | | (.30 | ) | | | (1.70 | ) | | | (.25 | ) |
|
Net asset value, end of period | | $ | 20.71 | | | $ | 20.88 | | | $ | 18.18 | | | $ | 14.56 | | | $ | 25.61 | |
| | |
| | | | | | | | | | | | | | | | | | | | |
Total Return, at Net Asset Value3 | | | (0.01 | )% | | | 16.11 | % | | | 28.29 | % | | | (38.47 | )% | | | 4.43 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 392,861 | | | $ | 469,720 | | | $ | 474,637 | | | $ | 432,360 | | | $ | 907,727 | |
|
Average net assets (in thousands) | | $ | 426,354 | | | $ | 454,937 | | | $ | 430,517 | | | $ | 670,994 | | | $ | 1,006,655 | |
|
Ratios to average net assets:4 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.79 | % | | | 0.93 | % | | | 1.35 | % | | | 1.42 | % | | | 1.28 | % |
Total expenses5 | | | 0.78 | % | | | 0.78 | % | | | 0.78 | % | | | 0.66 | % | | | 0.65 | % |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 0.78 | % | | | 0.78 | % | | | 0.78 | % | | | 0.66 | % | | | 0.65 | % |
|
Portfolio turnover rate | | | 38 | % | | | 45 | % | | | 128 | % | | | 132 | % | | | 111 | % |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
4. | | Annualized for periods less than one full year. |
|
5. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 0.78 | % |
Year Ended December 31, 2010 | | | 0.78 | % |
Year Ended December 31, 2009 | | | 0.78 | % |
Year Ended December 31, 2008 | | | 0.66 | % |
Year Ended December 31, 2007 | | | 0.65 | % |
See accompanying Notes to Financial Statements.
14 | OPPENHEIMER MAIN STREET FUND/VA
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Service Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 20.71 | | | $ | 18.04 | | | $ | 14.42 | | | $ | 25.38 | | | $ | 24.58 | |
|
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income2 | | | .11 | | | | .13 | | | | .17 | | | | .24 | | | | .26 | |
Net realized and unrealized gain (loss) | | | (.17 | ) | | | 2.70 | | | | 3.70 | | | | (9.56 | ) | | | .75 | |
| | |
Total from investment operations | | | (.06 | ) | | | 2.83 | | | | 3.87 | | | | (9.32 | ) | | | 1.01 | |
|
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.12 | ) | | | (.16 | ) | | | (.25 | ) | | | (.26 | ) | | | (.21 | ) |
Distributions from net realized gain | | | — | | | | — | | | | — | | | | (1.38 | ) | | | — | |
| | |
Total dividends and/or distributions to shareholders | | | (.12 | ) | | | (.16 | ) | | | (.25 | ) | | | (1.64 | ) | | | (.21 | ) |
|
Net asset value, end of period | | $ | 20.53 | | | $ | 20.71 | | | $ | 18.04 | | | $ | 14.42 | | | $ | 25.38 | |
| | |
| | | | | | | | | | | | | | | | | | | | |
Total Return, at Net Asset Value3 | | | (0.32 | )% | | | 15.83 | % | | | 27.99 | % | | | (38.63 | )% | | | 4.15 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 1,003,184 | | | $ | 1,185,456 | | | $ | 1,154,210 | | | $ | 1,020,103 | | | $ | 1,464,690 | |
|
Average net assets (in thousands) | | $ | 1,094,254 | | | $ | 1,193,630 | | | $ | 1,029,909 | | | $ | 1,268,430 | | | $ | 1,315,488 | |
|
Ratios to average net assets:4 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.54 | % | | | 0.68 | % | | | 1.10 | % | | | 1.20 | % | | | 1.03 | % |
Total expenses5 | | | 1.03 | % | | | 1.03 | % | | | 1.03 | % | | | 0.91 | % | | | 0.90 | % |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 1.03 | % | | | 1.03 | % | | | 1.03 | % | | | 0.91 | % | | | 0.90 | % |
|
Portfolio turnover rate | | | 38 | % | | | 45 | % | | | 128 | % | | | 132 | % | | | 111 | % |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
4. | | Annualized for periods less than one full year. |
|
5. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 1.03 | % |
Year Ended December 31, 2010 | | | 1.03 | % |
Year Ended December 31, 2009 | | | 1.03 | % |
Year Ended December 31, 2008 | | | 0.91 | % |
Year Ended December 31, 2007 | | | 0.90 | % |
See accompanying Notes to Financial Statements.
15 | OPPENHEIMER MAIN STREET FUND/VA
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Oppenheimer Main Street Fund/VA (the “Fund”) is a separate series of Oppenheimer Variable Account Funds, an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund’s investment objective is to seek high total return. The Fund’s investment adviser is OppenheimerFunds, Inc. (the “Manager”).
The Fund offers two classes of shares. Both classes are sold at their offering price, which is the net asset value per share, to separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. The class of shares designated as Service shares is subject to a distribution and service plan. Both classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class.
The following is a summary of significant accounting policies consistently followed by the Fund.
Fiscal Year End. Since December 30, 2011 represents the last day during the Fund’s 2011 fiscal year on which the New York Stock Exchange was open for trading, the Fund’s financial statements have been presented through that date to maintain consistency with the Fund’s net asset value calculations used for shareholder transactions.
Securities Valuation. The Fund calculates the net asset value of its shares as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading.
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. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” observable market inputs other than unadjusted quoted prices are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.
Securities traded on a registered U.S. securities exchange 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. Securities whose principal exchange is NASDAQ® are valued based on the official closing prices reported by NASDAQ prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.
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.
U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.
16 | OPPENHEIMER MAIN STREET FUND/VA
“Money market-type” debt instruments with remaining maturities 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.
In the absence of a current price quotation obtained from an independent pricing service or broker-dealer, including for securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund’s assets are valued but after the close of the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities 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 adjusted for any discounts related to 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.
There have been no significant changes to the fair valuation methodologies of the Fund during the period.
Investment in Oppenheimer Institutional Money Market Fund. The Fund is permitted to invest daily available cash balances in an affiliated money market fund. The Fund may invest the available cash in Class E shares of Oppenheimer Institutional Money Market Fund (“IMMF”) to seek current income while preserving liquidity. IMMF is a registered open-end management investment company, regulated as a money market fund under the Investment Company Act of 1940, as amended. The Manager is also the investment adviser of IMMF. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of IMMF’s Class E expenses, including its 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 IMMF.
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 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.
Reported net realized gains and losses from foreign currency transactions arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, exchange rate fluctuations between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized appreciation and depreciation on the translation of assets and liabilities denominated in foreign currencies arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund’s Statement of Operations.
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
17 | OPPENHEIMER MAIN STREET FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
1. Significant Accounting Policies Continued
Federal Taxes. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. Therefore, no federal income or excise tax provision is required. The Fund files income tax returns in U.S. federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remain open for the three preceding fiscal reporting period ends.
The tax components of capital shown in the following table represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes.
| | | | | | | | | | | | |
| | | | | | | | | | Net Unrealized | |
| | | | | | | | | | Appreciation | |
| | | | | | | | | | Based on Cost of | |
Undistributed | | Undistributed | | | Accumulated | | | Securities and Other | |
Net Investment | | Long-Term | | | Loss | | | Investments for Federal | |
Income | | Gain | | | Carryforward1,2,3,4 | | | Income Tax Purposes | |
|
$4,457,825 | | $ | — | | | $ | 365,662,510 | | | $ | 296,378,380 | |
| | |
1. | | As of December 30, 2011, the Fund had $360,688,381 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. Details of the capital loss carryforwards are included in the table below. Capital loss carryovers with no expiration, if any, must be utilized prior to those with expiration dates. |
| | | | |
Expiring | | | | |
2016 | | $ | 28,492,724 | |
2017 | | | 332,195,657 | |
| | | |
Total | | $ | 360,688,381 | |
| | | |
| | |
2. | | As of December 30, 2011, the Fund had $4,974,129 of post-October losses available to offset future realized capital gains, if any. |
|
3. | | During the fiscal year ended December 30, 2011, the Fund utilized $71,694,516 of capital loss carryforward to offset capital gains realized in that fiscal year. |
|
4. | | During the fiscal year ended December 31, 2010, the Fund utilized $117,805,966 of capital loss carryforward to offset capital gains realized in that fiscal year. |
Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund.
Accordingly, the following amounts have been reclassified for December 30, 2011. Net assets of the Fund were unaffected by the reclassifications.
| | | | | | | | |
| | Reduction | | | Reduction | |
| | to Accumulated | | | to Accumulated Net | |
Increase to | | Net Investment | | | Realized Loss | |
Paid-in Capital | | Income | | | on Investments | |
|
$303,331 | | $ | 7,567,693 | | | $ | 7,264,362 | |
The tax character of distributions paid during the years ended December 30, 2011 and December 31, 2010 was as follows:
| | | | | | | | |
| | Year Ended | | | Year Ended | |
| | December 30, 2011 | | | December 31, 2010 | |
|
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 10,322,764 | | | $ | 16,130,363 | |
18 | OPPENHEIMER MAIN STREET FUND/VA
The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 30, 2011 are noted in the following table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.
| | | | |
|
Federal tax cost of securities | | $ | 1,100,809,724 | |
| | | |
| | | | |
Gross unrealized appreciation | | $ | 330,799,821 | |
Gross unrealized depreciation | | | (34,421,441 | ) |
| | | |
Net unrealized appreciation | | $ | 296,378,380 | |
| | | |
Trustees’ Compensation. The Board of Trustees has adopted a compensation deferral plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of “Other” within the asset section of the Statement of Assets and Liabilities. Deferral of trustees’ fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund’s assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance with the compensation deferral plan.
Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles, are recorded on the ex-dividend date. Income and capital gain distributions, if any, are declared and paid annually or at other times as deemed necessary by the Manager.
Investment Income. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is recognized on an accrual basis. Discount and premium, which are included in interest income on the Statement of Operations, are amortized or accreted daily.
Custodian Fees. “Custodian fees and expenses” in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by the Fund, at a rate equal to the Federal Funds Rate plus 0.50%. The “Reduction to custodian expenses” line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings.
Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost.
Indemnifications. The Fund’s organizational documents provide current and former trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
19 | OPPENHEIMER MAIN STREET FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
1. Significant Accounting Policies Continued
Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
| | | | | | | | | | | | | | | | |
| | Year Ended December 30, 2011 | | | Year Ended December 31, 2010 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
|
Non-Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 2,028,214 | | | $ | 41,337,389 | | | | 2,851,462 | | | $ | 52,574,153 | |
Dividends and/or distributions reinvested | | | 176,503 | | | | 3,755,987 | | | | 279,275 | | | | 5,119,114 | |
Redeemed | | | (5,726,116 | ) | | | (118,191,402 | ) | | | (6,743,462 | ) | | | (124,635,015 | ) |
| | |
Net decrease | | | (3,521,399 | ) | | $ | (73,098,026 | ) | | | (3,612,725 | ) | | $ | (66,941,748 | ) |
| | |
| | | | | | | | | | | | | | | | |
Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 2,150,725 | | | $ | 42,852,883 | | | | 7,702,331 | | | $ | 136,115,255 | |
Dividends and/or distributions reinvested | | | 310,633 | | | | 6,566,777 | | | | 604,682 | | | | 11,011,249 | |
Redeemed | | | (10,851,128 | ) | | | (222,264,557 | ) | | | (15,049,192 | ) | | | (282,962,434 | ) |
| | |
Net decrease | | | (8,389,770 | ) | | $ | (172,844,897 | ) | | | (6,742,179 | ) | | $ | (135,835,930 | ) |
| | |
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations and investments in IMMF, for the year ended December 30, 2011, were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
|
Investment securities | | $ | 567,679,021 | | | $ | 792,267,202 | |
4. Fees and Other Transactions with Affiliates
Management Fees. Under the investment advisory agreement, the Fund pays the Manager a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| | | | |
Fee Schedule | | | | |
|
Up to $200 million | | | 0.75 | % |
Next $200 million | | | 0.72 | |
Next $200 million | | | 0.69 | |
Next $200 million | | | 0.66 | |
Over $800 million | | | 0.60 | |
Administration Service Fees. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund’s tax returns.
Transfer Agent Fees. OppenheimerFunds Services (“OFS”), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. For the year ended December 30, 2011, the Fund paid $1,542,614 to OFS for services to the Fund.
20 | OPPENHEIMER MAIN STREET FUND/VA
Distribution and Service Plan for Service Shares. The Fund has adopted a Distribution and Service Plan (the “Plan”) in accordance with Rule 12b-1 under the Investment Company Act of 1940 for Service shares to pay OppenheimerFunds Distributor, Inc. (the “Distributor”), for distribution related services, personal service and account maintenance for the Fund’s Service shares. Under the Plan, payments are made periodically at an annual rate of 0.25% of the daily net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors of the insurance product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service shares. These fees are paid out of the Fund’s assets on an on-going basis and increase operating expenses of the Service shares, which results in lower performance compared to the Fund’s shares that are not subject to a service fee. Fees incurred by the Fund under the Plan are detailed in the Statement of Operations.
Waivers and Reimbursements of Expenses. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.80% for Non-Service shares and 1.05% for Service shares.
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 IMMF. During the year ended December 30, 2011, the Manager waived fees and/or reimbursed the Fund $22,856 for IMMF management fees.
Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.
5. Risk Exposures and the Use of Derivative Instruments
The Fund’s investment objectives not only permit the Fund to purchase investment securities, they also allow the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward foreign currency exchange contracts, credit default swaps, interest rate swaps, total return 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. Central to those strategies are features inherent to derivatives that make them more attractive for this purpose than equity and debt securities: they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This 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.
Market Risk Factors. In accordance with its investment objectives, the Fund may use derivatives to increase or decrease its exposure to one or more of the following 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 to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds. |
| | 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 |
21 | OPPENHEIMER MAIN STREET FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
5. | | Risk Exposures and the Use of Derivative Instruments Continued 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. |
The Fund’s actual exposures to these market risk factors during the period are discussed in further detail, by derivative type, below.
Risks of Investing in Derivatives. The Fund’s use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. 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.
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. 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.
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. Associated risks can be different for each type of derivative and are discussed by each derivative type in the notes that follow.
| | Counterparty Credit Risk. Certain derivative positions are subject to counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. The Fund’s derivative counterparties are financial institutions who are subject to market conditions that may weaken their financial position. The Fund intends to enter into financial transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction. |
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| | Credit Related Contingent Features. The Fund’s agreements with derivative counterparties have several credit related contingent features that if triggered would allow its derivatives counterparties to close out and demand payment or additional collateral to cover their exposure from the Fund. Credit related contingent features are established between the Fund and its derivatives counterparties to reduce the risk that the Fund will not fulfill its payment obligations to its counterparties. These triggering features include, but are not limited to, a percentage decrease in the Fund’s net assets and or a percentage decrease in the Fund’s Net Asset Value or NAV. The contingent features are established within the Fund’s International Swap and Derivatives Association, Inc. master agreements which govern certain positions in swaps, over-the-counter options and swaptions, and forward currency exchange contracts for each individual counterparty. |
| | The effect of derivative instruments on the Statement of Operations is as follows: |
| | | | |
Amount of Realized Gain or (Loss) Recognized on Derivatives | |
Derivatives Not Accounted for as Hedging Instruments | | Foreign currency transactions | |
|
Foreign exchange contracts | | $ | 977 | |
22 | OPPENHEIMER MAIN STREET FUND/VA
Foreign Currency Exchange Contracts
The Fund may enter into foreign currency exchange contracts (“forward contracts”) for the purchase or sale of a foreign currency at a negotiated rate at a future date.
Forward contracts are reported on a schedule following the Statement of Investments. Forward contracts will be valued daily based upon the closing prices of the forward currency rates determined at the close of the Exchange as provided by a bank, dealer or pricing service. The resulting unrealized appreciation (depreciation) is reported in the Statement of Assets and Liabilities as a receivable or payable and in the Statement of Operations 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 Statement of Operations.
The Fund has purchased and sold certain forward foreign currency exchange contracts of different currencies in order to acquire currencies to pay for or sell currencies to acquire related foreign securities purchase and sale transactions, respectively, or to convert foreign currencies to U.S. dollars from related foreign securities transactions. These foreign currency exchange contracts are negotiated at the current spot exchange rate with settlement typically within two business days thereafter.
During the year ended December 30, 2011, the Fund had daily average contract amounts on forward foreign currency contracts to buy and sell of $51,915 and $26,942, respectively.
Additional associated risk to the Fund includes counterparty credit risk. Counterparty credit risk arises from the possibility that the counterparty will default.
As of December 30, 2011, the Fund had no outstanding forward contracts.
6. Pending Litigation
Since 2009, a number of class action, derivative and individual lawsuits have been pending in federal and state courts against OppenheimerFunds, Inc., the Fund’s investment advisor (the “Manager”), OppenheimerFunds Distributor, Inc., the Fund’s principal underwriter and distributor (the “Distributor”), and certain funds (but not including the Fund) advised by the Manager and distributed by the Distributor (the “Defendant Funds”). Several of these lawsuits also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The lawsuits raise claims under federal securities laws and various states’ securities, consumer protection and common law and allege, among other things, that the disclosure documents of the respective Defendant Funds contained misrepresentations and omissions and that the respective Defendant Funds’ investment policies were not followed. The plaintiffs in these actions seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. On September 30, 2011, the U.S. District Court for the District of Colorado entered orders and final judgments approving the settlement of certain putative class actions involving two Defendant Funds, Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund. Those orders are not subject to further appeal. These settlements do not resolve other outstanding lawsuits relating to Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund, nor do the settlements affect certain other putative class action lawsuits pending in federal court against the Manager, the Distributor, and other Defendant Funds and their independent trustees.
In 2009, what are claimed to be derivative lawsuits were filed in New Mexico state court against the Manager and a subsidiary (but not against the Fund) on behalf of the New Mexico Education Plan Trust challenging a settlement reached in 2010 between the Manager, its subsidiary and the Distributor and the board of the New Mexico section 529 college savings plan. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses. On September 9, 2011, the court denied plaintiffs’ request for a hearing to determine the fairness of the settlement, finding that plaintiffs lacked standing to pursue derivative claims on behalf of the Trust. On October 27, 2011, the parties to these actions filed a joint motion to dismiss the lawsuits with prejudice, which the court granted on October 28, 2011.
23 | OPPENHEIMER MAIN STREET FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
6. | | Pending Litigation Continued |
Other class action and individual lawsuits have been filed since 2008 in various state and federal courts against the Manager and certain of its affiliates by investors seeking to recover investments they allegedly lost as a result of the “Ponzi” scheme run by Bernard L. Madoff and his firm, Bernard L. Madoff Investment Securities, LLC (“BLMIS”). Plaintiffs in these suits allege that they suffered losses as a result of their investments in several funds managed by an affiliate of the Manager and assert a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. Neither the Distributor, nor any of the Oppenheimer mutual funds, their independent trustees or directors are named as defendants in these lawsuits. None of the Oppenheimer mutual funds invested in any funds or accounts managed by Madoff or BLMIS. On February 28, 2011, a stipulation of partial settlement of three groups of consolidated putative class action lawsuits relating to these matters was filed in the U.S. District Court for the Southern District of New York. On August 19, 2011, the court entered an order and final judgment approving the settlement as fair, reasonable and adequate. In September 2011, certain parties filed notices of appeal from the court’s order approving the settlement. On July 29, 2011, a stipulation of settlement between certain affiliates of the Manager and the Trustee appointed under the Securities Investor Protection Act to liquidate BLMIS was filed in the U.S. Bankruptcy Court for the Southern District of New York to resolve purported preference and fraudulent transfer claims by the Trustee. On September 22, 2011, the court entered an order approving the settlement as fair, reasonable and adequate. In October 2011, certain parties filed notices of appeal from the court’s order approving the settlement. The aforementioned settlements do not resolve other outstanding lawsuits against the Manager and its affiliates relating to BLMIS.
On April 16, 2010, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark IV Funding Limited (“AAArdvark IV”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark IV. Plaintiffs allege breach of contract against the defendants and seek compensatory damages, costs and disbursements, including attorney fees. On July 15, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark Funding Limited (“AAArdvark I”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark I. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees. On November 9, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark XS Funding Limited (“AAArdvark XS”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark XS. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees.
The Manager believes the lawsuits and appeals described above are without legal merit and, with the exception of actions it has settled, is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to represent the Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer mutual funds.
24 | OPPENHEIMER MAIN STREET FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:
We have audited the accompanying statement of assets and liabilities of Oppenheimer Main Street Fund/VA (a separate series of Oppenheimer Variable Account Funds), including the statement of investments, as of December 30, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of Oppenheimer Main Street Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 30, 2011, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Main Street Fund/VA as of December 30, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended, in conformity with U.S. generally accepted accounting principles.
KPMG llp
Denver, Colorado
February 16, 2012
25 | OPPENHEIMER MAIN STREET FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
In early 2012, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2011. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service.
Dividends, if any, paid by the Fund during the fiscal year ended December 30, 2011 which are not designated as capital gain distributions should be multiplied by the maximum amount allowable but not less than 100% to arrive at the amount eligible for the corporate dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance.
26 | OPPENHEIMER MAIN STREET FUND/VA
BOARD APPROVAL OF THE FUND’S INVESTMENT
ADVISORY AGREEMENT Unaudited
Each year, the Board of Trustees (the “Board”), including a majority of the independent Trustees, is required to determine whether to renew the Fund’s investment advisory agreement (the “Agreement”). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager’s services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager and its affiliates, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. The Board was aware that there are alternatives to retaining the Manager.
Outlined below is a summary of the principal information considered by the Board as well as the Board’s conclusions.
Nature, Quality and Extent of Services. The Board considered information about the nature, quality and extent of the services provided to the Fund and information regarding the Manager’s key personnel who provide such services. The Manager’s duties include providing the Fund with the services of the portfolio managers and the Manager’s investment team, who provide research, analysis and other advisory services in regard to the Fund’s investments; securities trading services; oversight of third-party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund’s investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel who are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund’s operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund’s shares. The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the quality of the Manager’s resources that are available to the Fund. The Board took account of the fact that the Manager has had over fifty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager’s advisory, administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager’s key personnel and the size and functions of its staff. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Manind Govil and Benjamin Ram, the portfolio managers for the Fund, and the Manager’s investment team and analysts. The Board members also considered the totality of their experiences with the Manager as directors or trustees of the Fund and other funds advised by the Manager. The Board considered information regarding the quality of services provided by affiliates of the Manager, which its members have become knowledgeable about in connection with the renewal of the Fund’s service agreements. The Board concluded, in light of the Manager’s experience, reputation, personnel, operations and resources that the Fund benefits from the services provided under the Agreement.
27 | OPPENHEIMER MAIN STREET FUND/VA
BOARD APPROVAL OF THE FUND’S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
Investment Performance of the Manager and the Fund. Throughout the year, the Manager provided information on the investment performance of the Fund and the Manager, including comparative performance information. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund’s historical performance to relevant market indices and to the performance of other large-cap core funds underlying variable insurance products. The Board considered that the Fund outperformed its performance universe median during the one-, three-, five-, and ten-year Lipper periods. The Board also considered the change, effective May 19, 2009, of a new portfolio management team.
Costs of Services by the Manager. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also considered the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund and other large-cap core funds underlying variable insurance products. In reviewing the fees and expenses charged to the VA funds, the Board considered the Manager’s assertion that, because there is much greater disparity in the fees and services that may be provided by a manager to a VA fund as opposed to a retail fund, when comparing the expenses of the various VA funds to those of retail funds, it is most appropriate to focus on total expenses (rather than on the management fees). Accordingly, while the Board reviewed and considered all expenses, it focused on total expenses. The Board considered that the Fund’s actual management fees were lower than its expense group median, although its total expenses were higher than its expense group median. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.80% for Non-Service shares and 1.05% for Service shares. This voluntary expense limitation may be amended or withdrawn at any time.
Economies of Scale and Profits Realized by the Manager. The Board considered information regarding the Manager’s costs in serving as the Fund’s investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager’s profitability from its relationship with the Fund. The Board reviewed whether the Manager may realize economies of scale in managing and supporting the Fund. The Board noted that the Fund currently has management fee breakpoints, which are intended to share with Fund shareholders economies of scale that may exist as the Fund’s assets grow.
Other Benefits to the Manager. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager’s affiliates and research provided to the Manager in connection with permissible brokerage arrangements (soft dollar arrangements). The Board also considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide quality services to the Fund.
Conclusions. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees’ counsel are independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the Agreement through August 31, 2012. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the above information, and considered the terms and conditions of the Agreement, including the management fee, in light of all of the surrounding circumstances.
28 | OPPENHEIMER MAIN STREET FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities (“portfolio proxies”) held by the Fund. A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund’s website at oppenheimerfunds.com, and (iii) on the SEC’s website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund’s voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC’s website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund’s Form N-Q filings are available on the SEC’s website at www.sec.gov. Those forms may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
29 | OPPENHEIMER MAIN STREET FUND/VA
TRUSTEES AND OFFICERS Unaudited
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Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
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INDEPENDENT TRUSTEES | | The address of each Trustee in the chart below is 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Trustee serves for an indefinite term, or until his or her resignation, retirement, death or removal. |
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William L. Armstrong, Chairman of the Board of Trustees (since 2003), Trustee (since 1999) Age: 74 | | President, Colorado Christian University (since 2006); Chairman, Cherry Creek Mortgage Company (since 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso Mortgage Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman, Broadway Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), former Director of Campus Crusade for Christ (non-profit) (1991-2008); former Director, The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (2002-2006); former Chairman of: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Armstrong has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Edward L. Cameron, Trustee (since 1999) Age: 73 | | Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000 — June 2006); Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (accounting firm) (July 1994-June 1998). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Cameron has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Jon S. Fossel, Trustee (since 1995) Age: 69 | | Chairman of the Board (since 2006) and Director (since June 2002) of UNUMProvident (insurance company); Director of Northwestern Energy Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003 and February 2005-February 2007); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. (“OAC”) (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Fossel has served on the Boards of certain Oppenheimer funds since 1990, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Sam Freedman, Trustee (since 1996) Age: 71 | | Director of Colorado UpLIFT (charitable organization) (since September 1984). Mr. Freedman held several positions with the Manager and with subsidiary or affiliated companies of the Manager (until October 1994). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Freedman has served on the Boards of certain Oppenheimer funds since 1996, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Beverly L. Hamilton, Trustee (since 2002) Age: 65 | | Trustee of Monterey Institute for International Studies (educational organization) (since February 2000); Board Member of Middlebury College (educational organization) (since December 2005); Chairman (since 2010) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); Director of The California Endowment (philanthropic organization) (April 2002-April 2008); Director (February 2002-2005) and Chairman of Trustees (2006-2007) of the Community Hospital of Monterey Peninsula; Director (October 1991-2005); Vice Chairman (2006-2009) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation (2001-2006) and The University of Michigan (since 2000); Advisor at Credit Suisse First Boston’s Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member of the investment committee of Hartford Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 36 portfolios in the OppenheimerFunds complex. |
30 | OPPENHEIMER MAIN STREET FUND/VA
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Beverly L. Hamilton, Continued | | Ms. Hamilton has served on the Boards of certain Oppenheimer funds since 2002, during which time she has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Robert J. Malone, Trustee (since 2002) Age: 67 | | Board of Directors of Opera Colorado Foundation (non-profit organization) (since March 2008); Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director of Steele Street Bank & Trust (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Malone has served on the Boards of certain Oppenheimer funds since 2002, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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F. William Marshall, Jr., Trustee (since 2000) Age: 69 | | Trustee Emeritus of Worcester Polytech Institute (WPI) (private university) (since 2009); Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment company) (since 1996) and MML Series Investment Fund (investment company) (since 1996); President and Treasurer of the SIS Funds (private charitable fund) (January 1999 — March 2011); Former Trustee of WPI (1985-2008); Former Chairman of the Board (2004-2006) and Former Chairman of the Investment Committee of WPI (1994-2008); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999); and Former President and Chief Executive Officer of SIS Bancorp. (1993-1999). Oversees 38 portfolios in the OppenheimerFunds complex. Mr. Marshall has served on the Boards of certain Oppenheimer funds since 2000, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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INTERESTED TRUSTEE AND OFFICER | | The address of Mr. Glavin is Two World Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008. Mr. Glavin serves as a Trustee for an indefinite term, or until his resignation, retirement, death or removal and as an Officer for an indefinite term, or until his resignation, retirement, death or removal. Mr. Glavin is an Interested Trustee due to his positions with OppenheimerFunds, Inc. and its affiliates. |
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William F. Glavin, Jr., Trustee, President and Principal Executive Officer (since 2009) Age: 53 | | Chairman of the Manager (since December 2009); Chief Executive Officer and Director of the Manager (since January 2009); President of the Manager (since May 2009); Director of Oppenheimer Acquisition Corp. (“OAC”) (the Manager’s parent holding company) (since June 2009); Executive Vice President (March 2006-February 2009) and Chief Operating Officer (July 2007-February 2009) of Massachusetts Mutual Life Insurance Company (OAC’s parent company); Director (May 2004-March 2006) and Chief Operating Officer and Chief Compliance Officer (May 2004-January 2005), President (January 2005-March 2006) and Chief Executive Officer (June 2005-March 2006) of Babson Capital Management LLC; Director (March 2005-March 2006), President (May 2003-March 2006) and Chief Compliance Officer (July 2005-March 2006) of Babson Capital Securities, Inc. (a broker-dealer); President (May 2003-March 2006) of Babson Investment Company, Inc.; Director (May 2004-August 2006) of Babson Capital Europe Limited; Director (May 2004-October 2006) of Babson Capital Guernsey Limited; Director (May 2004- March 2006) of Babson Capital Management LLC; Non-Executive Director (March 2005-March 2007) of Baring Asset Management Limited; Director (February 2005-June 2006) Baring Pension Trustees Limited; Director and Treasurer (December 2003-November 2006) of Charter Oak Capital Management, Inc.; Director (May 2006- September 2006) of C.M. Benefit Insurance Company; Director (May 2008-June 2009) and Executive Vice President (June 2007-July 2009) of C.M. Life Insurance Company; President (March 2006-May 2007) of MassMutual Assignment Company; Director (January 2005-December 2006), Deputy Chairman (March 2005-December 2006) and President (February 2005-March 2005) of MassMutual Holdings (Bermuda) Limited; Director (May 2008- June 2009) and Executive Vice President (June 2007-July 2009) of MML Bay State Life Insurance Company; Chief Executive Officer and President (April 2007-January 2009) of MML Distributors, LLC; and Chairman (March 2006- December 2008) and Chief Executive Officer (May 2007-December 2008) of MML Investors Services, Inc. Oversees 63 portfolios as a Trustee/Director and 96 portfolios as an officer in the OppenheimerFunds complex. |
31 | OPPENHEIMER MAIN STREET FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
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OTHER OFFICERS OF THE FUND | | The addresses of the Officers in the chart below are as follows: for Messrs. Govil, Ram, Gabinet and Ms. Nasta, Two World Financial Center, 225 Liberty Street, New York, New York 10281-1008, for Messrs. Vandehey and Wixted, 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Officer serves for an indefinite term or until his or her resignation, retirement, death or removal. |
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Manind Govil, Vice President (since 2009) Age: 42 | | Senior Vice President and the Main Street Team Leader of the Manager (since May 2009); a Chartered Financial Analyst. Prior to joining the Manager, managed the RS Largecap Alpha fund (August 2005-March 2009) first with Guardian Life Insurance Company of America then with RS Investment Management Co. LLC, subsequent to their merger; head of equity investments at The Guardian Life Insurance Company of America (August 2005- October 2006) when Guardian Life Insurance acquired an interest in RS Investment Management Co. LLC; lead portfolio manager — large cap blend/core equity, co-head of equities and head of equity research (2001-July 2005); lead portfolio manager — core equity (April 1996-July 2005), at Mercantile Capital Advisers, Inc. A portfolio manager and officer of 4 portfolios in the OppenheimerFunds complex. |
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Benjamin Ram, Vice President (since 2009) Age: 39 | | Vice President of the Manager (since May 2009). Prior to joining the Manager, a sector manager for financial investments and a co-portfolio manager for mid-cap portfolios with the RS Core Equity Team of RS Investment Management Co. LLC (January 2006-May 2009) first with Guardian Life Insurance Company of America then with RS Investment Management Co. LLC, subsequent to their merger; a financials analyst (2003-2005) and co-portfolio manager (2005-2006) at Mercantile Capital Advisers, Inc; a bank analyst at Legg Mason Securities (2000-2003); a senior financial analyst at the CitiFinancial division of Citigroup, Inc. (1997-2000). A portfolio manager and officer of 3 portfolios in the OppenheimerFunds complex. |
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Arthur S. Gabinet, Secretary (since 2011) Age: 53 | | Executive Vice President (since May 2010) and General Counsel (since January 2011) of the Manager; General Counsel of the Distributor (since January 2011); General Counsel of Centennial Asset Management Corporation (since January 2011); Executive Vice President and General Counsel of HarbourView Asset Management Corporation (since January 2011); Assistant Secretary (since January 2011) and Director (since January 2011) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since January 2011); Director of Oppenheimer Real Asset Management, Inc. (since January 2011); Executive Vice President and General Counsel of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since January 2011); Executive Vice President and General Counsel of OFI Private Investments, Inc. (since January 2011); Vice President of OppenheimerFunds Legacy Program (since January 2011); Executive Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since January 2011); General Counsel, Asset Management of the Manager (May 2010-December 2010); Principal, The Vanguard Group (November 2005-April 2010); District Administrator, U.S. Securities and Exchange Commission (January 2003-October 2005). An officer of 96 portfolios in the OppenheimerFunds complex. |
| | |
Christina M. Nasta, Vice President and Chief Business Officer (since 2011) Age: 38 | | Senior Vice President of the Manager (since July 2010); Vice President of the Manager (since January 2003); Vice President of OppenheimerFunds Distributor, Inc. (since January 2003). An officer of 96 portfolios in the OppenheimerFunds complex. |
| | |
Mark S. Vandehey, Vice President and Chief Compliance Officer (since 2004) Age: 61 | | Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983). An officer of 96 portfolios in the OppenheimerFunds complex. |
| | |
Brian W. Wixted, Treasurer and Principal Financial & Accounting Officer (since 1999) Age: 52 | | Senior Vice President of the Manager (since March 1999); Treasurer of the Manager and the following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership Holdings, Inc. (March 1999-June 2008), OFI Private Investments, Inc. (March 2000-June 2008), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of OAC (March 1999-June 2008). An officer of 96 portfolios in the OppenheimerFunds complex. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and Officers and is available without charge, upon request, by calling 1.800.988.8287.
32 | OPPENHEIMER MAIN STREET FUND/VA
OPPENHEIMER MAIN STREET FUND ®/ VA
A Series of Oppenheimer Variable Account Funds
| | |
|
Manager | | OppenheimerFunds, Inc. |
| | |
Distributor | | OppenheimerFunds Distributor, Inc. |
| | |
Transfer Agent | | OppenheimerFunds Services |
| | |
Independent Registered Public Accounting Firm | | KPMG llp |
| | |
Counsel | | K&L Gates LLP |
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| | Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing. |
| |
©2012 OppenheimerFunds, Inc. All rights reserved. | ![(oppenheimer funds)](https://capedge.com/proxy/N-CSR/0000950123-12-003003/g60124g6013005.gif) |
OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND®/VA
Portfolio Managers: Matthew P. Ziehl, CFA; Raymond Anello, CFA; and Raman Vardharaj, CFA
Average Annual Total Returns
For the Periods Ended 12/30/111
| | | | | | | | | | | | |
| | 1-Year | | | 5-Year | | | 10-Year | |
Non-Service Shares | | | -2.21 | % | | | 0.34 | % | | | 6.44 | % |
Service Shares | | | -2.38 | % | | | 0.10 | % | | | 6.22 | % |
Expense Ratios
For the Period Ended 12/30/111
| | | | | | | | |
| | Gross | | | Net | |
| | Expense | | | Expense | |
| | Ratios | | | Ratios | |
Non-Service Shares | | | 0.83 | % | | | 0.80 | % |
Service Shares | | | 1.08 | | | | 1.05 | |
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance and expense ratios may be lower or higher than the data quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account. The net expense ratios take into account voluntary fee waivers and/or expense reimbursements, without which performance would have been less. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund’s prospectus.
Sector Allocation
Portfolio holdings and allocations are subject to change. Percentages are as of December 30, 2011, and are based on the total market value of common stocks.
| | | | |
Top Ten Common Stock Holdings | | | | |
| | |
Robert Half International, Inc. | | | 1.7 | % |
HollyFrontier Corp. | | | 1.6 | |
Questcor Pharmaceuticals, Inc. | | | 1.5 | |
Old Dominion Freight Line, Inc. | | | 1.4 | |
AES Corp. (The) | | | 1.4 | |
Digital Realty Trust, Inc. | | | 1.2 | |
MSCI, Inc., Cl. A | | | 1.2 | |
PVH Corp. | | | 1.2 | |
KBR, Inc. | | | 1.1 | |
Toll Brothers, Inc. | | | 1.1 | |
Portfolio holdings and allocations are subject to change. Percentages are as of December 30, 2011, and are based on net assets.
2 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
FUND PERFORMANCE DISCUSSION
Management’s Discussion of Fund Performance. The Fund’s Non-Service shares produced a total return of —2.21% for the year ended December 30, 2011, modestly outperforming the Russell 2500 Index (the “Index”) which returned —2.51%.1 The Fund outperformed the Index primarily in the health care sector, due to strong relative stock selection and underperformed primarily in the utilities sector due largely to less favorable stock selection.
Economic and Market Overview
Last calendar year proved to be challenging. The environment was characterized by geopolitical uncertainties, fits and starts in economic news (both domestically and internationally), climatic catastrophes, and emotions which waivered erratically between strong optimism about an economic recovery and fears about a global recession. At the end of the day, U.S. equities finished little changed from twelve months prior, but the ride between points was a roller coaster.
We entered 2011 with a note of optimism. Indeed, the first quarter was very momentum driven as investors drove stocks higher, somewhat irrespective of underlying fundamentals or valuation. However, come the reporting of first quarter earnings, concerns over the world’s outlook began to rise. We witnessed the “Arab Spring”; a tragedy in Japan—one that was not only tragic for many but also highly disruptive to manufacturing globally; and a burgeoning European financial crisis that threatened to reach well beyond the borders of the Eurozone.
News from our own shores, too, was uneven. Though employment growth remained stubbornly below levels normally experienced in past recoveries and weakness in the housing market persisted, reported earnings by companies across sectors generally were topping expectations. Additionally, companies were hoarding cash, building considerable financial strength to fund continued growth. But with the specter of contagion from Europe and uncertainty about the growth trajectory of emerging markets, investors fled equities—especially those of lower quality or with high economic sensitivities. The political impasse in Washington during the summer over whether to raise the debt ceiling resulted in an unprecedented downgrade of the U.S. Government’s debt rating and exacerbated market anxiety.
The fourth quarter was quite the reversal from the third quarter’s market trends. Sectors which had been hit hard, particularly economically sensitive sectors, were among the better performing ones. Though Europe made little headway in resolving its deep-seated structural and financial problems, investors seemed calmer about an eventual settlement. And, almost lost among all the noise from overseas were periodic reports of modest domestic improvements in employment, consumer sentiment and in other areas.
Throughout much of 2011 two trends remained fairly consistent. One, financial stocks suffered. Despite generally rising earnings and vastly improved balance sheets, the market voiced its concerns about the increasing possibility of another 2008-style financial crisis. Virtually all segments of the sector sold down dramatically, with collapsing valuations which, in some instances, fell below book value.
The second trend was that stocks of well-managed companies with solid business models generally outperformed as the year progressed. Especially during times of macroeconomic uncertainty, investors generally value companies that deliver consistent results. Last year was a market often characterized by a “flight to quality” as investors sought shelter in stocks that had a low likelihood of surprising negatively. We believe a market that pays close attention to the underlying fundamentals of higher quality stocks is favorable for the investment style of the Main Street Team.
Top Individual Contributors
During the period, the Fund’s top two performing holdings were in the health care sector: health insurer Healthspring, Inc. and drug maker Questcor Pharmaceuticals, Inc. Healthspring enjoyed strong results from its Medicare Advantage plan and, in late October, announced that it had agreed to be purchased by health care provider Cigna for $3.8 billion. Questcor Pharmaceuticals benefited from a significant rise in new paid prescriptions for its Athcar drug for patients with multiple-sclerosis as well as patients with Nephrotic syndrome, which is a kidney disorder.
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1. | | December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011. |
3 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
FUND PERFORMANCE DISCUSSION
Another top contributor to Fund performance during the period was semiconductor company NetLogic Microsystems, Inc. In September, Broadcom Corp. agreed to purchase NetLogic for $50 per share, a 57% premium to the stock’s prior day close. In the real estate sector, Digital Realty Trust, Inc. was a top contributor to Fund performance. Digital Realty Trust owns, acquires, develops and manages technology-related real estate for customers providing internet and telecom services, as well as corporate enterprise data center tenants. With the explosive growth of transmitted data—especially over wireless networks—demand for Digital Realty’s data center capabilities has been strong.
Energy stock HollyFrontier Corp. contributed positively to results. In the first quarter, Holly Corporation and Frontier Oil, two large oil refiners, issued a statement that they had agreed upon an all-stock merger that would give the company a value of approximately $7 billion and would create one of the biggest oil refiners in the western U.S. The stock rose on the news and the impending completion of the merger, which was completed in July 2011. The Fund continued to hold HollyFrontier at period end. Also performing well for the Fund was a more defensive play in the trucking industry. Old Dominion Freight Line, Inc. had a strong reporting period, with higher revenues and higher earnings. Tractor Supply Co., the largest retail operator in the U.S. of farm and ranch-related equipment and supplies with over 1,000 stores, also performed positively for the Fund due to strong sales and increased demand for its livestock and pet products.
Top Individual Detractors
The Fund’s weakest performing holdings during the period were financials sector stocks MGIC Investment Corp. and MF Global Holdings Ltd. MGIC Investment is a holding company that provides mortgage insurance coverage in the U.S. through its subsidiaries. The company reported losses due to continued weakness in the housing market and market pessimism over the timing of a potential rebound in housing. We exited our position by period end. MF Global’s exposure to the European debt crisis resulted in its stock being pushed lower over the summer. Market fears about the stability of the Eurozone and the possibility of either a Greek or Italian default hammered bank stocks deemed to have significant exposure to the European banking system, including MF Global, which ultimately filed for bankruptcy protection. We exited our position prior to that event, limiting the degree of loss.
Within information technology, the Fund’s position in Skyworks Solutions, Inc. detracted from results. Information technology stocks, including stocks of semiconductor companies, generally did not perform well during the period. Valuations of information technology companies dropped to their lowest levels in more than a decade at one point in the period, reflecting market fear over a faltering global economic recovery and a potential drop in consumer demand for technological goods and services. In health care, Salix Pharmaceuticals’ shares fell after the FDA prevented the company from using its best-selling drug Xifaxan for irritable bowel syndrome. We exited our position.
Outlook
At period end, we believe the U.S. economy will continue to improve at a gradual and perhaps uneven fashion. The slow-growth environment could create a bifurcated stock market in which well-run companies with solid business models outperform. We also believe that while cyclical stocks and companies with cyclical earnings have generally performed positively as of late, this trend will eventually shift to the benefit of consistent, longer-term performers. If our expectations are correct, the current market environment could potentially favor our investment style and process, which focuses on companies with sustainable competitive advantages. We view such firms as well-positioned to generate stronger profit margins and take market share from weaker players. We seek to buy such companies when their valuations are attractive, and believe that this disciplined investment process is the key to generating solid long-term performance.
Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing.
Total returns include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown.
4 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
The Fund’s investment strategy and focus can change over time. The mention of specific fund holdings does not constitute a recommendation by OppenheimerFunds, Inc.
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.
Comparing the Fund’s Performance to the Market. The graphs that follow show the performance of a hypothetical $10,000 investment in each share class of the Fund held until December 30, 2011. Performance is measured over a ten-fiscal-year period for both Classes. Performance information does not reflect charges that apply to separate accounts investing in the Fund. If these charges were taken into account, performance would be lower. The graphs assume that all dividends and capital gains distributions were reinvested in additional shares.
The Fund’s performance is compared to the performance of the Russell 2500 Index, a broad-based index featuring 2,500 stocks of companies with small- and mid-cap market capitalizations, and the Russell 2000 Index, an unmanaged index of equity securities of small capitalization companies that is a measure of the small company market. Index performance includes reinvestment of income but does not reflect transaction costs, fees or expenses. The Fund’s performance reflects the effects of the Fund’s business and operating expenses. While index comparisons may be useful to provide a benchmark for the Fund’s performance, it must be noted that the Fund’s investments are not limited to the securities comprising the index.
5 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
FUND PERFORMANCE DISCUSSION
Non-Service Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Service Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account.
| | |
1. | | December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011. |
6 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
FUND EXPENSES
Fund Expenses. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 30, 2011.
Actual Expenses. The first section of the table provides information about actual account values and actual expenses. You may use the information in this section for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes. The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio for each class of shares, and an assumed rate of return of 5% per year for each class before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the “hypothetical” lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included your costs would have been higher.
| | | | | | | | | | | | |
| | Beginning | | | Ending | | | Expenses | |
| | Account | | | Account | | | Paid During | |
| | Value | | | Value | | | 6 Months Ended | |
| | July 1, 2011 | | December 30, 2011 | | December 30, 2011 | |
Actual | | | | | | | | | | | | |
Non-Service shares | | $ | 1,000.00 | | | $ | 908.50 | | | $ | 3.79 | |
Service shares | | | 1,000.00 | | | | 907.70 | | | | 4.99 | |
| | | | | | | | | | | | |
Hypothetical | | | | | | | | | | | | |
(5% return before expenses) | | | | | | | | | | | | |
Non-Service shares | | | 1,000.00 | | | | 1,021.11 | | | | 4.01 | |
Service shares | | | 1,000.00 | | | | 1,019.85 | | | | 5.28 | |
Expenses are equal to the Fund’s annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). Those annualized expense ratios, excluding indirect expenses from affiliated fund, based on the 6-month period ended December 30, 2011 are as follows:
| | | | |
Class | | Expense Ratios |
Non-Service shares | | | 0.79 | % |
Service shares | | | 1.04 | |
The expense ratios reflect voluntary waivers and/or reimbursements of expenses by the Fund’s Manager. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund’s prospectus. The “Financial Highlights” tables in the Fund’s financial statements, included in this report, also show the gross expense ratios, without such waivers or reimbursements and reduction to custodian expenses, if applicable.
7 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
STATEMENT OF INVESTMENTS December 30, 2011*
| | | | | | | | |
| | Shares | | | Value | |
Common Stocks—98.7% | | | | | | | | |
Consumer Discretionary—16.4% | | | | | | | | |
Auto Components—1.1% | | | | | | | | |
Dana Holding Corp.1 | | | 712,970 | | | $ | 8,662,586 | |
Standard Motor Products, Inc. | | | 21,980 | | | | 440,699 | |
| | | | | | | |
| | | | | | | 9,103,285 | |
| | | | | | | | |
Distributors—0.8% | | | | | | | | |
Pool Corp. | | | 215,280 | | | | 6,479,928 | |
Diversified Consumer Services—0.5% | | | | | | | | |
Bridgepoint Education, Inc.1 | | | 61,970 | | | | 1,425,310 | |
Capella Education Co.1 | | | 5,760 | | | | 207,648 | |
Coinstar, Inc.1 | | | 35,650 | | | | 1,627,066 | |
DeVry, Inc. | | | 5,730 | | | | 220,376 | |
ITT Educational Services, Inc.1 | | | 1,321 | | | | 75,152 | |
Regis Corp. | | | 46,380 | | | | 767,589 | |
Service Corp. International | | | 13,780 | | | | 146,757 | |
| | | | | | | |
| | | | | | | 4,469,898 | |
| | | | | | | | |
Hotels, Restaurants & Leisure—2.2% | | | | | | | | |
AFC Enterprises, Inc.1 | | | 15,432 | | | | 226,850 | |
Ameristar Casinos, Inc. | | | 76,357 | | | | 1,320,213 | |
Bob Evans Farms, Inc. | | | 20,790 | | | | 697,297 | |
Brinker International, Inc. | | | 85,980 | | | | 2,300,825 | |
Cheesecake Factory, Inc. (The)1 | | | 50,250 | | | | 1,474,838 | |
Cracker Barrel Old Country Store, Inc. | | | 57,270 | | | | 2,886,981 | |
Dunkin’ Brands Group, Inc.1 | | | 280,160 | | | | 6,998,397 | |
Jack in the Box, Inc.1 | | | 5,780 | | | | 120,802 | |
Marriott Vacations Worldwide Corp.1 | | | 6,470 | | | | 111,025 | |
P.F. Chang’s China Bistro, Inc. | | | 2,862 | | | | 88,464 | |
Papa John’s International, Inc.1 | | | 53,648 | | | | 2,021,457 | |
Shuffle Master, Inc.1 | | | 6,370 | | | | 74,656 | |
Texas Roadhouse, Inc., Cl. A | | | 72,990 | | | | 1,087,551 | |
Wyndham Worldwide Corp. | | | 930 | | | | 35,182 | |
| | | | | | | |
| | | | | | | 19,444,538 | |
| | | | | | | | |
Household Durables—1.4% | | | | | | | | |
American Greetings Corp., Cl. A | | | 66,590 | | | | 833,041 | |
CSS Industries, Inc. | | | 12,790 | | | | 254,777 | |
Helen of Troy Ltd.1 | | | 26,660 | | | | 818,462 | |
Jarden Corp. | | | 31,960 | | | | 954,965 | |
Toll Brothers, Inc.1 | | | 470,540 | | | | 9,608,427 | |
Universal Electronics, Inc.1 | | | 500 | | | | 8,435 | |
| | | | | | | |
| | | | | | | 12,478,107 | |
| | | | | | | | |
Internet & Catalog Retail—0.1% | | | | | | | | |
Expedia, Inc. | | | 9,215 | | | | 267,419 | |
HSN, Inc. | | | 3,440 | | | | 124,734 | |
TripAdvisor, Inc.1 | | | 5,885 | | | | 148,361 | |
| | | | | | | |
| | | | | | | 540,514 | |
| | | | | | | | |
Leisure Equipment & Products—0.0% | | | | | | | | |
Polaris Industries, Inc. | | | 1,531 | | | | 85,705 | |
Media—1.6% | | | | | | | | |
Cinemark Holdings, Inc. | | | 37,240 | | | | 688,568 | |
Dish Network Corp., Cl. A | | | 30,260 | | | | 861,805 | |
Global Sources Ltd.1 | | | 17,700 | | | | 85,845 | |
IMAX Corp.1 | | | 448,540 | | | | 8,221,738 | |
Interpublic Group of Cos., Inc. (The) | | | 174,040 | | | | 1,693,409 | |
Journal Communications, Inc.1 | | | 58,170 | | | | 255,948 | |
Sinclair Broadcast Group, Inc., Cl. A | | | 162,333 | | | | 1,839,233 | |
Valassis Communications, Inc.1 | | | 18,900 | | | | 363,447 | |
| | | | | | | |
| | | | | | | 14,009,993 | |
| | | | | | | | |
Multiline Retail—0.7% | | | | | | | | |
Big Lots, Inc.1 | | | 53,480 | | | | 2,019,405 | |
Dillard’s, Inc., Cl. A | | | 50,820 | | | | 2,280,802 | |
Fred’s, Inc. | | | 24,420 | | | | 356,044 | |
Saks, Inc.1 | | | 160,760 | | | | 1,567,410 | |
| | | | | | | |
| | | | | | | 6,223,661 | |
| | | | | | | | |
Specialty Retail—6.0% | | | | | | | | |
Aaron’s, Inc. | | | 18,160 | | | | 484,509 | |
Advance Auto Parts, Inc. | | | 14,970 | | | | 1,042,361 | |
AnnTaylor Stores Corp.1 | | | 63,470 | | | | 1,572,787 | |
Ascena Retail Group, Inc.1 | | | 66,740 | | | | 1,983,513 | |
CarMax, Inc.1 | | | 206,340 | | | | 6,289,243 | |
Casual Male Retail Group, Inc.1 | | | 11,200 | | | | 38,304 | |
Cato Corp., Cl. A | | | 82,214 | | | | 1,989,579 | |
Chico’s FAS, Inc. | | | 150,280 | | | | 1,674,119 | |
Children’s Place Retail Stores, Inc.1 | | | 130,860 | | | | 6,951,283 | |
Dick’s Sporting Goods, Inc. | | | 7,640 | | | | 281,763 | |
DSW, Inc., Cl. A | | | 3,943 | | | | 174,320 | |
Express, Inc.1 | | | 108,710 | | | | 2,167,677 | |
Finish Line, Inc. (The), Cl. A | | | 103,110 | | | | 1,988,476 | |
Foot Locker, Inc. | | | 99,850 | | | | 2,380,424 | |
GameStop Corp., Cl. A1 | | | 90,090 | | | | 2,173,872 | |
GNC Holdings, Inc., Cl. A1 | | | 4,390 | | | | 127,091 | |
Group 1 Automotive, Inc. | | | 12,540 | | | | 649,572 | |
hhgregg, Inc.1 | | | 2,890 | | | | 41,761 | |
Hibbett Sports, Inc.1 | | | 2,640 | | | | 119,275 | |
Men’s Wearhouse, Inc. (The) | | | 57,460 | | | | 1,862,279 | |
Monro Muffler Brake, Inc. | | | 173,320 | | | | 6,723,083 | |
Pep Boys-Manny, Moe & Jack | | | 36,600 | | | | 402,600 | |
PetSmart, Inc. | | | 2,520 | | | | 129,251 | |
Pier 1 Imports, Inc.1 | | | 107,950 | | | | 1,503,744 | |
RadioShack Corp. | | | 7,115 | | | | 69,087 | |
Rent-A-Center, Inc. | | | 15,290 | | | | 565,730 | |
Sally Beauty Holdings, Inc.1 | | | 80,520 | | | | 1,701,388 | |
8 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
| | | | | | | | |
| | Shares | | | Value | |
Specialty Retail Continued | | | | | | | | |
Select Comfort Corp.1 | | | 80,730 | | | $ | 1,751,034 | |
Tractor Supply Co. | | | 49,522 | | | | 3,473,968 | |
Wet Seal, Inc., Cl. A1 | | | 357,070 | | | | 1,164,048 | |
Williams-Sonoma, Inc. | | | 28,300 | | | | 1,089,550 | |
| | | | | | | |
| | | | | | | 52,565,691 | |
| | | | | | | | |
Textiles, Apparel & Luxury Goods—2.0% | | | | | | | | |
Fossil, Inc.1 | | | 89,647 | | | | 7,114,386 | |
Iconix Brand Group, Inc.1 | | | 4,950 | | | | 80,636 | |
PVH Corp. | | | 148,100 | | | | 10,439,569 | |
| | | | | | | |
| | | | | | | 17,634,591 | |
| | | | | | | | |
Consumer Staples—2.5% | | | | | | | | |
| | |
Beverages—0.2% | | | | | | | | |
Constellation Brands, Inc., Cl. A1 | | | 82,810 | | | | 1,711,683 | |
Cott Corp.1 | | | 6,340 | | | | 39,688 | |
Dr. Pepper Snapple Group, Inc. | | | 1,080 | | | | 42,638 | |
| | | | | | | |
| | | | | | | 1,794,009 | |
| | | | | | | | |
Food & Staples Retailing—0.4% | | | | | | | | |
Casey’s General Stores, Inc. | | | 33,090 | | | | 1,704,466 | |
Ruddick Corp. | | | 21,220 | | | | 904,821 | |
Spartan Stores, Inc. | | | 29,650 | | | | 548,525 | |
Susser Holdings Corp.1 | | | 7,330 | | | | 165,805 | |
Weis Markets, Inc. | | | 7,410 | | | | 295,955 | |
| | | | | | | |
| | | | | | | 3,619,572 | |
| | | | | | | | |
Food Products—1.0% | | | | | | | | |
Darling International, Inc.1 | | | 47,260 | | | | 628,085 | |
Hormel Foods Corp. | | | 1,330 | | | | 38,956 | |
Smithfield Foods, Inc.1 | | | 3,360 | | | | 81,581 | |
TreeHouse Foods, Inc.1 | | | 88,586 | | | | 5,791,753 | |
Tyson Foods, Inc., Cl. A | | | 102,090 | | | | 2,107,138 | |
| | | | | | | |
| | | | | | | 8,647,513 | |
| | | | | | | | |
Household Products—0.5% | | | | | | | | |
Church & Dwight Co., Inc. | | | 103,960 | | | | 4,757,210 | |
| | |
Personal Products—0.3% | | | | | | | | |
Elizabeth Arden, Inc.1 | | | 4,980 | | | | 184,459 | |
Medifast, Inc.1 | | | 63,920 | | | | 876,982 | |
Prestige Brands Holdings, Inc.1 | | | 32,990 | | | | 371,797 | |
USANA Health Sciences, Inc.1 | | | 30,010 | | | | 911,404 | |
| | | | | | | |
| | | | | | | 2,344,642 | |
| | | | | | | | |
Tobacco—0.1% | | | | | | | | |
Universal Corp. | | | 19,570 | | | | 899,437 | |
| | |
Energy—6.7% | | | | | | | | |
| | |
Energy Equipment & Services—1.5% | | | | | | | | |
Bolt Technology Corp. | | | 24,350 | | | | 278,564 | |
Helix Energy Solutions Group, Inc.1 | | | 95,060 | | | | 1,501,948 | |
Helmerich & Payne, Inc. | | | 5,620 | | | | 327,983 | |
ION Geophysical Corp.1 | | | 71,170 | | | | 436,272 | |
Matrix Service Co.1 | | | 32,970 | | | | 311,237 | |
Nabors Industries Ltd.1 | | | 14,930 | | | | 258,886 | |
Newpark Resources, Inc.1 | | | 264,660 | | | | 2,514,270 | |
Parker Drilling Co.1 | | | 164,760 | | | | 1,181,329 | |
Patterson-UTI Energy, Inc. | | | 53,410 | | | | 1,067,132 | |
Pioneer Drilling Co.1 | | | 58,660 | | | | 567,829 | |
Precision Drilling Corp.1 | | | 145,640 | | | | 1,494,266 | |
RPC, Inc. | | | 86,380 | | | | 1,576,435 | |
Superior Energy Services, Inc.1 | | | 52,590 | | | | 1,495,660 | |
Tesco Corp.1 | | | 42,120 | | | | 532,397 | |
| | | | | | | |
| | | | | | | 13,544,208 | |
| | | | | | | | |
Oil, Gas & Consumable Fuels—5.2% | | | | | | | | |
CVR Energy, Inc.1 | | | 97,704 | | | | 1,829,996 | |
Delek US Holdings, Inc. | | | 15,360 | | | | 175,258 | |
Energy Partners Ltd.1 | | | 18,410 | | | | 268,786 | |
Energy XXI (Bermuda) Ltd.1 | | | 106,600 | | | | 3,398,408 | |
Gran Tierra Energy, Inc.1 | | | 8,470 | | | | 40,656 | |
HollyFrontier Corp. | | | 591,960 | | | | 13,851,864 | |
Kosmos Energy Ltd.1 | | | 278,990 | | | | 3,420,417 | |
MarkWest Energy Partners LP | | | 120,678 | | | | 6,644,531 | |
PAA Natural Gas Storage LP | | | 246,700 | | | | 4,625,625 | |
Petrobras Argentina SA, ADR | | | 38,200 | | | | 482,084 | |
Stone Energy Corp.1 | | | 61,710 | | | | 1,627,910 | |
Tesoro Corp.1 | | | 83,280 | | | | 1,945,421 | |
Ultrapar Participacoes SA, Sponsored ADR | | | 75,630 | | | | 1,300,836 | |
VAALCO Energy, Inc.1 | | | 228,720 | | | | 1,381,469 | |
W&T Offshore, Inc. | | | 87,780 | | | | 1,861,814 | |
Warren Resources, Inc.1 | | | 113,020 | | | | 368,445 | |
Western Refining, Inc.1 | | | 125,050 | | | | 1,661,915 | |
| | | | | | | |
| | | | | | | 44,885,435 | |
| | | | | | | | |
Financials—20.7% | | | | | | | | |
| | |
Capital Markets—1.0% | | | | | | | | |
Apollo Global Management LLC | | | 149,000 | | | | 1,849,090 | |
Federated Investors, Inc., Cl. B | | | 104,960 | | | | 1,590,144 | |
Financial Engines, Inc.1 | | | 53,940 | | | | 1,204,480 | |
KBW, Inc. | | | 243,010 | | | | 3,688,892 | |
Knight Capital Group, Inc., Cl. A1 | | | 27,950 | | | | 330,369 | |
| | | | | | | |
| | | | | | | 8,662,975 | |
9 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Shares | | | Value | |
Commercial Banks—2.4% | | | | | | | | |
BBVA Banco Frances SA, ADR | | | 76,043 | | | $ | 370,329 | |
CapitalSource, Inc. | | | 1,322,410 | | | | 8,860,147 | |
Cardinal Financial Corp. | | | 1,580 | | | | 16,969 | |
Century Bancorp, Inc., Cl. A | | | 11,660 | | | | 329,278 | |
Columbia Banking System, Inc. | | | 4,500 | | | | 86,715 | |
First Horizon National Corp. | | | 12,962 | | | | 103,696 | |
First Midwest Bancorp, Inc. | | | 312,830 | | | | 3,168,968 | |
FirstMerit Corp. | | | 363,590 | | | | 5,501,117 | |
Fulton Financial Corp. | | | 101,530 | | | | 996,009 | |
Grupo Financiero Galicia SA, ADR | | | 123,750 | | | | 733,838 | |
National Bankshares, Inc. | | | 8,901 | | | | 248,516 | |
Republic Bancorp, Inc., Cl. A | | | 11,030 | | | | 252,587 | |
State Bank Financial Corp.1 | | | 2,190 | | | | 33,091 | |
Washington Banking Co. | | | 11,740 | | | | 139,823 | |
| | | | | | | |
| | | | | | | 20,841,083 | |
| | | | | | | | |
Consumer Finance—0.4% | | | | | | | | |
Advance America Cash Advance Centers, Inc. | | | 112,870 | | | | 1,010,187 | |
EZCORP, Inc., Cl. A1 | | | 20,960 | | | | 552,715 | |
First Cash Financial Services, Inc.1 | | | 2,183 | | | | 76,601 | |
World Acceptance Corp.1 | | | 17,337 | | | | 1,274,270 | |
| | | | | | | |
| | | | | | | 2,913,773 | |
| | | | | | | | |
Diversified Financial Services—2.2% | | | | | | | | |
Encore Capital Group, Inc.1 | | | 31,420 | | | | 667,989 | |
Life Partners Holdings, Inc. | | | 50,329 | | | | 325,125 | |
Moody’s Corp. | | | 210,050 | | | | 7,074,484 | |
MSCI, Inc., Cl. A1 | | | 318,920 | | | | 10,502,036 | |
NASDAQ OMX Group, Inc. (The)1 | | | 11,610 | | | | 284,561 | |
| | | | | | | |
| | | | | | | 18,854,195 | |
| | | | | | | | |
Insurance—4.9% | | | | | | | | |
Alterra Capital Holdings Ltd. | | | 118,210 | | | | 2,793,302 | |
American Equity Investment Life Holding Co. | | | 140,620 | | | | 1,462,448 | |
American Financial Group, Inc. | | | 63,980 | | | | 2,360,222 | |
American Safety Insurance Holdings Ltd.1 | | | 18,530 | | | | 403,028 | |
AmTrust Financial Services, Inc. | | | 87,528 | | | | 2,078,790 | |
Arch Capital Group Ltd.1 | | | 91,030 | | | | 3,389,047 | |
Assured Guaranty Ltd. | | | 11,600 | | | | 152,424 | |
Brown & Brown, Inc. | | | 282,540 | | | | 6,393,880 | |
CNO Financial Group, Inc.1 | | | 205,110 | | | | 1,294,244 | |
FBL Financial Group, Inc., Cl. A | | | 24,334 | | | | 827,843 | |
Fidelity National Financial, Inc., Cl. A | | | 151,710 | | | | 2,416,740 | |
Global Indemnity plc1 | | | 5,062 | | | | 100,379 | |
HCC Insurance Holdings, Inc. | | | 69,410 | | | | 1,908,775 | |
Horace Mann Educators Corp. | | | 71,279 | | | | 977,235 | |
Maiden Holdings Ltd. | | | 112,880 | | | | 988,829 | |
Meadowbrook Insurance Group, Inc. | | | 125,190 | | | | 1,337,029 | |
National Financial Partners Corp.1 | | | 18,660 | | | | 252,283 | |
National Interstate Corp. | | | 10,850 | | | | 267,670 | |
National Western Life Insurance Co., Cl. A | | | 2,410 | | | | 328,146 | |
Primerica, Inc. | | | 104,700 | | | | 2,433,228 | |
Principal Financial Group, Inc. (The) | | | 23,440 | | | | 576,624 | |
ProAssurance Corp. | | | 20 | | | | 1,596 | |
Protective Life Corp. | | | 78,250 | | | | 1,765,320 | |
Reinsurance Group of America, Inc. | | | 36,360 | | | | 1,899,810 | |
RLI Corp. | | | 1,690 | | | | 123,133 | |
StanCorp Financial Group, Inc. | | | 1,960 | | | | 72,030 | |
Symetra Financial Corp. | | | 172,160 | | | | 1,561,491 | |
Torchmark Corp. | | | 34,565 | | | | 1,499,775 | |
Tower Group, Inc. | | | 69,800 | | | | 1,407,866 | |
Universal Insurance Holdings, Inc. | | | 20,710 | | | | 74,142 | |
Unum Group | | | 69,650 | | | | 1,467,526 | |
| | | | | | | |
| | | | | | | 42,614,855 | |
| | | | | | | | |
Real Estate Investment Trusts—9.3% | | | | | | | | |
American Campus Communities, Inc. | | | 56,320 | | | | 2,363,187 | |
Associated Estates Realty Corp. | | | 77,180 | | | | 1,231,021 | |
BioMed Realty Trust, Inc. | | | 77,100 | | | | 1,393,968 | |
BRE Properties, Inc., Cl. A | | | 48,980 | | | | 2,472,510 | |
Camden Property Trust | | | 7,580 | | | | 471,779 | |
Chatham Lodging Trust | | | 152,860 | | | | 1,647,831 | |
Colonial Properties Trust | | | 4,610 | | | | 96,165 | |
CubeSmart | | | 186,130 | | | | 1,980,423 | |
CYS Investments, Inc. | | | 279,340 | | | | 3,670,528 | |
DDR Corp. | | | 1,400 | | | | 17,038 | |
Digital Realty Trust, Inc. | | | 157,910 | | | | 10,527,860 | |
Douglas Emmett, Inc. | | | 38,360 | | | | 699,686 | |
EastGroup Properties, Inc. | | | 39,130 | | | | 1,701,372 | |
Equity Lifestyle Properties, Inc. | | | 32,090 | | | | 2,140,082 | |
Essex Property Trust, Inc. | | | 15,770 | | | | 2,215,843 | |
Extra Space Storage, Inc. | | | 102,160 | | | | 2,475,337 | |
Federal Realty Investment Trust | | | 19,040 | | | | 1,727,880 | |
Glimcher Realty Trust | | | 100,630 | | | | 925,796 | |
Hatteras Financial Corp. | | | 227,210 | | | | 5,991,528 | |
Highwoods Properties, Inc. | | | 960 | | | | 28,483 | |
Home Properties of New York, Inc. | | | 39,970 | | | | 2,301,073 | |
Hospitality Properties Trust | | | 71,330 | | | | 1,639,163 | |
Kilroy Realty Corp. | | | 3,290 | | | | 125,250 | |
LaSalle Hotel Properties | | | 345,758 | | | | 8,370,801 | |
LTC Properties, Inc. | | | 24,350 | | | | 751,441 | |
10 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
| | | | | | | | |
| | Shares | | | Value | |
Real Estate Investment Trusts Continued | | | | | | | | |
Mid-America Apartment Communities, Inc. | | | 101,919 | | | $ | 6,375,033 | |
National Retail Properties, Inc. | | | 59,260 | | | | 1,563,279 | |
Post Properties, Inc. | | | 38,090 | | | | 1,665,295 | |
PS Business Parks, Inc. | | | 2,210 | | | | 122,500 | |
Realty Income Corp. | | | 24,100 | | | | 842,536 | |
Sovran Self Storage, Inc. | | | 29,630 | | | | 1,264,312 | |
Starwood Property Trust, Inc. | | | 316,420 | | | | 5,856,934 | |
Sun Communities, Inc. | | | 37,420 | | | | 1,366,953 | |
Tanger Factory Outlet Centers, Inc. | | | 83,880 | | | | 2,459,362 | |
Taubman Centers, Inc. | | | 36,160 | | | | 2,245,536 | |
Universal Health Realty Income Trust | | | 7,490 | | | | 292,110 | |
Weingarten Realty Investors | | | 790 | | | | 17,238 | |
| | | | | | | |
| | | | | | | 81,037,133 | |
| | | | | | | | |
Real Estate Management & Development—0.0% | | | | | | | | |
MI Developments, Inc. | | | 9,000 | | | | 287,820 | |
| | |
Thrifts & Mortgage Finance—0.5% | | | | | | | | |
BankUnited, Inc. | | | 162,620 | | | | 3,576,014 | |
Dime Community Bancshares, Inc. | | | 3,790 | | | | 47,754 | |
First Defiance Financial Corp. | | | 29,910 | | | | 436,387 | |
Flushing Financial Corp. | | | 3,390 | | | | 42,816 | |
OceanFirst Financial Corp. | | | 11,940 | | | | 156,056 | |
Ocwen Financial Corp.1 | | | 40 | | | | 579 | |
Walker & Dunlop, Inc.1 | | | 14,400 | | | | 180,864 | |
| | | | | | | |
| | | | | | | 4,440,470 | |
| | | | | | | | |
Health Care—10.2% | | | | | | | | |
| | |
Biotechnology—1.4% | | | | | | | | |
Aveo Pharmaceuticals, Inc.1 | | | 89,140 | | | | 1,533,208 | |
Halozyme Therapeutics, Inc.1 | | | 351,680 | | | | 3,344,477 | |
Indevus Pharmaceuticals, Inc.1 | | | 2,500 | | | | 25 | |
Inhibitex, Inc.1 | | | 140,240 | | | | 1,534,226 | |
Medivation, Inc.1 | | | 36,810 | | | | 1,697,309 | |
Myriad Genetics, Inc.1 | | | 88,364 | | | | 1,850,342 | |
PDL BioPharma, Inc. | | | 387,212 | | | | 2,400,714 | |
United Therapeutics Corp.1 | | | 4,610 | | | | 217,823 | |
| | | | | | | |
| | | | | | | 12,578,124 | |
| | | | | | | | |
Health Care Equipment & Supplies—1.6% | | | | | | | | |
Bard (C.R.), Inc. | | | 8,950 | | | | 765,225 | |
Cantel Medical Corp. | | | 5,780 | | | | 161,435 | |
ConMed Corp.1 | | | 13,930 | | | | 357,583 | |
Dexcom, Inc.1 | | | 352,310 | | | | 3,280,006 | |
Greatbatch, Inc.1 | | | 205,800 | | | | 4,548,180 | |
ICU Medical, Inc.1 | | | 5,120 | | | | 230,400 | |
IDEXX Laboratories, Inc.1 | | | 1,226 | | | | 94,353 | |
Invacare Corp. | | | 600 | | | | 9,174 | |
Orthofix International NV1 | | | 55,850 | | | | 1,967,596 | |
ResMed, Inc.1 | | | 56,630 | | | | 1,438,402 | |
RTI Biologics, Inc.1 | | | 5,280 | | | | 23,443 | |
Vascular Solutions, Inc.1 | | | 510 | | | | 5,676 | |
Wright Medical Group, Inc.1 | | | 25,620 | | | | 422,730 | |
Young Innovations, Inc. | | | 10,110 | | | | 299,559 | |
| | | | | | | |
| | | | | | | 13,603,762 | |
| | | | | | | | |
Health Care Providers & Services—4.0% | | | | | | | | |
AmSurg Corp.1 | | | 56,440 | | | | 1,469,698 | |
Assisted Living Concepts, Inc. | | | 4,190 | | | | 62,389 | |
Bio-Reference Laboratories, Inc.1 | | | 25,570 | | | | 416,024 | |
Brookdale Senior Living, Inc.1 | | | 12,304 | | | | 213,967 | |
Centene Corp.1 | | | 59,920 | | | | 2,372,233 | |
Chemed Corp. | | | 24,670 | | | | 1,263,351 | |
DaVita, Inc.1 | | | 3,170 | | | | 240,318 | |
Ensign Group, Inc. (The) | | | 49,660 | | | | 1,216,670 | |
ExamWorks Group, Inc.1 | | | 15,300 | | | | 145,044 | |
Health Management Associates, Inc., Cl. A1 | | | 186,650 | | | | 1,375,611 | |
HealthSouth Corp.1 | | | 320,030 | | | | 5,654,930 | |
Healthspring, Inc.1 | | | 41,380 | | | | 2,256,865 | |
HMS Holdings Corp.1 | | | 156,060 | | | | 4,990,799 | |
Laboratory Corp. of America Holdings1 | | | 1,960 | | | | 168,501 | |
LifePoint Hospitals, Inc.1 | | | 48,025 | | | | 1,784,129 | |
Lincare Holdings, Inc. | | | 75,556 | | | | 1,942,545 | |
Magellan Health Services, Inc.1 | | | 1,653 | | | | 81,774 | |
MedQuist Holdings, Inc.1 | | | 61,490 | | | | 591,534 | |
Metropolitan Health Networks, Inc.1 | | | 122,670 | | | | 916,345 | |
Molina Healthcare, Inc.1 | | | 26,250 | | | | 586,163 | |
Patterson Cos., Inc. | | | 48,080 | | | | 1,419,322 | |
PSS World Medical, Inc.1 | | | 74,930 | | | | 1,812,557 | |
Schein (Henry), Inc.1 | | | 1,860 | | | | 119,840 | |
Select Medical Holdings Corp.1 | | | 103,530 | | | | 877,934 | |
Triple-S Management Corp., Cl. B1 | | | 21,207 | | | | 424,564 | |
U.S. Physical Therapy, Inc. | | | 36,375 | | | | 715,860 | |
Universal Health Services, Inc., Cl. B | | | 44,400 | | | | 1,725,384 | |
| | | | | | | |
| | | | | | | 34,844,351 | |
| | | | | | | | |
Health Care Technology—0.1% | | | | | | | | |
Allscripts Healthcare Solutions, Inc.1 | | | 6,860 | | | | 129,928 | |
HealthStream, Inc.1 | | | 7,970 | | | | 147,047 | |
MedAssets, Inc.1 | | | 12,520 | | | | 115,810 | |
Transcend Services, Inc.1 | | | 17,290 | | | | 410,292 | |
| | | | | | | |
| | | | | | | 803,077 | |
11 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Shares | | | Value | |
Life Sciences Tools & Services—0.9% | | | | | | | | |
Cambrex Corp.1 | | | 99,400 | | | $ | 713,692 | |
eResearch Technology, Inc.1 | | | 17,250 | | | | 80,903 | |
Harvard Bioscience, Inc.1 | | | 63,310 | | | | 245,010 | |
PerkinElmer, Inc. | | | 4,730 | | | | 94,600 | |
Waters Corp.1 | | | 85,890 | | | | 6,360,155 | |
| | | | | | | |
| | | | | | | 7,494,360 | |
| | | | | | | | |
Pharmaceuticals—2.2% | | | | | | | | |
Hi-Tech Pharmacal Co., Inc.1 | | | 43,390 | | | | 1,687,437 | |
Medicines Co. (The)1 | | | 132,730 | | | | 2,474,087 | |
Obagi Medical Products, Inc.1 | | | 25,380 | | | | 257,861 | |
Questcor Pharmaceuticals, Inc.1 | | | 324,300 | | | | 13,484,394 | |
Warner Chilcott plc, Cl. A1 | | | 113,000 | | | | 1,709,690 | |
| | | | | | | |
| | | | | | | 19,613,469 | |
| | | | | | | | |
Industrials—16.1% | | | | | | | | |
| | |
Aerospace & Defense—1.6% | | | | | | | | |
B/E Aerospace, Inc.1 | | | 200,688 | | | | 7,768,632 | |
Ceradyne, Inc.1 | | | 9,851 | | | | 263,810 | |
Cubic Corp. | | | 12,410 | | | | 540,952 | |
Curtiss-Wright Corp. | | | 47,620 | | | | 1,682,415 | |
Exelis, Inc. | | | 134,440 | | | | 1,216,682 | |
LMI Aerospace, Inc.1 | | | 14,280 | | | | 250,614 | |
Moog, Inc., Cl. A1 | | | 12,920 | | | | 567,576 | |
Orbital Sciences Corp.1 | | | 90,870 | | | | 1,320,341 | |
| | | | | | | |
| | | | | | | 13,611,022 | |
| | | | | | | | |
Air Freight & Logistics—0.6% | | | | | | | | |
Hub Group, Inc., Cl. A1 | | | 146,140 | | | | 4,739,320 | |
Park-Ohio Holdings Corp.1 | | | 6,560 | | | | 117,030 | |
| | | | | | | |
| | | | | | | 4,856,350 | |
| | | | | | | | |
Airlines—0.3% | | | | | | | | |
Alaska Air Group, Inc.1 | | | 30,770 | | | | 2,310,519 | |
Spirit Airlines, Inc.1 | | | 1,860 | | | | 29,016 | |
| | | | | | | |
| | | | | | | 2,339,535 | |
| | | | | | | | |
Commercial Services & Supplies—2.1% | | | | | | | | |
Acco Brands Corp.1 | | | 3,620 | | | | 34,933 | |
Brink’s Co. (The) | | | 14,370 | | | | 386,266 | |
Cintas Corp. | | | 22,519 | | | | 783,886 | |
Consolidated Graphics, Inc.1 | | | 21,810 | | | | 1,052,987 | |
Corrections Corp. of America1 | | | 72,530 | | | | 1,477,436 | |
Deluxe Corp. | | | 95,566 | | | | 2,175,082 | |
Intersections, Inc. | | | 19,400 | | | | 215,146 | |
KAR Auction Services, Inc.1 | | | 87,540 | | | | 1,181,790 | |
Knoll, Inc. | | | 115,020 | | | | 1,708,047 | |
Miller (Herman), Inc. | | | 82,000 | | | | 1,512,900 | |
Multi-Color Corp. | | | 8,120 | | | | 208,928 | |
Quad Graphics, Inc. | | | 8,949 | | | | 128,329 | |
R.R. Donnelley & Sons Co. | | | 31,530 | | | | 454,978 | |
Steelcase, Inc., Cl. A | | | 140,910 | | | | 1,051,189 | |
Sykes Enterprises, Inc.1 | | | 87,490 | | | | 1,370,093 | |
Tetra Tech, Inc.1 | | | 79,750 | | | | 1,721,803 | |
United Stationers, Inc. | | | 5,470 | | | | 178,103 | |
Waste Connections, Inc. | | | 91,645 | | | | 3,037,115 | |
| | | | | | | |
| | | | | | | 18,679,011 | |
| | | | | | | | |
Construction & Engineering—2.1% | | | | | | | | |
Aecom Technology Corp.1 | | | 221,069 | | | | 4,547,389 | |
Chicago Bridge & Iron Co. NV | | | 25,150 | | | | 950,670 | |
EMCOR Group, Inc. | | | 12,622 | | | | 338,396 | |
KBR, Inc. | | | 354,810 | | | | 9,888,555 | |
Primoris Services Corp. | | | 66,440 | | | | 991,949 | |
URS Corp.1 | | | 51,770 | | | | 1,818,162 | |
| | | | | | | |
| | | | | | | 18,535,121 | |
| | | | | | | | |
Electrical Equipment—1.7% | | | | | | | | |
Belden, Inc. | | | 36,400 | | | | 1,211,392 | |
Brady Corp., Cl. A | | | 17,070 | | | | 538,900 | |
EnerSys, Inc.1 | | | 8,181 | | | | 212,461 | |
Generac Holdings, Inc.1 | | | 119,310 | | | | 3,344,259 | |
General Cable Corp.1 | | | 168,420 | | | | 4,212,184 | |
Regal-Beloit Corp. | | | 101,970 | | | | 5,197,411 | |
| | | | | | | |
| | | | | | | 14,716,607 | |
| | | | | | | | |
Industrial Conglomerates—0.0% | | | | | | | | |
Standex International Corp. | | | 10,490 | | | | 358,443 | |
| | |
Machinery—2.1% | | | | | | | | |
Actuant Corp., Cl. A | | | 68,950 | | | | 1,564,476 | |
AGCO Corp.1 | | | 36,900 | | | | 1,585,593 | |
Albany International Corp., Cl. A | | | 35,660 | | | | 824,459 | |
Barnes Group, Inc. | | | 27,500 | | | | 663,025 | |
Blount International, Inc.1 | | | 64,040 | | | | 929,861 | |
Briggs & Stratton Corp. | | | 24,990 | | | | 387,095 | |
Douglas Dynamics, Inc. | | | 21,400 | | | | 312,868 | |
Duoyuan Global Water, Inc., ADR1 | | | 19,520 | | | | 18,934 | |
Freightcar America, Inc.1 | | | 96,380 | | | | 2,019,161 | |
Gardner Denver, Inc. | | | 1,236 | | | | 95,246 | |
John Bean Technologies Corp. | | | 9,500 | | | | 146,015 | |
Kadant, Inc.1 | | | 31,010 | | | | 701,136 | |
Kennametal, Inc. | | | 40,010 | | | | 1,461,165 | |
Lincoln Electric Holdings, Inc. | | | 3,390 | | | | 132,617 | |
Miller Industries, Inc. | | | 17,650 | | | | 277,635 | |
Navistar International Corp.1 | | | 20,108 | | | | 761,691 | |
12 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
| | | | | | | | |
| | Shares | | | Value | |
Machinery Continued | | | | | | | | |
Sauer-Danfoss, Inc.1 | | | 29,300 | | | $ | 1,060,953 | |
TriMas Corp.1 | | | 51,170 | | | | 918,502 | |
Wabtec Corp. | | | 61,490 | | | | 4,301,226 | |
Xylem, Inc. | | | 5,300 | | | | 136,157 | |
| | | | | | | |
| | | | | | | 18,297,815 | |
| | | | | | | | |
Professional Services—3.0% | | | | | | | | |
CBIZ, Inc.1 | | | 149,860 | | | | 915,645 | |
Dun & Bradstreet Corp. | | | 1,356 | | | | 101,469 | |
GP Strategies Corp.1 | | | 34,700 | | | | 467,756 | |
ICF International, Inc.1 | | | 32,650 | | | | 809,067 | |
Insperity, Inc. | | | 13,770 | | | | 349,070 | |
Kelly Services, Inc., Cl. A | | | 34,090 | | | | 466,351 | |
Kforce, Inc.1 | | | 1,670 | | | | 20,591 | |
Korn-Ferry International1 | | | 368,460 | | | | 6,285,928 | |
Navigant Consulting, Inc.1 | | | 3,780 | | | | 43,130 | |
On Assignment, Inc.1 | | | 21,900 | | | | 244,842 | |
Robert Half International, Inc. | | | 528,520 | | | | 15,041,679 | |
Towers Watson & Co., Cl. A | | | 14,290 | | | | 856,400 | |
TrueBlue, Inc.1 | | | 38,390 | | | | 532,853 | |
| | | | | | | |
| | | | | | | 26,134,781 | |
| | | | | | | | |
Road & Rail—2.2% | | | | | | | | |
Genesee & Wyoming, Inc., Cl. A1 | | | 73,231 | | | | 4,436,334 | |
Knight Transportation, Inc. | | | 75,320 | | | | 1,178,005 | |
Old Dominion Freight Line, Inc.1 | | | 311,400 | | | | 12,621,042 | |
RailAmerica, Inc.1 | | | 8,300 | | | | 123,587 | |
Werner Enterprises, Inc. | | | 20,250 | | | | 488,025 | |
| | | | | | | |
| | | | | | | 18,846,993 | |
| | | | | | | | |
Trading Companies & Distributors—0.4% | | | | | | | | |
Applied Industrial Technologies, Inc. | | | 69,950 | | | | 2,460,142 | |
Beacon Roofing Supply, Inc.1 | | | 24,930 | | | | 504,334 | |
Interline Brands, Inc.1 | | | 64,640 | | | | 1,006,445 | |
| | | | | | | |
| | | | | | | 3,970,921 | |
| | | | | | | | |
Transportation Infrastructure—0.0% | | | | | | | | |
Wesco Aircraft Holdings, Inc.1 | | | 7,890 | | | | 110,381 | |
| | |
Information Technology—15.6% | | | | | | | | |
| | |
Communications Equipment—1.8% | | | | | | | | |
Aruba Networks, Inc.1 | | | 386,760 | | | | 7,162,795 | |
Brocade Communications Systems, Inc.1 | | | 97,020 | | | | 503,534 | |
Finisar Corp.1 | | | 364,090 | | | | 6,096,687 | |
Ituran Location & Control Ltd. | | | 21,751 | | | | 297,336 | |
Plantronics, Inc. | | | 42,344 | | | | 1,509,140 | |
Riverbed Technology, Inc.1 | | | 7,574 | | | | 177,989 | |
| | | | | | | |
| | | | | | | 15,747,481 | |
| | | | | | | | |
Computers & Peripherals—1.6% | | | | | | | | |
Cray, Inc.1 | | | 29,830 | | | | 193,000 | |
Electronics for Imaging, Inc.1 | | | 85,710 | | | | 1,221,368 | |
Lexmark International, Inc., Cl. A | | | 3,660 | | | | 121,036 | |
QLogic Corp.1 | | | 134,120 | | | | 2,011,800 | |
STEC, Inc.1 | | | 19,087 | | | | 163,957 | |
Synaptics, Inc.1 | | | 75,680 | | | | 2,281,752 | |
Western Digital Corp.1 | | | 260,700 | | | | 8,068,665 | |
| | | | | | | |
| | | | | | | 14,061,578 | |
| | | | | | | | |
Electronic Equipment & Instruments—1.3% | | | | | | | | |
Avnet, Inc.1 | | | 6,772 | | | | 210,541 | |
AVX Corp. | | | 103,950 | | | | 1,326,402 | |
Brightpoint, Inc.1 | | | 86,070 | | | | 926,113 | |
Daktronics, Inc. | | | 27,150 | | | | 259,826 | |
DDi Corp. | | | 48,710 | | | | 454,464 | |
Electro Scientific Industries, Inc.1 | | | 19,830 | | | | 287,138 | |
Elster Group SE, ADR1 | | | 21,950 | | | | 285,350 | |
Flextronics International Ltd.1 | | | 61,540 | | | | 348,316 | |
Itron, Inc.1 | | | 2,423 | | | | 86,671 | |
Jabil Circuit, Inc. | | | 80,360 | | | | 1,579,878 | |
Littlefuse, Inc. | | | 14,440 | | | | 620,631 | |
Molex, Inc. | | | 66,410 | | | | 1,584,543 | |
Newport Corp.1 | | | 56,170 | | | | 764,474 | |
Tech Data Corp.1 | | | 4,000 | | | | 197,640 | |
TTM Technologies, Inc.1 | | | 39,360 | | | | 431,386 | |
Vishay Intertechnology, Inc.1 | | | 142,830 | | | | 1,284,042 | |
X-Rite, Inc.1 | | | 28,350 | | | | 131,544 | |
Zygo Corp.1 | | | 3,680 | | | | 64,952 | |
| | | | | | | |
| | | | | | | 10,843,911 | |
| | | | | | | | |
Internet Software & Services—0.9% | | | | | | | | |
Ancestry.com, Inc.1 | | | 3,933 | | | | 90,302 | |
AOL, Inc.1 | | | 12,915 | | | | 195,017 | |
Demand Media, Inc.1 | | | 24,711 | | | | 164,328 | |
Digital River, Inc.1 | | | 8,983 | | | | 134,925 | |
j2 Global, Inc. | | | 132,664 | | | | 3,733,165 | |
Monster Worldwide, Inc.1 | | | 9,880 | | | | 78,348 | |
OpenTable, Inc.1 | | | 2,970 | | | | 116,216 | |
QuinStreet, Inc.1 | | | 24,490 | | | | 229,226 | |
United Online, Inc. | | | 105,770 | | | | 575,389 | |
ValueClick, Inc.1 | | | 124,250 | | | | 2,024,033 | |
WebMD Health Corp., Cl. A1 | | | 5,725 | | | | 214,974 | |
| | | | | | | |
| | | | | | | 7,555,923 | |
| | | | | | | | |
IT Services—2.4% | | | | | | | | |
Acxiom Corp.1 | | | 115,750 | | | | 1,413,308 | |
Alliance Data Systems Corp.1 | | | 921 | | | | 95,637 | |
13 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Shares | | | Value | |
IT Services Continued | | | | | | | | |
Amdocs Ltd.1 | | | 41,520 | | | $ | 1,184,566 | |
Booz Allen Hamilton Holding Corp.1 | | | 29,520 | | | | 509,220 | |
Broadridge Financial Solutions, Inc. | | | 37,760 | | | | 851,488 | |
CACI International, Inc., Cl. A1 | | | 92,636 | | | | 5,180,205 | |
CGI Group, Inc., Cl. A1 | | | 80,230 | | | | 1,512,336 | |
Convergys Corp.1 | | | 61,224 | | | | 781,830 | |
CSG Systems International, Inc.1 | | | 63,526 | | | | 934,467 | |
Euronet Worldwide, Inc.1 | | | 41,234 | | | | 762,004 | |
FleetCor Technologies, Inc.1 | | | 6,584 | | | | 196,664 | |
Genpact Ltd.1 | | | 42,560 | | | | 636,272 | |
Global Payments, Inc. | | | 4,205 | | | | 199,233 | |
Henry (Jack) & Associates, Inc. | | | 6,260 | | | | 210,399 | |
ManTech International Corp. | | | 49,820 | | | | 1,556,377 | |
Maximus, Inc. | | | 5,640 | | | | 233,214 | |
NeuStar, Inc., Cl. A1 | | | 60,430 | | | | 2,064,893 | |
SAIC, Inc.1 | | | 136,080 | | | | 1,672,423 | |
ServiceSource International, Inc.1 | | | 8,170 | | | | 128,187 | |
Total System Services, Inc. | | | 19,020 | | | | 372,031 | |
VeriFone Systems, Inc.1 | | | 3,340 | | | | 118,637 | |
| | | | | | | |
| | | | | | | 20,613,391 | |
| | | | | | | | |
Semiconductors & Semiconductor Equipment—4.4% | | | | | | | | |
ASM International NV | | | 19,120 | | | | 557,922 | |
Atmel Corp.1 | | | 46,660 | | | | 377,946 | |
ATMI, Inc.1 | | | 36,730 | | | | 735,702 | |
Brooks Automation, Inc. | | | 168,149 | | | | 1,726,890 | |
Cabot Microelectronics Corp.1 | | | 2,570 | | | | 121,433 | |
Cavuim, Inc.1 | | | 188,170 | | | | 5,349,673 | |
Cypress Semiconductor Corp. | | | 86,571 | | | | 1,462,184 | |
Entegris, Inc.1 | | | 144,220 | | | | 1,258,320 | |
Entropic Communications, Inc.1 | | | 140,480 | | | | 717,853 | |
Fairchild Semiconductor International, Inc., Cl. A1 | | | 25,220 | | | | 303,649 | |
GT Advanced Technologies, Inc.1 | | | 211,290 | | | | 1,529,740 | |
IXYS Corp.1 | | | 32,160 | | | | 348,293 | |
KLA-Tencor Corp. | | | 1,850 | | | | 89,263 | |
Kulicke & Soffa Industries, Inc.1 | | | 120,140 | | | | 1,111,295 | |
Lattice Semiconductor Corp.1 | | | 313,260 | | | | 1,860,764 | |
LSI Corp.1 | | | 252,150 | | | | 1,500,293 | |
Magnachip Semiconductor Corp., Depositary Shares1 | | | 6,750 | | | | 50,490 | |
Micrel, Inc. | | | 51,819 | | | | 523,890 | |
Nanometrics, Inc.1 | | | 94,328 | | | | 1,737,522 | |
OmniVision Technologies, Inc.1 | | | 19,080 | | | | 233,444 | |
Photronics, Inc.1 | | | 98,220 | | | | 597,178 | |
Rudolph Technologies, Inc.1 | | | 34,840 | | | | 322,618 | |
Semtech Corp.1 | | | 370,219 | | | | 9,188,836 | |
Skyworks Solutions, Inc.1 | | | 429,910 | | | | 6,973,140 | |
| | | | | | | |
| | | | | | | 38,678,338 | |
| | | | | | | | |
Software—3.2% | | | | | | | | |
BMC Software, Inc.1 | | | 7,210 | | | | 236,344 | |
Cadence Design Systems, Inc.1 | | | 169,150 | | | | 1,759,160 | |
Ebix, Inc. | | | 7,550 | | | | 166,855 | |
FactSet Research Systems, Inc. | | | 40,652 | | | | 3,548,107 | |
Fair Isaac Corp. | | | 3,610 | | | | 129,382 | |
Fortinet, Inc.1 | | | 191,100 | | | | 4,167,891 | |
Informatica Corp.1 | | | 2,101 | | | | 77,590 | |
JDA Software Group, Inc.1 | | | 44,700 | | | | 1,447,833 | |
Manhattan Associates, Inc.1 | | | 2,295 | | | | 92,902 | |
Monotype Imaging Holdings, Inc.1 | | | 28,920 | | | | 450,863 | |
NetScout Systems, Inc.1 | | | 14,190 | | | | 249,744 | |
Progress Software Corp.1 | | | 90 | | | | 1,742 | |
Solarwinds, Inc.1 | | | 135,740 | | | | 3,793,933 | |
Synopsys, Inc.1 | | | 54,990 | | | | 1,495,728 | |
TIBCO Software, Inc.1 | | | 358,306 | | | | 8,567,096 | |
Websense, Inc.1 | | | 87,920 | | | | 1,646,742 | |
| | | | | | | |
| | | | | | | 27,831,912 | |
| | | | | | | | |
Materials—5.6% | | | | | | | | |
| | |
Chemicals—2.1% | | | | | | | | |
American Vanguard Corp. | | | 25,730 | | | | 343,238 | |
Chemtura Corp.1 | | | 7,994 | | | | 90,652 | |
Cytec Industries, Inc. | | | 148,906 | | | | 6,648,653 | |
Ferro Corp.1 | | | 218,270 | | | | 1,067,340 | |
Fuller (H.B.) Co. | | | 70,890 | | | | 1,638,268 | |
Huntsman Corp. | | | 15,653 | | | | 156,530 | |
Innospec, Inc.1 | | | 3,940 | | | | 110,596 | |
Koppers Holdings, Inc. | | | 22,280 | | | | 765,541 | |
Kronos Worldwide, Inc. | | | 42,830 | | | | 772,653 | |
LSB Industries, Inc.1 | | | 26,630 | | | | 746,439 | |
Methanex Corp. | | | 12,160 | | | | 277,491 | |
Olin Corp. | | | 82,690 | | | | 1,624,859 | |
PolyOne Corp. | | | 99,370 | | | | 1,147,724 | |
Schulman (A.), Inc. | | | 21,670 | | | | 458,971 | |
Tredegar Corp. | | | 32,564 | | | | 723,572 | |
Valspar Corp. (The) | | | 18,800 | | | | 732,636 | |
Westlake Chemical Corp. | | | 19,450 | | | | 782,668 | |
| | | | | | | |
| | | | | | | 18,087,831 | |
14 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
| | | | | | | | |
| | Shares | | | Value | |
Containers & Packaging—1.5% | | | | | | | | |
Boise, Inc. | | | 204,367 | | | $ | 1,455,093 | |
Graphic Packaging Holding Co.1 | | | 244,550 | | | | 1,041,783 | |
Myers Industries, Inc. | | | 22,500 | | | | 277,650 | |
Packaging Corp. of America | | | 329,380 | | | | 8,313,551 | |
Sealed Air Corp. | | | 93,140 | | | | 1,602,939 | |
Silgan Holdings, Inc. | | | 8,506 | | | | 328,672 | |
| | | | | | | |
| | | | | | | 13,019,688 | |
| | | | | | | | |
Metals & Mining—1.4% | | | | | | | | |
Century Aluminum Co.1 | | | 412,040 | | | | 3,506,460 | |
Compass Minerals International, Inc. | | | 66,310 | | | | 4,565,444 | |
Nevsun Resources Ltd. | | | 13,970 | | | | 77,254 | |
Noranda Aluminum Holding Corp. | | | 23,220 | | | | 191,565 | |
Pan American Silver Corp. | | | 46,370 | | | | 1,011,330 | |
Steel Dynamics, Inc. | | | 125,990 | | | | 1,656,769 | |
Worthington Industries, Inc. | | | 105,490 | | | | 1,727,926 | |
| | | | | | | |
| | | | | | | 12,736,748 | |
| | | | | | | | |
Paper & Forest Products—0.6% | | | | | | | | |
Buckeye Technologies, Inc. | | | 85,850 | | | | 2,870,824 | |
Glatfelter | | | 116,700 | | | | 1,647,804 | |
KapStone Paper & Packing Corp.1 | | | 17,050 | | | | 268,367 | |
Mercer International, Inc.1 | | | 34,350 | | | | 209,535 | |
| | | | | | | |
| | | | | | | 4,996,530 | |
| | | | | | | | |
Telecommunication Services—0.9% | | | | | | | | |
| | |
Diversified Telecommunication Services—0.6% | | | | | | | | |
AboveNet, Inc.1 | | | 1,830 | | | | 118,968 | |
Brasil Telecom SA, ADR | | | 35,060 | | | | 623,717 | |
Cincinnati Bell, Inc.1 | | | 78,602 | | | | 238,164 | |
Nortel Inversora SA, Sponsored ADR1 | | | 17,370 | | | | 402,637 | |
Telecom Argentina SA, Sponsored ADR | | | 83,160 | | | | 1,486,901 | |
Telecom Corp. of New Zealand Ltd., Sponsored ADR | | | 146,020 | | | | 1,166,700 | |
Vonage Holdings Corp.1 | | | 498,240 | | | | 1,220,688 | |
| | | | | | | |
| | | | | | | 5,257,775 | |
| | | | | | | | |
Wireless Telecommunication Services—0.3% | | | | | | | | |
Cellcom Israel Ltd. | | | 41,590 | | | | 702,871 | |
Partner Communications Co. Ltd., Sponsored ADR | | | 17,760 | | | | 156,998 | |
Telephone & Data Systems, Inc. | | | 2,990 | | | | 77,411 | |
USA Mobility, Inc. | | | 99,322 | | | | 1,377,596 | |
| | | | | | | |
| | | | | | | 2,314,876 | |
| | | | | | | | |
Utilities—4.0% | | | | | | | | |
| | |
Electric Utilities—0.8% | | | | | | | | |
Cleco Corp. | | | 2,090 | | | | 79,629 | |
Companhia Energetica de Minas Gerais, Sponsored ADR | | | 96,060 | | | | 1,708,907 | |
Companhia Paranaense de Energia-Copel, Sponsored ADR | | | 87,091 | | | | 1,827,169 | |
El Paso Electric Co. | | | 7,880 | | | | 272,963 | |
Empire District Electric Co. | | | 40 | | | | 844 | |
NV Energy, Inc. | | | 62,310 | | | | 1,018,769 | |
Portland General Electric Co. | | | 87,270 | | | | 2,207,058 | |
UniSource Energy Corp. | | | 1,910 | | | | 70,517 | |
| | | | | | | |
| | | | | | | 7,185,856 | |
| | | | | | | | |
Energy Traders—1.4% | | | | | | | | |
AES Corp. (The)1 | | | 1,038,060 | | | | 12,290,630 | |
| | |
Gas Utilities—0.1% | | | | | | | | |
Atmos Energy Corp. | | | 26,400 | | | | 880,440 | |
Laclede Group, Inc. (The) | | | 220 | | | | 8,903 | |
| | | | | | | |
| | | | | | | 889,343 | |
| | | | | | | | |
Multi-Utilities—1.2% | | | | | | | | |
Avista Corp. | | | 33,140 | | | | 853,355 | |
CenterPoint Energy, Inc. | | | 69,840 | | | | 1,403,086 | |
CMS Energy Corp. | | | 105,780 | | | | 2,335,603 | |
NorthWestern Corp. | | | 47,760 | | | | 1,709,330 | |
Teco Energy, Inc. | | | 128,100 | | | | 2,451,834 | |
Vectren Corp. | | | 38,680 | | | | 1,169,296 | |
| | | | | | | |
| | | | | | | 9,922,504 | |
| | | | | | | | |
Water Utilities—0.5% | | | | | | | | |
Aqua America, Inc. | | | 189,060 | | | | 4,168,773 | |
| | | | | | | |
Total Common Stocks (Cost $771,498,099) | | | | | | | 858,777,452 | |
| | | | | | | | |
Investment Companies—2.0% | | | | | | | | |
BlackRock Kelso Capital Corp. | | | 3,200 | | | | 26,112 | |
Oppenheimer Institutional Money Market Fund, Cl. E, 0.20%2,3 | | | 17,286,356 | | | | 17,286,356 | |
Prospect Capital Corp. | | | 21,344 | | | | 198,286 | |
| | | | | | | |
Total Investment Companies (Cost $17,504,820) | | | | | | | 17,510,754 | |
Total Investments, at Value (Cost $789,002,919) | | | 100.7 | % | | | 876,288,206 | |
Liabilities in Excess of Other Assets | | | (0.7 | ) | | | (5,814,120 | ) |
| | |
Net Assets | | | 100.0 | % | | $ | 870,474,086 | |
| | |
15 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
Footnotes to Statement of Investments
| | |
* | | December 30, 2011 represents the last business day of Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
1. | | Non-income producing security. |
|
2. | | Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 30, 2011, 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 period in which the issuer was an affiliate are as follows: |
| | | | | | | | | | | | | | | | |
| | Shares | | | Gross | | | Gross | | | Shares | |
| | December 31, 2010 | | | Additions | | | Reductions | | | December 30, 2011 | |
Oppenheimer Institutional Money Market Fund, Cl. E | | | 13,940,550 | | | | 259,986,336 | | | | 256,640,530 | | | | 17,286,356 | |
| | | | | | | | |
| | Value | | | Income | |
Oppenheimer Institutional Money Market Fund, Cl. E | | $ | 17,286,356 | | | $ | 27,488 | |
| | |
3. | | Rate shown is the 7-day yield as of December 30, 2011. |
Valuation Inputs
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 table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 30, 2011 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 | | $ | 143,035,911 | | | $ | — | | | $ | — | | | $ | 143,035,911 | |
Consumer Staples | | | 22,062,383 | | | | — | | | | — | | | | 22,062,383 | |
Energy | | | 58,429,643 | | | | — | | | | — | | | | 58,429,643 | |
Financials | | | 179,652,304 | | | | — | | | | — | | | | 179,652,304 | |
Health Care | | | 88,937,118 | | | | — | | | | 25 | | | | 88,937,143 | |
Industrials | | | 140,438,046 | | | | — | | | | 18,934 | | | | 140,456,980 | |
Information Technology | | | 135,332,534 | | | | — | | | | — | | | | 135,332,534 | |
Materials | | | 48,840,797 | | | | — | | | | — | | | | 48,840,797 | |
Telecommunication Services | | | 7,572,651 | | | | — | | | | — | | | | 7,572,651 | |
Utilities | | | 34,457,106 | | | | — | | | | — | | | | 34,457,106 | |
Investment Companies | | | 17,510,754 | | | | — | | | | — | | | | 17,510,754 | |
| | |
Total Assets | | $ | 876,269,247 | | | $ | — | | | $ | 18,959 | | | $ | 876,288,206 | |
| | |
Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.
See accompanying Notes to Financial Statements.
16 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 30, 20111
| | | | |
|
Assets | | | | |
Investments, at value—see accompanying statement of investments: | | | | |
Unaffiliated companies (cost $771,716,563) | | $ | 859,001,850 | |
Affiliated companies (cost $17,286,356) | | | 17,286,356 | |
| | | |
| | | 876,288,206 | |
Cash | | | 128,190 | |
Receivables and other assets: | | | | |
Investments sold | | | 8,857,653 | |
Dividends | | | 1,051,426 | |
Other | | | 20,217 | |
| | | |
Total assets | | | 886,345,692 | |
| | | | |
Liabilities | | | | |
Payables and other liabilities: | | | | |
Investments purchased | | | 11,463,544 | |
Shares of beneficial interest redeemed | | | 3,860,364 | |
Shareholder communications | | | 255,470 | |
Distribution and service plan fees | | | 164,443 | |
Transfer and shareholder servicing agent fees | | | 73,970 | |
Trustees’ compensation | | | 17,259 | |
Other | | | 36,556 | |
| | | |
Total liabilities | | | 15,871,606 | |
| | | | |
Net Assets | | $ | 870,474,086 | |
| | | |
| | | | |
Composition of Net Assets | | | | |
Par value of shares of beneficial interest | | $ | 51,115 | |
Additional paid-in capital | | | 864,347,106 | |
Accumulated net investment income | | | 3,886,759 | |
Accumulated net realized loss on investments and foreign currency transactions | | | (85,096,181 | ) |
Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies | | | 87,285,287 | |
| | | |
Net Assets | | $ | 870,474,086 | |
| | | |
| | | | |
Net Asset Value Per Share | | | | |
Non-Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $79,721,990 and 4,642,305 shares of beneficial interest outstanding) | | $ | 17.17 | |
Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $790,752,096 and 46,472,920 shares of beneficial interest outstanding) | | $ | 17.02 | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
17 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 30, 20111
| | | | |
|
Investment Income | | | | |
Dividends: | | | | |
Unaffiliated companies (net of foreign withholding taxes of $65,983) | | $ | 12,575,002 | |
Affiliated companies | | | 27,488 | |
Interest | | | 569 | |
| | | |
Total investment income | | | 12,603,059 | |
| | | | |
Expenses | | | | |
Management fees | | | 6,299,582 | |
Distribution and service plan fees — Service shares | | | 2,058,442 | |
Transfer and shareholder servicing agent fees: | | | | |
Non-Service shares | | | 86,822 | |
Service shares | | | 823,389 | |
Shareholder communications: | | | | |
Non-Service shares | | | 22,908 | |
Service shares | | | 216,334 | |
Trustees’ compensation | | | 36,886 | |
Custodian fees and expenses | | | 5,171 | |
Administration service fees | | | 1,500 | |
Other | | | 104,687 | |
| | | |
Total expenses | | | 9,655,721 | |
Less waivers and reimbursements of expenses | | | (343,594 | ) |
| | | |
Net expenses | | | 9,312,127 | |
| | | | |
Net Investment Income | | | 3,290,932 | |
| | | | |
Realized and Unrealized Gain (Loss) | | | | |
Net realized gain on investments from: | | | | |
Unaffiliated companies | | | 130,487,197 | |
Foreign currency transactions | | | 34,071 | |
| | | |
Net realized gain | | | 130,521,268 | |
Net change in unrealized appreciation/depreciation on: | | | | |
Investments | | | (149,915,063 | ) |
Translation of assets and liabilities denominated in foreign currencies | | | (23,810 | ) |
| | | |
Net change in unrealized appreciation/depreciation | | | (149,938,873 | ) |
| | | | |
Net Decrease in Net Assets Resulting from Operations | | $ | (16,126,673 | ) |
| | | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
18 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
| | | | | | | | |
| | Year Ended | | | Year Ended | |
| | December 30, | | | December 31, | |
| | 20111 | | | 2010 | |
Operations | | | | | | | | |
Net investment income | | $ | 3,290,932 | | | $ | 3,898,427 | |
Net realized gain | | | 130,521,268 | | | | 52,686,058 | |
Net change in unrealized appreciation/depreciation | | | (149,938,873 | ) | | | 128,474,710 | |
| | |
Net increase (decrease) in net assets resulting from operations | | | (16,126,673 | ) | | | 185,059,195 | |
| | | | | | | | |
Dividends and/or Distributions to Shareholders | | | | | | | | |
Dividends from net investment income: | | | | | | | | |
Non-Service shares | | | (569,104 | ) | | | (548,102 | ) |
Service shares | | | (3,235,789 | ) | | | (2,854,368 | ) |
| | |
| | | (3,804,893 | ) | | | (3,402,470 | ) |
| | | | | | | | |
Beneficial Interest Transactions | | | | | | | | |
Net increase (decrease) in net assets resulting from beneficial interest transactions: | | | | | | | | |
Non-Service shares | | | (13,898,613 | ) | | | (4,150,760 | ) |
Service shares | | | (50,982,214 | ) | | | 33,619,248 | |
| | |
| | | (64,880,827 | ) | | | 29,468,488 | |
| | | | | | | | |
Net Assets | | | | | | | | |
Total increase (decrease) | | | (84,812,393 | ) | | | 211,125,213 | |
Beginning of period | | | 955,286,479 | | | | 744,161,266 | |
| | |
End of period (including accumulated net investment income of $3,886,759 and $4,175,047, respectively) | | $ | 870,474,086 | | | $ | 955,286,479 | |
| | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
19 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Non-Service Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 17.66 | | | $ | 14.40 | | | $ | 10.65 | | | $ | 18.20 | | | $ | 19.15 | |
|
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income2 | | | .10 | | | | .10 | | | | .08 | | | | .12 | | | | .09 | |
Net realized and unrealized gain (loss) | | | (.48 | ) | | | 3.25 | | | | 3.78 | | | | (6.73 | ) | | | (.30 | ) |
| | |
Total from investment operations | | | (.38 | ) | | | 3.35 | | | | 3.86 | | | | (6.61 | ) | | | (.21 | ) |
|
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.11 | ) | | | (.09 | ) | | | (.11 | ) | | | (.08 | ) | | | (.06 | ) |
Distributions from net realized gain | | | — | | | | — | | | | — | | | | (.86 | ) | | | (.68 | ) |
| | |
Total dividends and/or distributions to shareholders | | | (.11 | ) | | | (.09 | ) | | | (.11 | ) | | | (.94 | ) | | | (.74 | ) |
|
Net asset value, end of period | | $ | 17.17 | | | $ | 17.66 | | | $ | 14.40 | | | $ | 10.65 | | | $ | 18.20 | |
| | |
| | | | | | | | | | | | | | | | | | | | |
Total Return, at Net Asset Value3 | | | (2.21 | )% | | | 23.41 | % | | | 37.20 | % | | | (37.83 | )% | | | (1.21 | )% |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 79,722 | | | $ | 95,576 | | | $ | 81,814 | | | $ | 58,478 | | | $ | 93,939 | |
|
Average net assets (in thousands) | | $ | 86,796 | | | $ | 88,063 | | | $ | 69,585 | | | $ | 80,406 | | | $ | 94,815 | |
|
Ratios to average net assets:4 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.58 | % | | | 0.68 | % | | | 0.71 | % | | | 0.80 | % | | | 0.48 | % |
Total expenses5 | | | 0.83 | % | | | 0.85 | % | | | 0.91 | % | | | 0.75 | % | | | 0.73 | % |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 0.80 | % | | | 0.80 | % | | | 0.82 | % | | | 0.75 | % | | | 0.73 | % |
|
Portfolio turnover rate | | | 108 | % | | | 73 | % | | | 140 | % | | | 130 | % | | | 115 | % |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
4. | | Annualized for periods less than one full year. |
|
5. | | Total Expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 0.83 | % |
Year Ended December 31, 2010 | | | 0.85 | % |
Year Ended December 31, 2009 | | | 0.91 | % |
Year Ended December 31, 2008 | | | 0.75 | % |
Year Ended December 31, 2007 | | | 0.73 | % |
See accompanying Notes to Financial Statements.
20 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Service Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 17.50 | | | $ | 14.28 | | | $ | 10.54 | | | $ | 18.03 | | | $ | 18.98 | |
|
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income2 | | | .06 | | | | .07 | | | | .05 | | | | .08 | | | | .05 | |
Net realized and unrealized gain (loss) | | | (.47 | ) | | | 3.21 | | | | 3.76 | | | | (6.67 | ) | | | (.29 | ) |
| | |
Total from investment operations | | | (.41 | ) | | | 3.28 | | | | 3.81 | | | | (6.59 | ) | | | (.24 | ) |
|
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.07 | ) | | | (.06 | ) | | | (.07 | ) | | | (.04 | ) | | | (.03 | ) |
Distributions from net realized gain | | | — | | | | — | | | | — | | | | (.86 | ) | | | (.68 | ) |
| | |
Total dividends and/or distributions to shareholders | | | (.07 | ) | | | (.06 | ) | | | (.07 | ) | | | (.90 | ) | | | (.71 | ) |
|
Net asset value, end of period | | $ | 17.02 | | | $ | 17.50 | | | $ | 14.28 | | | $ | 10.54 | | | $ | 18.03 | |
| | |
| | | | | | | | | | | | | | | | | | | | |
Total Return, at Net Asset Value3 | | | (2.38 | )% | | | 23.06 | % | | | 36.88 | % | | | (38.00 | )% | | | (1.39 | )% |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 790,752 | | | $ | 859,710 | | | $ | 662,347 | | | $ | 551,644 | | | $ | 821,642 | |
|
Average net assets (in thousands) | | $ | 823,201 | | | $ | 730,069 | | | $ | 612,651 | | | $ | 769,150 | | | $ | 766,102 | |
|
Ratios to average net assets:4 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.34 | % | | | 0.45 | % | | | 0.47 | % | | | 0.52 | % | | | 0.23 | % |
Total expenses5 | | | 1.08 | % | | | 1.10 | % | | | 1.15 | % | | | 0.99 | % | | | 0.97 | % |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 1.05 | % | | | 1.05 | % | | | 1.07 | % | | | 0.99 | % | | | 0.97 | % |
|
Portfolio turnover rate | | | 108 | % | | | 73 | % | | | 140 | % | | | 130 | % | | | 115 | % |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
4. | | Annualized for periods less than one full year. |
|
5. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 1.08 | % |
Year Ended December 31, 2010 | | | 1.10 | % |
Year Ended December 31, 2009 | | | 1.15 | % |
Year Ended December 31, 2008 | | | 0.99 | % |
Year Ended December 31, 2007 | | | 0.97 | % |
See accompanying Notes to Financial Statements.
21 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Oppenheimer Main Street Small- & Mid-Cap Fund/VA (the “Fund”), formerly Oppenheimer Main Street Small Cap Fund/VA, is a separate series of Oppenheimer Variable Account Funds, an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund’s investment objective is to seek capital appreciation. The Fund’s investment adviser is OppenheimerFunds, Inc. (the “Manager”).
The Fund offers two classes of shares. Both classes are sold at their offering price, which is the net asset value per share, to separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. The class of shares designated as Service shares is subject to a distribution and service plan. Both classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class.
The following is a summary of significant accounting policies consistently followed by the Fund.
Fiscal Year End. Since December 30, 2011 represents the last day during the Fund’s 2011 fiscal year on which the New York Stock Exchange was open for trading, the Fund’s financial statements have been presented through that date to maintain consistency with the Fund’s net asset value calculations used for shareholder transactions.
Securities Valuation. The Fund calculates the net asset value of its shares as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading.
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. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” observable market inputs other than unadjusted quoted prices are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.
Securities traded on a registered U.S. securities exchange 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. Securities whose principal exchange is NASDAQ® are valued based on the official closing prices reported by NASDAQ prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.
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.
U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.
22 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
“Money market-type” debt instruments with remaining maturities 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.
In the absence of a current price quotation obtained from an independent pricing service or broker-dealer, including for securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund’s assets are valued but after the close of the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities 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 adjusted for any discounts related to 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.
There have been no significant changes to the fair valuation methodologies of the Fund during the period.
Investment in Oppenheimer Institutional Money Market Fund. The Fund is permitted to invest daily available cash balances in an affiliated money market fund. The Fund may invest the available cash in Class E shares of Oppenheimer Institutional Money Market Fund (“IMMF”) to seek current income while preserving liquidity. IMMF is a registered open-end management investment company, regulated as a money market fund under the Investment Company Act of 1940, as amended. The Manager is also the investment adviser of IMMF. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of IMMF’s Class E expenses, including its 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 IMMF.
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 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.
Reported net realized gains and losses from foreign currency transactions arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, exchange rate fluctuations between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized appreciation and depreciation on the translation of assets and liabilities denominated in foreign currencies arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund’s Statement of Operations.
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
23 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
1. Significant Accounting Policies Continued
Federal Taxes. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. Therefore, no federal income or excise tax provision is required. The Fund files income tax returns in U.S. federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remain open for the three preceding fiscal reporting period ends.
The tax components of capital shown in the following table represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes.
| | | | | | | | | | | | |
| | | | | | | | | | Net Unrealized | |
| | | | | | | | | | Appreciation | |
| | | | | | | | | | Based on Cost | |
| | | | | | | | | | of Securities and | |
Undistributed | | Undistributed | | | Accumulated | | | Other Investments | |
Net Investment | | Long-Term | | | Loss | | | for Federal Income | |
Income | | Gain | | | Carryforward1,2,3 | | | Tax Purposes | |
$2,648,726 | | $ | — | | | $ | 80,902,957 | | | $ | 84,353,340 | |
| | |
1. | | As of December 30, 2011, the Fund had $80,902,957 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. Details of the capital loss carryforwards are included in the table below. Capital loss carryovers with no expiration, if any, must be utilized prior to those with expiration dates. |
| | | | |
Expiring | |
2017 | | $ | 80,902,957 | |
| | |
2. | | During the fiscal year ended December 30, 2011, the Fund utilized $126,312,039 of capital loss carryforward to offset capital gains realized in that fiscal year. |
|
3. | | During the fiscal year ended December 31, 2010, the Fund utilized $46,424,238 of capital loss carryforward to offset capital gains realized in that fiscal year. |
Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund.
Accordingly, the following amounts have been reclassified for December 30, 2011. Net assets of the Fund were unaffected by the reclassifications.
| | | | | | | | |
| | Increase to | | | Increase to | |
| | Accumulated | | | Accumulated Net | |
Reduction to | | Net Investment | | | Realized Loss | |
Paid-in Capital | | Income | | | on Investments | |
$5 | | $ | 225,673 | | | $ | 225,668 | |
The tax character of distributions paid during the years ended December 30, 2011 and December 31, 2010 was as follows:
| | | | | | | | |
| | Year Ended | | | Year Ended | |
| | December 30, 2011 | | | December 31, 2010 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 3,804,893 | | | $ | 3,402,470 | |
The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 30, 2011 are noted in the following
24 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.
| | | | |
|
Federal tax cost of securities | | $ | 791,934,866 | |
| | | |
Gross unrealized appreciation | | $ | 123,193,164 | |
Gross unrealized depreciation | | | (38,839,824 | ) |
| | | |
Net unrealized appreciation | | $ | 84,353,340 | |
| | | |
Trustees’ Compensation. The Board of Trustees has adopted a compensation deferral plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of “Other” within the asset section of the Statement of Assets and Liabilities. Deferral of trustees’ fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund’s assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance with the compensation deferral plan.
Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles, are recorded on the ex-dividend date. Income and capital gain distributions, if any, are declared and paid annually or at other times as deemed necessary by the Manager.
Investment Income. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is recognized on an accrual basis. Discount and premium, which are included in interest income on the Statement of Operations, are amortized or accreted daily.
Custodian Fees. “Custodian fees and expenses” in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by the Fund, at a rate equal to the Federal Funds Rate plus 0.50%. The “Reduction to custodian expenses” line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings.
Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost.
Indemnifications. The Fund’s organizational documents provide current and former trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
25 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
| | | | | | | | | | | | | | | | |
| | Year Ended December 30, 2011 | | | Year Ended December 31, 2010 | |
| Shares | | Amount | | Shares | | Amount | |
Non-Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 1,642,399 | | | $ | 27,944,106 | | | | 2,793,780 | | | $ | 42,429,352 | |
Dividends and/or distributions reinvested | | | 30,896 | | | | 569,104 | | | | 36,202 | | | | 548,102 | |
Redeemed | | | (2,443,618 | ) | | | (42,411,823 | ) | | | (3,098,803 | ) | | | (47,128,214 | ) |
| | |
Net decrease | | | (770,323 | ) | | $ | (13,898,613 | ) | | | (268,821 | ) | | $ | (4,150,760 | ) |
| | |
| | | | | | | | | | | | | | | | |
Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 6,217,855 | | | $ | 105,066,282 | | | | 11,844,155 | | | $ | 173,858,907 | |
Dividends and/or distributions reinvested | | | 176,916 | | | | 3,235,789 | | | | 189,911 | | | | 2,854,368 | |
Redeemed | | | (9,038,872 | ) | | | (159,284,285 | ) | | | (9,301,032 | ) | | | (143,094,027 | ) |
| | |
Net increase (decrease) | | | (2,644,101 | ) | | $ | (50,982,214 | ) | | | 2,733,034 | | | $ | 33,619,248 | |
| | |
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations and investments in IMMF, for the year ended December 30, 2011, were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
Investment securities | | $ | 974,052,024 | | | $ | 1,035,161,207 | |
4. Fees and Other Transactions with Affiliates
Management Fees. Under the investment advisory agreement, the Fund pays the Manager a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| | | | |
Fee Schedule | |
Up to $200 million | | | 0.75 | % |
Next $200 million | | | 0.72 | |
Next $200 million | | | 0.69 | |
Next $200 million | | | 0.66 | |
Over $800 million | | | 0.60 | |
Administration Service Fees. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund’s tax returns.
Transfer Agent Fees. OppenheimerFunds Services (“OFS”), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. For the year ended December 30, 2011, the Fund paid $916,777 to OFS for services to the Fund.
Distribution and Service Plan for Service Shares. The Fund has adopted a Distribution and Service Plan (the “Plan”) in accordance with Rule 12b-1 under the Investment Company Act of 1940 for Service shares to pay OppenheimerFunds Distributor, Inc. (the “Distributor”), for distribution related services, personal service and account maintenance for the Fund’s Service shares. Under the Plan, payments are made periodically at an annual rate of 0.25% of the daily net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors of the insurance product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service shares. These fees are paid out of the Fund’s assets on an on-going basis and increase operating expenses of the Service shares, which results in lower performance compared to the Fund’s shares that are not subject to a service fee. Fees incurred by the Fund under the Plan are detailed in the Statement of Operations.
26 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
Waivers and Reimbursements of Expenses. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.80% for Non-Service shares and 1.05% for Service shares. During the year ended December 30, 2011, the Manager waived fees and/or reimbursed the Fund $30,571 and $297,339 for Non-Service and Service shares, respectively.
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 IMMF. During the year ended December 30, 2011, the Manager waived fees and/or reimbursed the Fund $15,684 for IMMF management fees.
Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.
5. Risk Exposures and the Use of Derivative Instruments
The Fund’s investment objectives not only permit the Fund to purchase investment securities, they also allow the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward foreign currency exchange contracts, credit default swaps, interest rate swaps, total return 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. Central to those strategies are features inherent to derivatives that make them more attractive for this purpose than equity and debt securities: they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This 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.
Market Risk Factors. In accordance with its investment objectives, the Fund may use derivatives to increase or decrease its exposure to one or more of the following 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 to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds.
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.
The Fund’s actual exposures to these market risk factors during the period are discussed in further detail, by derivative type, below.
27 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
5. Risk Exposures and the Use of Derivative Instruments Continued
Risks of Investing in Derivatives. The Fund’s use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. 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.
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. 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.
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. Associated risks can be different for each type of derivative and are discussed by each derivative type in the notes that follow.
Counterparty Credit Risk. Certain derivative positions are subject to counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. The Fund’s derivative counterparties are financial institutions who are subject to market conditions that may weaken their financial position. The Fund intends to enter into financial transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction.
Credit Related Contingent Features. The Fund’s agreements with derivative counterparties have several credit related contingent features that if triggered would allow its derivatives counterparties to close out and demand payment or additional collateral to cover their exposure from the Fund. Credit related contingent features are established between the Fund and its derivatives counterparties to reduce the risk that the Fund will not fulfill its payment obligations to its counterparties. These triggering features include, but are not limited to, a percentage decrease in the Fund’s net assets and or a percentage decrease in the Fund’s Net Asset Value or NAV. The contingent features are established within the Fund’s International Swap and Derivatives Association, Inc. master agreements which govern certain positions in swaps, over-the-counter options and swaptions, and forward currency exchange contracts for each individual counterparty.
The effect of derivative instruments on the Statement of Operations is as follows:
| | | | |
Amount of Realized Gain or (Loss) Recognized on Derivatives | |
Derivatives Not Accounted for as Hedging Instruments | | Foreign currency transactions | |
Foreign exchange contracts | | $ | 564 | |
Foreign Currency Exchange Contracts
The Fund may enter into foreign currency exchange contracts (“forward contracts”) for the purchase or sale of a foreign currency at a negotiated rate at a future date.
Forward contracts are reported on a schedule following the Statement of Investments. Forward contracts will be valued daily based upon the closing prices of the forward currency rates determined at the close of the Exchange as provided by a bank, dealer or pricing service. The resulting unrealized appreciation (depreciation) is reported in the Statement of Assets and Liabilities as a receivable or payable and in the Statement of Operations 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 Statement of Operations.
The Fund has purchased and sold certain forward foreign currency exchange contracts of different currencies in order to acquire currencies to pay for or sell currencies to acquire related foreign securities purchase and sale transactions,
28 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
respectively, or to convert foreign currencies to U.S. dollars from related foreign securities transactions. These foreign currency exchange contracts are negotiated at the current spot exchange rate with settlement typically within two business days thereafter.
During the year ended December 30, 2011, the Fund had daily average contract amounts on forward foreign currency contracts to buy and sell of $464 and $649, respectively.
Additional associated risk to the Fund includes counterparty credit risk. Counterparty credit risk arises from the possibility that the counterparty will default.
As of December 30, 2011, the Fund had no outstanding forward contracts.
6. Pending Litigation
Since 2009, a number of class action, derivative and individual lawsuits have been pending in federal and state courts against OppenheimerFunds, Inc., the Fund’s investment advisor (the “Manager”), OppenheimerFunds Distributor, Inc., the Fund’s principal underwriter and distributor (the “Distributor”), and certain funds (but not including the Fund) advised by the Manager and distributed by the Distributor (the “Defendant Funds”). Several of these lawsuits also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The lawsuits raise claims under federal securities laws and various states’ securities, consumer protection and common law and allege, among other things, that the disclosure documents of the respective Defendant Funds contained misrepresentations and omissions and that the respective Defendant Funds’ investment policies were not followed. The plaintiffs in these actions seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. On September 30, 2011, the U.S. District Court for the District of Colorado entered orders and final judgments approving the settlement of certain putative class actions involving two Defendant Funds, Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund. Those orders are not subject to further appeal. These settlements do not resolve other outstanding lawsuits relating to Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund, nor do the settlements affect certain other putative class action lawsuits pending in federal court against the Manager, the Distributor, and other Defendant Funds and their independent trustees.
In 2009, what are claimed to be derivative lawsuits were filed in New Mexico state court against the Manager and a subsidiary (but not against the Fund) on behalf of the New Mexico Education Plan Trust challenging a settlement reached in 2010 between the Manager, its subsidiary and the Distributor and the board of the New Mexico section 529 college savings plan. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses. On September 9, 2011, the court denied plaintiffs’ request for a hearing to determine the fairness of the settlement, finding that plaintiffs lacked standing to pursue derivative claims on behalf of the Trust. On October 27, 2011, the parties to these actions filed a joint motion to dismiss the lawsuits with prejudice, which the court granted on October 28, 2011.
Other class action and individual lawsuits have been filed since 2008 in various state and federal courts against the Manager and certain of its affiliates by investors seeking to recover investments they allegedly lost as a result of the “Ponzi” scheme run by Bernard L. Madoff and his firm, Bernard L. Madoff Investment Securities, LLC (“BLMIS”). Plaintiffs in these suits allege that they suffered losses as a result of their investments in several funds managed by an affiliate of the Manager and assert a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. Neither the Distributor, nor any of the Oppenheimer mutual funds, their independent trustees or directors are named as defendants in these lawsuits. None of the Oppenheimer mutual funds invested in any funds or accounts managed by Madoff or BLMIS. On February 28, 2011, a stipulation of partial settlement of three groups of consolidated putative class action lawsuits relating to these matters was filed in the U.S. District Court for the Southern District of New York. On August 19, 2011, the court entered an order and final judgment approving the settlement as fair, reasonable and adequate. In September 2011, certain parties filed notices of appeal from the court’s order approving the settlement. On July 29, 2011, a stipulation of settlement between certain affiliates of the Manager and the
29 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
6. Pending Litigation Continued
Trustee appointed under the Securities Investor Protection Act to liquidate BLMIS was filed in the U.S. Bankruptcy Court for the Southern District of New York to resolve purported preference and fraudulent transfer claims by the Trustee. On September 22, 2011, the court entered an order approving the settlement as fair, reasonable and adequate. In October 2011, certain parties filed notices of appeal from the court’s order approving the settlement. The aforementioned settlements do not resolve other outstanding lawsuits against the Manager and its affiliates relating to BLMIS.
On April 16, 2010, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark IV Funding Limited (“AAArdvark IV”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark IV. Plaintiffs allege breach of contract against the defendants and seek compensatory damages, costs and disbursements, including attorney fees. On July 15, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark Funding Limited (“AAArdvark I”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark I. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees. On November 9, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark XS Funding Limited (“AAArdvark XS”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark XS. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees.
The Manager believes the lawsuits and appeals described above are without legal merit and, with the exception of actions it has settled, is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to represent the Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer mutual funds.
30 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:
We have audited the accompanying statement of assets and liabilities of Oppenheimer Main Street Small- & Mid-Cap Fund/VA, formerly Oppenheimer Main Street Small Cap Fund/VA, (a separate series of Oppenheimer Variable Account Funds), including the statement of investments, as of December 30, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of Oppenheimer Main Street Small- & Mid-Cap Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 30, 2011, by correspondence with the custodian, transfer agent and brokers, or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Main Street Small- & Mid-Cap Fund/VA as of December 30, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the three-year period then ended, in conformity with U.S. generally accepted accounting principles.
KPMG llp
Denver, Colorado
February 16, 2012
31 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
In early 2012, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2011. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service.
Dividends, if any, paid by the Fund during the fiscal year ended December 30, 2011 which are not designated as capital gain distributions should be multiplied by the maximum amount allowable but not less than 100% to arrive at the amount eligible for the corporate dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance.
32 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
BOARD APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT Unaudited
Each year, the Board of Trustees (the “Board”), including a majority of the independent Trustees, is required to determine whether to renew the Fund’s investment advisory agreement (the “Agreement”). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager’s services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager and its affiliates, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. The Board was aware that there are alternatives to retaining the Manager.
Outlined below is a summary of the principal information considered by the Board as well as the Board’s conclusions.
Nature, Quality and Extent of Services. The Board considered information about the nature, quality and extent of the services provided to the Fund and information regarding the Manager’s key personnel who provide such services. The Manager’s duties include providing the Fund with the services of the portfolio managers and the Manager’s investment team, who provide research, analysis and other advisory services in regard to the Fund’s investments; securities trading services; oversight of third-party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund’s investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel who are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund’s operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund’s shares. The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the quality of the Manager’s resources that are available to the Fund. The Board took account of the fact that the Manager has had over fifty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager’s advisory, administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager’s key personnel and the size and functions of its staff. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Matthew Ziehl, Raymond Anello, and Raman Vardharaj, the portfolio managers for the Fund, and the Manager’s investment team and analysts. The Board members also considered the totality of their experiences with the Manager as directors or trustees of the Fund and other funds advised by the Manager. The Board considered information regarding the quality of services provided by affiliates of the Manager, which its members have become knowledgeable about in connection with the renewal of the Fund’s service agreements. The Board concluded, in light of the Manager’s experience, reputation, personnel, operations and resources that the Fund benefits from the services provided under the Agreement.
Investment Performance of the Manager and the Fund. Throughout the year, the Manager provided information on the investment performance of the Fund and the Manager, including comparative performance information. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund’s historical performance to relevant market indices and to the performance of other small-cap core funds underlying
33 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
BOARD APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT Unaudited / Continued
variable insurance products. The Board considered that the Fund outperformed its performance universe median during the ten-year Lipper period, although it underperformed its performance universe median during the one-, three-and five-year Lipper periods. The Board also considered the change, effective May 19, 2009, of a new portfolio management team and the change, effective November 1, 2010, to the investment strategy and name of the Fund. The Board also noted the Fund’s recent performance, which ranked in the third quintile of the Fund’s performance universe during the year to date ended April 30, 2011.
Costs of Services by the Manager. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also considered the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund and other small-cap core funds underlying variable insurance products. In reviewing the fees and expenses charged to the VA funds, the Board considered the Manager’s assertion that, because there is much greater disparity in the fees and services that may be provided by a manager to a VA fund as opposed to a retail fund, when comparing the expenses of the various VA funds to those of retail funds, it is most appropriate to focus on total expenses (rather than on the management fees). Accordingly, while the Board reviewed and considered all expenses, it focused on total expenses. The Board considered that the Fund’s actual management fees and total expenses were lower than its expense group median. The Board also considered that the Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.80% for Non-Service shares and 1.05% for Service shares. This voluntary expense limitation may not be amended or withdrawn until one year after the date of prospectus.
Economies of Scale and Profits Realized by the Manager. The Board considered information regarding the Manager’s costs in serving as the Fund’s investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager’s profitability from its relationship with the Fund. The Board reviewed whether the Manager may realize economies of scale in managing and supporting the Fund. The Board noted that the Fund currently has management fee breakpoints, which are intended to share with Fund shareholders economies of scale that may exist as the Fund’s assets grow.
Other Benefits to the Manager. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager’s affiliates and research provided to the Manager in connection with permissible brokerage arrangements (soft dollar arrangements). The Board also considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide quality services to the Fund.
Conclusions. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees’ counsel are independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the Agreement through August 31, 2012. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the above information, and considered the terms and conditions of the Agreement, including the management fee, in light of all of the surrounding circumstances.
34 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities (“portfolio proxies”) held by the Fund. A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund’s website at oppenheimerfunds.com, and (iii) on the SEC’s website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund’s voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC’s website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund’s Form N-Q filings are available on the SEC’s website at www.sec.gov. Those forms may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
35 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
TRUSTEES AND OFFICERS Unaudited
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Name, Position(s) Held with the | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in |
Fund, Length of Service, Age | | the Fund Complex Currently Overseen |
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INDEPENDENT TRUSTEES | | The address of each Trustee in the chart below is 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Trustee serves for an indefinite term, or until his or her resignation, retirement, death or removal. |
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William L. Armstrong, Chairman of the Board of Trustees (since 2003), Trustee (since 1999) Age: 74 | | President, Colorado Christian University (since 2006); Chairman, Cherry Creek Mortgage Company (since 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso Mortgage Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman, Broadway Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), former Director of Campus Crusade for Christ (non-profit) (1991-2008); former Director, The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (2002-2006); former Chairman of: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Armstrong has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Edward L. Cameron, Trustee (since 1999) Age: 73 | | Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000 — June 2006); Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (accounting firm) (July 1994-June 1998). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Cameron has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Jon S. Fossel, Trustee (since 1998) Age: 69 | | Chairman of the Board (since 2006) and Director (since June 2002) of UNUMProvident (insurance company); Director of Northwestern Energy Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003 and February 2005-February 2007); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. (“OAC”) (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Fossel has served on the Boards of certain Oppenheimer funds since 1990, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Sam Freedman, Trustee (since 1998) Age: 71 | | Director of Colorado UpLIFT (charitable organization) (since September 1984). Mr. Freedman held several positions with the Manager and with subsidiary or affiliated companies of the Manager (until October 1994). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Freedman has served on the Boards of certain Oppenheimer funds since 1996, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Beverly L. Hamilton, Trustee (since 2002) Age: 65 | | Trustee of Monterey Institute for International Studies (educational organization) (since February 2000); Board Member of Middlebury College (educational organization) (since December 2005); Chairman (since 2010) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); Director of The California Endowment (philanthropic organization) (April 2002-April 2008); Director (February 2002-2005) and Chairman of Trustees (2006-2007) of the Community Hospital of Monterey Peninsula; Director (October 1991-2005); Vice Chairman (2006-2009) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation (2001-2006) and The University of Michigan (since 2000); Advisor at Credit Suisse First Boston’s Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member of the investment committee of Hartford Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 36 portfolios in the OppenheimerFunds |
36 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
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Name, Position(s) Held with the | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in |
Fund, Length of Service, Age | | the Fund Complex Currently Overseen |
|
Beverly L. Hamilton, Continued | | complex. Ms. Hamilton has served on the Boards of certain Oppenheimer funds since 2002, during which time she has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Robert J. Malone, Trustee (since 2002) Age: 67 | | Board of Directors of Opera Colorado Foundation (non-profit organization) (since March 2008); Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director of Steele Street Bank & Trust (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Malone has served on the Boards of certain Oppenheimer funds since 2002, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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F. William Marshall, Jr., Trustee (since 2000) Age: 69 | | Trustee Emeritus of Worcester Polytech Institute (WPI) (private university) (since 2009); Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment company) (since 1996) and MML Series Investment Fund (investment company) (since 1996); President and Treasurer of the SIS Funds (private charitable fund) (January 1999 — March 2011); Former Trustee of WPI (1985-2008); Former Chairman of the Board (2004-2006) and Former Chairman of the Investment Committee of WPI (1994-2008); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999); and Former President and Chief Executive Officer of SIS Bancorp. (1993-1999). Oversees 38 portfolios in the OppenheimerFunds complex. Mr. Marshall has served on the Boards of certain Oppenheimer funds since 2000, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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INTERESTED TRUSTEE AND OFFICER | | The address of Mr. Glavin is Two World Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008. Mr. Glavin serves as a Trustee for an indefinite term, or until his resignation, retirement, death or removal and as an Officer for an indefinite term, or until his resignation, retirement, death or removal. Mr. Glavin is an Interested Trustee due to his positions with OppenheimerFunds, Inc. and its affiliates. |
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William F. Glavin, Jr., Trustee, President and Principal Executive Officer (since 2009) Age: 53 | | Chairman of the Manager (since December 2009); Chief Executive Officer and Director of the Manager (since January 2009); President of the Manager (since May 2009); Director of Oppenheimer Acquisition Corp. (“OAC”) (the Manager’s parent holding company) (since June 2009); Executive Vice President (March 2006-February 2009) and Chief Operating Officer (July 2007-February 2009) of Massachusetts Mutual Life Insurance Company (OAC’s parent company); Director (May 2004-March 2006) and Chief Operating Officer and Chief Compliance Officer (May 2004-January 2005), President (January 2005-March 2006) and Chief Executive Officer (June 2005- March 2006) of Babson Capital Management LLC; Director (March 2005-March 2006), President (May 2003- March 2006) and Chief Compliance Officer (July 2005-March 2006) of Babson Capital Securities, Inc. (a broker-dealer); President (May 2003-March 2006) of Babson Investment Company, Inc.; Director (May 2004- August 2006) of Babson Capital Europe Limited; Director (May 2004-October 2006) of Babson Capital Guernsey Limited; Director (May 2004-March 2006) of Babson Capital Management LLC; Non-Executive Director (March 2005-March 2007) of Baring Asset Management Limited; Director (February 2005-June 2006) Baring Pension Trustees Limited; Director and Treasurer (December 2003-November 2006) of Charter Oak Capital Management, Inc.; Director (May 2006-September 2006) of C.M. Benefit Insurance Company; Director (May 2008-June 2009) and Executive Vice President (June 2007-July 2009) of C.M. Life Insurance Company; President (March 2006-May 2007) of MassMutual Assignment Company; Director (January 2005-December 2006), Deputy Chairman (March 2005-December 2006) and President (February 2005-March 2005) of MassMutual Holdings (Bermuda) Limited; Director (May 2008-June 2009) and Executive Vice President (June 2007-July 2009) of MML Bay State Life Insurance Company; Chief Executive Officer and President (April 2007-January 2009) of MML Distributors, LLC; and Chairman (March 2006-December 2008) and Chief Executive Officer (May 2007- December 2008) of MML Investors Services, Inc. Oversees 63 portfolios as a Trustee/Director and 96 portfolios as an officer in the OppenheimerFunds complex. |
37 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
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Name, Position(s) Held with the | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in |
Fund, Length of Service, Age | | the Fund Complex Currently Overseen |
|
OTHER OFFICERS OF THE FUND | | The addresses of the Officers in the chart below are as follows: for Messrs. Ziehl, Vardharaj, Anello, Gabinet and Ms. Nasta, Two World Financial Center, 225 Liberty Street, New York, New York 10281-1008, for Messrs. Vandehey and Wixted, 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Officer serves for an indefinite or until his or her resignation, retirement, death or removal. |
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Matthew P. Ziehl, Vice President (since 2009) Age: 44 | | Vice President of the Manager (since May 2009); a Chartered Financial Analyst. Prior to joining the Manager, a portfolio manager with RS Investment Management Co. LLC (October 2006-May 2009); a managing director at The Guardian Life Insurance Company of America (December 2001-October 2006) when Guardian Life Insurance acquired an interest in RS Investment Management Co. LLC; a team leader and co-portfolio manager with Salomon Brothers Asset Management, Inc. for small growth portfolios (January 2001-December 2001). A portfolio manager and officer of 2 portfolios in the OppenheimerFunds complex. |
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Raman Vardharaj, Vice President (since 2009) Age: 40 | | Vice President of the Manager (since May 2009); a Chartered Financial Analyst. Prior to joining the Manager, a sector manager and a senior quantitative analyst creating stock selection models, monitoring portfolio risks and analyzing portfolio performance across the RS Core Equity Team of RS Investment Management Co. LLC (October 2006-May 2009); a quantitative analyst at The Guardian Life Insurance Company of America (1998-October 2006) when Guardian Life Insurance acquired an interest in RS Investment Management Co. LLC. A portfolio manager and officer of 2 portfolios in the OppenheimerFunds complex. |
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Raymond Anello, Vice President (since 2011) Age: 47 | | Vice President of the Manager and sector manager for energy and utilities for the Manager’s Main Street Investment Team (since May 2009); a Chartered Financial Analyst. Prior to joining the Manager, a portfolio manager of the RS All Cap Dividend product (July 2007-April 2009) and a sector manager for energy and utilities for various other RS Investments products; joined Guardian Life Insurance Company in October 1999 and transitioned to RS Investments in October 2006 in connection with Guardian Life Insurance Company’s acquisition of an interest in RS Investments. A portfolio manager and officer of 2 portfolios in the OppenheimerFunds complex. |
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Arthur S. Gabinet, Secretary (since 2011) Age: 53 | | Executive Vice President (since May 2010) and General Counsel (since January 2011) of the Manager; General Counsel of the Distributor (since January 2011); General Counsel of Centennial Asset Management Corporation (since January 2011); Executive Vice President and General Counsel of HarbourView Asset Management Corporation (since January 2011); Assistant Secretary (since January 2011) and Director (since January 2011) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since January 2011); Director of Oppenheimer Real Asset Management, Inc. (since January 2011); Executive Vice President and General Counsel of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since January 2011); Executive Vice President and General Counsel of OFI Private Investments, Inc. (since January 2011); Vice President of OppenheimerFunds Legacy Program (since January 2011); Executive Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since January 2011); General Counsel, Asset Management of the Manager (May 2010-December 2010); Principal, The Vanguard Group (November 2005-April 2010); District Administrator, U.S. Securities and Exchange Commission (January 2003-October 2005). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Christina M. Nasta, Vice President and Chief Business Officer (since 2011) Age: 38 | | Senior Vice President of the Manager (since March 1997); Director of Investment Brand Management of the Manager (since November 1997); Senior Vice President of OppenheimerFunds Distributor, Inc. (since December 1997). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Mark S. Vandehey, Vice President and Chief Compliance Officer (since 2004) Age: 61 | | Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Brian W. Wixted, Treasurer and Principal Financial & Accounting Officer (since 1999) Age: 52 | | Senior Vice President of the Manager (since March 1999); Treasurer of the Manager and the following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership Holdings, Inc. (March 1999-June 2008), OFI Private Investments, Inc. (March 2000-June 2008), OppenheimerFunds International Ltd. and |
38 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
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Name, Position(s) Held with the | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in |
Fund, Length of Service, Age | | the Fund Complex Currently Overseen |
|
Brian W. Wixted, Continued | | OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of OAC (March 1999-June 2008). An officer of 96 portfolios in the OppenheimerFunds complex. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and Officers and is available without charge, upon request, by calling 1.800.988.8287.
39 | OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND/VA
OPPENHEIMER MAIN STREET SMALL- & MID-CAP FUND®/VA
A Series of Oppenheimer Variable Account Funds
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Manager | | OppenheimerFunds, Inc. |
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Distributor | | OppenheimerFunds Distributor, Inc. |
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Transfer Agent | | OppenheimerFunds Services |
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Independent Registered | | KPMG llp |
Public Accounting Firm
Counsel | | K&L Gates LLP |
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| | Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing. |
©2012 OppenheimerFunds, Inc. All rights reserved.
OPPENHEIMER MONEY FUND/VA
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|
Current Yield | | | | |
For the 7-Day Period Ended 12/30/111 | | | | |
With Compounding | | | 0.01 | % |
Without Compounding | | | 0.01 | |
For the 12-Month Period Ended 12/30/111 | | | | |
With Compounding | | | 0.01 | % |
Without Compounding | | | 0.01 | |
Portfolio Managers: Carol Wolf and Christopher Proctor, CFA
The performance data quoted represents past performance, which does not guarantee future results. Yields include dividends in a hypothetical investment for the periods shown. Current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The yields take into account voluntary fee waivers and/or expense reimbursements, without which yields would have been lower. Some of these undertakings may be modified at any time, as indicated in the Fund’s prospectus. There is no guarantee that the Fund will maintain a positive yield. The Fund’s performance should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s performance does not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account.
Portfolio Allocation
Portfolio holdings and allocations are subject to change. Percentages are as of December 30, 2011, and are based on the total market value of investments.
Investment Strategy Discussion
The Fund continued to achieve its goals of providing capital preservation and liquidity to its shareholders. However, due to persistently low short-term interest rates set by the Federal Reserve (the “Fed”), the Fund’s yield remained near historically low levels.
Economic and Market Environment
The reporting period proved eventful from a macroeconomic perspective. Investor sentiment began to deteriorate in the spring of 2011 when Greece teetered on the brink of defaulting on its sovereign debt and fiscal pressures mounted on other members of the European Union. As their borrowing costs soared, a number of European nations implemented stringent austerity programs that weighed on the region’s economic growth rate. Meanwhile, inflationary pressures mounted in China and India, and investors worried that remedial measures, including higher local interest rates and tighter lending standards, might derail these major engines of global growth. In the United States, investors reacted cautiously to persistently high levels of unemployment, troubled housing markets and a contentious political debate regarding government spending, borrowing and taxes. These issues came to a head in early August, when Congress
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1. | | December 30, 2011 was the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes to Financial Statements. |
2 | OPPENHEIMER MONEY FUND/VA
passed last-minute legislation to raise the nation’s debt ceiling and, in an unprecedented move, the major credit rating agency Standard & Poor’s downgraded its assessment of long-term U.S. government debt. Short-term U.S. government debt, including instruments eligible for money market funds, retained their top-tier credit ratings.
As a result of these developments, stock and bond markets encountered heightened volatility as investors engaged in a “flight to quality” away from riskier assets and toward traditional safe havens, such as U.S. Treasury securities. Volatility was particularly severe in August and September, as investors feared a return to recession in the United States and European policymakers disagreed on remedial measures for the region’s debt crisis. Fortunately, apparent progress toward a solution in Europe, better economic data in the United States and the increased likelihood of a “soft landing” for China helped to reverse this trend, and most financial markets rallied from October through December.
In this environment, and as it has since December 2008, the Fed left short-term interest rates unchanged in a historically low range between 0% and 0.25%. Consequently, money market yields remained anchored near historically low levels. Although demand for money market instruments has remained robust from investors seeking safety and liquidity in light of turbulence in longer-term financial markets, the supply of newly issued instruments declined substantially during the reporting period. The reduction in supply is primarily attributable to the financial pressures on European banks, many of which curtailed their issuance programs as they focused on shoring up capital and weathering the debt crisis.
Portfolio Strategy
We maintained a conservative investment posture throughout 2011, carefully monitoring the health of the financial institutions that issue or back money market instruments. In light of the growing financial stress of European banks, we increased the Fund’s holdings of instruments from banks in the United States, Canada, Japan and Australia. We generally emphasized high-quality commercial paper and time deposits from high-quality issuers, and we continued to avoid non-traditional collateral in repurchase agreements. When opportunities for higher yields presented themselves, we increased the Fund’s holdings of floating-rate instruments tied to the London Interbank Offered Rate (LIBOR).
In addition, for much of the year, we maintained the Fund’s weighted average maturity in a range that was modestly longer than industry averages in order to capture incrementally higher yields. However, the Fund ended the reporting period with a weighted average maturity in the neutral range, primarily due to the addition of floating-rate instruments.
As of year-end, we have been encouraged by recent reports of U.S. economic improvement, including a drop in the unemployment rate from 9.0% to 8.5% between October and December. Nonetheless, a number of headwinds remain, including the still-unresolved European debt crisis, and U.S. economic growth seems likely to remain sluggish for some time. Consequently, we intend to retain the Fund’s focus on liquidity and capital preservation. We also expect to remain watchful for opportunities to boost yields through our credit selection strategy, including tactical investments in floating-rate instruments, as well as through changes to the Fund’s weighted average maturity.
An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing.
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.
3 | OPPENHEIMER MONEY FUND/VA
FUND EXPENSES
Fund Expenses. As a shareholder of the Fund, you incur ongoing costs, including management fees; service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 30, 2011.
Actual Expenses. The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes. The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio, and an assumed rate of return of 5% per year before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the “hypothetical” lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included your costs would have been higher.
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| | Beginning | | | Ending | | | Expenses | |
| | Account | | | Account | | | Paid During | |
| | Value | | | Value | | | 6 Months Ended | |
Actual | | July 1, 2011 | | | December 30, 2011 | | | December 30, 2011 | |
|
| | $ | 1,000.00 | | | $ | 1,000.10 | | | $ | 1.35 | |
Hypothetical (5% return before expenses) | | | | | | | | | | | | |
| | | 1,000.00 | | | | 1,023.71 | | | | 1.37 | |
Expenses are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). The annualized expense ratio based on the 6-month period ended December 30, 2011 is as follows:
The expense ratio reflects reduction to voluntary waivers and/or reimbursements of expenses by the Fund’s Manager. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund’s prospectus. The “Financial Highlights” table in the Fund’s financial statements, included in this report, also shows the gross expense ratio, without such waivers or reimbursements and reduction to custodian expenses, if applicable.
4 | OPPENHEIMER MONEY FUND/VA
STATEMENT OF INVESTMENTS December 30, 2011*
| | | | | | | | | | | | | | | | |
| | Maturity | | | Final Legal | | | Principal | | | | |
| | Date** | | | Maturity Date*** | | | Amount | | | Value | |
|
Certificates of Deposit — 25.0% | | | | | | | | | | | | | | | | |
Yankee Certificates of Deposit — 25.0% | | | | | | | | | | | | | | | | |
Bank of Nova Scotia, Houston TX: | | | | | | | | | | | | | | | | |
0.30% | | | 2/7/12 | | | | 2/7/12 | | | $ | 1,600,000 | | | $ | 1,600,000 | |
0.52% | | | 5/24/12 | | | | 5/24/12 | | | | 3,000,000 | | | | 3,000,000 | |
0.52% | | | 5/25/12 | | | | 5/25/12 | | | | 3,600,000 | | | | 3,600,000 | |
National Australia Bank, New York: | | | | | | | | | | | | | | | | |
0.29% | | | 2/21/12 | | | | 2/21/12 | | | | 3,300,000 | | | | 3,300,000 | |
0.29% | | | 2/21/12 | | | | 2/21/12 | | | | 1,800,000 | | | | 1,800,000 | |
0.31% | | | 1/9/12 | | | | 1/9/12 | | | | 3,100,000 | | | | 3,100,000 | |
Nordea Bank Finland plc, New York, 0.35% | | | 1/13/12 | | | | 1/13/12 | | | | 2,800,000 | | | | 2,800,000 | |
Rabobank Nederland NV, New York: | | | | | | | | | | | | | | | | |
0.37% | | | 2/9/12 | | | | 2/9/12 | | | | 5,000,000 | | | | 5,000,000 | |
0.46%1 | | | 2/16/12 | | | | 5/16/12 | | | | 2,500,000 | | | | 2,500,000 | |
Royal Bank of Canada, New York: | | | | | | | | | | | | | | | | |
0.44%1 | | | 1/1/12 | | | | 9/10/12 | | | | 4,000,000 | | | | 4,000,000 | |
0.61%1 | | | 3/14/12 | | | | 12/11/12 | | | | 3,000,000 | | | | 3,000,000 | |
0.77% | | | 11/28/12 | | | | 11/28/12 | | | | 1,300,000 | | | | 1,300,000 | |
Swedbank AB, New York, 0.06% | | | 1/3/12 | | | | 1/3/12 | | | | 5,000,000 | | | | 5,000,000 | |
Toronto Dominion Bank, New York, 0.36%1 | | | 1/12/12 | | | | 1/12/12 | | | | 1,000,000 | | | | 1,000,000 | |
| | | | | | | | | | | | | | | |
Total Certificates of Deposit (Cost $41,000,000) | | | | | | | | | | | | �� | | | 41,000,000 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Direct Bank Obligations — 15.0% | | | | | | | | | | | | | | | | |
DnB NOR Bank ASA: | | | | | | | | | | | | | | | | |
0.04%2 | | | 1/4/12 | | | | 1/4/12 | | | | 2,600,000 | | | | 2,599,991 | |
0.05%2 | | | 1/5/12 | | | | 1/5/12 | | | | 4,300,000 | | | | 4,299,976 | |
ING (US) Funding LLC, 0.26% | | | 1/11/12 | | | | 1/11/12 | | | | 6,800,000 | | | | 6,799,508 | |
Nordea North America, Inc.: | | | | | | | | | | | | | | | | |
0.33% | | | 2/7/12 | | | | 2/7/12 | | | | 1,000,000 | | | | 999,661 | |
0.40% | | | 1/24/12 | | | | 1/24/12 | | | | 1,700,000 | | | | 1,699,566 | |
Westpac Banking Corp.: | | | | | | | | | | | | | | | | |
0.25%2 | | | 2/16/12 | | | | 2/16/12 | | | | 1,800,000 | | | | 1,799,425 | |
0.26%2 | | | 2/9/12 | | | | 2/9/12 | | | | 4,000,000 | | | | 3,998,895 | |
0.30%2 | | | 1/9/12 | | | | 1/9/12 | | | | 2,500,000 | | | | 2,499,833 | |
| | | | | | | | | | | | | | | |
Total Direct Bank Obligations (Cost $24,696,855) | | | | | | | | | | | | | | | 24,696,855 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Short-Term Notes — 54.6% | | | | | | | | | | | | | | | | |
Banks — 4.9% | | | | | | | | | | | | | | | | |
HSBC USA, Inc.: | | | | | | | | | | | | | | | | |
0.23% | | | 2/16/12 | | | | 2/16/12 | | | | 5,000,000 | | | | 4,998,531 | |
0.23% | | | 2/22/12 | | | | 2/22/12 | | | | 2,000,000 | | | | 1,999,336 | |
0.25% | | | 2/10/12 | | | | 2/10/12 | | | | 1,100,000 | | | | 1,099,694 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 8,097,561 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Diversified Financial Services — 3.7% | | | | | | | | | | | | | | | | |
General Electric Capital Corp., 0.34% | | | 6/19/12 | | | | 6/19/12 | | | | 2,400,000 | | | | 2,396,147 | |
General Electric Capital Services: | | | | | | | | | | | | | | | | |
0.29% | | | 4/5/12 | | | | 4/5/12 | | | | 2,400,000 | | | | 2,398,163 | |
0.29% | | | 4/10/12 | | | | 4/10/12 | | | | 1,200,000 | | | | 1,199,033 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 5,993,343 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Electric Utilities — 1.5% | | | | | | | | | | | | | | | | |
Electricite De France, 0.43%2 | | | 1/27/12 | | | | 1/27/12 | | | | 2,400,000 | | | | 2,399,255 | |
5 | OPPENHEIMER MONEY FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | | | | | | | | | |
| | Maturity | | | Final Legal | | | Principal | | | | |
| | Date** | | | Maturity Date*** | | | Amount | | | Value | |
|
Leasing & Factoring — 8.9% | | | | | | | | | | | | | | | | |
American Honda Finance Corp.: | | | | | | | | | | | | | | | | |
0.68%1 | | | 3/29/12 | | | | 6/29/12 | | | $ | 1,500,000 | | | $ | 1,500,000 | |
0.74%1,3 | | | 3/27/12 | | | | 3/27/12 | | | | 2,000,000 | | | | 2,000,255 | |
0.82%1,3 | | | 3/26/12 | | | | 9/26/12 | | | | 1,500,000 | | | | 1,500,000 | |
5.10%3 | | | 3/27/12 | | | | 3/27/12 | | | | 1,300,000 | | | | 1,313,806 | |
Toyota Motor Credit Corp.: | | | | | | | | | | | | | | | | |
0.35% | | | 2/2/12 | | | | 2/2/12 | | | | 3,000,000 | | | | 2,999,067 | |
0.60%1 | | | 1/18/12 | | | | 10/18/12 | | | | 3,000,000 | | | | 3,000,000 | |
0.75%1 | | | 3/17/12 | | | | 12/17/12 | | | | 2,300,000 | | | | 2,300,000 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 14,613,128 | |
| | | | | | | | | | | | | | | | |
Municipal — 11.3% | | | | | | | | | | | | | | | | |
Austin Cnty., TX Industrial Development Corp. Revenue Bonds, Justin Industries, Inc., Series 1984, 0.10%1 | | | 1/7/12 | | | | 1/7/12 | | | | 5,000,000 | | | | 5,000,000 | |
Carroll Cnty., KY Solid Waste Disposal Revenue Bonds, North American Stainless Project, Series 2006, 0.09%1 | | | 1/7/12 | | | | 1/7/12 | | | | 4,300,000 | | | | 4,300,000 | |
Chicago, IL Industrial Development Revenue Bonds, Freedman Seating Co. Project, Series 1998, 0.24%1 | | | 1/7/12 | | | | 1/7/12 | | | | 1,215,000 | | | | 1,215,000 | |
Cobb Cnty., GA Development Authority Revenue Bonds, Presbyterian Village-Austell, Inc., 0.32%1 | | | 1/7/12 | | | | 1/7/12 | | | | 2,570,000 | | | | 2,570,000 | |
Health Care Revenue Bonds, SFO Associates Project, Series 1994, 0.27%1 | | | 1/7/12 | | | | 1/7/12 | | | | 1,500,000 | | | | 1,500,000 | |
IL Finance Authority, Freedman Seating Co. Project, Series 2005, 0.24%1 | | | 1/7/12 | | | | 1/7/12 | | | | 1,085,000 | | | | 1,085,000 | |
San Antonio, TX Industrial Development Authority Revenue Bonds, Tindall Corp. Project, 0.27%1 | | | 1/7/12 | | | | 1/7/12 | | | | 2,900,000 | | | | 2,900,000 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 18,570,000 | |
| | | | | | | | | | | | | | | | |
Personal Products — 4.2% | | | | | | | | | | | | | | | | |
Reckitt Benckiser Treasury Services plc: | | | | | | | | | | | | | | | | |
0.42%2 | | | 1/30/12 | | | | 1/30/12 | | | | 2,000,000 | | | | 1,999,323 | |
0.50%2 | | | 3/9/12 | | | | 3/9/12 | | | | 2,800,000 | | | | 2,797,356 | |
0.70%2 | | | 7/6/12 | | | | 7/6/12 | | | | 2,000,000 | | | | 1,992,728 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 6,789,407 | |
| | | | | | | | | | | | | | | | |
Receivables Finance — 9.1% | | | | | | | | | | | | | | | | |
Alpine Securitization Corp., 0.23% | | | 1/20/12 | | | | 1/20/12 | | | | 6,600,000 | | | | 6,599,199 | |
Market Street Funding LLC, 0.05%2 | | | 1/3/12 | | | | 1/3/12 | | | | 5,163,000 | | | | 5,162,986 | |
Mont Blanc Capital Corp., 0.32%2 | | | 1/11/12 | | | | 1/11/12 | | | | 1,500,000 | | | | 1,499,867 | |
Sheffield Receivables Corp., 0.25%2 | | | 1/13/12 | | | | 1/13/12 | | | | 1,700,000 | | | | 1,699,858 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 14,961,910 | |
| | | | | | | | | | | | | | | | |
Special Purpose Financial — 11.0% | | | | | | | | | | | | | | | | |
Concord Minutemen Cap. Corp. LLC: | | | | | | | | | | | | | | | | |
0.35% | | | 1/10/12 | | | | 1/10/12 | | | | 5,000,000 | | | | 4,999,563 | |
0.37% | | | 1/12/12 | | | | 1/12/12 | | | | 1,000,000 | | | | 999,887 | |
0.52% | | | 2/8/12 | | | | 2/8/12 | | | | 2,300,000 | | | | 2,298,738 | |
Crown Point Capital Co., 0.20% | | | 1/3/12 | | | | 1/3/12 | | | | 4,000,000 | | | | 3,999,956 | |
FCAR Owner Trust I, 0.28% | | | 1/9/12 | | | | 1/9/12 | | | | 3,000,000 | | | | 2,999,813 | |
Lexington Parker Capital Co. LLC, 0.47%2 | | | 2/2/12 | | | | 2/2/12 | | | | 2,800,000 | | | | 2,798,830 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 18,096,787 | |
| | | | | | | | | | | | | | | |
Total Short-Term Notes (Cost $89,521,391) | | | | | | | | | | | | | | | 89,521,391 | |
6 | OPPENHEIMER MONEY FUND/VA
| | | | | | | | | | | | | | | | |
| | Maturity | | | Final Legal | | | Principal | | | | |
| | Date** | | | Maturity Date*** | | | Amount | | | Value | |
|
U.S. Government Obligations — 3.7% | | | | | | | | | | | | | | | | |
U.S. Treasury Nts.: | | | | | | | | | | | | | | | | |
0.75% | | | 5/31/12 | | | | 5/31/12 | | | $ | 2,000,000 | | | $ | 2,003,805 | |
1.00% | | | 4/30/12 | | | | 4/30/12 | | | | 1,000,000 | | | | 1,002,267 | |
1.38% | | | 2/15/12 | | | | 2/15/12 | | | | 2,000,000 | | | | 2,002,559 | |
4.50% | | | 3/31/12 | | | | 3/31/12 | | | | 1,000,000 | | | | 1,010,245 | |
| | | | | | | | | | | | | | | |
Total U.S. Government Obligations (Cost $6,018,876) | | | | | | | | | | | | | | | 6,018,876 | |
Total Investments, at Value (Cost $161,237,122) | | | | | | | | | | | 98.3 | % | | | 161,237,122 | |
Other Assets Net of Liabilities | | | | | | | | | | | 1.7 | | | | 2,736,272 | |
| | | | | | | | | | |
Net Assets | | | | | | | | | | | 100.0 | % | | $ | 163,973,394 | |
| | | | | | | | | | |
Footnotes to Statement of Investments
| | |
|
* | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
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. | | Security issued in an exempt transaction without registration under the Securities Act of 1933. Such securities amount to $35,548,323 or 21.68% of the Fund’s net assets, and have been determined to be liquid pursuant to guidelines adopted by the Board of Trustees. |
|
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 $4,814,061 or 2.94% of the Fund’s net assets as of December 30, 2011. |
Valuation Inputs
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 table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 30, 2011 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: | | | | | | | | | | | | | | | | |
Certificates of Deposit | | $ | — | | | $ | 41,000,000 | | | $ | — | | | $ | 41,000,000 | |
Direct Bank Obligations | | | — | | | | 24,696,855 | | | | — | | | | 24,696,855 | |
Short-Term Notes | | | — | | | | 89,521,391 | | | | — | | | | 89,521,391 | |
U.S. Government Obligations | | | — | | | | 6,018,876 | | | | — | | | | 6,018,876 | |
| | |
Total Assets | | $ | — | | | $ | 161,237,122 | | | $ | — | | | $ | 161,237,122 | |
| | |
Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.
See accompanying Notes to Financial Statements.
7 | OPPENHEIMER MONEY FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 30, 20111
| | | | |
|
Assets | | | | |
Investments, at value (cost $161,237,122) — see accompanying statement of investments | | $ | 161,237,122 | |
Cash | | | 2,936,335 | |
Receivables and other assets: | | | | |
Interest | | | 70,460 | |
Shares of beneficial interest sold | | | 54,913 | |
Other | | | 13,757 | |
| | | |
Total assets | | | 164,312,587 | |
| | | | |
Liabilities | | | | |
Payables and other liabilities: | | | | |
Shares of beneficial interest redeemed | | | 273,299 | |
Shareholder communications | | | 18,659 | |
Legal, auditing and other professional fees | | | 18,237 | |
Transfer and shareholder servicing agent fees | | | 14,215 | |
Trustees’ compensation | | | 8,479 | |
Dividends | | | 619 | |
Other | | | 5,685 | |
| | | |
Total liabilities | | | 339,193 | |
| | | | |
Net Assets | | $ | 163,973,394 | |
| | | |
| | | | |
Composition of Net Assets | | | | |
Par value of shares of beneficial interest | | $ | 163,971 | |
Additional paid-in capital | | | 163,807,120 | |
Accumulated net investment income | | | 2,303 | |
| | | |
Net Assets — applicable to 163,971,175 shares of beneficial interest outstanding | | $ | 163,973,394 | |
| | | |
| | | | |
Net Asset Value, Redemption Price Per Share and Offering Price Per Share | | $ | 1.00 | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
8 | OPPENHEIMER MONEY FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 30, 20111
| | | | |
|
Investment Income | | | | |
Interest | | $ | 462,320 | |
| | | | |
Expenses | | | | |
Management fees | | | 702,396 | |
Transfer and shareholder servicing agent fees | | | 156,086 | |
Shareholder communications | | | 34,071 | |
Trustees’ compensation | | | 16,805 | |
Custodian fees and expenses | | | 1,869 | |
Administration service fees | | | 1,500 | |
Other | | | 41,072 | |
| | | |
Total expenses | | | 953,799 | |
Less waivers and reimbursements of expenses | | | (507,756 | ) |
| | | |
Net expenses | | | 446,043 | |
| | | | |
Net Investment Income | | | 16,277 | |
| | | | |
Net Realized Gain on Investments | | | 2,219 | |
| | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 18,496 | |
| | | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
9 | OPPENHEIMER MONEY FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
| | | | | | | | |
| | Year Ended | | | Year Ended | |
| | December 30, | | | December 31, | |
| | 20111 | | | 2010 | |
|
Operations | | | | | | | | |
Net investment income | | $ | 16,277 | | | $ | 11,351 | |
Net realized gain | | | 2,219 | | | | 68 | |
| | |
Net increase in net assets resulting from operations | | | 18,496 | | | | 11,419 | |
| | | | | | | | |
Dividends and/or Distributions to Shareholders | | | | | | | | |
Dividends from net investment income | | | (16,277 | ) | | | (46,794 | ) |
| | | | | | | | |
Beneficial Interest Transactions | | | | | | | | |
Net increase (decrease) in net assets resulting from beneficial interest transactions | | | 14,274,020 | | | | (31,222,151 | ) |
| | | | | | | | |
Net Assets | | | | | | | | |
Total increase (decrease) | | | 14,276,239 | | | | (31,257,526 | ) |
Beginning of period | | | 149,697,155 | | | | 180,954,681 | |
| | |
End of period (including accumulated net investment income of $2,303 and $0, respectively) | | $ | 163,973,394 | | | $ | 149,697,155 | |
| | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
10 | OPPENHEIMER MONEY FUND/VA
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | | | | | Year Ended | |
| | December 30, | | | | | | | | | | | | | | | December 31, | |
| | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 1.00 | | | $ | 1.00 | | | $ | 1.00 | | | $ | 1.00 | | | $ | 1.00 | |
|
Income from investment operations-net investment income and net realized gain2 | | | — | 3 | | | — | 3 | | | — | 3 | | | .03 | | | | .05 | |
|
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | — | 3 | | | — | 3 | | | — | 3 | | | (.03 | ) | | | (.05 | ) |
Distributions from net realized gain | | | — | | | | — | | | | — | | | | — | | | | — | 3 |
| | |
Total dividends and/or distributions to shareholders | | | — | 3 | | | — | 3 | | | — | 3 | | | (.03 | ) | | | (.05 | ) |
|
Net asset value, end of period | | $ | 1.00 | | | $ | 1.00 | | | $ | 1.00 | | | $ | 1.00 | | | $ | 1.00 | |
| | |
| | | | | | | | | | | | | | | | | | | | |
Total Return4 | | | 0.01 | % | | | 0.03 | % | | | 0.32 | % | | | 2.78 | % | | | 4.98 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 163,973 | | | $ | 149,697 | | | $ | 180,955 | | | $ | 243,356 | | | $ | 189,749 | |
|
Average net assets (in thousands) | | $ | 156,127 | | | $ | 164,258 | | | $ | 218,079 | | | $ | 212,564 | | | $ | 181,271 | |
|
Ratios to average net assets:5 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.01 | % | | | 0.01 | % | | | 0.35 | % | | | 2.72 | % | | | 4.86 | % |
Total expenses | | | 0.61 | % | | | 0.61 | % | | | 0.57 | % | | | 0.50 | % | | | 0.50 | % |
Expenses after payments, waivers and/or | | | | | | | | | | | | | | | | | | | | |
reimbursements and reduction to custodian expenses | | | 0.29 | % | | | 0.35 | % | | | 0.48 | % | | | 0.50 | % | | | 0.50 | % |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Less than $0.005 per share. |
|
4. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
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5. | | Annualized for periods less than one full year. |
See accompanying Notes to Financial Statements.
11 | OPPENHEIMER MONEY FUND/VA
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Oppenheimer Money Fund/VA (the “Fund”) is a separate series of Oppenheimer Variable Account Funds, an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund’s investment objective is to seek maximum current income from investments in “money market” securities consistent with low capital risk and the maintenance of liquidity. The Fund’s investment adviser is OppenheimerFunds, Inc. (the “Manager”).
| | The following is a summary of significant accounting policies consistently followed by the Fund. |
Fiscal Year End. Since December 30, 2011 represents the last day during the Fund’s 2011 fiscal year on which the New York Stock Exchange was open for trading, the Fund’s financial statements have been presented through that date to maintain consistency with the Fund’s net asset value calculations used for shareholder transactions.
Securities Valuation. 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.
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. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” observable market inputs other than unadjusted quoted prices are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.
In the absence of a current price quotation obtained from an independent pricing service or broker-dealer, including for securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund’s assets are valued but after the close of the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities 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 adjusted for any discounts related to 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.
There have been no significant changes to the fair valuation methodologies of the Fund during the period.
Federal Taxes. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income to shareholders. Therefore, no federal income or excise tax provision is required. The Fund files income tax returns in U.S. federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remain open for the three preceding fiscal reporting period ends.
The tax components of capital shown in the following table represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years for federal income tax purposes.
| | | | | | | | | |
Undistributed Net | | | Undistributed | | | Accumulated Loss |
Investment Income | | | Long-Term Gains | | | Carryforward |
|
$ | 14,033 | | | $ | — | | | $ | — |
12 | OPPENHEIMER MONEY FUND/VA
Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund.
Accordingly, the following amounts have been reclassified for December 30, 2011. Net assets of the Fund were unaffected by the reclassifications.
| | | | | | | | | |
| | | | Reduction | | | Reduction to |
| | | | to Accumulated | | | Accumulated Net |
Reduction to | | | Net Investment | | | Realized Gain |
Paid-in Capital | | | Loss | | | on Investments |
|
$ | 84 | | | $ | 2,303 | | | $ | 2,219 |
The tax character of distributions paid during the years ended December 30, 2011 and December 31, 2010 was as follows:
| | | | | | | | |
| | Year Ended | | | Year Ended | |
| | December 30, 2011 | | | December 31, 2010 | |
|
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 16,277 | | | $ | 46,794 | |
Trustees’ Compensation. The Board of Trustees has adopted a compensation deferral plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of “Other” within the asset section of the Statement of Assets and Liabilities. Deferral of trustees’ fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund’s assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance with the compensation deferral plan.
Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles, are recorded on the ex-dividend date. Income distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually but may be paid at other times to maintain the net asset value per share at $1.00.
Investment Income. Interest income is recognized on an accrual basis. Discount and premium, which are included in interest income on the Statement of Operations, are amortized or accreted daily.
Custodian Fees. “Custodian fees and expenses” in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by the Fund, at a rate equal to the Federal Funds Rate plus 0.50%. The “Reduction to custodian expenses” line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings.
Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost.
Indemnifications. The Fund’s organizational documents provide current and former trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications.
13 | OPPENHEIMER MONEY FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
1. Significant Accounting Policies Continued
The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:
| | | | | | | | | | | | | | | | |
| | Year Ended December 30, 2011 | | | Year Ended December 31, 2010 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
|
Sold | | | 112,694,489 | | | $ | 112,694,489 | | | | 64,871,083 | | | $ | 64,871,083 | |
Dividends and/or distributions reinvested | | | 16,277 | | | | 16,277 | | | | 46,794 | | | | 46,794 | |
Redeemed | | | (98,436,746 | ) | | | (98,436,746 | ) | | | (96,140,028 | ) | | | (96,140,028 | ) |
| | |
Net increase (decrease) | | | 14,274,020 | | | $ | 14,274,020 | | | | (31,222,151 | ) | | $ | (31,222,151 | ) |
| | |
3. Fees and Other Transactions with Affiliates
Management Fees. Under the investment advisory agreement, the Fund pays the Manager a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| | | | |
Fee Schedule | | | | |
|
Up to $500 million | | | 0.450 | % |
Next $500 million | | | 0.425 | |
Next $500 million | | | 0.400 | |
Over $1.5 billion | | | 0.375 | |
Administration Service Fees. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund’s tax returns.
Transfer Agent Fees. OppenheimerFunds Services (“OFS”), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. For the year ended December 30, 2011, the Fund paid $154,749 to OFS for services to the Fund.
Waivers and Reimbursements of Expenses. The Manager has voluntarily undertaken to waive fees and/or reimburse expenses to the extent necessary to assist the Fund in attempting to maintain a positive yield. There is no guarantee that the Fund will maintain a positive yield. During the year ended December 30, 2011, the Manager waived fees and/or reimbursed the Fund $507,756.
The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as a percentage of daily net assets, will not exceed the annual rate of 0.50%.
Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.
4. Pending Litigation
Since 2009, a number of class action, derivative and individual lawsuits have been pending in federal and state courts against OppenheimerFunds, Inc., the Fund’s investment advisor (the “Manager”), OppenheimerFunds Distributor, Inc., the Fund’s principal underwriter and distributor (the “Distributor”), and certain funds (but not including the Fund) advised by the Manager and distributed by the Distributor (the “Defendant Funds”). Several of these lawsuits also name
14 | OPPENHEIMER MONEY FUND/VA
as defendants certain officers and current and former trustees of the respective Defendant Funds. The lawsuits raise claims under federal securities laws and various states’ securities, consumer protection and common law and allege, among other things, that the disclosure documents of the respective Defendant Funds contained misrepresentations and omissions and that the respective Defendant Funds’ investment policies were not followed. The plaintiffs in these actions seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. On September 30, 2011, the U.S. District Court for the District of Colorado entered orders and final judgments approving the settlement of certain putative class actions involving two Defendant Funds, Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund. Those orders are not subject to further appeal. These settlements do not resolve other outstanding lawsuits relating to Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund, nor do the settlements affect certain other putative class action lawsuits pending in federal court against the Manager, the Distributor, and other Defendant Funds and their independent trustees.
In 2009, what are claimed to be derivative lawsuits were filed in New Mexico state court against the Manager and a subsidiary (but not against the Fund) on behalf of the New Mexico Education Plan Trust challenging a settlement reached in 2010 between the Manager, its subsidiary and the Distributor and the board of the New Mexico section 529 college savings plan. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses. On September 9, 2011, the court denied plaintiffs’ request for a hearing to determine the fairness of the settlement, finding that plaintiffs lacked standing to pursue derivative claims on behalf of the Trust. On October 27, 2011, the parties to these actions filed a joint motion to dismiss the lawsuits with prejudice, which the court granted on October 28, 2011.
Other class action and individual lawsuits have been filed since 2008 in various state and federal courts against the Manager and certain of its affiliates by investors seeking to recover investments they allegedly lost as a result of the “Ponzi” scheme run by Bernard L. Madoff and his firm, Bernard L. Madoff Investment Securities, LLC (“BLMIS”). Plaintiffs in these suits allege that they suffered losses as a result of their investments in several funds managed by an affiliate of the Manager and assert a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. Neither the Distributor, nor any of the Oppenheimer mutual funds, their independent trustees or directors are named as defendants in these lawsuits. None of the Oppenheimer mutual funds invested in any funds or accounts managed by Madoff or BLMIS. On February 28, 2011, a stipulation of partial settlement of three groups of consolidated putative class action lawsuits relating to these matters was filed in the U.S. District Court for the Southern District of New York. On August 19, 2011, the court entered an order and final judgment approving the settlement as fair, reasonable and adequate. In September 2011, certain parties filed notices of appeal from the court’s order approving the settlement. On July 29, 2011, a stipulation of settlement between certain affiliates of the Manager and the Trustee appointed under the Securities Investor Protection Act to liquidate BLMIS was filed in the U.S. Bankruptcy Court for the Southern District of New York to resolve purported preference and fraudulent transfer claims by the Trustee. On September 22, 2011, the court entered an order approving the settlement as fair, reasonable and adequate. In October 2011, certain parties filed notices of appeal from the court’s order approving the settlement. The aforementioned settlements do not resolve other outstanding lawsuits against the Manager and its affiliates relating to BLMIS.
On April 16, 2010, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark IV Funding Limited (“AAArdvark IV”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark IV. Plaintiffs allege breach of contract against the defendants and seek compensatory damages, costs and disbursements, including attorney fees. On July 15, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark Funding Limited (“AAArdvark I”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark I. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees. On November 9, 2011, a lawsuit was filed in New York state court against the Manager, an
15 | OPPENHEIMER MONEY FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
4. Pending Litigation Continued affiliate of the Manager and AAArdvark XS Funding Limited (“AAArdvark XS”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark XS. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees.
The Manager believes the lawsuits and appeals described above are without legal merit and, with the exception of actions it has settled, is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to represent the Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer mutual funds.
16 | OPPENHEIMER MONEY FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:
We have audited the accompanying statement of assets and liabilities of Oppenheimer Money Fund/VA (a separate series of Oppenheimer Variable Account Funds), including the statement of investments, as of December 30, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of Oppenheimer Money Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 30, 2011, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Money Fund/VA as of December 30, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended, in conformity with U.S. generally accepted accounting principles.
KPMG llp
Denver, Colorado
February 16, 2012
17 | OPPENHEIMER MONEY FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
In early 2012, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2011. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service.
The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance.
18 | OPPENHEIMER MONEY FUND/VA
BOARD APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT Unaudited
Each year, the Board of Trustees (the “Board”), including a majority of the independent Trustees, is required to determine whether to renew the Fund’s investment advisory agreement (the “Agreement”). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager’s services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager and its affiliates, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. The Board was aware that there are alternatives to retaining the Manager.
Outlined below is a summary of the principal information considered by the Board as well as the Board’s conclusions.
Nature, Quality and Extent of Services. The Board considered information about the nature, quality and extent of the services provided to the Fund and information regarding the Manager’s key personnel who provide such services. The Manager’s duties include providing the Fund with the services of the portfolio managers and the Manager’s investment team, who provide research, analysis and other advisory services in regard to the Fund’s investments; securities trading services; oversight of third-party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund’s investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel who are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund’s operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund’s shares. The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the quality of the Manager’s resources that are available to the Fund. The Board took account of the fact that the Manager has had over fifty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager’s advisory, administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager’s key personnel and the size and functions of its staff. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Carol Wolf and Christopher Proctor, the portfolio managers for the Fund, and the Manager’s investment team and analysts. The Board members also considered the totality of their experiences with the Manager as directors or trustees of the Fund and other funds advised by the Manager. The Board considered information regarding the quality of services provided by affiliates of the Manager, which its members have become knowledgeable about in connection with the renewal of the Fund’s service agreements. The Board concluded, in light of the Manager’s experience, reputation, personnel, operations and resources that the Fund benefits from the services provided under the Agreement.
Investment Performance of the Manager and the Fund. Throughout the year, the Manager provided information on the investment performance of the Fund and the Manager, including comparative performance information. The
19 | OPPENHEIMER MONEY FUND/VA
BOARD APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT Unaudited / Continued
Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund’s historical performance to relevant market indices and to the performance of other money market instrument funds underlying variable insurance products. The Board considered that the Fund outperformed its performance universe median during the one-, three-, five-, and ten-year Lipper periods.
Costs of Services by the Manager. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also considered the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund and other money market instrument funds underlying variable insurance products. In reviewing the fees and expenses charged to the VA funds, the Board considered the Manager’s assertion that, because there is much greater disparity in the fees and services that may be provided by a manager to a VA fund as opposed to a retail fund, when comparing the expenses of the various VA funds to those of retail funds, it is most appropriate to focus on total expenses (rather than on the management fees). Accordingly, while the Board reviewed and considered all expenses, it focused on total expenses. The Board considered that the Fund’s actual management fees were lower than its expense group median, although its total expenses were higher than its expense group median. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as a percentage of daily net assets, will not exceed the annual rate of 0.50%. The Board also considered that the Manager voluntarily agreed to waive and/or reimburse fees to the extent necessary to help maintain a positive yield. The voluntary expense limitation and voluntary fee waiver and/or reimbursement may not be amended or withdrawn until one year after the date of prospectus.
Economies of Scale and Profits Realized by the Manager. The Board considered information regarding the Manager’s costs in serving as the Fund’s investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager’s profitability from its relationship with the Fund. The Board reviewed whether the Manager may realize economies of scale in managing and supporting the Fund. The Board noted that the Fund currently has management fee breakpoints, which are intended to share with Fund shareholders economies of scale that may exist as the Fund’s assets grow.
Other Benefits to the Manager. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager’s affiliates. The Board also considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide quality services to the Fund.
Conclusions. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees’ counsel are independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the Agreement through August 31, 2012. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the above information, and considered the terms and conditions of the Agreement, including the management fee, in light of all of the surrounding circumstances.
20 | OPPENHEIMER MONEY FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities (“portfolio proxies”) held by the Fund. A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund’s website at oppenheimerfunds.com, and (iii) on the SEC’s website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund’s voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC’s website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund’s Form N-Q filings are available on the SEC’s website at www.sec.gov. Those forms may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
21 | OPPENHEIMER MONEY FUND/VA
TRUSTEES AND OFFICERS Unaudited
| | |
|
Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
| | |
INDEPENDENT TRUSTEES | | The address of each Trustee in the chart below is 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Trustee serves for an indefinite term, or until his or her resignation, retirement, death or removal. |
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William L. Armstrong, Chairman of the Board of Trustees (since 2003), Trustee (since 1999) Age: 74 | | President, Colorado Christian University (since 2006); Chairman, Cherry Creek Mortgage Company (since 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso Mortgage Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman, Broadway Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), former Director of Campus Crusade for Christ (non-profit) (1991-2008); former Director, The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (2002-2006); former Chairman of: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Armstrong has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
| | |
Edward L. Cameron, Trustee (since 1999) Age: 73 | | Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000-June 2006); Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (accounting firm) (July 1994-June 1998). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Cameron has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Jon S. Fossel, Trustee (since 1990) Age: 69 | | Chairman of the Board (since 2006) and Director (since June 2002) of UNUMProvident (insurance company); Director of Northwestern Energy Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003 and February 2005-February 2007); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. (“OAC”) (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Fossel has served on the Boards of certain Oppenheimer funds since 1990, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Sam Freedman, Trustee (since 1996) Age: 71 | | Director of Colorado UpLIFT (charitable organization) (since September 1984). Mr. Freedman held several positions with the Manager and with subsidiary or affiliated companies of the Manager (until October 1994). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Freedman has served on the Boards of certain Oppenheimer funds since 1996, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Beverly L. Hamilton, Trustee (since 2002) Age: 65 | | Trustee of Monterey Institute for International Studies (educational organization) (since February 2000); Board Member of Middlebury College (educational organization) (since December 2005); Chairman (since 2010) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); Director of The California Endowment (philanthropic organization) (April 2002-April 2008); Director (February 2002-2005) and Chairman of Trustees (2006-2007) of the Community Hospital of Monterey Peninsula; Director (October 1991-2005); Vice Chairman (2006-2009) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation (2001-2006) and The University of Michigan (since 2000); Advisor at Credit Suisse First Boston’s Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment |
22 | OPPENHEIMER MONEY FUND/VA
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|
Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
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Beverly L. Hamilton, Continued | | company) (April 1989-June 2004); Member of the investment committee of Hartford Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 36 portfolios in the OppenheimerFunds complex. Ms. Hamilton has served on the Boards of certain Oppenheimer funds since 2002, during which time she has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Robert J. Malone, Trustee (since 2002) Age: 67 | | Board of Directors of Opera Colorado Foundation (non-profit organization) (since March 2008); Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director of Steele Street Bank & Trust (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Malone has served on the Boards of certain Oppenheimer funds since 2002, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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F. William Marshall, Jr., Trustee (since 2000) Age: 69 | | Trustee Emeritus of Worcester Polytech Institute (WPI) (private university) (since 2009); Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment company) (since 1996) and MML Series Investment Fund (investment company) (since 1996); President and Treasurer of the SIS Funds (private charitable fund) (January 1999-March 2011); Former Trustee of WPI (1985-2008); Former Chairman of the Board (2004-2006) and Former Chairman of the Investment Committee of WPI (1994-2008); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999); and Former President and Chief Executive Officer of SIS Bancorp. (1993-1999). Oversees 38 portfolios in the OppenheimerFunds complex. Mr. Marshall has served on the Boards of certain Oppenheimer funds since 2000, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
| | |
INTERESTED TRUSTEE AND OFFICER | | The address of Mr. Glavin is Two World Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008. Mr. Glavin serves as a Trustee for an indefinite term, or until his resignation, retirement, death or removal and as an Officer for an indefinite term, or until his resignation, retirement, death or removal. Mr. Glavin is an Interested Trustee due to his positions with OppenheimerFunds, Inc. and its affiliates. |
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William F. Glavin, Jr., Trustee, President and Principal Executive Officer (since 2009) Age: 53 | | Chairman of the Manager (since December 2009); Chief Executive Officer and Director of the Manager (since January 2009); President of the Manager (since May 2009); Director of Oppenheimer Acquisition Corp. (“OAC”) (the Manager’s parent holding company) (since June 2009); Executive Vice President (March 2006-February 2009) and Chief Operating Officer (July 2007-February 2009) of Massachusetts Mutual Life Insurance Company (OAC’s parent company); Director (May 2004-March 2006) and Chief Operating Officer and Chief Compliance Officer (May 2004-January 2005), President (January 2005-March 2006) and Chief Executive Officer (June 2005- March 2006) of Babson Capital Management LLC; Director (March 2005-March 2006), President (May 2003- March 2006) and Chief Compliance Officer (July 2005-March 2006) of Babson Capital Securities, Inc. (a broker-dealer); President (May 2003-March 2006) of Babson Investment Company, Inc.; Director (May 2004-August 2006) of Babson Capital Europe Limited; Director (May 2004-October 2006) of Babson Capital Guernsey Limited; Director (May 2004-March 2006) of Babson Capital Management LLC; Non-Executive Director (March 2005-March 2007) of Baring Asset Management Limited; Director (February 2005-June 2006) Baring Pension Trustees Limited; Director and Treasurer (December 2003-November 2006) of Charter Oak Capital Management, Inc.; Director (May 2006-September 2006) of C.M. Benefit Insurance Company; Director (May 2008-June 2009) and Executive Vice President (June 2007-July 2009) of C.M. Life Insurance Company; President (March 2006-May 2007) of MassMutual Assignment Company; Director (January 2005-December 2006), Deputy Chairman (March 2005- December 2006) and President (February 2005-March 2005) of MassMutual Holdings (Bermuda) Limited; Director (May 2008-June 2009) and Executive Vice President (June 2007-July 2009) of MML Bay State Life Insurance Company; Chief Executive Officer and President (April 2007-January 2009) of MML Distributors, LLC; and Chairman (March 2006-December 2008) and Chief Executive Officer (May 2007-December 2008) of MML Investors Services, Inc. Oversees 63 portfolios as a Trustee/Director and 96 portfolios as an officer in the OppenheimerFunds complex. |
23 | OPPENHEIMER MONEY FUND/VA
TRUSTEES AND OFFICERS Unaudited/Continued
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|
Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
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OTHER OFFICERS OF THE FUND | | The addresses of the Officers in the chart below are as follows: for Mr. Gabinet and Ms. Nasta, Two World Financial Center, 225 Liberty Street, New York, New York 10281-1008, for Messrs. Proctor, Vandehey, Wixted, and Ms. Wolf, 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Officer serves for an indefinite term or until his or her resignation, retirement, death or removal. |
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Carol E. Wolf, Vice President (since 1998) Age: 60 | | Senior Vice President of the Manager (since June 2000) and of HarbourView Asset Management Corporation (since June 2003); Vice President of the Manager (June 1990-June 2000). A portfolio manager and officer of 6 portfolios in the OppenheimerFunds complex. |
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Christopher Proctor, Vice President (since 2010) Age: 43 | | Vice President of the Manager (since August 2008) and a Senior Analyst in the Money Market Fund Group responsible for leading the money market research team. A CFA and CTP with 20 years of credit research, trading and portfolio management experience in the money fund industry. Prior to joining the Manager, a Vice President at Calamos Asset Management (January 2007-March 2008) and Scudder-Kemper Investments (1999-2002), where he managed over $15 billion in institutional and retail money market products. A Managing Director and Co-Founder of Elmhurst Capital Management (June 2004-January 2007) and a Senior Manager of Research for Etrade Global Asset Management (2002-2004). A portfolio manager and officer of 5 portfolios in the OppenheimerFunds complex. |
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Arthur S. Gabinet, Secretary (since 2011) Age: 53 | | Executive Vice President (since May 2010) and General Counsel (since January 2011) of the Manager; General Counsel of the Distributor (since January 2011); General Counsel of Centennial Asset Management Corporation (since January 2011); Executive Vice President and General Counsel of HarbourView Asset Management Corporation (since January 2011); Assistant Secretary (since January 2011) and Director (since January 2011) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since January 2011); Director of Oppenheimer Real Asset Management, Inc. (since January 2011); Executive Vice President and General Counsel of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since January 2011); Executive Vice President and General Counsel of OFI Private Investments, Inc. (since January 2011); Vice President of OppenheimerFunds Legacy Program (since January 2011); Executive Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since January 2011); General Counsel, Asset Management of the Manager (May 2010-December 2010); Principal, The Vanguard Group (November 2005- April 2010); District Administrator, U.S. Securities and Exchange Commission (January 2003-October 2005). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Christina M. Nasta, Vice President and Chief Business Officer (since 2011) Age: 38 | | Senior Vice President of the Manager (since July 2010); Vice President of the Manager (since January 2003); Vice President of OppenheimerFunds Distributor, Inc. (since January 2003). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Mark S. Vandehey, Vice President and Chief Compliance Officer (since 2004) Age: 61 | | Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Brian W. Wixted, Treasurer and Principal Financial & Accounting Officer (since 1999) Age: 52 | | Senior Vice President of the Manager (since March 1999); Treasurer of the Manager and the following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership Holdings, Inc. (March 1999- June 2008), OFI Private Investments, Inc. (March 2000-June 2008), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of OAC (March 1999-June 2008). An officer of 96 portfolios in the OppenheimerFunds complex. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and Officers and is available without charge, upon request, by calling 1.800.988.8287.
24 | OPPENHEIMER MONEY FUND/VA
OPPENHEIMER MONEY FUND/VA
A Series of Oppenheimer Variable Account Funds
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Manager | | OppenheimerFunds, Inc. |
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Distributor | | OppenheimerFunds Distributor, Inc. |
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Transfer Agent | | OppenheimerFunds Services |
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Independent Registered Public Accounting Firm | | KPMG llp |
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Counsel | | K&L Gates LLP |
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| | Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing. |
© 2012 OppenheimerFunds, Inc. All rights reserved.
OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/ VA
Portfolio Managers: Arthur P. Steinmetz, Krishna Memani, Joseph Welsh, and Sara J. Zervos, Ph.D.
Average Annual Total Returns
For the Periods Ended 12/30/111
| | | | | | | | | | | | |
| | 1-Year | | | 5-Year | | | 10-Year | |
|
Non-Service Shares | | | 0.85 | % | | | 5.33 | % | | | 7.03 | % |
Service Shares | | | 0.65 | % | | | 5.08 | % | | | 6.71 | % |
Expense Ratios
For the Period Ended 12/30/111
| | | | | | | | |
| | Gross | | | Net | |
| | Expense | | | Expense | |
| | Ratios | | | Ratios | |
|
Non-Service Shares | | | 0.78 | % | | | 0.72 | % |
Service Shares | | | 1.03 | | | | 0.97 | |
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance and expense ratios may be lower or higher than the data quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account. The net expense ratios take into account voluntary fee waivers and/or expense reimbursements, without which performance would have been less. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund’s prospectus.
Portfolio Allocation
| | |
* | | Represents a value of less than 0.05%. |
Portfolio holdings and allocations are subject to change. Percentages are as of December 30, 2011, and are based on the total market value of investments.
| | | | |
|
Corporate Bonds & Notes–Top Ten Industries | | | | |
Oil, Gas & Consumable Fuels | | | 4.3 | % |
Commercial Banks | | | 2.4 | |
Electric Utilities | | | 1.8 | |
Media | | | 1.4 | |
Hotels, Restaurants & Leisure | | | 1.2 | |
Diversified Telecommunication Services | | | 1.0 | |
Wireless Telecommunication Services | | | 1.0 | |
Capital Markets | | | 0.9 | |
Metals & Mining | | | 0.9 | |
Energy Traders | | | 0.9 | |
Portfolio holdings and allocations are subject to change. Percentages are as of December 30, 2011, and are based on net assets.
2 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
FUND PERFORMANCE DISCUSSION
Management’s Discussion of Fund Performance. For the 12-month period ended December 30, 2011, Oppenheimer Global Strategic Income Fund/VA’s Non-Service shares produced a total return of 0.85%1. In comparison, the Barclays Capital U.S. Aggregate Bond Index and the Citigroup World Government Bond Index returned 7.84% and 6.35%, respectively. The Fund produced disappointing results in 2011 as U.S. and global bond markets struggled with heightened volatility stemming from macroeconomic developments that punished certain market sectors, often regardless of underlying credit fundamentals. Our fundamentals-based investment process proved relatively ineffective in this emotion-driven investment climate.
Economic and Market Overview
The opening months of 2011 generally were characterized by resilience among investors who looked forward to improved credit conditions in a recovering global economy. Even a wave of political unrest in the Middle East and natural disasters in Japan had only a temporary dampening effect on most financial markets in the first quarter of the year.
Investor sentiment took a more sustained turn for the worse in late April, when U.S. economic data proved disappointing and a contentious political debate about government borrowing and spending intensified. These concerns reached a tipping point in early August, when the credit-rating agency Standard & Poor’s downgraded its assessment of long-term debt securities issued by the U.S. government. Meanwhile, international uncertainty worsened as it became clearer that Greece was probably headed for default and the sovereign debt crisis spread to other members of the European Union. Meanwhile, inflationary pressures mounted in China and other fast-growing emerging markets, where investors grew concerned that remedial measures might derail major engines of global growth. Market turbulence was particularly severe during August and September, as investors grew more worried about possible returns to recession in the United States and Europe.
The ensuing flight to quality boosted traditional safe havens but hurt market sectors that historically have been considered riskier. In the United States, it is ironic that long-term U.S. Treasury securities gained value after their credit-rating downgrade, but high yield corporate bonds issued by companies with healthy balance sheets declined. Similarly, in international markets, fast-growing emerging markets mostly suffered during the downturn. Consequently, the U.S. dollar strengthened against most other currencies despite low short-term interest rates and a weak economy in the United States.
Market sentiment improved during the fourth quarter when it became clearer that the United States had avoided a return to recession and European policymakers took steps to address the region’s crisis. However, modest improvements among U.S. high yield securities and some international bond markets was not enough to offset earlier weakness.
Fund Review
The Fund’s performance in 2011 was undermined by our asset allocation strategy. Overweight exposure to high yield corporate bonds proved especially damaging, particularly among paper and forest products companies. A bias toward lower-rated bonds along the high yield spectrum also hurt performance. In the international portfolio, overweight exposure to bonds and currencies in the emerging markets hampered returns. Conversely, an underweight position in U.S. government securities hurt results during the flight to quality. Although they comprise a relatively small portion of the Fund, holdings in other developed markets also detracted from returns, mainly due to weakness among European covered bonds and Spanish sovereign bonds.
Our security selection strategies generally produced better relative results. Our focus on emerging bond markets offering higher inflation-adjusted returns—such as Brazil, South Africa, Mexico and Turkey—proved to be a bright spot during 2011. Underweight exposure to Eastern European bond markets also contributed positively to relative performance. Over the second half of the year, we reduced the Fund’s exposure to emerging markets’ currencies and the euro, helping to cushion the brunt of heightened volatility in currency markets. Among U.S. government securities, we favored mortgage-backed securities from U.S. government agencies, which provided higher yields than U.S. Treasury securities but did not gain as much value during the flight to quality. Modest allocations to non-agency residential mortgages and commercial mortgage-backed securities generally balanced any allocation-related weakness, enabling that portion
1. December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011.
3 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
FUND PERFORMANCE DISCUSSION
of the Fund to achieve results that were roughly in line with market averages. Finally, a relatively short duration during the summer proved counterproductive, but its impact was limited as we soon moved back to a market-neutral position for the remainder of the year.
Looking forward, we believe that investors will refocus on longer term credit fundamentals, rewarding issuers with healthier credit profiles and brighter economic prospects. Therefore, we currently are optimistic regarding high yield bonds, as many corporations have deleveraged their balance sheets and default rates remain low. Emerging markets bonds have fallen to low valuations compared to historical norms even though their economies have less debt, smaller budget deficits, higher inflation-adjusted bond yields and more robust economic growth rates than their more developed counterparts. However, we are less confident in the near-term outlook for emerging markets currencies and the euro relative to the U.S. dollar, leading us to maintain a relatively low level of exposure to currency markets.
Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing.
Total returns include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown.
The Fund’s investment strategy and focus can change over time. The mention of specific fund holdings does not constitute a recommendation by OppenheimerFunds, Inc.
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.
Comparing the Fund’s Performance to the Market. The graphs that follow show the performance of a hypothetical $10,000 investment in each share class of the Fund held until December 30, 2011. Performance is measured over a ten-fiscal-year period for both Classes. Performance information does not reflect charges that apply to separate accounts investing in the Fund. If these charges were taken into account, performance would be lower. The graphs assume that all dividends and capital gains distributions were reinvested in additional shares.
The Fund’s performance is compared to the performance of the Barclays Capital U.S. Aggregate Bond Index, an unmanaged index of U.S. corporate and government bonds, and to the Citigroup World Government Bond Index, an unmanaged index of debt securities of major foreign governments. Index performance includes reinvestment of income but does not reflect transaction costs, fees or expenses. The Fund’s performance reflects the effects of the Fund’s business and operating expenses. While index comparisons may be useful to provide a benchmark for the Fund’s performance, it must be noted that the Fund’s investments are not limited to the securities comprising the indices.
4 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
Non-Service Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Service Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
The performance data quoted represents past performance, which does not guarantee future results.
The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account.
1. December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011.
5 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
FUND EXPENSES
Fund Expenses. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 30, 2011.
Actual Expenses. The first section of the table provides information about actual account values and actual expenses. You may use the information in this section for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes. The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio for each class of shares, and an assumed rate of return of 5% per year for each class before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the “hypothetical” lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included your costs would have been higher.
| | | | | | | | | | | | |
| | Beginning | | | Ending | | | Expenses | |
| | Account | | | Account | | | Paid During | |
| | Value | | | Value | | | 6 Months Ended | |
| | July 1, 2011 | | | December 30, 2011 | | | December 30, 2011 | |
|
Actual | | | | | | | | | | | | |
Non-Service shares | | $ | 1,000.00 | | | $ | 962.40 | | | $ | 3.55 | |
Service shares | | | 1,000.00 | | | | 961.50 | | | | 4.78 | |
| | | | | | | | | | | | |
Hypothetical (5% return before expenses) | | | | | | | | | | | | |
Non-Service shares | | | 1,000.00 | | | | 1,021.46 | | | | 3.66 | |
Service shares | | | 1,000.00 | | | | 1,020.21 | | | | 4.92 | |
Expenses are equal to the Fund’s annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). Those annualized expense ratios, excluding indirect expenses from affiliated funds, based on the 6-month period ended December 30, 2011 are as follows:
| | | | |
Class | | Expense Ratios | |
|
Non-Service Shares | | | 0.72 | % |
Service Shares | | | 0.97 | |
The expense ratios reflect voluntary waivers and/or reimbursements of expenses by the Fund’s Manager. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund’s prospectus. The “Financial Highlights” tables in the Fund’s financial statements, included in this report, also show the gross expense ratios, without such waivers or reimbursements and reduction to custodian expenses, if applicable.
6 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS December 30, 2011*
| | | | | | | | |
| | Shares | | | Value | |
|
Wholly-Owned Subsidiary—0.1% | | | | | | | | |
Oppenheimer Global Strategic Income Fund/VA (Cayman) Ltd.1,2 (Cost $1,500,000) | | | 15,000 | | | $ | 1,482,519 | |
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Asset-Backed Securities—1.0% | | | | | | | | |
Argent Securities Trust 2004-W8, Asset-Backed Pass-Through Certificates, Series 2004-W8, Cl. A2, 1.254%, 5/25/343 | | $ | 924,857 | | | | 779,615 | |
Argent Securities Trust 2006-M3, Asset-Backed Pass-Through Certificates, Series 2006-M3, Cl. A2B, 0.394%, 9/25/363 | | | 349,382 | | | | 102,707 | |
Capital Auto Receivables Asset Trust 2007-1, Automobile Asset-Backed Securities, Series 2007-1, Cl. B, 5.15%, 9/17/12 | | | 75,367 | | | | 75,678 | |
Countrywide Home Loans, Asset-Backed Certificates, Series 2005-16, Cl. 2AF2, 5.377%, 5/1/363 | | | 946,187 | | | | 726,914 | |
CWABS Asset-Backed Certificates Trust 2006-25, Asset-Backed Certificates, Series 2006-25, Cl. 2A2, 0.414%, 6/25/473 | | | 4,747,180 | | | | 4,197,656 | |
CWHEQ Revolving Home Equity Loan Trust, Asset-Backed Certificates: | | | | | | | | |
Series 2005-G, Cl. 2A, 0.508%, 12/15/353 | | | 170,607 | | | | 93,939 | |
Series 2006-H, Cl. 2A1A, 0.428%, 11/15/363 | | | 66,437 | | | | 18,683 | |
DSC Floorplan Master Owner Trust, Automobile Receivable Nts., Series 2011-1, Cl. A, 3.91%, 3/15/16 | | | 520,000 | | | | 527,045 | |
DT Auto Owner Trust 2011-1A, Automobile Receivable Nts., Series 2011-1A, Cl. C, 3.05%, 8/15/154 | | | 720,000 | | | | 721,378 | |
Embarcadero Aircraft Securitization Trust, Airplane Receivable Nts., Series 2000-A, Cl. B, 0.656%, 8/15/255,6 | | | 1,820,063 | | | | — | |
GE Dealer Floorplan Master Note Trust, Asset-Backed Securities, Series 2009-2A, Cl. A, 1.828%, 10/20/143,4 | | | 270,000 | | | | 272,383 | |
GMAC Mortgage Servicer Advance Funding Ltd., Asset-Backed Nts., Series 2011-1A, Cl. A, 3.72%, 2/15/234 | | | 580,000 | | | | 579,958 | |
Home Equity Mortgage Trust 2005-1, Mtg. Pass-Through Certificates, Series 2005-1, Cl. M6, 5.863%, 6/1/35 | | | 1,046,000 | | | | 562,302 | |
Ice 1 Em CLO Ltd./Ice 1 Em CLO Corp., Sr. Sec. Sub. Term Nts.: | | | | | | | | |
Series 2007-1A, Cl. B, 2.152%, 8/15/223,6 | | | 7,870,000 | | | | 5,115,500 | |
Series 2007-1A, Cl. C, 3.452%, 8/15/223,6 | | | 5,270,000 | | | | 3,320,100 | |
Series 2007-1A, Cl. D, 5.452%, 8/15/223,6 | | | 5,270,000 | | | | 3,425,500 | |
Mastr Asset-Backed Securities Trust 2006-WMC3, Mtg. Pass-Through Certificates, Series 2006-WMC3, Cl. A3, 0.394%, 8/25/363 | | | 1,188,754 | | | | 362,295 | |
NC Finance Trust, Collateralized Mtg. Obligation Pass-Through Certificates, Series 1999-I, Cl. ECFD, 3.405%, 1/25/295,6 | | | 66,744 | | | | 6,007 | |
Popular ABS Mortgage Pass-Through Trust 2005-6, Mtg. Pass-Through Certificates, Series 2005-6, Cl. A3, 5.68%, 1/1/36 | | | 189,500 | | | | 164,109 | |
Santander Drive Auto Receivables Trust 2011-S1A, Automobile Receivables Nts., Series 2011-S1A, Cl. D, 3.10%, 5/15/176 | | | 227,466 | | | | 225,476 | |
SLM Student Loan Trust, Student Loan Receivables, Series 2005-B, Cl. B, 0.946%, 6/15/393 | | | 2,487,000 | | | | 1,257,532 | |
Terwin Mortgage Trust, Home Equity Asset-Backed Securities, Series 2006-4SL, Cl. A1, 3.383%, 5/1/373,4,7 | | | 170,566 | | | | 89,780 | |
| | | | | | | |
Total Asset-Backed Securities (Cost $32,000,626) | | | | | | | 22,624,557 | |
| | |
Mortgage-Backed Obligations—19.9% | | | | | | | | |
Government Agency—7.5% | | | | | | | | |
FHLMC/FNMA/FHLB/Sponsored—7.1% | | | | | | | | |
Federal Home Loan Mortgage Corp.: | | | | | | | | |
4.50%, 1/1/428 | | | 4,305,000 | | | | 4,562,627 | |
5%, 9/15/33 | | | 1,552,261 | | | | 1,671,403 | |
5.50%, 9/1/39 | | | 1,427,254 | | | | 1,551,743 | |
6%, 5/15/18-10/1/37 | | | 764,536 | | | | 838,676 | |
6.50%, 3/15/18-8/15/32 | | | 1,738,287 | | | | 1,957,263 | |
7%, 10/1/31-10/1/37 | | | 442,310 | | | | 507,122 | |
7.50%, 1/1/32 | | | 707,518 | | | | 846,381 | |
Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates: | | | | | | | | |
Series 1360, Cl. PZ, 7.50%, 9/15/22 | | | 798,690 | | | | 911,282 | |
Series 151, Cl. F, 9%, 5/15/21 | | | 23,166 | | | | 26,513 | |
Series 1674, Cl. Z, 6.75%, 2/15/24 | | | 641,374 | | | | 726,477 | |
Series 1897, Cl. K, 7%, 9/15/26 | | | 1,453,093 | | | | 1,676,511 | |
Series 2006-11, Cl. PS, 23.49%, 3/25/363 | | | 465,443 | | | | 649,970 | |
Series 2043, Cl. ZP, 6.50%, 4/15/28 | | | 590,196 | | | | 676,847 | |
Series 2106, Cl. FG, 0.728%, 12/15/283 | | | 1,008,882 | | | | 1,012,239 | |
Series 2122, Cl. F, 0.728%, 2/15/293 | | | 30,094 | | | | 30,144 | |
Series 2148, Cl. ZA, 6%, 4/15/29 | | | 830,754 | | | | 921,580 | |
Series 2195, Cl. LH, 6.50%, 10/15/29 | | | 449,972 | | | | 526,132 | |
Series 2326, Cl. ZP, 6.50%, 6/15/31 | | | 61,505 | | | | 71,262 | |
Series 2344, Cl. FP, 1.228%, 8/15/313 | | | 306,003 | | | | 310,421 | |
7 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
FHLMC/FNMA/FHLB/Sponsored Continued | | | | | | | | |
Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates: Continued | | | | | | | | |
Series 2368, Cl. PR, 6.50%, 10/15/31 | | $ | 249,716 | | | $ | 282,711 | |
Series 2412, Cl. GF, 1.228%, 2/15/323 | | | 571,056 | | | | 580,736 | |
Series 2449, Cl. FL, 0.828%, 1/15/323 | | | 392,333 | | | | 395,215 | |
Series 2451, Cl. FD, 1.278%, 3/15/323 | | | 199,396 | | | | 202,999 | |
Series 2453, Cl. BD, 6%, 5/15/17 | | | 85,469 | | | | 91,145 | |
Series 2461, Cl. PZ, 6.50%, 6/15/32 | | | 933,500 | | | | 1,059,538 | |
Series 2464, Cl. FI, 1.278%, 2/15/323 | | | 187,960 | | | | 190,735 | |
Series 2470, Cl. AF, 1.278%, 3/15/323 | | | 342,114 | | | | 351,102 | |
Series 2470, Cl. LF, 1.278%, 2/15/323 | | | 192,350 | | | | 195,896 | |
Series 2471, Cl. FD, 1.278%, 3/15/323 | | | 288,242 | | | | 293,191 | |
Series 2477, Cl. FZ, 0.828%, 6/15/313 | | | 765,919 | | | | 770,618 | |
Series 2500, Cl. FD, 0.778%, 3/15/323 | | | 25,512 | | | | 25,637 | |
Series 2517, Cl. GF, 1.278%, 2/15/323 | | | 167,239 | | | | 170,221 | |
Series 2526, Cl. FE, 0.678%, 6/15/293 | | | 47,899 | | | | 48,067 | |
Series 2551, Cl. FD, 0.678%, 1/15/333 | | | 22,098 | | | | 22,165 | |
Series 2676, Cl. KY, 5%, 9/15/23 | | | 3,608,534 | | | | 3,944,893 | |
Series 3019, Cl. MD, 4.75%, 1/1/31 | | | 315,800 | | | | 317,421 | |
Series 3025, Cl. SJ, 23.73%, 8/15/353 | | | 513,369 | | | | 734,124 | |
Series 3094, Cl. HS, 23.363%, 6/15/343 | | | 297,214 | | | | 402,413 | |
Series 3822, Cl. JA, 5%, 6/1/40 | | | 170,266 | | | | 184,389 | |
Series 3848, Cl. WL, 4%, 4/1/40 | | | 767,936 | | | | 811,707 | |
Series 3917, Cl. BA, 4%, 6/1/38 | | | 1,320,412 | | | | 1,382,038 | |
Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security: | | | | | | | | |
Series 192, Cl. IO, 13.393%, 2/1/289 | | | 22,180 | | | | 4,241 | |
Series 205, Cl. IO, 13.251%, 9/1/299 | | | 119,604 | | | | 20,719 | |
Series 2074, Cl. S, 62.824%, 7/17/289 | | | 31,828 | | | | 6,817 | |
Series 2079, Cl. S, 73.84%, 7/17/289 | | | 53,596 | | | | 11,558 | |
Series 2136, Cl. SG, 75.075%, 3/15/299 | | | 1,431,324 | | | | 285,517 | |
Series 2399, Cl. SG, 71.666%, 12/15/269 | | | 838,202 | | | | 165,928 | |
Series 243, Cl. 6, 0.369%, 12/15/329 | | | 327,532 | | | | 59,494 | |
Series 2437, Cl. SB, 83.176%, 4/15/329 | | | 2,539,180 | | | | 556,130 | |
Series 2526, Cl. SE, 39.476%, 6/15/299 | | | 60,136 | | | | 12,138 | |
Series 2795, Cl. SH, 13.471%, 3/15/249 | | | 1,239,510 | | | | 160,232 | |
Series 2802, Cl. AS, 63.634%, 4/15/339 | | | 304,023 | | | | 21,790 | |
Series 2920, Cl. S, 63.733%, 1/15/359 | | | 542,641 | | | | 91,968 | |
Series 3110, Cl. SL, 17.819%, 2/15/269 | | | 314,249 | | | | 40,276 | |
Series 3451, Cl. SB, 20.75%, 5/15/389 | | | 947,767 | | | | 112,971 | |
Federal National Mortgage Assn.: | | | | | | | | |
2.579%, 10/1/363 | | | 4,285,194 | | | | 4,533,517 | |
3.50%, 1/1/278 | | | 6,720,000 | | | | 7,028,700 | |
4%, 1/1/428 | | | 11,090,000 | | | | 11,653,165 | |
4.50%, 1/1/27-1/1/428 | | | 19,385,000 | | | | 20,641,338 | |
5%, 2/25/18-7/25/33 | | | 6,802,242 | | | | 7,353,055 | |
5%, 1/1/428 | | | 11,080,000 | | | | 11,971,597 | |
5.50%, 4/25/21-1/1/36 | | | 794,461 | | | | 865,905 | |
5.50%, 1/1/27-1/1/428 | | | 7,563,000 | | | | 8,231,582 | |
6%, 10/25/16-1/25/19 | | | 455,006 | | | | 491,642 | |
6%, 1/1/428 | | | 7,020,000 | | | | 7,730,777 | |
6.50%, 4/25/17-1/1/34 | | | 2,202,341 | | | | 2,507,741 | |
7%, 11/1/17-6/25/34 | | | 2,333,042 | | | | 2,701,329 | |
7.50%, 2/25/27-3/25/33 | | | 2,569,528 | | | | 3,061,726 | |
8.50%, 7/1/32 | | | 3,047 | | | | 3,725 | |
Federal National Mortgage Assn., 15 yr.: | | | | | | | | |
3%, 1/1/278 | | | 12,330,000 | | | | 12,736,504 | |
4%, 1/1/278 | | | 355,000 | | | | 374,470 | |
Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates: | | | | | | | | |
Trust 1999-54, Cl. LH, 6.50%, 11/25/29 | | | 442,685 | | | | 507,447 | |
Trust 2001-51, Cl. OD, 6.50%, 10/25/31 | | | 239,049 | | | | 277,602 | |
Trust 2001-69, Cl. PF, 1.294%, 12/25/313 | | | 425,974 | | | | 436,076 | |
Trust 2001-80, Cl. ZB, 6%, 1/25/32 | | | 496,676 | | | | 559,586 | |
Trust 2002-12, Cl. PG, 6%, 3/25/17 | | | 283,340 | | | | 306,448 | |
Trust 2002-29, Cl. F, 1.294%, 4/25/323 | | | 207,038 | | | | 211,910 | |
Trust 2002-60, Cl. FH, 1.294%, 8/25/323 | | | 425,986 | | | | 434,155 | |
Trust 2002-64, Cl. FJ, 1.294%, 4/25/323 | | | 63,754 | | | | 65,254 | |
Trust 2002-68, Cl. FH, 0.785%, 10/18/323 | | | 143,888 | | | | 144,867 | |
Trust 2002-84, Cl. FB, 1.294%, 12/25/323 | | | 887,171 | | | | 908,127 | |
Trust 2002-9, Cl. PC, 6%, 3/25/17 | | | 287,527 | | | | 312,608 | |
Trust 2002-9, Cl. PR, 6%, 3/25/17 | | | 352,063 | | | | 377,301 | |
Trust 2002-90, Cl. FH, 0.794%, 9/25/323 | | | 496,374 | | | | 499,657 | |
Trust 2003-11, Cl. FA, 1.294%, 9/25/323 | | | 887,191 | | | | 908,148 | |
Trust 2003-116, Cl. FA, 0.694%, 11/25/333 | | | 69,466 | | | | 69,806 | |
Trust 2004-101, Cl. BG, 5%, 1/25/20 | | | 1,316,490 | | | | 1,410,171 | |
Trust 2005-109, Cl. AH, 5.50%, 12/25/25 | | | 2,160,000 | | | | 2,450,278 | |
Trust 2005-12, Cl. JC, 5%, 6/1/28 | | | 266,423 | | | | 267,176 | |
Trust 2005-25, Cl. PS, 26.868%, 4/25/353 | | | 488,754 | | | | 820,394 | |
Trust 2005-31, Cl. PB, 5.50%, 4/25/35 | | | 560,000 | | | | 681,333 | |
Trust 2005-71, Cl. DB, 4.50%, 8/25/25 | | | 480,000 | | | | 522,160 | |
Trust 2006-46, Cl. SW, 23.123%, 6/25/363 | | | 777,236 | | | | 1,085,220 | |
Trust 2007-42, Cl. A, 6%, 2/1/33 | | | 915,470 | | | | 959,473 | |
Trust 2009-114, Cl. AC, 2.50%, 12/1/23 | | | 311,959 | | | | 320,010 | |
Trust 2009-36, Cl. FA, 1.234%, 6/25/373 | | | 385,345 | | | | 390,157 | |
Trust 2011-122, Cl. EC, 1.50%, 1/1/20 | | | 820,401 | | | | 824,162 | |
Trust 2011-15, Cl. DA, 4%, 3/1/41 | | | 931,138 | | | | 985,604 | |
Trust 2011-3, Cl. KA, 5%, 4/1/40 | | | 575,548 | | | | 623,764 | |
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: | | | | | | | | |
Trust 2001-61, Cl. SH, 37.704%, 11/18/319 | | | 234,604 | | | | 42,227 | |
Trust 2001-63, Cl. SD, 35.045%, 12/18/319 | | | 59,030 | | | | 10,517 | |
8 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
FHLMC/FNMA/FHLB/Sponsored Continued | | | | | | | | |
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: Continued | | | | | | | | |
Trust 2001-68, Cl. SC, 26.039%, 11/25/319 | | $ | 38,890 | | | $ | 7,047 | |
Trust 2001-81, Cl. S, 31.912%, 1/25/329 | | | 47,787 | | | | 9,450 | |
Trust 2002-28, Cl. SA, 38.153%, 4/25/329 | | | 30,886 | | | | 5,726 | |
Trust 2002-38, Cl. SO, 53.793%, 4/25/329 | | | 169,634 | | | | 30,920 | |
Trust 2002-48, Cl. S, 34.30%, 7/25/329 | | | 47,976 | | | | 9,060 | |
Trust 2002-52, Cl. SL, 36.455%, 9/25/329 | | | 31,036 | | | | 5,925 | |
Trust 2002-56, Cl. SN, 36.411%, 7/25/329 | | | 65,925 | | | | 12,458 | |
Trust 2002-77, Cl. IS, 48.559%, 12/18/329 | | | 289,005 | | | | 59,051 | |
Trust 2002-77, Cl. SH, 41.779%, 12/18/329 | | | 67,790 | | | | 13,251 | |
Trust 2002-9, Cl. MS, 33.312%, 3/25/329 | | | 63,634 | | | | 12,339 | |
Trust 2003-13, Cl. IO, 13.82%, 3/25/339 | | | 540,362 | | | | 93,726 | |
Trust 2003-26, Cl. DI, 11.494%, 4/25/339 | | | 395,052 | | | | 65,357 | |
Trust 2003-33, Cl. SP, 40.352%, 5/25/339 | | | 419,984 | | | | 68,524 | |
Trust 2003-38, Cl. SA, 30.916%, 3/25/239 | | | 606,686 | | | | 69,625 | |
Trust 2003-4, Cl. S, 36.632%, 2/25/339 | | | 122,727 | | | | 21,570 | |
Trust 2004-56, Cl. SE, 16.089%, 10/25/339 | | | 1,806,946 | | | | 253,761 | |
Trust 2005-14, Cl. SE, 41.639%, 3/25/359 | | | 1,742,433 | | | | 252,789 | |
Trust 2005-40, Cl. SA, 60.568%, 5/25/359 | | | 1,483,373 | | | | 264,146 | |
Trust 2005-40, Cl. SB, 95.476%, 5/25/359 | | | 2,468,634 | | | | 418,611 | |
Trust 2005-63, Cl. SA, 63.832%, 10/25/319 | | | 99,426 | | | | 17,871 | |
Trust 2005-71, Cl. SA, 61.309%, 8/25/259 | | | 339,035 | | | | 47,534 | |
Trust 2006-129, Cl. SM, 28.813%, 1/25/379 | | | 658,070 | | | | 94,284 | |
Trust 2006-51, Cl. SA, 17.813%, 6/25/369 | | | 8,463,081 | | | | 1,224,053 | |
Trust 2006-60, Cl. DI, 38.936%, 4/25/359 | | | 1,548,211 | | | | 223,361 | |
Trust 2006-90, Cl. SX, 99.999%, 9/25/369 | | | 1,565,790 | | | | 298,819 | |
Trust 2007-77, Cl. SB, 56.307%, 12/25/319 | | | 691,996 | | | | 37,991 | |
Trust 2007-88, Cl. XI, 35.108%, 6/25/379 | | | 2,501,195 | | | | 356,828 | |
Trust 2008-55, Cl. SA, 23.905%, 7/25/389 | | | 532,996 | | | | 59,164 | |
Trust 2011-84, Cl. IG, 4.92%, 8/1/139 | | | 5,366,801 | | | | 137,951 | |
Trust 214, Cl. 2, 41.274%, 3/1/239 | | | 370,937 | | | | 67,710 | |
Trust 221, Cl. 2, 38.496%, 5/1/239 | | | 42,507 | | | | 7,780 | |
Trust 254, Cl. 2, 31.151%, 1/1/249 | | | 697,834 | | | | 127,788 | |
Trust 2682, Cl. TQ, 99.999%, 10/15/339 | | | 571,463 | | | | 106,244 | |
Trust 2981, Cl. BS, 99.999%, 5/15/359 | | | 1,019,013 | | | | 183,934 | |
Trust 301, Cl. 2, 2.073%, 4/1/299 | | | 153,582 | | | | 27,773 | |
Trust 313, Cl. 2, 26.257%, 6/1/319 | | | 1,608,650 | | | | 274,972 | |
Trust 319, Cl. 2, 3.266%, 2/1/329 | | | 761,365 | | | | 137,820 | |
Trust 321, Cl. 2, 6.86%, 4/1/329 | | | 203,135 | | | | 36,724 | |
Trust 324, Cl. 2, 1.58%, 7/1/329 | | | 211,436 | | | | 37,644 | |
Trust 328, Cl. 2, 42.821%, 12/1/329 | | | 510,716 | | | | 82,614 | |
Trust 331, Cl. 5, 0%, 2/1/339,10 | | | 781,185 | | | | 131,962 | |
Trust 332, Cl. 2, 27.257%, 3/1/339 | | | 4,413,971 | | | | 628,364 | |
Trust 334, Cl. 12, 0.446%, 2/1/339 | | | 684,890 | | | | 113,386 | |
Trust 339, Cl. 15, 11.083%, 7/1/339 | | | 2,043,961 | | | | 380,823 | |
Trust 345, Cl. 9, 0%, 1/1/349,10 | | | 826,281 | | | | 106,928 | |
Trust 351, Cl. 10, 0.817%, 4/1/349 | | | 421,219 | | | | 61,461 | |
Trust 351, Cl. 8, 1.478%, 4/1/349 | | | 689,945 | | | | 101,701 | |
Trust 356, Cl. 10, 1.226%, 6/1/359 | | | 566,825 | | | | 82,597 | |
Trust 356, Cl. 12, 1.931%, 2/1/359 | | | 284,041 | | | | 41,407 | |
Trust 362, Cl. 13, 3.475%, 8/1/359 | | | 344,636 | | | | 55,272 | |
| | | | | | | |
| | | | | | | 159,745,840 | |
GNMA/Guaranteed—0.2% | | | | | | | | |
Government National Mortgage Assn.: | | | | | | | | |
2.125%, 12/9/253 | | | 5,206 | | | | 5,369 | |
7%, 3/29/28-7/29/28 | | | 232,865 | | | | 271,537 | |
7.50%, 3/1/27 | | | 12,567 | | | | 13,723 | |
8%, 11/29/25-5/29/26 | | | 49,596 | | | | 51,773 | |
Government National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates: | | | | | | | | |
Series 1999-32, Cl. ZB, 8%, 9/16/29 | | | 936,074 | | | | 1,115,418 | |
Series 2000-12, Cl. ZA, 8%, 2/16/30 | | | 2,090,283 | | | | 2,509,646 | |
Government National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: | | | | | | | | |
Series 1998-19, Cl. SB, 70.595%, 7/16/289 | | | 114,873 | | | | 24,854 | |
Series 1998-6, Cl. SA, 82.586%, 3/16/289 | | | 67,415 | | | | 14,301 | |
Series 2001-21, Cl. SB, 92.265%, 1/16/279 | | | 510,626 | | | | 100,562 | |
Series 2007-17, Cl. AI, 21.009%, 4/16/379 | | | 608,584 | | | | 114,146 | |
Series 2010-111, Cl. GI, 22.59%, 9/1/139 | | | 12,744,832 | | | | 341,607 | |
| | | | | | | |
| | | | | | | 4,562,936 | |
9 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Other Agency—0.2% | | | | | | | | |
NCUA Guaranteed Notes Trust 2010-C1, Gtd. Nts.: | | | | | | | | |
Series 2010-C1, Cl. A1, 1.60%, 10/29/20 | | $ | 522,335 | | | $ | 529,399 | |
Series 2010-C1, Cl. A2, 2.90%, 10/29/20 | | | 1,015,000 | | | | 1,073,156 | |
Series 2010-C1, Cl. APT, 2.65%, 10/29/20 | | | 1,165,858 | | | | 1,220,005 | |
NCUA Guaranteed Notes Trust 2010-R1, Gtd. Nts., Series 2010-R1, Cl. 1A, 0.724%, 10/7/203 | | | 1,026,754 | | | | 1,027,873 | |
NCUA Guaranteed Notes Trust 2010-R3, Gtd. Nts., Series 2010-R3, Cl. 3A, 2.40%, 12/8/20 | | | 828,953 | | | | 841,909 | |
| | | | | | | |
| | | | | | | 4,692,342 | |
Non-Agency—12.4% | | | | | | | | |
Commercial—7.4% | | | | | | | | |
Banc of America Commercial Mortgage Trust 2006-3, Commercial Mtg. Pass-Through Certificates, Series 2006-3, Cl. AM, 5.858%, 7/10/443 | | | 4,192,000 | | | | 4,060,143 | |
Banc of America Commercial Mortgage Trust 2006-5, Commercial Mtg. Pass-Through Certificates, Series 2006-5, Cl. AM, 5.448%, 9/1/47 | | | 6,055,000 | | | | 5,720,628 | |
Banc of America Commercial Mortgage Trust 2007-1, Commercial Mtg. Pass-Through Certificates, Series 2007-1, Cl. AMFX, 5.482%, 1/1/49 | | | 4,159,386 | | | | 3,896,452 | |
Banc of America Commercial Mortgage Trust 2007-5, Commercial Mtg. Pass-Through Certificates, Series 2007-5, Cl. AM, 5.772%, 2/1/51 | | | 8,090,000 | | | | 7,660,271 | |
Banc of America Commercial Mortgage, Inc., Commercial Mtg. Pass-Through Certificates: | | | | | | | | |
Series 2007-3, Cl. A4, 5.622%, 6/1/493 | | | 480,000 | | | | 516,735 | |
Series 2008-1, Cl. AM, 6.249%, 2/10/513 | | | 3,415,000 | | | | 3,372,832 | |
Bear Stearns ARM Trust 2007-4, Mtg. Pass-Through Certificates, Series 2007-4, Cl. 22A1, 5.669%, 6/1/473 | | | 1,096,341 | | | | 766,687 | |
Bear Stearns Commercial Mortgage Securities Trust 2006-PWR13, Commercial Mtg. Pass-Through Certificates, Series 2006-PWR13, Cl. AJ, 5.611%, 9/1/41 | | | 6,630,000 | | | | 4,565,856 | |
Bear Stearns Commercial Mortgage Securities Trust 2007-PWR17, Commercial Mtg. Pass-Through Certificates: | | | | | | | | |
Series 2007-PWR17, Cl. AJ, 5.897%, 6/1/503 | | | 7,400,000 | | | | 4,960,683 | |
Series 2007-PWR17, Cl. AM, 5.915%, 6/1/50 | | | 2,330,000 | | | | 2,310,698 | |
CHL Mortgage Pass-Through Trust 2005-17, Mtg. Pass-Through Certificates, Series 2005-17, Cl. 1A8, 5.50%, 9/1/35 | | | 3,149,421 | | | | 3,006,499 | |
CHL Mortgage Pass-Through Trust 2005-HYB8, Mtg. Pass-Through Certificates, Series 2005-HYB8, Cl. 4A1, 5.006%, 12/20/353 | | | 168,475 | | | | 125,414 | |
CHL Mortgage Pass-Through Trust 2007-J3, Mtg. Pass-Through Certificates, Series 2007-J3, Cl. A9, 6%, 7/1/37 | | | 9,122,866 | | | | 7,219,453 | |
Citigroup Commercial Mortgage Trust 2008-C7, Commercial Mtg. Pass-Through Certificates, Series 2008-C7, Cl. AM, 6.072%, 12/1/493 | | | 4,270,000 | | | | 4,324,176 | |
Citigroup, Inc./Deutsche Bank 2007-CD4 Commercial Mortgage Trust, Commercial Mtg. Pass-Through Certificates, Series 2007-CD4, Cl. A4, 5.322%, 12/1/49 | | | 955,000 | | | | 1,016,804 | |
DBUBS Mortgage Trust, Commercial Mtg. Pass-Through Certificates, Series 2011-LC1, Cl. E, 5.557%, 11/1/463,4 | | | 2,515,000 | | | | 2,079,576 | |
Deutsche Alt-A Securities, Inc., Mtg. Pass-Through Certificates, Series 2007-RS1, Cl. A2, 0.794%, 1/27/373,6 | | | 1,329,704 | | | | 605,015 | |
Deutsche Alt-B Securities, Inc., Mtg. Pass-Through Certificates: | | | | | | | | |
Series 2006-AB2, Cl. A1, 5.885%, 6/25/36 | | | 133,150 | | | | 81,735 | |
Series 2006-AB4, Cl. A1A, 6.005%, 10/25/36 | | | 654,918 | | | | 358,766 | |
Deutsche Mortgage & Asset Receiving, Commercial Mtg. Pass-Through Certificates, Interest-Only Stripped Mtg.-Backed Security, Series 2010-C1, Cl. XPA, 4.858%, 9/1/204,9 | | | 5,625,940 | | | | 422,823 | |
First Horizon Alternative Mortgage Securities Trust 2007-FA2, Mtg. Pass-Through Certificates, Series 2007-FA2, Cl. 1A1, 5.50%, 4/25/37 | | | 612,819 | | | | 402,037 | |
10 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Commercial Continued | | | | | | | | |
First Horizon Mortgage Pass-Through Trust 2007-AR3, Mtg. Pass-Through Certificates, Series 2007-AR3, Cl. 1A1, 5.857%, 11/1/373 | | $ | 3,351,000 | | | $ | 2,045,489 | |
GMAC Commercial Mortgage Securities, Inc., Commercial Mtg. Pass-Through Certificates, Series 1998-C1, Cl. F, 6.97%, 5/15/303 | | | 1,567,000 | | | | 1,537,230 | |
Greenwich Capital Commercial Funding Corp./Commercial Mortgage Trust 2006-GG7, Commercial Mtg. Pass-Through Certificates, Series 2006-GG7, Cl. AJ, 5.882%, 7/10/383 | | | 6,150,000 | | | | 4,327,531 | |
Greenwich Capital Commercial Funding Corp./Commercial Mortgage Trust 2007-GG11, Commercial Mtg. Pass-Through Certificates, Series 2007-GG11, Cl. AM, 5.867%, 12/1/49 | | | 5,550,000 | | | | 4,945,075 | |
Greenwich Capital Commercial Funding Corp./Commercial Mortgage Trust 2007-GG9, Commercial Mtg. Pass-Through Certificates, Series 2007-GG9, Cl. AM, 5.475%, 3/1/39 | | | 615,000 | | | | 579,913 | |
GS Mortgage Securities Corp. II, Commercial Mtg. Obligations, Series 2011-GC3, Cl. D, 5.543%, 3/1/443,4 | | | 3,130,000 | | | | 2,449,382 | |
GSR Mortgage Loan Trust 2005-AR4, Mtg. Pass-Through Certificates, Series 2005-AR4, Cl. 6A1, 5.25%, 7/1/35 | | | 79,796 | | | | 73,623 | |
Impac CMB Trust Series 2005-4, Collateralized Asset-Backed Bonds, Series 2005-4, Cl. 1A1A, 0.834%, 5/25/353 | | | 5,268,225 | | | | 3,587,226 | |
IndyMac Index Mortgage Loan Trust 2005-AR23, Mtg. Pass-Through Certificates, Series 2005-AR23, Cl. 6A1, 5.11%, 11/1/353 | | | 1,607,959 | | | | 1,095,990 | |
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial Mtg. Pass-Through Certificates: | | | | | | | | |
Series 2006-CIBC15, Cl. AM, 5.855%, 6/1/43 | | | 775,000 | | | | 760,626 | |
Series 2007-CB15, Cl. AJ, 5.502%, 6/1/47 | | | 8,281,000 | | | | 4,852,376 | |
Series 2007-CB18, Cl. A4, 5.44%, 6/1/47 | | | 2,315,000 | | | | 2,490,649 | |
Series 2007-CB18, Cl. AM, 5.466%, 6/1/47 | | | 6,400,000 | | | | 6,009,632 | |
Series 2008-C2, Cl. AM, 6.785%, 2/1/513 | | | 4,990,000 | | | | 4,467,462 | |
JPMorgan Chase Commercial Mortgage Securities Trust 2006-CIBC16, Commercial Mtg. Pass-Through Certificates, Series 2006-CIBC16, Cl. AJ, 5.623%, 5/1/45 | | | 2,175,000 | | | | 1,660,746 | |
JPMorgan Chase Commercial Mortgage Securities Trust 2006-LDP7, Commercial Mtg. Pass-Through Certificates, Series 2006-LDP7, 5.875%, 4/1/453 | | | 120,000 | | | | 123,999 | |
JPMorgan Chase Commercial Mortgage Securities Trust 2007-CB19, Commercial Mtg. Pass-Through Certificates, Series 2007-CB19, Cl. AM, 5.74%, 2/1/493 | | | 5,850,000 | | | | 5,572,195 | |
JPMorgan Chase Commercial Mortgage Securities Trust 2007-LDP11, Commercial Mtg. Pass-Through Certificates, Series 2007-LDP11, Cl. ASB, 5.817%, 6/1/493 | | | 570,000 | | | | 607,200 | |
JPMorgan Mortgage Trust 2006-A7, Mtg. Pass-Through Certificates, Series 2006-A7, Cl. 2A2, 2.756%, 1/1/373 | | | 337,389 | | | | 221,331 | |
LB-UBS Commercial Mortgage Trust 2007-C2, Commercial Mtg. Pass-Through Certificates, Series 2007-C2, Cl. AM, 5.493%, 2/11/40 | | | 2,950,000 | | | | 2,753,689 | |
LB-UBS Commercial Mortgage Trust 2007-C6, Commercial Mtg. Pass-Through Certificates: | | | | | | | | |
Series 2007-C6, Cl. A4, 5.858%, 7/11/40 | | | 1,095,000 | | | | 1,204,368 | |
Series 2007-C6, Cl. AM, 6.114%, 7/11/40 | | | 5,855,000 | | | | 5,512,272 | |
LB-UBS Commercial Mortgage Trust 2008-C1, Commercial Mtg. Pass-Through Certificates, Series 2008-C1, Cl. AM, 6.145%, 4/11/413 | | | 2,610,000 | | | | 2,535,524 | |
Lehman Structured Securities Corp., Mtg.-Backed Security, 6%, 5/1/29 | | | 73,876 | | | | 12,516 | |
Mastr Alternative Loan Trust 2004-6, Mtg. Pass-Through Certificates, Series 2004-6, Cl. 10A1, 6%, 7/25/34 | | | 259,554 | | | | 266,430 | |
Merrill Lynch Mortgage Trust 2006-C1, Commercial Mtg. Pass-Through Certificates, Series 2006-C1, Cl. AJ, 5.666%, 5/1/393 | | | 3,845,000 | | | | 3,241,873 | |
11 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Commercial Continued | | | | | | | | |
ML-CFC Commercial Mortgage Trust 2006-3, Commercial Mtg. Pass-Through Certificates, Series 2006-3, Cl. AJ, 5.485%, 7/1/46 | | $ | 3,745,000 | | | $ | 2,838,159 | |
Morgan Stanley Capital I Trust 2006-IQ12, Commercial Mtg. Pass-Through Certificates, Series 2006-IQ12, Cl. AJ, 5.399%, 12/1/43 | | | 7,734,000 | | | | 4,700,083 | |
Morgan Stanley Capital I Trust 2007-IQ15, Commercial Mtg. Pass-Through Certificates, Series 2007-IQ15, Cl. AM, 5.879%, 6/1/493 | | | 6,485,000 | | | | 6,131,606 | |
Morgan Stanley Capital I Trust, Commercial Mtg. Pass-Through Certificates, Series 2006-HQ10, Cl. AM, 5.36%, 11/1/41 | | | 8,500,000 | | | | 8,477,280 | |
RALI Series 2005-QA4 Trust, Mtg. Asset-Backed Pass-Through Certificates, Series 2005-QA4, Cl. A32, 3.187%, 4/25/353 | | | 116,489 | | | | 14,920 | |
Residential Asset Securitization Trust 2006-A12, Mtg. Pass-Through Certificates, Series 2006-A12, Cl. 1A, 6.25%, 11/1/36 | | | 713,314 | | | | 476,645 | |
STARM Mortgage Loan Trust 2007-1, Mtg. Pass-Through Certificates, Series 2007-1, Cl. 2A1, 5.801%, 2/1/373 | | | 9,310,563 | | | | 5,932,440 | |
Structured Adjustable Rate Mortgage Loan Trust, Mtg. Pass-Through Certificates, Series 2007-6, Cl. 3A1, 5.118%, 7/1/373 | | | 6,989,720 | | | | 4,207,647 | |
Wachovia Bank Commercial Mortgage Trust 2006-C23, Commercial Mtg. Pass-Through Certificates, Series 2006-C23, Cl. AJ, 5.515%, 1/1/45 | | | 4,510,000 | | | | 3,610,068 | |
Wachovia Bank Commercial Mortgage Trust 2006-C25, Commercial Mtg. Pass-Through Certificates, Series 2006-C25, Cl. AJ, 5.737%, 5/1/433 | | | 4,220,000 | | | | 3,632,665 | |
WaMu Mortgage Pass-Through Certificates 2006-AR15 Trust, Mtg. Pass-Through Certificates, Series 2006-AR15, Cl. 1A, 1.048%, 11/1/463 | | | 1,187,074 | | | | 659,868 | |
WaMu Mortgage Pass-Through Certificates 2007-OA3 Trust, Mtg. Pass-Through Certificates, Series 2007-OA3, Cl. 5A, 2.526%, 4/1/473 | | | 827,150 | | | | 411,370 | |
Wells Fargo Mortgage-Backed Securities 2004-W Trust, Mtg. Pass-Through Certificates, Series 2004-W, Cl. B2, 2.608%, 11/1/343 | | | 870,224 | | | | 45,914 | |
Wells Fargo Mortgage-Backed Securities 2005-AR1 Trust, Mtg. Pass-Through Certificates, Series 2005-AR1, Cl. 1A1, 2.719%, 2/1/353 | | | 3,709,449 | | | | 3,270,731 | |
Wells Fargo Mortgage-Backed Securities 2007-AR3 Trust, Mtg. Pass-Through Certificates, Series 2007-AR3, Cl. A4, 5.777%, 4/1/373 | | | 2,440,511 | | | | 1,971,911 | |
WFRBS Commercial Mortgage Trust 2011-C3, Interest-Only Commercial Mtg. Pass-Through Certificates, Series 2011-C3, Cl. XA, 7.982%, 3/1/449 | | | 6,107,862 | | | | 542,552 | |
| | | | | | | |
| | | | | | | 167,331,489 | |
Multifamily—0.9% | | | | | | | | |
Banc of America Commercial Mortgage, Inc., Commercial Mtg. Pass-Through Certificates, Series 2006-2, Cl. AJ, 5.766%, 5/1/453 | | | 4,295,000 | | | | 3,202,303 | |
Citigroup Commercial Mortgage Trust 2006-C5, Commercial Mtg. Pass-Through Certificates, Series 2006-C5, Cl. AJ, 5.482%, 10/1/49 | | | 5,792,000 | | | | 4,761,261 | |
Citigroup Mortgage Loan Trust, Inc. 2006-AR3, Mtg. Pass-Through Certificates, Series 2006-AR3, Cl. 1A2A, 5.672%, 6/1/363 | | | 6,101,361 | | | | 4,978,900 | |
JPMorgan Mortgage Trust 2007-A3, Mtg. Pass-Through Certificates, Series 2007-A3, Cl. 3A2M, 5.259%, 5/1/373 | | | 4,714,939 | | | | 3,815,300 | |
Wells Fargo Mortgage-Backed Securities 2005-AR15 Trust, Mtg. Pass-Through Certificates, Series 2005-AR15, Cl. 1A2, 5.036%, 9/1/353 | | | 432,581 | | | | 374,521 | |
Wells Fargo Mortgage-Backed Securities 2006-AR6 Trust, Mtg. Pass-Through Certificates, Series 2006-AR6, Cl. 3A1, 2.689%, 3/25/363 | | | 3,320,552 | | | | 2,655,264 | |
| | | | | | | |
| | | | | | | 19,787,549 | |
12 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| | | | | | | | |
| | Principal | | |
| | Amount | | Value |
|
Other—0.1% | | | | | | | | |
Greenwich Capital Commercial Funding Corp./Commercial Mortgage Trust 2007-GG9, Commercial Mtg. Pass-Through Certificates, Series 2007-GG9, Cl. A4, 5.444%, 3/1/39 | | $ | 2,315,000 | | | $ | 2,515,239 | |
Residential—4.0% | | | | | | | | |
Banc of America Commercial Mortgage, Inc., Commercial Mtg. Pass-Through Certificates, Series 2007-4, Cl. AM, 5.791%, 2/1/513 | | | 3,960,000 | | | | 3,762,857 | |
Banc of America Funding 2007-C Trust, Mtg. Pass-Through Certificates, Series 2007-C, Cl. 1A4, 5.544%, 5/1/363 | | | 2,025,000 | | | | 1,794,477 | |
Bear Stearns ARM Trust 2004-2, Mtg. Pass-Through Certificates, Series 2004-2, Cl. 12A2, 2.741%, 5/1/343 | | | 3,018,185 | | | | 2,431,936 | |
Bear Stearns ARM Trust 2004-9, Mtg. Pass-Through Certificates, Series 2004-9, Cl. 23A1, 3.372%, 11/1/343 | | | 908,812 | | | | 861,108 | |
Chase Mortgage Finance Trust 2007-A1, Multiclass Mtg. Pass-Through Certificates, Series 2007-A1, Cl. 9A1, 2.744%, 2/1/373 | | | 1,132,270 | | | | 1,110,849 | |
CHL Mortgage Pass-Through Trust 2005-29, Mtg. Pass-Through Certificates, Series 2005-29, Cl. A1, 5.75%, 12/1/35 | | | 6,019,799 | | | | 5,049,787 | |
CHL Mortgage Pass-Through Trust 2005-J4, Mtg. Pass-Through Certificates, Series 2005-J4, Cl. A7, 5.50%, 11/1/35 | | | 1,906,449 | | | | 1,845,680 | |
CHL Mortgage Pass-Through Trust 2006-6, Mtg. Pass-Through Certificates, Series 2006-6, Cl. A3, 6%, 4/1/36 | | | 661,883 | | | | 629,748 | |
CHL Mortgage Pass-Through Trust 2007-HY3, Mtg. Pass-Through Certificates, Series 2007-HY3, Cl. 1A1, 2.965%, 6/1/473 | | | 2,149,082 | | | | 1,391,123 | |
Citigroup Mortgage Loan Trust, Inc. 2005-2, Mtg. Pass-Through Certificates, Series 2005-2, Cl. 1A3, 4.051%, 5/1/353 | | | 2,424,426 | | | | 2,014,351 | |
Citigroup Mortgage Loan Trust, Inc. 2005-3, Mtg. Pass-Through Certificates, Series 2005-3, Cl. 2A4, 5.058%, 8/1/353 | | | 4,857,841 | | | | 3,245,723 | |
Citigroup, Inc./Deutsche Bank 2007-CD4 Commercial Mortgage Trust, Commercial Mtg. Pass-Through Certificates, Series 2007-CD4, Cl. AMFX, 5.366%, 12/1/49 | | | 6,060,000 | | | | 5,309,002 | |
CitiMortgage Alternative Loan Trust 2006-A5, Real Estate Mtg. Investment Conduit Pass-Through Certificates, Series 2006-A5, Cl. 2A1, 5.50%, 10/1/21 | | | 1,514,273 | | | | 1,423,222 | |
Countrywide Alternative Loan Trust 2006-43CB, Mtg. Pass-Through Certificates, Series 2006-43CB, Cl.1A10, 6%, 2/1/37 | | | 10,030,047 | | | | 6,250,926 | |
Countrywide Alternative Loan Trust 2007-19, Mtg. Pass-Through Certificates, Series 2007-19, Cl. 1A4, 6%, 8/1/37 | | | 2,836,165 | | | | 1,951,988 | |
GSR Mortgage Loan Trust 2004-5, Mtg. Pass-Through Certificates, Series 2004-5, Cl. 2A1, 2.774%, 5/1/343 | | | 2,941,179 | | | | 2,355,158 | |
GSR Mortgage Loan Trust 2005-AR7, Mtg. Pass-Through Certificates, Series 2005-AR7, Cl. 4A1, 5.195%, 11/1/353 | | | 3,224,679 | | | | 2,385,443 | |
GSR Mortgage Loan Trust 2006-5F, Mtg. Pass-Through Certificates, Series 2006-5F, Cl. 2A1, 6%, 6/1/36 | | | 1,058,425 | | | | 1,030,217 | |
JPMorgan Alternative Loan Trust 2006-S4, Mtg. Pass-Through Certificates, Series 2006-S4, Cl. A6, 5.71%, 12/1/36 | | | 306,665 | | | | 263,580 | |
LB-UBS Commercial Mortgage Trust 2007-C7, Commercial Mtg. Pass-Through Certificates, Series 2007-C7, Cl. AM, 6.005%, 9/11/453 | | | 10,430,000 | | | | 9,857,982 | |
Merrill Lynch Mortgage Investors Trust 2006-3, Mtg. Pass-Through Certificates, Series MLCC 2006-3, Cl. 2A1, 2.375%, 10/25/363 | | | 1,672,181 | | | | 1,508,881 | |
RALI Series 2006-QS13 Trust, Mtg. Asset-Backed Pass-Through Certificates: | | | | | | | | |
Series 2006-QS13, Cl. 1A5, 6%, 9/25/36 | | | 1,915,553 | | | | 1,087,473 | |
Series 2006-QS13, Cl. 1A8, 6%, 9/25/36 | | | 38,289 | | | | 21,737 | |
13 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Residential Continued | | | | | | | | |
RALI Series 2007-QS6 Trust, Mtg. Asset-Backed Pass-Through Certificates, Series 2007-QS6, Cl. A28, 5.75%, 4/25/37 | | $ | 927,888 | | | $ | 544,107 | |
Residential Asset Securitization Trust 2005-A14, Mtg. Pass-Through Certificates, Series 2005-A14, Cl. A1, 5.50%, 12/1/35 | | | 3,492,413 | | | | 2,832,202 | |
Residential Asset Securitization Trust 2005-A15, Mtg. Pass-Through Certificates, Series 2005-A15, Cl. 1A4, 5.75%, 2/1/36 | | | 4,067,603 | | | | 3,153,157 | |
Residential Asset Securitization Trust 2005-A6CB, Mtg. Pass-Through Certificates, Series 2005-A6CB, Cl. A7, 6%, 6/1/35 | | | 4,566,771 | | | | 3,761,538 | |
WaMu Mortgage Pass-Through Certificates 2005-AR12 Trust, Mtg. Pass-Through Certificates, Series 2007-AR12, Cl. 1A8, 2.482%, 10/1/353 | | | 2,412,270 | | | | 1,918,017 | |
WaMu Mortgage Pass-Through Certificates 2006-AR10 Trust, Mtg. Pass-Through Certificates, Series 2006-AR10, Cl. 1A2, 5.836%, 9/1/363 | | | 1,045,369 | | | | 704,859 | |
WaMu Mortgage Pass-Through Certificates 2007-HY1 Trust, Mtg. Pass-Through Certificates: | | | | | | | | |
Series 2007-HY1, Cl. 4A1, 2.61%, 2/1/373 | | | 13,787,040 | | | | 9,166,314 | |
Series 2007-HY1, Cl. 5A1, 5.183%, 2/1/373 | | | 8,403,903 | | | | 6,051,650 | |
WaMu Mortgage Pass-Through Certificates 2007-HY5 Trust, Mtg. Pass-Through Certificates, Series 2007-HY5, Cl. 3A1, 5.467%, 5/1/373 | | | 1,102,192 | | | | 920,384 | |
Wells Fargo Mortgage-Backed Securities 2005-9 Trust, Mtg. Pass-Through Certificates, Series 2005-9, Cl. 2A6, 5.25%, 10/25/35 | | | 415,798 | | | | 399,947 | |
Wells Fargo Mortgage-Backed Securities 2006-AR14 Trust, Mtg. Pass-Through Certificates, Series 2006-AR14, Cl. 1A2, 5.667%, 10/1/363 | | | 3,539,868 | | | | 2,974,976 | |
| | | | | | | |
| | | | | | | 90,010,399 | |
| | | | | | | |
Total Mortgage-Backed Obligations (Cost $474,215,861) | | | | | | | 448,645,794 | |
U.S. Government Obligations—8.0% | | | | | | | | |
Federal Home Loan Mortgage Corp. Nts.: | | | | | | | | |
1.125%, 7/27/12 | | | 17,545,000 | | | | 17,636,866 | |
2.50%, 5/27/16 | | | 1,000,000 | | | | 1,060,625 | |
5%, 2/16/17 | | | 6,500,000 | | | | 7,684,599 | |
5.125%, 11/17/17 | | | 4,000,000 | | | | 4,825,116 | |
Federal National Mortgage Assn. Nts.: | | | | | | | | |
1.125%, 7/30/12 | | | 16,180,000 | | | | 16,269,233 | |
2.375%, 4/11/16 | | | 1,000,000 | | | | 1,058,061 | |
4.375%, 10/15/15 | | | 4,000,000 | | | | 4,524,880 | |
4.875%, 12/15/16 | | | 488,000 | | | | 575,702 | |
5.375%, 6/12/17 | | | 6,991,000 | | | | 8,460,998 | |
U.S. Treasury Bills: | | | | | | | | |
0.038%, 6/14/12 | | | 55,000,000 | | | | 54,988,780 | |
0.035%, 3/8/1211,12 | | | 25,000,000 | | | | 24,999,325 | |
U.S. Treasury Bonds, STRIPS, 4.833%, 2/15/1612,13 | | | 2,116,000 | | | | 2,056,718 | |
U.S. Treasury Nts.: | | | | | | | | |
0.875%, 11/30/1612 | | | 23,000,000 | | | | 23,077,280 | |
2%, 11/15/2111,12 | | | 13,000,000 | | | | 13,144,222 | |
| | | | | | | |
Total U.S. Government Obligations (Cost $177,740,230) | | | | | | | 180,362,405 | |
| | | | | | | | |
Foreign Government Obligations—20.8% | | | | | | | | |
Argentina—0.5% | | | | | | | | |
Argentina (Republic of) Bonds: | | | | | | | | |
2.50%, 12/31/383 | | | 4,255,000 | | | | 1,510,525 | |
7%, 10/3/15 | | | 6,370,000 | | | | 5,863,259 | |
Argentina (Republic of) Sr. Unsec. Bonds, Series X, 7%, 4/17/17 | | | 3,870,000 | | | | 3,253,165 | |
Provincia de Buenos Aires Sr. Unsec. Unsub. Nts., 10.875%, 1/26/214 | | | 1,605,000 | | | | 1,223,813 | |
| | | | | | | |
| | | | | | | 11,850,762 | |
Australia—0.3% | | | | | | | | |
New South Wales, Treasury Corp., Series 22, 6%, 3/1/22 | | 460,000 | AUD | | | 520,139 | |
Queensland Treasury Corp.: | | | | | | | | |
Series 20, 6.25%, 2/21/20 | | 2,210,000 | AUD | | | 2,448,457 | |
Series 22, 6%, 7/21/22 | | 1,300,000 | AUD | | | 1,413,769 | |
Series 24, 5.75%, 7/22/24 | | 790,000 | AUD | | | 838,389 | |
Victoria Treasury Corp., Series 1224, 5.50%, 12/17/24 | | 1,330,000 | AUD | | | 1,448,692 | |
| | | | | | | |
| | | | | | | 6,669,446 | |
Austria—0.1% | | | | | | | | |
Austria (Republic of) Bonds, 4.35%, 3/15/194 | | 1,135,000 | EUR | | | 1,621,513 | |
Austria (Republic of) Sr. Unsec. Unsub. Nts., Series 1, 3.50%, 9/15/214 | | 880,000 | EUR | | | 1,198,539 | |
| | | | | | | |
| | | | | | | 2,820,052 | |
14 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| | | | | | | | |
| | Principal | | |
| | Amount | | Value |
|
Belgium—0.2% | | | | | | | | |
Belgium (Kingdom of) Bonds, Series 52, 4%, 3/28/18 | | 1,770,000 | EUR | | $ | 2,352,120 | |
Belgium (Kingdom of) Sr. Bonds, Series 40, 5.50%, 9/28/17 | | 175,000 | EUR | | | 247,994 | |
Belgium (Kingdom of) Treasury Bills, 0.543%, 1/19/1213 | | 995,000 | EUR | | | 1,288,169 | |
| | | | | | | | |
| | | | | | | 3,888,283 | |
Brazil—2.5% | | | | | | | | |
Brazil (Federative Republic of) Nota Do Tesouro Nacional Nts.: | | | | | | | | |
9.762%, 1/1/17 | | 47,838,000 | BRR | | | 24,639,039 | |
9.762%, 1/1/21 | | 33,538,000 | BRR | | | 16,727,196 | |
12.322%, 5/15/4514 | | 6,470,000 | BRR | | | 7,885,405 | |
Series NTNB, 12.322%, 5/15/1514 | | 6,025,000 | BRR | | | 6,997,754 | |
| | | | | | | | |
| | | | | | | 56,249,394 | |
Canada—0.1% | | | | | | | | |
Canada (Government of) Nts.: | | | | | | | | |
3.75%, 6/1/19 | | 1,420,000 | CAD | | | 1,595,292 | |
4%, 6/1/17 | | 1,230,000 | CAD | | | 1,372,010 | |
| | | | | | | | |
| | | | | | | 2,967,302 | |
Colombia—0.5% | | | | | | | | |
Bogota Distrio Capital Sr. Bonds, 9.75%, 7/26/284 | | 3,058,000,000 | COP | | | 2,170,652 | |
Colombia (Republic of) Bonds: | | | | | | | | |
4.375%, 7/12/21 | | | 2,165,000 | | | | 2,338,200 | |
7.375%, 9/18/37 | | | 745,000 | | | | 1,052,313 | |
Colombia (Republic of) Sr. Unsec. Bonds, 6.125%, 1/18/41 | | | 4,205,000 | | | | 5,214,200 | |
| | | | | | | | |
| | | | | | | 10,775,365 | |
Denmark—0.0% | | | | | | | | |
Denmark (Kingdom of) Bonds, 4%, 11/15/19 | | 4,275,000 | DKK | | | 891,607 | |
Dominican Republic—0.1% | | | | | | | | |
Dominican Republic Bonds, 7.50%, 5/6/214 | | | 1,880,000 | | | | 1,856,500 | |
Finland—0.0% | | | | | | | | |
Finland (Republic of) Sr. Unsec. Unsub. Nts., 3.875%, 9/15/17 | | 425,000 | EUR | | | 612,819 | |
France—0.2% | | | | | | | | |
France (Republic of) Bonds: | | | | | | | | |
3.25%, 10/25/21 | | 1,255,000 | EUR | | | 1,635,127 | |
3.75% 10/25/19 | | 750,000 | EUR | | | 1,034,537 | |
4%, 4/25/60 | | 395,000 | EUR | | | 540,730 | |
4.50%, 4/25/41 | | 845,000 | EUR | | | 1,253,329 | |
| | | | | | | | |
| | | | | | | 4,463,723 | |
Germany—0.2% | | | | | | | | |
Germany (Federal Republic of) Bonds: | | | | | | | | |
2.50%, 1/4/21 | | 700,000 | EUR | | | 967,335 | |
3.50%, 7/4/19 | | 1,270,000 | EUR | | | 1,880,522 | |
Series 157, 2.25%, 4/10/15 | | 1,995,000 | EUR | | | 2,733,505 | |
| | | | | | | | |
| | | | | | | 5,581,362 | |
Ghana—0.1% | | | | | | | | |
Ghana (Republic of) Bonds, 8.50%, 10/4/174 | | | 1,505,000 | | | | 1,655,500 | |
Greece—0.0% | | | | | | | | |
Hellenic Republic Sr. Unsec. Unsub. Bonds, 30 yr., 4.50%, 9/20/37 | | 2,600,000 | EUR | | | 693,199 | |
Hungary—0.8% | | | | | | | | |
Hungary (Republic of) Bonds: | | | | | | | | |
Series 12/B, 7.25%, 6/12/12 | | 525,000,000 | HUF | | | 2,141,981 | |
Series 19/A, 6.50%, 6/24/19 | | 647,000,000 | HUF | | | 2,196,738 | |
Series 20/A, 7.50%, 11/12/20 | | 820,000,000 | HUF | | | 2,917,983 | |
Hungary (Republic of) Sr. Unsec. Bonds: | | | | | | | | |
4.50%, 1/29/14 | | 2,120,000 | EUR | | | 2,507,014 | |
7.625%, 3/29/41 | | | 1,500,000 | | | | 1,335,000 | |
Hungary (Republic of) Sr. Unsec. Nts., 5.75%, 6/11/18 | | 1,695,000 | EUR | | | 1,849,111 | |
Hungary (Republic of) Sr. Unsec. Unsub. Nts., 6.375%, 3/29/21 | | | 4,230,000 | | | | 3,807,000 | |
Hungary (Republic of) Treasury Bills, 6.103%, 1/11/1213 | | 58,000,000 | HUF | | | 238,193 | |
| | | | | | | | |
| | | | | | | 16,993,020 | |
Indonesia—0.8% | | | | | | | | |
Indonesia (Republic of) Nts., 6.875%, 1/17/184 | | | 4,960,000 | | | | 5,865,200 | |
Indonesia (Republic of) Sr. Unsec. Bonds, 4.875%, 5/5/214 | | | 870,000 | | | | 935,250 | |
Indonesia (Republic of) Sr. Unsec. Nts., 7.75%, 1/17/384 | | | 4,395,000 | | | | 5,977,200 | |
Indonesia (Republic of) Sr. Unsec. Unsub. Bonds, 6.625% 2/17/374 | | | 1,340,000 | | | | 1,634,800 | |
Indonesia (Republic of) Unsec. Nts., 8.50%, 10/12/354 | | | 2,360,000 | | | | 3,422,000 | |
| | | | | | | | |
| | | | | | | 17,834,450 | |
Israel—0.1% | | | | | | | | |
Israel (State of) Bonds: | | | | | | | | |
Series 0312, 4%, 3/30/12 | | 2,895,000 | ILS | | | 762,426 | |
Series 0313, 5%, 3/31/13 | | 1,930,000 | ILS | | | 520,927 | |
| | | | | | | | |
| | | | | | | 1,283,353 | |
Italy—0.5% | | | | | | | | |
Italy (Republic of) Bonds: | | | | | | | | |
3.142%, 9/15/2614 | | 1,185,000 | EUR | | | 1,203,040 | |
4%, 9/1/20 | | 1,185,000 | EUR | | | 1,285,117 | |
15 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Italy Continued | | | | | | | | |
Italy (Republic of) Bonds: Continued | | | | | | | | |
4.75%, 1/25/16 | | $ | 845,000 | | | $ | 787,779 | |
5%, 9/1/40 | | 865,000 | EUR | | | 892,070 | |
5.375%, 6/12/17 | | | 425,000 | | | | 394,040 | |
Series EU, 2.575%, 10/15/173 | | 845,000 | EUR | | | 841,083 | |
Italy (Republic of) Nts., 4.22%, 3/1/143 | | 195,000 | EUR | | | 234,331 | |
Italy (Republic of) Sr. Unsec. Bonds, 2.839%, 9/15/2314 | | 2,195,000 | EUR | | | 2,359,287 | |
Italy (Republic of) Treasury Bonds, 4.75%, 9/1/21 | | 2,080,000 | EUR | | | 2,340,454 | |
| | | | | | | |
| | | | | | | 10,337,201 | |
Ivory Coast—0.0% | | | | | | | | |
Ivory Coast (Republic of) Sr. Unsec. Bonds, 2.50%, 12/31/324,5 | | | 415,000 | | | | 209,575 | |
Japan—2.0% | | | | | | | | |
Japan Bonds, 20 yr., Series 112, 2.10%, 6/20/29 | | 1,028,000,000 | JPY | | | 14,282,883 | |
Japan Sr. Unsec. Unsub. Bonds: | | | | | | | | |
2 yr., Series 304, 0.20%, 5/15/13 | | 448,000,000 | JPY | | | 5,826,567 | |
5 yr., Series 96, 0.50%, 3/20/16 | | 1,268,000,000 | JPY | | | 16,613,057 | |
10 yr., Series 307, 1.30%, 3/20/20 | | 652,000,000 | JPY | | | 8,839,356 | |
| | | | | | | |
| | | | | | | 45,561,863 | |
Korea, Republic of South—0.1% | | | | | | | | |
Korea (Republic of) Sr. Unsec. Treasury Bonds: | | | | | | | | |
Series 1406, 3.50%, 6/10/14 | | 1,201,000,000 | KRW | | | 1,047,539 | |
Series 1603, 4%, 3/10/16 | | 1,484,000,000 | KRW | | | 1,317,447 | |
| | | | | | | |
| | | | | | | 2,364,986 | |
Malaysia—0.4% | | | | | | | | |
Malaysia (Government of) Sr. Unsec. Bonds: | | | | | | | | |
Series 1/06, 4.262%, 9/15/16 | | 1,710,000 | MYR | | | 561,642 | |
Series 0309, 2.711%, 2/14/12 | | 20,900,000 | MYR | | | 6,591,062 | |
Wakala Global Sukuk Bhd Bonds, 4.646%, 7/6/214,8 | | | 2,160,000 | | | | 2,285,973 | |
| | | | | | | |
| | | | | | | 9,438,677 | |
Mexico—2.1% | | | | | | | | |
United Mexican States Bonds: | | | | | | | | |
5.625%, 1/15/17 | | | 1,340,000 | | | | 1,547,700 | |
Series M, 6.50%, 6/10/213 | | 214,660,000 | MXN | | | 15,437,224 | |
Series M20, 7.50%, 6/3/273 | | 201,220,000 | MXN | | | 14,941,227 | |
Series M10, 7.75%, 12/14/17 | | 10,850,000 | MXN | | | 853,953 | |
Series M10, 8%, 12/17/15 | | 44,000,000 | MXN | | | 3,443,387 | |
Series M20, 8.50%, 5/31/293 | | 8,960,000 | MXN | | | 712,784 | |
Series MI10, 9%, 12/20/123 | | 30,300,000 | MXN | | | 2,261,892 | |
Series M20, 10%, 12/5/243 | | 79,220,000 | MXN | | | 7,316,526 | |
United Mexican States Nts., 6.75%, 9/27/34 | | | 630,000 | | | | 823,725 | |
| | | | | | | |
| | | | | | | 47,338,418 | |
Panama—0.3% | | | | | | | | |
Panama (Republic of) Bonds: | | | | | | | | |
7.25%, 3/15/15 | | | 1,270,000 | | | | 1,470,025 | |
8.875%, 9/30/27 | | | 950,000 | | | | 1,429,750 | |
9.375%, 4/1/29 | | | 960,000 | | | | 1,531,200 | |
Panama (Republic of) Unsec. Bonds, 7.125%, 1/29/26 | | | 1,115,000 | | | | 1,457,863 | |
| | | | | | | |
| | | | | | | 5,888,838 | |
Peru—0.4% | | | | | | | | |
Peru (Republic of) Sr. Unsec. Nts., 7.84%, 8/12/204 | | 20,980,000 | PEN | | | 8,890,727 | |
Peru (Republic of) Sr. Unsec. Unsub. Bonds, 5.625%, 11/18/50 | | | 410,000 | | | | 453,050 | |
| | | | | | | |
| | | | | | | 9,343,777 | |
Philippines—0.1% | | | | | | | | |
Philippines (Republic of the) Sr. Unsec. Unsub. Bonds, 6.375%, 10/23/34 | | | 1,120,000 | | | | 1,342,600 | |
Poland—1.4% | | | | | | | | |
Poland (Republic of) Bonds: | | | | | | | | |
5.25%, 10/25/20 | | 14,100,000 | PLZ | | | 3,924,260 | |
Series 0415, 5.50%, 4/25/15 | | 1,680,000 | PLZ | | | 494,152 | |
Series 0416, 5%, 4/25/16 | | 53,215,000 | PLZ | | | 15,374,105 | |
Series 1015, 6.25%, 10/24/15 | | 16,725,000 | PLZ | | | 5,035,094 | |
Series 1017, 5.25%, 10/25/17 | | 905,000 | PLZ | | | 259,612 | |
Poland (Republic of) Sr. Unsec. Nts.: | | | | | | | | |
5%, 3/23/22 | | | 1,710,000 | | | | 1,724,963 | |
5.125%, 4/21/21 | | | 2,480,000 | | | | 2,529,600 | |
6.375%, 7/15/19 | | | 1,275,000 | | | | 1,415,250 | |
| | | | | | | |
| | | | | | | 30,757,036 | |
Qatar—0.2% | | | | | | | | |
Qatar (State of) Sr. Nts., 5.25%, 1/20/204 | | | 1,645,000 | | | | 1,813,613 | |
Qatar (State of) Sr. Unsec. Nts.: | | | | | | | | |
5.75%, 1/20/424 | | | 1,270,000 | | | | 1,374,775 | |
6.40%, 1/20/404 | | | 750,000 | | | | 885,000 | |
| | | | | | | |
| | | | | | | 4,073,388 | |
Russia—0.1% | | | | | | | | |
Russian Federation Bonds, 5%, 4/29/204 | | | 1,290,000 | | | | 1,334,054 | |
Singapore—0.0% | | | | | | | | |
Singapore (Republic of) Sr. Unsec. Bonds, 2.375%, 4/1/17 | | 520,000 | SGD | | | 432,736 | |
South Africa—2.2% | | | | | | | | |
South Africa (Republic of) Bonds: | | | | | | | | |
5.50%, 3/9/20 | | | 1,865,000 | | | | 2,098,125 | |
Series R209, 6.25%, 3/31/36 | | 57,350,000 | ZAR | | | 5,257,199 | |
Series R208, 6.75%, 3/31/21 | | 73,570,000 | ZAR | | | 8,417,522 | |
Series R213, 7%, 2/28/31 | | 68,375,000 | ZAR | | | 7,014,905 | |
Series R207, 7.25%, 1/15/20 | | 115,470,000 | ZAR | | | 13,773,794 | |
Series R186, 10.50%, 12/21/26 | | 85,840,000 | ZAR | | | 12,448,834 | |
| | | | | | | |
| | | | | | | 49,010,379 | |
16 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Spain—0.2% | | | | | | | | |
Spain (Kingdom of) Bonds, 4.25%, 10/31/16 | | 865,000 | EUR | | $ | 1,123,767 | |
Spain (Kingdom of) Treasury Bills, 2.991%, 2/17/1213 | | 2,105,000 | EUR | | | 2,720,167 | |
| | | | | | | |
| | | | | | | 3,843,934 | |
Sri Lanka—0.1% | | | | | | | | |
Sri Lanka (Democratic Socialist Republic of) Sr. Unsec. Nts.: | | | | | | | | |
6.25%, 10/4/204 | | | 1,480,000 | | | | 1,487,400 | |
6.25% 7/27/214 | | | 1,850,000 | | | | 1,826,161 | |
| | | | | | | |
| | | | | | | 3,313,561 | |
The Netherlands—0.1% | | | | | | | | |
Netherlands (Kingdom of the) Bonds: | | | | | | | | |
4%, 7/15/18 | | 600,000 | EUR | | | 880,520 | |
4%, 7/15/19 | | 1,025,000 | EUR | | | 1,518,917 | |
| | | | | | | |
| | | | | | | 2,399,437 | |
Turkey—2.0% | | | | | | | | |
Turkey (Republic of) Bonds: | | | | | | | | |
6.875%, 3/17/36 | | | 3,065,000 | | | | 3,210,588 | |
7%, 3/11/19 | | | 1,430,000 | | | | 1,590,875 | |
8.68%, 2/20/1313 | | 17,180,000 | TRY | | | 8,054,075 | |
9.964%, 7/17/1313 | | 31,595,000 | TRY | | | 14,100,504 | |
9.999%, 4/25/1213 | | 13,320,000 | TRY | | | 6,808,860 | |
10.50%, 1/15/203 | | 1,120,000 | TRY | | | 610,936 | |
11%, 8/6/14 | | 6,590,000 | TRY | | | 3,519,886 | |
14.689%, 8/14/133,14 | | 2,200,000 | TRY | | | 1,698,910 | |
Turkey (Republic of) Nts., 7.50%, 7/14/17 | | | 1,840,000 | | | | 2,079,200 | |
Turkey (Republic of) Unsec. Nts.: | | | | | | | | |
5.125%, 3/25/22 | | | 1,345,000 | | | | 1,287,838 | |
6%, 1/14/41 | | | 2,710,000 | | | | 2,567,725 | |
| | | | | | | |
| | | | | | | 45,529,397 | |
Ukraine—0.4% | | | | | | | | |
City of Kyiv Via Kyiv Finance plc Sr. Unsec. Bonds, 9.375%, 7/11/164 | | | 985,000 | | | | 773,225 | |
Financing of Infrastructural Projects State Enterprise Gtd. Nts., 8.375%, 11/3/174 | | | 2,240,000 | | | | 1,881,600 | |
Ukraine (Republic of) Bonds, 7.75%, 9/23/204,8 | | | 2,180,000 | | | | 1,896,600 | |
Ukraine (Republic of) Sr. Unsec. Nts.: | | | | | | | | |
6.25%, 6/17/164 | | | 2,720,000 | | | | 2,400,400 | |
6.75%, 11/14/174 | | | 2,160,000 | | | | 1,868,400 | |
7.95%, 2/23/214 | | | 1,555,000 | | | | 1,372,288 | |
| | | | | | | |
| | | | | | | 10,192,513 | |
United Kingdom—0.5% | | | | | | | | |
United Kingdom Treasury Bonds: | | | | | | | | |
4%, 9/7/16 | | 1,400,000 | GBP | | | 2,486,715 | |
4.25%, 3/7/36 | | 1,940,000 | GBP | | | 3,699,970 | |
4.75%, 3/7/20 | | 1,000,000 | GBP | | | 1,920,987 | |
4.75%, 12/7/38 | | 1,735,000 | GBP | | | 3,601,176 | |
| | | | | | | |
| | | | | | | 11,708,848 | |
Uruguay—0.4% | | | | | | | | |
Uruguay (Oriental Republic of) Bonds, 7.625%, 3/21/36 | | | 2,875,000 | | | | 4,003,438 | |
Uruguay (Oriental Republic of) Sr. Nts., 6.875%, 9/28/25 | | | 855,000 | | | | 1,111,500 | |
Uruguay (Oriental Republic of) Unsec. Bonds, 8%, 11/18/22 | | | 2,491,250 | | | | 3,425,469 | |
| | | | | | | |
| | | | | | | 8,540,407 | |
Venezuela—0.8% | | | | | | | | |
Venezuela (Republic of) Bonds: | | | | | | | | |
9%, 5/7/23 | | | 4,535,000 | | | | 3,265,200 | |
11.95%, 8/5/31 | | | 2,555,000 | | | | 2,101,488 | |
Venezuela (Republic of) Nts., 8.25%, 10/13/24 | | | 910,000 | | | | 602,875 | |
Venezuela (Republic of) Sr. Unsec. Unsub. Nts.: | | | | | | | | |
7.75%, 10/13/19 | | | 1,960,000 | | | | 1,411,200 | |
12.75%, 8/23/22 | | | 440,000 | | | | 399,300 | |
Venezuela (Republic of) Unsec. Bonds: | | | | | | | | |
7%, 3/31/38 | | | 3,920,000 | | | | 2,283,400 | |
7.65%, 4/21/25 | | | 4,500,000 | | | | 2,812,500 | |
Venezuela (Republic of) Unsec. Nts., 13.625%, 8/15/184 | | | 5,465,000 | | | | 5,150,763 | |
| | | | | | | |
| | | | | | | 18,026,726 | |
| | | | | | | |
Total Foreign Government Obligations (Cost $483,045,582) | | | | | | | 468,074,488 | |
Loan Participations—0.9% | | | | | | | | |
Brock Holdings III, Inc., Sr. Sec. Credit Facilities 2nd Lien Term Loan, 10%, 2/15/183 | | | 620,000 | | | | 571,175 | |
Clear Channel Communications, Inc., Sr. Sec. Credit Facilities 1st Lien Term Loan: | | | | | | | | |
Tranche B, 3.91%, 1/29/163 | | | 3,085,000 | | | | 2,288,898 | |
Tranche B, 3.91%, 1/29/163,8 | | | 585,000 | | | | 434,037 | |
Entegra Holdings LLC, Sr. Sec. Credit Facilities 3rd Lien Term Loan, Tranche B, 3.855%, 10/19/153,15 | | | 9,511,261 | | | | 5,667,123 | |
Nuveen Investments, Inc., Sr. Sec. Credit Facilities 2nd Lien Term Loan, 12.50%, 7/31/15 | | | 3,186,875 | | | | 3,307,712 | |
17 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Loan Participations Continued | | | | | | | | |
OneLink Communications/San Juan Cable LLC, Sr. Sec. Credit Facilities 2nd Lien Term Loan, Tranche B, 10%, 10/31/133,8 | | $ | 1,055,000 | | | $ | 1,028,625 | |
Realogy Corp., Extended Sr. Sec. Credit Facilities 1st Lien Term Loan: | | | | | | | | |
Tranche B, 4%, 10/10/163,8 | | | 222,461 | | | | 199,619 | |
Tranche B, 4.522%, 10/10/163,8 | | | 2,821,702 | | | | 2,531,972 | |
Revel Entertainment LLC, Sr. Sec. Credit Facilities 1st Lien Term Loan, 7.50%, 2/17/173,8 | | | 1,045,000 | | | | 958,788 | |
Samson Investment Co., Sr. Sec. Credit Facilities Bridge Loan, 6.50%, 12/20/123,8 | | | 3,890,000 | | | | 3,890,000 | |
| | | | | | | |
Total Loan Participations (Cost $21,142,146) | | | | | | | 20,877,949 | |
| | |
Corporate Bonds and Notes—25.9% | | | | | | | | |
Consumer Discretionary—3.3% | | | | | | | | |
Auto Components—0.4% | | | | | | | | |
Goodyear Tire & Rubber Co. (The), 8.25% Sr. Unsec. Unsub. Nts., 8/15/20 | | | 2,190,000 | | | | 2,398,050 | |
Tower Automotive Holdings USA LLC/TA Holdings Finance, Inc., 10.625% Sr. Sec. Nts., 9/1/174 | | | 4,762,000 | | | | 4,809,620 | |
Visteon Corp., 6.75% Sr. Nts., 4/15/194 | | | 2,470,000 | | | | 2,476,175 | |
| | | | | | | |
| | | | | | | 9,683,845 | |
Automobiles—0.0% | | | | | | | | |
Jaguar Land Rover plc, 7.75% Sr. Unsec. Bonds, 5/15/184,8 | | | 390,000 | | | | 373,425 | |
Hotels, Restaurants & Leisure—1.2% | | | | | | | | |
Equinox Holdings, Inc., 9.50% Sr. Sec. Nts., 2/1/164 | | | 1,780,000 | | | | 1,837,850 | |
Grupo Posadas SAB de CV, 9.25% Sr. Unsec. Nts., 1/15/154 | | | 1,285,000 | | | | 1,079,400 | |
Harrah’s Operating Co., Inc., 10% Sr. Sec. Nts., 12/15/18 | | | 10,027,000 | | | | 6,918,630 | |
HOA Restaurants Group LLC/HOA Finance Corp., 11.25% Sr. Sec. Nts., 4/1/174 | | | 2,635,000 | | | | 2,470,313 | |
Isle of Capri Casinos, Inc.: | | | | | | | | |
7% Sr. Unsec. Sub. Nts., 3/1/14 | | | 1,420,000 | | | | 1,334,800 | |
7.75% Sr. Unsec. Unsub. Nts., 3/15/19 | | | 2,030,000 | | | | 1,867,600 | |
Landry’s Restaurants, Inc., 11.625% Sr. Sec. Nts., 12/1/15 | | | 2,500,000 | | | | 2,643,750 | |
MGM Mirage, Inc., 6.625% Sr. Unsec. Nts., 7/15/15 | | | 3,890,000 | | | | 3,714,950 | |
Mohegan Tribal Gaming Authority, 8% Sr. Sub. Nts., 4/1/12 | | | 2,920,000 | | | | 1,971,000 | |
Penn National Gaming, Inc., 8.75% Sr. Unsec. Sub. Nts., 8/15/19 | | | 1,550,000 | | | | 1,693,375 | |
Premier Cruise Ltd., 11% Sr. Nts., 3/15/085,6 | | | 250,000 | | | | — | |
Travelport LLC, 11.875% Sr. Unsec. Sub. Nts., 9/1/16 | | | 1,885,000 | | | | 556,075 | |
| | | | | | | |
| | | | | | | 26,087,743 | |
Household Durables—0.2% | | | | | | | | |
Beazer Homes USA, Inc.: | | | | | | | | |
6.875% Sr. Unsec. Nts., 7/15/15 | | | 995,000 | | | | 748,738 | |
9.125% Sr. Unsec. Nts., 5/15/19 | | | 2,825,000 | | | | 1,942,188 | |
Reynolds Group Issuer, Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Luxembourg SA: | | | | | | | | |
9% Sr. Nts., 4/15/194 | | | 1,635,000 | | | | 1,561,425 | |
9% Sr. Nts., 5/15/184 | | | 995,000 | | | | 957,688 | |
| | | | | | | |
| | | | | | | 5,210,039 | |
Media—1.4% | | | | | | | | |
Affinion Group Holdings, Inc., 11.625% Sr. Unsec. Nts., 11/15/15 | | | 1,140,000 | | | | 951,900 | |
Affinion Group, Inc., 7.875% Sr. Unsec. Nts., 12/15/18 | | | 3,055,000 | | | | 2,596,750 | |
Belo (A.H.) Corp., 7.75% Sr. Unsec. Unsub. Debs., 6/1/27 | | | 2,983,000 | | | | 2,602,668 | |
Cengage Learning Acquisitions, Inc., 10.50% Sr. Nts., 1/15/154 | | | 3,225,000 | | | | 2,330,063 | |
Cequel Communications Holdings I LLC, 8.625% Sr. Unsec. Nts., 11/15/174 | | | 2,350,000 | | | | 2,502,750 | |
Clear Channel Communications, Inc., 5.75% Sr. Unsec. Unsub. Nts., 1/15/13 | | | 3,010,000 | | | | 2,874,550 | |
Cumulus Media, Inc., 7.75% Sr. Nts., 5/1/194 | | | 1,230,000 | | | | 1,097,775 | |
Entravision Communications Corp., 8.75% Sr. Sec. Nts., 8/1/17 | | | 1,905,000 | | | | 1,876,425 | |
Gray Television, Inc., 10.50% Sr. Sec. Nts., 6/29/15 | | | 3,510,000 | | | | 3,334,500 | |
Interactive Data Corp., 10.25% Sr. Unsec. Nts., 8/1/18 | | | 965,000 | | | | 1,056,675 | |
Kabel BW Erste Beteiligungs GmbH/Kabel Baden-Wurttemberg GmbH & Co. KG, 7.50% Sr. Sec. Nts., 3/15/194 | | | 1,595,000 | | | | 1,682,725 | |
Newport Television LLC/NTV Finance Corp., 12.719% Sr. Nts., 3/15/174,15 | | | 2,120,261 | | | | 1,902,934 | |
18 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Media Continued | | | | | | | | |
Nexstar Broadcasting, Inc./Mission Broadcasting, Inc., 8.875% Sec. Nts., 4/15/17 | | $ | 1,850,000 | | | $ | 1,905,500 | |
Sinclair Television Group, Inc., 8.375% Sr. Unsec. Nts., 10/15/18 | | | 2,505,000 | | | | 2,598,938 | |
Univision Communications, Inc., 7.875% Sr. Sec. Nts., 11/1/204 | | | 695,000 | | | | 708,900 | |
UPCB Finance V Ltd., 7.25% Sr. Sec. Nts., 11/15/214 | | | 1,225,000 | | | | 1,246,438 | |
Visant Corp., 10% Sr. Unsec. Nts., 10/1/17 | | | 1,135,000 | | | | 1,044,200 | |
| | | | | | | |
| | | | | | | 32,313,691 | |
Specialty Retail—0.0% | | | | | | | | |
Michaels Stores, Inc., 7.75% Sr. Unsec. Nts., 11/1/18 | | | 155,000 | | | | 157,325 | |
Textiles, Apparel & Luxury Goods—0.1% | | | | | | | | |
Jones Group, Inc. (The)/Jones Apparel Group Holdings, Inc./ Jones Apparel Group USA, Inc./ JAG Footwear, Accessories & Retail Corp., 6.875% Sr. Unsec. Unsub. Nts., 3/15/19 | | | 1,595,000 | | | | 1,443,475 | |
Consumer Staples—0.7% | | | | | | | | |
Beverages—0.1% | | | | | | | | |
AmBev International Finance Co. Ltd., 9.50% Sr. Unsec. Unsub. Nts., 7/24/173 | | | 2,080,000 | BRR | | | 1,176,793 | |
Food & Staples Retailing—0.1% | | | | | | | | |
Cencosud SA, 5.50% Sr. Unsec. Nts., 1/20/214 | | | 2,155,000 | | | | 2,207,530 | |
Food Products—0.5% | | | | | | | | |
American Seafoods Group LLC, 10.75% Sr. Sub. Nts., 5/15/164 | | | 2,150,000 | | | | 1,924,250 | |
ASG Consolidated LLC, 15% Sr. Nts., 5/15/174,15 | | | 5,015,747 | | | | 3,887,204 | |
Bumble Bee Acquisition Corp., 9% Sr. Sec. Nts., 12/15/174 | | | 2,162,000 | | | | 2,205,240 | |
MHP SA, 10.25% Sr. Unsec. Nts., 4/29/154 | | | 2,008,000 | | | | 1,787,120 | |
Southern States Cooperative, Inc., 11.25% Sr. Nts., 5/15/156 | | | 2,465,000 | | | | 2,600,575 | |
| | | | | | | |
| | | | | | | 12,404,389 | |
Household Products—0.0% | | | | | | | | |
Spectrum Brands Holdings, Inc., 9.50% Sr. Sec. Nts., 6/15/18 | | | 870,000 | | | | 955,913 | |
Energy—4.7% | | | | | | | | |
Energy Equipment & Services—0.4% | | | | | | | | |
Forbes Energy Services Ltd., 9% Sr. Unsec. Nts., 6/15/19 | | | 1,695,000 | | | | 1,593,300 | |
Global Geophysical Services, Inc., 10.50% Sr. Unsec. Nts., 5/1/17 | | | 2,200,000 | | | | 2,079,000 | |
Offshore Group Investments Ltd., 11.50% Sr. Sec. Nts., 8/1/15 | | | 3,105,000 | | | | 3,372,806 | |
Precision Drilling Corp., 6.625% Sr. Unsec. Nts., 11/15/20 | | | 2,420,000 | | | | 2,486,550 | |
| | | | | | | |
| | | | | | | 9,531,656 | |
Oil, Gas & Consumable Fuels—4.3% | | | | | | | | |
Afren plc, 11.50% Sr. Sec. Nts., 2/1/164 | | | 1,705,000 | | | | 1,687,950 | |
Alliance Oil Co. Ltd., 9.875% Sr. Unsec. Nts., 3/11/154 | | | 1,500,000 | | | | 1,533,750 | |
Antero Resources Finance Corp., 9.375% Sr. Unsec. Nts., 12/1/17 | | | 2,955,000 | | | | 3,206,175 | |
Arch Coal, Inc., 7% Sr. Unsec. Nts., 6/15/194 | | | 390,000 | | | | 399,750 | |
Atlas Pipeline Partners LP/Atlas Pipeline Finance Corp., 8.75% Sr. Unsec. Nts., 6/15/184 | | | 1,535,000 | | | | 1,611,750 | |
ATP Oil & Gas Corp., 11.875% Sr. Sec. Nts., 5/1/15 | | | 2,760,000 | | | | 1,828,500 | |
Bill Barrett Corp., 7.625% Sr. Unsec. Unsub. Nts., 10/1/19 | | | 780,000 | | | | 819,000 | |
Breitburn Energy Partners LP/Breitburn Finance Corp., 8.625% Sr. Unsec. Nts., 10/15/20 | | | 2,805,000 | | | | 2,948,756 | |
Chaparral Energy, Inc., 9.875% Sr. Unsec. Nts., 10/1/20 | | | 1,760,000 | | | | 1,909,600 | |
Cloud Peak Energy Resources LLC/Cloud Peak Energy Finance Corp., 8.50% Sr. Unsec. Unsub. Nts., 12/15/19 | | | 390,000 | | | | 423,150 | |
Empresa Nacional del Petroleo, 5.25% Unsec. Nts., 8/10/204 | | | 865,000 | | | | 916,517 | |
Gaz Capital SA: | | | | | | | | |
7.288% Sr. Sec. Nts., 8/16/374 | | | 5,225,000 | | | | 5,414,406 | |
8.146% Sr. Sec. Nts., 4/11/184 | | | 2,680,000 | | | | 3,028,400 | |
8.625% Sr. Sec. Nts., 4/28/344 | | | 1,680,000 | | | | 1,986,600 | |
9.25% Sr. Unsec. Unsub. Nts., 4/23/194 | | | 3,655,000 | | | | 4,363,705 | |
James River Coal Co., 7.875% Sr. Unsec. Unsub. Nts., 4/1/19 | | | 640,000 | | | | 486,400 | |
KazMunayGaz National Co., 6.375% Sr. Unsec. Bonds, 4/9/214 | | | 1,600,000 | | | | 1,628,000 | |
19 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Oil, Gas & Consumable Fuels Continued | | | | | | | | |
KMG Finance Sub BV: | | | | | | | | |
7% Sr. Unsec. Bonds, 5/5/204 | | $ | 1,150,000 | | | $ | 1,220,438 | |
9.125% Sr. Unsec. Unsub. Nts., 7/2/184 | | | 3,885,000 | | | | 4,545,450 | |
Linn Energy LLC/Linn Energy Finance Corp., 8.625% Sr. Unsec. Nts., 4/15/20 | | | 3,620,000 | | | | 3,945,800 | |
Lukoil International Finance BV: | | | | | | | | |
6.125% Sr. Unsec. Nts., 11/9/204 | | | 3,860,000 | | | | 3,802,100 | |
6.656% Sr. Unsec. Unsub. Bonds, 6/7/224 | | | 780,000 | | | | 781,950 | |
7.25% Sr. Unsec. Unsub. Nts., 11/5/194 | | | 595,000 | | | | 617,313 | |
MEG Energy Corp., 6.50% Sr. Unsec. Nts., 3/15/214 | | | 3,195,000 | | | | 3,282,863 | |
Murray Energy Corp., 10.25% Sr. Sec. Nts., 10/15/154 | | | 3,100,000 | | | | 3,092,250 | |
Nak Naftogaz Ukraine, 9.50% Unsec. Nts., 9/30/14 | | | 2,660,000 | | | | 2,507,050 | |
Navios Maritime Acquisition Corp., 8.625% Sr. Sec. Nts., 11/1/17 | | | 695,000 | | | | 507,350 | |
Odebrecht Drilling Norbe VIII/IX Ltd., 6.35% Sr. Sec. Nts., 6/30/214 | | | 1,290,000 | | | | 1,335,150 | |
Pemex Project Funding Master Trust: | | | | | | | | |
6.625% Sr. Unsec. Unsub. Nts., 6/15/38 | | | 830,000 | | | | 948,275 | |
6.625% Unsec. Unsub. Bonds, 6/15/35 | | | 4,225,000 | | | | 4,832,344 | |
Pertamina PT (Persero): | | | | | | | | |
5.25% Nts., 5/23/214 | | | 2,420,000 | | | | 2,501,070 | |
6.50% Sr. Unsec. Nts., 5/27/414 | | | 1,075,000 | | | | 1,123,375 | |
Petrobras International Finance Co., 5.75% Sr. Unsec. Unsub. Nts., 1/20/20 | | | 1,280,000 | | | | 1,375,711 | |
Petroleos de Venezuela SA: | | | | | | | | |
4.90% Sr. Unsec. Nts., Series 2014, 10/28/14 | | | 2,795,000 | | | | 2,194,075 | |
8.50% Sr. Nts., 11/2/174 | | | 3,565,000 | | | | 2,696,923 | |
12.75% Sr. Unsec. Nts., 2/17/224 | | | 2,540,000 | | | | 2,133,600 | |
Petroleos Mexicanos: | | | | | | | | |
5.50% Sr. Unsec. Unsub. Nts., 1/21/21 | | | 1,690,000 | | | | 1,842,100 | |
6% Sr. Unsec. Unsub. Nts., 3/5/20 | | | 2,050,000 | | | | 2,286,365 | |
Petroleum Co. of Trinidad & Tobago Ltd., 9.75% Sr. Unsec. Nts., 8/14/194 | | | 2,465,000 | | | | 2,933,350 | |
PT Adaro Indonesia, 7.625% Nts., 10/22/194 | | | 2,000,000 | | | | 2,192,600 | |
Quicksilver Resources, Inc.: | | | | | | | | |
8.25% Sr. Unsec. Nts., 8/1/15 | | | 170,000 | | | | 176,800 | |
11.75% Sr. Nts., 1/1/16 | | | 2,125,000 | | | | 2,422,500 | |
Range Resources Corp., 8% Sr. Unsec. Sub. Nts., 5/15/19 | | | 1,230,000 | | | | 1,377,600 | |
SandRidge Energy, Inc.: | | | | | | | | |
8.75% Sr. Unsec. Nts., 1/15/20 | | | 2,925,000 | | | | 3,034,688 | |
9.875% Sr. Unsec. Nts., 5/15/164 | | | 1,290,000 | | | | 1,386,750 | |
Tengizchevroil LLP, 6.124% Nts., 11/15/144 | | | 801,542 | | | | 824,586 | |
Venoco, Inc., 8.875% Sr. Unsec. Nts., 2/15/19 | | | 1,375,000 | | | | 1,244,375 | |
| | | | | | | |
| | | | | | | 97,357,210 | |
Financials—4.9% | | | | | | | | |
Capital Markets—0.9% | | | | | | | | |
Berry Plastics Holding Corp., 10.25% Sr. Unsec. Sub. Nts., 3/1/16 | | | 900,000 | | | | 873,000 | |
Credit Suisse First Boston International, 6.80% Export-Import Bank of Ukraine Nts., 10/4/12 | | | 830,000 | | | | 825,850 | |
Edgen Murray Corp., 12.25% Sr. Sec. Nts., 1/15/15 | | | 1,420,000 | | | | 1,285,100 | |
Korea Development Bank (The), 3.875% Sr. Unsec. Nts., 5/4/178 | | | 1,285,000 | | | | 1,272,433 | |
Nationstar Mortgage/Nationstar Capital Corp., 10.875% Sr. Unsec. Nts., 4/1/15 | | | 5,340,000 | | | | 5,313,300 | |
Nuveen Investments, Inc.: | | | | | | | | |
5.50% Sr. Unsec. Nts., 9/15/15 | | | 1,095,000 | | | | 925,275 | |
10.50% Sr. Unsec. Unsub. Nts., 11/15/15 | | | 1,960,000 | | | | 1,955,100 | |
Pinafore LLC/Pinafore, Inc., 9% Sec. Nts., 10/1/18 | | | 2,646,000 | | | | 2,946,983 | |
Springleaf Finance Corp., 6.90% Nts., Series J, 12/15/17 | | | 2,185,000 | | | | 1,584,125 | |
Verso Paper Holdings LLC, 11.375% Sr. Unsec. Sub. Nts., Series B, 8/1/16 | | | 5,310,000 | | | | 2,203,650 | |
Verso Paper Holdings LLC/Verso Paper, Inc., 8.75% Sr. Sec. Nts., 2/1/19 | | | 2,495,000 | | | | 1,534,425 | |
| | | | | | | |
| | | | | | | 20,719,241 | |
Commercial Banks—2.4% | | | | | | | | |
Akbank TAS, 5.125% Sr. Unsec. Nts., 7/22/154 | | | 2,130,000 | | | | 2,087,400 | |
Alfa Bank/Alfa Bond Issuance plc, 7.875% Nts., 9/25/174 | | | 1,570,000 | | | | 1,499,350 | |
Australia & New Zealand Banking Group Ltd., 2.40% Sec. Bonds, 11/23/164 | | | 480,000 | | | | 476,121 | |
Banco BMG SA: | | | | | | | | |
9.15% Nts., 1/15/164 | | | 2,660,000 | | | | 2,540,300 | |
9.95% Unsec. Unsub. Nts., 11/5/194 | | | 1,120,000 | | | | 1,047,200 | |
20 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Commercial Banks Continued | | | | | | | | |
Banco de Credito del Peru: | | | | | | | | |
5.375% Sr. Nts., 9/16/204 | | $ | 480,000 | | | $ | 473,184 | |
9.75% Jr. Sub. Nts., 11/6/694 | | | 800,000 | | | | 912,000 | |
Banco de Credito del Peru/Panama, 6.875% Sub. Nts., 9/16/263,4 | | | 1,628,000 | | | | 1,680,910 | |
Banco Do Brasil SA: | | | | | | | | |
5.875% Unsec. Sub. Nts., 1/26/224 | | | 825,000 | | | | 834,075 | |
8.50% Jr. Sub. Perpetual Bonds4,16 | | | 1,125,000 | | | | 1,316,250 | |
Banco PanAmericano SA, 8.50% Sr. Unsec. Sub. Nts., 4/23/204 | | | 1,160,000 | | | | 1,229,600 | |
Banco Votorantim SA, 5.25% Sr. Unsec. Unsub. Nts., 2/11/164 | | | 850,000 | | | | 863,600 | |
Bancolombia SA, 4.25% Sr. Unsec. Unsub. Nts., 1/12/16 | | | 1,740,000 | | | | 1,731,300 | |
Bank of Scotland plc: | | | | | | | | |
4.375% Sr. Sec. Nts., 7/13/16 | | | 2,050,000 | EUR | | | 2,774,169 | |
4.50% Sr. Sec. Nts., 7/13/21 | | | 1,404,000 | EUR | | | 1,870,079 | |
4.875% Sr. Sec. Nts., 12/20/24 | | | 160,000 | GBP | | | 258,046 | |
BOM Capital plc, 6.699% Sr. Unsec. Nts., 3/11/154 | | | 3,740,000 | | | | 3,721,300 | |
BPCE SFH SA, 3.75% Sr. Sec. Nts., 9/13/21 | | | 440,000 | EUR | | | 563,838 | |
CIT Group, Inc., 7% Sec. Bonds, 5/2/174 | | | 1,625,000 | | | | 1,625,000 | |
Halyk Savings Bank of Kazakhstan JSC: | | | | | | | | |
7.25% Unsec. Unsub. Nts., 5/3/174 | | | 430,000 | | | | 417,100 | |
9.25% Sr. Nts., 10/16/134 | | | 8,420,000 | | | | 8,883,100 | |
ICICI Bank Ltd.: | | | | | | | | |
5.50% Sr. Unsec. Nts., 3/25/154,8 | | | 3,090,000 | | | | 3,093,507 | |
6.375% Bonds, 4/30/223,4 | | | 3,060,000 | | | | 2,708,100 | |
Lloyds TSB Bank plc: | | | | | | | | |
4.875% Sec. Nts., 1/13/23 | | | 170,000 | EUR | | | 232,993 | |
6% Sr. Sec. Nts., 2/8/29 | | 190,000 | GBP | | | 331,033 | |
Privatbank CJSC/UK SPV Credit Finance plc, 8% Sr. Sec. Nts., 2/6/124 | | | 1,240,000 | | | | 1,223,731 | |
Sberbank of Russia Via SB Capital SA, 5.40% Sr. Unsec. Nts., 3/24/17 | | | 2,570,000 | | | | 2,570,000 | |
Turkiye Is Bankasi (Isbank), 5.10% Sr. Unsec. Nts., 2/1/164 | | | 1,290,000 | | | | 1,254,525 | |
VEB Finance Ltd., 6.902% Sr. Unsec. Unsub. Nts., 7/9/204 | | | 3,590,000 | | | | 3,697,700 | |
VTB Capital SA: | | | | | | | | |
6.315% Nts., 2/22/184 | | | 1,250,000 | | | | 1,188,375 | |
6.465% Sr. Sec. Unsub. Nts., 3/4/154 | | | 800,000 | | | | 810,000 | |
Westpac Banking Corp., 2.45% Sr. Sec. Bonds, 11/28/164 | | | 480,000 | | | | 476,527 | |
| | | | | | | |
| | | | | | | 54,390,413 | |
Consumer Finance—0.2% | | | | | | | | |
JSC Astana Finance, 9.16% Nts., 3/14/125 | | | 7,200,000 | | | | 792,000 | |
Speedy Cash, Inc., 10.75% Sr. Sec. Nts., 10/15/184 | | $ | 1,540,000 | | | $ | 1,555,400 | |
TMX Finance LLC/TitleMax Finance Corp., 13.25% Sr. Sec. Nts., 7/15/15 | | | 1,925,000 | | | | 2,127,125 | |
| | | | | | | |
| | | | | | | 4,474,525 | |
Diversified Financial Services—0.5% | | | | | | | | |
Autopistas del Nordeste Cayman Ltd., 9.39% Nts., 1/15/264 | | | 2,809,723 | | | | 2,556,847 | |
BA Covered Bond Issuer, 4.25% Sec. Nts., 4/5/17 | | | 825,000 | EUR | | | 1,076,830 | |
Banco Invex SA, 30.202% Mtg.-Backed Certificates, Series 062U, 3/13/343,14 | | | 4,830,734 | MXN | | | 472,173 | |
GMAC LLC, 8% Sr. Unsec. Nts., 11/1/31 | | | 1,260,000 | | | | 1,222,200 | |
JPMorgan Hipotecaria su Casita: | | | | | | | | |
7.973% Sec. Nts., 8/26/353,6 | | | 5,808,600 | MXN | | | 466,307 | |
28.563% Mtg.-Backed Certificates, Series 06U, 9/25/353 | | | 1,678,698 | MXN | | | 226,144 | |
Korea Development Bank (The), 4% Sr. Unsec. Unsub. Nts., 9/9/16 | | | 1,485,000 | | | | 1,512,432 | |
Tiers-BSP, 0%/8.60% Collateralized Trust, Cl. A, 6/15/974,17 | | | 6,360,000 | | | | 4,403,282 | |
| | | | | | | |
| | | | | | | 11,936,215 | |
Insurance—0.1% | | | | | | | | |
International Lease Finance Corp., 8.75% Sr. Unsec. Unsub. Nts., 3/15/17 | | | 1,475,000 | | | | 1,522,938 | |
Real Estate Investment Trusts—0.3% | | | | | | | | |
FelCor Escrow Holdings LLC, 6.75% Sr. Sec. Nts., 6/1/19 | | | 4,055,000 | | | | 3,913,075 | |
OMEGA Healthcare Investors, Inc., 6.75% Sr. Unsec. Nts., 10/15/22 | | | 2,470,000 | | | | 2,494,700 | |
| | | | | | | |
| | | | | | | 6,407,775 | |
Real Estate Management & Development—0.2% | | | | | | | | |
Ainsworth Lumber Co. Ltd., 11% Sr. Unsec. Unsub. Nts., 7/29/154,15 | | | 3,077,558 | | | | 1,986,376 | |
Realogy Corp., 11.50% Sr. Unsec. Unsub. Nts., 4/15/17 | | | 1,255,000 | | | | 985,175 | |
Wallace Theater Holdings, Inc., 12.50% Sr. Sec. Nts., 6/15/133,4 | | | 2,230,000 | | | | 2,174,250 | |
| | | | | | | |
| | | | | | | 5,145,801 | |
Thrifts & Mortgage Finance—0.3% | | | | | | | | |
Banco Hipotecario SA, 9.75% Sr. Unsec. Nts., 4/27/164 | | | 745,000 | | | | 685,400 | |
WM Covered Bond Program: | | | | | | | | |
4% Sec. Mtg. Nts., Series 2, 9/27/16 | | | 3,250,000 | EUR | | | 4,413,354 | |
4.375% Sec. Nts., 5/19/14 | | | 1,030,000 | EUR | | | 1,385,584 | |
| | | | | | | |
| | | | | | | 6,484,338 | |
21 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Health Care—1.0% | | | | | | | | |
| | | | | | | | |
Biotechnology—0.0% | | | | | | | | |
Grifols, Inc., 8.25% Sr. Sec. Nts., 2/1/18 | | $ | 800,000 | | | $ | 844,000 | |
| | | | | | | | |
Health Care Equipment & Supplies—0.3% | | | | | | | | |
Accellent, Inc., 10% Sr. Unsec. Sub. Nts., 11/1/17 | | | 2,305,000 | | | | 1,878,575 | |
Alere, Inc., 8.625% Sr. Unsec. Sub. Nts., 10/1/18 | | | 1,030,000 | | | | 1,019,700 | |
Biomet, Inc., 11.625% Sr. Unsec. Sub. Nts., 10/15/17 | | | 1,836,000 | | | | 2,001,240 | |
Inverness Medical Innovations, Inc., 7.875% Sr. Unsec. Unsub. Nts., 2/1/16 | | | 1,045,000 | | | | 1,052,838 | |
| | | | | | | |
| | | | | | | 5,952,353 | |
| | | | | | | | |
Health Care Providers & Services—0.5% | | | | | | | | |
Catalent Pharma Solutions, Inc., 9.50% Sr. Unsec. Nts., 4/15/1515 | | | 1,593,400 | | | | 1,645,186 | |
Gentiva Health Services, Inc., 11.50% Sr. Unsec. Unsub. Nts., 9/1/18 | | | 1,170,000 | | | | 966,713 | |
inVentiv Health, Inc., 10% Sr. Unsec. Nts., 8/15/184 | | | 1,280,000 | | | | 1,177,600 | |
Kindred Healthcare, Inc., 8.25% Sr. Unsec. Nts., 6/1/19 | | | 2,145,000 | | | | 1,812,525 | |
Multiplan, Inc., 9.875% Sr. Nts., 9/1/184 | | | 1,150,000 | | | | 1,201,750 | |
Oncure Holdings, Inc., 11.75% Sr. Sec. Nts., 5/15/17 | | | 1,130,000 | | | | 898,350 | |
Radiation Therapy Services, Inc., 9.875% Sr. Unsec. Sub. Nts., 4/15/17 | | | 1,205,000 | | | | 906,763 | |
STHI Holding Corp., 8% Sec. Nts., 3/15/184 | | | 795,000 | | | | 820,838 | |
US Oncology, Inc., Escrow Shares (related to 9.125% Sr. Sec. Nts., 8/15/17)5 | | | 1,730,000 | | | | 30,275 | |
Vanguard Health Holding Co. II LLC/Vanguard Holding Co. II, Inc., 8% Sr. Nts., 2/1/18 | | | 1,595,000 | | | | 1,591,013 | |
| | | | | | | |
| | | | | | | 11,051,013 | |
| | | | | | | | |
Health Care Technology—0.0% | | | | | | | | |
MedAssets, Inc., 8% Sr. Unsec. Nts., 11/15/18 | | | 305,000 | | | | 300,425 | |
| | | | | | | | |
Life Sciences Tools & Services—0.0% | | | | | | | | |
Jaguar Holding Co./Jaguar Merger Sub, Inc., 9.50% Sr. Unsec. Nts., 12/1/194 | | | 770,000 | | | | 812,350 | |
| | | | | | | | |
Pharmaceuticals—0.2% | | | | | | | | |
DJO Finance LLC/DJO Finance Corp., 10.875% Sr. Unsec. Nts., 11/15/14 | | | 535,000 | | | | 501,563 | |
Mylan, Inc., 6% Sr. Nts., 11/15/184 | | | 810,000 | | | | 837,338 | |
Valeant Pharmaceuticals International, Inc., 6.875% Sr. Unsec. Nts., 12/1/184 | | | 765,000 | | | | 766,913 | |
Warner Chilcott Co. LLC/Warner Chilcott Finance LLC, 7.75% Sr. Unsec. Nts., 9/15/18 | | | 2,320,000 | | | | 2,380,900 | |
| | | | | | | |
| | | | | | | 4,486,714 | |
| | | | | | | | |
Industrials—2.6% | | | | | | | | |
| | | | | | | | |
Aerospace & Defense—0.5% | | | | | | | | |
BE Aerospace, Inc., 6.875% Sr. Nts., 10/1/20 | | | 840,000 | | | | 919,800 | |
DynCorp International, Inc., 10.375% Sr. Unsec. Nts., 7/1/17 | | | 4,005,000 | | | | 3,504,375 | |
Hawker Beechcraft Acquisition Co. LLC: | | | | | | | | |
8.50% Sr. Unsec. Nts., 4/1/15 | | | 4,815,000 | | | | 914,850 | |
9.75% Sr. Unsec. Sub. Nts., 4/1/17 | | | 955,000 | | | | 95,500 | |
Huntington Ingalls Industries, Inc., 7.125% Sr. Unsec. Nts., 3/15/214 | | | 1,410,000 | | | | 1,388,850 | |
Kratos Defense & Security Solutions, Inc., 10% Sr. Sec. Nts., 6/1/17 | | | 1,040,000 | | | | 1,071,200 | |
TransDigm, Inc., 7.75% Sr. Unsec. Sub. Nts., 12/15/18 | | | 3,200,000 | | | | 3,456,000 | |
| | | | | | | |
| | | | | | | 11,350,575 | |
| | | | | | | | |
Air Freight & Logistics—0.0% | | | | | | | | |
AMGH Merger Sub, Inc., 9.25% Sr. Sec. Nts., 11/1/184 | | | 770,000 | | | | 796,950 | |
| | | | | | | | |
Airlines—0.2% | | | | | | | | |
American Airlines 2011-2 Class A Pass Through Trust, 8.625% Sec. Certificates, 4/15/23 | | | 420,000 | | | | 428,400 | |
Delta Air Lines, Inc., 12.25% Sr. Sec. Nts., 3/15/154 | | | 3,630,000 | | | | 3,811,500 | |
| | | | | | | |
| | | | | | | 4,239,900 | |
| | | | | | | | |
Building Products—0.2% | | | | | | | | |
Associated Materials LLC, 9.125% Sr. Sec. Nts., 11/1/174 | | | 1,105,000 | | | | 969,638 | |
Ply Gem Industries, Inc., 13.125% Sr. Unsec. Sub. Nts., 7/15/14 | | | 3,655,000 | | | | 3,252,950 | |
Roofing Supply Group LLC/Roofing Supply Finance, Inc., 8.625% Sr. Sec. Nts., 12/1/174 | | | 990,000 | | | | 1,017,500 | |
| | | | | | | |
| | | | | | | 5,240,088 | |
| | | | | | | | |
Commercial Services & Supplies—0.3% | | | | | | | | |
R.R. Donnelley & Sons Co., 7.25% Sr. Nts., 5/15/18 | | | 2,000,000 | | | | 1,950,000 | |
West Corp.: | | | | | | | | |
7.875% Sr. Unsec. Nts., 1/15/19 | | | 1,220,000 | | | | 1,216,950 | |
8.625% Sr. Unsec. Nts., 10/1/18 | | | 2,665,000 | | | | 2,704,975 | |
| | | | | | | |
| | | | | | | 5,871,925 | |
22 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| | | | | | | | |
| | Principal | | | |
| | Amount | | | Value | |
|
Construction & Engineering—0.2% | | | | | | | | |
IIRSA Norte Finance Ltd., 8.75% Sr. Nts., 5/30/244 | | $ | 3,701,713 | | | $ | 4,280,290 | |
Odebrecht Finance Ltd., 7% Sr. Unsec. Nts., 4/21/204 | | | 740,000 | | | | 795,500 | |
| | | | | | | | |
| | | | | | | 5,075,790 | |
| | | | | | | | |
Electrical Equipment—0.1% | | | | | | | | |
Thermon Industries, Inc., 9.50% Sr. Sec. Nts., 5/1/17 | | | 1,646,000 | | | | 1,781,795 | |
| | | | | | | | |
Machinery—0.5% | | | | | | | | |
Cleaver-Brooks, Inc., 12.25% Sr. Sec. Nts., 5/1/166 | | | 2,675,000 | | | | 2,658,148 | |
CNH Capital LLC, 6.25% Sr. Unsec. Nts., 11/1/164 | | | 520,000 | | | | 538,200 | |
Manitowoc Co., Inc. (The), 8.50% Sr. Unsec. Nts., 11/1/20 | | | 2,805,000 | | | | 2,969,794 | |
Terex Corp., 8% Sr. Unsec. Sub. Nts., 11/15/17 | | | 4,140,000 | | | | 4,077,900 | |
Thermadyne Holdings Corp., 9% Sr. Sec. Nts., 12/15/17 | | | 1,325,000 | | | | 1,378,000 | |
| | | | | | | | |
| | | | | | | 11,622,042 | |
| | | | | | | | |
Marine—0.2% | | | | | | | | |
Marquette Transportation Co./Marquette Transportation Finance Corp., 10.875% Sec. Nts., 1/15/17 | | | 2,790,000 | | | | 2,824,875 | |
Navios Maritime Holdings, Inc./Navios Maritime Finance U.S., Inc., 8.875% Sr. Sec. Nts., 11/1/17 | | | 565,000 | | | | 540,988 | |
| | | | | | | | |
| | | | | | | 3,365,863 | |
| | | | | | | | |
Professional Services—0.1% | | | | | | | | |
Altegrity, Inc., 10.50% Sr. Unsec. Sub. Nts., 11/1/154 | | | 1,080,000 | | | | 977,400 | |
TransUnion LLC/TransUnion Financing Corp., 11.375% Sr. Unsec. Nts., 6/15/18 | | | 660,000 | | | | 757,350 | |
| | | | | | | | |
| | | | | | | 1,734,750 | |
| | | | | | | | |
Road & Rail—0.3% | | | | | | | | |
Hertz Corp., 7.50% Sr. Unsec. Nts., 10/15/18 | | | 3,620,000 | | | | 3,801,000 | |
Kazakhstan Temir Zholy Finance BV, 6.375% Sr. Unsec. Nts., 10/6/204 | | | 825,000 | | | | 864,188 | |
Western Express, Inc., 12.50% Sr. Sec. Nts., 4/15/154 | | | 3,730,000 | | | | 1,603,900 | |
| | | | | | | | |
| | | | | | | 6,269,088 | |
| | | | | | | | |
Information Technology—1.2% | | | | | | | | |
| | | | | | | | |
Communications Equipment—0.0% | | | | | | | | |
Avaya, Inc., 7% Sr. Sec. Nts., 4/1/194 | | | 1,055,000 | | | | 1,028,625 | |
| | | | | | | | |
Computers & Peripherals—0.2% | | | | | | | | |
Seagate HDD Cayman: | | | | | | | | |
6.875% Sr. Unsec. Nts., 5/1/20 | | | 1,880,000 | | | | 1,941,100 | |
7% Sr. Unsec. Nts., 11/1/214 | | | 1,695,000 | | | | 1,745,850 | |
| | | | | | | | |
| | | | | | | 3,686,950 | |
| | | | | | | | |
Electronic Equipment & Instruments—0.1% | | | | | | | | |
CDW LLC/CDW Finance Corp., 12.535% Sr. Unsec. Sub. Nts., 10/12/17 | | | 1,920,000 | | | | 1,939,200 | |
| | | | | | | | |
Internet Software & Services—0.2% | | | | | | | | |
ITC DeltaCom, Inc., 10.50% Sr. Sec. Nts., 4/1/16 | | | 5,135,000 | | | | 5,276,213 | |
| | | | | | | | |
IT Services—0.3% | | | | | | | | |
Ceridian Corp., 11.25% Sr. Unsec. Nts., 11/15/15 | | | 2,145,000 | | | | 1,683,825 | |
First Data Corp.: | | | | | | | | |
8.875% Sr. Sec. Nts., 8/15/204 | | | 2,390,000 | | | | 2,401,950 | |
9.875% Sr. Unsec. Nts., 9/24/15 | | | 2,085,000 | | | | 1,970,325 | |
| | | | | | | | |
| | | | | | | 6,056,100 | |
| | | | | | | | |
Semiconductors & Semiconductor Equipment—0.3% | | | | | | | | |
Advanced Micro Devices, Inc., 7.75% Sr. Unsec. Nts., 8/1/20 | | | 2,520,000 | | | | 2,601,900 | |
Freescale Semiconductor, Inc.: | | | | | | | | |
9.25% Sr. Sec. Nts., 4/15/184 | | | 1,710,000 | | | | 1,836,113 | |
10.75% Sr. Unsec. Nts., 8/1/20 | | | 1,950,000 | | | | 2,042,625 | |
NXP BV/NXP Funding LLC, 9.75% Sr. Sec. Nts., 8/1/184 | | | 855,000 | | | | 936,225 | |
| | | | | | | | |
| | | | | | | 7,416,863 | |
| | | | | | | | |
Software—0.1% | | | | | | | | |
SunGard Data Systems, Inc.: | | | | | | | | |
7.375% Sr. Unsec. Nts., 11/15/18 | | | 560,000 | | | | 576,100 | |
7.625% Sr. Unsec. Nts., 11/15/20 | | | 765,000 | | | | 789,863 | |
| | | | | | | | |
| | | | | | | 1,365,963 | |
| | | | | | | | |
Materials—2.5% | | | | | | | | |
| | | | | | | | |
Chemicals—0.5% | | | | | | | | |
Braskem America Finance Co., 7.125% Sr. Unsec. Nts., 7/22/414 | | | 610,000 | | | | 589,413 | |
Braskem Finance Ltd., 5.75% Sr. Unsec. Nts., 4/15/214 | | | 2,580,000 | | | | 2,586,450 | |
Ferro Corp., 7.875% Sr. Unsec. Nts., 8/15/18 | | | 1,545,000 | | | | 1,560,450 | |
Hexion U.S. Finance Corp./Hexion | | | | | | | | |
Nova Scotia Finance ULC: | | | | | | | | |
8.875% Sr. Sec. Nts., 2/1/18 | | | 1,315,000 | | | | 1,239,388 | |
9% Sec. Nts., 11/15/20 | | | 1,340,000 | | | | 1,112,200 | |
Lyondell Chemical Co., 8% Sr. Sec. Nts., 11/1/17 | | | 960,000 | | | | 1,053,600 | |
LyondellBasell Industries NV, 6% Sr. Nts., 11/15/214 | | | 1,525,000 | | | | 1,589,813 | |
23 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | |
| | Amount | | | Value | |
|
CHEMICALS Continued | | | | | | | | |
Momentive Performance Materials, Inc., 9% Sec. Nts., 1/15/21 | | $ | 2,165,000 | | | $ | 1,656,225 | |
| | | | | | | | |
| | | | | | | 11,387,539 | |
| | | | | | | | |
Construction Materials—0.3% | | | | | | | | |
Building Materials Corp. of America, 6.75% Sr. Nts., 5/1/214 | | | 1,540,000 | | | | 1,620,850 | |
CEMEX Espana SA, 9.25% Sr. Sec. Nts., 5/12/204 | | | 872,000 | | | | 673,620 | |
CEMEX SAB de CV, 9% Sr. Sec. Nts., 1/11/184 | | | 1,950,000 | | | | 1,564,875 | |
Ply Gem Industries, Inc., 8.25% Sr. Sec. Nts., 2/15/18 | | | 1,355,000 | | | | 1,187,319 | |
Rearden G Holdings Eins GmbH, 7.875% Sr. Unsec. Nts., 3/30/204 | | | 990,000 | | | | 997,425 | |
| | | | | | | | |
| | | | | | | 6,044,089 | |
| | | | | | | | |
Containers & Packaging—0.2% | | | | | | | | |
Berry Plastics Corp., 9.75% Sec. Nts., 1/15/21 | | | 1,580,000 | | | | 1,583,950 | |
Polymer Group, Inc., 7.75% Sr. Sec. Nts., 2/1/194 | | | 2,075,000 | | | | 2,158,000 | |
Solo Cup Co., 8.50% Sr. Sub. Nts., 2/15/14 | | | 880,000 | | | | 814,000 | |
| | | | | | | | |
| | | | | | | 4,555,950 | |
| | | | | | | | |
Metals & Mining—0.9% | | | | | | | | |
Aleris International, Inc., 7.625% Sr. Unsec. Nts., 2/15/18 | | | 3,805,000 | | | | 3,728,900 | |
Alrosa Finance SA, 7.75% Nts., 11/3/204 | | | 1,580,000 | | | | 1,580,000 | |
Consolidated Minerals Ltd., 8.875% Sr. Sec. Nts., 5/1/164 | | | 1,245,000 | | | | 1,083,150 | |
CSN Islands XI Corp., 6.875% Sr. Unsec. Nts., 9/21/194 | | | 820,000 | | | | 870,430 | |
Ferrexpo Finance plc, 7.875% Sr. Unsec. Bonds, 4/7/164 | | | 2,105,000 | | | | 1,841,875 | |
JSC Severstal, 6.70% Nts., 10/25/174 | | | 1,940,000 | | | | 1,828,450 | |
Novelis, Inc., 8.75% Sr. Unsec. Nts., 12/15/20 | | | 465,000 | | | | 501,038 | |
Vedanta Resources plc: | | | | | | | | |
8.25% Sr. Unsec. Nts., 6/7/214 | | | 2,420,000 | | | | 1,899,700 | |
9.50% Sr. Unsec. Nts., 7/18/184 | | | 7,325,000 | | | | 6,372,750 | |
| | | | | | | | |
| | | | | | | 19,706,293 | |
| | | | | | | | |
Paper & Forest Products—0.6% | | | | | | | | |
ABI Escrow Corp., 10.25% Sr. Sec. Nts., 10/15/184 | | | 1,554,000 | | | | 1,721,055 | |
Appleton Papers, Inc., 10.50% Sr. Sec. Nts., 6/15/154 | | | 3,700,000 | | | | 3,667,625 | |
Catalyst Paper Corp., 11% Sr. Sec. Nts., 12/15/164 | | | 3,981,000 | | | | 2,129,835 | |
Mercer International, Inc., 9.50% Sr. Unsec. Nts., 12/1/17 | | | 2,005,000 | | | | 2,060,138 | |
NewPage Corp., 11.375% Sr. Sec. Nts., 12/31/145 | | | 4,855,000 | | | | 3,616,975 | |
Norske Skogindustrier ASA, 6.125% Unsec. Bonds, 10/15/156 | | | 1,500,000 | | | | 907,500 | |
| | | | | | | | |
| | | | | | | 14,103,128 | |
| | | | | | | | |
Telecommunication Services—2.0% | | | | | | | | |
| | | | | | | | |
Diversified Telecommunication Services—1.0% | | | | | | | | |
Axtel SAB de CV, 9% Sr. Unsec. Nts., 9/22/194 | | | 2,800,000 | | | | 2,156,000 | |
Brasil Telecom SA, 9.75% Sr. Unsec. Nts., 9/15/164 | | 2,990,000 | BRR | | | 1,570,942 | |
Cincinnati Bell, Inc.: | | | | | | | | |
8.25% Sr. Nts., 10/15/17 | | | 1,410,000 | | | | 1,424,100 | |
8.75% Sr. Unsec. Sub. Nts., 3/15/18 | | | 2,010,000 | | | | 1,876,838 | |
Intelsat Bermuda Ltd.: | | | | | | | | |
11.25% Sr. Unsec. Nts., 2/4/17 | | | 2,055,000 | | | | 1,993,350 | |
11.50% Sr. Unsec. Nts., 2/4/1715 | | | 1,424,414 | | | | 1,378,121 | |
Intelsat Jackson Holdings SA, 7.25% Sr. Unsec. Nts., 10/15/20 | | | 755,000 | | | | 768,213 | |
Level 3 Financing, Inc.: | | | | | | | | |
9.25% Sr. Unsec. Unsub. Nts., 11/1/14 | | | 320,000 | | | | 328,800 | |
9.375% Sr. Unsec. Unsub. Nts., 4/1/19 | | | 3,460,000 | | | | 3,628,675 | |
Telemar Norte Leste SA, 5.50% Sr. Unsec. Nts., 10/23/204 | | | 4,302,000 | | | | 4,258,980 | |
Wind Acquisition Finance SA, 7.25% Sr. Sec. Nts., 2/15/184 | | | 1,190,000 | | | | 1,085,875 | |
Windstream Corp., 7.50% Sr. Unsec. Nts., 6/1/224 | | | 1,975,000 | | | | 1,975,000 | |
| | | | | | | | |
| | | | | | | 22,444,894 | |
| | | | | | | | |
Wireless Telecommunication Services—1.0% | | | | | | | | |
America Movil SAB de CV: | | | | | | | | |
6.125% Sr. Unsec. Unsub. Nts., 3/30/40 | | | 655,000 | | | | 783,844 | |
8.46% Sr. Unsec. Unsub. Bonds, 12/18/36 | | 52,700,000 | MXN | | | 3,632,658 | |
Cricket Communications, Inc., 7.75% Sr. Unsec. Nts., 10/15/20 | | | 2,440,000 | | | | 2,141,100 | |
MetroPCS Wireless, Inc., 6.625% Sr. Unsec. Nts., 11/15/20 | | | 2,770,000 | | | | 2,589,950 | |
MTS International Funding Ltd., 8.625% Sr. Unsec. Nts., 6/22/204 | | | 2,035,000 | | | | 2,195,256 | |
Nextel Communications, Inc., 7.375% Sr. Nts., Series D, 8/1/15 | | | 2,065,000 | | | | 1,899,800 | |
Sprint Capital Corp., 8.75% Nts., 3/15/32 | | | 480,000 | | | | 390,600 | |
Sprint Nextel Corp., 9% Sr. Unsec. Nts., 11/15/184 | | | 775,000 | | | | 815,688 | |
24 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Wireless Telecommunication Services Continued | | | | | | | | |
Vimpel Communications/ VIP Finance Ireland Ltd. OJSC, 7.748% Nts., 2/2/214 | | $ | 1,205,000 | | | $ | 1,036,300 | |
VimpelCom Holdings BV, 7.504% Sr. Unsec. Unsub. Nts., 3/1/224 | | | 2,035,000 | | | | 1,719,575 | |
VIP Finance Ireland Ltd., 9.125% Bonds, 4/30/184 | | | 4,350,000 | | | | 4,279,313 | |
| | | | | | | |
| | | | | | | 21,484,084 | |
| | | | | | | | |
Utilities—3.0% | | | | | | | | |
| | |
Electric Utilities—1.8% | | | | | | | | |
Centrais Eletricas Brasileiras SA: | | | | | | | | |
5.75% Sr. Unsec. Unsub. Nts., 10/27/214 | | | 2,530,000 | | | | 2,641,320 | |
6.875% Sr. Unsec. Unsub. Nts., 7/30/194 | | | 1,605,000 | | | | 1,829,700 | |
Edison Mission Energy, 7% Sr. Unsec. Nts., 5/15/17 | | | 2,905,000 | | | | 1,902,775 | |
Empresa Distribuidora y Comercializadora Norte SA, 9.75% Nts., 10/25/224 | | | 800,000 | | | | 664,000 | |
Empresas Publicas de Medellin ESP, 7.625% Sr. Unsec. Nts., 7/29/194 | | | 1,445,000 | | | | 1,683,425 | |
Energy Future Intermediate Holding Co. LLC, 10% Sr. Sec. Nts., 12/1/20 | | | 1,992,000 | | | | 2,111,520 | |
Eskom Holdings Ltd.: | | | | | | | | |
5.75% Sr. Unsec. Bonds, 1/26/214 | | | 3,010,000 | | | | 3,077,725 | |
7.85% Sr. Unsec. Unsub. Nts., Series ES26, 4/2/26 | | | 31,000,000 | ZAR | | | 3,491,475 | |
10% Nts., Series ES23, 1/25/23 | | | 44,000,000 | ZAR | | | 6,064,528 | |
Israel Electric Corp. Ltd., 7.25% Nts., 1/15/194 | | | 4,440,000 | | | | 4,586,786 | |
Majapahit Holding BV: | | | | | | | | |
7.75% Nts., 10/17/164 | | | 2,250,000 | | | | 2,534,063 | |
8% Sr. Unsec. Nts., 8/7/194,8 | | | 1,650,000 | | | | 1,947,000 | |
National Power Corp., 5.875% Unsec. Unsub. Bonds, 12/19/16 | | | 109,600,000 | PHP | | | 2,789,456 | |
Perusahaan Listrik Negara PT, 5.50% Sr. Unsec. Nts., 1/22/214 | | | 2,220,000 | | | | 2,269,950 | |
Texas Competitive Electric Holdings Co. LLC: | | | | | | | | |
10.25% Sr. Unsec. Nts., Series A, 11/1/15 | | | 8,270,000 | | | | 2,977,200 | |
10.25% Sr. Unsec. Nts., Series B, 11/1/15 | | | 1,460,000 | | | | 511,000 | |
| | | | | | | |
| | | | | | | 41,081,923 | |
| | | | | | | | |
Energy Traders—0.9% | | | | | | | | |
AES Corp. (The), 8% Sr. Unsec. Unsub. Nts., 10/15/17 | | | 855,000 | | | | 944,775 | |
Calpine Corp., 7.50% Sr. Sec. Nts., 2/15/214 | | | 885,000 | | | | 951,375 | |
Colbun SA, 6% Sr. Unsec. Nts., 1/21/204 | | | 1,750,000 | | | | 1,860,646 | |
Comision Federal de Electricidad, 4.875% Sr. Nts., 5/26/214,8 | | | 1,725,000 | | | | 1,794,000 | |
Energy Future Holdings Corp., 10% Sr. Sec. Nts., 1/15/20 | | | 1,840,000 | | | | 1,941,200 | |
First Wind Capital LLC, 10.25% Sr. Sec. Nts., 6/1/184 | | | 270,000 | | | | 266,625 | |
Foresight Energy LLC, 9.625% Sr. Unsec. Nts., 8/15/174 | | | 1,895,000 | | | | 1,951,850 | |
GenOn Energy, Inc., 9.50% Sr. Unsec. Nts., 10/15/18 | | | 1,465,000 | | | | 1,490,638 | |
NRG Energy, Inc., 7.625% Sr. Unsec. Nts., 1/15/18 | | | 560,000 | | | | 562,800 | |
Power Sector Assets & Liabilities Management Corp.: | | | | | | | | |
7.25% Sr. Gtd. Unsec. Nts., 5/27/194 | | | 1,110,000 | | | | 1,351,425 | |
7.39% Sr. Gtd. Unsec. Nts., 12/2/244 | | | 1,200,000 | | | | 1,473,000 | |
PT Cikarang Listindo/Listindo Capital BV, 9.25% Sr. Nts., 1/29/154 | | | 1,120,000 | | | | 1,219,364 | |
United Maritime Group LLC, 11.75% Sr. Sec. Nts., 6/15/15 | | | 3,630,000 | | | | 3,711,643 | |
| | | | | | | |
| | | | | | | 19,519,341 | |
| | | | | | | | |
Gas Utilities—0.1% | | | | | | | | |
Empresa de Energia de Bogota SA ESP, 6.125% Sr. Unsec. Unsub. Nts., 11/10/216 | | | 870,000 | | | | 885,225 | |
Ferrellgas LP/Ferrellgas Finance Corp., 6.50% Sr. Unsec. Nts., 5/1/21 | | | 680,000 | | | | 601,800 | |
TGI International Ltd., 9.50% Nts., 10/3/174 | | | 1,352,000 | | | | 1,455,090 | |
| | | | | | | |
| | | | | | | 2,942,115 | |
| | | | | | | | |
Multi-Utilities—0.1% | | | | | | | | |
Abu Dhabi National Energy Co. (TAQA), 5.875% Sr. Unsec. Nts., 12/13/214 | | | 1,690,000 | | | | 1,766,050 | |
Water Utilities—0.1% | | | | | | | | |
Cia de Saneamento Basico do Estado de Sao Paulo, 6.25% Sr. Unsec. Nts., 12/16/204 | | | 1,475,000 | | | | 1,530,313 | |
| | | | | | | |
Total Corporate Bonds and Notes (Cost $615,468,202) | | | | | | | 584,115,534 | |
| | | | | | | | |
| | Shares | | | | | |
|
Preferred Stocks—0.3% | | | | | | | | |
Ally Financial, Inc., 7%, Non-Vtg.4 | | | 3,112 | | | | 2,231,012 | |
GMAC Capital Trust I, 8.125% Cum. | | | 30,000 | | | | 580,200 | |
Greektown Superholdings, Inc., Series A-12 | | | 45,600 | | | | 2,968,560 | |
| | | | | | | |
Total Preferred Stocks (Cost $8,077,075) | | | | | | | 5,779,772 | |
25 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Shares | | | Value | |
|
Common Stocks—0.6% | | | | | | | | |
AbitibiBowater, Inc.2 | | | 88,383 | | | $ | 1,285,973 | |
American Media Operations, Inc. 2 | | | 161,731 | | | | 2,587,696 | |
Arco Capital Corp. Ltd.2,6 | | | 690,638 | | | | 1,381,276 | |
Dana Holding Corp.2 | | | 72,775 | | | | 884,216 | |
Gaylord Entertainment Co., Cl. A2 | | | 43,813 | | | | 1,057,646 | |
Global Aviation Holdings, Inc.2 | | | 100 | | | | 1,000 | |
Greektown Superholdings, Inc. 2 | | | 3,450 | | | | 208,932 | |
Huntsman Corp. | | | 25,585 | | | | 255,850 | |
Kaiser Aluminum Corp. | | | 229 | | | | 10,507 | |
LyondellBasell Industries NV, Cl. A | | | 45,017 | | | | 1,462,602 | |
MHP SA, GDR2,4 | | | 56,610 | | | | 606,293 | |
Orbcomm, Inc.2 | | | 375 | | | | 1,121 | |
Premier Holdings Ltd.2 | | | 18,514 | | | | — | |
Range Resources Corp. | | | 7,593 | | | | 470,310 | |
Solutia, Inc.2 | | | 21,182 | | | | 366,025 | |
Visteon Corp. 2 | | | 36,636 | | | | 1,829,602 | |
Walter Industries, Inc. | | | 3,907 | | | | 236,608 | |
Whiting Petroleum Corp.2 | | | 7,858 | | | | 366,890 | |
| | | | | | | |
Total Common Stocks (Cost $27,341,263) | | | | | | | 13,012,547 | |
| | |
| | Units | | | | | |
|
Rights, Warrants and Certificates—0.0% | | | | | | | | |
MediaNews Group, Inc. Wts., Strike Price $0.001, Exp. 3/19/17 2 (Cost $3,162,655) | | | 11,668 | | | | 420 | |
| | |
| | Principal | | | | | |
| | Amount | | | | | |
|
Structured Securities—5.6% | | | | | | | | |
Barclays Bank plc: | | | | | | | | |
Indonesia (Republic of) Total Return Linked Bonds, 10.50%, 8/19/30 | | 13,870,000,000 | IDR | | | 2,067,613 | |
Indonesia (Republic of) Total Return Linked Bonds, Series 22, 11%, 9/17/25 | | 10,380,000,000 | IDR | | | 1,579,752 | |
Indonesia (Republic of) Total Return Linked Nts., Series 51, 10.50%, 8/19/30 | | 2,650,000,000 | IDR | | | 395,038 | |
Indonesia (Republic of) Total Return Linked Nts., Series 51, 11%, 9/17/25 | | 2,650,000,000 | IDR | | | 403,309 | |
Russian Federation Total Return Linked Bonds, 7.15%, 1/25/133 | | 57,980,000 | RUR | | | 1,811,650 | |
Russian Federation Total Return Linked Bonds, 6.70%, 2/8/133 | | 59,410,000 | RUR | | | 1,847,108 | |
Citigroup Funding, Inc.: | | | | | | | | |
ALROSA Russia Corporate Bond Credit Linked Unsec. Nts., 8.25%, 6/25/153,6 | | 19,220,000 | RUR | | | 601,296 | |
Indonesia (Republic of) Total Return Linked Nts., 11%, 9/17/25 | | 2,100,000,000 | IDR | | $ | 319,603 | |
Russian Federation Credit Linked Bonds, 6.70%, 2/8/133,6 | | 39,820,000 | RUR | | | 1,238,347 | |
Citigroup Global Markets Holdings, Inc.: | | | | | | | | |
Adira Dinamika Multi Finance Credit Linked Nts., 6.75%, 1/5/124 | | 34,400,000,000 | IDR | | | 3,794,907 | |
Colombia (Republic of) Credit Linked Bonds, 11.25%, 10/25/186 | | 3,255,000,000 | COP | | | 2,024,781 | |
Colombia (Republic of) Credit Linked Nts., Series 2, 10%, 7/25/24 | | 10,368,000,000 | COP | | | 6,359,928 | |
Colombia (Republic of) Total Return Linked Bonds, Series 2, 11%, 7/27/20 | | 2,665,000,000 | COP | | | 1,656,246 | |
Dominican Republic Unsec. Credit Linked Nts., 15%, 3/12/126 | | 49,300,000 | DOP | | | 1,278,000 | |
Credit Suisse First Boston International: | | | | | | | | |
Moitk Total Return Linked Nts., 21%, 3/30/115 | | 53,910,000 | RUR | | | 5,022 | |
Russian Oreniz Total Return Linked Nts., 9.24%, 2/24/123 | | 81,784,500 | RUR | | | 2,501,736 | |
Credit Suisse First Boston, Inc. (Nassau Branch), Russian Specialized Construction & Installation Administration Total Return Linked Nts., 13%, 5/24/105 | | 97,250,000 | RUR | | | 302 | |
Credit Suisse Group AG, Russian Moscoblgaz Finance Total Return Linked Nts., 9.25%, 6/27/12 | | 42,600,000 | RUR | | | 1,289,747 | |
Credit Suisse International: | | | | | | | | |
OAO Gazprom Total Return Linked Nts., 13.12%, 6/28/123 | | 41,550,000 | RUR | | | 1,328,919 | |
OAO Gazprom Total Return Linked Nts., 13.12%, 6/28/123 | | 30,880,000 | RUR | | | 987,654 | |
OAO Gazprom Total Return Linked Nts., 13.12%, 6/28/123 | | 44,460,000 | RUR | | | 1,421,991 | |
Deutsche Bank AG: | | | | | | | | |
Coriolanus Ltd. Sec. Credit Linked Bonds, Series 128, 3.006%, 5/6/256,13 | | | 1,831,327 | | | | 1,232,704 | |
Coriolanus Ltd. Sec. Credit Linked Bonds, 3.061%, 5/6/256,13 | | | 2,333,393 | | | | 1,570,655 | |
Coriolanus Ltd. Sec. Credit Linked Bonds, 3.10%, 5/6/256,13 | | | 2,014,511 | | | | 1,356,009 | |
Coriolanus Ltd. Sec. Credit Linked Bonds, 3.134%, 5/6/256,13 | | | 1,800,719 | | | | 1,212,101 | |
Coriolanus Ltd. Sec. Credit Linked Bonds, 3.187%, 5/6/256,13 | | | 2,242,041 | | | | 1,509,164 | |
26 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Structured Securities Continued | | | | | | | | |
Deutsche Bank AG: Continued | | | | | | | | |
Coriolanus Ltd. Sec. Credit Linked Bonds, 3.239%, 5/6/256,13 | | $ | 2,558,949 | | | $ | 1,722,481 | |
Coriolanus Ltd. Sec. Credit Linked Bonds, 3.266%, 5/6/256,13 | | | 2,044,301 | | | | 1,376,061 | |
Coriolanus Ltd. Sec. Credit Linked Bonds, 3.343%, 5/6/256,13 | | | 1,921,557 | | | | 1,293,439 | |
Coriolanus Ltd. Sec. Credit Linked Nts., 12.424%, 12/31/176 | | 15,420,000 | BRR | | | 9,946,565 | |
JSC Gazprom Total Return Linked Nts., 13.12%, 6/28/123 | | 38,600,000 | RUR | | | 1,236,844 | |
JSC Gazprom Total Return Linked Nts., Series 4, 13.12%, 6/28/123 | | 45,990,000 | RUR | | | 1,473,639 | |
JSC VTB Bank Credit Linked Nts., 12%, 6/19/123,6 | | 20,500,000 | UAH | | | 2,454,472 | |
Opic Reforma I Credit Linked Nts., Cl. 2A, 8.287%, 5/22/153,6 | | 697,693 | MXN | | | 48,425 | |
Opic Reforma I Credit Linked Nts., Cl. 2B, 8.287%, 5/22/153,6 | | 1,220,632 | MXN | | | 84,720 | |
Opic Reforma I Credit Linked Nts., Cl. 2C, 8.287%, 5/22/153,6 | | 18,404,162 | MXN | | | 1,277,379 | |
Opic Reforma I Credit Linked Nts., Cl. 2D, 8.287%, 5/22/153,6 | | 1,341,270 | MXN | | | 93,094 | |
Opic Reforma I Credit Linked Nts., Cl. 2E, 8.287%, 5/22/153,6 | | 974,458 | MXN | | | 67,634 | |
Opic Reforma I Credit Linked Nts., Cl. 2F, 8.287%, 5/22/153,6 | | 622,337 | MXN | | | 43,195 | |
Opic Reforma I Credit Linked Nts., Cl. 2G, 8.287%, 5/22/153,6 | | 114,609 | MXN | | | 7,955 | |
Eirles Two Ltd. Sec. Nts.: | | | | | | | | |
Series 324, 3.798%, 4/30/123,6 | | | 4,100,000 | | | | 3,767,900 | |
Series 335, 2.248%, 4/30/123,6 | | | 6,300,000 | | | | 6,016,500 | |
Goldman Sachs Capital Markets LP, Colombia (Republic of) Credit Linked Nts., 10.476%, 2/8/376,13 | | 63,720,800,000 | COP | | | 1,738,886 | |
Hallertau SPC Credit Linked Nts.: | | | | | | | | |
Series 2007-01, 2.838%, 12/20/173,6 | | | 6,250,000 | | | | 5,174,375 | |
Series 2008-01, 9.888%, 8/2/105,6,13 | | 14,337,604 | BRR | | | 768,669 | |
Series 2008-2A, 8.14%, 9/17/133,6 | | | 12,143,750 | | | | 6,820,359 | |
HSBC Bank USA NA: | | | | | | | | |
Indonesia (Republic of) Credit Linked Nts., Series 2, 8.25%, 7/15/214 | | 13,360,000,000 | IDR | | | 1,709,137 | |
Indonesia (Republic of) Credit Linked Nts., Series 2, 9.50%, 7/15/314 | | 13,330,000,000 | IDR | | | 1,852,308 | |
JPMorgan Chase & Co.: | | | | | | | | |
Colombia (Republic of) Credit Linked Nts., 11%, 7/28/206 | | 1,315,000,000 | COP | | | 817,423 | |
Indonesia (Republic of) Credit Linked Bonds, 8.25%, 7/19/214 | | 15,945,000,000 | IDR | | | 2,039,835 | |
Indonesia (Republic of) Credit Linked Bonds, Series 10, 8.25%, 7/19/214 | | 5,350,000,000 | IDR | | | 684,422 | |
Indonesia (Republic of) Credit Linked Bonds, Series 11, 8.25%, 7/19/214 | | 3,070,000,000 | IDR | | | 392,743 | |
Indonesia (Republic of) Credit Linked Bonds, Series 6, 8.25%, 7/19/214 | | 10,090,000,000 | IDR | | | 1,290,808 | |
Indonesia (Republic of) Credit Linked Bonds, Series 7, 8.25%, 7/19/214 | | 22,680,000,000 | IDR | | | 2,901,439 | |
Indonesia (Republic of) Credit Linked Bonds, Series 9, 8.25%, 7/19/214 | | 3,970,000,000 | IDR | | | 507,880 | |
Indonesia (Republic of) Credit Linked Nts., Series 4, 11%, 9/17/25 | | 32,670,000,000 | IDR | | | 4,972,109 | |
Indonesia (Republic of) Total Return Linked Nts., Series 53, 11%, 9/17/254 | | 2,100,000,000 | IDR | | | 319,603 | |
JPMorgan Chase Bank NA: | | | | | | | | |
Indonesia (Republic of) Credit Linked Nts., Series 1, 9.50%, 7/17/314 | | 4,222,000,000 | IDR | | | 586,680 | |
Indonesia (Republic of) Credit Linked Nts., Series 2, 10.50%, 8/19/304 | | 17,135,000,000 | IDR | | | 2,554,329 | |
Russian Federation Credit Linked Bonds, 6.70%, 2/8/133,4 | | 39,840,000 | RUR | | | 1,238,351 | |
Russian Federation Credit Linked Bonds, Series 2, 7.15%, 1/25/133,6 | | 48,970,000 | RUR | | | 1,528,982 | |
LB Peru Trust II Certificates, Series 1998-A, 4.534%, 2/28/165,13 | | | 363,871 | | | | 36,387 | |
Lehman Brothers Treasury Co. BV, Microvest Capital Management LLC Credit Linked Nts., 7.55%, 5/24/126 | | | 1,089,830 | | | | 331,962 | |
Merrill Lynch, Colombia (Republic of) Credit Linked Nts., 10%, 11/17/166 | | 1,784,000,000 | COP | | | 930,515 | |
Morgan Stanley: | | | | | | | | |
Peru (Republic of) Credit Linked Nts., 6.25%, 3/23/174 | | 4,885,000 | PEN | | | 1,344,394 | |
Russian Federation Total Return Linked Bonds, Series 007, Cl. VR, 5%, 8/22/34 | | 62,606,453 | RUR | | | 931,673 | |
Morgan Stanley Capital Services, Inc.: | | | | | | | | |
Brazil (Federative Republic of) Credit Linked Nts., 12.551%, 1/5/224,13 | | 28,914,000 | BRR | | | 2,163,996 | |
United Mexican States Credit Linked Nts., 5.64%, 11/20/154 | | | 2,000,000 | | | | 1,568,000 | |
Standard Bank Group Ltd., Ghana (Republic of) Credit Linked Bonds, 10.038%, 1/25/126,13 | | 1,710,000 | GHS | | | 1,036,743 | |
UBS AG: | | | | | | | | |
Indonesia (Republic of) Total Return Linked Nts., 8.25%, 7/19/21 | | 19,270,000,000 | IDR | | | 2,465,200 | |
27 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
| | | | | | | | |
| | Principal | | | | |
| | Amount | | | Value | |
|
Structured Securities Continued | | | | | | | | | | |
UBS AG: Continued | | | | | | | | | | |
Indonesia (Republic of) Total Return Linked Nts., Series 1, 9.50%, 7/17/31 | | 14,700,000,000 IDR | | $ | 2,042,680 | |
Indonesia (Republic of) Total Return Linked Nts., Series 3, 8.25%, 7/19/21 | | 2,970,000,000 IDR | | | 379,950 | |
Indonesia (Republic of) Total Return Linked Nts., Series 5, 8.25%, 7/19/21 | | 23,105,000,000 IDR | | | 2,955,809 | |
Indonesia (Republic of) Total Return Linked Nts., Series 999, 9.50%, 7/17/31 | | 18,212,000,000 IDR | | | 2,530,700 | |
| | | | | | | |
Total Structured Securities (Cost $155,955,100) | | | | | | | 127,320,232 | |
| | | | | | | | | | | | | | | | |
| | Expiration | | | Strike | | | | | | | | |
| | Date | | | Price | | | Contracts | | | | | |
|
Options Purchased—0.2% | | | | | | | | | | | | | | | | |
Australian Dollar (AUD) Call2 | | | 1/13/12 | | | $ | 1.040 | | | | 1,905,000 | | | | 6,373 | |
Australian Dollar (AUD) Call2 | | | 1/13/12 | | | | 1.040 | | | | 1,905,000 | | | | 6,373 | |
Australian Dollar (AUD) Call2 | | | 1/13/12 | | | | 1.040 | | | | 2,930,000 | | | | 9,802 | |
Australian Dollar (AUD) Call2 | | | 1/17/12 | | | | 1.040 | | | | 950,000 | | | | 4,215 | |
Australian Dollar (AUD) Futures, 3/19/12 Put2 | | | 1/9/12 | | | | 95.000 | | | | 95 | | | | 475 | |
Australian Dollar (AUD) Futures, 3/19/12 Put2 | | | 1/9/12 | | | | 99.000 | | | | 48 | | | | 5,760 | |
Australian Dollar (AUD) Futures, 3/19/12 Put2 | | | 1/9/12 | | | | 89.000 | | | | 49 | | | | 245 | |
Euro (EUR) 90 Day Futures, 3/19/12 Put2 | | | 1/16/12 | | | | 99.250 | | | | 179 | | | | 3,356 | |
Euro (EUR) 90 Day Futures, 3/19/12 Put2 | | | 2/13/12 | | | | 99.250 | | | | 179 | | | | 12,306 | |
Euro (EUR) Call2 | | | 1/13/12 | | | | 1.390 | | | | 950,000 | | | | 9 | |
Euro (EUR) Call2 | | | 1/13/12 | | | | 1.450 | | | | 950,000 | | | | — | |
Euro (EUR) Call2 | | | 1/18/12 | | | | 1.400 | | | | 955,000 | | | | 23 | |
Euro (EUR) FX Futures, 3/19/12 Put2 | | | 3/12/12 | | | | 1.310 | | | | 36 | | | | 176,850 | |
Euro-Bundesobligation Futures, 3/8/12 Call2 | | | 1/30/12 | | | 143.000 EUR | | | 136 | | | | 35,204 | |
Euro-Bundesobligation Futures, 3/8/12 Put2 | | | 1/30/12 | | | 130.000 EUR | | | 484 | | | | 18,792 | |
Euro-Bundesobligation Futures, 3/8/12 Put2 | | | 1/30/12 | | | 132.000 EUR | | | 484 | | | | 37,585 | |
Euro-Bundesobligation Futures, 3/8/12 Put2 | | | 1/30/12 | | | 135.000 EUR | | | 97 | | | | 32,641 | |
Euro-Bundesobligation Futures, 3/8/12 Put2 | | | 2/27/12 | | | 133.000 EUR | | | 98 | | | | 43,124 | |
Euro-Bundesobligation Futures, 3/8/12 Put2 | | | 2/27/12 | | | 134.000 | EUR | | | 433 | | | | 263,392 | |
Indonesia Rupiah (IDR) Put2 | | | 1/27/12 | | | 9,300,000 | IDR | | | 61,700,000,000 | | | | 70,338 | |
Indonesia Rupiah (IDR) Put2 | | | 1/27/12 | | | 9,300,000 | IDR | | | 30,900,000,000 | | | | 35,226 | |
Indonesia Rupiah (IDR) Put2 | | | 1/30/12 | | | 9,300,000 | IDR | | | 30,800,000,000 | | | | 33,880 | |
Japanese Yen (JPY) Futures, 3/19/12 Put2 | | | 1/9/12 | | | | 127.500 | | | | 24 | | | | 2,400 | |
Japanese Yen (JPY) Futures, 3/19/12 Put2 | | | 1/9/12 | | | | 126.500 | | | | 4 | | | | 250 | |
Japanese Yen (JPY) Futures, 3/19/12 Put2 | | | 1/9/12 | | | | 127.000 | | | | 41 | | | | 3,075 | |
Japanese Yen (JPY) Futures, 3/19/12 Put2 | | | 1/9/12 | | | | 128.000 | | | | 3 | | | | 413 | |
Japanese Yen (JPY) Futures, 3/19/12 Put2 | | | 2/6/12 | | | | 127.000 | | | | 20 | | | | 9,250 | |
Japanese Yen (JPY) Futures, 3/19/12 Put2 | | | 3/12/12 | | | | 127.500 | | | | 20 | | | | 24,250 | |
Japanese Yen (JPY) Futures, 3/19/12 Put2 | | | 3/12/12 | | | | 127.000 | | | | 56 | | | | 58,800 | |
Japanese Yen (JPY) Put2 | | | 10/23/12 | | | 85.000 | JPY | | | 322,000,000 | | | | 36,892 | |
Mexican Nuevo Peso (MXN) Call2 | | | 1/18/12 | | | 12.950 | MXN | | | 64,860,000 | | | | 385 | |
Mexican Nuevo Peso (MXN) Call2 | | | 1/18/12 | | | 12.950 | MXN | | | 64,860,000 | | | | 385 | |
New Zealand Dollar (NZD) Call2 | | | 1/13/12 | | | | 0.840 | | | | 2,860,000 | | | | 32 | |
New Zealand Dollar (NZD) Call2 | | | 1/17/12 | | | | 0.840 | | | | 2,800,000 | | | | 119 | |
New Zealand Dollar (NZD) Call2 | | | 1/17/12 | | | | 0.840 | | | | 2,855,000 | | | | 121 | |
South Korean Won (KRW) Call2 | | | 1/19/12 | | | 1,120.000 | KRW | | | 1,219,000,000 | | | | 1,158 | |
U.S. Treasury Nts. Futures, 10 yr., 3/21/12 Call2 | | | 1/30/12 | | | | 131.000 | | | | 222 | | | | 190,781 | |
U.S. Treasury Nts. Futures, 10 yr., 3/21/12 Put2 | | | 1/30/12 | | | | 125.000 | | | | 467 | | | | 7,297 | |
U.S. Treasury Nts. Futures, 10 yr., 3/21/12 Put2 | | | 1/30/12 | | | | 125.500 | | | | 188 | | | | 2,938 | |
U.S. Treasury Nts. Futures, 10 yr., 3/21/12 Put2 | | | 1/30/12 | | | | 127.500 | | | | 13 | | | | 813 | |
U.S. Treasury Nts. Futures, 10 yr., 3/21/12 Put2 | | | 1/30/12 | | | | 128.000 | | | | 664 | | | | 62,250 | |
U.S. Treasury Nts. Futures, 10 yr., 3/21/12 Put2 | | | 1/30/12 | | | | 128.500 | | | | 117 | | | | 14,625 | |
28 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| | | | | | | | | | | | | | | | |
| | Expiration | | | Strike | | | | | | | |
| | Date | | | Price | | | Contracts | | | Value | |
|
Options Purchased Continued | | | | | | | | | | | | | | | | |
U.S. Treasury Nts. Futures, 10 yr., 3/21/12 Put2 | | | 1/30/12 | | | $ | 129.500 | | | | 58 | | | $ | 15,406 | |
U.S. Treasury Nts. Futures, 10 yr., 3/21/12 Put2 | | | 2/27/12 | | | | 123.500 | | | | 89 | | | | 5,563 | |
U.S. Treasury Nts. Futures, 10 yr., 3/21/12 Put2 | | | 2/27/12 | | | | 125.500 | | | | 89 | | | | 9,734 | |
U.S. Treasury Nts. Futures, 10 yr., 3/21/12 Put2 | | | 2/27/12 | | | | 126.500 | | | | 9 | | | | 1,406 | |
U.S. Treasury Nts., 3.125%, 11/15/41 Call 2 | | | 5/30/12 | | | | 103.470 | | | | 70,500,000 | | | | 4,428,281 | |
| | | | | | | | | | | | | | | |
Total Options Purchased (Cost $8,462,954) | | | | | | | | | | | | | | | 5,672,593 | |
| | |
| | Exercise | | | | | | | Notional | | | | | |
| | Date | | | | | | | Amount | | | | | |
|
Swaptions Purchased—0.2% | | | | | | | | | | | | | | | | |
Goldman Sachs Group, Inc. (The); Interest Rate Swaption (European); Swap Terms; Paid: 2.495%; Received: Three-Month USD BBA LIBOR; Termination Date: 11/22/222 | | | 11/23/12 | | | | 2.500 | | | $ | 37,700,000 | | | | 1,002,622 | |
UBS AG; Interest Rate Swaption (European); Swap Terms; Paid: 2.215%; Received: | | | | | | | | | | | | | | | | |
Three-Month USD BBA LIBOR; Termination Date: 12/4/222 | | | 12/3/12 | | | | 2.220 | | | | 96,515,000 | | | | 3,449,483 | |
| | | | | | | | | | | | | | | |
Total Swaptions Purchased (Cost $6,458,261) | | | | | | | | | | | | | | | 4,452,105 | |
| | | | | | | | |
| | Shares | | | Value | |
|
Investment Companies—19.7% | | | | | | | | |
Oppenheimer Institutional Money Market Fund, Cl. E, 0.20%1,18 | | | 27,393,119 | | | $ | 27,393,119 | |
Oppenheimer Master Event-Linked Bond Fund, LLC1 | | | 4,827,322 | | | | 54,385,728 | |
Oppenheimer Master Loan Fund, LLC1 | | | 29,466,809 | | | | 351,705,692 | |
Oppenheimer Short Duration Fund, Cl. Y1 | | | 1,001,329 | | | | 10,013,286 | |
| | | | | | | |
Total Investment Companies (Cost $453,272,500) | | | | | | | 443,497,825 | |
Total Investments, at Value (Cost $2,467,842,455) | | | 103.2 | % | | | 2,325,918,740 | |
Liabilities in Excess of Other Assets | | | (3.2 | ) | | | (72,928,642 | ) |
| | |
Net Assets | | | 100.0 | % | | $ | 2,252,990,098 | |
| | |
29 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
Footnotes to Statement of Investments
*December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes.
Principal amount is reported in U.S. Dollars, except for those denoted in the following currencies:
| | |
|
AUD | | Australian Dollar |
BRR | | Brazilian Real |
CAD | | Canadian Dollar |
COP | | Colombian Peso |
DKK | | Danish Krone |
DOP | | Dominican Republic Peso |
EUR | | Euro |
GBP | | British Pound Sterling |
GHS | | Ghana Cedi |
HUF | | Hungarian Forint |
IDR | | Indonesia Rupiah |
ILS | | Israeli Shekel |
JPY | | Japanese Yen |
|
KRW | | South Korean Won |
MXN | | Mexican Nuevo Peso |
MYR | | Malaysian Ringgit |
NZD | | New Zealand Dollar |
PEN | | Peruvian New Sol |
PHP | | Philippines Peso |
PLZ | | Polish Zloty |
RUR | | Russian Ruble |
SGD | | Singapore Dollar |
TRY | | New Turkish Lira |
UAH | | Ukraine Hryvnia |
ZAR | | South African Rand |
1. | | Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 30, 2011, 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 period in which the issuer was an affiliate are as follows: |
| | | | | | | | | | | | | | | | |
| | Shares | | | Gross | | | Gross | | | Shares | |
| | December 31, 2010 | | | Additions | | | Reductions | | | December 30, 2011 | |
|
Oppenheimer Institutional Money Market Fund, Cl. E | | | 83,436,389 | | | | 624,478,359 | | | | 680,521,629 | | | | 27,393,119 | |
Oppenheimer Global Strategic Bond Fund/VA | | | — | | | | 15,000 | | | | — | | | | 15,000 | |
(Cayman) Ltd.a | | | | | | | | | | | | | | | | |
Oppenheimer Master Event-Linked Bond Fund, LLC | | | 1,103,918 | | | | 3,723,404 | | | | — | | | | 4,827,322 | |
Oppenheimer Master Loan Fund, LLC | | | 29,466,809 | | | | — | | | | — | | | | 29,466,809 | |
Oppenheimer Short Duration Fund, Cl. Y | | | — | | | | 1,001,329 | | | | — | | | | 1,001,329 | |
| | | | | | | | | | | | |
| | | | | | | | | | Realized | |
| | Value | | | Income | | | Gain (Loss) | |
|
Oppenheimer Institutional Money Market Fund, Cl. E | | $ | 27,393,119 | | | $ | 89,809 | | | $ | — | |
Oppenheimer Global Strategic Bond Fund/VA | | | 1,482,519 | | | | — | | | | — | |
(Cayman) Ltd.a | | | | | | | | | | | | |
Oppenheimer Master Event-Linked Bond Fund, LLC | | | 54,385,728 | | | | 4,073,320 | b | | | (2,323,415 | )b |
Oppenheimer Master Loan Fund, LLC | | | 351,705,692 | | | | 27,436,119 | c | | | 455,054 | c |
Oppenheimer Short Duration Fund, Cl. Y | | | 10,013,286 | | | | 18,665 | | | | — | |
| | |
| | $ | 444,980,344 | | | $ | 31,617,913 | | | $ | (1,868,361 | ) |
| | |
a. | | Investment in a wholly-owned subsidiary. See Note 1 of the accompanying Notes and individual financial statements of the entity included herein. |
|
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. |
|
2. | | Non-income producing security. |
|
3. | | Represents the current interest rate for a variable or increasing rate security. |
|
4. | | Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $374,254,289 or 16.61% of the Fund’s net assets as of December 30, 2011. |
|
5. | | 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 original contractual interest rate. See Note 1 of the accompanying Notes. |
|
6. | | Restricted security. The aggregate value of restricted securities as of December 30, 2011 was $80,967,420, which represents 3.59% of the Fund’s net assets. See Note 6 of the accompanying Notes. Information concerning restricted securities is as follows: |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Unrealized | |
| | Acquisition | | | | | | | | | | | Appreciation | |
Security | | Dates | | | Cost | | | Value | | | (Depreciation) | |
|
Arco Capital Corp. Ltd. | | | 2/27/07 | | | $ | 10,359,570 | | | $ | 1,381,276 | | | $ | (8,978,294 | ) |
Citigroup Funding, Inc., ALROSA Russia Corporate Bond Credit Linked Unsec. Nts., 8.25%, 6/25/15 | | | 3/1/11 | | | | 679,152 | | | | 601,296 | | | | (77,856 | ) |
Citigroup Funding, Inc., Russian Federation Credit Linked Bonds, 6.70%, 2/8/13 | | | 3/2/11 | | | | 1,411,191 | | | | 1,238,347 | | | | (172,844 | ) |
Citigroup Global Markets Holdings, Inc., Colombia (Republic of) Credit Linked Bonds, 11.25%, 10/25/18 | | | 12/9/08 | | | | 1,376,941 | | | | 2,024,781 | | | | 647,840 | |
Citigroup Global Markets Holdings, Inc., Dominican Republic Unsec. Credit Linked Nts., 15%, 3/12/12 | | | 3/7/07 | | | | 1,479,820 | | | | 1,278,000 | | | | (201,820 | ) |
30 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Unrealized | |
| | Acquisition | | | | | | | | | | | Appreciation | |
Security | | Dates | | | Cost | | | Value | | | (Depreciation) | |
|
Cleaver-Brooks, Inc., 12.25% Sr. Sec. Nts., 5/1/16 | | | 4/21/10-5/3/11 | | | $ | 2,685,164 | | | $ | 2,658,148 | | | $ | (27,016 | ) |
Deutsche Alt-A Securities, Inc., Mtg. Pass-Through Certificates, Series 2007-RS1, Cl. A2, 0.794%, 1/27/37 | | | 5/29/08 | | | | 968,781 | | | | 605,015 | | | | (363,766 | ) |
Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Bonds, Series 128, 3.006%, 5/6/25 | | | 10/8/10 | | | | 1,239,751 | | | | 1,232,704 | | | | (7,047 | ) |
Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Bonds, 3.343%, 5/6/25 | | | 4/16/09 | | | | 1,262,351 | | | | 1,293,439 | | | | 31,088 | |
Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Bonds, 3.266%, 5/6/25 | | | 8/18/09 | | | | 1,351,510 | | | | 1,376,061 | | | | 24,551 | |
Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Bonds, 3.239%, 5/6/25 | | | 9/25/09 | | | | 1,695,487 | | | | 1,722,481 | | | | 26,994 | |
Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Bonds, 3.187%, 5/6/25 | | | 12/17/09 | | | | 1,492,145 | | | | 1,509,164 | | | | 17,019 | |
Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Bonds, 3.134%, 5/6/25 | | | 3/30/10 | | | | 1,204,077 | | | | 1,212,101 | | | | 8,024 | |
Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Bonds, 3.10%, 5/6/25 | | | 5/18/10 | | | | 1,351,634 | | | | 1,356,009 | | | | 4,375 | |
Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Bonds, 3.061%, 5/6/25 | | | 7/16/10 | | | | 1,571,099 | | | | 1,570,655 | | | | (444 | ) |
Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Nts., 12.424%, 12/31/17 | | | 9/19/07 | | | | 6,852,465 | | | | 9,946,565 | | | | 3,094,100 | |
Deutsche Bank AG, JSC VTB Bank Credit Linked Nts., 12%, 6/19/12 | | | 6/30/11 | | | | 2,586,915 | | | | 2,454,472 | | | | (132,443 | ) |
Deutsche Bank AG, Opic Reforma I Credit Linked Nts., Cl. 2A, 8.287%, 5/22/15 | | | 5/21/08 | | | | 67,269 | | | | 48,425 | | | | (18,844 | ) |
Deutsche Bank AG, Opic Reforma I Credit Linked Nts., Cl. 2B, 8.287%, 5/22/15 | | | 6/12/08 | | | | 117,680 | | | | 84,720 | | | | (32,960 | ) |
Deutsche Bank AG, Opic Reforma I Credit Linked Nts., Cl. 2C, 8.287%, 5/22/15 | | | 6/18/08 | | | | 1,785,486 | | | | 1,277,379 | | | | (508,107 | ) |
Deutsche Bank AG, Opic Reforma I Credit Linked Nts., Cl. 2D, 8.287%, 5/22/15 | | | 7/8/08 | | | | 130,028 | | | | 93,094 | | | | (36,934 | ) |
Deutsche Bank AG, Opic Reforma I Credit Linked Nts., Cl. 2E, 8.287%, 5/22/15 | | | 7/15/08 | | | | 94,626 | | | | 67,634 | | | | (26,992 | ) |
Deutsche Bank AG, Opic Reforma I Credit Linked Nts., Cl. 2F, 8.287%, 5/22/15 | | | 8/8/08 | | | | 61,263 | | | | 43,195 | | | | (18,068 | ) |
Deutsche Bank AG, Opic Reforma I Credit Linked Nts., Cl. 2G, 8.287%, 5/22/15 | | | 8/22/08 | | | | 11,304 | | | | 7,955 | | | | (3,349 | ) |
Eirles Two Ltd. Sec. Nts., Series 324, 3.798%, 4/30/12 | | | 4/17/07 | | | | 4,100,884 | | | | 3,767,900 | | | | (332,984 | ) |
Eirles Two Ltd. Sec. Nts., Series 335, 2.248%, 4/30/12 | | | 9/17/07 | | | | 6,282,061 | | | | 6,016,500 | | | | (265,561 | ) |
Embarcadero Aircraft Securitization Trust, Airplane Receivable Nts., Series 2000-A, Cl. B, 0.656%, 8/15/25 | | | 8/17/00 | | | | 1,820,063 | | | | — | | | | (1,820,063 | ) |
Empresa de Energia de Bogota SA ESP, 6.125% Sr. Unsec. Unsub. Nts., 11/10/21 | | | 11/3/11-12/16/11 | | | | 870,449 | | | | 885,225 | | | | 14,776 | |
Goldman Sachs Capital Markets LP, Colombia (Republic of) Credit Linked Nts., 10.476%, 2/8/37 | | | 1/18/07 | | | | 6,374,568 | | | | 1,738,886 | | | | (4,635,682 | ) |
Hallertau SPC Credit Linked Nts., Series 2007-01, 2.838%, 12/20/17 | | | 12/13/07 | | | | 6,250,000 | | | | 5,174,375 | | | | (1,075,625 | ) |
Hallertau SPC Credit Linked Nts., Series 2008-01, 9.888%, 8/2/10 | | | 4/18/08-10/1/08 | | | | 7,188,001 | | | | 768,669 | | | | (6,419,332 | ) |
Hallertau SPC Credit Linked Nts., Series 2008-2A, 8.14%, 9/17/13 | | | 10/23/08 | | | | 12,215,603 | | | | 6,820,359 | | | | (5,395,244 | ) |
Ice 1 Em CLO Ltd./Ice 1 Em CLO Corp., Sr. Sec. Sub. Term Nts., Series 2007-1A, Cl. B, 2.152%, 8/15/22 | | | 11/6/07 | | | | 7,001,104 | | | | 5,115,500 | | | | (1,885,604 | ) |
Ice 1 Em CLO Ltd./Ice 1 Em CLO Corp., Sr. Sec. Sub. Term Nts., Series 2007-1A, Cl. C, 3.452%, 8/15/22 | | | 6/8/07 | | | | 5,270,000 | | | | 3,320,100 | | | | (1,949,900 | ) |
Ice 1 Em CLO Ltd./Ice 1 Em CLO Corp., Sr. Sec. Sub. Term Nts., Series 2007-1A, Cl. D, 5.452%, 8/15/22 | | | 6/8/07 | | | | 5,270,000 | | | | 3,425,500 | | | | (1,844,500 | ) |
JPMorgan Chase & Co., Colombia (Republic of) Credit Linked Nts., 11%, 7/28/20 | | | 8/24/10 | | | | 902,343 | | | | 817,423 | | | | (84,920 | ) |
JPMorgan Chase Bank NA, Russian Federation Credit Linked Bonds, Series 2, 7.15%, 1/25/13 | | | 2/28/11 | | | | 1,714,455 | | | | 1,528,982 | | | | (185,473 | ) |
JPMorgan Hipotecaria su Casita, 7.973% Sec. Nts., 8/26/35 | | | 3/21/07 | | | | 526,714 | | | | 466,307 | | | | (60,407 | ) |
Lehman Brothers Treasury Co. BV, Microvest Capital Management LLC Credit Linked Nts., 7.55%, 5/24/12 | | | 6/20/07 | | | | 1,091,362 | | | | 331,962 | | | | (759,400 | ) |
Merrill Lynch, Colombia (Republic of) Credit Linked Nts., 10%, 11/17/16 | | | 10/20/06 | | | | 762,393 | | | | 930,515 | | | | 168,122 | |
NC Finance Trust, Collateralized Mtg. Obligation Pass-Through Certificates, Series 1999-I, Cl. ECFD, 3.405%, 1/25/29 | | | 8/10/10 | | | | 66,025 | | | | 6,007 | | | | (60,018 | ) |
Norske Skogindustrier ASA, 6.125% Unsec. Bonds, 10/15/15 | | | 3/7/11-4/6/11 | | | | 1,364,632 | | | | 907,500 | | | | (457,132 | ) |
Premier Cruise Ltd., 11% Sr. Nts., 3/15/08 | | | 3/6/98 | | | | 242,675 | | | | — | | | | (242,675 | ) |
Santander Drive Auto Receivables Trust 2011-S1A, Automobile Receivables Nts., Series 2011-S1A, Cl. D, 3.10%, 5/15/17 | | | 2/4/11-4/14/11 | | | | 227,780 | | | | 225,476 | | | | (2,304 | ) |
Southern States Cooperative, Inc., 11.25% Sr. Nts., 5/15/15 | | | 9/22/10-9/23/10 | | | | 2,614,264 | | | | 2,600,575 | | | | (13,689 | ) |
Standard Bank Group Ltd., Ghana (Republic of) Credit Linked Bonds, 10.038%, 1/25/12 | | | 9/16/11 | | | | 1,085,794 | | | | 1,036,743 | | | | (49,051 | ) |
| | | | | | |
| | | | | | $ | 115,076,879 | | | $ | 80,967,420 | | | $ | (34,109,459 | ) |
| | | | | | |
7. | | This security is accruing partial income at an anticipated effective rate based on expected interest and/or principal payments. The rate shown is the original contractual interest rate. |
|
8. | | When-issued security or delayed delivery to be delivered and settled after December 30, 2011. See Note 1 of the accompanying Notes. |
31 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT O F INVESTMENTS Continued
Footnotes to Statement of Investments Continued
9. | | Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of mortgage loans or other receivables. 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 or asset-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 $10,129,464 or 0.45% of the Fund’s net assets as of December 30, 2011. |
|
10. | | 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. |
|
11. | | All or a portion of the security position is held in collateral accounts to cover the Fund’s obligations under certain derivative contracts. The aggregate market value of such securities is $5,763,355 See Note 5 of the accompanying Notes. |
|
12. | | All or a portion of the security position is held in collateralized accounts to cover initial margin requirements on open futures contracts and written options on futures, if applicable. The aggregate market value of such securities is $12,776,418. See Note 5 of the accompanying Notes. |
|
13. | | Zero coupon bond reflects effective yield on the date of purchase. |
|
14. | | Denotes an inflation-indexed security: coupon or principal are indexed to a consumer price index. |
|
15. | | Interest or dividend is paid-in-kind, when applicable. |
|
16. | | 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. |
|
17. | | Denotes a step bond: a zero coupon bond that converts to a fixed or variable interest rate at a designated future date. |
|
18. | | Rate shown is the 7-day yield as of December 30, 2011. |
Valuation Inputs
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 table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 30, 2011 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: | | | | | | | | | | | | | | | | |
Wholly-Owned Subsidiary | | $ | — | | | $ | 1,482,519 | | | $ | — | | | $ | 1,482,519 | |
Asset-Backed Securities | | | — | | | | 10,763,457 | | | | 11,861,100 | | | | 22,624,557 | |
Mortgage-Backed Obligations | | | — | | | | 447,222,572 | | | | 1,423,222 | | | | 448,645,794 | |
U.S. Government Obligations | | | — | | | | 180,362,405 | | | | — | | | | 180,362,405 | |
Foreign Government Obligations | | | — | | | | 468,074,488 | | | | — | | | | 468,074,488 | |
Loan Participations | | | — | | | | 20,877,949 | | | | — | | | | 20,877,949 | |
Corporate Bonds and Notes | | | — | | | | 584,115,534 | | | | — | | | | 584,115,534 | |
Preferred Stocks | | | — | | | | 2,811,212 | | | | 2,968,560 | | | | 5,779,772 | |
Common Stocks | | | 7,004,041 | | | | 5,798,574 | | | | 209,932 | | | | 13,012,547 | |
Rights, Warrants and Certificates | | | — | | | | — | | | | 420 | | | | 420 | |
Structured Securities | | | — | | | | 120,126,200 | | | | 7,194,032 | | | | 127,320,232 | |
Options Purchased | | | 1,038,981 | | | | 4,633,612 | | | | — | | | | 5,672,593 | |
Swaptions Purchased | | | — | | | | 4,452,105 | | | | — | | | | 4,452,105 | |
Investment Companies | | | 37,406,405 | | | | 406,091,420 | | | | — | | | | 443,497,825 | |
| | |
Total Investments, at Value | | | 45,449,427 | | | | 2,256,812,047 | | | | 23,657,266 | | | | 2,325,918,740 | |
| | | | | | | | | | | | | | | | |
Other Financial Instruments: | | | | | | | | | | | | | | | | |
Appreciated swaps, at value | | | — | | | | 4,059,953 | | | | — | | | | 4,059,953 | |
Depreciated swaps, at value | | | — | | | | 1,058,863 | | | | — | | | | 1,058,863 | |
Futures margins | | | 919,349 | | | | — | | | | — | | | | 919,349 | |
Foreign currency exchange contracts | | | — | | | | 6,674,020 | | | | — | | | | 6,674,020 | |
| | |
Total Assets | | $ | 46,368,776 | | | $ | 2,268,604,883 | | | $ | 23,657,266 | | | $ | 2,338,630,925 | |
| | |
32 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| | | | | | | | | | | | | | | | |
| | | | | | | | | | Level 3– | | | | |
| | Level 1– | | | Level 2– | | | Significant | | | | |
| | Unadjusted | | | Other Significant | | | Unobservable | | | | |
| | Quoted Prices | | | Observable Inputs | | | Inputs | | | Value | |
|
Liabilities Table | | | | | | | | | | | | | | | | |
Other Financial Instruments: | | | | | | | | | | | | | | | | |
Appreciated swaps, at value | | $ | — | | | $ | (2,186,195 | ) | | $ | — | | | $ | (2,186,195 | ) |
Depreciated swaps, at value | | | — | | | | (3,188,215 | ) | | | — | | | | (3,188,215 | ) |
Appreciated options written, at value | | | (1,271,573 | ) | | | (155,575 | ) | | | — | | | | (1,427,148 | ) |
Depreciated options written, at value | | | (937,077 | ) | | | — | | | | — | | | | (937,077 | ) |
Appreciated swaptions written, at value | | | — | | | | (1,798,390 | ) | | | — | | | | (1,798,390 | ) |
Depreciated swaptions written, at value | | | — | | | | (5,770,471 | ) | | | — | | | | (5,770,471 | ) |
Futures margins | | | (289,872 | ) | | | — | | | | — | | | | (289,872 | ) |
Foreign currency exchange contracts | | | — | | | | (9,409,937 | ) | | | — | | | | (9,409,937 | ) |
| | |
Total Liabilities | | $ | (2,498,522 | ) | | $ | (22,508,783 | ) | | $ | — | | | $ | (25,007,305 | ) |
| | |
Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
The table below shows the significant transfers between Level 1, Level 2 and Level 3. The Fund’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
| | | | | | | | | | | | | | | | | | | | |
| | Transfers out of | | | Transfers into | | | Transfers out of | | | Transfers into | | | Transfers out of | |
| | Level 1 | | | Level 2 | | | Level 2 | | | Level 3 | | | Level 3 | |
|
Assets Table | | | | | | | | | | | | | | | | | | | | |
Investments, at Value: | | | | | | | | | | | | | | | | | | | | |
Common Stocks | | $ | — | | | $ | 1,381,276 | a | | $ | — | | | $ | — | | | $ | (1,381,276 | )a |
Structured Securities | | | — | | | | — | | | | (13,653,340 | )b | | | 13,653,340 | b | | | — | |
Investment Companies | | | (353,953,479 | )c | | | 353,953,479 | c | | | — | | | | — | | | | — | |
| | |
Total Assets | | $ | (353,953,479 | ) | | $ | 355,334,755 | | | $ | (13,653,340 | ) | | $ | 13,653,340 | | | $ | (1,381,276 | ) |
| | |
a. | | Transferred from Level 3 to Level 2 because of the presence of observable market data due to an increase in market activity for these securities. |
|
b. | | Transferred from Level 2 to Level 3 because of the lack of observable market data due to a decrease in market activity for these securities. |
|
c. | | Transferred from Level 1 to Level 2 as the current market for the securities are not considered active. |
The following is a reconciliation of assets in which significant unobservable inputs (level 3) were used in determining fair value:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Change in | | | Accretion/ | | | | | | | | | | | | | | | | |
| | | | | | | | | | Unrealized | | | (Amortization) | | | | | | | | | | | | | | | Value as of | |
| | Value as of | | | Realized | | | Appreciation/ | | | of Premium/ | | | | | | | Transfers into | | | Transfers out | | | December 30, | |
| | December 31, 2010 | | | Gain (Loss) | | | Depreciation | | | Discount | | | Sales | | | Level 3 | | | of Level 3 | | | 2011 | |
|
Assets Table | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Investments, at Value: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Asset-Backed Securities | | $ | 10,800,935 | | | $ | 755 | | | $ | 1,241,950 | | | $ | 48,178 | a | | $ | (230,718 | ) | | $ | — | | | $ | — | | | $ | 11,861,100 | |
Mortgage-Backed Obligations | | | 1,581,294 | | | | — | | | | (172,330 | ) | | | 14,258 | a | | | — | | | | — | | | | — | | | | 1,423,222 | |
Corporate Bonds and Notes | | | 1,744,997 | | | | (672,002 | ) | | | 959,482 | | | | — | | | | (932,477 | ) | | | — | | | | (1,100,000 | )b | | | — | |
Preferred Stocks | | | 4,844,088 | | | | (537,064 | ) | | | (1,338,464 | ) | | | — | | | | — | | | | — | | | | — | | | | 2,968,560 | |
Common Stocks | | | 4,360,342 | | | | (34,604 | ) | | | 1,807,026 | | | | — | | | | — | | | | — | | | | (5,922,832 | )c | | | 209,932 | |
Rights, Warrants and Certificates | | | 423 | | | | (2,025 | ) | | | 2,022 | | | | — | | | | — | | | | — | | | | — | | | | 420 | |
Structured Securities | | | 1,288,812 | | | | — | | | | (7,724,149 | ) | | | (23,971 | )a | | | — | | | | 13,653,340 | d | | | — | | | | 7,194,032 | |
| | |
Total Assets | | $ | 24,620,891 | | | $ | (1,244,940 | ) | | $ | (5,224,463 | ) | | $ | 38,465 | | | $ | (1,163,195 | ) | | $ | 13,653,340 | | | $ | (7,022,832 | ) | | $ | 23,657,266 | |
| | |
a. | | Included in net investment income. |
|
b. | | Transferred from Level 3 because of the presence of observable market data due to a increase in market activity for these securities. |
|
c. | | Transferred from Level 3 because of the presence of a readily available unadjusted quoted market price for these securities. |
|
d. | | Transferred to Level 3 because of the lack of observable market data due to a decrease in market activity for these securities. |
33 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
Footnotes to Statement of Investments Continued
The total change in unrealized appreciation/depreciation included in the Statement of Operations attributable to Level 3 investments still held at December 30, 2011 includes:
| | | | |
| | Change in unrealized | |
| | appreciation/depreciation | |
|
Asset-Backed Securities | | $ | 1,241,922 | |
Mortgaged-Backed Obligations | | | 163,795 | |
Preferred Stocks | | | (1,591,440 | ) |
Common Stocks | | | (131,997 | ) |
Rights, Warrants and Certificates | | | (3,162,235 | ) |
Structured Securities | | | (5,118,148 | ) |
| | | |
Total | | $ | (8,598,103 | ) |
| | | |
See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.
Distribution of investments representing geographic holdings, as a percentage of total investments at value, is as follows:
| | | | | | | | |
Geographic Holdings | | Value | | | Percent | |
|
United States | | $ | 1,459,325,704 | | | | 62.7 | % |
Brazil | | | 105,338,135 | | | | 4.5 | |
Mexico | | | 73,287,695 | | | | 3.2 | |
Indonesia | | | 70,507,170 | | | | 3.0 | |
Russia | | | 68,431,158 | | | | 2.9 | |
South Africa | | | 61,644,107 | | | | 2.7 | |
Turkey | | | 48,871,322 | | | | 2.1 | |
Japan | | | 45,697,193 | | | | 2.0 | |
Poland | | | 30,757,036 | | | | 1.3 | |
Colombia | | | 30,058,184 | | | | 1.3 | |
Peru | | | 29,343,556 | | | | 1.3 | |
Venezuela | | | 25,051,324 | | | | 1.1 | |
Supranational | | | 21,977,462 | | | | 1.0 | |
Ukraine | | | 21,438,904 | | | | 0.9 | |
Kazakhstan | | | 19,174,862 | | | | 0.8 | |
United Kingdom | | | 17,548,593 | | | | 0.8 | |
Hungary | | | 16,993,020 | | | | 0.7 | |
Philippines | | | 16,534,138 | | | | 0.7 | |
Canada | | | 14,905,812 | | | | 0.6 | |
India | | | 14,575,095 | | | | 0.6 | |
Argentina | | | 13,200,162 | | | | 0.6 | |
Italy | | | 11,423,076 | | | | 0.5 | |
Malaysia | | | 9,438,677 | | | | 0.4 | |
Australia | | | 8,738,487 | | | | 0.4 | |
Uruguay | | | 8,540,407 | | | | 0.4 | |
Germany | | | 7,694,825 | | | | 0.3 | |
The Netherlands | | | 7,634,515 | | | | 0.3 | |
Panama | | | 5,888,838 | | | | 0.3 | |
Israel | | | 5,870,139 | | | | 0.3 | |
Dominican Republic | | | 5,691,347 | | | | 0.3 | |
Korea, Republic of South | | | 5,151,009 | | | | 0.2 | |
France | | | 5,027,561 | | | | 0.2 | |
Chile | | | 4,984,693 | | | | 0.2 | |
Spain | | | 4,687,934 | | | | 0.2 | |
Qatar | | | 4,073,388 | | | | 0.2 | |
Belgium | | | 3,888,283 | | | | 0.2 | |
Luxembourg | | | 3,371,471 | | | | 0.2 | |
34 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| | | | | | | | |
Geographic Holdings Continued | | Value | | | Percent | |
|
Sri Lanka | | $ | 3,313,561 | | | | 0.1 | % |
Trinidad & Tobago | | | 2,933,350 | | | | 0.1 | |
Austria | | | 2,820,052 | | | | 0.1 | |
Ghana | | | 2,692,243 | | | | 0.1 | |
United Arab Emirates | | | 1,766,050 | | | | 0.1 | |
Nigeria | | | 1,687,950 | | | | 0.1 | |
Norway | | | 907,500 | | | | — | |
Denmark | | | 891,607 | | | | — | |
Greece | | | 693,199 | | | | — | |
Finland | | | 612,819 | | | | — | |
Singapore | | | 432,736 | | | | — | |
Ivory Coast | | | 209,575 | | | | — | |
European Union | | | 192,544 | | | | — | |
New Zealand | | | 272 | | | | — | |
| | |
Total | | $ | 2,325,918,740 | | | | 100.0 | |
| | |
Foreign Currency Exchange Contracts as of December 30, 2011 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Contract | | | | | | | | | | | | | | |
Counterparty/ | | | | | | Amount | | | Expiration | | | | | | | Unrealized | | | Unrealized | |
Contract Description | | Buy/Sell | | (000’s) | | | Dates | | | Value | | | Appreciation | | | Depreciation | |
|
Bank of America: | | | | | | | | | | | | | | | | | | | | | | | | |
British Pound Sterling (GBP) | | Sell | | 10 | GBP | | | 1/25/12 | | | $ | 15,526 | | | $ | 42 | | | $ | — | |
Euro (EUR) | | Sell | | 4,585 | EUR | | | 1/23/12-1/27/12 | | | | 5,935,181 | | | | 357,380 | | | | — | |
Hungarian Forint (HUF) | | Sell | | 1,760,000 | HUF | | | 1/11/12 | | | | 7,221,407 | | | | 579,323 | | | | — | |
New Turkish Lira (TRY) | | Sell | | 13,320 | TRY | | | 4/25/12 | | | | 6,850,184 | | | | 110,883 | | | | — | |
Peruvian New Sol (PEN) | | Sell | | 18,570 | PEN | | | 1/17/12 | | | | 6,876,025 | | | | — | | | | 98,324 | |
Singapore Dollar (SGD) | | Buy | | 7,180 | SGD | | | 1/17/12 | | | | 5,535,324 | | | | — | | | | 83,269 | |
South African Rand (ZAR) | | Sell | | 118,740 | ZAR | | | 2/15/12 | | | | 14,597,856 | | | | 161,072 | | | | — | |
South Korean Won (KRW) | | Buy | | 10,249,000 | KRW | | | 1/17/12-1/25/12 | | | | 8,879,720 | | | | 83,586 | | | | — | |
South Korean Won (KRW) | | Sell | | 1,262,000 | KRW | | | 1/25/12 | | | | 1,093,390 | | | | — | | | | 1,695 | |
Swedish Krona (SEK) | | Sell | | 4,360 | SEK | | | 1/27/12 | | | | 632,599 | | | | 3,544 | | | | — | |
Swiss Franc (CHF) | | Sell | | 2,380 | CHF | | | 1/27/12 | | | | 2,535,041 | | | | 20,499 | | | | — | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 1,316,329 | | | | 183,288 | |
Bank of America EM | | | | | | | | | | | | | | | | | | | | | | | | |
Colombian Peso (COP) | | Buy | | 294,000 | COP | | | 2/1/12 | | | | 152,392 | | | | — | | | | 177 | |
Bank Paribas Asia — FGN: | | | | | | | | | | | | | | | | | | | | | | | | |
Euro (EUR) | | Sell | | 915 | EUR | | | 1/25/12 | | | | 1,184,440 | | | | 60,380 | | | | — | |
Swiss Franc (CHF) | | Sell | | 610 | CHF | | | 1/25/12 | | | | 649,714 | | | | — | | | | 3,297 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 60,380 | | | | 3,297 | |
Barclay’s Capital: | | | | | | | | | | | | | | | | | | | | | | | | |
Chilean Peso (CLP) | | Sell | | 330,000 | CLP | | | 1/20/12 | | | | 633,262 | | | | — | | | | 13,195 | |
Euro (EUR) | | Buy | | 60 | EUR | | | 2/1/12 | | | | 77,672 | | | | — | | | | 1,925 | |
Euro (EUR) | | Sell | | 3,340 | EUR | | | 1/25/12-2/1/12 | | | | 4,323,560 | | | | 122,056 | | | | — | |
Hungarian Forint (HUF) | | Buy | | 42,000 | HUF | | | 1/11/12 | | | | 172,329 | | | | — | | | | 7,134 | |
Hungarian Forint (HUF) | | Sell | | 336,000 | HUF | | | 6/12/12 | | | | 1,356,545 | | | | 376,754 | | | | — | |
Israeli Shekel (ILS) | | Sell | | 2,030 | ILS | | | 4/2/13 | | | | 530,173 | | | | 5,744 | | | | — | |
Norwegian Krone (NOK) | | Buy | | 2,600 | NOK | | | 2/1/12 | | | | 434,233 | | | | — | | | | 13,462 | |
Norwegian Krone (NOK) | | Sell | | 2,300 | NOK | | | 1/25/12 | | | | 384,226 | | | | 11,948 | | | | — | |
Polish Zloty (PLZ) | | Sell | | 4,060 | PLZ | | | 1/11/12-2/1/12 | | | | 1,174,526 | | | | 25,929 | | | | 188 | |
Russian Ruble (RUR) | | Buy | | 3,840 | RUR | | | 1/19/12 | | | | 118,909 | | | | — | | | | 2,571 | |
Russian Ruble (RUR) | | Sell | | 657,370 | RUR | | | 1/11/12-2/2/12 | | | | 20,341,554 | | | | 409,075 | | | | 241,848 | |
Swedish Krona (SEK) | | Buy | | 133,780 | SEK | | | 2/1/12-2/10/12 | | | | 19,398,624 | | | | — | | | | 888,051 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 951,506 | | | | 1,168,374 | |
35 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENTOF INVESTMENTS Continued
Footnotes to Statement of Investments Continued
Foreign Currency Exchange Contracts: Continued
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Contract | | | | | | | | | | | | | | |
Counterparty/ | | | | | | Amount | | | Expiration | | | | | | | Unrealized | | | Unrealized | |
Contract Description | | Buy/Sell | | | (000’s) | | | Dates | | | Value | | | Appreciation | | | Depreciation | |
|
Citigroup: | | | | | | | | | | | | | | | | | | | | | | | | |
British Pound Sterling (GBP) | | Buy | | 380 | GBP | | | 2/1/12 | | | $ | 589,960 | | | $ | 1,491 | | | $ | — | |
Czech Koruna (CZK) | | Sell | | 3,510 | CZK | | | 2/1/12 | | | | 177,703 | | | | 1,973 | | | | — | |
Euro (EUR) | | Sell | | 12,775 | EUR | | | 1/23/12-5/10/12 | | | | 16,537,568 | | | | 456,517 | | | | — | |
Hungarian Forint (HUF) | | Buy | | 356,000 | HUF | | | 1/11/12 | | | | 1,460,694 | | | | — | | | | 64,349 | |
Hungarian Forint (HUF) | | Sell | | 494,000 | HUF | | | 1/11/12-6/12/12 | | | | 2,013,507 | | | | 270,592 | | | | — | |
Mexican Nuevo Peso (MXN) | | Buy | | 14,200 | MXN | | | 1/11/12 | | | | 1,016,565 | | | | — | | | | 37,314 | |
Mexican Nuevo Peso (MXN) | | Sell | | 59,100 | MXN | | | 1/11/12-2/1/12 | | | | 4,230,808 | | | | 97,416 | | | | — | |
New Taiwan Dollar (TWD) | | Sell | | 135,000 | TWD | | | 2/8/12 | | | | 4,462,176 | | | | 5,064 | | | | — | |
Norwegian Krone (NOK) | | Buy | | 2,300 | NOK | | | 1/25/12 | | | | 384,226 | | | | — | | | | 27,359 | |
South African Rand (ZAR) | | Sell | | 16,860 | ZAR | | | 3/12/12 | | | | 2,065,196 | | | | — | | | | 28,098 | |
Swedish Krona (SEK) | | Sell | | 6,800 | SEK | | | 2/1/12 | | | | 986,374 | | | | — | | | | 15,877 | |
Swiss Franc (CHF) | | Sell | | 520 | CHF | | | 1/17/12 | | | | 553,774 | | | | 4,004 | | | | — | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 837,057 | | | | 172,997 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Citigroup EM: | | | | | | | | | | | | | | | | | | | | | | | | |
Brazilian Real (BRR) | | Buy | | 7,860 | BRR | | | 1/4/12-2/2/12 | | | | 4,179,040 | | | | — | | | | 22,820 | |
Brazilian Real (BRR) | | Sell | | 18,980 | BRR | | | 1/4/12-2/2/12 | | | | 10,091,372 | | | | 55,105 | | | | — | |
Chilean Peso (CLP) | | Buy | | 330,000 | CLP | | | 1/20/12 | | | | 633,262 | | | | — | | | | 5,653 | |
Colombian Peso (COP) | | Sell | | 4,947,000 | COP | | | 2/1/12-2/9/12 | | | | 2,563,065 | | | | 893 | | | | 9,744 | |
Egyptian Pounds (EGP) | | Buy | | 17,580 | EGP | | | 2/13/12 | | | | 2,774,947 | | | | — | | | | 62,274 | |
Mexican Nuevo Peso (MXN) | | Sell | | 34,200 | MXN | | | 1/11/12 | | | | 2,448,347 | | | | — | | | | 58,909 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 55,998 | | | | 159,400 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Credit Suisse: | | | | | | | | | | | | | | | | | | | | | | | | |
Malaysian Ringgit (MYR) | | Buy | | 59,510 | MYR | | | 1/31/12 | | | | 18,730,664 | | | | 5,058 | | | | 153,950 | |
New Turkish Lira (TRY) | | Sell | | 4,880 | TRY | | | 7/17/13 | | | | 2,301,945 | | | | 61,632 | | | | — | |
South African Rand (ZAR) | | Sell | | 107,450 | ZAR | | | 1/11/12 | | | | 13,284,412 | | | | — | | | | 120,391 | |
Swiss Franc (CHF) | | Sell | | 680 | CHF | | | 2/1/12 | | | | 724,368 | | | | 17,775 | | | | 625 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 84,465 | | | | 274,966 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Credit Suisse EM | | | | | | | | | | | | | | | | | | | | | | | | |
Russian Ruble (RUR) | | Buy | | 13,010 | RUR | | | 1/24/12 | | | | 402,573 | | | | — | | | | 9,396 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Deutsche Bank Capital Corp.: | | | | | | | | | | | | | | | | | | | | | | | | |
Australian Dollar (AUD) | | Sell | | 5,245 | AUD | | | 1/27/12 | | | | 5,346,570 | | | | 61,025 | | | | — | |
Canadian Dollar (CAD) | | Buy | | 210 | CAD | | | 1/24/12 | | | | 206,020 | | | | — | | | | 1,876 | |
Chinese Renminbi (Yuan) (CNY) | | Buy | | 27,950 | CNY | | | 1/6/12 | | | | 4,440,032 | | | | 101,794 | | | | — | |
Euro (EUR) | | Sell | | 17,540 | EUR | | | 1/25/12 | | | | 22,705,012 | | | | 708,376 | | | | — | |
Hungarian Forint (HUF) | | Sell | | 1,025,000 | HUF | | | 1/11/12 | | | | 4,205,649 | | | | 309,770 | | | | — | |
Mexican Nuevo Peso (MXN) | | Sell | | 800 | MXN | | | 2/1/12 | | | | 57,164 | | | | — | | | | 1,244 | |
Polish Zloty (PLZ) | | Sell | | 17,210 | PLZ | | | 1/11/12 | | | | 4,981,886 | | | | 45,162 | | | | — | |
Singapore Dollar (SGD) | | Buy | | 110 | SGD | | | 1/17/12 | | | | 84,803 | | | | 288 | | | | — | |
South African Rand (ZAR) | | Sell | | 106,440 | ZAR | | | 3/12/12 | | | | 13,037,927 | | | | — | | | | 85,556 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 1,226,415 | | | | 88,676 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Deutsche Bank EM: | | | | | | | | | | | | | | | | | | | | | | | | |
Chinese Renminbi (Yuan) (CNY) | | Sell | | 27,950 | CNY | | | 1/6/12 | | | | 4,440,032 | | | | — | | | | 75,099 | |
Egyptian Pounds (EGP) | | Buy | | 9,810 | EGP | | | 1/9/12 | | | | 1,605,815 | | | | — | | | | 7,672 | |
Israeli Shekel (ILS) | | Sell | | 3,010 | ILS | | | 3/30/12 | | | | 788,712 | | | | 11,224 | | | | — | |
Mexican Nuevo Peso (MXN) | | Sell | | 32,570 | MXN | | | 3/15/12 | | | | 2,319,919 | | | | 27,046 | | | | — | |
New Turkish Lira (TRY) | | Buy | | 31,670 | TRY | | | 2/10/12 | | | | 16,559,943 | | | | — | | | | 972,165 | |
Singapore Dollar (SGD) | | Buy | | 4,470 | SGD | | | 1/17/12 | | | | 3,446,086 | | | | — | | | | 65,580 | |
South African Rand (ZAR) | | Buy | | 35,220 | ZAR | | | 2/14/12 | | | | 4,330,538 | | | | 113,382 | | | | — | |
South Korean Won (KRW) | | Buy | | 3,298,000 | KRW | | | 1/25/12 | | | | 2,857,371 | | | | — | | | | 28,019 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 151,652 | | | | 1,148,535 | |
36 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
Foreign Currency Exchange Contracts: Continued
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Contract | | | | | | | | | | | | | | |
Counterparty/ | | | | | | Amount | | | Expiration | | | | | | | Unrealized | | | Unrealized | |
Contract Description | | Buy/Sell | | (000’s) | | | Dates | | | Value | | | Appreciation | | | Depreciation | |
|
Goldman Sachs EM: | | | | | | | | | | | | | | | | | | | | | | | | |
Brazilian Real (BRR) | | Sell | | 16,530 | BRR | | | 2/2/12 | | | $ | 8,788,745 | | | $ | 38,554 | | | $ | — | |
Mexican Nuevo Peso (MXN) | | Buy | | 117,800 | MXN | | | 1/11/12 | | | | 8,433,195 | | | | — | | | | 365,913 | |
Mexican Nuevo Peso (MXN) | | Sell | | 71,200 | MXN | | | 1/11/12 | | | | 5,097,143 | | | | — | | | | 69,711 | |
New Turkish Lira (TRY) | | Buy | | 13,545 | TRY | | | 1/18/12 | | | | 7,120,647 | | | | — | | | | 38,822 | |
Polish Zloty (PLZ) | | Sell | | 16,855 | PLZ | | | 1/11/12 | | | | 4,879,122 | | | | 187,917 | | | | — | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 226,471 | | | | 474,446 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Goldman, Sachs & Co.: | | | | | | | | | | | | | | | | | | | | | | | | |
British Pound Sterling (GBP) | | Sell | | 2,285 | GBP | | | 1/27/12-2/1/12 | | | | 3,547,682 | | | | 90,107 | | | | — | |
Canadian Dollar (CAD) | | Buy | | 10 | CAD | | | 2/1/12 | | | | 9,809 | | | | 263 | | | | — | |
Canadian Dollar (CAD) | | Sell | | 130 | CAD | | | 2/1/12 | | | | 127,513 | | | | — | | | | 3,412 | |
Euro (EUR) | | Buy | | 17,400 | EUR | | | 1/27/12-2/10/12 | | | | 22,526,182 | | | | — | | | | 1,273,203 | |
Euro (EUR) | | Sell | | 7,459 | EUR | | | 1/3/12-2/27/12 | | | | 9,655,450 | | | | 289,716 | | | | — | |
Hungarian Forint (HUF) | | Buy | | 288,000 | HUF | | | 1/11/12 | | | | 1,181,685 | | | | — | | | | 56,877 | |
Hungarian Forint (HUF) | | Sell | | 30,000 | HUF | | | 1/11/12 | | | | 123,092 | | | | 5,019 | | | | — | |
Japanese Yen (JPY) | | Buy | | 518,000 | JPY | | | 1/27/12 | | | | 6,732,713 | | | | — | | | | 119,773 | |
Japanese Yen (JPY) | | Sell | | 1,763,000 | JPY | | | 1/17/12-2/2/12 | | | | 22,913,659 | | | | — | | | | 296,809 | |
Mexican Nuevo Peso (MXN) | | Sell | | 143,650 | MXN | | | 1/11/12 | | | | 10,283,773 | | | | 245,690 | | | | — | |
New Turkish Lira (TRY) | | Buy | | 15,480 | TRY | | | 1/18/12-4/25/12 | | | | 8,039,285 | | | | — | | | | 149,828 | |
New Zealand Dollar (NZD) | | Buy | | 230 | NZD | | | 2/1/12 | | | | 178,608 | | | | 4,411 | | | | — | |
New Zealand Dollar (NZD) | | Sell | | 320 | NZD | | | 2/1/12 | | | | 248,498 | | | | — | | | | 6,137 | |
Swedish Krona (SEK) | | Buy | | 6,340 | SEK | | | 1/25/12 | | | | 919,981 | | | | — | | | | 27,065 | |
Swedish Krona (SEK) | | Sell | | 22,920 | SEK | | | 1/27/12 | | | | 3,325,498 | | | | 28,854 | | | | — | |
Swiss Franc (CHF) | | Sell | | 2,370 | CHF | | | 1/27/12 | | | | 2,524,389 | | | | 3,239 | | | | — | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 667,299 | | | | 1,933,104 | |
| | | | | | | | | | | �� | | | | | | | | | | | | | |
HSBC EM | | | | | | | | | | | | | | | | | | | | | | | | |
New Turkish Lira (TRY) | | Sell | | 19,280 | TRY | | | 1/18/12-7/17/13 | | | | 9,890,966 | | | | 270,575 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
JP Morgan Chase: | | | | | | | | | | | | | | | | | | | | | | | | |
Australian Dollar (AUD) | | Buy | | 10 | AUD | | | 2/1/12 | | | | 10,188 | | | | 553 | | | | — | |
Australian Dollar (AUD) | | Sell | | 1,005 | AUD | | | 1/18/12-2/1/12 | | | | 1,025,508 | | | | — | | | | 4,295 | |
Canadian Dollar (CAD) | | Buy | | 990 | CAD | | | 1/18/12 | | | | 971,373 | | | | — | | | | 2,599 | |
Canadian Dollar (CAD) | | Sell | | 260 | CAD | | | 1/24/12 | | | | 255,073 | | | | 4,476 | | | | — | |
Euro (EUR) | | Buy | | 1,905 | EUR | | | 1/27/12 | | | | 2,466,000 | | | | — | | | | 85,626 | |
Hungarian Forint (HUF) | | Buy | | 1,069,000 | HUF | | | 1/11/12 | | | | 4,386,184 | | | | — | | | | 9,556 | |
Indian Rupee (INR) | | Sell | | 8,980 | INR | | | 1/31/12 | | | | 167,945 | | | | 10,761 | | | | — | |
Mexican Nuevo Peso (MXN) | | Buy | | 5,000 | MXN | | | 2/1/12 | | | | 357,274 | | | | — | | | | 6,396 | |
Mexican Nuevo Peso (MXN) | | Sell | | 3,400 | MXN | | | 2/1/12 | | | | 242,947 | | | | 4,901 | | | | — | |
Philippines Peso (PHP) | | Sell | | 123,000 | PHP | | | 1/23/12 | | | | 2,801,759 | | | | — | | | | 9,478 | |
Polish Zloty (PLZ) | | Sell | | 15,140 | PLZ | | | 1/11/12 | | | | 4,382,671 | | | | 12,449 | | | | — | |
Russian Ruble (RUR) | | Sell | | 3,840 | RUR | | | 1/19/12 | | | | 118,909 | | | | 642 | | | | — | |
South African Rand (ZAR) | | Buy | | 141,735 | ZAR | | | 2/10/12 | | | | 17,436,978 | | | | — | | | | 372,283 | |
South Korean Won (KRW) | | Sell | | 1,151,000 | KRW | | | 1/25/12 | | | | 997,221 | | | | 2,866 | | | | — | |
Swedish Krona (SEK) | | Buy | | 27,280 | SEK | | | 1/27/12 | | | | 3,958,097 | | | | — | | | | 165,988 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 36,648 | | | | 656,221 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
JP Morgan EM: | | | | | | | | | | | | | | | | | | | | | | | | |
Egyptian Pounds (EGP) | | Buy | | 9,810 | EGP | | | 3/5/12 | | | | 1,534,620 | | | | 32,323 | | | | — | |
Egyptian Pounds (EGP) | | Sell | | 9,810 | EGP | | | 1/9/12 | | | | 1,605,815 | | | | 7,672 | | | | — | |
Indonesia Rupiah (IDR) | | Sell | | 53,215,000 | IDR | | | 3/19/12 | | | | 5,821,881 | | | | — | | | | 53,317 | |
South Korean Won (KRW) | | Buy | | 334,000 | KRW | | | 1/25/12 | | | | 289,376 | | | | — | | | | 5,157 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 39,995 | | | | 58,474 | |
37 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
Footnotes to Statement of Investments Continued
Foreign Currency Exchange Contracts: Continued
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Contract | | | | | | | | | | | | | | |
Counterparty/ | | | | | | Amount | | | Expiration | | | | | | | Unrealized | | | Unrealized | |
Contract Description | | Buy/Sell | | (000’s) | | | Dates | | | Value | | | Appreciation | | | Depreciation | |
|
Nomura Securities: | | | | | | | | | | | | | | | | | | | | | | | | |
British Pound Sterling (GBP) | | Buy | | 1,645 | GBP | | | 1/23/12-2/1/12 | | | $ | 2,554,107 | | | $ | — | | | $ | 2,995 | |
British Pound Sterling (GBP) | | Sell | | 830 | GBP | | | 1/25/12-2/1/12 | | | | 1,288,637 | | | | 10,217 | | | | 213 | |
Euro (EUR) | | Sell | | 10,040 | EUR | | | 1/17/12 | | | | 12,995,766 | | | | 304,774 | | | | — | |
Hong Kong Dollar (HKD) | | Sell | | 34,600 | HKD | | | 1/17/12 | | | | 4,455,169 | | | | — | | | | 7,711 | |
Indian Rupee (INR) | | Buy | | 241,980 | INR | | | 1/31/12-2/8/12 | | | | 4,519,169 | | | | — | | | | 133,546 | |
Japanese Yen (JPY) | | Buy | | 286,000 | JPY | | | 1/25/12 | | | | 3,717,174 | | | | 16,084 | | | | 1,005 | |
New Zealand Dollar (NZD) | | Buy | | 320 | NZD | | | 2/1/12 | | | | 248,498 | | | | 6,967 | | | | — | |
New Zealand Dollar (NZD) | | Sell | | 3,655 | NZD | | | 1/27/12-2/1/12 | | | | 2,839,195 | | | | 81,792 | | | | 12,020 | |
Norwegian Krone (NOK) | | Buy | | 101,710 | NOK | | | 2/1/12-2/10/12 | | | | 16,980,989 | | | | 14 | | | | 1,118,729 | |
Norwegian Krone (NOK) | | Sell | | 300 | NOK | | | 2/1/12 | | | | 50,104 | | | | 1,846 | | | | — | |
Singapore Dollar (SGD) | | Sell | | 5,730 | SGD | | | 2/2/12 | | | | 4,417,268 | | | | 51,527 | | | | — | |
South Korean Won (KRW) | | Buy | | 1,151,000 | KRW | | | 1/25/12 | | | | 997,221 | | | | 1,976 | | | | — | |
South Korean Won (KRW) | | Sell | | 71,000 | KRW | | | 1/17/12 | | | | 61,552 | | | | 838 | | | | — | |
Swiss Franc (CHF) | | Buy | | 435 | CHF | | | 5/10/12 | | | | 464,598 | | | | — | | | | 21,811 | |
Swiss Franc (CHF) | | Sell | | 1,190 | CHF | | | 1/25/12 | | | | 1,267,474 | | | | — | | | | 6,271 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 476,035 | | | | 1,304,301 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
RBS Greenwich Capital | | | | | | | | | | | | | | | | | | | | | | | | |
Czech Koruna (CZK) | | Sell | | 81,600 | CZK | | | 1/17/12 | | | | 4,130,695 | | | | 233,991 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
State Street | | | | | | | | | | | | | | | | | | | | | | | | |
New Turkish Lira (TRY) | | Buy | | 8,190 | TRY | | | 1/13/12 | | | | 4,310,853 | | | | — | | | | 234,450 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
UBS Inv Bank EM | | | | | | | | | | | | | | | | | | | | | | | | |
Polish Zloty (PLZ) | | Buy | | 57,450 | PLZ | | | 2/10/12 | | | | 16,582,128 | | | | — | | | | 1,483,910 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Westpac: | | | | | | | | | | | | | | | | | | | | | | | | |
Australian Dollar (AUD) | | Buy | | 1,475 | AUD | | | 1/18/12-2/1/12 | | | | 1,504,329 | | | | 19,783 | | | | — | |
Australian Dollar (AUD) | | Sell | | 1,095 | AUD | | | 1/17/12-2/1/12 | | | | 1,116,992 | | | | — | | | | 26,330 | |
British Pound Sterling (GBP) | | Sell | | 1,440 | GBP | | | 1/17/12 | | | | 2,235,949 | | | | 10,944 | | | | — | |
Canadian Dollar (CAD) | | Buy | | 1,630 | CAD | | | 1/24/12-2/1/12 | | | | 1,598,982 | | | | 4,806 | | | | 4,509 | |
Canadian Dollar (CAD) | | Sell | | 3,745 | CAD | | | 1/17/12-2/1/12 | | | | 3,674,478 | | | | — | | | | 24,893 | |
Japanese Yen (JPY) | | Buy | | 42,000 | JPY | | | 2/1/12 | | | | 545,942 | | | | 3,554 | | | | 193 | |
New Zealand Dollar (NZD) | | Buy | | 150 | NZD | | | 2/1/12 | | | | 116,484 | | | | 117 | | | | — | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 39,204 | | | | 55,925 | |
| | | | | | | | | | | | | | | | | | |
Total unrealized appreciation and depreciation | | | | | | | | | | | | | | | | | | $ | 6,674,020 | | | $ | 9,409,937 | |
| | | | | | | | | | | | | | | | | | |
Futures Contracts as of December 30, 2011 are as follows:
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | Unrealized | |
| | | | | | Number of | | | Expiration | | | | | | | Appreciation | |
Contract Description | | Buy/Sell | | | Contracts | | | Date | | | Value | | | (Depreciation) | |
|
DAX Index | | Sell | | | | 20 | | | | 3/16/12 | | | $ | 3,818,029 | | | $ | (48,269 | ) |
Euro-Bundesobligation | | Buy | | | | 26 | | | | 3/8/12 | | | | 4,678,755 | | | | 148,703 | |
Euro-Bundesobligation | | Sell | | | | 43 | | | | 3/8/12 | | | | 6,962,700 | | | | (118,957 | ) |
Euro-Bundesobligation | | Sell | | | | 67 | | | | 3/8/12 | | | | 12,056,792 | | | | (245,800 | ) |
Euro-Schatz | | Sell | | | | 44 | | | | 3/8/12 | | | | 6,283,518 | | | | (21,405 | ) |
FTSE 100 Index | | Buy | | | | 9 | | | | 3/16/12 | | | | 773,761 | | | | 6,509 | |
FTSE 100 Index | | Sell | | | | 73 | | | | 3/16/12 | | | | 6,276,059 | | | | (89,048 | ) |
Japan (Government of) Mini Bonds, 10 yr. | | Buy | | | | 40 | | | | 3/8/12 | | | | 7,406,002 | | | | 27,324 | |
NASDAQ 100 Index | | Sell | | | | 165 | | | | 3/16/12 | | | | 7,505,850 | | | | (4,006 | ) |
NIKKEI 225 Index | | Buy | | | | 14 | | | | 3/8/12 | | | | 769,391 | | | | 2,043 | |
NIKKEI 225 Index | | Sell | | | | 61 | | | | 3/8/12 | | | | 6,696,765 | | | | 148,275 | |
Standard & Poor’s 500 E-Mini Index | | Sell | | | | 298 | | | | 3/16/12 | | | | 18,663,740 | | | | (349,170 | ) |
U.S. Long Bonds | | Buy | | | | 476 | | | | 3/21/12 | | | | 68,930,750 | | | | 605,274 | |
38 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
Futures Contracts: Continued
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | Unrealized | |
| | | | | | Number of | | | Expiration | | | | | | | Appreciation | |
Contract Description | | Buy/Sell | | Contracts | | | Date | | | Value | | | (Depreciation) | |
|
U.S. Treasury Nts., 2 yr. | | Buy | | | 382 | | | | 3/30/12 | | | $ | 84,248,907 | | | $ | 11,596 | |
U.S. Treasury Nts., 2 yr. | | Sell | | | 157 | | | | 3/30/12 | | | | 34,625,860 | | | | (9,109 | ) |
U.S. Treasury Nts., 5 yr. | | Buy | | | 1,206 | | | | 3/30/12 | | | | 148,648,922 | | | | 712,535 | |
U.S. Treasury Nts., 5 yr. | | Sell | | | 71 | | | | 3/30/12 | | | | 8,751,305 | | | | (35,570 | ) |
U.S. Treasury Nts., 10 yr. | | Buy | | | 1,052 | | | | 3/21/12 | | | | 137,943,500 | | | | 1,454,392 | |
U.S. Treasury Nts., 10 yr. | | Sell | | | 465 | | | | 3/21/12 | | | | 60,973,125 | | | | (316,664 | ) |
U.S. Treasury Ultra Bonds | | Buy | | | 197 | | | | 3/21/12 | | | | 31,556,938 | | | | 191,835 | |
United Kingdom Long Gilt | | Sell | | | 8 | | | | 3/28/12 | | | | 1,452,976 | | | | (20,523 | ) |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | 2,049,965 | |
| | | | | | | | | | | | | | | | | | | |
Written Options as of December 30, 2011 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | Unrealized | |
| | | | | | Number of | | | Exercise | | | Expiration | | | Premiums | | | | | | | Appreciation/ | |
Description | | Type | | Contracts | | | Price | | | Date | | | Received | | | Value | | | (Depreciation) | |
|
Australian Dollar (AUD) | | Put | | | 2,930,000 | | | $ | 0.920 | | | | 1/13/12 | | | $ | 50,007 | | | $ | (3 | ) | | $ | 50,004 | |
Australian Dollar (AUD) | | Put | | | 1,905,000 | | | | 0.959 | | | | 1/13/12 | | | | 40,005 | | | | (279 | ) | | | 39,726 | |
Australian Dollar (AUD) | | Put | | | 1,905,000 | | | | 0.949 | | | | 1/13/12 | | | | 38,083 | | | | (97 | ) | | | 37,986 | |
Australian Dollar (AUD) | | Put | | | 950,000 | | | | 0.923 | | | | 1/17/12 | | | | 16,948 | | | | (12 | ) | | | 16,936 | |
Australian Dollar (AUD) Futures | | Put | | | 144 | | | | 93.000 | | | | 1/9/12 | | | | 54,429 | | | | (720 | ) | | | 53,709 | |
Australian Dollar (AUD) Futures | | Put | | | 97 | | | | 97.000 | | | | 1/9/12 | | | | 1,269 | | | | (1,455 | ) | | | (186 | ) |
Euro (EUR) | | Call | | | 950,000 | | | | 1.450 | | | | 1/13/12 | | | | 15,690 | | | | — | | | | 15,690 | |
Euro (EUR) | | Put | | | 955,000 | | | | 1.290 | | | | 1/18/12 | | | | 17,802 | | | | (11,775 | ) | | | 6,027 | |
Euro (EUR) 90 Day Futures | | Put | | | 359 | | | | 98.625 | | | | 2/13/12 | | | | 17,536 | | | | (2,244 | ) | | | 15,292 | |
Euro (EUR) 90 Day Futures | | Put | | | 179 | | | | 98.750 | | | | 1/16/12 | | | | 8,744 | | | | (1,119 | ) | | | 7,625 | |
Euro (EUR) FX Futures | | Put | | | 72 | | | | 1.210 | | | | 3/12/12 | | | | 92,735 | | | | (76,500 | ) | | | 16,235 | |
Euro-Bundesobligation Futures | | Call | | | 272 | | | 142.000 | EUR | | | 1/30/12 | | | | 149,532 | | | | (123,212 | ) | | | 26,320 | |
Euro-Bundesobligation Futures | | Call | | | 131 | | | 141.000 | EUR | | | 1/30/12 | | | | 89,508 | | | | (100,032 | ) | | | (10,524 | ) |
Euro-Bundesobligation Futures | | Call | | | 96 | | | 141.000 | EUR | | | 2/27/12 | | | | 136,921 | | | | (144,127 | ) | | | (7,206 | ) |
Euro-Bundesobligation Futures | | Call | | | 337 | | | 140.000 | EUR | | | 2/27/12 | | | | 440,769 | | | | (676,050 | ) | | | (235,281 | ) |
Euro-Bundesobligation Futures | | Put | | | 968 | | | 131.000 | EUR | | | 1/30/12 | | | | 288,529 | | | | (50,113 | ) | | | 238,416 | |
Euro-Bundesobligation Futures | | Put | | | 194 | | | 130.500 | EUR | | | 2/27/12 | | | | 93,545 | | | | (37,663 | ) | | | 55,882 | |
Euro-Bundesobligation Futures | | Put | | | 145 | | | 133.000 | EUR | | | 1/30/12 | | | | 71,810 | | | | (18,767 | ) | | | 53,043 | |
Indonesia Rupiah (IDR) | | Call | | | 57,400,000,000 | | | 8,650.000 | IDR | | | 1/27/12 | | | | 51,230 | | | | (574 | ) | | | 50,656 | |
Indonesia Rupiah (IDR) | | Call | | | 28,700,000,000 | | | 8,650.000 | IDR | | | 1/27/12 | | | | 25,283 | | | | (287 | ) | | | 24,996 | |
Indonesia Rupiah (IDR) | | Call | | | 28,500,000,000 | | | 8,600.000 | IDR | | | 1/30/12 | | | | 20,050 | | | | (285 | ) | | | 19,765 | |
Indonesia Rupiah (IDR) | | Put | | | 66,500,000,000 | | | 10,020.000 | IDR | | | 1/27/12 | | | | 56,744 | | | | (5,320 | ) | | | 51,424 | |
Indonesia Rupiah (IDR) | | Put | | | 33,200,000,000 | | | 10,000.000 | IDR | | | 1/27/12 | | | | 29,116 | | | | (2,988 | ) | | | 26,128 | |
Indonesia Rupiah (IDR) | | Put | | | 33,000,000,000 | | | 9,950.000 | IDR | | | 1/30/12 | | | | 23,879 | | | | (4,620 | ) | | | 19,259 | |
Japanese Yen (JPY) Futures | | Call | | | 59 | | | | 140.000 | | | | 3/12/12 | | | | 19,883 | | | | (13,275 | ) | | | 6,608 | |
Japanese Yen (JPY) Futures | | Call | | | 10 | | | | 139.000 | | | | 3/12/12 | | | | 2,475 | | | | (2,875 | ) | | | (400 | ) |
Japanese Yen (JPY) Futures | | Call | | | 5 | | | | 140.500 | | | | 3/12/12 | | | | 8,552 | | | | (1,000 | ) | | | 7,552 | |
Japanese Yen (JPY) Futures | | Put | | | 59 | | | | 121.000 | | | | 3/12/12 | | | | 12,167 | | | | (12,538 | ) | | | (371 | ) |
Japanese Yen (JPY) Futures | | Put | | | 48 | | | | 124.000 | | | | 1/9/12 | | | | 4,823 | | | | (1,200 | ) | | | 3,623 | |
Japanese Yen (JPY) Futures | | Put | | | 48 | | | | 125.500 | | | | 1/9/12 | | | | 4,139 | | | | (2,100 | ) | | | 2,039 | |
Japanese Yen (JPY) Futures | | Put | | | 48 | | | | 117.000 | | | | 3/12/12 | | | | 8,939 | | | | (3,600 | ) | | | 5,339 | |
Japanese Yen (JPY) Futures | | Put | | | 39 | | | | 123.000 | | | | 2/6/12 | | | | 7,750 | | | | (3,900 | ) | | | 3,850 | |
Japanese Yen (JPY) Futures | | Put | | | 29 | | | | 120.000 | | | | 3/12/12 | | | | 6,091 | | | | (4,713 | ) | | | 1,378 | |
Japanese Yen (JPY) Futures | | Put | | | 17 | | | | 123.000 | | | | 1/9/12 | | | | 1,291 | | | | (213 | ) | | | 1,078 | |
Japanese Yen (JPY) Futures | | Put | | | 5 | | | | 126.000 | | | | 1/9/12 | | | | 1,302 | | | | (250 | ) | | | 1,052 | �� |
Mexican Nuevo Peso (MXN) | | Call | | | 61,760,000 | | | 12.330 MXN | | | 1/18/12 | | | | 87,105 | | | | (1 | ) | | | 87,104 | |
Mexican Nuevo Peso (MXN) | | Call | | | 61,680,000 | | | 12.315 MXN | | | 1/18/12 | | | | 55,094 | | | | (1 | ) | | | 55,093 | |
Mexican Nuevo Peso (MXN) | | Put | | | 70,120,000 | | | 14.000 MXN | | | 1/18/12 | | | | 104,178 | | | | (61,107 | ) | | | 43,071 | |
Mexican Nuevo Peso (MXN) | | Put | | | 70,120,000 | | | 14.000 MXN | | | 1/18/12 | | | | 84,044 | | | | (61,107 | ) | | | 22,937 | |
New Zealand Dollar (NZD) | | Put | | | 2,860,000 | | | | 0.753 | | | | 1/13/12 | | | | 42,613 | | | | (3,548 | ) | | | 39,065 | |
New Zealand Dollar (NZD) | | Put | | | 2,855,000 | | | | 0.740 | | | | 1/17/12 | | | | 39,485 | | | | (1,973 | ) | | | 37,512 | |
New Zealand Dollar (NZD) | | Put | | | 2,800,000 | | | | 0.737 | | | | 1/17/12 | | | | 37,326 | | | | (1,446 | ) | | | 35,880 | |
39 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
Footnotes to Statement of Investments Continued
Written Options: Continued
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | Unrealized | |
| | | | | | Number of | | | Exercise | | | Expiration | | | Premiums | | | | | | | Appreciation/ | |
Description | | Type | | Contracts | | | Price | | | Date | | | Received | | | Value | | | (Depreciation) | |
|
South Korean Won (KRW) | | Call | | | 1,147,000,000 | | | 1,050.000 | KRW | | | 1/19/12 | | | $ | 6,751 | | | $ | — | | | $ | 6,751 | |
South Korean Won (KRW) | | Put | | | 1,385,000,000 | | | 1,272.000 | KRW | | | 1/19/12 | | | | 23,606 | | | | (152 | ) | | | 23,454 | |
U.S. Long Bonds Futures | | Call | | | 772 | | | | 150.000 | | | | 2/27/12 | | | | 898,920 | | | | (844,375 | ) | | | 54,545 | |
U.S. Treasury Nts. Futures, 10 yr. | | Put | | | 941 | | | | 126.000 | | | | 1/30/12 | | | | 67,780 | | | | (29,406 | ) | | | 38,374 | |
U.S. Treasury Nts. Futures, 10 yr. | | Put | | | 609 | | | | 126.500 | | | | 1/30/12 | | | | 45,331 | | | | (19,031 | ) | | | 26,300 | |
U.S. Treasury Nts. Futures, 10 yr. | | Put | | | 468 | | | | 127.000 | | | | 1/30/12 | | | | 28,604 | | | | (21,938 | ) | | | 6,666 | |
U.S. Treasury Nts. Futures, 10 yr. | | Put | | | 179 | | | | 124.500 | | | | 2/27/12 | | | | 36,190 | | | | (13,984 | ) | | | 22,206 | |
U.S. Treasury Nts. Futures, 10 yr. | | Put | | | 18 | | | | 126.000 | | | | 2/27/12 | | | | 7,850 | | | | (2,250 | ) | | | 5,600 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | 3,472,453 | | | $ | (2,364,225 | ) | | $ | 1,108,228 | |
| | | | | | | | | | | | | | | | | | |
Exercise price is reported in U.S. Dollars (USD), except for those denoted in the following currency:
| | | | | | |
|
EUR | | Euro | | KRW | | South Korean Won |
IDR | | Indonesia Rupiah | | MXN | | Mexican Nuevo Peso |
Credit Default Swap Contracts as of December 30, 2011 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Pay/ | | | | | | | Upfront | | | | | | | | |
| | Buy/Sell | | Notional | | | Receive | | | | | | | Payment | | | | | | | Unrealized | |
Reference Entity/ | | Credit | | Amount | | | Fixed | | | Termination | | | Received/ | | | | | | | Appreciation | |
Swap Counterparty | | Protection | | (000’s) | | | Rate | | | Date | | | (Paid) | | | Value | | | (Depreciation) | |
|
Brazil (Federative Republic of) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Barclays Bank plc | | Sell | | $ | 3,800 | | | | 1.00 | % | | | 3/20/17 | | | $ | 113,422 | | | $ | (112,729 | ) | | $ | 693 | |
| | | | | | | | | | | | | | | | | |
| | Total | | | 3,800 | | | | | | | | | | | | 113,422 | | | | (112,729 | ) | | | 693 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Bristol-Myers Squibb Co. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Citibank NA | | Sell | | | 4,480 | | | | 1.00 | | | | 12/20/16 | | | | (152,683 | ) | | | 138,840 | | | | (13,843 | ) |
| | | | | | | | | | | | | | | | | |
| | Total | | | 4,480 | | | | | | | | | | | | (152,683 | ) | | | 138,840 | | | | (13,843 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CDX Emerging Market Index, Series 16: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Bank of America NA | | Buy | | | 10,735 | | | | 5.00 | | | | 12/20/16 | | | | 966,568 | | | | (927,549 | ) | | | 39,019 | |
Barclays Bank plc | | Buy | | | 10,525 | | | | 5.00 | | | | 12/20/16 | | | | 943,449 | | | | (909,404 | ) | | | 34,045 | |
| | | | | | | | | | | | | | | | | |
| | Total | | | 21,260 | | | | | | | | | | | | 1,910,017 | | | | (1,836,953 | ) | | | 73,064 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gatx Corp. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
UBS AG | | Sell | | | 4,480 | | | | 1.00 | | | | 12/20/16 | | | | 238,374 | | | | (236,513 | ) | | | 1,861 | |
| | | | | | | | | | | | | | | | | |
| | Total | | | 4,480 | | | | | | | | | | | | 238,374 | | | | (236,513 | ) | | | 1,861 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Goodrich Corp. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deutsche Bank AG | | Sell | | | 4,510 | | | | 1.00 | | | | 12/20/16 | | | | (166,825 | ) | | | 167,625 | | | | 800 | |
| | | | | | | | | | | | | | | | | |
| | Total | | | 4,510 | | | | | | | | | | | | (166,825 | ) | | | 167,625 | | | | 800 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Halliburton Co. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Credit Suisse International | | Buy | | | 4,480 | | | | 1.00 | | | | 12/20/16 | | | | 13,499 | | | | 5,177 | | | | 18,676 | |
| | | | | | | | | | | | | | | | | |
| | Total | | | 4,480 | | | | | | | | | | | | 13,499 | | | | 5,177 | | | | 18,676 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Hewlett-Packard Co. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Credit Suisse International | | Buy | | | 4,480 | | | | 1.00 | | | | 12/20/16 | | | | (83,398 | ) | | | 99,384 | | | | 15,986 | |
| | | | | | | | | | | | | | | | | |
| | Total | | | 4,480 | | | | | | | | | | | | (83,398 | ) | | | 99,384 | | | | 15,986 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Hungary (Republic of) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
HSBC Bank USA NA | | Sell | | | 2,960 | | | | 1.00 | | | | 3/20/17 | | | | 602,512 | | | | (664,578 | ) | | | (62,066 | ) |
| | | | | | | | | | | | | | | | | |
| | Total | | | 2,960 | | | | | | | | | | | | 602,512 | | | | (664,578 | ) | | | (62,066 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ingersoll-Rand Co. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deutsche Bank AG | | Buy | | | 4,510 | | | | 1.00 | | | | 12/20/16 | | | | 117,936 | | | | (135,679 | ) | | | (17,743 | ) |
| | | | | | | | | | | | | | | | | |
| | Total | | | 4,510 | | | | | | | | | | | | 117,936 | | | | (135,679 | ) | | | (17,743 | ) |
40 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
Credit Default Swap Contracts: Continued
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Pay/ | | | | | | | Upfront | | | | | | | | |
| | Buy/Sell | | Notional | | | Receive | | | | | | | Payment | | | | | | | Unrealized | |
Reference Entity/ | | Credit | | Amount | | | Fixed | | | Termination | | | Received/ | | | | | | | Appreciation | |
Swap Counterparty | | Protection | | (000’s) | | | Rate | | | Date | | | (Paid) | | | Value | | | (Depreciation) | |
|
Istanbul Bond Co. SA for Finansbank AS | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Morgan Stanley Capital Services, Inc. | | Sell | | $ | 3,100 | | | | 1.30 | % | | | 3/24/13 | | | $ | — | | | $ | (134,878 | ) | | $ | (134,878 | ) |
| | | | | | | | | | | | | | | | | |
| | Total | | | 3,100 | | | | | | | | | | | | — | | | | (134,878 | ) | | | (134,878 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Japan: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
JPMorgan Chase Bank NA | | Sell | | | 470 | | | | 1.00 | | | | 9/20/16 | | | | 1,824 | | | | (8,343 | ) | | | (6,519 | ) |
JPMorgan Chase Bank NA | | Sell | | | 475 | | | | 1.00 | | | | 9/20/16 | | | | 1,646 | | | | (8,432 | ) | | | (6,786 | ) |
JPMorgan Chase Bank NA | | Sell | | | 475 | | | | 1.00 | | | | 9/20/16 | | | | 2,505 | | | | (8,432 | ) | | | (5,927 | ) |
| | | | | | | | | | | | | | | | | |
| | Total | | | 1,420 | | | | | | | | | | | | 5,975 | | | | (25,207 | ) | | | (19,232 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
McDonald’s Corp. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deutsche Bank AG | | Sell | | | 4,480 | | | | 1.00 | | | | 12/20/16 | | | | (179,909 | ) | | | 166,821 | | | | (13,088 | ) |
| | | | | | | | | | | | | | | | | |
| | Total | | | 4,480 | | | | | | | | | | | | (179,909 | ) | | | 166,821 | | | | (13,088 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Peru (Republic of): | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Citibank NA | | Buy | | | 10,000 | | | | 1.00 | | | | 9/20/15 | | | | 11,275 | | | | 171,709 | | | | 182,984 | |
Deutsche Bank AG | | Buy | | | 1,900 | | | | 1.71 | | | | 12/20/16 | | | | — | | | | (1,865 | ) | | | (1,865 | ) |
| | | | | | | | | | | | | | | | | |
| | Total | | | 11,900 | | | | | | | | | | | | 11,275 | | | | 169,844 | | | | 181,119 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Philippines (Republic of the) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Barclays Bank plc | | Buy | | | 12,430 | | | | 1.00 | | | | 3/20/17 | | | | (612,768 | ) | | | 565,604 | | | | (47,164 | ) |
| | | | | | | | | | | | | | | | | |
| | Total | | | 12,430 | | | | | | | | | | | | (612,768 | ) | | | 565,604 | | | | (47,164 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reynolds American, Inc. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Goldman Sachs International | | Sell | | | 4,510 | | | | 1.00 | | | | 12/20/16 | | | | 186,191 | | | | (189,589 | ) | | | (3,398 | ) |
| | | | | | | | | | | | | | | | | |
| | Total | | | 4,510 | | | | | | | | | | | | 186,191 | | | | (189,589 | ) | | | (3,398 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Southwest Airlines Co. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Goldman Sachs International | | Buy | | | 4,480 | | | | 1.00 | | | | 12/20/16 | | | | (198,445 | ) | | | 187,598 | | | | (10,847 | ) |
| | | | | | | | | | | | | | | | | |
| | Total | | | 4,480 | | | | | | | | | | | | (198,445 | ) | | | 187,598 | | | | (10,847 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Whirlpool Corp. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Barclays Bank plc | | Buy | | | 4,590 | | | | 1.00 | | | | 12/20/16 | | | | (335,439 | ) | | | 415,460 | | | | 80,021 | |
| | | | | | | | | | | | | | | | | |
| | Total | | | 4,590 | | | | | | | | | | | | (335,439 | ) | | | 415,460 | | | | 80,021 | |
| | | | | | | | | | | | | | | | | | |
Grand Total Buys | | | | | | | | | | | | | | | | | | | 822,677 | | | | (529,565 | ) | | | 293,112 | |
| | | | | | | | | | | | | | | | | | |
Grand Total Sells | | | | | | | | | | | | | | | | | | | 647,057 | | | | (890,208 | ) | | | (243,151 | ) |
| | | | | | | | | | | | | | | | | | |
Total Credit Default Swaps | | | | | | | | | | | | | | | | | | $ | 1,469,734 | | | $ | (1,419,773 | ) | | $ | 49,961 | |
| | | | | | | | | | | | | | | | | | |
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 | | Total Maximum Potential | | | | | | | Reference Asset | |
Asset on which the | | Payments for Selling Credit | | | | | | | Rating Range** | |
Fund Sold Protection | | Protection (Undiscounted) | | | Amount Recoverable* | | | (Unaudited) | |
|
Investment Grade Single Name Corporate Debt | | $ | 25,560,000 | | | $ | — | | | A+ to BBB- |
Investment Grade Sovereign Debt | | | 5,220,000 | | | | — | | | AA- to BBB- |
Non-Investment Grade Sovereign Debt | | | 2,960,000 | | | | — | | | BB- |
| | | | | | |
Total | | $ | 33,740,000 | | | $ | — | | | | | |
| | | | | | |
| | |
* | | 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. |
41 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
Footnotes to Statement of Investments Continued
Interest Rate Swap Contracts as of December 30, 2011 are as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Notional | | | | | | | | | | | | |
Interest Rate/ | | Amount | | Paid by | | Received by | | | Termination | | | | |
Swap Counterparty | | (000’s) | | the Fund | | the Fund | | | Date | | | Value | |
|
BZDI: | | | | | | | | | | | | | | | | | | | | |
Citibank NA | | 9,670 BRR | | BZDI | | | 11.540 | % | | | 1/2/14 | | | $ | 90,683 | |
Goldman Sachs Group, Inc. (The) | | 10,600 BRR | | BZDI | | | 11.390 | | | | /5/15 | | | | 101,156 | |
Goldman Sachs Group, Inc. (The) | | 8,670 BRR | | BZDI | | | 11.520 | | | | 1/2/14 | | | | 86,153 | |
Goldman Sachs Group, Inc. (The) | | 9,900 BRR | | BZDI | | | 11.420 | | | | 1/3/14 | | | | 87,081 | |
| | | | | | | | | | | | | | | | | | |
Total | | 38,840 BRR | | | | | | | | | | | | | | | 365,073 | |
| | | | | | | | | | | | | | | | | | | | |
MXN TIIE BANXICO: | | | | | | | | | | | | | | | | | | | | |
Bank of America NA | | 114,400 MXN | | MXN TIIE BANXICO | | | 5.170 | | | | 11/14/14 | | | | (60,944 | ) |
Bank of America NA | | 84,200 MXN | | MXN TIIE BANXICO | | | 5.130 | | | | 11/19/14 | | | | (38,707 | ) |
Barclays Bank plc | | 33,700 MXN | | MXN TIIE BANXICO | | | 5.150 | | | | 11/20/14 | | | | (14,241 | ) |
Credit Suisse International | | 13,300 MXN | | MXN TIIE BANXICO | | | 7.010 | | | | 7/24/31 | | | | (91,257 | ) |
Credit Suisse International | | 67,400 MXN | | MXN TIIE BANXICO | | | 5.120 | | | | 11/19/14 | | | | (32,307 | ) |
Deutsche Bank AG | | 66,000 MXN | | MXN TIIE BANXICO | | | 5.120 | | | | 11/19/14 | | | | (31,636 | ) |
Goldman Sachs Group, Inc. (The) | | 10,300 MXN | | MXN TIIE BANXICO | | | 7.000 | | | | 7/24/31 | | | | (71,452 | ) |
Goldman Sachs Group, Inc. (The) | | 73,700 MXN | | MXN TIIE BANXICO | | | 5.000 | | | | 11/14/14 | | | | (51,829 | ) |
Merrill Lynch & Co., Inc. | | 17,000 MXN | | MXN TIIE BANXICO | | | 6.990 | | | | 7/24/31 | | | | (119,215 | ) |
| | | | | | | | | | | | | | | | | | |
Total | | 480,000 MXN | | | | | | | | | | | | | | | (511,588 | ) |
| | | | | | | | | | | | | | | | | | | | |
Six-Month AUD BBR BBSW | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Six-Month AUD | | | | | | | | | |
Westpac Banking Corp. | | 10,670 AUD | | | 4.990 | % | | BBR BBSW | | | | 11/3/21 | | | | (360,873 | ) |
Six-Month EUR EURIBOR: | | | | | | | | | | | | | | | | | | | | |
| | | | | | Six-Month EUR | | | | | | | | | | | | |
Bank of America Merrill Lynch | | 500 EUR | | EURIBOR | | | 2.710 | | | | 8/22/21 | | | | 20,922 | |
| | | | | | Six-Month EUR | | | | | | | | | | | | |
Bank of America NA | | 470 EUR | | EURIBOR | | | 1.945 | | | | 9/8/16 | | | | 7,135 | |
| | | | | | Six-Month EUR | | | | | | | | | | | | |
Bank of America NA | | 1,440 EUR | | EURIBOR | | | 1.890 | | | | 10/6/16 | | | | 15,936 | |
| | | | | | Six-Month EUR | | | | | | | | | | | | |
Barclays Bank plc | | 2,965 EUR | | EURIBOR | | | 2.580 | | | | 11/22/17 | | | | 55,603 | |
| | | | | | Six-Month EUR | | | | | | | | | | | | |
Barclays Bank plc | | 2,300 EUR | | EURIBOR | | | 2.520 | | | | 12/13/17 | | | | 33,767 | |
| | | | | | Six-Month EUR | | | | | | | | | | | | |
Deutsche Bank AG | | 4,850 EUR | | EURIBOR | | | 1.395 | | | | 12/2/13 | | | | 6,588 | |
| | | | | | Six-Month EUR | | | | | | | | | | | | |
Goldman Sachs Group, Inc. (The) | | 390 EUR | | EURIBOR | | | 2.840 | | | | 10/10/31 | | | | 11,595 | |
| | | | | | Six-Month EUR | | | | | | | | | | | | |
Goldman Sachs Group, Inc. (The) | | 1,770 EUR | | EURIBOR | | | 2.735 | | | | 11/24/17 | | | | 18,738 | |
| | | | | | Six-Month EUR | | | | | | | | | | | | |
Goldman Sachs Group, Inc. (The) | | 3,880 EUR | | EURIBOR | | | 2.160 | | | | 12/2/15 | | | | 40,997 | |
| | | | | | Six-Month EUR | | | | | | | | | | | | |
Goldman Sachs Group, Inc. (The) | | 475 EUR | | EURIBOR | | | 2.990 | | | | 8/11/21 | | | | 35,737 | |
| | | | | | Six-Month EUR | | | | | | | | | | | | |
JPMorgan Chase Bank NA | | 1,915 EUR | | EURIBOR | | | 1.860 | | | | 11/3/16 | | | | 16,243 | |
| | | | | | | | | | | | | | | | | | |
Total | | 20,955 EUR | | | | | | | | | | | | | | | 263,261 | |
| | | | | | | | | | | | | | | | | | | | |
Six-Month PLZ WIBOR WIBO: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Six-Month PLZ | | | | | | | | |
JPMorgan Chase Bank NA | | 10,980 PLZ | | | 4.575 | | | WIBOR WIBO | | | 8/23/16 | | | | 31,098 | |
| | | | | | | | | | Six-Month PLZ | | | | | | | | |
JPMorgan Chase Bank NA | | 10,980 PLZ | | | 4.590 | | | WIBOR WIBO | | | 8/23/16 | | | | 28,985 | |
| | | | | | | | | | | | | | | | | | |
Total | | 21,960 PLZ | | | | | | | | | | | | | | | 60,083 | |
42 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
Interest Rate Swap Contracts: Continued
| | | | | | | | | | | | | | | | | | | | |
| | Notional | | | | | | | | | | | | | |
Interest Rate/ | | Amount | | | Paid by | | | Received by | | | Termination | | | | |
Swap Counterparty | | (000’s) | | | the Fund | | | the Fund | | | Date | | | Value | |
|
Three-Month CAD BA CDOR: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Three-Month | | | | | | | | | |
Bank of America Merrill Lynch | | 2,840 | CAD | | | 1.183 | % | | CAD BA CDOR | | | | 8/18/14 | | | $ | (1,818 | ) |
| | | | | | | | | | Three-Month | | | | | | | | | |
JPMorgan Chase Bank NA | | 3,845 | CAD | | | 1.320 | | | CAD BA CDOR | | | | 8/8/14 | | | | (12,264 | ) |
| | | | | | | | | | Three-Month | | | | | | | | | |
JPMorgan Chase Bank NA | | 3,865 | CAD | | | 1.585 | | | CAD BA CDOR | | | | 8/4/14 | | | | (32,678 | ) |
| | | | | | | | | | | | | | | | | | |
Total | | 10,550 | CAD | | | | | | | | | | | | | | | (46,760 | ) |
| | | | | | | | | | | | | | | | | | | | |
Three-Month NZD BBR FRA | | | | | | | | | | | | | | | | | | | | |
| | | | | | Three-Month | | | | | | | | | | | | | |
Barclays Bank plc | | 13,915 | NHZ | | NZD BBR FRA | | | | 4.600 | % | | | 11/3/21 | | | | 549,297 | |
| | | | | | | | | | | | | | | | | | | | |
Three-Month SEK STIBOR SIDE | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Three-Month | | | | | | | | | |
Goldman Sachs Group, Inc. (The) | | 72,770 | SEK | | | 2.440 | | | SEK STIBOR SIDE | | | | 11/3/21 | | | | (147,775 | ) |
| | | | | | | | | | | | | | | | | | | | |
Three-Month USD BBA LIBOR | | | | | | | | | | | | | | | | | | | | |
| | | | | | Three-Month USD | | | | | | | | | | | | | |
Barclays Bank plc | | | 11,300 | | | BBA LIBOR | | | | 2.358 | | | | 11/2/21 | | | | 385,933 | |
| | | | | | | | | | | | | | | | | | | | |
Three-Month ZAR JIBAR SAFEX: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Three-Month | | | | | | | | | |
Barclays Bank plc | | 91,000 | ZAR | | | 6.110 | | | ZAR JIBAR SAFEX | | | | 12/8/14 | | | | 10,091 | |
| | | | | | | | | | | | | | | | | | |
Total where Fund pays a fixed rate | | 91,000 | ZAR | | | | | | | | | | | | | | | 10,091 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | Three-Month ZAR | | | | | | | | | | | | | |
Barclays Bank plc | | 34,900 | ZAR | | JIBAR SAFEX | | | | 7.510 | | | | 12/7/21 | | | | (15,471 | ) |
| | | | | | Three-Month ZAR | | | | | | | | | | | | | |
Barclays Bank plc | | 13,300 | ZAR | | JIBAR SAFEX | | | | 7.480 | | | | 8/17/21 | | | | (5,712 | ) |
| | | | | | Three-Month ZAR | | | | | | | | | | | | | |
Goldman Sachs Group, Inc. (The) | | 13,500 | ZAR | | JIBAR SAFEX | | | | 7.480 | | | | 8/17/21 | | | | (5,798 | ) |
| | | | | | Three-Month ZAR | | | | | | | | | | | | | |
HSBC Bank USA NA | | 13,300 | ZAR | | JIBAR SAFEX | | | | 7.470 | | | | 8/17/21 | | | | (6,874 | ) |
| | | | | | | | | | | | | | | | | | | |
Total where Fund pays a variable rate | | | 75,000 | | | | | | | | | | | | | | | | (33,855 | ) |
| | | | | | | | | | | | | | | | | | |
Total | | 166,000 | ZAR | | | | | | | | | | | | | | | (23,764 | ) |
| | | | | | | | | | | | | | | | | | | |
Total Interest Rate Swaps | | | | | | | | | | | | | | | | | | $ | 532,887 | |
| | | | | | | | | | | | | | | | | | | |
Notional amount is reported in U.S. Dollars (USD), except for those denoted in the following currencies:
| | |
|
AUD | | Australian Dollar |
BRR | | Brazilian Real |
CAD | | Canadian Dollar |
EUR | | Euro |
MXN | | Mexican Nuevo Peso |
NZD | | New Zealand Dollar |
PLZ | | Polish Zloty |
SEK | | Swedish Krona |
ZAR | | South African Rand |
Abbreviations/Definitions are as follows:
| | |
|
BA CDOR | | Canada Bankers Acceptances Deposit Offering Rate |
BANIXCO | | Banco de Mexico |
BBA LIBOR | | British Bankers’ Association London-Interbank Offered Rate |
BBR BBSW | | Bank Bill Swap Reference Rate |
| | (Australian Financial Market) |
BBR FRA | | Bank Bill Rate Forward Rate Agreement |
BZDI | | Brazil Interbank Deposit Rate |
EURIBOR | | Euro Interbank Offered Rate |
JIBAR | | South Africa Johannesburg Interbank Agreed Rate |
SAFEX | | South African Futures Exchange |
STIBOR SIDE | | Stockholm Interbank Offered Rate |
TIIE | | Interbank Equilibrium Interest Rate |
WIBOR WIBO | | Poland Warsaw Interbank Offer Bid Rate |
43 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
Footnotes to Statement of Investments Continued
Total Return Swap Contracts as of December 30, 2011 are as follows:
| | | | | | | | | | | | | | |
| | Notional | | | | | | | | |
Reference Entity/ | | Amount | | Paid by | | Received by | | Termination | | |
Swap Counterparty | | (000’s) | | the Fund | | the Fund | | Date | | Value |
|
Consumer Staples Select Sector Index | | | | | | | | | | | | | | |
Morgan Stanley | | $ | 1,738 | | | One-Month USD BBA LIBOR plus 15 basis points and if negative, the absolute value of the Total Return of the Consumer Staples Select Sector Index | | If positive, the Total Return of the Consumer Staples Select Sector Index | | 3/6/12 | | $ | 47,668 | |
| | | | | | | | | | | | | | |
Custom Basket of Securities: | | | | | | | | | | | | | | |
Citibank NA | | 1,813 | CHF | | One-Month CHF BBA LIBOR plus 30 basis points and if negative, the absolute value of the Total Return of a custom basket of securities | | If positive, the Total Return of a custom basket of securities | | 1/11/12 | | | 14,438 | |
Citibank NA | | 6,030 | SEK | | One-Month SEK STIBOR SIDE plus 30 basis points and if negative, the absolute value of the Total Return of a custom basket of securities | | If positive, the Total Return of a custom basket of securities | | 1/11/12 | | | 5,200 | |
Citibank NA | | 2,388 | EUR | | One-Month EURIBOR plus 30 basis points and if negative, the absolute value of the Total Return of a custom basket of securities | | If positive, the Total Return of a custom basket of securities | | 1/11/12 | | | 35,226 | |
Citibank NA | | 1,717 | GBP | | One-Month GBP BBA LIBOR plus 30 basis points and if negative, the absolute value of the Total Return of a custom basket of securities | | If positive, the Total Return of a custom basket of securities | | 1/11/12 | | | (65,033 | ) |
Citibank NA | | 986 | DKK | | One-Month DKK BBA LIBOR plus 30 basis points and if negative, the absolute value of the Total Return of a custom basket of securities | | If positive, the Total Return of a custom basket of securities | | 1/11/12 | | | 10,639 | |
Citibank NA | | 525,530 | JPY | | One-Month JPY BBA LIBOR plus 53 basis points and if negative, the absolute value of the Total Return of a custom basket of securities | | If positive, the Total Return of a custom basket of securities | | 4/16/12 | | | (114,270 | ) |
44 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
Total Return Swap Contracts: Continued
| | | | | | | | | | | | | | |
| | Notional | | | | | | | | |
Reference Entity/ | | Amount | | Paid by | | Received by | | Termination | | |
Swap Counterparty | | (000’s) | | the Fund | | the Fund | | Date | | Value |
|
Custom Basket of Securities: Continued | | | | | | | | | | | | | | |
Goldman Sachs Group, Inc. (The) | | $ | 22,387 | | | One-Month USD BBA LIBOR plus 35 basis points and if negative, the absolute value of the Total Return of a custom basket of securities | | If positive, the Total Return of a custom basket of securities | | 12/6/12 | | $ | 598,976 | |
Morgan Stanley | | 4,326 | GBP | | One-Month GBP BBA LIBOR plus 50 basis points and if negative, the absolute value of the Total Return of a custom basket of securities | | If positive, the Total Return of a custom basket of securities | | 1/1/12 | | | (88,542 | ) |
| | | | | | | | | | | | | | |
| | | | | | | | Reference Entity Total | | | | | 396,634 | |
| | | | | | | | | | | | | | |
Energy Select Sector Index | | | | | | | | | | | | | | |
UBS AG | | | 1,878 | | | One-Month USD BBA LIBOR plus 3 basis points and if negative, the absolute value of the Total Return of the Energy Select Sector Index | | If positive, the Total Return of the Energy Select Sector Index | | 12/6/12 | | | (37,241 | ) |
| | | | | | | | | | | | | | |
Industrial Select Sector Index | | | | | | | | | | | | | | |
UBS AG | | | 1,724 | | | One-Month USD BBA LIBOR plus 15 basis points and if negative, the absolute value of the Total Return of the Industrial Select Sector Index | | If positive, the Total Return of the Industrial Select Sector Index | | 9/7/12 | | | 9,154 | |
MSCI Daily TR Gross EAFE USD Index: | | | | | | | | | | | | | | |
Citibank NA | | | 252 | | | If positive, the Total Return of the MSCI Daily Gross EAFE USD Index | | One-Month USD BBA LIBOR plus 15 basis points and if negative, the Total Return of the MSCI Daily Gross EAFE USD Index | | 1/9/12 | | | 2,068 | |
Goldman Sachs Group, Inc. (The) | | | 889 | | | If positive, the Total Return of the MSCI Daily Gross EAFE USD Index | | One-Month USD BBA LIBOR plus 10 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Gross EAFE USD Index | | 7/10/12 | | | 21,804 | |
45 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
Footnotes to Statement of Investments Continued
Total Return Swap Contracts: Continued
| | | | | | | | | | | | | | |
| | Notional | | | | | | | | | | |
Reference Entity/ | | Amount | | | Paid by | | Received by | | Termination | | | |
Swap Counterparty | | (000’s) | | | the Fund | | the Fund | | Date | | Value | |
|
MSCI Daily TR Gross EAFE USD Index: Continued | | | | | | | | | | | | | | |
Goldman Sachs Group, Inc. (The) | | $ | 3,461 | | | If positive, the Total Return of the MSCI Daily Gross EAFE USD Index | | One-Month USD BBA LIBOR plus 20 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Gross EAFE USD Index | | 5/10/12 | | $ | 50,532 | |
Goldman Sachs Group, Inc. (The) | | | 2,875 | | | If positive, the Total Return of the MSCI Daily Gross EAFE USD Index | | One-Month USD BBA LIBOR plus 28 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Gross EAFE USD Index | | 9/7/12 | | | 53,935 | |
UBS AG | | | 6,044 | | | If positive, the Total Return of the MSCI Daily Gross EAFE USD Index | | One-Month USD BBA LIBOR minus 10 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Gross EAFE USD Index | | 10/9/12 | | | 83,116 | |
| | | | | | | | | | | | | |
Reference Entity Total | | | | | | | | | | | 211,455 | |
MSCI Daily TR Gross Europe Euro Index: | | | | | | | | | | | | | | |
Citibank NA | | 2,112 | EUR | | If positive, the Total Return of the MSCI Daily Gross Europe Euro Index | | One-Month EUR EURIBOR minus 20 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Gross Europe Euro Index | | 1/6/12 | | | (34,706 | ) |
Goldman Sachs Group, Inc. (The) | | 3,341 | EUR | | If positive, the Total Return of the MSCI Daily Gross Europe Euro Index | | One-Month EUR EURIBOR and if negative, the absolute value of the Total Return of the MSCI Daily Gross Europe Euro Index | | 1/12/12 | | | (68,066 | ) |
Goldman Sachs Group, Inc. (The) | | 331 | EUR | | If positive, the Total Return of the MSCI Daily Gross Europe Euro Index | | One-Month EUR EURIBOR and if negative, the Total Return of the MSCI Daily Gross Europe Euro Index | | 1/12/12 | | | (7,306 | ) |
| | | | | | | | | | | | | |
Reference Entity Total | | | | | | | | | | | (110,078 | ) |
46 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
Total Return Swap Contracts: Continued
| | | | | | | | | | | | | | |
| | Notional | | | | | | | | | | |
Reference Entity/ | | Amount | | | Paid by | | Received by | | Termination | | | |
Swap Counterparty | | (000’s) | | | the Fund | | the Fund | | Date | | Value | |
|
MSCI Daily TR Net Emerging Markets USD Index | | | | | | | | | | | | | | |
Goldman Sachs Group, Inc. (The) | | $ | 5,647 | | | If positive, the Total Return of the MSCI Daily Net Emerging Markets USD Index | | One-Month USD BBA LIBOR plus 20 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Net Emerging Markets USD Index | | 12/13/12 | | $ | 282,433 | |
MSCI Daily TR Net France USD Index: | | | | | | | | | | | | | | |
Goldman Sachs Group, Inc. (The) | | | 2,040 | | | One-Month USD BBA LIBOR minus 65 basis points and if negative, the absolute value of the MSCI Daily Net France USD Index | | If positive, the Total Return of the MSCI Daily Net France USD Index | | 7/6/12 | | | (37,305 | ) |
Goldman Sachs Group, Inc. (The) | | | 291 | | | One-Month USD BBA LIBOR minus 65 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Net France USD Index | | If positive, the Total Return of the MSCI Daily Net France USD Index | | 7/6/12 | | | (8,075 | ) |
Goldman Sachs Group, Inc. (The) | | | 171 | | | One-Month USD BBA LIBOR minus 65 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Net France USD Index | | If positive, the Total Return of the MSCI Daily Net France USD Index | | 7/6/12 | | | (3,862 | ) |
Goldman Sachs Group, Inc. (The) | | | 199 | | | One-Month USD BBA LIBOR minus 65 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Net France USD Index | | If positive, the Total Return of the MSCI Daily Net France USD Index | | 7/6/12 | | | (4,125 | ) |
| | | | | | | | | | | | | |
Reference Entity Total | | | | | | | | | | | (53,367 | ) |
MSCI Daily TR Net Germany USD Index | | | | | | | | | | | | | | |
Morgan Stanley | | | 2,226 | | | One-Month USD BBA LIBOR minus 10 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Net Germany USD Index | | If positive, the Total Return of the MSCI Daily Net Germany USD Index | | 12/6/12 | | | (127,927 | ) |
47 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
Footnotes to Statement of Investments Continued
Total Return Swap Contracts: Continued
| | | | | | | | | | | | | | |
| | Notional | | | | | | | | | | |
Reference Entity/ | | Amount | | | Paid by | | Received by | | Termination | | | |
Swap Counterparty | | (000’s) | | | the Fund | | the Fund | | Date | | Value | |
|
MSCI Daily TR Net Hong Kong USD Index | | | | | | | | | | | | | | |
UBS AG | | $ | 1,883 | | | One-Month USD BBA LIBOR plus 30 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Net Hong Kong USD Index | | If positive, the Total Return of the MSCI Daily Net Hong Kong USD Index | | 10/9/12 | | $ | (42,925 | ) |
MSCI Daily TR Net Italy USD Index | | | | | | | | | | | | | | |
Morgan Stanley | | | 2,241 | | | One-Month USD BBA LIBOR minus 20 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Net Italy USD Index | | If positive, the Total Return of the MSCI Daily Net Italy USD Index | | 12/6/12 | | | (98,280 | ) |
MSCI Daily TR Net Spain USD Index: | | | | | | | | | | | | | | |
Morgan Stanley | | | 165 | | | One-Month USD BBA LIBOR minus 2 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Net Spain USD Index | | If positive, the Total Return of the MSCI Daily Net Spain USD Index | | 9/12/12 | | | (5,279 | ) |
Morgan Stanley | | | 2,341 | | | One-Month USD BBA LIBOR minus 2 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Net Spain USD Index | | If positive, the Total Return of the MSCI Daily Net Spain USD Index | | 9/12/12 | | | (65,864 | ) |
| | | | | | | | | | | | | |
Reference Entity Total | | | | | | | | | | | (71,143 | ) |
S&P 400 Midcap Index | | | | | | | | | | | | | | |
BNP Paribas | | | 5,650 | | | One-Month USD BBA LIBOR minus 6 basis points and if negative, the absolute value of the Total Return of the S&P 400 Midcap Index | | If positive, the Total Return of the S&P 400 Midcap Index | | 12/6/12 | | | (37,019 | ) |
| | | | | | | | | | | | | |
Total of Total Return Swaps | | | | | | | | | | $ | 369,364 | |
| | | | | | | | | | | | | |
Notional amount is reported in U.S. Dollars (USD), except for those denoted in the following currencies:
| | |
|
CHF | | Swiss Franc |
DKK | | Danish Krone |
EUR | | Euro |
GBP | | British Pounds Sterling |
JPY | | Japanese Yen |
SEK | | Swedish Krona |
| | |
Abbreviations are as follows: |
BBA LIBOR | | British Bankers’ Association London-Interbank Offered Rate |
EAFE | | Europe, Australasia, Far East |
EURIBOR | | Euro Interbank Offered Rate |
MSCI | | Morgan Stanley Capital International |
S&P | | Standard & Poor’s |
STIBOR SIDE | | Stockholm Interbank Offered Rate |
TR | | Total Return |
48 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
Currency Swaps as of December 30, 2011 are as follows:
| | | | | | | | | | | | | | |
| | Notional | | | | | | | | | | |
Reference Entity/ | | Amount | | | Paid by | | Received by | | Termination | | | |
Swap Counterparty | | (000’s) | | | the Fund | | the Fund | | Date | | Value | |
|
Six-Month EUR EURIBOR | | | | | | | | | | | | | | |
Credit Suisse International | | $ | 1,100 | | | Six-Month EUR EURIBOR plus 80 basis points on 843,882 EUR | | 2.950% on 1,100,000 USD | | 10/15/17 | | $ | (573 | ) |
Abbreviations/Definitions are as follows:
| | |
|
EUR | | Euro |
EURIBOR | | Euro Interbank Offered Rate |
Volatility Swaps as of December 30, 2011 are as follows:
| | | | | | | | | | | | | | |
| | Notional | | | | | | | | | | |
Reference Entity/ | | Amount | | Paid by | | Received by | | | Termination | | | |
Swap Counterparty | | (000’s) | | the Fund | | the Fund | | | Date | | Value | |
|
AUD/CAD Spot Exchange Rate | | | | | | | | | | | | | | |
Goldman Sachs Group, Inc. (The) | | 13 AUD | | The Historic Volatility of the mid AUD/CAD spot exchange rate during the period 12/29/11-2/1/12 | | | 8.750 | % | | 2/3/12 | | $ | (13,696 | ) |
AUD/NZD Spot Exchange Rate | | | | | | | | | | | | | | |
Goldman Sachs Group, Inc. (The) | | 12 AUD | | The Historic Volatility of the mid AUD/NZD spot exchange rate during the period 12/30/11-2/2/12 | | | 6.300 | | | 2/6/12 | | | (9,708 | ) |
EUR/CAD Spot Exchange Rate | | | | | | | | | | | | | | |
Credit Suisse International | | 10 EUR | | The Historic Volatility of the mid EUR/CAD spot exchange rate during the period 12/27/11-1/26/12 | | | 8.200 | | | 1/30/12 | | | (12,256 | ) |
EUR/JPY Spot Exchange Rate: | | | | | | | | | | | | | | |
Goldman Sachs Group, Inc. (The) | | 10 EUR | | The Historic Volatility of the mid EUR/JPY spot exchange rate during the period 12/6/11-1/5/12 | | | 14.250 | | | 1/9/12 | | | 58,327 | |
Goldman Sachs Group, Inc. (The) | | 9 EUR | | The Historic Volatility of the mid EUR/JPY spot exchange rate during the period 12/5/11-1/5/12 | | | 14.250 | | | 1/9/12 | | | 56,469 | |
JPMorgan Chase Bank NA | | 10 EUR | | The Historic Volatility of the mid EUR/JPY spot exchange rate during the period 12/7/11-1/5/12 | | | 14.300 | | | 1/10/12 | | | 56,763 | |
| | | | | | | | | | | | | |
Reference Entity Total | | | | | | | | | 171,559 | |
49 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
Footnotes to Statement of Investments Continued
Volatility Swaps: Continued
| | | | | | | | | | | | | | | | |
| | Notional | | | | | | | | | | | |
Reference Entity/ | | Amount | | | Paid by | | Received by | | | Termination | | | |
Swap Counterparty | | (000’s) | | | the Fund | | the Fund | | | Date | | Value | |
|
EUR/USD Spot Exchange Rate: | | | | | | | | | | | | | | | | |
Goldman Sachs Group, Inc. (The) | | $ | 13 | | | The Historic Volatility of the mid EUR/USD spot exchange rate during the period 12/8/11-1/10/12 | | | 14.650 | % | | 1/12/12 | | $ | 48,608 | |
Goldman Sachs Group, Inc. (The) | | | 13 | | | The Historic Volatility of the mid EUR/USD spot exchange rate during the period 12/1/11-1/3/12 | | | 14.550 | | | 1/15/12 | | | 64,415 | |
JPMorgan Chase Bank NA | | | 13 | | | The Historic Volatility of the mid EUR/USD spot exchange rate during the period 12/9/11-1/11/12 | | | 14.400 | | | 1/13/12 | | | 39,188 | |
Reference Entity Total | | | | | | | | | | | 152,211 | |
GBP/CAD Spot Exchange Rate: | | | | | | | | | | | | | | | | |
Credit Suisse International | | 8 | GBP | | The Historic Volatility of the mid GBP/CAD spot exchange rate during the period 12/14/11-1/13/12 | | | 9.700 | | | 1/17/12 | | | 14,997 | |
Deutsche Bank AG | | 8 | GBP | | The Historic Volatility of the mid GBP/CAD spot exchange rate during the period 12/20/11-1/19/12 | | | 8.500 | | | 1/23/12 | | | (12,500 | ) |
Goldman Sachs Group, Inc. (The) | | 8 | GBP | | The Historic Volatility of the mid GBP/CAD spot exchange rate during the period 12/13/11-1/13/12 | | | 9.050 | | | 1/17/12 | | | 11,262 | |
Goldman Sachs Group, Inc. (The) | | 8 | GBP | | The Historic Volatility of the mid GBP/CAD spot exchange rate during the period 12/21/11-1/19/12 | | | 7.450 | | | 1/23/12 | | | (23,299 | ) |
JPMorgan Chase Bank NA | | 8 | GBP | | The Historic Volatility of the mid GBP/CAD spot exchange rate during the period 12/19/11-1/19/12 | | | 7.700 | | | 1/23/12 | | | (17,070 | ) |
JPMorgan Chase Bank NA | | 8 | GBP | | The Historic Volatility of the mid GBP/CAD spot exchange rate during the period 12/15/11-1/17/12 | | | 8.800 | | | 1/19/12 | | | 1,642 | |
| | | | | | | | | | | | | | | |
Reference Entity Total | | | | | | | | | | | (24,968 | ) |
50 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
Volatility Swaps: Continued
| | | | | | | | | | | | | | |
| | Notional | | | | | | | | | | |
Reference Entity/ | | Amount | | Paid by | | Received by | | | Termination | | | |
Swap Counterparty | | (000’s) | | the Fund | | the Fund | | | Date | | Value | |
|
NZD/CAD Spot Exchange Rate | | | | | | | | | | | | | | |
Goldman Sachs Group, Inc. (The) | | 17 NZD | | The Historic Volatility of the mid NZD/CAD spot exchange rate during the period 12/12/11-1/13/12 | | | 9.500 | % | | 1/17/12 | | $ | (641 | ) |
| | | | | | | | | | | | | |
Total Volatility Swaps | | | | | | | | $ | 262,501 | |
| | | | | | | | | | | | | |
Notional amount is reported in U.S. Dollars (USD), except for those denoted in the following currencies:
| | |
|
AUD | | Australian Dollar |
CAD | | Canadian Dollar |
EUR | | Euro |
GBP | | British Pounds Sterling |
JPY | | Japanese Yen |
NZD | | New Zealand Dollar |
Swap Summary as of December 30, 2011 is as follows:
The following table aggregates, as of period end, the amount receivable from/(payable to) each counterparty with whom the Fund has entered into a swap agreement. Swaps are individually disclosed in the preceding tables.
| | | | | | | | | | |
| | | | Notional | | | | |
| | Swap Type from | | Amount | | | | |
Swap Counterparty | | Fund Perspective | | (000’s) | | | Value | |
|
Bank of America Merrill Lynch: | | | | | | | | | | |
| | Interest Rate | | 2,840 | CAD | | $ | (1,818 | ) |
| | Interest Rate | | 500 | EUR | | | 20,922 | |
| | | | | | | | | |
| | | | | | | | | 19,104 | |
| | | | | | | | | |
Bank of America NA: | | | | | | | | | | |
| | Credit Default Buy Protection | | | 10,735 | | | | (927,549 | ) |
| | Interest Rate | | 1,910 | EUR | | | 23,071 | |
| | Interest Rate | | 198,600 | MXN | | | (99,651 | ) |
| | | | | | | | | |
| | | | | | | | | (1,004,129 | ) |
| | | | | | | | | |
Barclays Bank plc: | | | | | | | | | | |
| | Credit Default Buy Protection | | | 27,545 | | | | 71,660 | |
| | Credit Default Sell Protection | | | 3,800 | | | | (112,729 | ) |
| | Interest Rate | | 5,265 | EUR | | | 89,370 | |
| | Interest Rate | | 33,700 | MXN | | | (14,241 | ) |
| | Interest Rate | | 13,915 | NZD | | | 549,297 | |
| | Interest Rate | | | 11,300 | | | | 385,933 | |
| | Interest Rate | | 139,200 | ZAR | | | (11,092 | ) |
| | | | | | | | | |
| | | | | | | | | 958,198 | |
| | | | | | | | | |
BNP Paribas | | Total Return | | | 5,650 | | | | (37,019 | ) |
| | | | | | | | | |
Citibank NA: | | | | | | | | | | |
| | Credit Default Buy Protection | | | 10,000 | | | | 171,709 | |
| | Credit Default Sell Protection | | | 4,480 | | | | 138,840 | |
| | Interest Rate | | 9,670 | BRR | | | 90,683 | |
| | Total Return | | 1,813 | CHF | | | 14,438 | |
| | Total Return | | 986 | DKK | | | 10,639 | |
| | Total Return | | 4,500 | EUR | | | 520 | |
| | Total Return | | 1,717 | GBP | | | (65,033 | ) |
| | Total Return | | 525,530 | JPY | | | (114,270 | ) |
| | Total Return | | 6,030 | SEK | | | 5,200 | |
| | Total Return | | | 252 | | | | 2,068 | |
| | | | | | | | | |
| | | | | | | | | 254,794 | |
| | | | | | | | | |
Credit Suisse International: | | | | | | | | | | |
| | Credit Default Buy Protection | | | 8,960 | | | | 104,561 | |
| | Currency | | | 1,100 | | | | (573 | ) |
| | Interest Rate | | 80,700 | MXN | | | (123,564 | ) |
51 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
Footnotes to Statement of Investments Continued
Swap Summary: Continued
| | | | | | | | | | |
| | | | Notional | | | | |
| | Swap Type from | | Amount | | | | |
Swap Counterparty | | Fund Perspective | | (000’s) | | | Value | |
|
Credit Suisse International: Continued | | | | | | | | | | |
| | Volatility | | 10 | EUR | | $ | (12,256 | ) |
| | Volatility | | 8 | GBP | | | 14,997 | |
| | | | | | | | | |
| | | | | | | | | (16,835 | ) |
Deutsche Bank AG: | | | | | | | | | | |
| | Credit Default Buy Protection | | | 6,410 | | | | (137,544 | ) |
| | Credit Default Sell Protection | | | 8,990 | | | | 334,446 | |
| | Interest Rate | | 4,850 | EUR | | | 6,588 | |
| | Interest Rate | | 66,000 | MXN | | | (31,636 | ) |
| | Volatility | | 8 | GBP | | | (12,500 | ) |
| | | | | | | | | |
| | | | | | | | | 159,354 | |
Goldman Sachs Group, Inc. (The): | | | | | | | | | | |
| | Interest Rate | | 29,170 | BRR | | | 274,390 | |
| | Interest Rate | | 6,515 | EUR | | | 107,067 | |
| | Interest Rate | | 84,000 | MXN | | | (123,281 | ) |
| | Interest Rate | | 72,770 | SEK | | | (147,775 | ) |
| | Interest Rate | | 13,500 | ZAR | | | (5,798 | ) |
| | Total Return | | 3,672 | EUR | | | (75,372 | ) |
| | Total Return | | | 37,960 | | | | 954,313 | |
| | Volatility | | 25 | AUD | | | (23,404 | ) |
| | Volatility | | 19 | EUR | | | 114,796 | |
| | Volatility | | 16 | GBP | | | (12,037 | ) |
| | Volatility | | 17 | NZD | | | (641 | ) |
| | Volatility | | | 26 | | | | 113,023 | |
| | | | | | | | | |
| | | | | | | | | 1,175,281 | |
Goldman Sachs International: | | | | | | | | | | |
| | Credit Default Buy Protection | | | 4,480 | | | | 187,598 | |
| | Credit Default Sell Protection | | | 4,510 | | | | (189,589 | ) |
| | | | | | | | | |
| | | | | | | | | (1,991 | ) |
HSBC Bank USA NA: | | | | | | | | | | |
| | Credit Default Sell Protection | | | 2,960 | | | | (664,578 | ) |
| | Interest Rate | | 13,300 | ZAR | | | (6,874 | ) |
| | | | | | | | | |
| | | | | | | | | (671,452 | ) |
JPMorgan Chase Bank NA: | | | | | | | | | | |
| | Credit Default Sell Protection | | | 1,420 | | | | (25,207 | ) |
| | Interest Rate | | 7,710 | CAD | | | (44,942 | ) |
| | Interest Rate | | 1,915 | EUR | | | 16,243 | |
| | Interest Rate | | 21,960 | PLZ | | | 60,083 | |
| | Volatility | | 10 | EUR | | | 56,763 | |
| | Volatility | | 16 | GBP | | | (15,428 | ) |
| | Volatility | | | 13 | | | | 39,188 | |
| | | | | | | | | |
| | | | | | | | | 86,700 | |
Merrill Lynch & Co., Inc. | | Interest Rate | | 17,000 | MXN | | | (119,215 | ) |
Morgan Stanley: | | | | | | | | | | |
| | Total Return | | 4,326 | GBP | | | (88,542 | ) |
| | Total Return | | | 8,711 | | | | (249,682 | ) |
| | | | | | | | | |
| | | | | | | | | (338,224 | ) |
Morgan Stanley Capital Services, Inc. | | Credit Default Sell Protection | | | 3,100 | | | | (134,878 | ) |
UBS AG: | | | | | | | | | | |
| | Credit Default Sell Protection | | | 4,480 | | | | (236,513 | ) |
| | Total Return | | | 11,529 | | | | 12,104 | |
| | | | | | | | | |
| | | | | | | | | (224,409 | ) |
Westpac Banking Corp. | | Interest Rate | | 10,670 | AUD | | | (360,873 | ) |
| | | | | | | | | |
Total Swaps | | | | | | $ | (255,594 | ) |
| | | | | | | | | |
52 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
Swap Summary: Continued
Notional amount is reported in U.S.Dollars (USD), except for those denoted in the following currencies:
| | |
|
AUD | | Australian Dollar |
BRR | | Brazilian Real |
CAD | | Canadian Dollar |
CHF | | Swiss Franc |
DKK | | Danish Krone |
EUR | | Euro |
GBP | | British Pounds Sterling |
JPY | | Japanese Yen |
MXN | | Mexican Nuevo Peso |
NZD | | New Zealand Dollar |
PLZ | | Polish Zloty |
SEK | | Swedish Krona |
ZAR | | South African Rand |
As of December 30, 2011, the Fund had entered into the following written swaption contracts:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Underlying | | Notional | | | | | | | | | | | | | | | | | | | Unrealized | |
| | Swap Type from | | Amount | | | Strike | | | Expiration | | | Premium | | | | | | | Appreciation | |
Reference Entity | | Fund Perspective | | (000’s) | | | Price/Rate | | | Date | | | Received | | | Value | | | (Depreciation) | |
|
Bank of America NA; Interest Rate Swaption (European); Swap Terms: Paid: 2.4375%; Received: Three-Month USD BBA LIBOR; Termination Date 5/24/24 | | Interest Rate Pay Fixed | | $ | 60,800 | | | | 2.4375 | % | | | 5/22/12 | | | $ | 2,103,680 | | | $ | (2,125,358 | ) | | $ | (21,678 | ) |
Bank of America NA; Interest Rate Swaption (European); Swap Terms; Paid: 2.315%; Received: Three-Month USD BBA LIBOR; Termination Date 5/31/22 | | Interest Rate Pay Fixed | | | 42,600 | | | | 2.3150 | | | | 5/29/12 | | | | 1,233,270 | | | | (1,386,632 | ) | | | (153,362 | ) |
Goldman Sachs Group, Inc. (The), Interest Rate Swaption (European); Swap Terms; Paid: 2.465%; Received: Three-Month USD BBA LIBOR; Termination Date 5/24/24 | | Interest Rate Pay Fixed | | | 60,800 | | | | 2.4650 | | | | 5/22/12 | | | | 2,128,000 | | | | (2,258,481 | ) | | | (130,481 | ) |
Goldman Sachs Group, Inc. (The); Interest Rate Swaption (European); Swap Terms; Paid: Three-Month USD BBA LIBOR; Received: 1.225%; Termination Date: 11/23/15 | | Interest Rate Receive Fixed | | | 124,600 | | | | 1.2250 | | | | 11/21/12 | | | | 1,044,486 | | | | (630,685 | ) | | | 413,801 | |
UBS AG; Interest Rate Swaption (European); Swap Terms; Paid: Three-Month USD BBA LIBOR Received: 3.215%; Termination Date 12/4/22 | | Interest Rate Receive Fixed | | | 96,515 | | | | 3.2150 | | | | 11/30/12 | | | | 1,679,361 | | | | (1,167,705 | ) | | | 511,656 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | $ | 8,188,797 | | | $ | (7,568,861 | ) | | $ | 619,936 | |
| | | | | | | | | | | | | | | | |
See accompanying Notes to Financial Statements.
53 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 30, 20111
| | | | |
|
Assets | | | | |
Investments, at value—see accompanying statement of investments: | | | | |
Unaffiliated companies (cost $2,013,069,955) | | $ | 1,880,938,396 | |
Affiliated companies (cost $453,272,500) | | | 443,497,825 | |
Wholly-owned subsidiary (cost $1,500,000) | | | 1,482,519 | |
| | | |
| | | 2,325,918,740 | |
Cash | | | 5,008,403 | |
Cash—foreign currencies (cost $771,347) | | | 731,412 | |
Unrealized appreciation on foreign currency exchange contracts | | | 6,674,020 | |
Appreciated swaps, at value (upfront payments paid $560,888) | | | 4,059,953 | |
Depreciated swaps, at value (upfront payments paid $1,143,805) | | | 1,058,863 | |
Receivables and other assets: | | | | |
Interest, dividends and principal paydowns | | | 27,285,460 | |
Investments sold (including $2,262,138 sold on a when-issued or delayed delivery basis) | | | 4,750,784 | |
Closed foreign currency contracts | | | 2,419,546 | |
Shares of beneficial interest sold | | | 2,373,971 | |
Futures margins | | | 919,349 | |
Other | | | 65,762 | |
| | | |
Total assets | | | 2,381,266,263 | |
| | | |
Liabilities | | | | |
Appreciated options written, at value (premiums received $2,789,344) | | | 1,427,148 | |
Depreciated options written, at value (premiums received $683,109) | | | 937,077 | |
Appreciated swaptions written, at value (premiums received $2,723,847) | | | 1,798,390 | |
Depreciated swaptions written, at value (premiums received $5,464,950) | | | 5,770,471 | |
Unrealized depreciation on foreign currency exchange contracts | | | 9,409,937 | |
Appreciated swaps, at value (upfront payments received $2,261,813) | | | 2,186,195 | |
Depreciated swaps, at value (upfront payments received $912,614) | | | 3,188,215 | |
Payables and other liabilities: | | | | |
Investments purchased (including $97,019,778 purchased on a when-issued or delayed delivery basis) | | | 98,445,212 | |
Closed foreign currency contracts | | | 2,858,168 | |
Shares of beneficial interest redeemed | | | 945,482 | |
Distribution and service plan fees | | | 339,265 | |
Futures margins | | | 289,872 | |
Shareholder communications | | | 281,755 | |
Transfer and shareholder servicing agent fees | | | 191,305 | |
Foreign capital gains tax | | | 50,425 | |
Trustees’ compensation | | | 41,778 | |
Other | | | 115,470 | |
| | | |
Total liabilities | | | 128,276,165 | |
| | | | |
Net Assets | | $ | 2,252,990,098 | |
| | | |
54 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| | | | |
|
Composition of Net Assets | | | | |
Par value of shares of beneficial interest | | $ | 412,905 | |
Additional paid-in capital | | | 2,229,752,031 | |
Accumulated net investment income | | | 151,980,652 | |
Accumulated net realized gain on investments and foreign currency transactions | | | 11,286,058 | |
Net unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies | | | (140,441,548 | ) |
| | | |
Net Assets | | $ | 2,252,990,098 | |
| | | |
| | | | |
Net Asset Value Per Share | | | | |
Non-Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $648,083,701 and 120,411,955 shares of beneficial interest outstanding) | | $ | 5.38 | |
Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $1,604,906,397 and 292,492,931 shares of beneficial interest outstanding) | | $ | 5.49 | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
55 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 30, 20111
| | | | |
|
Allocation of Income and Expenses from Master Funds2 | | | | |
Net investment income allocated from Oppenheimer Master Event-Linked Bond Fund, LLC: | | | | |
Interest | | $ | 4,069,460 | |
Dividends | | | 3,860 | |
Expenses3 | | | (219,345 | ) |
| | | |
Net investment income allocated from Oppenheimer Master Event-Linked Bond Fund, LLC | | | 3,853,975 | |
Net investment income allocated from Oppenheimer Master Loan Fund, LLC: | | | | |
Interest (net of foreign withholding taxes of $381) | | | 27,277,056 | |
Dividends | | | 159,063 | |
Expenses4 | | | (1,168,872 | ) |
| | | |
Net investment income allocated from Oppenheimer Master Loan Fund, LLC | | | 26,267,247 | |
| | | |
Total allocation of net investment income from master funds | | | 30,121,222 | |
| | | | |
Investment Income | | | | |
Interest (net of foreign withholding taxes of $85,329) | | | 136,177,720 | |
Dividends: | | | | |
Unaffiliated companies (net of foreign withholding taxes of $56,691) | | | 797,281 | |
Affiliated companies | | | 108,474 | |
Fee income on when-issued securities | | | 2,197,637 | |
| | | |
Total investment income | | | 139,281,112 | |
| | | | |
Expenses | | | | |
Management fees | | | 13,684,521 | |
Distribution and service plan fees—Service shares | | | 4,184,730 | |
Transfer and shareholder servicing agent fees: | | | | |
Non-Service shares | | | 694,965 | |
Service shares | | | 1,673,920 | |
Shareholder communications: | | | | |
Non-Service shares | | | 76,649 | |
Service shares | | | 182,693 | |
Custodian fees and expenses | | | 246,234 | |
Trustees’ compensation | | | 56,379 | |
Administration service fees | | | 1,500 | |
Other | | | 193,848 | |
| | | |
Total expenses | | | 20,995,439 | |
Less waivers and reimbursements of expenses | | | (1,313,375 | ) |
| | | |
Net expenses | | | 19,682,064 | |
| | | | |
Net Investment Income | | | 149,720,270 | |
56 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| | | | |
|
Realized and Unrealized Gain (Loss) | | | | |
Net realized gain (loss) on: | | | | |
Investments from unaffiliated companies (including premiums on options exercised) | | $ | 41,024,794 | |
Closing and expiration of option contracts written | | | 6,144,856 | |
Closing and expiration of futures contracts | | | 9,478,578 | |
Foreign currency transactions | | | (18,115,992 | ) |
Swap contracts | | | 1,922,300 | |
Net realized gain (loss) allocated from: | | | | |
Oppenheimer Master Event-Linked Bond Fund, LLC | | | (2,323,415 | ) |
Oppenheimer Master Loan Fund, LLC | | | 455,054 | |
| | | |
Net realized gain | | | 38,586,175 | |
| | | | |
Net change in unrealized appreciation/depreciation on: | | | | |
Investments | | | (116,568,023 | ) |
Translation of assets and liabilities denominated in foreign currencies | | | (47,584,909 | ) |
Futures contracts | | | 10,314,852 | |
Option contracts written | | | 1,108,228 | |
Swaption contracts | | | 619,936 | |
Swap contracts | | | 1,685,137 | |
Net change in unrealized appreciation/deprecation allocated from: | | | | |
Oppenheimer Master Event-Linked Bond Fund, LLC | | | (1,591,152 | ) |
Oppenheimer Master Loan Fund, LLC | | | (16,653,717 | ) |
| | | |
Net change in unrealized appreciation/depreciation | | | (168,669,648 | ) |
| | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 19,636,797 | |
| | | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | The Fund invests in certain affiliated Mutual Funds that expect to be treated as partnerships for tax purposes. See Note 1 of the accompanying Notes |
|
3. | | Net of expense waivers and/or reimbursement $2,322. |
|
4. | | Net of expense waivers and/or reimbursements $11,926. |
See accompanying Notes to Financial Statements.
57 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | Year Ended | | | Year Ended | |
| | December 30, | | | December 31, | |
| | 20111 | | | 2010 | |
|
Operations | | | | | | | | |
Net investment income | | $ | 149,720,270 | | | $ | 200,479,913 | |
|
Net realized gain | | | 38,586,175 | | | | 193,741,731 | |
|
Net change in unrealized appreciation/depreciation | | | (168,669,648 | ) | | | 11,389,337 | |
| | |
Net increase in net assets resulting from operations | | | 19,636,797 | | | | 405,610,981 | |
| | | | | | | | |
Dividends and/or Distributions to Shareholders | | | | | | | | |
Dividends from net investment income: | | | | | | | | |
Non-Service shares | | | (23,004,040 | ) | | | (66,430,241 | ) |
Service shares | | | (46,831,691 | ) | | | (313,790,173 | ) |
| | |
| | | (69,835,731 | ) | | | (380,220,414 | ) |
|
Distributions from net realized gain: | | | | | | | | |
Non-Service shares | | | (8,843,118 | ) | | | — | |
Service shares | | | (20,376,612 | ) | | | — | |
| | |
| | | (29,219,730 | ) | | | — | |
Beneficial Interest Transactions | | | | | | | | |
Net decrease in net assets resulting from beneficial interest transactions: | | | | | | | | |
Non-Service shares | | | (39,359,888 | ) | | | (81,259,481 | ) |
Service shares | | | (10,325,962 | ) | | | (1,976,534,500 | ) |
| | |
| | | (49,685,850 | ) | | | (2,057,793,981 | ) |
| | | | | | | | |
Net Assets | | | | | | | | |
Total decrease | | | (129,104,514 | ) | | | (2,032,403,414 | ) |
|
Beginning of period | | | 2,382,094,612 | | | | 4,414,498,026 | |
| | |
End of period (including accumulated net investment income of $151,980,652 and $5,967,605, respectively) | | $ | 2,252,990,098 | | | $ | 2,382,094,612 | |
| | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
58 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | |
| | December 30, | | | Year Ended December 31, | |
Non-Service Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 5.58 | | | $ | 5.30 | | | $ | 4.49 | | | $ | 5.56 | | | $ | 5.26 | |
|
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income2 | | | .36 | | | | .34 | | | | .30 | | | | .30 | | | | .28 | |
Net realized and unrealized gain (loss) | | | (.31 | ) | | | .40 | | | | .53 | | | | (1.04 | ) | | | .21 | |
| | |
Total from investment operations | | | .05 | | | | .74 | | | | .83 | | | | (.74 | ) | | | .49 | |
|
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.18 | ) | | | (.46 | ) | | | (.02 | ) | | | (.27 | ) | | | (.19 | ) |
Distributions from net realized gain | | | (.07 | ) | | | — | | | | —3 | | | | (.06 | ) | | | — | |
| | |
Total dividends and distributions to shareholders | | | (.25 | ) | | | (.46 | ) | | | (.02 | ) | | | (.33 | ) | | | (.19 | ) |
|
Net asset value, end of period | | $ | 5.38 | | | $ | 5.58 | | | $ | 5.30 | | | $ | 4.49 | | | $ | 5.56 | |
| | |
| | | | | | | | | | | | | | | | | | | | |
Total Return, at Net Asset Value4 | | | 0.85 | % | | | 14.97 | % | | | 18.83 | % | | | (14.21 | )% | | | 9.69 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 648,084 | | | $ | 711,755 | | | $ | 757,772 | | | $ | 648,570 | | | $ | 734,611 | |
|
Average net assets (in thousands) | | $ | 694,868 | | | $ | 737,071 | | | $ | 681,926 | | | $ | 753,062 | | | $ | 664,668 | |
|
Ratios to average net assets:5,6 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 6.50 | % | | | 6.47 | % | | | 6.20 | % | | | 5.78 | % | | | 5.34 | % |
Total expenses | | | 0.77 | %7 | | | 0.75 | %8 | | | 0.67 | % 8 | | | 0.59 | %8 | | | 0.59 | %8 |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 0.71 | %9 | | | 0.71 | % | | | 0.64 | % | | | 0.57 | % | | | 0.57 | % |
|
Portfolio turnover rate10 | | | 49 | % | | | 99 | % | | | 110 | % | | | 86 | % | | | 76 | % |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Less than $0.005 per share. |
|
4. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
5. | | Annualized for periods less than one full year. |
|
6. | | Includes the Fund’s share of the allocated expenses and/or net investment income from the master funds. |
|
7. | | Ratio including all expenses of the wholly-owned subsidiary and indirect expenses from affiliated funds were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 0.78 | % |
| | |
8. | | Total expenses including all affiliated fund expenses were as follows: |
| | | | |
|
Year Ended December 31, 2010 | | | 0.75 | % |
Year Ended December 31, 2009 | | | 0.68 | % |
Year Ended December 31, 2008 | | | 0.60 | % |
Year Ended December 31, 2007 | | | 0.61 | % |
| | |
9. | | Ratio including expenses of the wholly-owned subsidiary and indirect expenses from affiliated funds were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 0.72 | % |
| | |
10. | | The portfolio turnover rate excludes purchase and sale transactions of To Be Announced (TBA) mortgage-related securities as follows: |
| | | | | | | | |
| | Purchase Transactions | | | Sale Transactions | |
|
Year Ended December 30, 2011 | | $ | 1,050,654,783 | | | $ | 1,039,506,614 | |
Year Ended December 31, 2010 | | $ | 1,034,550,699 | | | $ | 1,085,289,655 | |
Year Ended December 31, 2009 | | $ | 1,909,574,925 | | | $ | 1,836,038,328 | |
Year Ended December 31, 2008 | | $ | 634,319,548 | | | $ | 594,845,589 | |
Year Ended December 31, 2007 | | $ | 1,061,009,472 | | | $ | 1,120,098,096 | |
See accompanying Notes to Financial Statements.
59 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
FINANCIAL HIGHLIGHTS Continued
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | |
| | December 30, | | | Year Ended December 31, | |
Service Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 5.68 | | | $ | 5.38 | | | $ | 4.56 | | | $ | 5.65 | | | $ | 5.34 | |
|
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income2 | | | .35 | | | | .33 | | | | .29 | | | | .29 | | | | .28 | |
Net realized and unrealized gain (loss) | | | (.31 | ) | | | .42 | | | | .54 | | | | (1.06 | ) | | | .22 | |
| | |
Total from investment operations | | | .04 | | | | .75 | | | | .83 | | | | (.77 | ) | | | .50 | |
|
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.16 | ) | | | (.45 | ) | | | (.01 | ) | | | (.26 | ) | | | (.19 | ) |
Distributions from net realized gain | | | (.07 | ) | | | — | | | | —3 | | | | (.06 | ) | | | — | |
| | |
Total dividends and distributions to shareholders | | | (.23 | ) | | | (.45 | ) | | | (.01 | ) | | | (.32 | ) | | | (.19 | ) |
|
Net asset value, end of period | | $ | 5.49 | | | $ | 5.68 | | | $ | 5.38 | | | $ | 4.56 | | | $ | 5.65 | |
| | |
| | | | | | | | | | | | | | | | | | | | |
Total Return, at Net Asset Value4 | | | 0.65 | % | | | 14.77 | % | | | 18.41 | % | | | (14.49 | )% | | | 9.55 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 1,604,906 | | | $ | 1,670,340 | | | $ | 3,656,726 | | | $ | 2,810,315 | | | $ | 2,876,016 | |
|
Average net assets (in thousands) | | $ | 1,673,715 | | | $ | 2,485,427 | | | $ | 3,143,836 | | | $ | 3,152,967 | | | $ | 2,075,028 | |
|
Ratios to average net assets:5,6 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 6.25 | % | | | 6.15 | % | | | 5.95 | % | | | 5.54 | % | | | 5.08 | % |
Total expenses | | | 1.02 | %7 | | | 0.99 | %8 | | | 0.92 | %8 | | | 0.84 | %8 | | | 0.84 | %8 |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 0.96 | %9 | | | 0.95 | % | | | 0.89 | % | | | 0.82 | % | | | 0.82 | % |
|
Portfolio turnover rate10 | | | 49 | % | | | 99 | % | | | 110 | % | | | 86 | % | | | 76 | % |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Less than $0.005 per share. |
|
4. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
5. | | Annualized for periods less than one full year. |
|
6. | | Includes the Fund’s share of the allocated expenses and/or net investment income from the master funds. |
|
7. | | Ratio including all expenses of the wholly-owned subsidiary and indirect expenses from affiliated funds were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 1.03 | % |
| | |
8. | | Total expenses including all affiliated fund expenses were as follows: |
| | | | |
|
Year Ended December 31, 2010 | | | 0.99 | % |
Year Ended December 31, 2009 | | | 0.93 | % |
Year Ended December 31, 2008 | | | 0.85 | % |
Year Ended December 31, 2007 | | | 0.86 | % |
| | |
9. | | Ratio including expenses of the wholly-owned subsidiary and indirect expenses from affiliated funds were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 0.97 | % |
| | |
10. | | The portfolio turnover rate excludes purchase and sale transactions of To Be Announced (TBA) mortgage-related securities as follows: |
| | | | | | | | |
| | Purchase Transactions | | | Sale Transactions | |
|
Year Ended December 30, 2011 | | $ | 1,050,654,783 | | | $ | 1,039,506,614 | |
Year Ended December 31, 2010 | | $ | 1,034,550,699 | | | $ | 1,085,289,655 | |
Year Ended December 31, 2009 | | $ | 1,909,574,925 | | | $ | 1,836,038,328 | |
Year Ended December 31, 2008 | | $ | 634,319,548 | | | $ | 594,845,589 | |
Year Ended December 31, 2007 | | $ | 1,061,009,472 | | | $ | 1,120,098,096 | |
See accompanying Notes to Financial Statements.
60 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Oppenheimer Global Strategic Income Fund/VA (the “Fund”) is a separate series of Oppenheimer Variable Account Funds, an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund’s investment objective is to seek a high level of current income principally derived from interest on debt securities. The Fund’s investment adviser is OppenheimerFunds, Inc. (the “Manager”).
The Fund offers two classes of shares. Both classes are sold at their offering price, which is the net asset value per share, to separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. The class of shares designated as Service shares is subject to a distribution and service plan. Both classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class.
The following is a summary of significant accounting policies consistently followed by the Fund.
Fiscal Year End. Since December 30, 2011 represents the last day during the Fund’s 2011 fiscal year on which the New York Stock Exchange was open for trading, the Fund’s financial statements have been presented through that date to maintain consistency with the Fund’s net asset value calculations used for shareholder transactions.
Securities Valuation. The Fund calculates the net asset value of its shares as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading.
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. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” observable market inputs other than unadjusted quoted prices are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.
Securities traded on a registered U.S. securities exchange 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. Securities whose principal exchange is NASDAQ® are valued based on the official closing prices reported by NASDAQ prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.
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.
U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.
61 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
1. Significant Accounting Policies Continued
Structured securities are valued utilizing price quotations obtained from broker-dealers or independent pricing services. Values are determined based upon market inputs which typically include the price of underlying financial instruments, stock market indices, foreign currencies, interest rate spreads, commodities, or the occurrence of other specific events.
Swap contracts are valued utilizing price quotations obtained from broker-dealer counterparties or independent pricing services. Values are determined based on relevant market information on the underlying reference assets which may include credit spreads, credit event probabilities, index values, individual security values, forward interest rates, variable interest rates, volatility measures and forward currency rates.
Forward foreign currency exchange contracts are valued utilizing current and forward currency rates obtained from independent pricing services.
“Money market-type” debt instruments with remaining maturities 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.
In the absence of a current price quotation obtained from an independent pricing service or broker-dealer, including for securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund’s assets are valued but after the close of the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities 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 adjusted for any discounts related to 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. As of December 30, 2011, the Manager determined the fair value of certain notes using internal models based on anticipated cash flows. The Manager determined the fair value of certain distressed notes at a discounted residual value or at a discount to the value of the collateral held in regards to the particular note. The Manager fair valued certain thinly traded collateralized debt obligations using monthly broker-dealer price quotations. The Manager fair valued certain thinly traded collateralized mortgage obligations using modeled price quotations provided by an external pricing vendor. The Manager determined the fair value of certain common stock at the last traded price. For certain common and preferred stock that do not trade, the Manager has determined the fair value of these securities using internal models utilizing Manager assumptions, comparable security inputs and the company’s quarterly financial statements. For certain warrants received in a bankruptcy reorganization that do not trade, the Manager has determined the fair value of these securities based on the residual value of the original bonds. Such investments have been classified as Level 3 instruments.
There have been no significant changes to the fair valuation methodologies of the Fund during the period.
The net asset value per share of the Subsidiary is determined as of the close of the Exchange, on each day the Exchange is open for trading. The net asset value per share is determined by dividing the value of the Subsidiary’s net assets by the number of shares that are outstanding. The Subsidiary values its investments in the same manner as the Fund as described above.
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. The Fund records a realized gain or loss when a structured security is sold or matures.
62 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
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.
As of December 30, 2011, 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 | | $ | 97,019,778 | |
Sold securities | | | 2,262,138 | |
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.
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 as of December 30, 2011 is as follows:
| | | | |
|
Cost | | $ | 27,027,445 | |
Market Value | | $ | 5,465,212 | |
Market Value as a % of Net Assets | | | 0.24 | % |
Investment in Oppenheimer Global Strategic Income Fund/VA (Cayman) Ltd. The Fund has established a Cayman Islands company that is wholly-owned and controlled by the Fund (the “Subsidiary”). The Fund may invest up to 25% of its total assets in the Subsidiary. The Subsidiary invests primarily in commodity-linked derivatives (including commodity related futures, options and swap contracts), and exchange traded funds and certain fixed-income securities and other
63 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
1. Significant Accounting Policies Continued
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. The Fund wholly owns and controls the Subsidiary, and the Fund and Subsidiary are both managed by the Manager.
The Fund does not consolidate the assets, liabilities, capital or operations of the Subsidiary into its financial statements. Rather, the Subsidiary is separately presented as an investment in the Fund’s Statement of Investments. Shares of the Subsidiary are valued at their net asset value per share. Gains or losses on withdrawals of capital from the Subsidiary by the Fund are recognized on an average cost basis. Unrealized appreciation or depreciation on the Fund’s investment in the Subsidiary is recorded in the Fund’s Statement of Assets and Liabilities and the Fund’s Statement of Operations. Distributions received from the Subsidiary are recorded as income on the ex-dividend date.
For tax purposes, the Subsidiary is an exempted Cayman investment company. The Subsidiary has received an undertaking from the Government of the Cayman Islands exempting it from all local income, profits and capital gains taxes through September of 2030. No such taxes are levied in the Cayman Islands at the present time. For U.S. income tax purposes, the Subsidiary is a Controlled Foreign Corporation and as such is not subject to U.S. income tax. However, as a wholly-owned Controlled Foreign Corporation, the Subsidiary’s net income and capital gain, to the extent of its earnings and profits, will be included each year in the Fund’s investment company taxable income. For the year ended December 30, 2011, the Subsidiary has a deficit of $17,481 in its taxable earnings and profits. In addition, any in-kind capital contributions made by the Fund to the Subsidiary will result in the Fund recognizing taxable gain to the extent of unrealized gain, if any, on securities transferred to the Subsidiary while any unrealized losses on securities so transferred will not be recognized at the time of transfer.
Investment in Oppenheimer Institutional Money Market Fund. The Fund is permitted to invest daily available cash balances in an affiliated money market fund. The Fund may invest the available cash in Class E shares of Oppenheimer Institutional Money Market Fund (“IMMF”) to seek current income while preserving liquidity. IMMF is a registered open-end management investment company, regulated as a money market fund under the Investment Company Act of 1940, as amended. The Manager is also the investment adviser of IMMF. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of IMMF’s Class E expenses, including its 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 IMMF.
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 and Oppenheimer Master Event-Linked Bond Fund, LLC (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 Oppenheimer Master Loan Fund, LLC is to seek as high a level of current income and preservation of capital as is consistent with investing primarily in loans and other debt securities. The investment objective of Oppenheimer Master Event-Linked Bond Fund, LLC is to seek a high level of current income principally derived from interest on debt securities. The Fund’s investments in the Master Funds are included in the 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
64 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
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.
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 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.
Reported net realized gains and losses from foreign currency transactions arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, exchange rate fluctuations between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized appreciation and depreciation on the translation of assets and liabilities denominated in foreign currencies arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund’s Statement of Operations.
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
Federal Taxes. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. Therefore, no federal income or excise tax provision is required. The Fund files income tax returns in U.S. federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remain open for the three preceding fiscal reporting period ends.
The tax components of capital shown in the following table represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes.
| | | | | | | | | | | | |
| | | | | | | | | | Net Unrealized | |
| | | | | | | | | | Depreciation | |
| | | | | | | | | | Based on Cost of | |
| | | | | | | | | | Securities and | |
Undistributed | | Undistributed | | | Accumulated | | | Other Investments | |
Net Investment | | Long-Term | | | Loss | | | for Federal Income | |
Income | | Gain | | | Carryforward1 | | | Tax Purposes | |
|
$147,943,807 | | $ | 16,250,407 | | | $ | 792,837 | | | $ | 138,562,774 | |
| | |
1. | | The Fund had $792,837 of straddle losses which were deferred. |
Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund.
65 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
1. | | Significant Accounting Policies Continued |
| | Accordingly, the following amounts have been reclassified for December 30, 2011. Net assets of the Fund were unaffected by the reclassifications. |
| | | | | | | | |
| | Increase to | | | Reduction to | |
| | Accumulated | | | Accumulated | |
Increase to | | Net Investment | | | Net Realized Gain | |
Paid-in Capital | | Income | | | on Investments4 | |
|
$2,370,070 | | $ | 66,128,508 | | | $ | 68,498,578 | |
| | |
4. | | $2,370,070, including $1,364,369 of long-term capital gain, was distributed in connection with Fund share redemptions. |
The tax character of distributions paid during the years ended December 30, 2011 and December 31, 2010 was as follows:
| | | | | | | | |
| | Year Ended | | | Year Ended | |
| | December 30, 2011 | | | December 31, 2010 | |
|
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 69,835,731 | | | $ | 380,220,414 | |
Long-term capital gain | | | 29,219,730 | | | | — | |
| | |
Total | | $ | 99,055,461 | | | $ | 380,220,414 | |
| | |
The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 30, 2011 are noted in the following table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.
| | | | |
|
Federal tax cost of securities | | $ | 2,465,151,650 | |
Federal tax cost of other investments | | | 205,375,217 | |
| | | |
Total federal tax cost | | $ | 2,670,526,867 | |
| | | |
| | | | |
Gross unrealized appreciation | | $ | 112,337,035 | |
Gross unrealized depreciation | | | (250,899,809 | ) |
| | | |
Net unrealized depreciation | | $ | (138,562,774 | ) |
| | | |
Certain foreign countries impose a tax on capital gains which is accrued by the Fund based on unrealized appreciation, if any, on affected securities. The tax is paid when the gain is realized.
Trustees’ Compensation. The Board of Trustees has adopted a compensation deferral plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of “Other” within the asset section of the Statement of Assets and Liabilities. Deferral of trustees’ fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund’s assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance with the compensation deferral plan.
Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles, are recorded on the ex-dividend date. Income and capital gain distributions, if any, are declared and paid annually or at other times as deemed necessary by the Manager.
66 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
Investment Income. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is recognized on an accrual basis. Discount and premium, which are included in interest income on the Statement of Operations, are amortized or accreted daily.
Custodian Fees. “Custodian fees and expenses” in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by the Fund, at a rate equal to the Federal Funds Rate plus 0.50%. The “Reduction to custodian expenses” line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings.
Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost.
Indemnifications. The Fund’s organizational documents provide current and former trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
| | | | | | | | | | | | | | | | |
| | Year Ended December 30, 2011 | | | Year Ended December 31, 2010 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
|
Non-Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 11,331,249 | | | $ | 62,405,055 | | | | 13,659,013 | | | $ | 73,616,257 | |
Dividends and/or distributions reinvested | | | 5,843,515 | | | | 31,847,158 | | | | 13,002,895 | | | | 66,430,241 | |
Redeemed | | | (24,340,756 | ) | | | (133,612,101 | ) | | | (42,045,616 | ) | | | (221,305,979 | ) |
| | |
Net decrease | | | (7,165,992 | ) | | $ | (39,359,888 | ) | | | (15,383,708 | ) | | $ | (81,259,481 | ) |
| | |
| | | | | | | | | | | | | | | | |
Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 30,704,662 | | | $ | 172,623,711 | | | | 39,118,559 | | | $ | 211,931,885 | |
Dividends and/or distributions reinvested | | | 12,087,824 | | | | 67,208,303 | | | | 60,274,068 | | | | 313,790,173 | |
Redeemed | | | (44,589,582 | ) | | | (250,157,976 | ) | | | (484,576,971 | ) | | | (2,502,256,558 | ) |
| | |
Net decrease | | | (1,797,096 | ) | | $ | (10,325,962 | ) | | | (385,184,344 | ) | | $ | (1,976,534,500 | ) |
| | |
67 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations and investments in the Subsidiary and IMMF, for the year ended December 30, 2011, were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
|
Investment securities | | $ | 885,448,910 | | | $ | 981,223,989 | |
U.S. government and government agency obligations | | | 39,608,149 | | | | 1,502,573 | |
To Be Announced (TBA) mortgage-related securities | | | 1,050,654,783 | | | | 1,039,506,614 | |
4. Fees and Other Transactions with Affiliates
Management Fees. Under the investment advisory agreement, the Fund pays the Manager a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| | | | |
Fee Schedule | | | | |
|
Up to $200 million | | | 0.75 | % |
Next $200 million | | | 0.72 | |
Next $200 million | | | 0.69 | |
Next $200 million | | | 0.66 | |
Next $200 million | | | 0.60 | |
Over $1 billion | | | 0.50 | |
Administration Service Fees. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund’s tax returns.
Transfer Agent Fees. OppenheimerFunds Services (“OFS”), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. For the year ended December 30, 2011, the Fund paid $2,376,241 to OFS for services to the Fund.
Distribution and Service Plan for Service Shares. The Fund has adopted a Distribution and Service Plan (the “Plan”) in accordance with Rule 12b-1 under the Investment Company Act of 1940 for Service shares to pay OppenheimerFunds Distributor, Inc. (the “Distributor”), for distribution related services, personal service and account maintenance for the Fund’s Service shares. Under the Plan, payments are made periodically at an annual rate of 0.25% of the daily net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors of the insurance product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service shares. These fees are paid out of the Fund’s assets on an on-going basis and increase operating expenses of the Service shares, which results in lower performance compared to the Fund’s shares that are not subject to a service fee. Fees incurred by the Fund under the Plan are detailed in the Statement of Operations.
Waivers and Reimbursements of Expenses. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.75% for Non-Service shares and 1.00% for Service shares.
The Manager has contractually agreed to waive the management fee it receives from the Fund in an amount equal to the management fee it receives from the Subsidiary. This undertaking will continue in effect for so long as the Fund invests in the Subsidiary and may not be terminated unless approved by the Fund’s Board of Trustees. During the year ended December 30, 2011, the Manager waived $1,195.
The Manager will waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Fund’s investments in IMMF, Oppenheimer Short Duration Fund and the Master Funds. During the year ended December 30, 2011, the Manager waived fees and/or reimbursed the Fund $1,312,180 for management fees.
Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.
68 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
5. Risk Exposures and the Use of Derivative Instruments
The Fund’s investment objectives not only permit the Fund to purchase investment securities, they also allow the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward foreign currency exchange contracts, credit default swaps, interest rate swaps, total return 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. Central to those strategies are features inherent to derivatives that make them more attractive for this purpose than equity and debt securities: they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This 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.
Market Risk Factors. In accordance with its investment objectives, the Fund may use derivatives to increase or decrease its exposure to one or more of the following 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 to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds.
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.
The Fund’s actual exposures to these market risk factors during the period are discussed in further detail, by derivative type, below.
Risks of Investing in Derivatives. The Fund’s use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. 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.
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. 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.
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
69 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
5. Risk Exposures and the Use of Derivative Instruments Continued
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. Associated risks can be different for each type of derivative and are discussed by each derivative type in the notes that follow.
Counterparty Credit Risk. Certain derivative positions are subject to counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. The Fund’s derivative counterparties are financial institutions who are subject to market conditions that may weaken their financial position. The Fund intends to enter into financial transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction. As of December 30, 2011, the maximum amount of loss that the Fund would incur if the counterparties to its derivative transactions failed to perform would be $23,298,100, which represents gross payments to be received by the Fund on these derivative contracts were they to be unwound as of period end. To reduce this risk the Fund has entered into master netting arrangements, established within the Fund’s International Swap and Derivatives Association, Inc. master agreements, which allow the Fund to net unrealized appreciation and depreciation for certain positions in swaps, over-the-counter options, swaptions, and forward currency exchange contracts for each individual counterparty. The amount of loss that the Fund would incur taking into account these master netting arrangements would be $6,185,349 as of December 30, 2011. 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 International Swap and Derivatives Association, Inc. 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.
As of December 30, 2011 the Fund has required certain counterparties to post collateral of $6,108,673.
Credit Related Contingent Features. The Fund’s agreements with derivative counterparties have several credit related contingent features that if triggered would allow its derivatives counterparties to close out and demand payment or additional collateral to cover their exposure from the Fund. Credit related contingent features are established between the Fund and its derivatives counterparties to reduce the risk that the Fund will not fulfill its payment obligations to its counterparties. These triggering features include, but are not limited to, a percentage decrease in the Fund’s net assets and or a percentage decrease in the Fund’s Net Asset Value or NAV. The contingent features are established within the Fund’s International Swap and Derivatives Association, Inc. master agreements which govern certain positions in swaps, over-the-counter options and swaptions, and forward currency exchange contracts for each individual counterparty.
As of December 30, 2011, the aggregate fair value of derivative instruments with credit related contingent features in a net liability position was $8,019,755 for which the Fund has posted collateral of $5,763,355. If a contingent feature would have been triggered as of December 30, 2011, the Fund could have been required to pay this amount in cash to its counterparties. If the Fund fails to perform under these contracts and agreements, the cash and/or securities posted as collateral will be made available to the counterparty. Cash posted as collateral for these contracts, if any, is reported on the Statement of Assets and Liabilities; securities posted as collateral, if any, are reported on the Statement of Investments.
Valuations of derivative instruments as of December 30, 2011 are as follows:
| | | | | | | | | | | | |
| | Asset Derivatives | | | Liability Derivatives |
| | | | | |
| | Statement | | | | | | Statement | | | |
Derivatives Not | | of Assets | | | | | | of Assets | | | |
Accounted for as | | and Liabilities | | | | | | and Liabilities | | | |
Hedging Instruments | | Location | | Value | | | Location | | Value | |
|
Credit contracts | | Appreciated swaps, at value | | $ | 859,355 | | | Appreciated swaps, at value | | $ | 2,186,195 | |
Credit contracts | | Depreciated swaps, at value | | | 1,058,863 | | | Depreciated swaps, at value | | | 1,151,796 | |
Equity contracts | | Appreciated swaps, at value | | | 1,215,189 | | | Depreciated swaps, at value | | | 845,825 | |
70 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| | | | | | | | | | | | |
| | Asset Derivatives | | | Liability Derivatives | |
| | Statement | | | | | | Statement | | | |
Derivatives Not | | of Assets | | | | | | of Assets | | | |
Accounted for as | | and Liabilities | | | | | | and Liabilities | | | |
Hedging Instruments | | Location | | Value | | | Location | | Value | |
|
Foreign exchange contracts | | | | | | | | Depreciated swaps, at value | | $ | 573 | |
Interest rate contracts | | Appreciated swaps, at value | | $ | 1,633,738 | | | Depreciated swaps, at value | | | 1,100,851 | |
Volatility contracts | | Appreciated swaps, at value | | | 351,671 | | | Depreciated swaps, at value | | | 89,170 | |
Equity contracts | | Futures margins | | | 94,356 | * | | Futures margins | | | 131,001 | |
Interest rate contracts | | Futures margins | | | 824,993 | * | | Futures margins | | | 158,871 | |
Foreign exchange contracts | | Unrealized appreciation on foreign currency exchange contracts | | | 6,674,020 | | | Unrealized depreciation on foreign currency exchange contracts | | | 9,409,937 | |
Foreign exchange contracts | | | | | | | | Appreciated options written, at value | | | 263,046 | |
Foreign exchange contracts | | | | | | | | Depreciated options written, at value | | | 16,868 | |
Interest rate contracts | | | | | | | | Appreciated options written, at value | | | 1,164,102 | |
Interest rate contracts | | | | | | | | Depreciated options written, at value | | | 920,209 | |
Interest rate contracts | | | | | | | | Appreciated swaptions written, at value | | | 1,798,390 | |
Interest rate contracts | | | | | | | | Depreciated swaptions written, at value | | | 5,770,471 | |
Foreign exchange contracts | | Investments, at value | | | 487,099 | ** | | | | | | |
Interest rate contracts | | Investments, at value | | | 9,637,599 | ** | | | | | | |
| | | | | | | | | | |
Total | | | | $ | 22,836,883 | | | | | $ | 25,007,305 | |
| | | | | | | | | | |
| | |
* | | Includes only the current day’s variation margin. Prior variation margin movements have been reflected in cash on the Statement of Assets and Liabilities upon receipt or payment. |
|
** | | Amounts relate to purchased options and swaptions |
The effect of derivative instruments on the Statement of Operations is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Amount of Realized Gain or (Loss) Recognized on Derivatives | |
| | Investments from | | | | | | | | | | | | | | | | |
| | unaffiliated | | | Closing and | | | | | | | | | | | | | |
| | companies | | | expiration | | | Closing and | | | | | | | | | | |
Derivatives Not | | (including | | | of option | | | expiration of | | | Foreign | | | | | | | |
Accounted for as | | premiums on | | | contracts | | | futures | | | currency | | | | | | | |
Hedging Instruments | | options exercised)* | | | written | | | contracts | | | transactions | | | Swap contracts | | | Total | |
|
Credit contracts | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (453,430 | ) | | $ | (453,430 | ) |
Equity contracts | | | — | | | | — | | | | (719,017 | ) | | | — | | | | (3,194,024 | ) | | | (3,913,041 | ) |
Foreign exchange contracts | | | (1,094,302 | ) | | | 3,524,494 | | | | 681,420 | | | | (33,825,963 | ) | | | (240,915 | ) | | | (30,955,266 | ) |
Interest rate contracts | | | 6,132,218 | | | | 2,620,362 | | | | 9,516,175 | | | | — | | | | 2,917,344 | | | | 21,186,099 | |
Volatility contracts | | | — | | | | — | | | | — | | | | — | | | | 2,893,325 | | | | 2,893,325 | |
| | |
Total | | $ | 5,037,916 | | | $ | 6,144,856 | | | $ | 9,478,578 | | | $ | (33,825,963 | ) | | $ | 1,922,300 | | | $ | (11,242,313 | ) |
| | |
| | |
* | | Includes purchased option contracts, purchased swaption contracts and written option contracts exercised, if any. |
71 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
5. Risk Exposures and the Use of Derivative Instruments Continued
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Amount of Change in Unrealized Gain or (Loss) Recognized on Derivatives | |
| | | | | | | | | | | | | | | | | | Translation of | | | | | | | |
| | | | | | | | | | | | | | | | | | assets and | | | | | | | |
| | | | | | | | | | | | | | | | | | liabilities | | | | | | | |
Derivatives Not | | | | | | Option | | | Swaption | | | | | | | denominated | | | | | | | |
Accounted for as | | | | | | contracts | | | contracts | | | Futures | | | in foreign | | | | | | | |
Hedging Instruments | | Investments* | | | written | | | written | | | contracts | | | currencies | | | Swap contracts | | | Total | |
|
Credit contracts | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 210,402 | | | $ | 210,402 | |
Equity contracts | | | — | | | | — | | | | — | | | | 201,501 | | | | — | | | | (532,569 | ) | | | (331,068 | ) |
Foreign exchange contracts | | | (205,745 | ) | | | 810,970 | | | | — | | | | — | | | | 5,737,529 | | | | 1,563,616 | | | | 7,906,370 | |
Interest rate contracts | | | (3,840,417 | ) | | | 297,258 | | | | 619,936 | | | | 10,113,351 | | | | — | | | | 182,900 | | | | 7,373,028 | |
Volatility contracts | | | — | | | | — | | | | — | | | | — | | | | — | | | | 260,788 | | | | 260,788 | |
| | |
Total | | $ | (4,046,162 | ) | | $ | 1,108,228 | | | $ | 619,936 | | | $ | 10,314,852 | | | $ | 5,737,529 | | | $ | 1,685,137 | | | $ | 15,419,520 | |
| | |
| | |
* | | Includes purchased option contracts and purchased swaption contracts, if any. |
Foreign Currency Exchange Contracts
The Fund may enter into foreign currency exchange contracts (“forward contracts”) for the purchase or sale of a foreign currency at a negotiated rate at a future date.
Forward contracts are reported on a schedule following the Statement of Investments. Forward contracts will be valued daily based upon the closing prices of the forward currency rates determined at the close of the Exchange as provided by a bank, dealer or pricing service. The resulting unrealized appreciation (depreciation) is reported in the Statement of Assets and Liabilities as a receivable or payable and in the Statement of Operations 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 Statement of Operations.
The Fund has purchased and sold certain forward foreign currency exchange contracts of different currencies in order to acquire currencies to pay for or sell currencies to acquire related foreign securities purchase and sale transactions, respectively, or to convert foreign currencies to U.S. dollars from related foreign securities transactions. These foreign currency exchange contracts are negotiated at the current spot exchange rate with settlement typically within two business days thereafter.
The Fund has entered into forward foreign currency exchange 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 foreign currency exchange contracts seek to increase exposure to foreign exchange rate risk.
The Fund has entered into forward foreign currency exchange 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 foreign currency exchange 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 foreign currency exchange contracts seek to increase exposure to foreign exchange rate risk.
The Fund has entered into forward foreign currency exchange 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 year ended December 30, 2011, the Fund had daily average contract amounts on forward foreign currency contracts to buy and sell of $507,810,597 and $295,644,686, respectively.
Additional associated risk to the Fund includes counterparty credit risk. Counterparty credit risk arises from the possibility that the counterparty will default.
72 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
Futures Contracts
A futures contract is a commitment to buy or sell a specific amount of a 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 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.
Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses.
Futures contracts are reported on a schedule following the Statement of Investments. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. Cash held by the broker 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. The net change in unrealized appreciation and depreciation is reported in the Statement of Operations. Realized gains (losses) are reported in the Statement of Operations 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 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 on various currencies to increase exposure to foreign exchange rate risk.
During the year ended December 30, 2011, the Fund had an ending monthly average market value of $393,293,709 and $304,497,391 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 at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the principal exchange on which the option is traded. 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. 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.
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.
73 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
5. | | Risk Exposures and the Use of Derivative Instruments Continued |
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 year ended December 30, 2011, the Fund had an ending monthly average market value of $2,943,183 and $534,702 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. Securities held in collateralized 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 Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk 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.
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 year ended December 30, 2011, the Fund had an ending monthly average market value of $325,841 and $371,464 on written call options and written put options, respectively.
Additional associated risks to the Fund include counterparty credit risk for over-the-counter options and liquidity risk.
Written option activity for the year ended December 30, 2011 was as follows:
| | | | | | | | | | | | | | | | |
| | Call Options | | | Put Options | |
| | Number of | | | Amount of | | | Number of | | | Amount of | |
| | Contracts | | | Premiums | | | Contracts | | | Premiums | |
|
Options outstanding as of December 31, 2010 | | | — | | | $ | — | | | | — | | | $ | — | |
Options written | | | 120,340,252,175 | | | | 6,884,670 | | | | 139,478,984,387 | | | | 7,041,489 | |
Options closed or expired | | | (2,809,615,444 | ) | | | (3,761,874 | ) | | | (1,748,384,721 | ) | | | (4,417,546 | ) |
Options exercised | | | (1,659,245,049 | ) | | | (1,115,033 | ) | | | (3,488,195,000 | ) | | | (1,159,253 | ) |
| | |
Options outstanding as of December 30, 2011 | | | 115,871,391,682 | | | $ | 2,007,763 | | | | 134,242,404,666 | | | $ | 1,464,690 | |
| | |
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, or the occurrence of a credit event, over a specified period. Such contracts may include interest rate, equity, debt, index, total return, credit and currency swaps.
Swaps are marked to market daily using primarily quotations from pricing services, counterparties and brokers. Swap contracts are reported on a schedule following the Statement of Investments. The values of swap contracts are aggregated by positive and negative values and disclosed separately on the Statement of Assets and Liabilities by contracts in unrealized appreciation and depreciation positions. Upfront payments paid or received, if any, affect the value of the respective swap. Therefore, to determine the unrealized appreciation (depreciation) on swaps, upfront payments paid should be subtracted from, while upfront payments received should be added to, the value of contracts reported as an asset on the Statement of Assets and Liabilities. Conversely, upfront payments paid should be added to, while upfront payments received should be subtracted from the value of contracts reported as a liability. The unrealized appreciation
74 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
(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 at termination or settlement. The net change in this amount during the period is included on the Statement of Operations. 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 Statement of Operations.
Swap contract agreements are exposed to the market risk factor of the specific underlying reference 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 require little or no initial cash investment, they can expose the Fund to substantial risk in the isolated market risk factor.
Credit Default Swap Contracts. A credit default swap is a bilateral contract that enables an investor to buy or sell protection on a debt security against a defined-issuer credit event, such as the issuer’s failure to make timely payments of interest or principal on the debt security, bankruptcy or restructuring. The Fund may enter into credit default swaps either by buying or selling protection on a single security, sovereign debt, or a basket of securities (the “reference asset”).
The buyer of protection pays a periodic fee to the seller of protection based on the notional amount of debt securities underlying 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 reference asset less the market value of the reference asset. Upon exercise of the contract the difference between the value of the underlying reference asset and the notional amount is recorded as realized gain (loss) and is included on the Statement of Operations.
The Fund has sold credit protection through credit default swaps to increase exposure to the credit risk of individual securities and/or, indexes 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 securities and/or, indexes.
For the year ended December 30, 2011, the Fund had ending monthly average notional amounts of $74,950,385 and $46,280,769 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 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.
75 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
5. Risk Exposures and the Use of Derivative Instruments Continued
For the year ended December 30, 2011, the Fund had ending monthly average notional amounts of $57,933,599 and $189,819,585 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 asset or non-asset references. One cash flow is typically based on a non-asset reference (such as an interest rate or index) and the other on the total return of a reference asset (such as a security or a basket of securities). 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, or an amount equal to the negative price movement of securities or an index 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 multiplied by the notional amount of the contract.
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 multiplied by the notional amount of the contract. The Fund will receive payments of a floating reference interest rate or an amount equal to the negative price movement of the same securities or index multiplied by the notional amount of the contract.
For the year ended December 30, 2011, the Fund had ending monthly average notional amounts of $71,294,843 and $27,935,187 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.
Currency Swaps. A currency swap is an agreement between counterparties to exchange different currencies equivalent to the notional value at contract inception and reverse the exchange of the same notional values of those currencies at contract termination. The contract may also include periodic exchanges of cash flows based on a specified index or interest rate.
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 various foreign currency notional amounts in order to take a positive investment perspective on the related currencies for which the Fund receives a payment. These currency swap contracts seek to increase exposure to foreign exchange rate risk.
The Fund has entered into currency swap contracts with the obligation to pay an interest rate on various foreign currency notional amounts and receive an interest rate on the dollar notional amount in order to take a negative investment perspective on the related currencies for which the Fund receives a payment. These currency swap contracts seek to decrease exposure to foreign exchange rate risk.
For the year ended December 30, 2011, the Fund had ending monthly average notional amounts of $4,434,734 on currency swaps.
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 volatility of the reference investment as measured by changes in its price or level while the other cash flow is based on an interest rate or the measured volatility of a different reference investment. The appreciation or depreciation on a volatility swap will typically
76 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
depend on the magnitude of the reference investment’s volatility, or size of the movement, 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.
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 interest payment over the period of the contract. 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 interest payment and receive the measured volatility over the period of the contract. 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.
For the year ended December 30, 2011, the Fund had ending monthly average notional amounts of $72,000 and $172,963 on volatility swaps which pay volatility and volatility swaps which receive volatility, 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.
Swaptions are marked to market daily using primarily portfolio pricing services or quotations from counterparties and brokers. Purchased swaptions are reported as a component of investments in the Statement of Investments, the Statement of Assets and Liabilities and the Statement of Operations. 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. The net change in unrealized appreciation or depreciation on written swaptions is separately reported in the Statement of Operations. 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 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 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 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 appreciates 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 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 depreciates relative to the preset interest rate.
77 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
5. Risk Exposures and the Use of Derivative Instruments Continued
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 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 appreciates relative to the preset interest rate.
During the year ended December 30, 2011, the Fund had an ending monthly average market value of $449,402 and $1,062,770 on purchased and written swaptions, respectively.
Written swaption activity for the year ended December 30, 2011 was as follows:
| | | | | | | | |
| | Call Swaptions |
| | Notional | | Amount of |
| | Amount | | Premiums |
|
Swaptions outstanding as of December 31, 2010 | | $ | — | | | $ | — | |
Swaptions written | | | 385,315,000 | | | | 8,188,797 | |
| | |
Swaptions outstanding as of December 30, 2011 | | $ | 385,315,000 | | | $ | 8,188,797 | |
| | |
6. Restricted Securities
As of December 30, 2011, 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 Directors as reflecting fair value. Securities that are restricted are marked with an applicable footnote on the Statement of Investments. Restricted securities are reported on a schedule following the Statement of Investments.
7. Pending Litigation
Since 2009, a number of class action, derivative and individual lawsuits have been pending in federal and state courts against OppenheimerFunds, Inc., the Fund’s investment advisor (the “Manager”), OppenheimerFunds Distributor, Inc., the Fund’s principal underwriter and distributor (the “Distributor”), and certain funds (but not including the Fund) advised by the Manager and distributed by the Distributor (the “Defendant Funds”). Several of these lawsuits also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The lawsuits raise claims under federal securities laws and various states’ securities, consumer protection and common law and allege, among other things, that the disclosure documents of the respective Defendant Funds contained misrepresentations and omissions and that the respective Defendant Funds’ investment policies were not followed. The plaintiffs in these actions seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. On September 30, 2011, the U.S. District Court for the District of Colorado entered orders and final judgments approving the settlement of certain putative class actions involving two Defendant Funds, Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund. Those orders are not subject to further appeal. These settlements do not resolve other outstanding lawsuits relating to Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund, nor do the settlements affect certain other putative class action lawsuits pending in federal court against the Manager, the Distributor, and other Defendant Funds and their independent trustees.
In 2009, what are claimed to be derivative lawsuits were filed in New Mexico state court against the Manager and a subsidiary (but not against the Fund) on behalf of the New Mexico Education Plan Trust challenging a settlement reached in 2010 between the Manager, its subsidiary and the Distributor and the board of the New Mexico section 529 college savings plan. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses. On September 9, 2011, the court denied plaintiffs’ request for a hearing to determine the fairness of the settlement, finding that plaintiffs lacked standing to pursue derivative claims on behalf of the Trust. On October 27, 2011, the parties to these actions filed a joint motion to dismiss the lawsuits with prejudice, which the court granted on October 28, 2011.
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Other class action and individual lawsuits have been filed since 2008 in various state and federal courts against the Manager and certain of its affiliates by investors seeking to recover investments they allegedly lost as a result of the “Ponzi” scheme run by Bernard L. Madoff and his firm, Bernard L. Madoff Investment Securities, LLC (“BLMIS”). Plaintiffs in these suits allege that they suffered losses as a result of their investments in several funds managed by an affiliate of the Manager and assert a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. Neither the Distributor, nor any of the Oppenheimer mutual funds, their independent trustees or directors are named as defendants in these lawsuits. None of the Oppenheimer mutual funds invested in any funds or accounts managed by Madoff or BLMIS. On February 28, 2011, a stipulation of partial settlement of three groups of consolidated putative class action lawsuits relating to these matters was filed in the U.S. District Court for the Southern District of New York. On August 19, 2011, the court entered an order and final judgment approving the settlement as fair, reasonable and adequate. In September 2011, certain parties filed notices of appeal from the court’s order approving the settlement. On July 29, 2011, a stipulation of settlement between certain affiliates of the Manager and the Trustee appointed under the Securities Investor Protection Act to liquidate BLMIS was filed in the U.S. Bankruptcy Court for the Southern District of New York to resolve purported preference and fraudulent transfer claims by the Trustee. On September 22, 2011, the court entered an order approving the settlement as fair, reasonable and adequate. In October 2011, certain parties filed notices of appeal from the court’s order approving the settlement. The aforementioned settlements do not resolve other outstanding lawsuits against the Manager and its affiliates relating to BLMIS.
On April 16, 2010, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark IV Funding Limited (“AAArdvark IV”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark IV. Plaintiffs allege breach of contract against the defendants and seek compensatory damages, costs and disbursements, including attorney fees. On July 15, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark Funding Limited (“AAArdvark I”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark I. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees. On November 9, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark XS Funding Limited (“AAArdvark XS”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark XS. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees.
The Manager believes the lawsuits and appeals described above are without legal merit and, with the exception of actions it has settled, is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to represent the Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer mutual funds.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:
We have audited the accompanying statement of assets and liabilities of Oppenheimer Global Strategic Income Fund/VA (a separate series of Oppenheimer Variable Account Funds), including the statement of investments, as of December 30, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of Oppenheimer Global Strategic Income Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 30, 2011, by correspondence with the custodian, transfer agent and brokers, or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Global Strategic Income Fund/VA as of December 30, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended, in conformity with U.S. generally accepted accounting principles.
KPMG LLP
Denver, Colorado
February 16, 2012
80 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
In early 2012, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2011. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service.
Capital gain distributions of $0.06966 per share were paid to Non-Service and Service shareholders, respectively, on March 7, 2011. Whether received in stock or in cash, the capital gain distribution should be treated by shareholders as a gain from the sale of the capital assets held for more than one year (long-term capital gains).
Dividends, if any, paid by the Fund during the fiscal year ended December 30, 2011 which are not designated as capital gain distributions should be multiplied by the maximum amount allowable but not less than 0.32% to arrive at the amount eligible for the corporate dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance.
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BOARD APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT Unaudited
Each year, the Board of Trustees (the “Board”), including a majority of the independent Trustees, is required to determine whether to renew the Fund’s investment advisory agreement (the “Agreement”). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager’s services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager and its affiliates, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. The Board was aware that there are alternatives to retaining the Manager.
Outlined below is a summary of the principal information considered by the Board as well as the Board’s conclusions.
Nature, Quality and Extent of Services. The Board considered information about the nature, quality and extent of the services provided to the Fund and information regarding the Manager’s key personnel who provide such services. The Manager’s duties include providing the Fund with the services of the portfolio managers and the Manager’s investment team, who provide research, analysis and other advisory services in regard to the Fund’s investments; securities trading services; oversight of third-party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund’s investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel who are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund’s operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund’s shares. The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the quality of the Manager’s resources that are available to the Fund. The Board took account of the fact that the Manager has had over fifty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager’s advisory, administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager’s key personnel and the size and functions of its staff. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Arthur Steinmetz, Krishna Memani, Joseph Welsh, and Sara Zervos the portfolio managers for the Fund, and the Manager’s investment team and analysts. The Board members also considered the totality of their experiences with the Manager as directors or trustees of the Fund and other funds advised by the Manager. The Board considered information regarding the quality of services provided by affiliates of the Manager, which its members have become knowledgeable about in connection with the renewal of the Fund’s service agreements. The Board concluded, in light of the Manager’s experience, reputation, personnel, operations and resources that the Fund benefits from the services provided under the Agreement.
Investment Performance of the Manager and the Fund. Throughout the year, the Manager provided information on the investment performance of the Fund and the Manager, including comparative performance information. The
82 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund’s historical performance to relevant market indices and to the performance of other global income funds underlying variable insurance products. The Board considered that the Fund outperformed its performance universe median during the one- and ten-year Lipper periods, although the Fund underperformed its performance universe median during the three- and five-year Lipper periods. The Board also considered the Fund’s recent improved performance, noting it had ranked in the first quintile for the year to date ended April 30, 2011.
Costs of Services by the Manager. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also considered the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund and other global income funds underlying variable insurance products. In reviewing the fees and expenses charged to the VA funds, the Board considered the Manager’s assertion that, because there is much greater disparity in the fees and services that may be provided by a manager to a VA fund as opposed to a retail fund, when comparing the expenses of the various VA funds to those of retail funds, it is most appropriate to focus on total expenses (rather than on the management fees). Accordingly, while the Board reviewed and considered all expenses, it focused on total expenses. The Board considered that the Fund’s actual management fees were equal to, and its total expenses were higher than, its expense group median. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.75% for Non-Service shares and 1.00% for Service shares. This voluntary expense limitation may be amended or withdrawn at any time.
Economies of Scale and Profits Realized by the Manager. The Board considered information regarding the Manager’s costs in serving as the Fund’s investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager’s profitability from its relationship with the Fund. The Board reviewed whether the Manager may realize economies of scale in managing and supporting the Fund. The Board noted that the Fund currently has management fee breakpoints, which are intended to share with Fund shareholders economies of scale that may exist as the Fund’s assets grow.
Other Benefits to the Manager. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager’s affiliates. The Board also considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide quality services to the Fund.
Conclusions. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees’ counsel are independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the Agreement through August 31, 2012. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the above information, and considered the terms and conditions of the Agreement, including the management fee, in light of all of the surrounding circumstances.
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PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities (“portfolio proxies”) held by the Fund. A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund’s website at oppenheimerfunds.com, and (iii) on the SEC’s website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund’s voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC’s website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund’s Form N-Q filings are available on the SEC’s website at www.sec.gov. Those forms may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
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TRUSTEES AND OFFICERS Unaudited
| | |
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Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
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INDEPENDENT TRUSTEES | | The address of each Trustee in the chart below is 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Trustee serves for an indefinite term, or until his or her resignation, retirement, death or removal. |
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William L. Armstrong, Chairman of the Board of Trustees (since 2003), Trustee (since 1999) Age: 74 | | President, Colorado Christian University (since 2006); Chairman, Cherry Creek Mortgage Company (since 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso Mortgage Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman, Broadway Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), former Director of Campus Crusade for Christ (non-profit) (1991-2008); former Director, The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (2002-2006); former Chairman of: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Armstrong has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Edward L. Cameron, Trustee (since 1999) Age: 73 | | Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000-June 2006); Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (accounting firm) (July 1994-June 1998). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Cameron has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Jon S. Fossel, Trustee (since 1993) Age: 69 | | Chairman of the Board (since 2006) and Director (since June 2002) of UNUMProvident (insurance company); Director of Northwestern Energy Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003 and February 2005-February 2007); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. (“OAC”) (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Fossel has served on the Boards of certain Oppenheimer funds since 1990, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Sam Freedman, Trustee (since 1996) Age: 71 | | Director of Colorado UpLIFT (charitable organization) (since September 1984). Mr. Freedman held several positions with the Manager and with subsidiary or affiliated companies of the Manager (until October 1994). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Freedman has served on the Boards of certain Oppenheimer funds since 1996, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Beverly L. Hamilton, Trustee (since 2002) Age: 65 | | Trustee of Monterey Institute for International Studies (educational organization) (since February 2000); Board Member of Middlebury College (educational organization) (since December 2005); Chairman (since 2010) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); Director of The California Endowment (philanthropic organization) (April 2002-April 2008); Director (February 2002-2005) and Chairman of Trustees (2006-2007) of the Community Hospital of Monterey Peninsula; Director (October 1991-2005); Vice Chairman (2006-2009) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation (2001-2006) and The University of Michigan (since 2000); Advisor at Credit Suisse First Boston’s Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member of the investment committee of Hartford Hospital |
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TRUSTEES AND OFFICERS Unaudited / Continued
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Beverly L. Hamilton, Continued | | (2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 36 portfolios in the OppenheimerFunds complex. Ms. Hamilton has served on the Boards of certain Oppenheimer funds since 2002, during which time she has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
| | |
Robert J. Malone, Trustee (since 2002) Age: 67 | | Board of Directors of Opera Colorado Foundation (non-profit organization) (since March 2008); Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director of Steele Street Bank & Trust (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997- February 2004). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Malone has served on the Boards of certain Oppenheimer funds since 2002, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
| | |
F. William Marshall, Jr., Trustee (since 2000) Age: 69 | | Trustee Emeritus of Worcester Polytech Institute (WPI) (private university) (since 2009); Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment company) (since 1996) and MML Series Investment Fund (investment company) (since 1996); President and Treasurer of the SIS Funds (private charitable fund) (January 1999-March 2011); Former Trustee of WPI (1985-2008); Former Chairman of the Board (2004-2006) and Former Chairman of the Investment Committee of WPI (1994-2008); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999); and Former President and Chief Executive Officer of SIS Bancorp. (1993-1999). Oversees 38 portfolios in the OppenheimerFunds complex. Mr. Marshall has served on the Boards of certain Oppenheimer funds since 2000, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
| | |
INTERESTED TRUSTEE AND OFFICER | | The address of Mr. Glavin is Two World Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008. Mr. Glavin serves as a Trustee for an indefinite term, or until his resignation, retirement, death or removal and as an Officer for an indefinite term, or until his resignation, retirement, death or removal. Mr. Glavin is an Interested Trustee due to his positions with OppenheimerFunds, Inc. and its affiliates. |
| | |
William F. Glavin, Jr., Trustee, President and Principal Executive Officer (since 2009) Age: 53 | | Chairman of the Manager (since December 2009); Chief Executive Officer and Director of the Manager (since January 2009); President of the Manager (since May 2009); Director of Oppenheimer Acquisition Corp. (“OAC”) (the Manager’s parent holding company) (since June 2009); Executive Vice President (March 2006-February 2009) and Chief Operating Officer (July 2007-February 2009) of Massachusetts Mutual Life Insurance Company (OAC’s parent company); Director (May 2004-March 2006) and Chief Operating Officer and Chief Compliance Officer (May 2004-January 2005), President (January 2005-March 2006) and Chief Executive Officer (June 2005- March 2006) of Babson Capital Management LLC; Director (March 2005-March 2006), President (May 2003- March 2006) and Chief Compliance Officer (July 2005-March 2006) of Babson Capital Securities, Inc. (a broker-dealer); President (May 2003-March 2006) of Babson Investment Company, Inc.; Director (May 2004-August 2006) of Babson Capital Europe Limited; Director (May 2004-October 2006) of Babson Capital Guernsey Limited; Director (May 2004-March 2006) of Babson Capital Management LLC; Non-Executive Director (March 2005-March 2007) of Baring Asset Management Limited; Director (February 2005-June 2006) Baring Pension Trustees Limited; Director and Treasurer (December 2003-November 2006) of Charter Oak Capital Management, Inc.; Director (May 2006-September 2006) of C.M. Benefit Insurance Company; Director (May 2008-June 2009) and Executive Vice President (June 2007-July 2009) of C.M. Life Insurance Company; President (March 2006-May 2007) of MassMutual Assignment Company; Director (January 2005-December 2006), Deputy Chairman (March 2005- December 2006) and President (February 2005-March 2005) of MassMutual Holdings (Bermuda) Limited; Director (May 2008-June 2009) and Executive Vice President (June 2007-July 2009) of MML Bay State Life Insurance Company; Chief Executive Officer and President (April 2007-January 2009) of MML Distributors, LLC; and Chairman (March 2006-December 2008) and Chief Executive Officer (May 2007-December 2008) of MML Investors Services, Inc. Oversees 63 portfolios as a Trustee/Director and 96 portfolios as an officer in the OppenheimerFunds complex. |
86 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
| | |
|
OTHER OFFICERS OF THE FUND | | The addresses of the Officers in the chart below are as follows: for Messrs. Steinmetz, Memani, Welsh, Gabinet and Mss. Zervos and Nasta, Two World Financial Center, 225 Liberty Street, New York, New York 10281-1008, for Messrs. Welsh, Vandehey and Wixted, 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Officer serves for an indefinite term or until his or her resignation, retirement, death or removal. |
| | |
Arthur P. Steinmetz, Vice President (since 1993) Age: 53 | | Chief Investment Officer of the Manager (since October 2010); Executive Vice President of the Manager (since October 2009). Chief Investment Officer of Fixed-Income Investments of the Manager (April 2009-October 2010); Director of Fixed-Income Investments of the Manager (January 2009-April 2009) and a Senior Vice President of the Manager (March 1993-September 2009). A portfolio manager and an officer of 5 portfolios in the OppenheimerFunds complex. |
| | |
Krishna Memani, Vice President (since 2009) Age: 51 | | Director of Fixed Income (since October 2010), Senior Vice President and Head of the Investment Grade Fixed Income Team of the Manager (since March 2009). Prior to joining the Manager, Managing Director and Head of the U.S. and European Credit Analyst Team at Deutsche Bank Securities (June 2006-January 2009); Chief Credit Strategist at Credit Suisse Securities (August 2002-March 2006); a Managing Director and Senior Portfolio Manager at Putnam Investments (September 1998-June 2002). A portfolio manager and an officer of 22 portfolios in the OppenheimerFunds complex. |
| | |
Joseph Welsh, Vice President (since 2009) Age: 47 | | Head of the Manager’s High Yield Corporate Debt Team (since April 2009); Senior Vice President of the Manager (since May 2009); Vice President of the Manager (December 2000-April 2009); Assistant Vice President of the Manager (December 1996-November 2000); a high yield bond analyst of the Manager (January 1995- December 1996); a CFA. A portfolio manager and officer of 6 portfolios in the OppenheimerFunds complex. |
| | |
Sara J. Zervos, Ph.D., Vice President (since 2010) Age: 42 | | Head of the Global Debt Team (since October 2010); Senior Vice President of the Manager (since January 2011); Vice President of the Manager (April 2008-December 2010). Prior to joining the Manager, a portfolio manager with Sailfish Capital Management (May 2007-February 2008) and a portfolio manager for emerging market debt at Dillon Read Capital Management and OTA Asset Management (June 2004-April 2007). A portfolio manager and officer of 4 portfolios in the OppenheimerFunds complex. |
| | |
Arthur S. Gabinet, Secretary (since 2011) Age: 53 | | Executive Vice President (since May 2010) and General Counsel (since January 2011) of the Manager; General Counsel of the Distributor (since January 2011); General Counsel of Centennial Asset Management Corporation (since January 2011); Executive Vice President and General Counsel of HarbourView Asset Management Corporation (since January 2011); Assistant Secretary (since January 2011) and Director (since January 2011) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since January 2011); Director of Oppenheimer Real Asset Management, Inc. (since January 2011); Executive Vice President and General Counsel of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since January 2011); Executive Vice President and General Counsel of OFI Private Investments, Inc. (since January 2011); Vice President of OppenheimerFunds Legacy Program (since January 2011); Executive Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since January 2011); General Counsel, Asset Management of the Manager (May 2010-December 2010); Principal, The Vanguard Group (November 2005-April 2010); District Administrator, U.S. Securities and Exchange Commission (January 2003-October 2005). An officer of 96 portfolios in the OppenheimerFunds complex. |
| | |
Christina M. Nasta, Vice President and Chief Business Officer (since 2011) Age: 38 | | Senior Vice President of the Manager (since July 2010); Vice President of the Manager (since January 2003); Vice President of OppenheimerFunds Distributor, Inc. (since January 2003). An officer of 96 portfolios in the OppenheimerFunds complex. |
| | |
Mark S. Vandehey, Vice President and Chief Compliance Officer (since 2004) Age: 61 | | Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983). An officer of 96 portfolios in the OppenheimerFunds complex. |
87 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
| | |
|
Brian W. Wixted, Treasurer and Principal Financial & Accounting Officer (since 1999) Age: 52 | | Senior Vice President of the Manager (since March 1999); Treasurer of the Manager and the following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership Holdings, Inc. (March 1999-June 2008), OFI Private Investments, Inc. (March 2000-June 2008), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of OAC (March 1999-June 2008). An officer of 96 portfolios in the OppenheimerFunds complex. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and Officers and is available without charge, upon request, by calling 1.800.988.8287.
88 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
Financial Statements for Oppenheimer Global Strategic Income Fund/VA (Cayman) Ltd. for the Period Ended December 30, 2011
| | |
90 | | Statement of Assets and Liabilities |
91 | | Statement of Operations |
92 | | Statement of Changes in Net Assets |
93 | | Notes to Financial Statements |
98 | | Report of Independent Registered Public Accounting Firm |
89 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA (CAYMAN) LTD.
STATEMENT OF ASSETS AND LIABILITIES December 30, 20111
| | | | |
|
Assets | | | | |
Cash | | $ | 1,498,774 | |
| | | |
Total assets | | | 1,498,774 | |
Liabilities | | | | |
Payables and other liabilities: | | | | |
Auditing and other professional fees | | | 16,255 | |
| | | |
Total liabilities | | | 16,255 | |
| | | | |
Net Assets | | $ | 1,482,519 | |
| | | |
Composition of Net Assets | | | | |
Par value of shares of beneficial interest | | $ | 150 | |
Additional paid-in capital | | | 1,499,850 | |
Accumulated net investment loss | | | (17,481 | ) |
| | | |
Net Assets—applicable to 15,000 shares of beneficial interest outstanding | | $ | 1,482,519 | |
| | | |
Net Asset Value, Redemption Price Per Share and Offering Price Per Share | | $ | 98.83 | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
90 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA (CAYMAN) LTD.
STATEMENT OF OPERATIONS For the Period Ended December 30, 20111,2
| | | | |
|
Expenses | | | | |
Management fees | | $ | 1,226 | |
Legal, auditing and other professional fees | | | 16,255 | |
| | | |
Total expenses | | | 17,481 | |
| | | | |
Net Investment Loss | | | (17,481 | ) |
| | |
Net Decrease in Net Assets Resulting from Operations | | $ | (17,481 | ) |
| | | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | For the period from November 21, 2011 (commencement of operations) to December 30, 2011. |
See accompanying Notes to Financial Statements.
91 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA (CAYMAN) LTD.
STATEMENT OF CHANGES IN NET ASSETS
| | | | |
|
Period Ended December 30, | | | 2011 | 1,2 |
Operations | | | | |
Net investment loss | | $ | (17,481 | ) |
Net decrease in net assets resulting from operations | | | (17,481 | ) |
| | |
Beneficial Interest Transactions | | | | |
Net increase in net assets resulting from beneficial interest transactions | | | 1,500,000 | |
| | | | |
Net Assets | | | | |
Total increase | | | 1,482,519 | |
| | | |
Beginning of period | | | — | |
| | | |
End of period (including accumulated net investment loss of $17,481 for the period ended December 30, 2011) | | $ | 1,482,519 | |
| | | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | For the period from November 21, 2011 (commencement of operations) to December 30, 2011. |
See accompanying Notes to Financial Statements.
92 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA (CAYMAN) LTD.
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Oppenheimer Global Strategic Income Fund/VA (Cayman) Ltd. (the “Fund”) is organized as a Cayman Islands Company Limited by Shares. The Fund intends to carry on the business of an investment company and to acquire, invest in and hold by way of investment, sell and deal primarily in commodity-linked derivatives (including commodity futures, financial futures, options and swap contracts) and exchange traded funds (“ETF”). The Fund’s investment adviser is OppenheimerFunds, Inc. (the “Manager”). The Sub-Adviser is Oppenheimer Real Asset Management, Inc. (“ORAMI” or the “Sub-Adviser”), a wholly-owned subsidiary of the Manager. As of December 30, 2011, 100% of the Fund was owned by Oppenheimer Global Strategic Income Fund/VA (“OGSIFVA”). The Manager is also the investment adviser of OGSIFVA. The Fund commenced operations on November 21, 2011.
The beneficial interest of each investor in the Fund is represented by units of participating shares. The Fund’s directors may further designate classes of participating shares and series within each class. As of December 30, 2011, the directors have not designated classes or series of outstanding participating shares. During the year ended December 30, 2011, all income, profits, losses and expenses, if any, of the Fund were allocated pro rata to all participating shares of the Fund. Issuance of additional participating shares is at the discretion of the Fund’s directors.
The following is a summary of significant accounting policies consistently followed by the Fund.
Fiscal Year End. Since December 30, 2011 represents the last day during the Fund’s 2011 fiscal year on which the New York Stock Exchange was open for trading, the Fund’s financial statements have been presented through that date to maintain consistency with the Fund’s net asset value calculations used for shareholder transactions.
Securities Valuation. The Fund calculates the net asset value of its shares as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading.
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. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” observable market inputs other than unadjusted quoted prices are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.
Securities traded on a registered U.S. securities exchange 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. Securities whose principal exchange is NASDAQ® are valued based on the official closing prices reported by NASDAQ prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.
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.
U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price
93 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA (CAYMAN) LTD.
NOTES TO FINANCIAL STATEMENTS Continued
1. Significant Accounting Policies Continued
Continued quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.
“Money market-type” debt instruments with remaining maturities 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.
In the absence of a current price quotation obtained from an independent pricing service or broker-dealer, including for securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund’s assets are valued but after the close of the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities 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 adjusted for any discounts related to 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.
There have been no significant changes to the fair valuation methodologies of the Fund during the period.
Income Taxes. The Fund has received an undertaking from the Government of the Cayman Islands exempting it from all local income, profits and capital gains taxes through September of 2030. No such taxes are levied in the Cayman Islands at the present time. The Fund is a Controlled Foreign Corporation under U.S. tax laws and as such is not subject to U.S. income tax. Therefore, the Fund is not required to record a tax provision.
Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, if any, are declared and paid annually from the Fund’s tax basis earnings and profits. Distributions are recorded on ex-dividend date.
Investment Income. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is recognized on an accrual basis. Discount and premium, which are included in interest income on the Statement of Operations, are amortized or accreted daily.
Custodian Fees. “Custodian fees and expenses” in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by the Fund, at a rate equal to the Federal Funds Rate plus 0.50%. The “Reduction to custodian expenses” line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings.
Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost.
Indemnifications. The Fund’s organizational documents provide current and former directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s
94 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
2. Capital Transactions
The Fund has authorized 5,000,000 participating shares of $0.01 par value per share. The Fund issued 15,000 participating shares for $1,500,000 on November 21, 2011 in conjunction with OGSI’s initial capitalization of the Fund. All subsequent capital contributions and withdrawals did not have participating shares associated with the transaction.
Capital transactions were as follows:
| | | | |
| | Period Ended December 30, 20111 | |
| | Amount | |
|
Contributions | | $ | 1,500,000 | |
Withdrawals | | | — | |
| | | |
Net increase | | $ | 1,500,000 | |
| | | |
| | |
1. | | For the period from November 21, 2011 (commencement of operations) to December 30, 2011. |
3. | | Expenses
Management Fees. Under the investment advisory agreement, the Fund pays the Manager a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table: |
| | | | |
|
Up to $200 million | | | 0.75 | % |
Next $200 million | | | 0.72 | |
Next $200 million | | | 0.69 | |
Next $200 million | | | 0.66 | |
Next $200 million | | | 0.60 | |
Over $1 billion | | | 0.50 | |
Sub-Adviser Fees. The Manager retains the Sub-Adviser to provide the day-to-day portfolio management of the Fund. Under the Sub-Advisory Agreement, the Manager pays the Sub-Adviser a fee in monthly installments, based on the daily net assets of the Fund at an annual rate as shown in the following table:
| | | | |
Fee Schedule | | | | |
|
Up to $200 million | | | 0.375 | % |
Next $200 million | | | 0.360 | |
Next $200 million | | | 0.345 | |
Next $200 million | | | 0.330 | |
Next $200 million | | | 0.300 | |
Over $1 billion | | | 0.250 | |
The Fund shall bear all fees and expenses related to the business and affairs of the Fund, including among others, directors’ fees, audit fees, custodian fees and expenses in connection with the purchase and sale of securities and other Fund assets.
Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.
95 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA (CAYMAN) LTD.
NOTES TO FINANCIAL STATEMENTS Continued
4. Financial Highlights
The following represents the total return of the Fund for the period ended December 30, 2011. Total return was calculated based upon the daily returns of the Fund during this period. The calculation has not been annualized for reporting purposes:
Period Ended December 30, 20111 (1.17)%
The following represents certain financial ratios of the Fund for the periods noted. The computation of the net investment income and total expense ratios was based upon the daily net assets of the Fund during these periods. The calculations have been annualized for reporting purposes:
| | |
| | Period Ended |
| | December 30, 20111 |
|
Ratios to average net assets: | | | | |
Net investment income (loss) | | | (10.44 | )% |
Total expenses | | | 10.44 | % |
| | |
1. | | For the period from November 21, 2011 (commencement of operations) through December 30, 2011. |
5. Pending Litigation
Since 2009, a number of class action, derivative and individual lawsuits have been pending in federal and state courts against OppenheimerFunds, Inc., the Fund’s investment advisor (the “Manager”), OppenheimerFunds Distributor, Inc., the Fund’s principal underwriter and distributor (the “Distributor”), and certain funds (but not including the Fund) advised by the Manager and distributed by the Distributor (the “Defendant Funds”). Several of these lawsuits also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The lawsuits raise claims under federal securities laws and various states’ securities, consumer protection and common law and allege, among other things, that the disclosure documents of the respective Defendant Funds contained misrepresentations and omissions and that the respective Defendant Funds’ investment policies were not followed. The plaintiffs in these actions seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. On September 30, 2011, the U.S. District Court for the District of Colorado entered orders and final judgments approving the settlement of certain putative class actions involving two Defendant Funds, Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund. Those orders are not subject to further appeal. These settlements do not resolve other outstanding lawsuits relating to Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund, nor do the settlements affect certain other putative class action lawsuits pending in federal court against the Manager, the Distributor, and other Defendant Funds and their independent trustees.
In 2009, what are claimed to be derivative lawsuits were filed in New Mexico state court against the Manager and a subsidiary (but not against the Fund) on behalf of the New Mexico Education Plan Trust challenging a settlement reached in 2010 between the Manager, its subsidiary and the Distributor and the board of the New Mexico section 529 college savings plan. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses. On September 9, 2011, the court denied plaintiffs’ request for a hearing to determine the fairness of the settlement, finding that plaintiffs lacked standing to pursue derivative claims on behalf of the Trust. On October 27, 2011, the parties to these actions filed a joint motion to dismiss the lawsuits with prejudice, which the court granted on October 28, 2011.
Other class action and individual lawsuits have been filed since 2008 in various state and federal courts against the Manager and certain of its affiliates by investors seeking to recover investments they allegedly lost as a result of the “Ponzi” scheme run by Bernard L. Madoff and his firm, Bernard L. Madoff Investment Securities, LLC (“BLMIS”). Plaintiffs in these suits allege that they suffered losses as a result of their investments in several funds managed by an affiliate of
96 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
the Manager and assert a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. Neither the Distributor, nor any of the Oppenheimer mutual funds, their independent trustees or directors are named as defendants in these lawsuits. None of the Oppenheimer mutual funds invested in any funds or accounts managed by Madoff or BLMIS. On February 28, 2011, a stipulation of partial settlement of three groups of consolidated putative class action lawsuits relating to these matters was filed in the U.S. District Court for the Southern District of New York. On August 19, 2011, the court entered an order and final judgment approving the settlement as fair, reasonable and adequate. In September 2011, certain parties filed notices of appeal from the court’s order approving the settlement. On July 29, 2011, a stipulation of settlement between certain affiliates of the Manager and the Trustee appointed under the Securities Investor Protection Act to liquidate BLMIS was filed in the U.S. Bankruptcy Court for the Southern District of New York to resolve purported preference and fraudulent transfer claims by the Trustee. On September 22, 2011, the court entered an order approving the settlement as fair, reasonable and adequate. In October 2011, certain parties filed notices of appeal from the court’s order approving the settlement. The aforementioned settlements do not resolve other outstanding lawsuits against the Manager and its affiliates relating to BLMIS.
On April 16, 2010, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark IV Funding Limited (“AAArdvark IV”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark IV. Plaintiffs allege breach of contract against the defendants and seek compensatory damages, costs and disbursements, including attorney fees. On July 15, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark Funding Limited (“AAArdvark I”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark I. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees. On November 9, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark XS Funding Limited (“AAArdvark XS”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark XS. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees.
The Manager believes the lawsuits and appeals described above are without legal merit and, with the exception of actions it has settled, is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to represent the Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer mutual funds.
6. Subsequent Events Evaluation
The Fund has evaluated the need for disclosures and/or adjustments resulting from subsequent events through February 16, 2012, the date the financial statements were available to be issued. This evaluation determined that there are no subsequent events that necessitated disclosures and/or adjustments.
97 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA (CAYMAN) LTD.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholder of Oppenheimer Global Strategic Income Fund/VA (Cayman) Ltd.:
We have audited the accompanying statement of assets and liabilities of Oppenheimer Global Strategic Income Fund/VA (Cayman) Ltd., including the statement of investments, as of December 30, 2011, and the related statement of operations and the statement of changes in net assets for the period from November 21, 2011 (commencement of operations) to December 30, 2011. These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 30, 2011, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Oppenheimer Global Strategic Income Fund/VA (Cayman) Ltd. as of December 30, 2011, the results of its operations and the changes in its net assets for the period from November 21, 2011 (commencement of operations) to December 30, 2011, in conformity with U.S. generally accepted accounting principles.
KPMG llp
Denver, Colorado
February 16, 2012
98 | OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/VA
OPPENHEIMER GLOBAL STRATEGIC INCOME FUND/ VA
A Series of Oppenheimer Variable Account Funds
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Manager | | OppenheimerFunds, Inc. |
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Distributor | | OppenheimerFunds Distributor, Inc. |
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Transfer Agent | | OppenheimerFunds Services |
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Independent Registered Public Accounting Firm | | KPMG llp |
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Counsel | | K&L Gates LLP |
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| | Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing. |
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©2012 OppenheimerFunds, Inc. All rights reserved. | | ![(OPPENHEIMERFUNDS LOGO)](https://capedge.com/proxy/N-CSR/0000950123-12-003003/g60124g6013305.gif) |
December 31, 2011 Oppenheimer Value Fund/VA Annual Report A Series of Oppenheimer Variable Account Funds ANNUAL REPORT Listing of Top Holdings Fund Performance Discussion Financial Statements |
OPPENHEIMER VALUE FUND/ VA
Portfolio Manager: Mitch Williams, CFA
Average Annual Total Returns
For the Periods Ended 12/30/111
| | | | | | | | | | | | |
| | | | | | | | | | Since |
| | | | | | | | | | Inception |
| | 1-Year | | | 5-Year | | | (1/2/03) |
|
Non-Service Shares | | | -4.93 | % | | | 1.99 | % | | 7.81% | |
| | | | | | | | | | | | |
| | | | | | | | | | Since |
| | | | | | | | | | Inception |
| | 1-Year | | | 5-Year | | | (9/18/06) |
|
Service Shares | | | -4.48 | % | | | -2.15 | % | | -0.80% | |
Expense Ratios
For the Period Ended 12/30/111
| | | | | | | | |
| | | Gross | | Net |
| | | Expense | | Expense |
| | | Ratios | | Ratios |
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Non-Service Shares | | | 1.83 | % | | | 0.80 | % |
Service Shares | | | 1.90 | | | | 1.05 | |
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance and expense ratios may be lower or higher than the data quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account. The net expense ratios take into account voluntary fee waivers and/or expense reimbursements, without which performance would have been less. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund’s prospectus.
Sector Allocation
Portfolio holdings and allocations are subject to change. Percentages are as of December 30, 2011, and are based on the total market value of common stocks.
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Top Ten Common Stock Holdings | | | | |
Chevron Corp. | | | 5.9 | % |
Medtronic, Inc. | | | 4.0 | |
U.S. Bancorp | | | 3.5 | |
Coca-Cola Co. (The) | | | 3.3 | |
Wells Fargo & Co. | | | 3.2 | |
MetLife, Inc. | | | 2.7 | |
Gilead Sciences, Inc. | | | 2.6 | |
Goldman Sachs Group, Inc. (The) | | | 2.6 | |
Exxon Mobil Corp. | | | 2.5 | |
Pfizer, Inc. | | | 2.5 | |
Portfolio holdings and allocations are subject to change. Percentages are as of December 30, 2011, and are based on net assets.
2 | OPPENHEIMER VALUE FUND/VA
FUND PERFORMANCE DISCUSSION
Management’s Discussion of Fund Performance. The Fund’s Non-Service shares produced a total return of —4.93% during the reporting period ended December 30, 2011.1 On a relative basis, the Fund underperformed the Russell 1000 Value Index (the “Index”), which returned 0.39%. The bulk of the Fund’s declines occurred over the third quarter of 2011 when markets witnessed significant volatility. On a sector basis, the Fund underperformed the Index primarily in the industrials, utilities and information technology sectors due to weaker relative stock selection. The Fund outperformed the Index within the energy sector as a result of stronger relative stock selection and within the financials sector, where an underweight position to the worst performing sector of the Index benefited performance.
Economic and Market Overview
The reporting period began with a sense of market optimism over improving Gross Domestic Product (“GDP”) growth in Europe and the U.S., and equity markets in those regions overall experienced solid gains through the first four months of 2011. After strong gains in 2010, most developing market equities started the year off lagging their developed market counterparts due to concerns over slowing growth and rising inflation.
Market volatility across global equity markets grew over the second quarter of 2011 when Greece again teetered on the brink of defaulting on its sovereign debt, rekindling worries that fiscal instability might spread to other parts of Europe. Concerns over the economic problems in other European countries intensified as did a sense of unease over the health of the European banking system. A natural disaster in Japan caused disruptions in supply chains in the information technology sector and the automotive industry. Previously high-flying economies such as Brazil, Australia and India saw their GDP numbers cool off significantly as they struggled to keep their economies from heading into recession. In the U.S., the Fed’s latest round of quantitative easing, labeled “QE2”, officially ended on June 30, adding to questions around what the Fed’s next move might be to help stimulate the U.S. economy. These developments, in addition to persistently high levels of U.S. unemployment and a depressed U.S. housing market, contributed to a weaker-than-expected estimate of U.S. GDP during the second quarter of the year.
Due to the sluggish economy and lowered expectations for future economic growth, global equities began a decline over the summer that intensified as the third quarter progressed. The markets priced in a renewed sense of pessimism that Europe might succumb to a double-dip recession and that the U.S. was headed for a prolonged period of disappointing growth. Uncertainty and market nervousness grew as a deal to raise the U.S. debt ceiling was not reached until shortly before the deadline. As a result of the intense political wrangling, the credit rating agency Standard & Poor’s took the unprecedented and controversial step of downgrading the debt of the U.S., a decision that the two other major U.S. credit rating agencies opted not to follow. These events, coupled with the high likelihood of a Greek default on its debt and worries that Italy might be next, sent stocks sharply lower over the third quarter of 2011.
In the fourth quarter, equity markets finished the period largely on a positive note, rebounding strongly in October in particular, as European leaders sought to undertake measures to address the debt issues in the region and the U.S. economy began to show some signs of life as high unemployment trended downward, the housing market picked up slightly and consumer sentiment improved.
Top Individual Contributors
Two top performing holdings for the Fund this period were health care stocks Humana, Inc. and Pfizer, Inc. As fears over the new health care overhaul abated to a degree, the market generally responded more positively to health care stocks. Humana is a leading Medicare provider in the U.S. and in 2011 expanded its base of operations as well as Medicare Advantage policyholders through a series of acquisitions, including deals to acquire Antiva Health, MD Care, Arcadian Management Services, SeniorBridge and several urgent medical centers from NextCare, Inc. through its subsidiary Concentra, Inc. Pharmaceutical giant Pfizer performed well on continued strong sales of its popular drug Lipitor as well as positive top-line data of Lyrica from a phase III study and its evaluation for possible use in additional indications. During the period, Pfizer completed acquisitions of Excaliard Pharmaceuticals, Inc. and Ferrosan Consumer Health.
Several energy sector holdings also produced positive results for the Fund, including Chevron Corp., Exxon Mobil Corp. and Halliburton Co. Chevron and Exxon benefited from the rising price of oil and natural gas both early in the
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1. | | December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011. |
3 | OPPENHEIMER VALUE FUND/VA
FUND PERFORMANCE DISCUSSION
period and as the period came to a close, after a significant dip in prices over the middle of the period. Chevron announced a new natural discovery by its Australian unit and outlined plans for 2012 to be a year of major investment for the company in large natural gas-related exploration and production projects. Exxon continued to seek new growth opportunities in its exploration and production efforts and continued building upon its already impressive revenue stream. Energy-services company Halliburton performed well early in the period and we closed out of our position.
Within the consumer staples sector, household products manufacturer Church & Dwight Co., Inc. performed well as the market reacted positively to its solid increase in profit and plan to raise prices on selected products. Lastly, information technology stock National Semiconductor Corp. contributed significantly to performance as it was acquired by Texas Instruments during the period. The Fund did not hold a position in Texas Instruments at period end.
Top Individual Detractors
The Goldman Sachs Group, Inc. was the most significant detractor from performance this reporting period. Goldman’s stock price declined primarily due to increased regulation in the financial industry and uncertainty over its eventual implementation, which reduced the outlook for profit growth for many financial firms, particularly in the investment banking sector. A weak global economy and investment banks’ exposure to the Eurozone also gave investors pause. Other holdings in the financials sector that hurt performance this period included MetLife, Inc. and JPMorgan Chase & Co.
Within industrials, the negative market outlook for machinery companies in a weakening global economy resulted in declines for the Fund’s position in Ingersoll-Rand, which experienced a shortfall in expected demand for its HVAC (heating, ventilation and air conditioning) products. We exited our position in the stock by period end. Consumer discretionary stock Ford Motor Co. came under selling pressure, due in part to rising concern that consumer spending would suffer in the event of a double-dip recession. The Fund also experienced declines through its investment in information technology stock Research in Motion Ltd. Research in Motion issued a weak performance outlook and quarterly results, and also announced a delay in its next generation of BlackBerry smartphones. We exited our position.
Outlook
At period end, investors generally remain wary of risk. The markets are pricing in a great deal of uncertainty, whether that uncertainty lies with the outcomes of the debates in the U.S. Congress over debt reduction or the political upheavals across much of Europe. Weak GDP numbers in multiple regions of the globe have raised questions around whether the fragile global economic recovery has reversed course and begun a slide back into recession. Concerns exist that slow or negative growth will negatively impact consumer sentiment and spending habits, leading to further weakness in the global economy and the markets.
Improving unemployment figures in the U.S. offer some degree of optimism for the U.S economy. Measures being undertaken in Europe to shore up the euro and the Eurozone may help to stem in 2012 some of the significant market volatility we saw in 2011. Despite the market volatility we have witnessed of late, we remain confident in our investment approach. We will continue to search for companies that, in our view, offer strong earnings prospects and are trading at attractive valuations. We believe that moments like these can lead to significant investment opportunities where solid companies are undervalued and which we can purchase at a bargain price. While current global political and economic conditions are causing significant market fluctuations, we have not changed our long-term approach to investing and believe that reacting strongly to short-term market gyrations is rarely warranted or a prudent investment strategy.
Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing.
Total returns include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown.
The Fund’s investment strategy and focus can change over time. The mention of specific fund holdings does not constitute a recommendation by OppenheimerFunds, Inc.
4 | OPPENHEIMER VALUE FUND/VA
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.
Comparing the Fund’s Performance to the Market. The graphs that follow show the performance of a hypothetical $10,000 investment in each share class of the Fund held until December 30, 2011. In the case of Non-Service shares, performance is measured from inception of the Class on January 2, 2003. In the case of Service shares, performance is measured from inception of the Class on September 18, 2006. Performance information does not reflect charges that apply to separate accounts investing in the Fund. If these charges were taken into account, performance would be lower. The graphs assume that all dividends and capital gains distributions were reinvested in additional shares.
The Fund’s performance is compared to the performance of the Russell 1000 Value Index, an unmanaged index of equity securities of large capitalization value companies. Index performance includes reinvestment of income but does not reflect transaction costs, fees or expenses. The Fund’s performance reflects the effects of the Fund’s business and operating expenses. While index comparisons may be useful to provide a benchmark for the Fund’s performance, it must be noted that the Fund’s investments are not limited to the securities comprising the index.
5 | OPPENHEIMER VALUE FUND/VA
FUND PERFORMANCE DISCUSSION
Non-Service Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Service Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
The performance data quoted represents past performance, which does not guarantee future results.
The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, call us at 1.800.988.8287. The Fund’s total returns should not be expected to be the same as the returns of other funds, whether or not both funds have the same portfolio managers and/or similar names. The Fund’s total returns do not include the charges associated with the separate account products that offer this Fund. Such performance would have been lower if such charges were taken into account.
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1. | | December 30, 2011 was the last business day of the Fund’s fiscal year. See Note 1 of the accompanying Notes to Financial Statements. Index returns are calculated through December 31, 2011. |
6 | OPPENHEIMER VALUE FUND/VA
FUND EXPENSES
Fund Expenses. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended December 30, 2011.
Actual Expenses. The first section of the table provides information about actual account values and actual expenses. You may use the information in this section for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes. The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio for each class of shares, and an assumed rate of return of 5% per year for each class before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any charges associated with the separate accounts that offer this Fund. Therefore, the “hypothetical” lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these separate account charges were included your costs would have been higher.
| | | | | | | | | | | | |
| | Beginning | | Ending | | Expenses |
| | Account | | Account | | Paid During |
| | Value | | Value | | 6 Months Ended |
| | July 1, 2011 | | December 30, 2011 | | December 30, 2011 |
|
Actual | | | | | | | | | | | | |
Non-Service shares | | $ | 1,000.00 | | | $ | 886.90 | | | $ | 3.79 | |
Service shares | | | 1,000.00 | | | | 903.10 | | | | 5.02 | |
| | | | | | | | | | | | |
Hypothetical | | | | | | | | | | | | |
(5% return before expenses) | | | | | | | | | | | | |
Non-Service shares | | | 1,000.00 | | | | 1,021.06 | | | | 4.06 | |
Service shares | | | 1,000.00 | | | | 1,019.80 | | | | 5.33 | |
Expenses are equal to the Fund’s annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). Those annualized expense ratios, excluding indirect expenses from affiliated fund, based on the 6-month period ended December 30, 2011 are as follows:
| | | | |
Class | | Expense Ratios |
|
Non-Service shares | | | 0.80 | % |
Service shares | | | 1.05 | |
The expense ratios reflect voluntary waivers and/or reimbursements of expenses by the Fund’s Manager. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund’s prospectus. The “Financial Highlights” tables in the Fund’s financial statements, included in this report, also show the gross expense ratios, without such waivers or reimbursements and reduction to custodian expenses, if applicable.
7 | OPPENHEIMER VALUE FUND/VA
STATEMENT OF INVESTMENTS December 30, 2011*
| | | | | | | | |
| | Shares | | | Value | |
|
Common Stocks—95.1% | | | | | | | | |
Consumer Discretionary—9.6% | | | | | | | | |
Automobiles—1.5% | | | | | | | | |
Ford Motor Co.1 | | | 9,900 | | | $ | 106,524 | |
Household Durables—1.9% | | | | | | | | |
Mohawk Industries, Inc.1 | | | 2,270 | | | | 135,860 | |
Media—3.6% | | | | | | | | |
Comcast Corp., Cl. A | | | 6,700 | | | | 158,857 | |
Viacom, Inc., Cl. B | | | 1,990 | | | | 90,366 | |
| | | | | | | |
| | | | | | | 249,223 | |
Multiline Retail—2.2% | | | | | | | | |
Target Corp. | | | 3,030 | | | | 155,197 | |
Specialty Retail—0.4% | | | | | | | | |
Talbots, Inc. (The)1 | | | 10,180 | | | | 27,079 | |
Consumer Staples—8.0% | | | | | | | | |
Beverages—3.3% | | | | | | | | |
Coca-Cola Co. (The) | | | 3,330 | | | | 233,000 | |
Food & Staples Retailing—2.2% | | | | | | | | |
Wal-Mart Stores, Inc. | | | 2,580 | | | | 154,181 | |
Household Products—2.5% | | | | | | | | |
Church & Dwight Co., Inc. | | | 3,710 | | | | 169,770 | |
Energy—12.8% | | | | | | | | |
Energy Equipment & Services—0.7% | | | | | | | | |
Nabors Industries Ltd.1 | | | 2,930 | | | | 50,806 | |
Oil, Gas & Consumable Fuels—12.1% | | | | | | | | |
Apache Corp. | | | 700 | | | | 63,406 | |
Chevron Corp. | | | 3,890 | | | | 413,896 | |
Exxon Mobil Corp. | | | 2,094 | | | | 177,487 | |
Penn West Petroleum Ltd. | | | 3,930 | | | | 77,814 | |
Royal Dutch Shell plc, ADR | | | 1,530 | | | | 111,828 | |
| | | | | | | |
| | | | | | | 844,431 | |
Financials—20.2% | | | | | | | | |
Capital Markets—2.6% | | | | | | | | |
Goldman Sachs Group, Inc. (The) | | | 2,010 | | | | 181,764 | |
Commercial Banks—10.4% | | | | | | | | |
CIT Group, Inc.1 | | | 3,320 | | | | 115,768 | |
M&T Bank Corp. | | | 1,860 | | | | 141,992 | |
U.S. Bancorp | | | 8,940 | | | | 241,827 | |
Wells Fargo & Co. | | | 8,130 | | | | 224,063 | |
| | | | | | | |
| | | | | | | 723,650 | |
Diversified Financial Services—2.2% | | | | | | | | |
JPMorgan Chase & Co. | | | 4,580 | | | | 152,285 | |
Insurance—5.0% | | | | | | | | |
ACE Ltd. | | | 2,310 | | | | 161,977 | |
MetLife, Inc. | | | 6,080 | | | | 189,574 | |
| | | | | | | |
| | | | | | | 351,551 | |
Health Care—15.7% | | | | | | | | |
Biotechnology—2.6% | | | | | | | | |
Gilead Sciences, Inc.1 | | | 4,450 | | | | 182,139 | |
Health Care Equipment & Supplies—4.0% | | | | | | | | |
Medtronic, Inc. | | | 7,380 | | | | 282,285 | |
Health Care Providers & Services—6.6% | | | | | | | | |
HCA Holdings, Inc.1 | | | 5,420 | | | | 119,403 | |
Humana, Inc. | | | 1,640 | | | | 143,680 | |
UnitedHealth Group, Inc. | | | 2,270 | | | | 115,044 | |
WellPoint, Inc. | | | 1,230 | | | | 81,488 | |
| | | | | | | |
| | | | | | | 459,615 | |
Pharmaceuticals—2.5% | | | | | | | | |
Pfizer, Inc. | | | 8,150 | | | | 176,366 | |
Industrials—5.7% | | | | | | | | |
Electrical Equipment—2.2% | | | | | | | | |
Cooper Industries plc | | | 2,840 | | | | 153,786 | |
Industrial Conglomerates—2.1% | | | | | | | | |
Tyco International Ltd. | | | 3,090 | | | | 144,334 | |
Trading Companies & Distributors—1.4% | | | | | | | | |
AerCap Holdings NV1 | | | 9,010 | | | | 101,723 | |
Information Technology—9.0% | | | | | | | | |
Communications Equipment—1.7% | | | | | | | | |
Juniper Networks, Inc.1 | | | 5,790 | | | | 118,174 | |
Computers & Peripherals—0.9% | | | | | | | | |
Hewlett-Packard Co. | | | 2,570 | | | | 66,203 | |
Internet Software & Services—1.1% | | | | | | | | |
VeriSign, Inc. | | | 2,270 | | | | 81,084 | |
Semiconductors & Semiconductor Equipment—1.2% | | | | | | | | |
Xilinx, Inc. | | | 2,590 | | | | 83,035 | |
Software—4.1% | | | | | | | | |
Microsoft Corp. | | | 6,100 | | | | 158,356 | |
Oracle Corp. | | | 4,890 | | | | 125,429 | |
| | | | | | | |
| | | | | | | 283,785 | |
Materials—4.1% | | | | | | | | |
Chemicals—2.6% | | | | | | | | |
Celanese Corp., Series A | | | 1,760 | | | | 77,915 | |
Mosaic Co. (The) | | | 1,980 | | | | 99,851 | |
| | | | | | | |
| | | | | | | 177,766 | |
Containers & Packaging—1.5% | | | | | | | | |
Rock-Tenn Co., Cl. A | | | 1,840 | | | | 106,168 | |
Telecommunication Services—2.9% | | | | | | | | |
Diversified Telecommunication Services—1.3% | | | | | | | | |
AT&T, Inc. | | | 2,912 | | | | 88,059 | |
Wireless Telecommunication Services—1.6% | | | | | | | | |
Vodafone Group plc, Sponsored ADR | | | 4,130 | | | | 115,764 | |
8 | OPPENHEIMER VALUE FUND/VA
| | | | | | | | |
| | Shares | | | Value | |
|
Utilities—7.1% | | | | | | | | |
Electric Utilities—3.5% | | | | | | | | |
American Electric Power Co., Inc. | | | 2,110 | | | $ | 87,164 | |
Edison International, Inc. | | | 3,720 | | | | 154,008 | |
| | | | | | | | |
| | | | | | | 241,172 | |
Energy Traders—1.3% | | | | | | | | |
GenOn Energy, Inc.1 | | | 33,520 | | | | 87,487 | |
Multi-Utilities—2.3% | | | | | | | | |
Public Service Enterprise Group, Inc. | | | 4,970 | | | | 164,059 | |
| | | | | | | | |
Total Common Stocks (Cost $6,390,152) | | | | | | | 6,648,325 | |
| | | | | | | | | | | | | | | | |
| | Expiration | | | Strike | | | | | | | | |
| | Date | | | Price | | | Contracts | | | | | |
|
Options Purchased—0.1% | | | | | | | | | | | | | | | | |
Chicago Board Options Exchange Volatility Index Call1 | | | 1/18/12 | | | $ | 40.000 | | | | 30 | | | | 1,200 | |
Chicago Board Options Exchange Volatility Index Call1 | | | 1/18/12 | | | | 42.500 | | | | 20 | | | | 700 | |
Chicago Board Options Exchange Volatility Index Call1 | | | 2/15/12 | | | | 40.000 | | | | 20 | | | | 2,000 | |
Chicago Board Options Exchange Volatility Index Call1 | | | 2/15/12 | | | | 42.500 | | | | 10 | | | | 800 | |
| | | | | | | | | | | | | | | | |
Total Options Purchased (Cost $18,849) | | | | | | | | | | | | | | | 4,700 | |
| | | | | | | | |
| | Shares | | | Value | |
|
Investment Company—5.3% | | | | | | | | |
Oppenheimer Institutional Money Market Fund, Cl. E, 0.20%2,3 (Cost $374,186) | | | 374,186 | | | $ | 374,186 | |
Total Investments, at Value (Cost $6,783,187) | | | 100.5 | % | | | 7,027,211 | |
Liabilities in Excess of Other Assets | | | (0.5 | ) | | | (37,778 | ) |
| | |
Net Assets | | | 100.0 | % | | $ | 6,989,433 | |
| | |
Footnotes to Statement of Investments
| | |
* | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
1. | | Non-income producing security. |
|
2. | | Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 30, 2011, 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 period in which the issuer was an affiliate are as follows: |
| | | | | | | | | | | | | | | | |
| | Shares | | Gross | | Gross | | Shares |
| | December 31, 2010 | | Additions | | Reductions | | December 30, 2011 |
|
Oppenheimer Institutional Money Market Fund, Cl. E | | | 230,823 | | | 3,758,508 | | | 3,615,145 | | | 374,186 |
| | | | | | | | |
| | Value | | | Income | |
|
Oppenheimer Institutional Money Market Fund, Cl. E | | $ | 374,186 | | | $ | 623 | |
| | |
3. | | Rate shown is the 7-day yield as of December 30, 2011. |
Valuation Inputs
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). |
9 | OPPENHEIMER VALUE FUND/VA
STATEMENT OF INVESTMENTS Continued
Footnotes to Statement of Investments Continued
The table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 30, 2011 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 | | $ | 673,883 | | | $ | — | | | $ | — | | | $ | 673,883 | |
Consumer Staples | | | 556,951 | | | | — | | | | — | | | | 556,951 | |
Energy | | | 895,237 | | | | — | | | | — | | | | 895,237 | |
Financials | | | 1,409,250 | | | | — | | | | — | | | | 1,409,250 | |
Health Care | | | 1,100,405 | | | | — | | | | — | | | | 1,100,405 | |
Industrials | | | 399,843 | | | | — | | | | — | | | | 399,843 | |
Information Technology | | | 632,281 | | | | — | | | | — | | | | 632,281 | |
Materials | | | 283,934 | | | | — | | | | — | | | | 283,934 | |
Telecommunication Services | | | 203,823 | | | | — | | | | — | | | | 203,823 | |
Utilities | | | 492,718 | | | | — | | | | — | | | | 492,718 | |
Options Purchased | | | 4,700 | | | | — | | | | — | | | | 4,700 | |
Investment Company | | | 374,186 | | | | — | | | | — | | | | 374,186 | |
| | |
Total Assets | | $ | 7,027,211 | | | $ | — | | | $ | — | | | $ | 7,027,211 | |
| | |
Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.
See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.
See accompanying Notes to Financial Statements.
10 | OPPENHEIMER VALUE FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 30, 20111
| | | | |
|
Assets | | | | |
Investments, at value—see accompanying statement of investments: | | | | |
Unaffiliated companies (cost $6,409,001) | | $ | 6,653,025 | |
Affiliated companies (cost $374,186) | | | 374,186 | |
| | | |
| | | 7,027,211 | |
Cash | | | 10,940 | |
Receivables and other assets: | | | | |
Dividends | | | 11,609 | |
Other | | | 6,985 | |
| | | |
Total assets | | | 7,056,745 | |
| | | | |
Liabilities | | | | |
Payables and other liabilities: | | | | |
Shares of beneficial interest redeemed | | | 22,042 | |
Legal, auditing and other professional fees | | | 20,001 | |
Shareholder communications | | | 15,426 | |
Trustees’ compensation | | | 5,055 | |
Distribution and service plan fees | | | 1,410 | |
Transfer and shareholder servicing agent fees | | | 594 | |
Other | | | 2,784 | |
| | | |
Total liabilities | | | 67,312 | |
| | | | |
Net Assets | | $ | 6,989,433 | |
| | | |
| | | | |
Composition of Net Assets | | | | |
Par value of shares of beneficial interest | | $ | 724 | |
Additional paid-in capital | | | 8,021,828 | |
Accumulated net investment income | | | 75,254 | |
Accumulated net realized loss on investments and foreign currency transactions | | | (1,352,402 | ) |
Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies | | | 244,029 | |
| | | |
Net Assets | | $ | 6,989,433 | |
| | | |
| | | | |
Net Asset Value Per Share | | | | |
Non-Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $104,481 and 13,056 shares of beneficial interest outstanding) | | $ | 8.00 | |
Service Shares: | | | | |
Net asset value, redemption price per share and offering price per share (based on net assets of $6,884,952 and 710,734 shares of beneficial interest outstanding) | | $ | 9.69 | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
11 | OPPENHEIMER VALUE FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 30, 20111
| | | | |
|
Investment Income | | | | |
Dividends: | | | | |
Unaffiliated companies (net of foreign withholding taxes of $1,691) | | $ | 160,618 | |
Affiliated companies | | | 623 | |
Interest | | | 5 | |
| | | |
Total investment income | | | 161,246 | |
| | | | |
Expenses | | | | |
Management fees | | | 56,629 | |
Distribution and service plan fees — Service shares | | | 18,625 | |
Transfer and shareholder servicing agent fees: | | | | |
Non-Service shares | | | 101 | |
Service shares | | | 7,450 | |
Shareholder communications: | | | | |
Non-Service shares | | | 352 | |
Service shares | | | 21,015 | |
Legal, auditing and other professional fees | | | 23,480 | |
Trustees’ compensation | | | 7,567 | |
Administration service fees | | | 1,500 | |
Custodian fees and expenses | | | 677 | |
Other | | | 6,089 | |
| | | |
Total expenses | | | 143,485 | |
Less waivers and reimbursements of expenses | | | (64,465 | ) |
| | | |
Net expenses | | | 79,020 | |
| | | | |
Net Investment Income | | | 82,226 | |
| | | | |
Realized and Unrealized Gain (Loss) | | | | |
Net realized gain (loss) on: | | | | |
Investments from unaffiliated companies | | | 605,487 | |
Closing and expiration of option contracts written | | | (4,653 | ) |
Foreign currency transactions | | | 40 | |
| | | |
Net realized gain | | | 600,874 | |
Net change in unrealized appreciation/depreciation on: | | | | |
Investments | | | (1,040,606 | ) |
Translation of assets and liabilities denominated in foreign currencies | | | 5 | |
| | | |
Net change in unrealized appreciation/depreciation | | | (1,040,601 | ) |
| | | | |
Net Decrease in Net Assets Resulting from Operations | | $ | (357,501 | ) |
| | | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
12 | OPPENHEIMER VALUE FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
| | | | | | | | |
| | Year Ended | | | Year Ended | |
| | December 30, | | | December 31, | |
| | 20111 | | | 2010 | |
|
Operations | | | | | | | | |
Net investment income | | $ | 82,226 | | | $ | 60,182 | |
Net realized gain | | | 600,874 | | | | 524,533 | |
Net change in unrealized appreciation/depreciation | | | (1,040,601 | ) | | | 356,769 | |
| | |
Net increase (decrease) in net assets resulting from operations | | | (357,501 | ) | | | 941,484 | |
Dividends and/or Distributions to Shareholders | | | | | | | | |
Dividends from net investment income: | | | | | | | | |
Non-Service shares | | | (904 | ) | | | (479 | ) |
Service shares | | | (66,745 | ) | | | (64,271 | ) |
| | |
| | | (67,649 | ) | | | (64,750 | ) |
Beneficial Interest Transactions | | | | | | | | |
Net increase (decrease) in net assets resulting from beneficial interest transactions: | | | | | | | | |
Non-Service shares | | | 17,714 | | | | 42,114 | |
Service shares | | | (6,322 | ) | | | (1,058,473 | ) |
| | |
| | | 11,392 | | | | (1,016,359 | ) |
Net Assets | | | | | | | | |
Total decrease | | | (413,758 | ) | | | (139,625 | ) |
Beginning of period | | | 7,403,191 | | | | 7,542,816 | |
| | |
End of period (including accumulated net investment income of $75,254 and $60,637, respectively) | | $ | 6,989,433 | | | $ | 7,403,191 | |
| | |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
See accompanying Notes to Financial Statements.
13 | OPPENHEIMER VALUE FUND/VA
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Non-Service Shares | | 20111 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 8.49 | | | $ | 7.22 | | | $ | 4.99 | | | $ | 11.73 | | | $ | 11.58 | |
| | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income2 | | | .15 | | | | .11 | | | | .11 | | | | .12 | | | | .10 | |
Net realized and unrealized gain (loss) | | | (.56 | ) | | | 1.24 | | | | 2.14 | | | | (4.44 | ) | | | .59 | |
| | |
Total from investment operations | | | (.41 | ) | | | 1.35 | | | | 2.25 | | | | (4.32 | ) | | | .69 | |
| | |
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.08 | ) | | | (.08 | ) | | | (.02 | ) | | | (2.42 | ) | | | (.10 | ) |
Distributions from net realized gain | | | — | | | | — | | | | — | | | | — | | | | (.44 | ) |
| | |
Total dividends and/or distributions to shareholders | | | (.08 | ) | | | (.08 | ) | | | (.02 | ) | | | (2.42 | ) | | | (.54 | ) |
| | |
Net asset value, end of period | | $ | 8.00 | | | $ | 8.49 | | | $ | 7.22 | | | $ | 4.99 | | | $ | 11.73 | |
| | |
| | | | | | | | | | | | | | | | | | | | |
Total Return, at Net Asset Value3 | | | (4.93 | )% | | | 18.85 | % | | | 45.08 | % | | | (36.43 | )% | | | 5.89 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 104 | | | $ | 92 | | | $ | 38 | | | $ | 6 | | | $ | 1,728 | |
| | |
Average net assets (in thousands) | | $ | 101 | | | $ | 57 | | | $ | 20 | | | $ | 857 | | | $ | 2,753 | |
| | |
Ratios to average net assets:4 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.78 | % | | | 1.46 | % | | | 1.75 | % | | | 1.07 | % | | | 0.80 | % |
Total expenses5 | | | 1.83 | % | | | 2.05 | % | | | 2.30 | % | | | 1.48 | % | | | 1.49 | % |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 0.80 | % | | | 0.57 | % | | | 0.85 | % | | | 1.25 | % | | | 1.25 | % |
| | |
Portfolio turnover rate | | | 86 | % | | | 109 | % | | | 122 | % | | | 175 | % | | | 142 | % |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
4. | | Annualized for periods less than one full year. |
|
5. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 1.83 | % |
Year Ended December 31, 2010 | | | 2.05 | % |
Year Ended December 31, 2009 | | | 2.31 | % |
Year Ended December 31, 2008 | | | 1.48 | % |
Year Ended December 31, 2007 | | | 1.49 | % |
See accompanying Notes to Financial Statements.
14 | OPPENHEIMER VALUE FUND/VA
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | | | | | |
| | December 30, | | | | | | | | | | | Year Ended December 31, | |
Service Shares | | 20111 | | 2010 | | 2009 | | 2008 | | | | 2007 | |
|
Per Share Operating Data | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $ | 10.23 | | | $ | 8.99 | | | $ | 6.79 | | | $ | 11.75 | | | $ | 11.57 | |
| | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income2 | | | .11 | | | | .08 | | | | .09 | | | | .08 | | | | .06 | |
Net realized and unrealized gain (loss) | | | (.56 | ) | | | 1.24 | | | | 2.12 | | | | (4.97 | ) | | | .60 | |
| | |
Total from investment operations | | | (.45 | ) | | | 1.32 | | | | 2.21 | | | | (4.89 | ) | | | .66 | |
| | |
Dividends and/or distributions to shareholders: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.09 | ) | | | (.08 | ) | | | (.01 | ) | | | (.07 | ) | | | (.04 | ) |
Distributions from net realized gain | | | — | | | | — | | | | — | | | | — | | | | (.44 | ) |
| | |
Total dividends and/or distributions to shareholders | | | (.09 | ) | | | (.08 | ) | | | (.01 | ) | | | (.07 | ) | | | (.48 | ) |
| | |
Net asset value, end of period | | $ | 9.69 | | | $ | 10.23 | | | $ | 8.99 | | | $ | 6.79 | | | $ | 11.75 | |
| | |
Total Return, at Net Asset Value3 | | | (4.48 | )% | | | 14.81 | % | | | 32.57 | % | | | (41.62 | )% | | | 5.70 | % |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | $ | 6,885 | | | $ | 7,311 | | | $ | 7,505 | | | $ | 4,690 | | | $ | 6,481 | |
| | |
Average net assets (in thousands) | | $ | 7,449 | | | $ | 7,008 | | | $ | 5,501 | | | $ | 5,561 | | | $ | 3,527 | |
| | |
Ratios to average net assets:4 | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.08 | % | | | 0.85 | % | | | 1.10 | % | | | 0.84 | % | | | 0.49 | % |
Total expenses5 | | | 1.90 | % | | | 2.08 | % | | | 2.17 | % | | | 2.13 | % | | | 1.63 | % |
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | | | 1.05 | % | | | 0.93 | % | | | 1.15 | % | | | 1.50 | % | | | 1.50 | % |
| | |
Portfolio turnover rate | | | 86 | % | | | 109 | % | | | 122 | % | | | 175 | % | | | 142 | % |
| | |
1. | | December 30, 2011 represents the last business day of the Fund’s 2011 fiscal year. See Note 1 of the accompanying Notes. |
|
2. | | Per share amounts calculated based on the average shares outstanding during the period. |
|
3. | | Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
|
4. | | Annualized for periods less than one full year. |
|
5. | | Total expenses including indirect expenses from affiliated fund were as follows: |
| | | | |
|
Year Ended December 30, 2011 | | | 1.90 | % |
Year Ended December 31, 2010 | | | 2.08 | % |
Year Ended December 31, 2009 | | | 2.18 | % |
Year Ended December 31, 2008 | | | 2.13 | % |
Year Ended December 31, 2007 | | | 1.63 | % |
See accompanying Notes to Financial Statements.
15 | OPPENHEIMER VALUE FUND/VA
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Oppenheimer Value Fund/VA (the “Fund”) is a separate series of Oppenheimer Variable Account Funds, an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund’s investment objective is to seek long-term growth of capital by investing primarily in common stocks with low price earnings ratios and better-than-anticipated earnings. Realization of current income is a secondary consideration. The Fund’s investment adviser is OppenheimerFunds, Inc. (the “Manager”).
The Fund offers two classes of shares. Both classes are sold at their offering price, which is the net asset value per share, to separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. The class of shares designated as Service shares is subject to a distribution and service plan. Both classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class.
The following is a summary of significant accounting policies consistently followed by the Fund.
Fiscal Year End. Since December 30, 2011 represents the last day during the Fund’s 2011 fiscal year on which the New York Stock Exchange was open for trading, the Fund’s financial statements have been presented through that date to maintain consistency with the Fund’s net asset value calculations used for shareholder transactions.
Securities Valuation. The Fund calculates the net asset value of its shares as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading.
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. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” observable market inputs other than unadjusted quoted prices are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.
Securities traded on a registered U.S. securities exchange 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. Securities whose principal exchange is NASDAQ® are valued based on the official closing prices reported by NASDAQ prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.
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.
U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.
16 | OPPENHEIMER VALUE FUND/VA
“Money market-type” debt instruments with remaining maturities 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.
In the absence of a current price quotation obtained from an independent pricing service or broker-dealer, including for securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund’s assets are valued but after the close of the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities 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 adjusted for any discounts related to 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.
There have been no significant changes to the fair valuation methodologies of the Fund during the period.
Investment in Oppenheimer Institutional Money Market Fund. The Fund is permitted to invest daily available cash balances in an affiliated money market fund. The Fund may invest the available cash in Class E shares of Oppenheimer Institutional Money Market Fund (“IMMF”) to seek current income while preserving liquidity. IMMF is a registered open-end management investment company, regulated as a money market fund under the Investment Company Act of 1940, as amended. The Manager is also the investment adviser of IMMF. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of IMMF’s Class E expenses, including its 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 IMMF.
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 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.
Reported net realized gains and losses from foreign currency transactions arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, exchange rate fluctuations between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized appreciation and depreciation on the translation of assets and liabilities denominated in foreign currencies arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund’s Statement of Operations.
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
17 | OPPENHEIMER VALUE FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
1. Significant Accounting Policies Continued
Federal Taxes. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. Therefore, no federal income or excise tax provision is required. The Fund files income tax returns in U.S. federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remain open for the three preceding fiscal reporting period ends.
The tax components of capital shown in the following table represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes.
| | | | | | | | | | | | |
| | | | | | | | | | Net Unrealized |
| | | | | | | | | | Appreciation |
| | | | | | | | | | Based on Cost of |
| | | | | | | | | | Securities and |
Undistributed | | Undistributed | | Accumulated | | Other Investments |
Net Investment | | Long-Term | | Loss | | for Federal Income |
Income | | Gain | | Carryforward1,2,3,4 | | Tax Purposes |
|
$82,579 | | | $ | — | | | $ | 1,290,536 | | | $ | 179,891 |
| | |
1. | | As of December 30, 2011, the Fund had $1,204,711 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. Details of the capital loss carryforwards are included in the table below. Capital loss carryovers with no expiration, if any, must be utilized prior to those with expiration dates. |
| | | | |
Expiring | | | | |
|
2016 | | $ | 204,829 | |
2017 | | | 999,882 | |
| | | |
Total | | $ | 1,204,711 | |
| | | |
| | |
2. | | As of December 30, 2011, the Fund had $85,825 of post-October losses available to offset future realized capital gains, if any. |
|
3. | | During the fiscal year ended December 30, 2011, the Fund utilized $652,156 of capital loss carryforward to offset capital gains realized in that fiscal year. |
|
4. | | During the fiscal year ended December 31, 2010, the Fund utilized $446,612 of capital loss carryforward to offset capital gains realized in that fiscal year. |
Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund.
Accordingly, the following amounts have been reclassified for December 30, 2011. Net assets of the Fund were unaffected by the reclassifications.
| | | | |
| | Increase |
Increase | | to Accumulated |
to Accumulated | | Net Realized |
Net Investment | | Loss on |
Income | | Investments |
|
$40 | | | $ | 40 |
The tax character of distributions paid during the years ended December 30, 2011 and December 31, 2010 was as follows:
| | | | | | | | |
| | Year Ended | | Year Ended |
| | December 30, 2011 | | December 31, 2010 |
|
Distributions paid from: | | | | | | | | |
Ordinary income | | | $ | 67,649 | | | $ | 64,750 |
The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 30, 2011 are noted in the following
18 | OPPENHEIMER VALUE FUND/VA
table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.
| | | | |
|
Federal tax cost of securities | | $ | 6,861,475 | |
Federal tax cost of other investments | | | (14,150 | ) |
| | | |
Total federal tax cost | | $ | 6,847,325 | |
| | | |
| | | | |
Gross unrealized appreciation | | $ | 667,294 | |
Gross unrealized depreciation | | | (487,403 | ) |
| | | |
Net unrealized appreciation | | $ | 179,891 | |
| | | |
Trustees’ Compensation. The Board of Trustees has adopted a compensation deferral plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of “Other” within the asset section of the Statement of Assets and Liabilities. Deferral of trustees’ fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund’s assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance with the compensation deferral plan.
Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles, are recorded on the ex-dividend date. Income and capital gain distributions, if any, are declared and paid annually or at other times as deemed necessary by the Manager.
Investment Income. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is recognized on an accrual basis. Discount and premium, which are included in interest income on the Statement of Operations, are amortized or accreted daily.
Custodian Fees. “Custodian fees and expenses” in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by the Fund, at a rate equal to the Federal Funds Rate plus 0.50%. The “Reduction to custodian expenses” line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings.
Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost.
Indemnifications. The Fund’s organizational documents provide current and former trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts
19 | OPPENHEIMER VALUE FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
1. | | Significant Accounting Policies Continued |
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
2. Shares of Beneficial Interest
| | The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows: |
| | | | | | | | | | | | | | | | |
| | Year Ended December 30, 2011 | | | Year Ended December 31, 2010 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
|
Non-Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 4,906 | | | $ | 40,931 | | | | 6,745 | | | $ | 50,146 | |
Dividends and/or distributions reinvested | | | 101 | | | | 904 | | | | 65 | | | | 479 | |
Redeemed | | | (2,787 | ) | | | (24,121 | ) | | | (1,196 | ) | | | (8,511 | ) |
| | |
Net increase | | | 2,220 | | | $ | 17,714 | | | | 5,614 | | | $ | 42,114 | |
| | |
Service Shares | | | | | | | | | | | | | | | | |
Sold | | | 114,846 | | | $ | 1,183,318 | | | | 108,649 | | | $ | 1,008,324 | |
Dividends and/or distributions reinvested | | | 6,285 | | | | 66,745 | | | | 7,063 | | | | 64,271 | |
Redeemed | | | (125,191 | ) | | | (1,256,385 | ) | | | (235,966 | ) | | | (2,131,068 | ) |
| | |
Net decrease | | | (4,060 | ) | | $ | (6,322 | ) | | | (120,254 | ) | | $ | (1,058,473 | ) |
| | |
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations and investments in IMMF, for the year ended December 30, 2011, were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
|
Investment securities | | $ | 6,276,087 | | | $ | 6,309,695 | |
4. Fees and Other Transactions with Affiliates
Management Fees. Under the investment advisory agreement, the Fund pays the Manager a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| | | | |
Fee Schedule | | | | |
|
Up to $200 million | | | 0.75 | % |
Next $200 million | | | 0.72 | |
Next $200 million | | | 0.69 | |
Next $200 million | | | 0.66 | |
Over $800 million | | | 0.60 | |
Administration Service Fees. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund’s tax returns.
Transfer Agent Fees. OppenheimerFunds Services (“OFS”), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. For the year ended December 30, 2011, the Fund paid $7,566 to OFS for services to the Fund.
Distribution and Service Plan for Service Shares. The Fund has adopted a Distribution and Service Plan (the “Plan”) in accordance with Rule 12b-1 under the Investment Company Act of 1940 for Service shares to pay OppenheimerFunds Distributor, Inc. (the “Distributor”), for distribution related services, personal service and account maintenance for the
20 | OPPENHEIMER VALUE FUND/VA
Fund’s Service shares. Under the Plan, payments are made periodically at an annual rate of 0.25% of the daily net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors of the insurance product that offers Fund shares, for providing personal service and maintenance of accounts of their variable contract owners that hold Service shares. These fees are paid out of the Fund’s assets on an on-going basis and increase operating expenses of the Service shares, which results in lower performance compared to the Fund’s shares that are not subject to a service fee. Fees incurred by the Fund under the Plan are detailed in the Statement of Operations.
Waivers and Reimbursements of Expenses. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.80% for Non-Service shares and 1.05% for Service shares. During the year ended December 30, 2011, the Manager waived fees and/or reimbursed the Fund $1,028 and $63,072 for Non-Service and Service shares, respectively.
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 IMMF. During the year ended December 30, 2011, the Manager waived fees and/or reimbursed the Fund $365 for IMMF management fees.
Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.
5. Risk Exposures and the Use of Derivative Instruments
The Fund’s investment objectives not only permit the Fund to purchase investment securities, they also allow the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward foreign currency exchange contracts, credit default swaps, interest rate swaps, total return 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. Central to those strategies are features inherent to derivatives that make them more attractive for this purpose than equity and debt securities: they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This 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.
Market Risk Factors. In accordance with its investment objectives, the Fund may use derivatives to increase or decrease its exposure to one or more of the following 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 to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds. |
| | 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. |
21 | OPPENHEIMER VALUE FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
5. | | Risk Exposures and the Use of Derivative Instruments Continued |
| | 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. |
The Fund’s actual exposures to these market risk factors during the period are discussed in further detail, by derivative type, below.
Risks of Investing in Derivatives. The Fund’s use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. 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.
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. 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.
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. Associated risks can be different for each type of derivative and are discussed by each derivative type in the notes that follow.
| | Counterparty Credit Risk. Certain derivative positions are subject to counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. The Fund’s derivative counterparties are financial institutions who are subject to market conditions that may weaken their financial position. The Fund intends to enter into financial transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction. |
| | Credit Related Contingent Features. The Fund’s agreements with derivative counterparties have several credit related contingent features that if triggered would allow its derivatives counterparties to close out and demand payment or additional collateral to cover their exposure from the Fund. Credit related contingent features are established between the Fund and its derivatives counterparties to reduce the risk that the Fund will not fulfill its payment obligations to its counterparties. These triggering features include, but are not limited to, a percentage decrease in the Fund’s net assets and or a percentage decrease in the Fund’s Net Asset Value or NAV. The contingent features are established within the Fund’s International Swap and Derivatives Association, Inc. master agreements which govern certain positions in swaps, over-the-counter options and swaptions, and forward currency exchange contracts for each individual counterparty. |
Valuations of derivative instruments as of December 30, 2011 are as follows:
| | | | |
| | Asset Derivatives |
Derivatives Not Accounted for | | | | |
as Hedging Instruments | | Statement of Assets and Liabilities Location | | Value |
|
Volatility contracts | | Investments, at value | | $4,700* |
| | |
* | | Amounts relate to purchased options. |
22 | OPPENHEIMER VALUE FUND/VA
The effect of derivative instruments on the Statement of Operations is as follows:
| | | | | | | | | | | | |
Amount of Realized Gain or (Loss) Recognized on Derivatives |
Derivatives Not Accounted for | | Investments from | | | Closing and expiration of | | | |
as Hedging Instruments | | unaffiliated companies* | | | option contracts written | | | Total | |
|
Equity contracts | | $ | 21,613 | | | $ | (4,653 | ) | | $ | 16,960 | |
Volatility contracts | | | (1,137 | ) | | | — | | | | (1,137 | ) |
| | |
Total | | $ | 20,476 | | | $ | (4,653 | ) | | $ | 15,823 | |
| | |
| | |
* | | Includes purchased option contracts, purchased swaption contracts and written option contracts exercised, if any. |
| | | | |
Amount of Change in Unrealized Gain or (Loss) Recognized on Derivatives |
Derivatives Not Accounted | | |
for as Hedging Instruments | | Investments* |
|
Volatility contracts | | $ | (14,149 | ) |
| | |
* | | Includes purchased option contracts and purchased swaption contracts, if any. |
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 at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the principal exchange on which the option is traded. 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. 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.
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.
The Fund has purchased call options on volatility indexes to increase exposure to volatility risk. A purchased call option becomes more valuable as the level of the underlying volatility index increases relative to the strike price.
During the year ended December 30, 2011, the Fund had an ending monthly average market value of $2,884 and $567 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. Securities held in collateralized 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 Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk 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.
During the year ended December 30, 2011, the Fund had an ending monthly average market value of $90 on written put options.
Additional associated risks to the Fund include counterparty credit risk for over-the-counter options and liquidity risk.
23 | OPPENHEIMER VALUE FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
5. Risk Exposures and the Use of Derivative Instruments Continued
Written option activity for the year ended December 30, 2011 was as follows:
| | | | | | | | |
| | Put Options |
| | Number of Contracts | | | Amount of Premiums | |
|
Options outstanding as of December 31, 2010 | | | — | | | $ | — | |
Options written | | | 24 | | | | 940 | |
Options closed or expired | | | (24 | ) | | | (940 | ) |
| | |
Options outstanding as of December 30, 2011 | | | — | | | $ | — | |
| | |
6. Pending Litigation
Since 2009, a number of class action, derivative and individual lawsuits have been pending in federal and state courts against OppenheimerFunds, Inc., the Fund’s investment advisor (the “Manager”), OppenheimerFunds Distributor, Inc., the Fund’s principal underwriter and distributor (the “Distributor”), and certain funds (but not including the Fund) advised by the Manager and distributed by the Distributor (the “Defendant Funds”). Several of these lawsuits also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The lawsuits raise claims under federal securities laws and various states’ securities, consumer protection and common law and allege, among other things, that the disclosure documents of the respective Defendant Funds contained misrepresentations and omissions and that the respective Defendant Funds’ investment policies were not followed. The plaintiffs in these actions seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. On September 30, 2011, the U.S. District Court for the District of Colorado entered orders and final judgments approving the settlement of certain putative class actions involving two Defendant Funds, Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund. Those orders are not subject to further appeal. These settlements do not resolve other outstanding lawsuits relating to Oppenheimer Champion Income Fund and Oppenheimer Core Bond Fund, nor do the settlements affect certain other putative class action lawsuits pending in federal court against the Manager, the Distributor, and other Defendant Funds and their independent trustees.
In 2009, what are claimed to be derivative lawsuits were filed in New Mexico state court against the Manager and a subsidiary (but not against the Fund) on behalf of the New Mexico Education Plan Trust challenging a settlement reached in 2010 between the Manager, its subsidiary and the Distributor and the board of the New Mexico section 529 college savings plan. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses. On September 9, 2011, the court denied plaintiffs’ request for a hearing to determine the fairness of the settlement, finding that plaintiffs lacked standing to pursue derivative claims on behalf of the Trust. On October 27, 2011, the parties to these actions filed a joint motion to dismiss the lawsuits with prejudice, which the court granted on October 28, 2011.
Other class action and individual lawsuits have been filed since 2008 in various state and federal courts against the Manager and certain of its affiliates by investors seeking to recover investments they allegedly lost as a result of the “Ponzi” scheme run by Bernard L. Madoff and his firm, Bernard L. Madoff Investment Securities, LLC (“BLMIS”). Plaintiffs in these suits allege that they suffered losses as a result of their investments in several funds managed by an affiliate of the Manager and assert a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and awards of attorneys’ fees and litigation expenses. Neither the Distributor, nor any of the Oppenheimer mutual funds, their independent trustees or directors are named as defendants in these lawsuits. None of the Oppenheimer mutual funds invested in any funds or accounts managed by Madoff or BLMIS. On February 28, 2011, a stipulation of partial settlement of three groups of consolidated putative class action lawsuits relating to these
24 | OPPENHEIMER VALUE FUND/VA
matters was filed in the U.S. District Court for the Southern District of New York. On August 19, 2011, the court entered an order and final judgment approving the settlement as fair, reasonable and adequate. In September 2011, certain parties filed notices of appeal from the court’s order approving the settlement. On July 29, 2011, a stipulation of settlement between certain affiliates of the Manager and the Trustee appointed under the Securities Investor Protection Act to liquidate BLMIS was filed in the U.S. Bankruptcy Court for the Southern District of New York to resolve purported preference and fraudulent transfer claims by the Trustee. On September 22, 2011, the court entered an order approving the settlement as fair, reasonable and adequate. In October 2011, certain parties filed notices of appeal from the court’s order approving the settlement. The aforementioned settlements do not resolve other outstanding lawsuits against the Manager and its affiliates relating to BLMIS.
On April 16, 2010, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark IV Funding Limited (“AAArdvark IV”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark IV. Plaintiffs allege breach of contract against the defendants and seek compensatory damages, costs and disbursements, including attorney fees. On July 15, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark Funding Limited (“AAArdvark I”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark I. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees. On November 9, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark XS Funding Limited (“AAArdvark XS”), an entity advised by the Manager’s affiliate, in connection with investments made by the plaintiffs in AAArdvark XS. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees.
The Manager believes the lawsuits and appeals described above are without legal merit and, with the exception of actions it has settled, is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to represent the Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer mutual funds.
25 | OPPENHEIMER VALUE FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:
We have audited the accompanying statement of assets and liabilities of Oppenheimer Value Fund/VA (a separate series of Oppenheimer Variable Account Funds), including the statement of investments, as of December 30, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of Oppenheimer Value Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 30, 2011, by correspondence with the custodian and transfer agent. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Value Fund/VA as of December 30, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the three-year period then ended, in conformity with U.S. generally accepted accounting principles.
KPMG llp
Denver, Colorado
February 16, 2012
26 | OPPENHEIMER VALUE FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
In early 2012, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2011. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service.
Dividends, if any, paid by the Fund during the fiscal year ended December 30, 2011 which are not designated as capital gain distributions should be multiplied by the maximum amount allowable but not less than 100% to arrive at the amount eligible for the corporate dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance.
27 | OPPENHEIMER VALUE FUND/VA
BOARD APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT Unaudited
Each year, the Board of Trustees (the “Board”), including a majority of the independent Trustees, is required to determine whether to renew the Fund’s investment advisory agreement (the “Agreement”). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information that the Board requests for that purpose. In addition, the Board receives information throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Manager’s services, (ii) the investment performance of the Fund and the Manager, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager and its affiliates, including an analysis of the cost of providing services, (v) whether economies of scale are realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. The Board was aware that there are alternatives to retaining the Manager.
Outlined below is a summary of the principal information considered by the Board as well as the Board’s conclusions.
Nature, Quality and Extent of Services. The Board considered information about the nature, quality and extent of the services provided to the Fund and information regarding the Manager’s key personnel who provide such services. The Manager’s duties include providing the Fund with the services of the portfolio manager and the Manager’s investment team, who provide research, analysis and other advisory services in regard to the Fund’s investments; securities trading services; oversight of third-party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund’s investment restrictions. The Manager is responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel who are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund’s operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund’s shares. The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the quality of the Manager’s resources that are available to the Fund. The Board took account of the fact that the Manager has had over fifty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the Manager’s advisory, administrative, accounting, legal and compliance services, and information the Board has received regarding the experience and professional qualifications of the Manager’s key personnel and the size and functions of its staff. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Mitch Williams, the portfolio manager for the Fund, and the Manager’s investment team and analysts. The Board members also considered the totality of their experiences with the Manager as directors or trustees of the Fund and other funds advised by the Manager. The Board considered information regarding the quality of services provided by affiliates of the Manager, which its members have become knowledgeable about in connection with the renewal of the Fund’s service agreements. The Board concluded, in light of the Manager’s experience, reputation, personnel, operations and resources that the Fund benefits from the services provided under the Agreement.
Investment Performance of the Manager and the Fund. Throughout the year, the Manager provided information on the investment performance of the Fund and the Manager, including comparative performance information. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund’s
28 | OPPENHEIMER VALUE FUND/VA
historical performance to relevant market indices and to the performance of other large-cap value funds underlying variable insurance products. The Board considered that the Fund outperformed its performance universe during the one-, three-, and five-year Lipper periods.
Costs of Services by the Manager. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also considered the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in regard to the fees and expenses of the Fund and other large-cap value funds underlying variable insurance products. In reviewing the fees and expenses charged to the VA funds, the Board considered the Manager’s assertion that, because there is much greater disparity in the fees and services that may be provided by a manager to a VA fund as opposed to a retail fund, when comparing the expenses of the various VA funds to those of retail funds, it is most appropriate to focus on total expenses (rather than on the management fees). Accordingly, while the Board reviewed and considered all expenses, it focused on total expenses. The Board considered that the Fund’s actual management fees and total expenses were lower than its expense group median. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.80% for Non-Service Shares and 1.05% for Service Shares. This voluntary expense limitation my not be amended or withdrawn until one year after the date of prospectus.
Economies of Scale and Profits Realized by the Manager. The Board considered information regarding the Manager’s costs in serving as the Fund’s investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager’s profitability from its relationship with the Fund. The Board reviewed whether the Manager may realize economies of scale in managing and supporting the Fund. The Board noted that the Fund currently has management fee breakpoints, which are intended to share with Fund shareholders economies of scale that may exist as the Fund’s assets grow.
Other Benefits to the Manager. In addition to considering the profits realized by the Manager, the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Manager’s affiliates and research provided to the Manager in connection with permissible brokerage arrangements (soft dollar arrangements). The Board also considered that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide quality services to the Fund.
Conclusions. These factors were also considered by the independent Trustees meeting separately from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees’ counsel are independent of the Manager within the meaning and intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations described above, the Board, including a majority of the independent Trustees, decided to continue the Agreement through August 31, 2012. In arriving at this decision, the Board did not single out any factor or factors as being more important than others, but considered all of the above information, and considered the terms and conditions of the Agreement, including the management fee, in light of all of the surrounding circumstances.
29 | OPPENHEIMER VALUE FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities (“portfolio proxies”) held by the Fund. A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund’s website at oppenheimerfunds.com, and (iii) on the SEC’s website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund’s voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC’s website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund’s Form N-Q filings are available on the SEC’s website at www.sec.gov. Those forms may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
30 | OPPENHEIMER VALUE FUND/VA
TRUSTEES AND OFFICERS Unaudited
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Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
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INDEPENDENT TRUSTEES | | The address of each Trustee in the chart below is 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Trustee serves for an indefinite term, or until his or her resignation, retirement, death or removal. |
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William L. Armstrong, Chairman of the Board of Trustees and Trustee (since 2002) Age: 74 | | President, Colorado Christian University (since 2006); Chairman, Cherry Creek Mortgage Company (since 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso Mortgage Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman, Broadway Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), former Director of Campus Crusade for Christ (non-profit) (1991-2008); former Director, The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (2002-2006); former Chairman of: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Armstrong has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Edward L. Cameron, Trustee (since 2002) Age: 73 | | Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000-June 2006); Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group (accounting firm) (July 1994-June 1998). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Cameron has served on the Boards of certain Oppenheimer funds since 1999, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Jon S. Fossel, Trustee (since 2002) Age: 69 | | Chairman of the Board (since 2006) and Director (since June 2002) of UNUMProvident (insurance company); Director of Northwestern Energy Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February 1998-February 2003 and February 2005-February 2007); Chairman and Director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. (“OAC”) (parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Fossel has served on the Boards of certain Oppenheimer funds since 1990, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Sam Freedman, Trustee (since 2002) Age: 71 | | Director of Colorado UpLIFT (charitable organization) (since September 1984). Mr. Freedman held several positions with the Manager and with subsidiary or affiliated companies of the Manager (until October 1994). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Freedman has served on the Boards of certain Oppenheimer funds since 1996, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Beverly L. Hamilton, Trustee (since 2002) Age: 65 | | Trustee of Monterey Institute for International Studies (educational organization) (since February 2000); Board Member of Middlebury College (educational organization) (since December 2005); Chairman (since 2010) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); Director of The California Endowment (philanthropic organization) (April 2002-April 2008); Director (February 2002-2005) and Chairman of Trustees (2006-2007) of the Community Hospital of Monterey Peninsula; Director (October 1991-2005); Vice Chairman (2006-2009) of American Funds’ Emerging Markets Growth Fund, Inc. (mutual fund); President of ARCO Investment Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller Foundation (2001-2006) and The University of Michigan (since 2000); Advisor at Credit Suisse First Boston’s Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual |
31 | OPPENHEIMER VALUE FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
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Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
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Beverly L. Hamilton, Continued | | Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member of the investment committee of Hartford Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 36 portfolios in the OppenheimerFunds complex. Ms. Hamilton has served on the Boards of certain Oppenheimer funds since 2002, during which time she has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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Robert J. Malone, Trustee (since 2002) Age: 67 | | Board of Directors of Opera Colorado Foundation (non-profit organization) (since March 2008); Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director of Steele Street Bank & Trust (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 36 portfolios in the OppenheimerFunds complex. Mr. Malone has served on the Boards of certain Oppenheimer funds since 2002, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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F. William Marshall, Jr., Trustee (since 2002) Age: 69 | | Trustee Emeritus of Worcester Polytech Institute (WPI) (private university) (since 2009); Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment company) (since 1996) and MML Series Investment Fund (investment company) (since 1996); President and Treasurer of the SIS Funds (private charitable fund) (January 1999-March 2011); Former Trustee of WPI (1985-2008); Former Chairman of the Board (2004-2006) and Former Chairman of the Investment Committee of WPI (1994-2008); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999); and Former President and Chief Executive Officer of SIS Bancorp. (1993-1999). Oversees 38 portfolios in the OppenheimerFunds complex. Mr. Marshall has served on the Boards of certain Oppenheimer funds since 2000, during which time he has become familiar with the Fund’s (and other Oppenheimer funds’) financial, accounting, regulatory and investment matters and has contributed to the Boards’ deliberations. |
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INTERESTED TRUSTEE AND OFFICER | | The address of Mr. Glavin is Two World Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008. Mr. Glavin serves as a Trustee for an indefinite term, or until his resignation, retirement, death or removal and as an Officer for an indefinite term, or until his resignation, retirement, death or removal. Mr. Glavin is an Interested Trustee due to his positions with OppenheimerFunds, Inc. and its affiliates. |
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William F. Glavin, Jr., Trustee, President and Principal Executive Officer (since 2009) Age: 53 | | Chairman of the Manager (since December 2009); Chief Executive Officer and Director of the Manager (since January 2009); President of the Manager (since May 2009); Director of Oppenheimer Acquisition Corp. (“OAC”) (the Manager’s parent holding company) (since June 2009); Executive Vice President (March 2006-February 2009) and Chief Operating Officer (July 2007-February 2009) of Massachusetts Mutual Life Insurance Company (OAC’s parent company); Director (May 2004-March 2006) and Chief Operating Officer and Chief Compliance Officer (May 2004-January 2005), President (January 2005-March 2006) and Chief Executive Officer (June 2005-March 2006) of Babson Capital Management LLC; Director (March 2005-March 2006), President (May 2003-March 2006) and Chief Compliance Officer (July 2005-March 2006) of Babson Capital Securities, Inc. (a broker-dealer); President (May 2003-March 2006) of Babson Investment Company, Inc.; Director (May 2004-August 2006) of Babson Capital Europe Limited; Director (May 2004-October 2006) of Babson Capital Guernsey Limited; Director (May 2004-March 2006) of Babson Capital Management LLC; Non-Executive Director (March 2005-March 2007) of Baring Asset Management Limited; Director (February 2005-June 2006) Baring Pension Trustees Limited; Director and Treasurer (December 2003-November 2006) of Charter Oak Capital Management, Inc.; Director (May 2006-September 2006) of C.M. Benefit Insurance Company; Director (May 2008-June 2009) and Executive Vice President (June 2007-July 2009) of C.M. Life Insurance Company; President (March 2006-May 2007) of MassMutual Assignment Company; Director (January 2005-December 2006), Deputy Chairman (March 2005- December 2006) and President (February 2005-March 2005) of MassMutual Holdings (Bermuda) Limited; Director (May 2008-June 2009) and Executive Vice President (June 2007-July 2009) of MML Bay State Life Insurance Company; Chief Executive Officer and President (April 2007-January 2009) of MML Distributors, LLC; and Chairman (March 2006-December 2008) and Chief Executive Officer (May 2007-December 2008) of MML Investors Services, Inc. Oversees 63 portfolios as a Trustee/Director and 96 portfolios as an officer in the OppenheimerFunds complex. |
32 | OPPENHEIMER VALUE FUND/VA
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Name, Position(s) Held with the Fund, Length of Service, Age | | Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen |
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OTHER OFFICERS OF THE FUND | | The addresses of the Officers in the chart below are as follows: for Messrs. Williams, Gabinet and Ms. Nasta, Two World Financial Center, 225 Liberty Street, New York, New York 10281-1008, for Messrs. Vandehey and Wixted, 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Officer serves for an indefinite term or until his or her resignation, retirement, death or removal. |
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Mitch Williams, Vice President (since 2008) Age: 43 | | Vice President of the Manager (since July 2006) and a Senior Research Analyst of the Manager (since April 2002); a Chartered Financial Analyst. Prior to joining the manager, Vice President and Research Analyst for Evergreen Funds (October 2000-January 2002). A portfolio manager and officer of 6 portfolios in the OppenheimerFunds complex. |
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Arthur S. Gabinet, Secretary (since 2011) Age: 53 | | Executive Vice President (since May 2010) and General Counsel (since January 2011) of the Manager; General Counsel of the Distributor (since January 2011); General Counsel of Centennial Asset Management Corporation (since January 2011); Executive Vice President and General Counsel of HarbourView Asset Management Corporation (since January 2011); Assistant Secretary (since January 2011) and Director (since January 2011) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since January 2011); Director of Oppenheimer Real Asset Management, Inc. (since January 2011); Executive Vice President and General Counsel of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since January 2011); Executive Vice President and General Counsel of OFI Private Investments, Inc. (since January 2011); Vice President of OppenheimerFunds Legacy Program (since January 2011); Executive Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since January 2011); General Counsel, Asset Management of the Manager (May 2010-December 2010); Principal, The Vanguard Group (November 2005-April 2010); District Administrator, U.S. Securities and Exchange Commission (January 2003- October 2005). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Christina M. Nasta, Vice President and Chief Business Officer (since 2011) Age: 38 | | Senior Vice President of the Manager (since July 2010); Vice President of the Manager (since January 2003); Vice President of OppenheimerFunds Distributor, Inc. (since January 2003). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Mark S. Vandehey, Vice President and Chief Compliance Officer (since 2004) Age: 61 | | Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983). An officer of 96 portfolios in the OppenheimerFunds complex. |
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Brian W. Wixted, Treasurer and Principal Financial & Accounting Officer (since 2002) Age: 52 | | Senior Vice President of the Manager (since March 1999); Treasurer of the Manager and the following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership Holdings, Inc. (March 1999- June 2008), OFI Private Investments, Inc. (March 2000-June 2008), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of OAC (March 1999-June 2008). An officer of 96 portfolios in the OppenheimerFunds complex. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and Officers and is available without charge, upon request, by calling 1.800.988.8287.
33 | OPPENHEIMER VALUE FUND/VA
OPPENHEIMER VALUE FUND/ VA
A Series of Oppenheimer Variable Account Funds
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Manager | | OppenheimerFunds, Inc. |
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Distributor | | OppenheimerFunds Distributor, Inc. |
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Transfer Agent | | OppenheimerFunds Services |
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Independent Registered Public Accounting Firm | | KPMG llp |
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Counsel | | K&L Gates llp |
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| | Before investing in the Fund, investors should carefully consider its investment objectives, risks, charges and expenses. The Fund’s prospectus and summary prospectus contain this and other information about the Fund, and may be |
| | obtained by asking your financial advisor or calling us at 1.800.988.8287. Read prospectuses and summary prospectuses carefully before investing. |
©2012 OppenheimerFunds, Inc. All rights reserved.
Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.
Item 3. Audit Committee Financial Expert.
The Board of Trustees of the registrant has determined that F. William Marshall, Jr., the Chairman of the Board’s Audit Committee, is the audit committee financial expert and that Mr. Marshall is “independent” for purposes of this Item 3.
Item 4. Principal Accountant Fees and Services.
The principal accountant for the audit of the registrant’s annual financial statements billed $327,200 in fiscal 2011 and 2010.
(b) Audit-Related Fees
The principal accountant for the audit of the registrant’s annual financial statements billed no such fees during the last two fiscal years.
The principal accountant for the audit of the registrant’s annual financial statements billed $414,870 in fiscal 2011 and $342,900 in fiscal 2010 to the registrant’s investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant.
Such services include: internal control reviews, surprise exams, attestation and compliance procedures.
(c) Tax Fees
The principal accountant for the audit of the registrant’s annual financial statements billed $6,190 in fiscal 2011 and $50,311 in fiscal 2010.
The principal accountant for the audit of the registrant’s annual financial statements billed no such fees to the registrant during the last two fiscal years to the registrant’s investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant.
Such services include: tax compliance, tax planning and tax advice. Tax compliance generally involves preparation of original and amended tax returns, claims for a refund and tax payment-
planning services. Tax planning and tax advice includes assistance with tax audits and appeals, tax advice related to mergers and acquisitions and requests for rulings or technical advice from taxing authorities.
(d) All Other Fees
The principal accountant for the audit of the registrant’s annual financial statements billed no such fees during the last two fiscal years.
The principal accountant for the audit of the registrant’s annual financial statements billed no such fees during the last two fiscal years to the registrant’s investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant.
(e) | | (1) During its regularly scheduled periodic meetings, the registrant’s audit committee will pre-approve all audit, audit-related, tax and other services to be provided by the principal accountants of the registrant. |
| | The audit committee has delegated pre-approval authority to its Chairman for any subsequent new engagements that arise between regularly scheduled meeting dates provided that any fees such pre-approved are presented to the audit committee at its next regularly scheduled meeting. |
| | Under applicable laws, pre-approval of non-audit services maybe waived provided that: 1) the aggregate amount of all such services provided constitutes no more than five percent of the total amount of fees paid by the registrant to it principal accountant during the fiscal year in which services are provided 2) such services were not recognized by the registrant at the time of engagement as non-audit services and 3) such services are promptly brought to the attention of the audit committee of the registrant and approved prior to the completion of the audit. |
(f) | | Not applicable as less than 50%. |
(g) | | The principal accountant for the audit of the registrant’s annual financial statements billed $421,060 in fiscal 2011 and $393,211 in fiscal 2010 to the registrant and the registrant’s investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant related to non-audit fees. Those billings did not include any prohibited non-audit services as defined by the Securities Exchange Act of 1934. |
The registrant’s audit committee of the board of trustees has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence. No such services were rendered.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Schedule of Investments.
a) Not applicable. The complete schedule of investments is included in Item 1 of this Form N-CSR.
b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
The Fund’s Governance Committee Provisions with Respect to Nominations of Directors/Trustees to the Respective Boards
1. | | The Fund’s Governance Committee (the “Committee”) will evaluate potential Board candidates to assess their qualifications. The Committee shall have the authority, upon approval of the Board, to retain an executive search firm to assist in this effort. The Committee may consider recommendations by business and personal contacts of current Board members and by executive search firms which the Committee may engage from time to time and may also consider shareholder recommendations. The Committee may consider the advice and recommendation of the Funds’ investment manager and its affiliates in making the selection. |
2. | | The Committee shall screen candidates for Board membership. The Committee has not established specific qualifications that it believes must be met by a trustee nominee. In evaluating trustee nominees, the Committee considers, among other things, an individual’s background, skills, and experience; whether the individual is an “interested person” as defined in the Investment Company Act of 1940; and whether the individual would be deemed an “audit committee financial expert” within the meaning of applicable SEC rules. The Committee also considers whether the individual’s background, skills, and experience will complement the background, skills, and experience of other nominees and will contribute to the Board. There are no differences in the manner in which the Committee evaluates nominees for trustees based on whether the nominee is recommended by a shareholder. |
3. | | The Committee may consider nominations from shareholders for the Board at such times as the Committee meets to consider new nominees for the Board. The Committee shall have the sole discretion to determine the candidates to present to the Board and, in such cases where required, to shareholders. Recommendations for trustee nominees should, at a minimum, be accompanied by the following: |
| • | | the name, address, and business, educational, and/or other pertinent background of the person being recommended; |
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| • | | a statement concerning whether the person is an “interested person” as defined in the Investment Company Act of 1940; |
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| • | | any other information that the Funds would be required to include in a proxy statement concerning the person if he or she was nominated; and |
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| • | | the name and address of the person submitting the recommendation and, if that person is a shareholder, the period for which that person held Fund shares. |
| | The recommendation also can include any additional information which the person submitting it believes would assist the Committee in evaluating the recommendation. |
4. | | Shareholders should note that a person who owns securities issued by Massachusetts Mutual Life Insurance Company (the parent company of the Funds’ investment adviser) would be deemed an “interested person” under the Investment Company Act of 1940. In addition, certain other relationships with Massachusetts Mutual Life Insurance Company or its subsidiaries, with registered broker-dealers, or with the Funds’ outside legal counsel may cause a person to be deemed an “interested person.” |
5. | | Before the Committee decides to nominate an individual as a trustee, Committee members and other directors customarily interview the individual in person. In addition, the individual customarily is asked to complete a detailed questionnaire which is designed to elicit |
| | information which must be disclosed under SEC and stock exchange rules and to determine whether the individual is subject to any statutory disqualification from serving as a trustee of a registered investment company. |
Item 11. Controls and Procedures.
Based on their evaluation of the registrant’s disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR 270.30a-3(c)) as of 12/30/2011, the registrant’s principal executive officer and principal financial officer found the registrant’s disclosure controls and procedures to provide reasonable assurances that information required to be disclosed by the registrant in the reports that it files under the Securities Exchange Act of 1934 (a) is accumulated and communicated to registrant’s management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure, and (b) is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the U.S. Securities and Exchange Commission.
There have been no changes in the registrant’s internal controls over financial reporting that occurred during the registrant’s second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a) | | (1) Exhibit attached hereto. |
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| | (2) Exhibits attached hereto. |
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| | (3) Not applicable. |
(b) | | Exhibit attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Oppenheimer Variable Account Funds
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By: | | /s/ William F. Glavin, Jr. | | |
| | William F. Glavin, Jr. | | |
| | Principal Executive Officer | | |
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Date: | | 2/9/2012 | | |
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.
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By: | | /s/ William F. Glavin, Jr. | | |
| | William F. Glavin, Jr. | | |
| | Principal Executive Officer | | |
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Date: | | 2/9/2012 | | |
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By: | | /s/ Brian W. Wixted | | |
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| | Brian W. Wixted | | |
| | Principal Financial Officer | | |
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Date: | | 2/9/2012 | | |